Exhibit 10.14
RETURN TO:
Xxxxx Xxxxxxxxxx, Esq.
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
THIS INSTRUMENT PREPARED BY:
Xxxxx Xxxxxxxxxx, Esq.
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") dated
as of November 26, 2002, and effective as of December 19, 2002 is entered into
between Guaranty Business Credit Corporation ("Senior Lender"), and Halifax
Fund, L.P. ("Halifax").
RECITALS
A. U.S. Plastic Lumber Ltd., a Delaware corporation ("Borrower")
is indebted to Senior Lender pursuant to that certain Loan and Security
Agreement (the "Loan Agreement') dated as of the date hereof between Senior
Lender and Borrower.
B. U.S. Plastic Lumber Corp., a Nevada corporation ("USPL"), U.S.
Plastic Lumber Finance Corporation and U.S. Plastic Lumber IP Corporation each
executed guaranties (the "Guaranties") dated the date hereof in favor of Senior
Lender, which guaranties each guarantee the obligations of Borrower to Senior
Lender under the Loan Agreement.
C. Borrower's obligations under the Loan Agreement and each of
the Guaranties are to be secured by a first priority continuing Lien on all
Senior Lender Collateral, including, without limitation, the Ocala Property (as
defined herein) .
D. USPL is indebted to Halifax pursuant to the Halifax Documents.
E. Each of the Credit Parties (other than USPL) have executed
guaranties in favor of Halifax.
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F. USPL's obligations and each of the guaranties thereof are each
secured pursuant to the Halifax Documents.
G. All Halifax Indebtedness is to be secured by a second priority
continuing Lien on all Senior Lender Collateral.
H. Senior Lender and Halifax have entered into this Agreement in
order to set forth, among other things, the relative priority of their
respective Liens on, and their respective rights with respect to, the Senior
Lender Collateral.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Senior Lender and Halifax hereby
agree as follows:
SECTION 1. Certain Definitions. The following terms shall have the
following meanings for purposes of this Agreement (including the background
recitals hereto):
"Bankruptcy Code" means Chapter 11 of title 11 of the United States
Code (11 U.S.C. Section 101 et seq.), as amended from time to time, and any
successor statute, and all rules and regulations promulgated thereunder.
"Borrower" see the Preamble.
"Credit Parties" means, collectively, Borrower, USPL, U.S. Plastic
Lumber Finance Corporation, U.S. Plastic Lumber IP Corporation and The
Eaglebrook Group, Inc.
"Guaranties" see the Preamble.
"Halifax" - see the Preamble.
"Halifax Documents" means and includes the documents relating to the
issuance of the Subordinated Debenture, the Subordinated Note, the Halifax
Mortgage and all other agreements, documents and instruments set forth on
Schedule 1 hereto, and all other agreements, documents and instruments
evidencing any replacement, substitution, refunding, renewal or refinancing of
or for all or any part of the Halifax Indebtedness, in each case as amended,
restated, supplemented or otherwise modified and in effect from time to time, to
the extent permitted pursuant to the terms hereof.
"Halifax Indebtedness" means all indebtedness, liabilities and other
obligations of any and every kind and nature now existing or hereafter arising,
contingent or otherwise, of USPL, any other Credit Party or any other Person
under, in connection with, or evidenced or secured by the Halifax Documents, in
each case including, without limitation, obligations to pay (i) principal, (ii)
interest or premium (including interest accruing after the commencement of any
Proceeding, whether or not constituting an allowed claim in such Proceeding),
(iii) dividends, (iv) fees, (v) costs, expenses and other amounts related to any
indemnity against loss, damage or liability and (vi) any other monetary
obligation.
"Halifax Mortgage" means that certain Mortgage, Security Agreement,
Financing Statement and Assignment of Leases and Rents, executed by Borrower in
favor of Halifax on
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September 24, 2002 and recorded on October 3, 2002 , in Book 03250, Page 871 as
File No. 2002 11 0777 in the Public Records of Xxxxxx County, Florida.
"Holders" means the holders of the Subordinated Debenture and the
Subordinated Note.
"Junior Security" means (i) any common stock of USPL, (ii) any
preferred stock of USPL which is not mandatorily redeemable prior to the 91st
day after the payment in full in cash of all Senior Indebtedness and (iii) any
debt securities issued by USPL which are expressly subordinated to the Senior
Indebtedness at least to the extent set forth herein.
"Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
"Loan Agreement" - see the Preamble.
"Ocala Property" means the real property located at 0000 Xxxxxx Xxxx,
Xxxxx 0000, Xxxx Xxxxx, Xxxxxxx 00000 for which a legal description is attached
hereto as Exhibit A.
"Other Senior Default" - see Section 2.3(b).
"Payment Default" - see Section 2.3(b).
"Payment Blockage Period" - see Section 2.3(b).
"Person" means any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.
