EXHIBIT 10.20
SUBORDINATION AND INTERCREDITOR AGREEMENT
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This Subordination and Intercreditor Agreement is made as of
this 29th day of December, 1994, among GREYHOUND FINANCIAL CORPORATION, a
Delaware corporation ("Senior Lender"), XXXXXXX XXXXXX MEZZANINE FUND, L.P., a
Colorado limited partnership ("Subordinated Lender"), CPS ACQUISITION CORP., a
Georgia corporation ("Acquisition") and CPS SYSTEMS, INC., a Texas corporation
(the "Company"; Acquisition and Company being hereinafter collectively referred
to as "Borrower").
W I T N E S S E T H:
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WHEREAS, Senior Lender and Borrower have entered into a Term
Loan Agreement, and Senior Lender and the Company have entered into a Revolving
Loan and Security Agreement (as from time to time modified, extended, renewed,
or restated, the "Term Loan Agreement" and the "Revolving Loan Agreement,"
respectively, all of which shall be referred to collectively herein as the "Loan
Agreement"), each dated December 29, 1994, together with the other Credit
Facilities Documents (as defined in the Loan Agreement), whereby Senior Lender
has made and shall make available to Borrower the credit facilities
(collectively, the "Senior Loan") therein set forth, which Senior Loan is
secured by certain assignments of and security interests in the assets of
Borrower, now or hereafter existing, and the pledge of 100% of the issued and
outstanding common capital stock in each Borrower, all as more fully set forth
in the Credit Facilities Documents; and
WHEREAS, Subordinated Lender and the Company have entered into
a Note Agreement dated December 29, 1994 (the "Subordinate Debt Loan Agreement")
pursuant to which the Company has issued to Subordinated Lender its Senior
Subordinated Secured Note due December 31 in the principal amount of $2,100,000
(the "Subordinate Note"; the Subordinate Debt Loan Agreement, the Subordinate
Note, and all other documents or instruments executed in connection therewith,
as from time to time modified, extended, renewed or restated, collectively the
"Subordinated Loan Documents"); and
WHEREAS, as set forth in Section 19, Subordinated Lender shall
benefit from the execution and delivery of the Loan Agreement and the making of
the Senior Loan; and
WHEREAS, as a condition of the financial accommodations under
the Credit Facilities Documents, the parties hereto are required to enter into
this Agreement to establish the priority of the repayment of the Borrower's
debt, and to address certain related matters; and
WHEREAS, Subordinated Lender and Borrower desire to enter into
this Agreement in order to induce Senior Lender to enter into the Loan Agreement
with Borrower and to make the Senior Loan.
NOW, THEREFORE, for good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
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Except as otherwise provided herein, all capitalized terms
used in this Agreement shall have the meanings ascribed to such terms in the
Loan Agreement, provided that the following terms shall have the meanings set
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forth below:
"Borrower's Property" means all assets, property and property
rights, of any kind or nature, tangible or intangible, now or hereafter
existing, in which Borrower owns, asserts or maintains an interest.
"Finally Paid" or "Final Payment," when used in connection
with the Senior Indebtedness shall mean the full, final and indefeasible payment
of all of the Senior Indebtedness and the irrevocable termination of Senior
Lender's obligation to make loans or other advances under the Revolving Loan
Agreement.
"Insolvency Proceeding" shall mean any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Liens" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge, set-off right or other encumbrances, whether now
existing or hereafter created, acquired or arising.
"Senior Indebtedness" means all principal, interest and other
obligations at any time due and owing by Borrower to Senior Lender arising out
of or incurred in connection with the Credit Facilities Documents or other
documents executed in connection with the Senior Loan (and any indebtedness
which refinances such principal, interest or other obligations), subject to the
provisions of Section 15, as modified, extended, renewed or restated, whether
direct or contingent, and whether now existing or hereafter created; provided,
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however, that for purposes hereof the term "Senior Indebtedness" shall not
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include any obligations of Borrower to Senior Lender in respect of loans which
are not currently provided for in the Credit Facilities Documents. The foregoing
limitation shall not however result in the exclusion from Senior Indebtedness of
any capitalization of interest due under the Credit Facilities Documents as
currently in effect or the payment of default interest due under the Credit
Facilities Documents as currently in effect. Senior Indebtedness shall include,
without limitation, all interest which accrues on the principal amount of the
Senior Indebtedness subsequent to the commencement of a proceeding under Chapter
11 of the Bankruptcy Code, irrespective of whether or not such interest would be
allowed as a claim in such proceedings.
"Subordinated Indebtedness" means (i) all indebtedness of
Borrower to Subordinated Lender pursuant to the Subordinated Loan Documents and
all present and future loans, advances, debts, liabilities, obligations, and
indebtedness owing by Borrower to the Subordinated Lender, whether evidenced by
any note, or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by the Subordinated Lender in
Borrower's debts owing others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to Borrower and (ii) any payments to the
Subordinated Lender in redemption or purchase of warrants, capital stock,
partnership interest, ownership interest or equity of the Borrower held by such
Subordinated Lender or any other payment in respect of warrants, capital stock,
partnership interest, ownership interest or equity of the Borrower.
"UCC" shall mean Article 9 of the Uniform Commercial Code, as
in effect in the State of Arizona from time to time, unless the context
otherwise requires.
