EXHIBIT 4.8
AMENDED AND RESTATED SUBORDINATION AGREEMENT
WHEREAS, Tarpon Industries, Inc. ("Tarpon"), is indebted to certain
subordinated creditors pursuant to Tarpon's 8% Junior Secured Promissory Notes
dated April 5, 2004 (the "Subordinated Notes") and to secure its obligations
thereunder, Tarpon has executed and delivered a General Security Agreement dated
April 5, 2004 (the "Tarpon Security Agreement");
WHEREAS, Xxxxxx Welding Co. ("Borrower") guarantied the obligations of
Tarpon in respect of the Subordinated Notes pursuant to a guaranty dated as of
April 5, 2004, and a General Subordinated Security Agreement of even date
therewith (collectively, the "Guaranty Instruments"), and will or may from time
to time hereafter be otherwise indebted to the holders of the Subordinated Notes
in various sums (the Subordinated Notes, the Tarpon Security Agreement and the
Guaranty Instruments are collectively referred to herein as the "Junior Debt
Instruments");
WHEREAS, Comerica Bank and the Undersigned are parties to that certain
Subordination Agreement, dated April 6, 2004 (the "Original Agreement"),
pursuant to which, among other things, the Junior Debt and the Undersigned's
Collateral (as defined below) are subordinated to certain indebtedness owing to
Comerica Bank and collateral securing the same;
WHEREAS, the holders of the Subordinated Notes are desirous of having
STANDARD FEDERAL BANK N.A. ("Lender") extend and/or continue the extension of
credit to Borrower from time to time as Lender in its sole discretion may
determine, which extension of credit would be used, in part, to pay off the
indebtedness owing the Comerica Bank;
WHEREAS, in consideration for Lender's extension of such credit and the
payoff by Borrower of its indebtedness to Comerica Bank, and with the consent of
the Undersigned, Comerica Bank has assigned all of its right, title and interest
in and to the Original Agreement to Lender, and Lender's extension and/or
continued extension of such credit is conditioned upon the Junior Debt and the
Undersigned's Collateral being subordinated to the Senior Debt and the Lender's
Collateral (as defined below) in the manner set forth in this amendment and
restatement of the Original Agreement; and
WHEREAS, the extension and/or continued extension of credit, as aforesaid,
by Lender is necessary or desirable to the conduct and operation of the business
of Borrower, and will inure to the personal and financial benefit of the
Undersigned and the holders of the Subordinated Notes;
WHEREAS, by execution and delivery of an agency representation agreement,
each holder of the Subordinated Notes has duly authorized the execution and
delivery by the Undersigned of this agreement, for and on behalf of such holder
(reference to the Undersigned hereafter is as agent for and on behalf of each
such holder);
NOW, THEREFORE, in consideration of the extension and/or continued
extension of credit by Lender to Borrower, as Lender may, in its sole
discretion, determine, and for other good and valuable consideration to the
Undersigned, the receipt and sufficiency of which is hereby acknowledged, the
Undersigned agrees to continue in effect the Original Agreement, as amended and
restated hereby, as to the Lender, the Senior Debt and the Lender's Collateral,
and further agrees to amend and restate the Original Agreement in its entirety
as follows:
The Undersigned hereby:
(A) subordinates the indebtedness of Borrower evidenced by the
Junior Debt Instruments, as well as any and all other indebtedness for
borrowed money now or at any time or times hereafter owing by Borrower or
any successor of Borrower, including without limitation, a receiver,
trustee, or debtor-in-possession (the term "Borrower" as used hereinafter
shall include any such successor or assign) to the Undersigned, whether
such indebtedness is absolute or contingent, direct or indirect and
howsoever evidenced, including without limitation all interest thereon
(collectively, the "Junior Debt") to any and all indebtedness now or at
any time or times hereafter owing by Borrower to Lender (whether absolute
or contingent, direct or indirect and howsoever evidenced, including
without limitation all interest thereon, whether or not such interest is
allowed in a bankruptcy or similar proceeding) and all other demands,
claims, liabilities or causes of action for which Borrower may now or at
any time or times hereafter in any way be liable to Lender, whether under
any agreement, instrument, or document executed and delivered or made by
Borrower to Lender or otherwise (collectively, the "Senior Debt");
(B) agrees not to ask for or receive from Borrower any security for
the Junior Debt, not specifically granted by the Junior Debt Instruments;
agrees to subordinate all security interests, liens, encumbrances and
claims, whether now existing or hereafter arising, which in any way secure
the payment of the Junior Debt (the "Undersigned's Collateral") to all
security interests, liens, encumbrances and claims, whether now existing
or hereafter arising, including without limitation claims under guaranties
of the Senior Debt, which in any way secure the payment of the Senior Debt
(the "Lender's Collateral"); and agrees that it will not take any action
to enforce any of its liens or claims on the Undersigned's Collateral or
otherwise under the Junior Debt Instruments, except that upon or after the
due date of the Subordinated Notes, the Undersigned may upon the
non-payment by Tarpon of such Subordinated Notes upon or after the due
date thereof, (i) institute suit for a money judgment to collect any such
payments from Tarpon or any other persons (other than Borrower) liable for