"Proceeding" means, with respect to any Person, any (a) insolvency,
bankruptcy, receivership, liquidation, reorganization, readjustment, composition
or other similar proceeding relating to such Person or its Property or creditors
in such capacity, (b) proceeding for any liquidation, dissolution or other
winding-up of such Person, voluntary or involuntary, whether or not involving
insolvency or proceedings under the Bankruptcy Code, whether partial or complete
and whether by operation of law or otherwise, (c) assignment for the benefit of
creditors of such Person or (d) other marshaling of the assets of such Person.
"Property" means, with respect to any Person, all property and
interests in property of such Person, whether real, personal or mixed, whether
now owned or existing or hereafter acquired or arising and wheresoever located.
"Senior Commitment" means the commitment of Senior Lender to provide
financing under the Senior Loan Agreement.
"Senior Default Notice" - see Section 2.3(b).
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"Senior Enforcement Action" means any of the following: (a) with
respect to any Term Advances outstanding, acceleration by Senior Lender or, with
respect to any Revolving Advances outstanding, demand for payment by Senior
Lender of all or any part of the Senior Indebtedness; (b) commencement of any
Proceeding with respect to any Credit Party; (c) initiation of any suit or
action, including any Proceeding, against or with respect to any Credit Party or
other Person to enforce payment of or to collect the whole or any part of the
Senior Indebtedness; or (d) the taking by Senior Lender of any action under the
provisions of any state or federal law, including, without limitation, the
Bankruptcy Code or the UCC, to enforce, foreclose upon, take possession of or
sell any Property of any Credit Party or any other Person on account of all or
any part of the Senior Indebtedness, including, any Senior Lender Collateral.
"Senior Indebtedness" means all indebtedness, liabilities and other
obligations of any and every kind and nature now existing or hereafter arising,
contingent or otherwise, of any Credit Party or any other Person under, in
connection with, or evidenced or secured by the Senior Loan Documents.
"Senior Lender" - see the Preamble.
"Senior Lender Collateral" means all of each Credit Party's (other than
The Eaglebrook Group, Inc.) Property, whether now owned or existing or hereafter
acquired or arising and wheresoever located, including, without limitation, (i)
all of each Credit Party's accounts, machinery, equipment, fixtures, inventory,
goods, chattel paper, general intangibles, investment property, instruments and
documents, (ii) all real property and interests in real property (including
leasehold interests), including, without limitation, the Ocala Property and
(iii) all accessions to, substitutions for and replacements, products and
proceeds of all of the foregoing Property; provided, however that Senior Lender
Collateral shall not include any property specifically carved out of the
definition of Collateral set forth in Section 8.1 of the Loan Agreement.
"Senior Loan Documents" means and includes the Loan Agreement, the
Senior Mortgage, the Guaranties and the respective securities agreements of each
Credit Party, to the extent applicable, and all other agreements, documents and
instruments now or at any time hereafter entered into or delivered by any Credit
Party pursuant thereto, or evidencing any replacement, substitution, refunding,
renewal or refinancing of or for all or any part of, the Senior Indebtedness, in
each case as amended, restated, supplemented or otherwise modified and in effect
from time to time, to the extent permitted pursuant to the terms hereof.
"Senior Mortgage" means that certain Mortgage, Security Agreement,
Financing Statement and Assignment of Leases and Rents, executed by Borrower in
favor of Senior Lender on or about the date hereof, to be recorded substantially
in concurrence with the date hereof in the Public Records of Xxxxxx County,
Florida.
"Subordinated Debenture" means the $2,831,558 10% Convertible
Subordinated Debenture due March 26, 2006 issued by USPL to Halifax.
"Subordinated Note" means the $5,600,000 10% Subordinated Note due
March 26, 2006 issued by USPL to Halifax.
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"UCC" means the Uniform Commercial Code, as in effect from time to time
in any applicable jurisdiction.
"USPL" - see the Recitals.
All terms used but not otherwise defined herein but defined in the UCC
shall have the respective meanings provided in the UCC.
SECTION 2. Lien Priorities; Payments.
2.1 Subordination. Notwithstanding the date, manner or order of
grant, attachment or perfection of the Liens on all or any part of the Senior
Lender Collateral granted to Senior Lender and Halifax, and notwithstanding the
provisions of the UCC or any other applicable law or decision, or the terms or
provisions of the Senior Loan Documents or the Halifax Documents, respectively,
or any other circumstance whatsoever, Halifax hereby agrees that (a) Senior
Lender shall have a first, prior, senior and continuing Lien on all of the
Senior Lender Collateral, including, without limitation, the Ocala Property, to
secure the prompt and complete payment, performance and observance of all Senior
Indebtedness and (b) any Lien on all or any part of the Senior Lender Collateral
including, without limitation, the Ocala Property, now or hereafter held by
Halifax or any other Holder, regardless of when or how acquired, whether by
grant, statute, operation of law, subrogation or otherwise, shall be in all
respects and for all purposes subject to, junior to and subordinate to all Liens
on all or any part of the Senior Collateral granted to or held by Senior Lender.