2. Subordination.
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Subordinated Lender hereby postpones and subordinates, to the
extent and in the manner provided in this Agreement, all of the Subordinated
Indebtedness to the Final Payment of all of
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the Senior Indebtedness. Subordinated Lender hereby agrees that all claims and
rights of any kind Subordinated Lender may now have or hereafter acquire against
Borrower and Borrower's Property resulting from Subordinated Indebtedness shall
be subordinate and subject to the claims and rights against Borrower and/or
Borrower's Property of Senior Lender arising from or out of the Senior
Indebtedness, to the extent and in the manner set forth in this Agreement. If
Borrower issues any instrument or document evidencing the Subordinated
Indebtedness each such instrument and document shall bear a conspicuous legend
that it is subordinated to the Senior Indebtedness in accordance with the terms
of this Agreement. Borrower's books shall be marked to evidence the
subordination of all of the Subordinated Indebtedness to the holder of Senior
Indebtedness, in accordance with the terms of this Agreement. Senior Lender is
authorized to examine such books from time to time and to make any notations
required by this Agreement.
3.(A). Warranties and Representations of Borrower and
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Subordinated Lender.
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Borrower and Subordinated Lender each hereby severally
represents and warrants to the Senior Lender that the Senior Lender has been
furnished with a true and correct copy of all instruments and securities
evidencing or pertaining to the Subordinated Indebtedness. Borrower hereby
represents and warrants to the Senior Lender that this Agreement has been duly
executed and delivered by Borrower and constitutes a legal, valid and binding
obligation of Borrower enforceable in accordance with its terms except to the
extent that the enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies and general principles of equity. Subordinated Lender represents and
warrants to the Senior Lender: (A) that this Agreement has been duly executed
and delivered by Subordinated Lender and constitutes a legal, valid and binding
obligation of Subordinated Lender enforceable against the Subordinated Lender in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting generally the
enforcement of creditors' rights and remedies and general principles of equity;
(B) that Subordinated Lender is a limited partnership duly formed, validly
existing and in good standing under the laws of Colorado, and in good standing
and authorized to do business in each jurisdiction in which a failure to so
qualify would have a material adverse effect on the financial condition,
operations, prospects, profits, business or property of Subordinated Lender; (C)
that the execution, delivery, and performance by Subordinated Lender of this
Agreement do not and will not conflict with or contravene any law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Subordinated Lender or
conflict with, or result in any default under Subordinated Lender's charter,
articles of incorporation or similar instrument or any agreement or instrument
of any kind to which Subordinated Lender is a party or by which Subordinated
Lender or the properties of Subordinated Lender are bound, except for those as
to which consents have been obtained and are in full force and effect, and
except where such conflict or contravention will not have a material adverse
effect on the financial condition, operations, prospects, profits, business or
property of Subordinated Lender; (D) that Subordinated Lender is the holder and
owner of all of the Subordinated Indebtedness, together with all claims and
rights in connection therewith, arising therefrom or evidenced thereby; (E) that
neither the execution and delivery by Subordinated Lender of this Agreement nor
the performance by Subordinated Lender hereunder requires the consent, approval,
order, or authorization of, or registration with, or the giving of notice to any
governmental authority, domestic or foreign, or any other person or entity,
except such consents as have been obtained by Subordinated Lender and are in
full force and effect, and except where the failure to obtain such consent will
not have a material adverse effect on the financial condition, operations,
prospects, profits, business or property of Subordinated Lender; and (F) that it
has not relied and shall not rely on any representation or information of any
nature made by or received from Senior Lender relative to Borrower in deciding
to execute this Agreement or to permit it to continue in effect.
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3(B). Warranties and Representations of Senior Lender.
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Senior Lender represents and warrants to the Subordinated
Lender: (A) that this Agreement has been duly executed and delivered by Senior
Lender and constitutes a legal, valid and binding obligation of Senior Lender
enforceable against the Senior Lender in accordance with its terms, except to
the extent that the enforceability hereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies and general principles of equity; (B) that Senior Lender is a
corporation duly formed, validly existing and in good standing under the laws of
Delaware; (C) that all necessary corporate actions have been taken by Senior
Lender to authorize the execution and delivery by Senior Lender of this
Agreement and the performance of its obligations hereunder; (D) that the
execution, delivery, and performance by Senior Lender of this Agreement do not
and will not conflict with or result in any default under Senior Lender's
articles of incorporation, bylaws or other governing instrument, or any
agreement or instrument of any kind to which Senior Lender is a party or by
which Senior Lender or its properties are bound, except for those as to which
consents have been obtained and are in full force and effect, and except where
such conflict or contravention will not have a material adverse effect on the
financial condition, operations, prospects, profits, business or property of
Senior Lender; (E) that Senior Lender is the holder and owner of all of the
Senior Indebtedness, together with all claims and rights in connection
therewith, arising therefrom or evidenced thereby; and (F) that it has not
relied and shall not rely on any representation or information of any nature
made by or received from Subordinated Lender relative to Borrower in deciding to
execute this Agreement or to permit it to continue in effect.
