EXHIBIT 10.27
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as of the 12th
day of April, 1998, by and among XXXXXX FINANCIAL, INC., a Delaware
corporation ("Xxxxxx"); Funding Enterprises LLC, a Delaware limited liability
company ("Creditor"); and TOWER AIR, INC., a Delaware corporation (together
with any receiver, trustee, custodian or debtor in possession which is or
becomes its successor, "Borrower").
WHEREAS, Borrower and Xxxxxx are parties to that certain Amended and
Restated Loan and Security Agreement dated as of September 1, 1997 (the "Loan
and Security Agreement") (said Loan and Security Agreement, together with all
other documents, agreements and instruments now or hereafter executed in
connection therewith, all as amended, supplemented, restated or otherwise
modified from time to time, are collectively called the "Loan Documents");
WHEREAS, Borrower has issued or intends to issue to Creditor (i) that
certain Unsecured Subordinated Promissory Note dated as of February 6, 1998 in
the principal amount of Two Million Dollars ($2,000,000) (the "Note") and (ii)
certain additional promissory notes not exceeding Eight Million Dollars
($8,000,000) in aggregate principal amount (as amended, supplemented, renewed,
extended or modified from time to time, the "Additional Notes"); and
WHEREAS, the incurrence of the Indebtedness evidenced by the Note is
not permitted by Section 7.1 of the Loan and Security Agreement, and Xxxxxx is
unwilling to permit the incurrence of such Indebtedness unless Creditor and
Borrower enter into this Agreement with Xxxxxx.
NOW, THEREFORE, in consideration of the above recitals and the
provisions set forth herein, Xxxxxx, Creditor, and Borrower agree as follows:
1. DEFINITIONS. Except as otherwise specifically set forth herein,
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terms capitalized but not otherwise defined herein have the respective
meanings assigned to such terms in the Loan and Security Agreement. The
following terms in this Agreement shall have the following meanings:
"Senior Debt" means (a) all indebtedness, liabilities and obligations
of every kind or nature, absolute or contingent, now or existing or
hereafter arising, of Borrower owed to Senior Lender under the Senior
Loan Agreements, including without limitation the principal of, and
interest on (including any interest accruing after the commencement of
any bankruptcy, insolvency or similar proceeding with respect to
Borrower whether or not allowed as a claim in such proceeding), and all
premiums, fees, charges, expenses and indemnities arising under or in
connection with the Senior Loan Agreements; and (b) any modifications,
amendments, refundings, refinancings, renewals or extensions of any
indebtedness or obligation described in clause (a) above.
"Senior Lender" means Xxxxxx, its successor and assigns and any person
who refinances or refunds all or any portion of the Senior Debt.
"Senior Loan Agreements" means the Loan Documents and any other
agreements, including any amendments, restatements, supplements or
modifications thereto, relating to the Senior Debt.
"Subordinated Debt" means all indebtedness evidenced by the Note
including, without limitation, principal, interest, fees, charges,
indemnities and other liabilities now or hereafter existing with
respect to the Note, and, except as set forth in the next following
sentence, all other present or future loans, advances, debit balances,
liabilities, indebtedness, covenants, duties or obligations of Borrower
to Creditor, whether direct or indirect, absolute or contingent,
secured or unsecured, due or to become due, now existing or hereafter
arising, and whether created directly or acquired indirectly by
assignment, pledge, purchase or otherwise, together with all interest,
fees, charges, expenses and attorneys' fees for which Borrower is now
or hereafter becomes liable to pay to Creditor under any agreement or
by law. Notwithstanding anything contained herein to the contrary, the
term "Subordinated Debt" shall not include any indebtedness evidenced
by the Additional Notes, including, without limitation, principal,
interest, fees, charges, warrants, indemnification or other liabilities
now or hereafter existing with respect to the Additional Notes.
2. SUBORDINATION TO SENIOR DEBT. Notwithstanding any other provision of
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the Note, any document or instrument executed by Borrower relating thereto, or
any collateral now or hereafter securing the Note, all Subordinated Debt is
and shall be subordinate and junior in right of payment, to the extent and in
the manner hereinafter set forth, to the prior indefeasible payment in full of
all Senior Debt. Except as and to the extent provided hereinafter, Creditor
will not ask, demand, xxx for, take or receive from Borrower, by set-off or in
any other manner, direct or indirect payment (whether in cash or property), of
the whole or any part of the Subordinated Debt, or any transfer of any
property in payment of or as security therefor, unless and until all of the
Senior Debt has been fully and indefeasibly paid in full and the Senior Loan
Agreements have been terminated. The Senior Debt shall continue to be treated
as Senior Debt and the provisions of this Agreement shall continue to govern
the relative rights and priorities of Senior Lender and Creditor even if all
or part of the Senior Debt or the security interests securing the Senior Debt
are subordinated, set aside, avoided, invalidated or disallowed or determined
to be unenforceable or invalid for any reason whatsoever.