2.2 Prohibition on Contesting Liens. Halifax agrees not to
challenge, to seek to avoid or subordinate or to contest, or directly or
indirectly to support any other Person in challenging, seeking to avoid or
subordinate or contesting, in any judicial or other proceeding (including,
without limitation, any Proceeding) the priority, validity, extent, perfection
or enforceability of any Lien held by Senior Lender in all or any part of the
Senior Lender Collateral. The foregoing shall not prevent Halifax from providing
documents to any Person pursuant to subpoena or other legal process.
2.3 Payments. (a) Notwithstanding any provision of this Agreement
to the contrary, (i) at all times prior to the earlier to occur of (x) the
commencement of any Proceeding and (y) the receipt by Halifax of notice from
Senior Lender of the commencement of any other Senior Enforcement Action,
Halifax and Holders may accept from any Credit Party (1) regularly scheduled
payments of interest at the respective times and in the respective amounts
required pursuant to the Halifax Documents without regard to whether such
payments constitute Loans from Senior Lender (it being understood that during
the period beginning on September 24, 2002 and ending on the second anniversary
thereof, to the extent that any interest becomes due on a Scheduled Payment Date
(as defined in the Subordinated Debenture and the Subordinated Note) USPL shall
pay such interest, but only by increasing the principal balance of such notes
and not by payment of any moneys) and (2) beginning on September 25, 2005,
regularly scheduled payments of principal at the respective times and in the
respective amounts required pursuant to the Halifax Documents without regard to
whether such payments constitute proceeds of Senior Lender Collateral; (ii) the
Halifax Indebtedness may be converted into or exchanged for Junior Securities;
and (iii) Halifax may receive and retain any payment made solely in Junior
Securities.
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(b) Except as provided in Section 2.3(a)(ii) and (iii), no direct
or indirect payment (including by way of set-off) by any Credit Party in respect
of the Halifax Indebtedness, whether upon acceleration or otherwise, shall be
made if at the time of such payment there exists (x) a default in the payment
when due (whether upon acceleration or otherwise) of any principal of, or any
interest on or fees included in, any Senior Indebtedness (such default, a
"Payment Default"); or (y) subject to the following sentences of this paragraph,
a matured event of default (other than a Payment Default) under the Senior Loan
Documents (an "Other Senior Default") and Halifax and USPL have received notice
from Senior Lender, in the manner specified in Section 16 hereof, of such event
of default (a "Senior Default Notice"). With respect to any Other Senior
Default, the period during which no payment on account of Halifax Indebtedness
may be made to or retained by Halifax shall commence only upon giving of a
Senior Default Notice as provided above and shall end at the first to occur of
(x) completion of the 180th day after the beginning of such period, (y) the cure
or waiver of all defaults existing at the time of the applicable Senior Default
Notice or (z) payment in full in cash of all Senior Indebtedness (the "Payment
Blockage Period"). Upon termination of any Payment Blockage Period, USPL may
resume payments on account of the Halifax Indebtedness (including any missed
payments) subject to the provisions of Section 2.3(a). Only one Senior Default
Notice may be given in any period of 360 consecutive days, and no Other Senior
Default which was in existence on the date of a Senior Default Notice may be
used as the basis for a subsequent Senior Default Notice (it being understood
that any action, or breach of a financial covenant, which occurs after the date
on which a Senior Default Notice is given that, in either case, would give rise
to a matured event of default pursuant to any provision of the Senior Loan
Documents under which a matured event of default existed shall constitute a new
matured event of default for purposes of this paragraph). Halifax shall not
institute any suit or other action against Borrower during any Payment Blockage
Period.
SECTION 3. Enforcement.
3.1 No Exercise of Remedies.
(a) Unless and until Senior Lender shall have received
indefeasible payment in full in cash of all Senior Indebtedness and the Senior
Loan Documents and all Senior Commitments thereunder shall have been terminated
pursuant to the respective terms and provisions thereof, except for its receipt
of payments expressly permitted under Section 2.3, neither Halifax nor any other
Holder shall exercise any right or remedy in respect of all or any part of the
Senior Lender Collateral, and Halifax and each Holder agrees not to take or
receive from any Credit Party, directly or indirectly, in cash or other Property
or by set-off or in any other manner, whether pursuant to any enforcement,
collection, execution, levy or foreclosure proceeding or otherwise, all or any
part of the Senior Lender Collateral. Without limiting the generality of the
foregoing, unless and until Senior Lender shall have received indefeasible
payment in full in cash of all Senior Indebtedness and the Senior Loan Documents
and all Senior Commitments thereunder shall have been terminated pursuant to the
respective terms and provisions thereof (i) neither Halifax nor any other Holder
shall exercise or otherwise assert any right or remedy in respect of all or any
part of the Senior Lender Collateral or any Lien thereon; (ii) Halifax shall
have no right either to possess any of the Senior Lender Collateral, enforce any
security interests in, foreclose, levy or execute upon, or collect or attach any
of the Senior Lender Collateral, whether by private or judicial action or
otherwise; the sole right of Halifax with respect to the Senior
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Lender Collateral shall be to hold a Lien thereon to the extent granted pursuant
to the Halifax Documents and to receive proceeds thereof remaining after such
payment and termination; provided, however, that in the event that the Lien of
Senior Lender is deemed unperfected or invalid, Halifax shall be permitted, to
the extent of such imperfection or invalidity, to exercise the remedies
contained in this clause (ii) so long as any proceeds collected from the
exercise of such remedies are turned over to Senior Lender in accordance with
Section 6 hereof; and (iii) without the prior written consent of Senior Lender,
neither Halifax nor any other Holder shall exercise any right Halifax may have
under the Halifax Documents or under the UCC or other applicable law to deliver
any notices to account debtors informing them of Halifax's interest in any
accounts of any Credit Party or directing such account debtors to make payments
in any particular manner of amounts due in respect of any such account.