4. Negative Covenants.
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Until all of the Senior Indebtedness has been fully and
finally paid: (A) Borrower shall not, directly or indirectly, grant a security
interest in, mortgage, pledge, assign or transfer any properties, to secure or
satisfy all or any part of the Subordinated Indebtedness, except for a Lien on
the Collateral (as defined in the Term Loan Agreement) which is junior to the
Lien in favor of Lender on such Collateral and is subject to the terms of this
Subordination Agreement; (B) Subordinated Lender shall not demand or accept from
Borrower or any other person any such collateral, except for a Lien on the
Collateral (as defined in the Term Loan Agreement) which is junior to the Lien
in favor of Lender on such Collateral and is subject to the terms of this
Subordination Agreement; (C) Borrower shall not discharge the Subordinated
Indebtedness other than in accordance with its terms; (D) Subordinated Lender
shall not demand or accept from Borrower or other person any consideration which
would result in a discharge of the Subordinated Indebtedness other than in
accordance with its terms; (E) Subordinated Lender shall not hereafter give any
subordination in respect of the Subordinated Indebtedness or convert any or all
of the Subordinated Indebtedness to capital stock, equity, ownership interest or
other securities of Borrower; (F) Subordinated Lender shall not transfer or
assign any of the Subordinated Indebtedness to any person, except upon the
condition that such transferee or assignee shall have agreed in writing to be
bound by the terms of this Agreement as a Subordinated Lender hereunder; (G)
Borrower shall not hereafter issue any instrument, security or other writing
evidencing any part of the Subordinated Indebtedness, and Subordinated Lender
shall not receive any such writing, except upon the condition that such security
shall bear the legend referred to in Section 2 above and a true copy thereof
shall be furnished to Senior Lender; (H) Borrower shall not directly or
indirectly redeem or purchase any warrants, capital stock, ownership interest or
other equity interest in Borrower held by Subordinated Lender; (I) Subordinated
Lender shall not demand or accept from Borrower or any other person, any
payments in redemption or purchase of any warrants, capital stock, ownership
interest or other equity interest in Borrower held by Subordinated Lender; (J)
neither Borrower nor Subordinated Lender otherwise shall take any action
contrary to Senior Lender's priority position over Subordinated Lender that is
created by this Agreement; and (K) Subordinated Lender agrees not to exercise
any warrants to purchase any capital stock of Borrower.
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5. Payments of Subordinated Indebtedness.
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Until all of the Senior Indebtedness has been Finally Paid,
Borrower shall not make and Subordinated Lender shall not accept any direct or
indirect payment in cash, property or securities, by set-off or otherwise, with
respect to any Subordinated Indebtedness, including, without limitation, any
principal or interest payments, except to the extent permitted in this Section 5
or Section 6. Borrower shall be permitted to make payments of interest only in
respect of the Subordinated Indebtedness in accordance with the provisions of
the Subordinated Debt Loan Agreement, and to pay the expenses described in
Sections 5.1(e) and 6.17 of the Subordinate Debt Loan Agreement provided that
(i) no Event of Default under Section 8.1 of the Term Loan Agreement or Section
8.1 of the Revolving Loan Agreement, each as in effect on the date hereof,
exists at the time of such payment or (ii) such payment does not occur during
any Standstill Period, as described in Section 6 hereof. Notwithstanding the
foregoing, Subordinated Lender may demand, receive and retain such payments
until the Senior Lender has given a Default Notice as described in Section 6
hereof.
6. Prohibition on Payments.
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(A) The foregoing provisions of Section 5 to the contrary
notwithstanding, upon the happening of any Event of Default or any Incipient
Default under Section 8.1.6 of the Loan Agreement under and as defined in the
Loan Agreement and upon receipt by Subordinated Lender of written notice (the
"Default Notice") from the Senior Lender, no direct or indirect payment in cash,
property or securities, by setoff or otherwise, shall be made or agreed to be
made by the Borrower or accepted by the Subordinated Lender on account of the
principal of, premium or interest on or any other amounts due under the
Subordinated Loan Documents or in respect of any redemption, retirement or
acquisition of any of the indebtedness evidencing or due under the Subordinated
Loan Documents and the Borrower shall not segregate or hold in trust money for
any such payment or distribution, unless and until the earliest of the following
to occur has occurred: (i) Subordinated Lender has received a written notice
from the Senior Lender that the default referred to in such Default Notice has
been cured or waived by Senior Lender, or (ii) the expiration of 180 days
following the giving of the Default Notice (the period from the date the Default
Notice is given to the earlier to occur of the events described in clauses (i)
and (ii) of this sentence shall be referred to as the "Standstill Period").
Senior Lender shall not be entitled to give a Default Notice more than one time
in any 360 day period. Upon the expiration of the Standstill Period, the
Subordinated Lender shall be entitled, notwithstanding anything herein to the
contrary, to the immediate payment in full of all suspended payments of the
Subordinated Indebtedness to the fullest extent permitted by Section 5, and the
Subordinated Lender shall further be entitled to seek enforcement, collection,
or realization on such suspended payments of the Subordinated Indebtedness if
said suspended payments are not immediately so paid by Borrower.
(B) In the event that the Borrower shall make or Subordinated
Lender shall collect any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness in
contravention of this Section 6, such payments shall be held in trust and paid
over and delivered to the Senior Lender.