3. DISTRIBUTIONS IN LIQUIDATION AND BANKRUPTCY. In the event of any
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distribution, division or application partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the
assets of Borrower or the proceeds thereof (including any assets now or
hereafter securing any Subordinated Debt) to creditors of Borrower or upon any
indebtedness of Borrower, as a result of the liquidation, dissolution or other
winding up, partial or complete, of Borrower, or as a result of any
receivership, insolvency or bankruptcy proceeding, or assignment for the
benefit of creditors or marshaling of assets, or as a result of any proceeding
by or against Borrower for any relief under any bankruptcy or insolvency law
or laws relating to the relief of debtors, readjustment of indebtedness,
arrangements, reorganizations, compositions or extensions, or as a result of
the sale of all or substantially all of the assets of Borrower, then and in
any such event:
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(a) The Senior Lender shall be entitled to receive payment in
full of all Senior Debt before Creditor shall be entitled to receive
any payment or other distributions on, or with respect to, the
Subordinated Debt;
(b) Any payment or distribution of any kind or character,
whether in cash, securities or other property, which but for these
provisions would be payable or deliverable upon or with respect to the
Subordinated Debt shall instead be paid or delivered directly to Senior
Lender for the benefit of the holders of the Senior Debt for
application on the Senior Debt, whether then due or not due, until the
Senior Debt shall have first been fully and indefeasibly paid in full;
(c) Creditor shall duly and promptly take such action as may
reasonably be requested by Senior Lender to assist in the collection of
the Subordinated Debt for the account of any holder of the Senior Debt,
including the filing of appropriate proofs of claim with respect to the
Subordinated Debt and the voting of such claims;
(d) In the event that Creditor shall not have filed a claim in
any bankruptcy, insolvency or similar proceeding with respect to
Borrower at least sixty (60) days prior to the expiration of the time
to file such claims, then Senior Lender, on behalf of Creditor, shall
be authorized to file a claim with respect to the Subordinated Debt;
and
(e) Should any direct or indirect payment be made to Creditor
upon or with respect to the Subordinated Debt prior to the payment in
full of the Senior Debt in accordance with these provisions, Creditor
will forthwith deliver the same to Senior Lender in precisely the form
received (except for the endorsement or assignment by Creditor where
necessary) for application on the Senior Debt, whether then due or not
due. Until so delivered, the payment or distribution shall be held in
trust by Creditor as property of the holders of the Senior Debt. In the
event of the failure of Creditor to make any such endorsement or
assignment, Senior Lender, or any of its officers or employees, are
hereby irrevocably authorized to make the same.
4. PERMITTED PAYMENTS. Until such time as a Default or an Event of
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Default arises with respect to the Senior Debt, Borrower may make and Creditor
may accept the scheduled payment of interest and principal due under the Note
at the maturity thereof; provided, however, that no such payment shall be made
if, after giving effect to such payment, a Default or Event of Default shall
exist. Borrower shall not pay and Creditor shall not accept any prepayments of
the Note, whether voluntary or mandatory, or any payment of any accelerated
amounts due under the Note.
5. DEFAULT ON SENIOR DEBT. In the event that any default shall occur
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and be continuing with respect to Senior Debt, unless and until all Senior
Debt shall have been indefeasibly paid in full, the right of Creditor to
receive any payments or other distributions with respect to the Subordinated
Debt shall be suspended during the continuance of such default. If,
notwithstanding the foregoing, Creditor shall receive any payment or
distribution of any kind (whether from any
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collateral securing such debt or otherwise), such payment or distribution
shall be received in trust for, and shall be delivered to, Senior Lender
promptly in precisely the form received (except for the endorsement or
assignment by Creditor where necessary) for application on the Senior Debt,
whether then due or not due. Until so delivered, the payment or distribution
shall be held in trust by Creditor as property of the holders of Senior Debt.
6. NO ACCELERATION OR EXERCISE OF REMEDIES. So long as any Senior Debt
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remains unpaid, Creditor will not (a) accelerate, or cause to be accelerated,
the Subordinated Debt or otherwise cause the Subordinated Debt to become due
prior to its original stated maturity; or (b) accept any payment, prepayment
or defeasance of any portion of the Subordinated Debt on any date prior to the
due date for such Subordinated Debt as set forth in the Note or in any other
document creating any Subordinated Debt, except as provided herein; or (c)
modify or alter in any way the terms of the Subordinated Debt if the effect
of such is to accelerate the payments due thereon; or (d) exercise any
remedies with respect to the Subordinated Debt or any collateral at any time
securing payment or performance thereof unless and until, in each such case,
all of the Senior Debt shall have been indefeasibly paid in full, or Senior
Lender shall have otherwise consented in writing.