3.2 Cooperation. Halifax agrees that, unless and until Senior
Lender shall have received indefeasible payment in full in cash of all Senior
Indebtedness and the Senior Loan Documents and all Senior Commitments thereunder
shall have been terminated pursuant to the respective terms and provisions
thereof, neither Halifax nor any other Holder will commence, or join with any
creditor other than Senior Lender in commencing, any enforcement, collection,
execution, levy or foreclosure proceeding with respect to any Lien held by it
in, or otherwise with respect to, all or any part of the Senior Lender
Collateral, including, without limitation, petitioning, filing or joining in any
involuntary Proceeding pursuant to Section 303 of the Bankruptcy Code.
SECTION 4. Liquidation; Dissolution; Bankruptcy. In the event of any
Proceeding involving any Credit Party, or any sale, transfer or other
disposition of all or substantially all of the assets of any Credit Party:
(a) Halifax agrees:
(i) that Senior Lender may consent to the use of cash
collateral or the provision of financing to the Credit Parties on such terms and
conditions and in such amounts as Senior Lender, in its sole discretion, may
decide and that, in connection with such cash collateral usage or such
financing, as the case may be, each Credit Party (or a trustee appointed for the
estate of any Credit Party) may grant to Senior Lender Liens on all of such
Credit Party's Property, which Liens (x) shall secure payment, performance and
observance of all Senior Indebtedness (whether such Senior Indebtedness arose
prior to the commencement of any Proceeding or at any time thereafter) and (y)
shall be superior in priority to the Liens in favor of Halifax on any Property
of any Credit Party;
(ii) that it will not object to or oppose a sale or other
disposition of any Property of any Credit Party securing all or any part of the
Senior Indebtedness free and clear of Liens or other claims of Halifax under
Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code
if Senior Lender has consented to such sale or disposition;
(iii) agrees that it will not seek to have the automatic
stay lifted with respect to any Senior Lender Collateral, to appoint a Chapter
11 trustee under Section 1104 of the Bankruptcy Code or to convert or dismiss
such Proceeding under Section 1112 of the Bankruptcy Code, in each case without
the prior written consent of Senior Lender;
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(iv) to waive in any Proceeding under the Bankruptcy Code
any claim it may now or hereafter have under Section 1111(b)(2) of the
Bankruptcy Code, including, without limitation, any such claim arising out of
the election by Senior Lender of the application of Section 1111(b)(2) of the
Bankruptcy Code, and/or any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code by any Credit Party as debtor in possession;
and
(v) that to the extent it receives any "adequate
protection" for any interest it may have in any Senior Lender Collateral in any
Proceeding, it will (A) if such "adequate protection" is in the form of cash or
cash equivalents, deliver such "adequate protection" to Senior Lender to be
applied to, or held as collateral for (and, if liquidated, applied against), the
Senior Indebtedness, and (B) if such "adequate protection" is in any other form,
assign such "adequate protection" to Senior Lender to be held as collateral for
(and, if liquidated, to be applied against) the Senior Indebtedness, in each
case until all Senior Indebtedness has been fully satisfied or is no longer
outstanding.
(b) Halifax shall not, directly or indirectly, take any action or
vote in any way that would be in violation of, or inconsistent with, or result
in a breach of, this Agreement or challenge or contest in any Proceeding, or in
connection with any other enforcement, collection, execution, levy or
foreclosure proceeding or otherwise, (i) the validity, perfection, priority or
enforceability of any Liens held by Senior Lender to secure the payment,
performance or observance of all or any part of the Senior Indebtedness, (ii)
the rights of Senior Lender set forth in any of the Senior Loan Documents with
respect to such Liens, or (iii) the validity or enforceability of any of the
Senior Loan Documents or any term, condition or provision of this Agreement.
(c) Subject to the limitations set forth in this Agreement,
Halifax may file proofs of claim and other pleadings and motions with respect to
the Senior Lender Collateral in such Proceeding.