(C) In the event that any failure of the Borrower to make or
the Subordinated Lender to receive any payment with respect to the Subordinated
Indebtedness as a result of the provision of this Section 6 shall be deemed a
default under the Subordinated Loan Documents, such event shall not give rise to
any right of Subordinated Lender to exercise any remedies otherwise available to
it, any provision of the Subordinated Loan Documents to the contrary
notwithstanding, until the expiration of the Standstill Period (unless earlier
permitted as provided in Section 7).
(D) Before Senior Lender shall be entitled to give a Default
Notice on account of an Event of Default or an Incipient Default (except for an
Event of Default or Incipient Default arising
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pursuant to Section 8.1.6 or any other Event of Default or Incipient Default
which is not reasonably susceptible to cure by Subordinated Lender), Senior
Lender shall first give Subordinated Lender a notice (which shall not be deemed
a Default Notice) of the Event of Default or Incipient Default and its intention
to give a Default Notice on account of such default and Subordinated Lender
shall have ten (10) days after receipt of such notice within which to cure
payment defaults and twenty (20) Business Days (as defined in the Term Loan
Agreement) to cure non-payment defaults.
7. Forbearance of Legal Remedies.
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(A) Subordinated Lender shall not exercise any remedies it may
have for an Event of Default under the Subordinated Loan Documents, except as
permitted below. The Subordinated Lender may exercise any of its rights and
remedies (in each case, subject at all times to the payment subordination and
lien subordination provisions set forth in this Agreement), at any time,
including, without limitation, accelerating the Subordinated Indebtedness;
provided, however, that the Subordinated Lender may not exercise any of its
remedies (including, without limitation, accelerating the Subordinated
Indebtedness) during a Standstill Period unless: (a) an Insolvency Proceeding
shall occur, (b) the Senior Lender commences legal proceedings against the
Borrower, or (c) payment of the Senior Indebtedness is accelerated.
(B) Nothing in this Agreement shall impair the right of
Subordinated Lender to foreclose any security interest in and sell or otherwise
dispose of any collateral securing the Subordinated Indebtedness which is not
then subject to a Lien granted in favor of the Senior Lender.
The Subordinated Lender agrees to provide the Senior Lender
with not less than ten (10) days prior written notice of its intent to exercise
any legal remedies (the "Subordinate Debt Notice Period"), which notice may be
given during a Standstill Period. In the event that Subordinated Lender has
commenced to sell, foreclose upon or liquidate any of the Borrower's Property
that is subject to a Lien securing Senior Indebtedness, Subordinated Lender will
permit Senior Lender to control such sale, foreclosure or liquidation if the
Senior Lender gives Subordinated Lender notice of its election to control such
sale, foreclosure or liquidation prior to the later to occur of the end of the
Subordinated Debt Notice Period or the expiration of any Standstill Period which
may be or become in effect, for so long as Senior Lender continues to diligently
pursue such sale, foreclosure, or liquidation in a commercially reasonable
manner in accordance with (S) 47-9504 of the UCC.
8. Subordinated Indebtedness Subordinated to Prior Payment of
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All Senior Indebtedness on Dissolution, Liquidation or Reorganization of the
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Borrower.
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Upon any distribution of assets of the Borrower in any
dissolution, winding up, liquidation or reorganization of the Borrower (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise) tending toward liquidation of the
business and assets of Borrower:
(A) the holder of all Senior Indebtedness shall first be
entitled to receive payment in full (or to have such payment duly provided for
in a manner previously agreed upon or otherwise satisfactory to it) of the
principal thereof, and premium and interest due thereon, and other amounts
payable comprising such Senior Indebtedness, before the Subordinated Lender is
entitled to receive any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness; and
(B) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, to which the
Subordinated Lender would be entitled except for these provisions, shall be paid
by the liquidating trustee or agent or other person making such payment or
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distribution directly to the holder of the Senior Indebtedness, to the extent
necessary to make payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution or provision
therefor to the holders of such Senior Indebtedness.
The Borrower shall give prompt written notice to the Senior
Lender and the Subordinated Lender of any dissolution, winding up, liquidation
or reorganization of the Borrower or any assignment for the benefit of any of
the creditors of the Borrower tending toward the liquidation of the business and
assets of the Borrower.
9. Obligation of Borrower Unconditional.
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Nothing contained herein or in the Credit Facilities Documents
is intended to or shall impair, as between the Borrower and the Subordinated
Lender only, the obligation of the Borrower, which is absolute and
unconditional, to pay to the holder of the Subordinated Indebtedness the
principal of, premium (if any) and interest on the Subordinated Indebtedness as
and when the same shall become due and payable in accordance with their terms,
or to affect the relative rights of the Subordinated Lender and creditors of the
Borrower other than the Senior Lender.
10. Subordination Rights Not Impaired by Acts or Omissions of
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Borrower or Holder of Senior Indebtedness.
