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EXHIBIT 10.10
DEBT
SUBORDINATION AGREEMENT
This subordination agreement (this "Agreement"), dated as of September 28,
1996, is entered into by and between The Huntington National Bank and Xxxxxxx
Xxxxxxxx.
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the loans, leases, advances, commitments
to issue letters of credit and/or bankers acceptances, discounts, renewals or
extensions now or hereafter made by The Huntington National Bank, its successors
and assigns (the "Senior Creditor"), directly or indirectly, to or for the
benefit of L D M Industries Inc. (the "Debtor"), the undersigned, Xxxxxxx
Xxxxxxxx on behalf of the undersigned and the undersigned's heirs, executors,
administrators, successors and assigns (the "Subordinated Creditor"), agrees
with Senior Creditor as follows:
1. Description of Subordinated Debt. Subordinated Creditor represents
and warrants to Senior Creditor that (a) Debtor is indebted to Subordinated
Creditor in the principal sum of $3,000,000.00, evidenced by a certain
promissory note from Debtor dated as of September 28, 1996, which is attached to
this Agreement as Exhibit A (the "Subordinated Note"); (b) Subordinated Creditor
holds no collateral, guarantees, assurances, or security for the Subordinated
Debt; (c) the Subordinated Debt has not been subordinated in favor of or sold,
assigned, pledged or otherwise transferred or encumbered, in whole or in part,
to any other person, entity or corporation; and (d) Subordinated Creditor has
the full right, power and authority to enter into this Agreement.
2. Subordination. Subordinated Creditor hereby subordinates all
indebtedness, obligations, and liabilities now or hereafter owing by Debtor to
Subordinated Creditor, including without limitation, all principal, interest,
fees, expenses, and other charges owed under the Subordinated Note (the
"Subordinated Debt"), to the payment of any and all indebtedness, obligations
and liabilities now or hereafter owing by Debtor to Senior Creditor, plus all
principal, interest, fees, expenses, and other charges accruing on such
principal sum (the "Senior Debt"), to the extent and in the manner set forth
below, and Subordinated Creditor agrees not to demand, accept or receive,
directly or indirectly, any payment or repayment of principal, interest or other
amount on the Subordinated Debt, or from any property of Debtor or guarantor or
any third party, in violation of the terms hereof. Nothing contained in this
Agreement shall be construed to constitute consent or acquiescence in the
granting of any security interest, lien, mortgage, assignment, pledge, chattel
mortgage, guaranty, surety, hypothecation or any other property or security for
the Subordinated Debt by Debtor.
(a) Permitted Payments. Subject to the provisions of paragraphs
2(b) and 2(c) below, the Debtor may pay to Subordinated Creditor the following
payments (the "Permitted Payments" or a "Permitted Payment"): (1) accrued
interest at a rate not to exceed 6 1/2% per annum may be paid on the
Subordinated Note, on a monthly basis; and (2) monthly payments of principal
to the extent of $90,000 per month may be paid on the Subordinated Note, (3) no
prepayment of
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interest or principal or other distribution of any kind shall be made pursuant
to the Subordinated Note.
(b) No Payments Upon Default. No amount, including, without
limitation, the Permitted Payments, shall be paid by Debtor or accepted by
Subordinated Creditor, whether in cash, property, securities or otherwise, in
respect of the Subordinated Debt, if (i) there exists, or would exist after
giving effect to such proposed payment, any "Event of Default" or default as
defined or provided in any loan and security agreement, loan agreement,
promissory note or other agreement of Debtor with Senior Creditor (a "Default")
and (ii) Subordinated Creditor shall (A) have received written notice of such
Default or (B) have knowledge of a Default under the Senior Debt. Subordinated
Creditor acknowledges and agrees that a "default" or "event of default" under
the terms of the Subordinated Debt shall automatically constitute a Default (and
Subordinated Creditor's knowledge of the same) under the Senior Debt; provided,
however, that notwithstanding the foregoing restrictions, Subordinated Creditor
may receive any payment which was suspended hereunder upon the earlier of (i)
the cure by Debtor, acknowledged by the Senior Creditor in writing or written
waiver by Senior Creditor of the then existing Defaults, or (ii) the payment in
full in cash of Senior Debt and the irrevocable termination of the loan
documents relating thereto.
(c) No Payments Upon Bankruptcy, etc. In the event of any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization, sale or transfer of any material asset or interest in Debtor,
or other similar proceedings or transactions in connection therewith, relative
to Debtor, to its creditors, or to its properties, or in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
Debtor, whether or not involving insolvency or bankruptcy, Senior Creditor
shall be entitled to receive payment in full of the Senior Debt, including,
without limitation, interest, fees, or expenses accruing subsequent to the
filing of a petition in any such insolvency or bankruptcy proceeding,
notwithstanding any law, rule or regulation that would otherwise limit Senior
Creditor's right to receive such "post-petition" interest, fees, or expenses
before subordinated creditor is entitled to receive any payment of the
Subordinated Debt, and Senior Creditor shall be entitled to receive for
application in payment thereof any payment, distribution, or dividend of any
kind or character, whether in cash or property or securities, which be
payable or deliverable in any such proceedings in respect of the Subordinated
Debt, except securities which are subordinate and junior in right of payment
to the payment of all the Senior Debt then outstanding.