(d) Halifax shall execute and deliver to Senior Lender all such
instruments and other documentation confirming the above authorizations and all
such proofs of claim, assignments of claim and other instruments and
documentation, and shall take all such other action as may be reasonably
requested by Senior Lender to enforce such claims and carry out the purpose of
this Section 4.
(e) The agreements of Halifax set forth in this Section 4 are
solely for the benefit of Senior Lender. Without limiting the foregoing, no
agreement of Halifax set forth in this Section 4, and no action or inaction of
Halifax in accordance with the terms hereof (including, without limitation, any
failure to object to any sale or other disposition of property or any waiver of
any right) shall constitute a relinquishment by Halifax of any Lien it may have
on any property of any Credit Party (other than property which has been sold or
otherwise disposed of by such Credit Party as provided above) or a waiver by
Halifax of any priority it may have over any other creditor of any Credit Party.
SECTION 5. Insurance and Condemnation; Releases of Liens; Effect of
Refinancing.
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(a) Unless and until Senior Lender shall have received
indefeasible payment in full in cash of all Senior Indebtedness and the Senior
Loan Documents and all Senior Commitments thereunder shall have been terminated
pursuant to the respective terms and provisions thereof (i) Halifax agrees that
Senior Lender shall have the sole and exclusive right to adjust settlement with
respect to any insurance coverage for any Senior Lender Collateral and (ii) all
proceeds of any insurance policy, and proceeds of any condemnation or similar
proceeding, covering all or any part of the Senior Lender Collateral shall be
paid to Senior Lender for application to indebtedness of Borrower under the Loan
Agreement. If Senior Lender allows any portion of any proceeds of any insurance,
condemnation or similar award with respect to any Senior Lender Collateral to be
used by any Credit Party to repair or replace the Senior Lender Collateral
affected, Halifax agrees to take promptly all action reasonably requested by
Senior Lender to permit such use.
(b) If Senior Lender releases any of its Liens on all or any part
of the Senior Lender Collateral in connection with the sale or other disposition
thereof (including the sale of all or a portion of the stock or assets of any
Credit Party) or pursuant to any Senior Enforcement Action by Senior Lender or
otherwise (other than in connection with a refinancing as described in Section
5(c) below), Halifax shall thereupon promptly execute and deliver to Senior
Lender such termination statements and releases as Senior Lender shall
reasonably request to effect the release of Halifax's Lien thereon. In
furtherance of the foregoing, Halifax hereby appoints Senior Lender as its
attorney-in-fact, with full authority in the place and stead of Halifax and full
power of substitution and in the name of Halifax or otherwise, to execute and
deliver any document or instrument which Halifax is required to deliver pursuant
to this Section 5(b), such appointment being coupled with an interest and
irrevocable.
(c) Halifax agrees that if the indebtedness owed to Senior Lender
under the Loan Agreement is refinanced (and the obligations of the Credit
Parties (other than Borrower) owing under the Senior Loan Documents are assigned
to a replacement lender or lenders in connection with such refinancing), (i) all
Liens of Halifax on the Senior Lender Collateral will continue to be junior and
subordinate to the Liens of such replacement lender or lenders (or any agent
therefor) and (ii) in order to evidence such subordination, Halifax shall, upon
the request of any Credit Party or such replacement lender or lenders (or any
agent therefor), execute and deliver to such replacement lender or lenders (or
any agent therefor) a subordination and intercreditor agreement containing terms
no less favorable to Halifax than this Agreement (and prior to such execution
and delivery, all of the terms of this Agreement shall inure to the benefit of
such replacement lender or lenders (or such agent) as if such Person or Persons
were the original Senior Lender hereunder).
SECTION 6. When Proceeds Must Be Paid Over. If any proceeds of Senior
Lender Collateral are received by Halifax or any Holder for application to the
Halifax Indebtedness other than as expressly permitted by the terms of this
Agreement, such proceeds shall be received by such Person in trust for the
benefit of Senior Lender and such Person shall promptly turn over such proceeds
to Senior Lender (in the same form as received, with any necessary endorsement),
for application (in the case of cash) to, or as Senior Lender Collateral (in the
case of non-cash Property or securities) for, the payment or prepayment of the
indebtedness owing to Senior Lender under the Loan Agreement in accordance with
the provisions thereof. In the event Halifax or any Holder fails to provide any
endorsement, as contemplated by the preceding
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sentences, Senior Lender, or any of its officers or employees, is hereby
irrevocably authorized to make the same (which authorization, being coupled with
an interest, is irrevocable).
SECTION 7. Subrogation. Halifax hereby waives all rights of subrogation
to the claims of Senior Lender against any Credit Party, and waives all rights
of recourse to any security for any Senior Indebtedness until such time as
Senior Lender shall have received indefeasible payment in full in cash of all
Senior Indebtedness and the Senior Loan Documents and all Senior Commitments
thereunder shall have been terminated pursuant to the respective terms and
provisions thereof; provided that if any payment to Senior Lender is rescinded
as a result of a Proceeding or otherwise, the subrogation of Halifax as provided
herein shall likewise be rescinded until all of the Senior Indebtedness is
indefeasibly paid in full in cash.