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No right of any present or future holder of any Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Borrower, by any act or failure to act, in good faith, by any such holder,
by any act or failure to act by the other holder or by any noncompliance by the
Borrower with the terms hereof, regardless of any knowledge thereof which any
such holder may have or be otherwise charged with. This subordination shall
continue and shall be irrevocable until the date all of the Senior Indebtedness
has been fully and finally paid by Borrower or otherwise discharged and released
by the Senior Lender. Subordinated Lender shall not be released, nor shall
Subordinated Lender's obligation hereunder be in anyway diminished, by any of
the following: (A) the exercise or the failure to exercise by Senior Lender of
any rights or remedies conferred on it or them under the Credit Facilities
Documents hereunder or existing at law or otherwise, or against any of
Borrower's Property; (B) the commencement of an action at law or the recovery of
a judgment at law against Borrower or any obligor ("Obligor") for the
performance of the Senior Indebtedness and the enforcement thereof through levy
or execution or otherwise; (C) the taking or institution or any other action or
proceeding against Borrower or any Obligor; or (D) any delay in taking,
pursuing, or exercising any of the foregoing actions, rights, powers, or
remedies (even though requested by Subordinated Lender) by Senior Lender or
anyone acting for Senior Lender. Without limiting the generality of the
foregoing, and anything else contained herein to the contrary notwithstanding,
Senior Lender, from time to time, without notice to Subordinated Lender, may
take all or any of the following actions without in any manner affecting or
impairing the obligation or liability of Subordinated Lender hereunder: (I)
obtain a lien or a security interest in any property to secure any of the Senior
Indebtedness; (II) obtain the primary and secondary liability of any party or
parties with respect to any of the Senior Indebtedness; (III) renew, extend, or
otherwise change the time for payment of the Senior Loan or any installment
thereof for any period, subject to the provisions of Section 15; (IV) release or
compromise any liability of any nature of any person or entity with respect to
the Senior Indebtedness; (V) exchange, enforce, waive, release, and apply any of
Borrower's Property and direct the order or manner of sale thereof as Senior
Lender may in its discretion determine; (VI) enforce their rights hereunder,
whether or not Senior Lender shall proceed against any other person or entity;
(VII) agree to any amendment, modification, or alteration of the Credit
Facilities Documents and/or exercise its rights to consent to any action or
non-action of Borrower which may violate the covenants and agreements contained
in the Credit Facilities Documents with or
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without consideration, on such terms and conditions as may be acceptable to it;
or (VIII) exercise any of its rights conferred by the Credit Facilities
Documents or by law.
11. Authority to Act for Subordinated Lender.
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Until the Senior Indebtedness has been Finally Paid, in the
event an Insolvency Proceeding shall occur and be continuing, if the
Subordinated Lender is within ninety (90) days of a final bar on exercising its
right to present a proof of debt, proof of claim, suit or other similar right
available for the purpose of protecting the Senior Lender's rights created by
the subordination herein (to the extent that any of the foregoing proofs,
procedures, or rights are relevant in the context of the particular Insolvency
Proceeding involved) and at least than 30 days have elapsed since the
establishment of such bar date, Subordinated Lender shall advise Senior Lender
prior to the date sixty (60) days before such final bar occurs whether
Subordinated Lender intends to exercise its rights and present a proof of debt,
proof of claim, file suit, or preserve such other rights as are available to
Subordinated Lender prior to the expiration of such rights. In the event that
Subordinated Lender advises Senior Lender of its intention to let any such
rights lapse, Senior Lender shall thereupon immediately have the right to act as
Subordinated Lender's attorney-in-fact for the purposes specified in the
remainder of this Section 11 (but solely to the extent that any of the actions
on behalf of Senior Lender authorized hereby are relevant in the context of the
particular Insolvency Proceeding involved). In the event Subordinated Lender,
regardless of whether Subordinated Lender notified Senior Lender of its
intention to preserve its rights or not, is within thirty (30) days of a final
bar on exercising its right to present a proof of debt, proof of claim, file
suit or exercise such other similar rights as are available to Subordinated
Lender, then upon five (5) days notice to Subordinated Lender, which notice can
be given commencing on the forty-fifth (45th) day prior to the date a final bar
would prevent Subordinated Lender from exercising its rights described above,
unless the Subordinated Lender within the five (5) day notice period presents
its proof of debt, proof of claim, suit or preserves such other similar right,
Senior Lender shall have the right to act as Subordinated Lender's
attorney-in-fact for the purposes specified herein, and Subordinated Lender
hereby irrevocably appoints Senior Lender its true and lawful attorney, with
full power of substitution, in the name of Subordinated Lender or in the name of
Senior Lender, for the use and benefit of Senior Lender, without further or
additional notice to Subordinated Lender or any of its representatives,
successors or assigns, to perform the following acts, at Senior Lender's option,
in such Insolvency Proceeding:
(A) To enforce or vote claims comprising the Subordinated
Indebtedness, either in its own name or in the name of Subordinated Lender, by
proof of debt, proof of claim, suit or otherwise; provided, however,
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Subordinated Lender may preserve its right to vote claims comprising the
Subordinated Indebtedness in a manner not inconsistent with this Agreement if
Subordinated Lender has presented its proof of debt, proof of claim, or is
otherwise pursuing its claim, or if in circumstances where Senior Lender has
presented proof of debt, proof of claim, or otherwise filed suit to preserve
claims comprising the Subordinated Indebtedness pursuant to this Section 11, if
Subordinated Lender notifies Senior Lender of Subordinated Lender's intention to
pursue such claims within five (5) Business Days following the filing of any
such proof of debt, proof of claim, or suit by Senior Lender in respect of the
Subordinated Indebtedness; and
(B) To collect any assets of Borrower distributed, divided or
applied by way of dividend or payment, or any securities issued, on account of
the Subordinated Indebtedness and to apply the same, or the proceeds of any
realization upon the same that Senior Lender in its discretion elects to effect,
to the Senior Indebtedness until all of the Senior Indebtedness has been paid in
full, rendering any surplus to Subordinated Lender if and to the extent
permitted by law.