3. Legend. Subordinated Creditor shall cause all promissory notes
and other instruments and agreements evidencing any Subordinated Debt to bear
an appropriate legend referring to this Agreement and reciting that the
payment of the Subordinated Debt evidenced thereby is subject to the provisions
hereof, and agrees to cause any extension of any such instrument to bear such
legend.
4. Turnover of Payments. If, prior to the satisfaction of the
Senior Debt, Subordinated Creditor receives from any source whatsoever
including, but not limited to, receipt resulting from the exercise by any court
of its legal or equitable powers, any payment (except for a Permitted
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Payment) with respect to any of the Subordinated Debt, Subordinated Creditor
shall forthwith deliver such payment to Senior Creditor, in precisely the form
received, expect for Subordinated Creditor's indorsement when necessary, for
application on account of the Senior Debt, and until so delivered, such payment
or security shall be held in trust by Subordinated Creditor as the property of
Senior Creditor. In the event of the failure of any Subordinated Creditor to
indorse any instrument for the payment of money so received by such
Subordinated Creditor, Senior Creditor is irrevocably appointed attorney for
such Subordinated Creditor with full power to make such indorsement and with
full power of substitution.
5. Standstill. Subordinated Creditor agrees for the benefit of
the holder of the Senior Debt that, so long as any part of the Senior Debt
remains outstanding, Subordinated Creditor will not prior to the earlier of (i)
180 days after providing written notice to Senior Creditor of a payment default
under the terms of the Subordinated Debt, which is not thereafter cured or
waived by Subordinated Creditor, or (ii) the acceleration of the maturity of
the Senior Debt (a) take any action to accelerate, demand the payment of, or
recover any amount due under the Subordinated Debt or to exercise any remedies
with respect thereto; or (b) take any action or exercise any remedies against
the Debtor or any guarantor or against any property of the Debtor, such
guarantor, or third party which is subject to an security interests, liens,
mortgages, assignments, pledges, chattel mortgages, guarantees, sureties,
hypothecations, subordinations, or any other property or security, whether now
existing or acquired thereafter, held by or in favor of Senior Creditor to
secure or assure the payment of the Senior Debt (collectively the "Senior
Collateral"), or (c) delay, impede or otherwise interfere with the efforts of
Senior Creditor in connection with the realization of the Senior Collateral, or
application of the proceeds thereof.
6. Mutual Consent. Notwithstanding any provision in any
promissory notes, security agreements, mortgages, financing statements and
other instruments and agreements evidencing any Senior Debt, the Senior
Creditor hereby consents to the Debtor incurring the Subordinated Debt.
Notwithstanding any provision in any promissory notes and other instruments
and agreements evidencing any Subordinated Debt, the Subordinated Creditor
hereby consents to the Debtor incurring the Senior Debt.
7. No Waiver. No action which Senior Creditor, or Debtor with the
consent of Senior Creditor, may take or refrain from taking with respect to any
Senior Debt, or any note or notes representing the same, or any Senior
Collateral therefor, including a waiver or release thereof, or any agreement or
agreements (including guaranties) in connection therewith, shall affect this
Agreement or the obligations of Subordinated Creditor hereunder. Without
limitation, the subordination of Subordinated Creditor shall in no way be
affected or impaired by, and Subordinated Creditor hereby irrevocably consents
to: (a) any amendment, restatement, alteration, extension, renewal, waiver,
indulgence or other modification of the documents evidencing the Senior Debt;
(b) any settlement or compromise, in connection with the Senior Debt; (c) any
substitution, exchange release or other disposition of all or any part of the
Senior Debt or the Senior Collateral; (d) any failure, delay, neglect, act or
omission by the Senior Creditor to act in connection with the Senior Debt or
the Senior Collateral; or (e) any advance for the purpose of performing or
curing any term or covenant
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contained in the documents or agreements evidencing the Senior Debt to which
Debtor shall be or would otherwise be in default. The obligations and
agreements of the Subordinated Creditor shall be unconditional and continuing,
notwithstanding any defect in the genuineness, validity, regularity or
enforceability of the documents or agreements evidencing the Senior Debt or the
Senior Collateral or any other circumstances whether or not referred to herein,
which might otherwise constitute a legal or equitable discharge or a defense of
the Subordinated Creditor.