SECTION 8. No Impairment of Subordination. No right of Senior Lender to
enforce the subordination of the Liens on Senior Lender Collateral securing all
or any part of the Halifax Indebtedness shall be impaired by any act or failure
to act by any Credit Party or by its failure to comply with this Agreement.
Without limiting the generality of the foregoing, the rights of Senior Lender
under this Agreement shall remain in full force and effect without regard to,
and shall not be impaired by: (a) any act or failure to act of any Credit Party,
Halifax or any other Holder, or any noncompliance by any Credit Party, Halifax
or any other Holder with any agreement or obligation, regardless of any
knowledge thereof which Senior Lender may have or with which Senior Lender may
be charged, (b) the validity or enforceability of the Loan Agreement or any of
the Senior Loan Documents, (c) any extension or indulgence in respect of any
payment or prepayment of the indebtedness owing to Senior Lender under the Loan
Agreement, other Senior Indebtedness or any part thereof or in respect of any
other amount payable to Senior Lender, (d) any amendment, modification or waiver
of any of the terms of the Loan Agreement, the Senior Loan Documents or the
Halifax Documents, (e) any exercise, delayed exercise or non-exercise by Senior
Lender of any right, power, privilege or remedy under or in respect of any
Senior Indebtedness, the Senior Lender Collateral or this Agreement, (f) any
other action of Senior Lender permitted under the Senior Loan Documents or this
Agreement or (g) the absence of any notice to, or knowledge by, Halifax or any
other Holder of the existence, creation or non-payment of all or any part of the
Senior Indebtedness, or the occurrence of any of the matters or events set forth
in the foregoing clauses (a) through (f), except as such notice shall be
specifically required pursuant to the terms hereof.
SECTION 9. Waivers and Consents of Halifax.
(a) All of the Senior Indebtedness shall be deemed to have been
made or incurred in reliance upon this Agreement and Halifax expressly waives
(i) notice of acceptance by Senior Lender of this Agreement, (ii) notice of the
existence or creation or non-payment of all or any part of the Senior
Indebtedness, (iii) all diligence in collection or protection of or realization
upon all or any part of the Senior Indebtedness or any security therefor and any
requirement that Senior Lender protect, secure, perfect or insure any Lien or
any Property subject thereto or exhaust any right or take any action against any
Credit Party or any other Person or any such Property, and (iv) promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Senior Indebtedness.
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(b) Halifax agrees that Senior Lender may, at any time and from
time to time, in its sole discretion, without the consent of or notice to
Halifax or any other Holder, without incurring responsibility to Halifax or any
other Holder, and without impairing or releasing the subordination provided for
herein or the obligations of Halifax or any other Holder to Senior Lender
hereunder, amend, restate, supplement or otherwise modify the Loan Agreement,
any document related thereto or any of the Senior Loan Documents in any way
whatsoever, including, without limitation, the following: (i) shorten the final
maturity of all or any part of the indebtedness owing to Senior Lender under the
Loan Agreement, (ii) modify the amortization of the principal amount of all or
any part of the indebtedness owing to Senior Lender under the Loan Agreement,
(iii) increase the principal amount of the indebtedness owing to Senior Lender
under the Loan Agreement to an amount not in excess of $14,200,000 in the
aggregate, or otherwise provide for additional advances not in excess of such
amount, (iv) raise the standard or default per annum interest rates applicable
to all or any part of the indebtedness owing to Senior Lender under the Loan
Agreement, (v) impose any additional fee or penalty upon any Credit Party or
increase the amount of or rate for any fee or penalty provided for in the Senior
Loan Documents, (vi) retain or obtain a Lien on any Property to secure any of
the Senior Indebtedness, (vii) enter into new Senior Loan Documents with any
Credit Party or any of their direct or indirect subsidiaries, (viii) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, all or any of the Senior Indebtedness or otherwise amend, restate,
supplement or otherwise modify in any manner, or grant any waiver or release
with respect to, all or any part of the Senior Indebtedness or the Loan
Agreement or any of the Senior Loan Documents, (ix) retain or obtain the primary
or secondary obligation of any other Person with respect to any of the Senior
Indebtedness, (x) release any Person liable in any manner under or in respect of
Senior Indebtedness or release or compromise any obligation of any nature of any
Person with respect to any of the Senior Indebtedness, (xi) sell, exchange, not
perfect or otherwise deal with any Property at any time pledged, assigned or
mortgaged to secure or otherwise securing all or any part of the Senior
Indebtedness, (xii) release its security interest in, or surrender, release or
permit any substitution or exchange for, all or any part of any Property
securing any Senior Indebtedness, or release, compromise, alter or exchange any
obligations of any nature of any Person with respect to any such Property, (xiv)
amend, or grant any waiver or release with respect to, or consent to any
departure from, any guaranty for all or any of the Senior Indebtedness, (xv)
exercise or refrain from exercising any rights against, and release from
obligations of any type, any Credit Party or any other Person, (xiv) apply any
sums from time to time received to the Senior Indebtedness in such manner such
as such Person shall determine and (xvi) otherwise manage and supervise the
Senior Indebtedness in accordance with such Person's usual practices, modified
from time to time as such Person deems appropriate under the circumstances.