In no event shall Senior Lender be liable to Subordinated Lender for any failure
to prove the Subordinated Indebtedness, to exercise any right with respect
thereto or to collect any sums payable
-8-
thereon. In the event that Senior Lender shall exercise its rights hereunder and
act as Subordinated Lender's attorney-in-fact, Senior Lender shall give notice
to Subordinated Lender of any of the foregoing actions within five (5) Business
Days following such act; provided, however, that the failure of Senior Lender to
give such notice to Subordinated Lender shall not invalidate or otherwise limit
the effectiveness of any act undertaken by Senior Lender as attorney-in-fact for
Subordinated Lender hereunder, or otherwise provide any rights to Subordinated
Lender hereunder.
12. Waivers.
-------
Borrower and Subordinated Lender each hereby waives any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance of this Agreement in any action
brought therefor by Senior Lender. To the fullest extent permitted by law and
except as otherwise expressly provided in Section 6(A) hereof, Borrower and
Subordinated Lender each hereby further waives: presentment, demand, protest,
notice of protest, notice of default or dishonor, notice of payment or
nonpayment and any and all other notices and demands of any kind in connection
with all negotiable instruments evidencing all or any portion of the Senior
Indebtedness or the Subordinated Indebtedness to which Borrower or Subordinated
Lender may be a party; notice of any loans made, extensions granted subject to
the provisions of Section 15 or other action taken in reliance thereon; and all
other demands and notices of every kind in connection with this Agreement, the
Senior Indebtedness or the Subordinated Indebtedness; prior notice of and
consent to any loans made, extension granted or other action taken in reliance
thereon; and all other demands and notices of every kind in connection with this
Agreement or the Senior Indebtedness. Senior Lender shall give notice to
Subordinated Lender of any of the foregoing acts within five (5) Business Days
following such act, provided, however, that the failure of Senior Lender to give
such notice to Subordinated Lender shall not invalidate or otherwise limit the
effectiveness of any act undertaken by Senior Lender or provide any rights to
Subordinated Lender hereunder. Subject to the provisions of Section 15,
Subordinated Lender assents to any release, renewal, extension, compromise or
postponement of the time of payment of the Senior Indebtedness, to any
substitution, exchange or release of collateral therefor and to the addition or
release of any person primarily or secondarily liable thereon.
13. Indulgences Not Waivers.
----------- --- -------
Neither the failure nor any delay on the part of Senior Lender
to exercise any right, remedy, power or privilege hereunder shall operate as a
waiver thereof or give rise to an estoppel, nor be construed as an agreement to
modify the terms of this Agreement, nor shall any single or partial exercise of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver by a party hereunder shall be effective unless
it is in writing and signed by the party making such waiver, and then only to
the extent specifically stated in such writing.
14. Reliance on Judicial Order or Certificate of
-------- -- -------- ----- -- ----------- --
Liquidating Agent.
----------- -----
Upon any payment or distribution of assets of the Borrower
referred to in this Agreement, the Subordinated Lender shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of a trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Subordinated Lender, for the
purpose of ascertaining the persons entitled to participate in such payment or
distribution, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto.
-9-
15. Amendment of the Credit Facilities Documents and the
--------- -- --- ------ ---------- --------- --- ---
Subordinated Loan Documents.
------------ ---- ---------
Notwithstanding anything herein to the contrary, the Senior
Lender agrees that it will not, without the prior written consent of the
Subordinated Lender, amend the Credit Facilities Documents so as to increase the
financial terms thereof [including, without limitation, the amount of principal,
rate of interest (other than with respect to fluctuations in a variable rate of
interest in accordance with the terms of the Loan Agreement or with respect to
the application of the Default Rate of interest, as provided in the Loan
Agreement], fees, annual cash flow recapture prepayments, and prepayment
premiums, if any), extend the maturity of the Loan, add or change any covenants
in a manner materially more restrictive to the Borrower. Subordinated Lender
agrees that it will not, without the consent of the Senior Lender, amend the
Subordinated Loan Documents so as to increase the financial terms thereof
(including, without limitation, the amount of principal, rate of interest,
dividends, fees and prepayment premiums, if any), extend the maturity thereof,
add or change any covenants in a manner materially more restrictive to the
Borrower, or effect any other modification to the Subordinated Loan Documents,
which would be materially adverse to the Senior Lender.
16. Inconsistent or Conflicting Provisions.
------------ -- ----------- ----------
In the event any provision of the Credit Facilities Documents
or the Subordinated Loan Documents is inconsistent with the provisions of this
Agreement, the provisions of this Agreement shall govern and prevail.