such payments, or (ii) institute suit against Tarpon or any other persons
(other than Borrower) liable for such payments to collect all or any
portion of the Subordinated Notes and foreclose on any of the
Undersigned's Collateral that is owned by Tarpon (other than its ownership
interest in Borrower) or any other persons (other than Borrower) liable
for such payments and not owned by Borrower or used by Borrower in the
ordinary course of its business;
(C) agrees that in the event Lender forecloses or realizes upon or
enforces any of its rights with respect to Lender's Collateral, or
Borrower sells any of Lender's Collateral in a transaction consented to by
Lender, the Undersigned shall, upon demand, execute such terminations,
partial releases and other documents as Lender requests in its sole
discretion to release the Undersigned's lien and claims upon such Lender's
Collateral to the extent of
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Lender's interest therein; agrees that it shall have no right to
possession of any assets included in the Undersigned's Collateral if it is
included in the Lender's Collateral or is otherwise used by Borrower in
the ordinary course of its business, whether by judicial action or
otherwise, unless and until Lender has, in writing, notified the
Undersigned that all the Senior Debt has been paid in full and all
obligations arising in connection therewith have been discharged; agrees
that it will not contest the validity, perfection, priority or
enforceability of any lien or security interest now or hereafter granted
to secure the Senior Debt; and agrees that, as between Lender and the
Undersigned, the terms of this Subordination Agreement shall govern even
if all or part of the Lender's claim or the liens or security interests
securing payment thereof, are avoided, disallowed, set aside or otherwise
invalidated;
(D) agrees to instruct Borrower not to pay, and agrees not to accept
payment of, or assert, demand, xxx for or seek to enforce against
Borrower, by setoff or otherwise, all or any portion of the Junior Debt or
the Junior Debt Instruments unless and until Lender has, in writing,
notified the Undersigned that the Senior Debt has been paid in full and
all obligations arising in connection therewith have been discharged;
provided, however, Borrower may make distributions to Tarpon for the
purpose of, and to the extent necessary for, paying all or any portion of
the Subordinated Notes or the interest accrued thereon if: (a) the
Subordinated Notes are due and payable, (b) Tarpon has not yet completed
the underwritten initial public offering of its common shares pursuant to
an effective registration statement filed with the United States
Securities and Exchange Commission, (c) at the time of any such payment
and immediately thereafter there is no Event of Default nor any event that
with notice or lapse of time would constitute an Event of Default under
the agreements and instruments evidencing or relating to the Senior Debt
(the "Senior Debt Instruments") other than Tarpon's and Borrower's failure
to have paid when due the Subordinated Notes, other indebtedness due the
Undersigned or other indebtedness subordinated to Lender under a written
subordination agreement of even date herewith, (d) Borrower has Excess
Availability (as defined in the Senior Debt Instruments) of at least
$1,000,000 immediately after such payment and has an average Excess
Availability of at least $1,000,000 plus the amount of such payment over
the period of 90 days ending on the date of such payment, and (e) all
funds so distributed are used to pay principal and accrued interest on the
Subordinated Notes;
(E) during the continuance of an Event of Default under the Senior
Debt Instruments of which the Undersigned has actual notice, other than
Tarpon's and Borrower's failure to have paid when due the Subordinated
Notes, other indebtedness due the Undersigned or other indebtedness
subordinated to Lender under a written subordination agreement of even
date herewith, or in the event of a breach by the Undersigned of its
obligations hereunder, subrogates Lender to the Junior Debt and the
Undersigned's Collateral and irrevocably authorizes Lender (i) to collect,
receive, enforce and accept any and all sums or distributions
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of any kind that may become due, payable or distributable on or in respect
of the Junior Debt or the Undersigned's Collateral, whether paid directly
by Borrower or paid or distributed in any liquidation, bankruptcy,
arrangement, receivership, assignment, reorganization or dissolution
proceedings or otherwise, and (ii) in Lender's sole discretion, to make
and present claims therefor in, and take such other actions as Lender
deems necessary or advisable in connection with, any such proceedings,
either in Lender's name or in the name of the Undersigned; and agrees
that, during the continuance of an Event of Default under the Senior Debt
Instruments of which the Undersigned has actual notice, other than
Tarpon's and Borrower's failure to have paid when due the Subordinated
Notes, other indebtedness due the Undersigned or other indebtedness
subordinated to Lender under a written subordination agreement of even
date herewith, or in the event of a breach by the Undersigned of its
obligations hereunder upon the written request of Lender, it will promptly
assign, endorse and deliver to and deposit with Lender all agreements,
instruments and documents evidencing the Junior Debt, including without
limitation the Junior Debt Instruments;
(F) agrees to receive and hold in trust for and promptly turn over
to Lender, in the form received (except for the endorsement or assignment