(c) Halifax agrees that Senior Lender has made no warranties or
representations with respect to the legality, validity, enforceability,
collectability or perfection of the Senior Indebtedness or any Liens held in
connection therewith.
(d) Except in connection with its requirements to (i) sell, lease,
license or otherwise dispose of collateral in a commercially reasonable manner
pursuant to Section 9610 of the UCC, (ii) send an authenticated notice of
disposition of collateral pursuant to Section 9611 of the UCC and (iii) apply or
pay over cash proceeds pursuant to Section 9608(a) and Section 9615(a)(3) of the
UCC, Senior Lender shall have no liability to Halifax as a result of any and all
lawful actions
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which Senior Lender takes or omits to take (including, without limitation,
actions with respect to the creation, perfection or continuation of its Liens,
actions with respect to the occurrence of a default in payment or Other Senior
Default, actions with respect to the foreclosure upon, sale, release or failure
to realize upon, any of its collateral, and actions with respect to the
collection of any claim for all or any part of the Senior Indebtedness from any
account debtor or any other party), regardless of whether any such actions or
omissions may affect Senior Lender's rights to deficiency or Halifax's rights of
subrogation or reimbursement.
SECTION 10. Representations and Warranties of Halifax. Halifax hereby
represents and warrants to Senior Lender that all material agreements, documents
and instruments between Halifax and the other Holders, on the one hand, and any
Credit Party or any of its affiliates, on the other hand, are set forth on
Schedule 1 hereto and, except as disclosed on Schedule 1, no such agreement,
document or instrument has been amended, restated, supplemented or otherwise
modified.
SECTION 11. Marshalling. Halifax hereby waives, to the fullest extent
permitted by applicable law, any rights it may have under applicable law to
assert the doctrine of marshaling or otherwise to require Senior Lender to
xxxxxxxx any Property of any Credit Party for the benefit of Halifax or any
Holder.
SECTION 12. Waiver of Rights. Halifax hereby waives, to the fullest
extent permitted by applicable law, any rights it may have to enjoin or
otherwise obtain a judicial or administrative order preventing Senior Lender
from taking, or refraining from taking, any action with respect to all or any
part of the Senior Lender Collateral.
SECTION 13. Continuation of Subordination; Termination of Agreement.
This Agreement shall in all respects be a continuing agreement and shall remain
in full force and effect until Senior Lender shall have received indefeasible
payment in full in cash of all Senior Indebtedness and all of the Senior Loan
Documents and the Senior Commitments thereunder shall have terminated pursuant
to the respective terms and provisions thereof; provided that this Agreement
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any Senior Indebtedness is rescinded, avoided or must
otherwise be returned by Senior Lender upon the insolvency, bankruptcy or
reorganization of any Credit Party, all as though such payment had not been
made.
SECTION 14. Specific Performance. Senior Lender is hereby authorized to
demand specific performance of the provisions of this Agreement, at any time
when Halifax or any other Holder shall have failed to comply with any term or
provision hereof. Halifax hereby irrevocably waives any defense based on the
adequacy of a remedy at law that might be asserted as a bar to such remedy of
specific performance.
SECTION 15. Further Assurances. Each party hereto will, upon the
written request of the other party, from time to time execute and deliver or
cause to be executed and delivered such further instruments and agreements and
do or cause to be done such further acts as may be reasonably necessary or
proper to carry out more effectively the provisions of this Agreement and to
effectuate the terms of the Lien subordination contemplated hereby.
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SECTION 16. Notices. Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective parties as set forth
below and may be personally served, facsimilied or sent by overnight courier
service or United States mail and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by facsimile transmission,
on the date of such transmission if transmitted on a business day before 4:00
p.m. (Chicago time) or, if not, on the next succeeding business day; (c) if
delivered by overnight courier, on the business day after delivery to such
courier correctly addressed; or (d) if by United States Mail, upon receipt (or
when delivery is refused):
If to Senior Lender Guaranty Business Credit Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
FAX: (000) 000-0000
If to Halifax: c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx
FAX: (000) 000-0000
or to such other address as the party addressed shall have previously designated
by written notice to the serving party given in accordance with this Section 16.
SECTION 17. Amendment of Halifax Documents. Halifax understands and
agrees that, so long as any debt is owing to Halifax thereunder, neither the
Subordinated Debenture nor the Subordinated Note may be modified or amended
without Senior Lender's prior written consent.