17. Default.
-------
Subject to applicable notice and/or grace periods, if any, if
any representation or warranty of Borrower or Subordinated Lender in this
Agreement or in any instrument evidencing, securing or relating to the Senior
Indebtedness proves to have been materially false when made, or, in the event of
a breach by either the Borrower or Subordinated Lender in the performance of any
of the material terms of this Agreement, or any instrument or agreement
evidencing, securing or relating to the Senior Indebtedness, all of the Senior
Indebtedness shall, at the option of Senior Lender, become immediately due and
payable without presentment, demand, protest, or notices of any kind,
notwithstanding any time or credit otherwise allowed. At any time Subordinated
Lender fails to comply with any material term of this Agreement that is
applicable to Subordinated Lender, Senior Lender may demand specific performance
of this Agreement, whether or not Borrower has complied with this Agreement, and
may exercise any other remedy available at law or equity.
18. Notices.
-------
All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when delivered
against receipt or when deposited in the United States mails, certified or
registered mail, return receipt requested, postage prepaid, addressed as set
forth below, and actually presented at the address of the notice party.
(A) If to Senior Lender:
((two copies)
Greyhound Financial Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President - Law
-10-
and
Greyhound Financial Corporation
000 Xx. Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Portfolio Manager
(B) If to Subordinated Lender:
Xxxxxxx Xxxxxx Mezzanine Fund, L.P.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Managing Partner
With a Copy to:
Holme, Xxxxxxx & Xxxx, LLC
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxx, Jr.
(C) If to Borrower:
CPS Systems, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxx Xxxxxxx
With a Copy To:
Xxxxx, Xxxx & Xxxxxxxx
Cumberland Center II
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Any addressee may alter the address to which communications
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
19. Benefit.
-------
Each of Subordinated Lender and Senior Lender represents and
warrants to the other that the making of the Senior Loan will benefit
Subordinated Lender and the making of the Subordinated Loan will benefit Senior
Lender; and each of Subordinated Lender and Senior Lender acknowledges to the
other that the other would not make the its loan(s) but for the execution of
this Agreement. Therefore, each of Senior Lender and Subordinated Lender has
received good, sufficient and adequate consideration for the making of this
Agreement.
-11-
20. Entire Agreement.
------ ---------
This Agreement constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement in
writing signed by Senior Lender, Borrower and Subordinated Lender.
21. Additional Documentation.
---------- -------------
Borrower and Subordinated Lender shall execute and deliver to
Senior Lender such further instruments and shall take such further action as
Senior Lender may at any time or times reasonably request in order to carry out
the provisions and intent of this Agreement.
22. Expenses.
--------
Borrower agrees to pay Senior Lender on demand all expenses of
every kind, including reasonable attorney's fees, that Senior Lender may
reasonably incur in enforcing any of its rights against Borrower under this
Agreement. As between Senior Lender and the Subordinated Lender, the
non-prevailing party shall pay to the prevailing party all expenses incurred by
the prevailing party in enforcing its rights against the nonprevailing party
under this Agreement.
23. Successors and Assigns.
---------- --- -------
This Agreement shall inure to the benefit of Senior Lender and
Subordinated Lender, their respective successors and assigns, and shall be
binding upon the parties hereto and their respective successors and assigns,
including, without limitation, any subsequent holders of the Subordinate Note.
Senior Lender, without notice of any kind, may sell, assign or transfer the
Senior Indebtedness, and in such event each and every immediate and successive
assignee or transferee thereof may be given the right by Senior Lender to
enforce this Agreement in full against Borrower and Subordinated Lender, by suit
or otherwise, for its own benefit. Subordinated Lender agrees, for the benefit
of any such assignee or transferee, that Subordinated Lender's obligations
hereunder shall not be subject to any reduction, abatement, defense, set-off,
counterclaim or recoupment for any reason whatsoever.
24. Covenant Not to Challenge.
-------- --- -- ---------
This Agreement has been negotiated by the parties with the
expectation and in reliance upon the assumption that the instruments and
documents evidencing the Senior Indebtedness are valid and enforceable. In
determining whether to enter into this Agreement, Subordinated Lender has
assumed such validity and enforceability, and has agreed to the provisions
contained herein, without relying upon any reservation of a right to challenge
or call into question such validity or enforceability. Except as otherwise
permitted by the UCC, as between Senior Lender and Subordinated Lender,
Subordinated Lender hereby covenants and agrees that it shall not initiate in
any proceeding a challenge to the validity or enforceability of the documents
and instruments evidencing the Senior Indebtedness, nor shall Subordinated
Lender instigate other parties to raise any such challenges, nor shall
Subordinated Lender participate in or otherwise assert any such challenges which
are raised by other parties. The foregoing notwithstanding, in the event that
any other party is independently successful in establishing the invalidity or
unenforceability of any of the documents or instruments evidencing the Senior
Indebtedness, then Subordinated Lender shall be entitled to the benefit of such
result, and Subordinated Lender shall not be bound by the subordination
provisions of this Agreement to the extent of such invalidity or enforceability.
