SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") is made
and entered into as of February 29, 2008, by Prestige Capital Corporation
("Prestige") and RCM Technologies, Inc. and RCM Technologies Services Company,
Inc. (collectively known as "RCM"); and acknowledged and consented to by Ideal
Interiors, Inc. ("Client").
RECITALS
WHEREAS, as security for various obligations owed to RCM (collectively,
the "Client - RCM Obligations"), Client has granted RCM a security interest in
and lien upon Client's right, title and interest in and to all accounts whether
now owned or existing or hereafter acquired or arising, regardless of where
located (collectively, the "Client Accounts"), including especially and without
limitation Client's right, title and interest in and to all accounts whether now
owned or existing or hereafter acquired or arising with respect to Client's
construction contract(s) and interests in construction projects for (a) the
Union Baptist Church, in White Pains, New York, and (b) the Staten Island YMCA,
in Staten Island, New York (collectively, the "Bonded Project Accounts"):
WHEREAS, Prestige intends to purchase from time-to-time certain
accounts receivable of Client pursuant to the Purchase and Sale Agreement
between Prestige and Client (the "Purchase Agreement," as amended and together
with any related assignments, agreements and instruments, collectively the
"Prestige Agreements"), executed copies of such Prestige Agreements are attached
hereto as Exhibit "A". As security for Client's obligations under the Prestige
Agreements, Client intends to grant Prestige a security interest in and lien
upon Client's right, title and interest in and to the specific Client Accounts
that Client sells and assigns to Prestige under the Purchase Agreement
(collectively, the "Assigned Accounts") and all other Client Accounts, excepting
thereout and therefrom the Bonded Project Accounts (the foregoing collateral is
hereinafter collectively the "Prestige Collateral").
WHEREAS, in order to induce (a) Prestige to enter into the Prestige
Agreements and purchase the Assigned Accounts and (b) RCM to consent to Client
entering into the Prestige Agreements and granting Prestige a security interest
in and lien upon the Prestige Collateral, the parties hereto have agreed to
certain terms and accommodations pursuant to the provisions of this Agreement.
NOW THEREFORE, for and in consideration of the foregoing Recitals
(which are incorporated herein by reference to the same extent and with the same
force and effect as if fully set forth herein below), the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RCM Payments. On or before March 4, 2008, Client and Prestige agree
that RCM shall be paid, directly out of the "Down Payment" (as defined in the
Purchase Agreement) the sum of $1,000,000.00 (the "First RCM Payment") by wire
transfer of immediately available funds pursuant to wire transfer instructions
to be provided by RCM to Prestige. This Agreement shall become null and void in
the event that RCM does not receive the First RCM Payment on or before March 4,
2008, 1:00 p.m. (EST). On or before March 14, 2008, Client and Prestige agree
that RCM shall be paid the sum of $200,000.00 (the "Second RCM Payment") by wire
transfer of immediately available funds pursuant to wire transfer instructions
to be provided by RCM to Prestige.
2. Lien Priorities; Subordination. Effective upon RCM's receipt of the
First RCM Payment as provided above, and notwithstanding the time, order, method
of attachment, perfection, filing or recording of any security interests in and
liens upon the Client Accounts and Prestige Collateral in favor of RCM or
Prestige, the parties hereto agree, confirm and acknowledge that RCM shall have
a continuing security interest in and lien upon the Client Accounts, including
without limitation the Assigned Accounts, provided, however, that such security
interest and lien shall be subordinate in all respects including but not limited
to priority and distribution (the "RCM Subordination"), to Prestige's security
interest in and lien upon the Prestige Collateral, except that:
a. RCM shall have a continuing first security interest in and
lien upon the Bonded Project Accounts, it being understood and agree that (i)
Client shall not sell or assign, and Prestige shall not purchase or accept an
assignment of, the Bonded Project Accounts, and (ii) the Bonded Project Accounts
are not part of the Prestige Collateral and shall continue hereafter to be
excluded from the Prestige Collateral; and
b. Upon the occurrence of an "RCM Terminating Event" (as
hereinafter defined):
(i) the RCM Subordination shall automatically and
without the need for written
notice be deemed revoked and terminated solely with respect to RCM's security
interest in and lien upon any and all Client Accounts acquired or arising after
such RCM Terminating Event (collectively, the "Post-RCM Terminating Event
Accounts") and RCM shall thereafter have a continuing first security interest
and lien upon the Post-RCM Terminating Event Accounts;
(ii) RCM may exercise, enforce and/or realize upon
its rights and remedies with
respect to RCM's security interest in and lien upon the Post-RCM Terminating
Event Accounts; and/or
(iii) RCM may exercise, enforce and/or realize upon
its rights and remedies with
respect to RCM's security interest in and lien upon any Client Accounts existing
as of the occurrence of the RCM Terminating Event other than the Assigned
Accounts, free and clear of Prestige's security interest in and lien upon the
same, unless and until the occurrence of a "Prestige Terminating Event" (as
hereinafter defined).