8. No Interference. In the event of forbearance or workout arrangements,
or any insolvency or bankruptcy proceedings relative to Debtor, Subordinated
Creditor agrees that it will fully cooperate with Senior Creditor and will not
take any action to delay, impede, oppose, or otherwise interfere with efforts
or actions taken by Senior Creditor with respect to any actions, proceedings,
motions, orders, agreements or other matters arising in or related to such
insolvency or bankruptcy proceedings, including but not limited to, any actions,
proceedings, motions, orders, agreements or other matters relating to relief
from any automatic stay provisions, abandonment of property, use of cash
collateral, sale of the Senior Collateral free and clear of liens, the recovery
of fees and expenses in connection with such proceedings, the voting on any
plan of reorganization either with respect to a claim in respect of the Senior
Debt or the Subordinated Debt, filing and prosecution of claims, or making any
election permitted by the Bankruptcy Code, Xxxxx 00, Xxxxxx Xxxxxx Code, 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code") or otherwise.
9. Bankruptcy Claims. Subordinated Creditor waives any claim that it may
now or hereafter have against the Senior Creditor arising out of any proceeding
instituted under Chapter 11 of the Bankruptcy Code related to the Senior
Creditor's election of the application of Section 1111(b)(2) of the Bankruptcy
Code and/or Senior Creditor's right to adequate protection in connection with
any borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code by Debtor as debtor in possession. To the extent that the
Senior Creditor receives payments on, or proceeds of the Senior Collateral
which are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, state or federal laws, common law or equitable
cause, then, to the extent of such payment or proceeds received, the Senior
Debt, or part thereof, intended to be satisfied shall be revived and the Senior
Creditor's security interest in the Senior Collateral shall continue in full
force and effect as if such payments or proceeds had not been received by the
Senior Creditor.
10. In Writing. No modification or waiver shall be deemed to be made by
Senior Creditor of any of its rights hereunder unless the same shall be in
writing and then only with respect to the specific instance involved, and
shall in no way impair or offset the rights of Senior Creditor or the
obligations of Subordinated Creditor in any other respect or at any other time.
11. Successors: Governing Law; Venue. This Agreement shall be binding
upon Subordinated Creditor and Debtor and their respective legal
representatives, heirs, successors and assigns and shall inure to the benefit
of Senior Creditor and its respective legal representatives, heirs, successors
and assigns (including, without limitation, any transferee of any Senior Debt).
References herein to the binding effect of this Agreement shall not be deemed
to constitute consent
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or acquiescence in the sale, assignment, pledge or other transfer or
encumbrance of the Subordinated Debt by Subordinated Creditor. This Agreement
shall be construed and enforced in accordance with and governed by the law of
the State of Ohio. For the purpose of Senior Creditor seeking any and all such
relief, or any other adjudication of the rights of the parties pursuant to this
Agreement, Subordinated Creditor hereby consents and submits to the personal
jurisdiction of the Court of Common Pleas of Franklin County, Ohio, and the
United States District Court for the Southern District of Ohio, Eastern
Division. Subordinated Creditor further irrevocably consents to the service of
process out of either of the aforementioned courts in any such action or
proceeding.
12. Jury Trial Waiver. THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND THE PARTIES HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
13. Notice. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) one day after the same is
sent to the address set forth below such party's signature line below if sent by
recognized overnight delivery service, (b) upon confirmation of electronic
communication if sent by telecopier, or (c) upon delivery to such address if
personally delivered.
14. Subrogation. Subject to the prior payment in full in cash of Senior
Debt, to the extent that Senior Creditor has received any payment or
distribution which but for this Agreement, would have been applied to the
Subordinated Debt, Subordinated Creditor shall be subrogated to the rights of
Senior Creditor until the Subordinated Debt shall be paid in full, and, for the
purposes of such subrogation, no such payment or distribution shall, as
between the Debtor or its other creditors, be deemed to be a payment or
distribution on account of the Senior Debt.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same document.
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16. Headings. The headings contained in this Agreement are for ease
of reference only, and shall not be construed to modify, alter or affect this
Agreement in any way.
Each of the parties has executed this Agreement as of the date set
forth above.
SUBORDINATED CREDITOR:
Xxxxxxx Xxxxxxxx
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Xxxxxxx Xxxxxxxx
Notice Address:
1250 Maplelawn
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Xxxx, XX 00000
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Fax: (000) 000-0000
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SENIOR CREDITOR:
THE HUNTINGTON NATIONAL BANK
By:
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Its:
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Notice Address:
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxx X. Xxxxxxxxx
Fax: (000) 000-0000
Debtor hereby acknowledges notice of the within and foregoing
Subordination Agreement and agrees to be bound by all of the terms, provisions
and conditions hereof.
DEBTOR:
L D M INDUSTRIES INC.
By: Xxxxxxx X. Xxxx
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Its: C.E.O.
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