SECTION 18. Information Concerning Financial Condition. Halifax
understands and agrees that Senior Lender has no duty to keep Halifax informed
of the financial condition of USPL or Borrower or of any other circumstances
bearing upon the risk of nonpayment of the Senior Indebtedness, and agrees that
Senior Lender shall have no duty to advise it of information known to Senior
Lender regarding such condition or any such circumstances. In the event Senior
Lender, in its sole discretion, undertakes, at any time or from time to time, to
provide any such information to Subordinated Lender, Senior Lender shall be
under no obligation (i) to provide any such information to Halifax on any
subsequent occasion, (ii) to undertake any investigation not a part of its
regular business routine, or (iii) to disclose any information which, pursuant
to its commercial finance practices, Senior Lender wishes to maintain
confidential.
SECTION 19. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. SENIOR
LENDER MAY ENFORCE ANY CLAIM ARISING OUT OF THIS AGREEMENT IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN THE CITY OF LOS
ANGELES, CALIFORNIA. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH
RESPECT TO ANY SUCH CLAIM,
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HALIFAX HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. HALIFAX
HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SUCH COURTS BY
MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO SUCH PERSON AT
THE ADDRESS SET FORTH IN SECTION 16 HEREOF AND AGREES THAT SUCH SERVICE, TO THE
FULLEST EXTENT PERMITTED BY LAW, (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON SUCH PERSON IN ANY SUCH SUIT, ACTION OR PROCEEDING AND
(ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL
DELIVERY TO SUCH PERSON. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHTS OF
SENIOR LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE
SENIOR LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY
OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. HALIFAX
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH SUCH PERSON NOW OR HEREAFTER MAY HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 20. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES HEREUNDER OR UNDER ANY AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED OR WHICH MAY HEREAFTER BE DELIVERED IN CONNECTION HEREWITH, OR ARISING
FROM ANY RELATIONSHIP ARISING HEREUNDER, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 21. Successors and Assigns. (a) This Agreement is solely for
the benefit of Senior Lender, Halifax and their respective successors and
assigns, and neither USPL, Borrower, any other Credit Party nor any other
persons or entities are intended to be third party beneficiaries hereunder or to
have any right, benefit, priority or interest under, or because of the existence
of, or to have any right to enforce, this Agreement. Senior Lender and Halifax
shall have the right to modify or terminate this Agreement at any time without
notice to or approval of any Credit Party or any other person or persons.
(b) Nothing in this Agreement is intended to or shall impair, as
between any Credit Party and their respective creditors other than Senior Lender
and Halifax, the obligation of such Credit Party, which is absolute and
unconditional, to pay to Halifax the principal of and interest comprising its
obligations under the Subordinated Debenture, the Subordinated Note and all of
the Halifax Indebtedness as and when the same shall become due and payable in
accordance with their terms, or affect the relative rights of Halifax and
creditors of each Credit Party other than Senior Lender.
(c) Notwithstanding any of the foregoing, if any third party
satisfies the Senior Indebtedness owing to Senior Lender, Senior Lender may
assign its rights and remedies hereunder to such third party, and such third
party shall be deemed to be Senior Lender for all
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purposes of this Agreement. If a determination is made in favor of any third
party, including, without limitation, a trustee in bankruptcy, that Senior
Lender's liens or security interests are invalid, avoidable or unperfected, the
subordination set forth herein shall be deemed null and void, but only to the
extent of such invalidity, avoidability and imperfection.
SECTION 22. Governing Law. This Agreement shall be construed and
interpreted, and the rights of the parties shall be determined, in accordance
with the internal laws and decisions of the State of California, without regard
to conflicts of laws principles.
SECTION 23. Costs and Attorneys' Fees. If there is any claim or
controversy litigated in any lawsuit between any of the parties hereto in
connection with this Agreement, the prevailing parties in the lawsuit shall be
entitled to recover from the other parties their reasonable costs and attorneys'
fees.
SECTION 24. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement between the parties hereto pertaining to the
subject matter hereof. There are no other agreements between the parties hereto
in connection with the subject matter hereof except as specifically set forth
herein or contemplated hereby. No amendment, modification or waiver of any of
the provisions of this Agreement shall be binding unless executed in writing by
Senior Lender and Halifax. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided. No delay on the part of Senior Lender in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Senior Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy. For the purposes of this Agreement, Senior Indebtedness shall include
all Senior Indebtedness, notwithstanding any right or power of any Credit Party
or other Person to assert any claim or defense as to the invalidity or
unenforceability of all or any part of the Senior Indebtedness, and no such
claim or defense shall affect or impair the agreements and obligations of the
respective parties hereto.
SECTION 25. 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 26. Invalidity. In the event one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
SECTION 27. Headings. The headings of the several sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been made and delivered
as of the date first above written.
GUARANTY BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Senior Vice President
HALIFAX FUND, L.P.
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxx
--------------------------------
Title: Corporate Counsel
--------------------------------
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