by the Undersigned where necessary), any sums at any time paid to, or
received by, the Undersigned in violation of the terms of this Agreement
and to reimburse Lender for all costs, including reasonable attorney's
fees, incurred by Lender in the course of collecting said sums should the
Undersigned fail to voluntarily turn the same over to Lender as herein
required. If the Undersigned fails to endorse or assign to Lender any
items of payment received by the Undersigned on account of the Junior Debt
or the Undersigned's Collateral to the extent required hereby, the
Undersigned hereby irrevocably makes, constitutes and appoints Lender (and
all persons designated by Lender for that purpose) as the Undersigned's
true and lawful attorney and agent-in-fact, to make such endorsement or
assignment in the Undersigned's name; and
(G) agrees that it shall not modify or amend any agreement,
instrument or document evidencing or securing the Junior Debt, including
without limitation the Junior Debt Instruments, without the prior written
consent of Lender.
Upon written request by the Undersigned in each instance, Lender will
endeavor to notify the Undersigned of any conditions described in paragraph
(D)(c); however, Lender shall have no obligation to do so and shall not waive
any of its rights or interests if it fails or refuses to do so.
The Undersigned represents and warrants to Lender that the Undersigned has not
assigned or otherwise transferred the Junior Debt or the Undersigned's
Collateral, or any interest therein to any person or entity, that the
Undersigned will make no such assignment or other transfer thereof, and that all
agreements, instruments and documents evidencing the Junior Debt and the
Undersigned's Collateral will be endorsed with proper notice of this Agreement.
The Undersigned and Borrower will, within 30 days following the date hereof,
deliver to Lender certified copies of at least 34% (measured by outstanding
principal amount) of the Junior Debt
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Instruments, as well as certified copies of all other agreements, instruments
and documents hereafter evidencing such Junior Debt, and will, within 60 days
following the date hereof, deliver to Lender certified copies of at least 67%
(measured by outstanding principal amount, including those delivered in the
first 30 day period) of the Junior Debt Instruments, as well as certified copies
of all other agreements, instruments and documents hereafter evidencing such
Junior Debt, and will, within 90 days following the date hereof, deliver to
Lender certified copies of the remaining Junior Debt Instruments, as well as
certified copies of all other agreements, instruments and documents hereafter
evidencing such Junior Debt, in each case showing such endorsement.
The Undersigned represents and warrants to Lender that the outstanding
principal amount of Junior Debt evidenced by the Junior Debt Instruments as of
the date of this Agreement is $2,000,000, plus accrued interest.
The Undersigned expressly waives all notice of the acceptance by Lender of
the subordination and other provisions of this Agreement and all notices not
specifically required pursuant to the terms of this Agreement, and the
Undersigned expressly waives reliance by Lender upon the subordination and other
provisions of this Agreement as herein provided. The Undersigned consents and
agrees that all Senior Debt shall be deemed to have been made, incurred and/or
continued at the request of the Undersigned and in reliance upon this Agreement.
The Undersigned agrees that Lender has made no warranties or representations
with respect to the due execution, legality, validity, completeness or
enforceability of the documents, instruments and agreements evidencing the
Senior Debt, that Lender shall be entitled to manage and supervise its financial
arrangements with Borrower in accordance with its usual practices, without
impairing or affecting this Agreement, and that Lender shall have no liability
to the Undersigned, and the Undersigned hereby waives any claim which it may now
or hereafter have against Lender arising out of (i) any and all actions which
Lender takes or omits to take (including without limitation actions with respect
to the creation, perfection or continuation of liens or security interests in
any existing or future Lender's Collateral, actions with respect to the
occurrence of an event of default under any documents, instruments or agreements
evidencing the Senior Debt, actions with respect to the foreclosure upon, sale,
release, or depreciation of, or failure to realize upon, any of Lender's
Collateral and actions with respect to the collection of any claim for all or
any part of the Senior Debt from any account debtor, guarantor or other person
or entity) with respect to the documents, instruments and agreements evidencing
the Senior Debt or to the collection of the Senior Debt or the valuation, use,
protection or release of Lender's Collateral (ii) Lender's election in any
proceeding instituted under Chapter 11 of Title 11 of United States Code (11
U.S.C. Section 101 et. seq.) (the "Bankruptcy Code"), of the application of
Section 1111(b)(2) of the Bankruptcy Code, and/or (iii) any borrowing or grant
of a security interest under Section 364 of the Bankruptcy Code by Borrower, as
debtor in possession. Without limiting the generality of the foregoing, the
Undersigned waives the right to assert the doctrine of marshalling with respect
to any of the Lender's Collateral, and consents and agrees that Lender may
proceed against any or all of the Lender's Collateral in such order as Lender
shall determine in its sole discretion.
