SUBORDINATION AGREEMENT
Exhibit 10.12
THIS SUBORDINATION AGREEMENT (this “Agreement”) is made as of July 13, 2007, by and among CAMOFI Master LDC and CAMHZN Master LDC, each a Cayman Islands Limited Duration Company (collectively, the “Senior Lender”), the lenders listed on Schedule A attached hereto (each a “Junior Lender”, and collectively, the “Junior Lenders”), and XXXX DEVELOPMENT CORP., a Nevada corporation and each of its subsidiaries (collectively, the “Borrower”).
RECITALS
A. The Senior Lender has purchased certain secured notes from the Borrower and pursuant to the terms and provisions of the Securities Purchase Agreement and related documents, each dated as of July 13, 2007 (as amended, modified or amended and restated from time to time, the “Purchase Agreement”), by and among the Senior Lender and the Borrower;
B. The Junior Lenders have loaned certain monies to the Borrower on terms between the Junior Lenders and the Borrower, each in the principal amount set forth opposite the Junior Lenders’ name on Schedule A; and
C. It is a condition to the Senior Lender’s obligations to purchase the secured notes from the Borrower that the Junior Lenders enter into this Agreement;
NOW, THEREFORE, in consideration of the above recitals and the provisions set forth herein, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows, intending to be legally bound:
AGREEMENT
Section 1. Definitions. For purpose of this Agreement, the following terms used herein shall have the following meanings:
“Collateral” means any and all property which now constitutes or hereafter will constitute collateral or other security for payment of the Senior Debt pursuant to the Senior Loan Documents.
“Default” means a default or event of default under the Junior Notes, or any of them, or under any other instrument or agreement evidencing the Junior Debt.
“Junior Debt” means all indebtedness, obligations, and liabilities of the Borrower or any guarantor to the Junior Lenders, under any agreement of any kind, including, without limitation, all principal and interest (including, without limitation, any interest accruing after the filing of any petition in bankruptcy or the commencement of any Proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such Proceeding) and late fees payable thereunder, and any obligation to redeem, repurchase or otherwise acquire any Junior Securities.
“Junior Loan Documents” means any all documents evidencing the Junior Debt.
“Junior Securities” means any securities (including common stock, warrants or other equity securities) other than those Securities issued to the Senior Lender.
“Person” means any corporation, association, joint venture, partnership, limited liability company, organization, business, individual, trust, government or agency or political subdivision thereof, or any other legal entity.
“Proceeding” means (a) any insolvency, bankruptcy, receivership, custodianship, liquidation, reorganization, readjustment, composition, or other similar proceeding relating to Borrower or any of its respective properties, whether under any bankruptcy, reorganization, or insolvency laws or any law relating to relief of debtors, readjustment of indebtedness, reorganization, composition, or extension; (b) any proceeding for the liquidation, liquidating distribution, dissolution, or other winding up of Borrower, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings; (c) any assignment for the benefit of creditors of Borrower; or (d) any other marshalling of the assets of Borrower.
“Remedy” means, with respect to a Default, the acceleration of any Junior Debt or the exercise of any remedies in respect of such Default (including, without limitation, the right to xxx the Borrower, to exercise any right of set off, to put or otherwise tender for repurchase any Junior Securities, and to file or participate in any involuntary bankruptcy proceeding against the Borrower, and explicitly including the imposition of default rate interest).
“Senior Debt” means all of the following: (a) the aggregate principal indebtedness outstanding from time to time under the Purchase Agreement, (b) all interest accrued and accruing on such aggregate principal amounts from time to time (including, without limitation, any interest accruing after the filing of any petition in bankruptcy or the commencement of any Proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such Proceeding), (c) all other costs, fees, and expenses owed from time to time under the Senior Loan Documents and (d) all other liabilities, indebtedness and obligations of Borrower to the Senior Lender, whether now existing or hereafter arising, direct or indirect, contingent or non-contingent, secured or unsecured, due or not due.
“Senior Event of Default” means the occurrence and continuance of an “Event of Default” under the Senior Loan Documents.
“Senior Loan Documents” means the Purchase Agreement, the Senior Notes, and the other Loan Documents (as defined in the Purchase Agreement), as they may be amended, modified, extended, or amended and restated from time to time.
“Senior Notes” means the Notes (as defined in the Purchase Agreement) and any other promissory note executed and delivered by the Borrower to the Senior Lender from time to time, as amended, modified, renewed or extended from time to time.
Section 2. General.
The Borrower and the Junior Lenders agree that on the terms and conditions herein the payment of the Junior Debt by the Borrower is subordinated, to the extent and in the manner provided in this Agreement, to the prior payment in full of all the Senior Debt.
Section 3. Subordination in the Event of a Proceeding.