7. BANKRUPTCY. Until the Senior Debt shall have been indefeasibly paid
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in full, Creditor will not, without the prior written consent of Senior
Lender, commence, or join with any other person in commencing, any proceeding
against any person with respect to the Subordinated Debt under any bankruptcy
reorganization, readjustment of debt, dissolution, receivership, liquidation
or insolvency law or statute now or hereafter in effect in any jurisdiction.
8. CONTINUING SUBORDINATION. The subordination effected by these
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provisions is a continuing subordination and may not be modified or terminated
by Creditor or any other holder of any Subordinated Debt until all of the
Senior Debt shall have been indefeasibly paid in full. At any time and from
time to time, without consent of or notice to Creditor or any other holder of
Subordinated Debt, and without impairing or affecting the obligations of any
of them hereunder:
(a) The time for Borrower's performance of, or compliance with,
any of its agreements contained in the Senior Loan Agreements, or any
other agreement, instrument or document relating to the Senior Debt,
may be modified or extended or such performance or compliance may be
waived;
(b) Senior Lender may exercise or refrain from exercising any
rights under the Senior Loan Agreements, or any other agreement,
instrument or document relating to the Senior Debt;
(c) The Senior Loan Agreements, or any other agreement,
instrument or document relating to the Senior Debt, may be revised,
amended or otherwise modified for the purpose of adding or changing any
provisions thereof (including, without limitation, increases in the
principal amount or increases in the interest charges or fees), or
changing in any manner the rights of Senior Lender, Borrower, or any
guarantor of the Senior Debt;
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(d) Payment of the Senior Debt or any portion thereof may be
extended, refunded or refinanced or any notes evidencing such Senior
Debt may be renewed in whole or in part;
(e) The maturity of the Senior Debt may be accelerated, and any
collateral security therefor or any other rights of Senior Lender may
be exchanged, sold, surrendered, released or otherwise dealt with, in
accordance with the terms of any present or future agreement with
Borrower or any guarantor and any other agreement of subordination (and
the debt covered thereby) may be surrendered, released or discharged,
or the terms thereof modified or otherwise dealt with in any manner;
(f) Any person liable in any manner for payment of the Senior
Debt may be released by holders of Senior Debt; and
(g) Notwithstanding the occurrence of any of the foregoing,
these subordination provisions shall remain in full force and effect
with respect to the Senior Debt, as the same shall have been extended,
renewed, modified, refunded or refinanced.
9. WAIVERS. Creditor hereby waives, and agrees not to assert: (a) any
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right, now or hereafter existing, to require Senior Lender to proceed against
or exhaust any collateral at any time securing the Senior Debt, or to marshal
any assets in favor of Creditor or any other holder of Subordinated Debt; and
(b) any notice of the incurrence of Senior Debt, it being understood that
Senior Lender may, in reliance upon these subordination provisions, make
advances under the Loan Documents, or any other agreement, document or
instrument now or hereafter relating to the Senior Debt, without notice to or
authorization of Creditor.
10. LIEN SUBORDINATION AND STANDBY. Any lien, security interest,
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encumbrance, charge or claim of Creditor on any assets or property of Borrower
or any proceeds or revenues therefrom which Creditor may have at any time as
security for any Subordinated Debt shall be, and hereby is, subordinated to
all liens, security interests, or encumbrances now or hereafter granted to
Senior Lender by Borrower or by law, notwithstanding the date or order of
attachment or perfection of any such lien, security interest, encumbrance or
claim or charge or the provision of any applicable law. Until Senior Lender
has received indefeasible payment in full of the Senior Debt, Creditor agrees
that Creditor will not assert or seek to enforce against Borrower any interest
of Creditor in any and all collateral for the Subordinated Debt and that
Senior Lender may dispose of any or all of the collateral for the Senior Debt
free of any and all liens, including but not limited to liens created in favor
of Creditor through judicial or nonjudicial proceedings, in accordance with
applicable law including taking title, after notice to Creditor. Creditor
agrees that any such sale or other disposition by Senior Lender of so much of
the collateral for the Senior Debt as is necessary to satisfy in full, all
of the principal of, interest on and reasonable costs of collection of the
Senior Debt shall be made free and clear of any security interest granted to
holder provided the entire proceeds (after deducting reasonable expenses of
sale) are applied in reduction of the Senior Debt. Upon Senior Lender's
request, Creditor shall execute and deliver any releases or other documents
and agreements that Senior Lender in its reasonable discretion deems necessary
to dispose of the collateral for the Senior
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Debt free of Creditor's interest in same. Creditor retains all of its rights
as a junior secured creditor with respect to the surplus, if any, arising from
any such disposition of the collateral for the Senior Debt.