The Undersigned agrees that Lender, at any time and from time to time
hereafter, may enter into such agreements with Borrower as Lender may deem
proper extending the time of
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payment of or renewing or otherwise altering the terms of all or any of the
Senior Debt or affecting any of Lender's Collateral, and may sell or surrender
or otherwise deal with any of Lender's Collateral, and may release any balance
of funds of Borrower with Lender, without notice to the Undersigned and without
in any way impairing or affecting this Agreement.
This Agreement shall be irrevocable and shall constitute a continuing
agreement of subordination and shall be binding on the Undersigned and its
heirs, personal representatives, successors and assigns, and shall inure to the
benefit of Lender, its successors and assigns until Lender has, in writing,
notified the Undersigned that all of the Senior Debt has been paid in full and
all obligations arising in connection therewith have been discharged. Lender may
continue, without notice to the Undersigned, to lend monies, extend credit and
make other accommodations to or for the account of Borrower on the faith hereof.
The Undersigned hereby agrees that all payments received by Lender may be
applied, reversed, and reapplied, in whole or in part, to any of the Senior
Debt, without impairing or affecting this Agreement.
The Undersigned hereby assumes responsibility for keeping itself informed
of the financial condition of Borrower, any and all endorsers and any and all
guarantors of the Senior Debt and the Junior Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior Debt and the Junior Debt that
diligent inquiry would reveal, and the Undersigned hereby agrees that Lender
shall have no duty to advise the Undersigned of information known to Lender
regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine. If Lender, in its sole
discretion, undertakes, at any time or from time to time, to provide any
information of the type described herein to the Undersigned, Lender shall be
under no obligation to subsequently update any such information or to provide
any such information to the Undersigned on any subsequent occasion.
The Undersigned hereby authorizes Lender to file and/or record UCC
financing statements for the purpose of providing notice to third parties of the
existence and effect of this Agreement.
No waiver shall be deemed to be made by Lender of any of its rights
hereunder unless the same shall be in writing signed on behalf of Lender and
each such waiver, if any, shall be a waiver only with respect to the specific
matter or matters to which the waiver relates and shall in no way impair the
rights of Lender or the obligations of the Undersigned to Lender in any other
respect at any other time.
The Undersigned represents and warrants to Lender that all of the holders
of the Subordinated Notes are identified on Schedule 1 to this agreement, and
that each has executed and delivered an agency representation agreement, whereby
each such holder of the Subordinated Notes has duly authorized the execution and
delivery by the Undersigned of this agreement, for and on behalf of such holder.
THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF
THE STATE OF MICHIGAN.
To induce Lender and the Undersigned to accept this Agreement, the
Undersigned and the Lender irrevocably agree that ALL ACTIONS OR PROCEEDINGS IN
ANY WAY,
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MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE COUNTY OF OAKLAND, STATE OF
MICHIGAN. THE UNDERSIGNED AND LENDER HEREBY CONSENT AND SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID COUNTY
AND STATE. THE UNDERSIGNED AND THE LENDER HEREBY WAIVE ANY RIGHT THEY MAY HAVE
TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST THE
UNDERSIGNED OR LENDER IN ACCORDANCE WITH THIS PARAGRAPH.
THE UNDERSIGNED AND LENDER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT.
IN WITNESS WHEREOF, this Agreement has been executed as of this 11th day
of August, 2004.
XXXXXX XXXXXX & CO., LLC, as Secured Party
Representative.
XXXXX X. XXXXXXXXX By: /s/ Xxxxxxx X. Xxxxx
Notary Public, State of New York --------------------
No. 31-01ZA4853922 Title: Member
Qualified In New York County
Commission Expires Feb. 24, 2006 Address: 00 Xxxxx Xxxxxx
XX XX 00000
/s/ Xxxxx X. Xxxxxxxxx
-------------------------------- Attention: _________________
8/12/2004
ACKNOWLEDGMENT OF SIGNATURES
STATE OF NEW YORK COUNTY )
) SS.
