Exhibit 4.4
ESCROW AND SUBORDINATION AGREEMENT
This Agreement, dated as of February 22, 2002, is entered into by and
between NORTHWEST ETHANOL, LLC (the "Company"), NATIONAL CITY BANK, a national
banking association, as escrow agent (the "Escrow Agent"), and Messrs. Eugene
Schubert, Fred Schubert, Virgil Hoene, Gary Mavis and Ted Penner, and Ney Oil
Company, 5C's Farms, Inc., Spatial Ag Management, LLC and Nester Ag-Management
(collectively, the "Unitholders").
The Company has filed a registration application (File No. 31363) with the
Ohio Division of Securities (the "Division), pursuant to section 1707.091 of the
Revised Code. As a condition for the approval of the registration application by
the Division, Unitholders have agreed to escrow certain units subject to the
terms of this Agreement.
Therefore, Unitholders have deposited with the Escrow Agent certificates
evidencing four hundred and eighty-three (483) limited liability company units
of the Company (the "Escrowed Units"), and the Escrow Agent acknowledges receipt
thereof. See Exhibit A, incorporated in and made a part of this Agreement, which
details the Escrowed Units.
Therefore, with respect to the Escrowed Units the parties to this Agreement
agree as follows:
1. The Escrowed Unit certificates shall bear the following legend:
"These shares are subject to certain restrictions, including escrow
and subordination, and may not be transferred without compliance with
the Escrow and Subordination Agreement, dated February 22, 2002. This
legend may be removed only if the shares are released from escrow by
the terms of the Agreement."
2. The Escrowed Units shall not be assigned, sold, hypothecated, pledged,
transferred, or otherwise disposed (except by will, descent, or
operation of law) until released from escrow.
3. Except as otherwise provided by this Agreement, any distribution,
cash, stock, or property paid or issued with respect to the Escrowed
Units and any distribution, cash, stock or property paid or issued
with respect to the Escrowed Units by reason of any exchange of units,
merger, consolidation, recapitalization, reorganization or similar
business combination shall be subject to the terms of this Agreement.
4. In the event the Company makes a distribution to its Unitholders in
connection with the liquidation, dissolution, bankruptcy,
receivership, or sale of all or substantially all of the Company
assets, then a distribution shall be made to all Unitholders based on
their positive Capital Account balances, as that term is defined in
the Company's Amended and Restated Operating Agreement dated November
27, 2001 as amended for clarification purposes by the Directors on
January 10, 2002, and any other subsequent amendment thereto. Any
remaining proceeds shall be distributed to all Unitholders in
proportion to the
total number of units owned by each Unitholder as compared to the
total number of units owned by all the Unitholders.. If the
distribution consists of non-cash items, the fair market value of
non-cash items shall be valued by an independent appraiser.
5. In the case of a tender offer to purchase all or substantially all of
the Company's outstanding units, or a merger, consolidation, or
reorganization into an unaffiliated entity, the Escrowed Units shall
be released from escrow and this Agreement shall be terminated if the
majority of the non-escrowed units (excluding all units owned or
controlled directly or indirectly by any officer, director, or person
subject to this Agreement) are purchased in such tender offer or voted
in favor of such merger, consolidation, or reorganization.
6. Other than as specified by this Agreement, the Unitholder shall have
all beneficial rights of ownership of the Escrowed Units, including
the right to vote the Escrowed Units for all purposes.
7. All calculations used in this Agreement shall be adjusted should the
Company make a unit distribution or distribution of units, have a unit
split, have a reverse unit split, or otherwise reclassify its units.
8. All Escrowed Units shall be released by the Escrow Agent and this
Agreement shall be terminated when:
a. The Company has provided to the Escrow Agent and the Commissioner
of Securities annual audited financial statements (per United
States Generally Accepted Accounting Principles consistently
applied and signed by a Certified Public Accountant) showing,
and a certification by the Company as to the Company's
fully-diluted net earnings, after taxes and exclusive of
extraordinary items, for a period of four consecutive quarters of
at least $600.00 per unit per quarter or for each of two
consecutive periods of four consecutive quarters of at least
$300.00 per unit per quarter; and
b. The Escrow Agent has not received written objection from the
Commissioner of Securities within thirty (30) days of receipt of
such audited financial statements by the Commissioner of
Securities.
9. If the Escrowed Units are not released pursuant to the terms of paragraph
(8) above, then twenty-five per cent (25%) of the total amount of units
originally escrowed shall be released automatically on each of the fifth,
sixth, seventh, and eighth anniversaries of the effective date of the
registration (File No. 31363) in Ohio as stated in the Division Order
granting effectiveness, a copy of which will be provided by the Company to
the Escrow Agent. This Agreement shall also terminate on the eighth
anniversary of the registration (File No. 31363). Units shall be released
ratably to all Unitholders subject to this Agreement.
10. Any cash distributions and associated Interest, as defined in this
paragraph, paid on Escrowed Units or earned in respect of such
distributions and held by the Escrow Agent pursuant to paragraph (3) and/or
this paragraph shall be released upon the release of the Escrowed Units to
which such distributions and associated Interest are attributable. The
Escrow Agent shall invest or
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reinvest any cash held in escrow in accordance with the written
instructions of the Company from time to time, until all the Escrowed Units
and their associated distributions and any interest, dividends or increase
earned thereon (collectively, "Interest") have been released from escrow.
Absent written instructions from the Company to the contrary, the Escrow
Agent shall invest and reinvest any cash held in escrow together with the
Interest thereon (the "Escrow Amount") in the Armada Money Market Fund. The
Company acknowledges receipt of disclosure that the Escrow Agent or an
affiliate of the Escrow Agent serves as investment advisor to the Armada
Money Market Fund and in such capacity receives a fee. The Escrow Agent is
authorized to liquidate in accordance with its customary procedures any
portion of the Escrow Amount consisting of investments to provide for
payments required to be made under this Agreement. The Escrow Agent shall
not be required to invest any funds held hereunder except as directed in
this Agreement, or in written instructions from the Company. The Escrow
Agent does not have any interest in the Escrow Amount deposited hereunder
but is serving as escrow holder only and having only possession thereof.
Each Unitholder shall be responsible for the payment of taxes related to
Interest earned on the Escrow Amount. Any payments of Interest to
Unitholders from the Escrow Amount shall be subject to any applicable
withholding regulations then in force with respect to United States taxes.
Each Unitholder will provide the Escrow Agent with an appropriate Internal
Revenue Service Form W-9 for tax identification number certification. The
Escrow Agent will provide 1099 reporting. This paragraph shall survive
notwithstanding any termination of this Agreement or the resignation of the
Escrow Agent.
11. Other than as specified by this Agreement, the Escrow Units shall be
released if the offering has been terminated pursuant to Section 3.(b) or
3.(c) of that certain Escrow Agreement dated February 22, 2002, by and
between Northwest Ethanol, LLC and National City Bank as escrow agent.
12. In performing any of its duties, the Escrow Agent shall not incur any
liability for any damages, losses, or expenses, except for willful
misconduct or gross negligence. It shall not incur any liability with
respect to any action taken or omitted in good faith upon advice of counsel
or counsel for the Company given with respect to the duties and
responsibilities of the Escrow Agent under this Escrow Agreement. The
Escrow Agent may in good faith rely on the truth and accuracy of any
information believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement and which conforms with the provisions
of this Agreement.
13. The Company and the Unitholders jointly and severally agree to indemnify
and hold harmless the Escrow Agent against any and all losses, claims,
liabilities and expenses, including reasonable costs of investigation,
counsel fees and disbursements, which may be imposed upon or incurred by
the Escrow Agent in connection with its acceptance of appointment as Escrow
Agent.
14. The Escrow Agent's fees for serving as Escrow Agent under this Agreement
shall be $1,500.00 per year or any part thereof, as well as the fees listed
below in this paragraph, and all fees shall be paid by the Company:
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Armada Fund Automatic Cash Management Fee 50 basis points of daily
balance calculated daily
Purchase of sale of assets other than
Armada Funds $50.00
15. This Escrow Agreement may be executed in any number of counterparts with
the same force and effect as if all parties had signed the same document.
16. All notices, requests, instructions or other communications required or
permitted to be given under this Agreement shall be given in writing and
delivered by certified mail or hand-delivered to all parties to this
Agreement and to the Commissioner of the Ohio Division of Securities, at
the following address:
Ohio Department of Commerce
Division of Securities
77 South High Street, 22nd Floor
Columbus, Ohio 43215-6131
Attn: Mark R. Heuerman, Esq.
17. If the Escrow Agent is unable to perform its duties, a new escrow agent
shall be appointed, a new Escrow and Subordination Agreement (identical in
all respects to this Agreement) shall be entered into, and notice shall be
given to the Division. The Escrow Agent must be satisfactory to the
Division.
18. This Agreement sets forth the entire understanding of the parties hereto
with respect to the operations contemplated hereby and may not be amended
except by a written instrument executed by the parties hereto and consented
to by the Commissioner of the Ohio Division of Securities.
19. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Ohio.
20. This Agreement may be executed in counterparts, which together shall
constitute one and the same binding agreement.
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Northwest Ethanol, LLC 5Cs Farms
By /s/ Ted W. Penner Sec/Treas By /s/ William A. Cleland Jr.
------------------------------- ----------------------------------
Company, Date Unitholder, Date
National City Bank Nester Ag Management
By /s/ Karen Franklin /s/ Joe Nester
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Unitholder, Date
/s/
------------------------------- Ney Oil Company
Escrow Agent, Date
By /s/ Lynn Bergman
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Unitholder, Date
Spatial Ag Systems, LLC
By James Joost, Member
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Unitholder, Date
/s/ Eugene Schubert
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Unitholder, Date
/s/ Fred Schubert
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Unitholder, Date
/s/ Virgil Hoene
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Unitholder, Date
/s/ Gary Mavis
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Unitholder, Date
/s/ Ted Penner
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Unitholder, Date
ESCROW AND SUBORDINATION AGREEMENT
EXHIBIT A
Unitholder Name and Address # of units escrowed
Ted W. Penner, Esq. 57.4 Units
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101 Clinton Street, Suite 1500
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Defiance, Ohio 43512
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Spatial Ag Management, LLC 97.2 Units
- ---------------------------------------- -----------------------------
c/o James Joost
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11111 Lockwood Road
- ----------------------------------------
Sherwood, Ohio 43556
5C's Farms, Inc. 49.2 Units
- ---------------------------------------- -----------------------------
c/o William A. Cleland, Jr.
- ----------------------------------------
R.R. 20683
- ----------------------------------------
Hicksville, Ohio 43526
- ----------------------------------------
Eugene Schubert 37.2 Units
- ---------------------------------------- -----------------------------
13021 Scott Road
- ----------------------------------------
Ney, Ohio
- ----------------------------------------
Nester Ag-Management 47.6 Units
- ---------------------------------------- -----------------------------
c/o Joel Nester
- ----------------------------------------
01521 Ney-Williams Center Road
- ----------------------------------------
Bryan, Ohio 43506
- ----------------------------------------
Gary Mavis 40.2 Units
- ---------------------------------------- -----------------------------
08660 Beerbower Road
- ----------------------------------------
Edgerton, Ohio 43517
- ----------------------------------------
Ney Oil Company 37.2 Units
- ---------------------------------------- -----------------------------
c/o Lynn Bergman
- ----------------------------------------
14533 Defiance - Paulding County Line Rd.
- ----------------------------------------
Cecil, Ohio
- ----------------------------------------
Fred Schubert 22.8 Units
- ---------------------------------------- -----------------------------
112 Sunset Avenue
- ----------------------------------------
Sherwood, Ohio 43556
- ----------------------------------------
Virgil Hoene 94.2 Units
- ---------------------------------------- -----------------------------
Box 23
- ----------------------------------------
Sherwood, Ohio 43556
- ----------------------------------------
Company Name and Address
Northwest Ethanol, LLC
- ----------------------------------------
P.O. Box 4505
- ----------------------------------------
Sherwood, Ohio 43556-0505
- ----------------------------------------
Attention: Ted W. Penner, Esq.
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Telephone: (419) 784-9982
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Facsimile: (419) 784-9991
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Escrow Agent Name and Address
National City Bank
- ----------------------------------------
One National City Center, Suite 655S
- ----------------------------------------
Indianapolis, IN 46255
- ----------------------------------------
Attention: Charles L. Mariner
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Telephone: (317) 267-7260
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Facsimile: (317) 267-7605
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