As used herein: (x) the term "RCM Terminating Event" shall mean the
occurrence of a material breach or default by Client of the Client - RCM
Obligations as declared by RCM which is not fully cured by Client and/or
Prestige within fifteen (15) days after written notice to cure provided by RCM
to Client with a copy to Prestige; and (y) the term "Prestige Terminating Event"
shall mean the occurrence of a material breach or default by Client of the
Prestige Agreements as declared by Prestige which is not fully cured by Client
and/or RCM within fifteen (15) days after written notice to cure provided by
Prestige to Client with a copy to RCM.
3. Lien Acknowledgements; Permitted RCM Payments. Notwithstanding
anything to the contrary in this Agreement or the Prestige Agreements:
a. The parties hereto agree, acknowledge and confirm that all
security interests and liens granted to RCM and Prestige in the Client Accounts
and Prestige Collateral, respectively, are consented to, valid and perfected and
secure the performance by Client of the (i) Client - RCM Obligations, and (ii)
obligations under the Prestige Agreements, respectively.
b. Client agrees and authorizes Prestige to holdback, release
and pay over directly to RCM, and Prestige agrees to holdback, release and pay
over directly to RCM sufficient "Reserves" (as defined in the Purchase
Agreement) that would otherwise be paid or remitted to Client pursuant to the
Purchase Agreement, to make the following scheduled installment payments to RCM
for the benefit of Client on account of the Client - RCM Obligations
(collectively, the "RCM Installments"):
Due Date Amount
May 1, 2008 $600,000.00
June 1, 2008 $250,000.00
July 1, 2008 $400,000.00
In the event that there are insufficient Reserves to pay in full any of
the RCM Installments, Prestige nevertheless agrees to pay over to RCM all
available Reserves up to the amount of the applicable RCM Installment, as stated
above, and Ideal shall be responsible for paying RCM the difference between the
amount of the applicable RCM Installment and the amount paid over to RCM by
Prestige out of the Reserves. All payments of the RCM Installments shall be paid
by wire transfer of immediately available funds pursuant to wire transfer
instructions to be provided by RCM to Prestige.
4. RCM Right to Cure Prestige Agreement Default. Prestige shall send
RCM written notice of any material breach or default by Client under the
Prestige Agreements and an opportunity to cure same within fifteen (15) days
thereafter (each a "Prestige Default Notice"). RCM shall have the right, but not
the obligation, to cure any such material breach or default by Client under the
Prestige Agreements within such fifteen (15) day period. During such cure
period, Prestige agrees not to exercise, enforce and/or realize upon its rights
and remedies with respect to Prestige's security interest in and lien upon the
Prestige Collateral. Prestige also agrees to promptly send RCM a copy of any
notice sent by Prestige or Ideal terminating the Purchase Agreement (each a
"Termination Notice").
5. RCM Option to Purchase Prestige Rights. Upon delivery of a Prestige
Default Notice or Termination Notice to RCM, as the case may be, RCM shall have
the right, but not the obligation, to purchase Prestige's interest in the
Prestige Agreements for a purchase price equal to the aggregate outstanding
amount due and owing Prestige under the Prestige Agreements, as of the "Purchase
Closing Date" (as defined below), including any outstanding advances and accrued
termination and other fees and costs permitted and owing under the Prestige
Agreements. If RCM elects in writing to purchase Prestige's interest in the
Prestige Agreements, RCM's right to purchase the same (the "Purchase") shall be
subject to the following conditions: (1) the Purchase shall close (the "Purchase
Closing Date") on the date selected by RCM but in no event later than sixty (60)
days after the delivery of the Prestige Default Notice or Termination Notice to
RCM, as the case may be; (2) Prestige shall execute such assignments and
instruments as are reasonably required by RCM to evidence and confirm the
Purchase; and (3) the Purchase shall be accomplished through an escrow at a
title company to be mutually selected by RCM and Prestige, and RCM shall deposit
the purchase price and both RCM and Prestige shall deposit all documents
effectuating the Purchase with said title company. Upon consummation of the
Purchase, RCM shall be subrogated to the rights of Prestige under the Prestige
Agreements. Prior to the Purchase Closing Date, Prestige shall not, without
RCM's prior written consent, amend, modify, restructure or extend the Prestige
Agreements, or enforce or foreclose upon Prestige's security interest in and
lien upon the Prestige Collateral.