COUNTY OF NEW YORK )
I, Xxxxx X. Xxxxxxxxx, a Notary Public in and for the state and county
aforesaid, do hereby certify that before me this day personally appeared Xxxxxx
Xxxxx, known to me to be a member of the limited liability company that executed
the foregoing Agreement, and acknowledged to me that he (they) executed and
delivered the foregoing Agreement for and on behalf of the corporation, for the
uses set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
11th day of August, 2004.
XXXXX X. XXXXXXXXX /s/ Xxxxx X. Xxxxxxxxx
Notary Public, State of New York ----------------------------------
No. 31-01ZA4853922 Notary Public, State of NY
Qualified In New York County Acting in New York County,
Commission Expires Feb. 24, 2006 My Commission Expires: Feb. 24, 2006
/s/ Xxxxx X. Xxxxxxxxx
--------------------------------
BORROWER'S CONSENT
Borrower hereby consents to the foregoing Agreement (and the terms
thereof) and agrees to abide thereby and to keep, observe and perform the
several matters and things therein intended to be kept, observed and performed
by it, and specifically agrees not to make any payments contrary to the terms of
said Agreement.
A breach of any of the terms and conditions of this consent shall
constitute an "Event of Default" under the Loan and Security Agreement dated of
even date herewith between Borrower and Lender.
BORROWER:
XXXXXX WELDING CO.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
ACKNOWLEDGMENT OF SIGNATURES
STATE OF MICHIGAN )
) SS.
COUNTY OF XXXXX )
I, Xxxxxx X. Xxxxxxxxx, a Notary Public in and for the state and county
aforesaid, do hereby certify that before me this day personally appeared Xxxxxxx
X. Xxxxxxx known to me to be the Chief Executive Officer of the corporation that
executed the foregoing consent and acknowledged to me that he (they) executed
and delivered the foregoing consent for and on behalf of the corporation, for
the uses set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
11th day of August, 2004.
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Notary Public
Acting in Xxxxx County, Michigan
My Commission Expires: 12/30/07
Xxxxxx X. Xxxxxxxxx
Notary Public, Xxxxx County, Michigan
My Commission Expires: December 30, 2007
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TARPON'S CONSENT
Tarpon hereby consents to the foregoing Agreement (and the terms thereof)
and agrees to abide thereby and to keep, observe and perform the several matters
and things therein intended to be kept, observed and performed by it, and
specifically agrees not to make or receive any payments contrary to the terms of
said Agreement.
A breach of any of the terms and conditions of this consent shall
constitute an "Event of Default" under the Loan and Security Agreement dated of
even date herewith between Borrower and Lender.
TARPON:
TARPON INDUSTRIES, INC.
By /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
ACKNOWLEDGMENT OF SIGNATURES
STATE OF MICHIGAN )
) SS.
COUNTY OF XXXXX )
I, Xxxxxx X. Xxxxxxxxx, a Notary Public in and for the state and county
aforesaid, do hereby certify that before me this day personally appeared Xxxxxxx
X. Xxxxxxx known to me to be the Chief Executive Officer of the corporation that
executed the foregoing consent and acknowledged to me that he (they) executed
and delivered the foregoing consent for and on behalf of the corporation, for
the uses set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
11th day of August, 2004.
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Notary Public
Acting in Xxxxx County, Michigan
My Commission Expires: 12/30/07
Xxxxxx X. Xxxxxxxxx
Notary Public, Xxxxx County, Michigan
My Commission Expires: December 30, 2007
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LENDER'S CONSENT
Lender hereby consents to the foregoing Agreement (and the terms thereof).
LENDER:
STANDARD FEDERAL BANK N.A.
By /s/ Xxxx Xxxxxx
----------------------------------------
Xxxx Xxxxxx, Vice President
STATE OF MICHIGAN )
) SS.
COUNTY OF XXXXX )
I, Xxxxxx X. Xxxxxxxxx, a Notary Public in and for the state and county
aforesaid, do hereby certify that before me this day personally appeared Xxxx
Xxxxxx known to me to be the Vice President of the bank that executed the
foregoing consent and acknowledged to me that he (they) executed and delivered
the foregoing consent for and on behalf of the corporation, for the uses set
forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
11th day of August, 2004.
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Notary Public
Acting in Xxxxx County, Michigan
My Commission Expires: 12/30/07
Xxxxxx X. Xxxxxxxxx
Notary Public, Xxxxx County, Michigan
My Commission Expires: December 30, 2007