-12-
25. Subrogation.
-----------
Subject to the foregoing provisions hereof, provided that the
Senior Indebtedness has been paid in full (and shall not be subject to avoidance
under Section 547 of the Bankruptcy Code) the Subordinated Lender shall be
subrogated, to the extent of such Senior Indebtedness so paid, to the rights of
the holder of such Senior Indebtedness to receive payments or distributions or
assets of the Borrower that secure such Senior Indebtedness until all amounts
owing on the Subordinated Indebtedness shall be paid in full. For the purpose of
such subrogation no payments or distributions to the holder of the Senior
Indebtedness by or on behalf of the Borrower or by or on behalf of Subordinated
Lender by virtue of the provisions hereof which otherwise would have been made
to the Subordinated Lender shall, as between the Borrower, a creditor of the
Borrower (other than Subordinated Lender and the Senior Lender) and the
Subordinated Lender, be deemed to be payment by the Borrower to or on account of
the Senior Indebtedness, it being understood that the provisions of this
Agreement are, and are intended solely, for the purpose of defining the relative
rights of Subordinated Lender on the one hand, and Senior Lender on the other
hand. In the event that Subordinated Lender turns over to any Senior Lender any
payment or contributions received by it in accordance with this Agreement,
Subordinated Lender shall, for purposes of determining whether an a default
under the Subordinated Loan Documents has occurred, be deemed never to have
received such payment or distribution. In the event that Borrower fails to make
any payment on account of the Subordinated Indebtedness by reason of any
provision contained herein, such failure shall, notwithstanding such provision
contained herein, constitute a default with respect to the Subordinated
Indebtedness if and to the extent such failure would otherwise constitute such a
default in accordance with the terms of the Subordinated Indebtedness.
26. Termination of Subordination: Turn Over of Collateral.
----------- -- ------------- ---- ---- -- ----------
This subordination shall continue and shall be irrevocable
until the date all of the Senior Indebtedness has been Finally Paid by Borrower
or otherwise discharged and released by the Senior Lender. Upon or subsequent to
the termination of this Agreement, the Senior Lender shall, upon Subordinated
Lender's request, turn over to Subordinated Lender any of Borrower's Property
then in the Senior Lender's possession, to the extent that Subordinated Lender
holds any Lien on or security interest in such Property of Borrower, including
but not limited to the certificates for shares of Acquisition and the Company
held by the Senior Lender pursuant to the Stock Pledge Agreements and related
stock powers. In determining whether Subordinated Lender holds any Lien on or
security interest in any Property of Borrower in Senior Lender's possession,
Senior Lender shall be entitled to rely upon the certification of any officer of
Subordinated Lender confirming the existence of Lien in favor of Subordinated
Lender, and Borrower hereby releases Senior Lender from any liability or
obligation arising as the result of Senior Lender's reliance upon such
certification and compliance with the terms of this Section requiring delivery
of such property to Subordinated Lender.
27. Reinstatement.
-------------
The obligations of Subordinated Lender under the Agreement
shall continue to be effective, or be reinstated, as the case may be, if at any
time any payment in respect of any Senior Indebtedness is rescinded or must
otherwise be restored or returned by Senior Lender by reason of any bankruptcy,
reorganization, arrangement, composition or similar proceeding or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, Borrower or any substantial part of its property, or
otherwise, all as though such payment had not been made.
28. Governing Law.
--------- ---
THE VALIDITY, CONSTRUCTION AND ENFORCEMENT OF THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
-13-
ARIZONA. BORROWER AND SUBORDINATED LENDER HEREBY AGREE THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY EITHER BORROWER OR SUBORDINATED LENDER AND ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN A MARICOPA
COUNTY, ARIZONA SUPERIOR COURT OR THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF ARIZONA OR, IF SENIOR LENDER INITIATES SUCH ACTION, IN ADDITION TO
THE FOREGOING COURTS, ANY COURT IN WHICH SENIOR LENDER SHOULD INITIATE SUCH
ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH OF BORROWER AND
SUBORDINATED LENDER HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY SENIOR LENDER AND HEREBY
WAIVES ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED UPON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM AS SET FORTH IN THIS
SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY SENIOR LENDER, OF
ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY SENIOR LENDER, OF ANY
ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH OF
BORROWER AND SUBORDINATED LENDER HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK
SUCH JUDGMENT OR ACTION.
29. Jury Trial.
---- -----
SENIOR LENDER, SUBORDINATED LENDER AND BORROWER WAIVE TRIAL BY
JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WITH THIS AGREEMENT,
EACH ACKNOWLEDGING AND AGREEING THAT ANY CONTROVERSY THAT MAY ARISE HEREUNDER
WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, WOULD BE BETTER
PRESENTED TO AND RESOLVED BY A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
30. Severability.
------------
The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
31. Counterparts.
------------
This Agreement may be executed in any number of separate
counterparts, all of which, when taken together, shall constitute one and the
same instrument, notwithstanding the fact that all parties did not sign the same
counterpart.
-14-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GREYHOUND FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxxx Xxxxxx
------------------------------
Title: Vice President
-----------------------------
CPS ACQUISITION CORP., a Georgia
corporation
By: /s/ Xxxx X. Xxxx
-----------------------------------
Name: Xxxx X. Xxxx
------------------------------
Title: President
-----------------------------
CPS SYSTEMS, INC., a Texas
corporation
By: /s/ Xxxx X. Xxxx
-----------------------------------
Name: Xxxx X. Xxxx
------------------------------
Title: President
-----------------------------
XXXXXXX XXXXXX MEZZANINE FUND,
L.P., a Colorado limited
partnership
By: XXXXXXX XXXXXX CAPITAL
PARTNERS, a Colorado
general partnership,
General Partner
By: /s/ X. X. Xxxxx
-----------------------------------
Name: X. X. Xxxxx
------------------------------
Title: MANAGING PARTNER
-----------------------------