6. Payments Held In Trust. In the event that any payment is made to RCM
or Prestige which is not permitted under this Agreement, such payments shall be
held by RCM or Prestige, as the case may be, in trust for the benefit of
Prestige, if held by RCM, or RCM, if held by Prestige, and shall be paid
forthwith over and delivered to the appropriate secured party for application to
the payment of the obligations under the Prestige Agreements, if paid over to
Prestige, or the payment of the Client - RCM Obligations, if paid over to RCM.
7. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (i) personal
delivery; (ii) facsimile transmission; (iii) electronic mail; or (iv) overnight
delivery service. Notices shall be sent to the appropriate party at its address,
email address, or facsimile number given below (or at such other address, email
address or facsimile number of such party as shall be specified by notices given
hereunder):
To RCM: RCM Technologies, Inc. and RCM Technologies Services
------
Company, Inc.
00 Xxxxxxxxx Xxxx., 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Rich Timer and Xxxxx Xxxxxx
Facsimile: 000-000-0000
Email: xxxx.xxxxx@xxxx.xxx and
xxxxx.xxxxxx@xxxx.xxx
With a copy to: White and Xxxxxxxx LLP
--------------
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esquire
Facsimile: 000-000-0000
Email: xxxxxxx@xxxxxxxxxxxxxxxx.xxx
To Prestige: Prestige Capital Corporation
-----------
Att: Xxxxxx X. Xxxxxxxx, President
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxxx Xxx, XX 00000
Fax # 000-000-0000
Email: Hkaminski@ xxxxxxxxxxxxxxx.xxx
To Client: Ideal Interiors, Inc.
---------
000 0xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxxxx
Facsimile: 212.262.7024
Email: Xxxxxxxxx@xxxxx-xxxxxxxxx.xxx
With a copy to: Xxxx Xxxxxx, Esquire
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Email: xxxx@xxxxxxxxxxxxxxx.xxx
All such notices, shall be deemed received as follows: (i) in the case
of personal delivery, upon actual receipt thereof by the addressee, (ii) in the
case of overnight delivery, upon receipt, (iii) in case of electronic mail, upon
receipt, or (iv) in the case of a facsimile transmission, upon transmission
thereof by the sender and issuance by the transmitting machine of a confirmation
slip that the number of pages constituting the notice have been transmitted
without error.
8. Further Assurances. The parties hereto shall execute, acknowledge,
and deliver upon the written demand of Prestige or RCM, as the case may be, at
any time or times, any and all further documents or instruments in recordable
form for the purpose of further confirming the subordination and the agreements
herein set forth.
9. Miscellaneous.
a. Severability; Waiver and Amendment. If any provision of
this Agreement shall, for any reason, be held to be invalid or unenforceable in
any jurisdiction in which it is sought to be enforced, such invalidity and
unenforceability shall not affect any other provision hereof and it shall be
construed as if such invalid or unenforceable provision were omitted. The waiver
by either party of a breach or default in any of the provisions of this
Agreement by the other party shall not be construed as a waiver of any
succeeding breach of the same or other provisions; nor shall any delay or
omission on the part of either party to exercise or avail itself of any right,
power or privilege that it has or may have hereunder operate as a waiver of any
breach or default by the other party.
b. Entire Agreement. This Agreement sets forth the entire
understanding and agreement between the parties regarding the subject matter of
this Agreement, and supersedes all oral or written agreements or understandings
between the parties as to that subject matter. No course of prior dealings
between the parties and no usage of trade shall be relevant to supplement or
explain any term herein. Except as otherwise provided herein, this Agreement may
be modified or amended only by a writing signed by all parties.
c. Counterparts; Facsimiles. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one agreement. Any facsimile signature of
any party hereto or any other document executed in connection herewith shall
constitute a legal, valid and binding execution by such party.
d. Construction. This Agreement was negotiated by
sophisticated parties at arms' length, and each party has carefully reviewed
this Agreement prior to execution and has been represented by counsel in the
negotiation of this Agreement. Accordingly, no party shall be construed as the
drafting party against which this Agreement could be construed.
e. Assignment. This Agreement shall inure to the benefit of,
and be binding upon, the successors and assigns of the parties hereto; provided,
however, that Client may not, without the prior written consent of Prestige and
RCM, assign or delegate any of Client's rights, interests, duties, obligations
or liabilities under this Agreement.
f. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the domestic laws of the State of New Jersey,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of laws of any other jurisdiction other than the State of New
Jersey.
(CONTINUED ON NEXT PAGE)
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
RCM TECHNOLOGIES SERVICES COMPANY, INC.
By:
Name:
Title:
RCM TECHNOLOGIES, INC.
By: __________________________________
Name:
Title:
PRESTIGE CAPITAL CORPORATION
By: __________________________________
Name:
Title:
IDEAL INTERIORS, INC.
By:
Name:
Title:
EXHIBIT "A"
[EXECUTED COPIES OF PRESTIGE AGREEMENTS]