11. SUBROGATION. Until the Senior Debt shall have been indefeasibly
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paid in full, Creditor hereby waives all rights of subrogation with respect to
the rights of Senior Lender to receive payments or distributions and with
respect to any rights to any collateral for the Senior Debt. Upon payment in
full of the Senior Debt, Creditor shall be subrogated, to the extent permitted
by law, to all rights of the holders of Senior Debt.
12. SUBORDINATION NOT IMPAIRED BY BORROWER. No right of any holder of
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Senior Debt to enforce the subordination of the Subordinated Debt shall be
impaired by any act or failure to act by Borrower or by its failure to comply
with these provisions.
13. NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
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give or confer any rights to any person other than the holders of the Senior
Debt. No other party, including Borrower, is intended to be a third party
beneficiary of this Agreement.
14. LEGEND ON NOTE. If any portion of the Subordinated Debt is
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evidenced by a promissory note, debenture, stock certificate or other
instrument, Creditor and Borrower agree to promptly add a conspicuous legend
or other reference to such instrument stating that the rights of any holder
and Borrower thereof are subject to this Agreement.
15. REPRESENTATIONS AND WARRANTIES. Creditor hereby represents and
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warrants that: (a) the execution and delivery of this Agreement and the
performance by Creditor of its obligations hereunder have received all
necessary approvals, corporate or otherwise, and do not and will not
contravene or conflict with any provision of law or any provision of any
indenture, instrument or other agreement to which Creditor is a party or by
which it or its property may be bound or affected; (b) Creditor has full
power, authority and legal right to make and perform this Agreement; (c)
Creditor has not assigned or transferred any indebtedness (other than
indebtedness evidenced by the Additional Notes) owing by Borrower or any of
the collateral for the Subordinated Debt and Creditor will not assign or
transfer same without at least ten (10) days prior written notice to Senior
Lender and without, prior to the effectiveness of any assignment or transfer,
having obtained in writing from such successor or assignor an assumption
agreement wherein any such proposed assignee or transferee agrees to be bound
by the terms of this Agreement as if it were Creditor and as if it were an
initial party hereto; and (d) this Agreement is the legal, valid and binding
obligation of Creditor, enforceable against Creditor in accordance with its
terms.
16. NO WAIVER. No failure on the part of Senior Lender to exercise, no
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delay in exercising, and no course of dealing with respect to, any right or
remedy hereunder will operate as a waiver thereof; nor will any single or
partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy. This
Agreement may not be amended or modified except by written agreement of Senior
Lender, Creditor and
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Borrower, and no consent or waiver hereunder shall be valid unless in writing
and signed by Senior Lender.
17. SUCCESSOR AND ASSIGNS. This Agreement, and the terms, covenants
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and conditions hereof shall survive any transfer or assignment
(notwithstanding any failure by Creditor to obtain an assumption agreement
as required in Section 15 above), and shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE
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CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES
19. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE THEIR
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RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. THE PARTIES HERETO ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY
OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
20. CONSENT TO JURISDICTION. EACH OF BORROWER AND CREDITOR HEREBY
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CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COUNTY OF XXXX, STATE OF ILLINOIS OR THE COUNTY OF NEW YORK, STATE OF NEW
YORK, AND EACH IRREVOCABLY AGREES THAT, SUBJECT TO SENIOR LENDER'S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL
BE LITIGATED IN SUCH COURTS. EACH OF BORROWER AND CREDITOR EXPRESSLY SUBMITS
AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. EACH OF BORROWER AND CREDITOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON SUCH PARTY BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY, AT THE ADDRESS SET FORTH FOR SUCH
PARTY IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED.
[Signature on next page]
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IN WITNESS WHEREOF, this Subordination Agreement has been duly executed
as of the day and year first above written.
XXXXXX FINANCIAL, INC. FUNDING ENTERPRISES LLC
By: By:
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Title: Title: President & EVP-Operations
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Notice Address: Notice Address:
Xxxxxx Financial, Inc. Funding Enterprises LLC
Attn: HBC Portfolio Manager c/o Salisbury & Xxxx LLP
000 Xxxx Xxxxxx Xxxxxx 1325 Avenue of the Americas
Xxxxxxx, Xxxxxxxx 00000 Xxx Xxxx, XX 00000
Fax No.: (000) 000-0000 Attn: Xxxxxxx X. Xxxxxxxxx
Fax No.: (000) 000-0000
TOWER AIR, INC.
By:
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Title: President & EVP-Operations
Notice Address:
Tower Air, Inc.
Attn: President
Hanger 00
XXX Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Fax No. (000) 000-0000
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