Upon any distribution of assets of the Borrower upon any Proceeding:
(i) the Senior Lender shall first be entitled to receive payments in full of the Senior Debt in cash, property or securities (with any such property or securities being valued based on its fair market value after deducting liquidation and sale expenses) before any Junior Lender is entitled to receive any payment on account of the Junior Debt;
(ii) any payment or distribution of assets of the Borrower of any kind or character, whether in cash, property, or securities to which any Junior Lender would be entitled except for the provisions of this Agreement, shall be paid by the liquidating trustee or agent or other Person making such a payment or distribution, directly to the Senior Lender, to the extent necessary to pay the Senior Debt in full in cash, property or securities (valued as provided in subsection (i) above) after giving effect to all concurrent payments and distributions; and
(iii) in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Borrower of any kind or character, whether in cash, property, or securities, shall be received by the Junior Lenders on account of the Junior Debt before the Senior Debt is paid in full in cash, property or securities (valued as provided in subsection (i) above), such payment or distribution shall be received and held in trust by the Junior Lenders for the benefit of the Senior Lender, to the extent necessary to pay the Senior Debt in full in cash, property or securities (valued as provided in subsection (i) above) after giving effect to all concurrent payments and distributions.
The Borrower shall give written notice to the Senior Lender and the Junior Lenders within three days of receipt of notice of any Proceeding.
Section 4. Remedy Standstill.
The Junior Lenders shall not exercise any Remedy in respect of any Default until the earliest of (i) the date the Senior Debt has been paid in full, (ii) the date a Proceeding is commenced or (iii) the date the Senior Debt has been accelerated in writing.
Section 5. Payments Held in Trust, Subrogation, Right to Cure and Purchase.
(i) If any payment or distribution of assets on account of the Junior Debt shall be made by the Borrower or received by the Junior Lenders at a time when such payment or distribution was prohibited by the provisions of this Agreement, then such payment or distribution shall be received and held in trust by the Junior Lenders for the benefit of the
Senior Lender and shall be paid or delivered by the Junior Lenders to the Senior Lender to the extent necessary to enable payment in full of the Senior Debt.
(ii) After the payment in full of all Senior Debt, the Junior Lenders shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of assets of the Borrower applicable to the Senior Debt until all amounts owing on the Junior Debt shall be paid in full, and for the purpose of such subrogation no such payments or distributions to the holders of the Senior Debt by or on behalf of the Borrower, or by or on behalf of the Junior Lenders by virtue of this Agreement, that otherwise would have been made to the Junior Lenders shall, as between the Borrower and the Junior Lenders, be deemed to be payment by the Borrower to or on account of the Senior Debt in respect thereof, it being understood that the provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Junior Lenders, on the one hand, and the holders of such Senior Debt, on the other hand. If any payment or distribution to which the Junior Lenders would otherwise have been entitled but for the provisions of this Agreement shall have been applied, pursuant to the provisions of this Agreement, to the payment of amounts payable under the Senior Debt, then the Junior Lenders shall be entitled to receive from the holders of the Senior Debt any payments or distributions received by such holders of the Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Debt in full.
(iii) The Senior Lender hereby grants the Junior Lenders the right, but not the obligation, to cure any and all defaults under the Senior Debt (to the extent any such defaults are curable) within the same period of time afforded the Borrower for curing such defaults before the same become Senior Events of Default. The Senior Lender shall have no obligation hereunder, however, to provide notice of any Senior Event of Default to the Junior Lenders, and the lack of any such notice shall not affect the existence or occurrence of any Event of Default.
Section 6. No Prejudice or Impairment.
Nothing contained in this Agreement, is intended to or shall impair, as between the Borrower and the Junior Lenders, the obligation of the Borrower, which is absolute and unconditional, to pay to the Junior Lenders the Junior Debt as and when the same shall become due and payable in accordance with its terms, or is intended to or shall affect the relative rights of the Junior Lenders and creditors of the Borrower (other than the holders of the Senior Debt).
Section 7. Proofs of Claim.
In connection with any Proceeding involving any Borrower, the Junior Lenders are entitled to file proofs of claim in respect of the Junior Debt. Upon the failure of the Junior Lenders to take any such action as of the fifteenth Business Day preceding the bar date for the filing of proofs of claims, the Senior Lender is hereby irrevocably authorized and empowered, but shall have no obligation to file proofs of claim with respect to the Junior Debt. Notwithstanding the foregoing, the Senior Lender shall not have any right whatsoever to vote any claim that the Junior Lenders may have in the Proceeding to accept or reject any plan or
partial or complete liquidation, reorganization, arrangement, composition, or extension; provided, that the Junior Lenders shall not vote with respect to any such plan or take any other action in any way so as to contest (i) the relative rights and duties of the Senior Lender under the Senior Loan Documents with respect to any collateral or guaranties or (ii) the Junior Lenders’ obligations and agreements set forth in this Agreement.
Section 8. Benefit of Agreement; Amendments of Certain Documents; etc.
This Agreement shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become a Senior Lender, and such provisions are made for the benefit of each subsequent Senior Lender and each of them may enforce such provisions.
The Senior Loan Documents may be amended, supplemented, waived, altered, modified, or otherwise changed in any manner approved by the Senior Lender and the Borrower without the consent or approval of the Junior Lenders. The Junior Loan Documents may not be amended, supplemented, waived, altered, modified, or otherwise changed in any manner without the prior written approval of the Senior Lender.
The Senior Lender shall have no obligation to preserve rights in the Collateral against any prior parties or to marshal any of the Collateral for the benefit of any Person. No failure to exercise, and no delay in exercising on the part of any party hereto, any right, power, or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided in this Agreement are cumulative and shall not be exclusive of any rights or remedies provided by law.
Except as expressly set forth herein, there shall be no third party beneficiaries of this Agreement.
Section 9. Further Agreements Concerning the Collateral and Senior Debt.
Each Junior Lender agrees that (i) it will not at any time contest the validity, perfection, priority or enforceability of the security interests and liens granted by the Borrower to the Senior Lender in the Borrower’s assets; (ii) the Senior Lender may administer the Senior Debt and any of the Senior Lender’s agreements with the Borrower in any way the Senior Lender deems appropriate consistent with the terms and provisions of the Senior Loan Documents, without regard to the Junior Lenders or the Junior Debt; (iii) the Senior Lender shall have no obligation to preserve rights in the Collateral against any prior parties or to marshal any of the Collateral for the benefit of any Person; (iv) nothing in this Agreement shall impair or adversely affect the manner or timing with which the Senior Lender enforces any of its security; (vi) nothing in this Agreement shall impair or adversely affect any right, privilege, power or remedy of the Senior Lender with respect to the Senior Debt, the Borrower, or any assets of the Borrower, including without limitation, the Senior Lender’s right to (x) waive or release any of the Senior Lender’s security or rights, (y) waive or ignore any defaults by the Borrower; and/or (z) restructure, renew, modify, or supplement the Senior Debt or any portion thereof or any agreement with the Borrower relating to the Senior Debt or to increase the outstanding principal amount of the Senior Debt by extending additional credit to the Borrower; and (vi) nothing contained herein is
intended to alter or deprive the Senior Lender of any of its rights as the senior secured creditor of the Borrower to collect or otherwise foreclose upon any of the Borrower’s assets.
Section 10. Instrument Legend.
Any instrument evidencing any of the Junior Debt (including, without limitation, the Junior Notes), or any portion thereof, will, on the date hereof, have affixed to it a document conspicuously indicating that payment thereof is subordinated to the claims of the Senior Creditor pursuant to the terms of this Agreement: “THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF JULY 13, 2007 BY AND BETWEEN THE HOLDER HEREOF AND CAMOFI MASTER LDC AND CAMHZN MASTER LDC.” Any instruments evidencing any of the Junior Debt, or any portion thereof, which is hereafter executed by the Borrower, will, on the date thereof, be inscribed with the aforesaid legend, and copies of such instrument will be delivered to the Senior Lender on the date of its execution or within five (5) business days thereafter and the original of such instrument will be delivered to the Senior Lender upon request therefor to the Senior Lender after the occurrence of a Senior Event of Default.
Section 11. Representations and Warranties.
Each of the parties hereto hereby represents and warrants that (i) it has full power, authority and legal right to make and perform this Agreement and (ii) this Agreement is its legal, valid, and binding obligation, enforceable against it in accordance with its terms.
Section 12. Amendment.Neither this Agreement nor any of the terms hereof may be amended, waived, discharged, or terminated unless such amendment, waiver, discharge, or termination is in writing signed by the Senior Lender and the Junior Lenders.
Section 13. Successors and Assigns. This Agreement and the terms, covenants, and conditions hereof shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, and neither the Senior Debt nor the Junior Debt shall be sold, assigned, or transferred unless the assignee or transferee thereof expressly takes such debt subject to and agrees to be bound by the terms and conditions of this Agreement.
Section 14. Governing Law. This Agreement will be construed in accordance with and governed by the law of the State of New York, without regard to the choice of law principles thereof.
Section 15. Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration, or other communication shall be in writing and shall be deemed to have been duly given and received, for purposes hereof, when (i) delivered by hand, (ii) four days after being deposited in the mail, postage prepaid, and (iii) one Business Day after having been sent by reputable overnight courier, in each case addressed as set forth on Annex I hereto or at such address as may be substituted by notice given as herein provided. Failure to
delay in delivering copies of any communication to the persons designated to receive copies shall in no way adversely affect the effectiveness of such communication.
Section 16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 17. Final Agreement. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 18. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE SENIOR LENDER, THE JUNIOR LENDERS AND THE BORROWERS HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED THEREBY OR THE ACTIONS OF THE SENIOR LENDER OR THE JUNIOR LENDERS IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY; SIGNATURES PAGES FOLLOW.]
IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be duly executed by their proper and duly authorized officers as of the day and year first above written.
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SENIOR LENDERS: |
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CAMOFI MASTER LDC |
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CAMHZN MASTER LDC |
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JUNIOR LENDERS: |
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BORROWER: |
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XXXX DEVELOPMENT CORP. |
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SUBSIDIARIES |
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ANNEX I
ADDRESSES FOR NOTICE
Senior Lender
CAMOFI Master LDC
CAMHZN Master LDC
c/o Centrecourt Asset Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx XX 00000
Attn: Xxxxx X. Xxxxxxx, General Counsel
Junior Lenders
Borrowers
with a copy to:
