AGREEMENT
Exhibit 10.1
AGREEMENT
THIS AGREEMENT (this “Agreement”) is made as of the 27th day of March, 2008, by and among
Taberna Capital Management, LLC, as collateral manager for and on behalf of the CDOs (as defined
below) (“Senior Lender”), the holders of the Securities (as defined below), Beachwold Partners,
L.P., a Texas limited partnership, and Xxxxxx Xxxxxxxxxx (collectively and individually, “Junior
Lender”) and Tarragon Corporation, a Nevada corporation (“Borrower”). Xxxxxxx Xxxxxxxx and Xxxx
Xxxxxxxx, Affiliates (as defined below) of Junior Lender (the “Insiders”), have signed to indicate
their agreement to be bound by the obligations of Junior Lender under the provisions of Articles 2,
3 and 4 of this Agreement and to make certain representations, warranties and covenants to and for
the benefit of Senior Lender.
BACKGROUND
Borrower has previously issued certain subordinated unsecured notes (as the same may be
amended, extended, supplemented, increased, consolidated, renewed or otherwise modified or replaced
from time to time, the “Securities”) pursuant to the subordinated indentures between Tarragon
Corporation and The Bank of New York Trust Company, National Association (successor to JPMorgan
Chase Bank, National Association), as Trustee (together with its successors or assigns, the
“Securities Trustee”), dated as of June 15, 2005, September 12, 2005, and March 1, 2006 (as the
same may be amended, extended, supplemented, increased, consolidated, renewed or otherwise modified
or replaced from time to time, the “Securities Indentures”), as listed more particularly on
Schedule 1 attached to this Agreement and made a part hereof.
Senior Lender is the collateral manager of the following collateralized debt obligations: (i)
Taberna Preferred Funding II, Ltd., holder of $37,500,000 of Securities, (ii) Taberna Preferred
Funding III, Ltd., holder of $27,500,000 of Securities, (iii) Taberna Preferred Funding IV, Ltd.,
holder of $24,375,000 of Securities, (iv) Taberna Preferred Funding V, Ltd., holder of $25,000,000
of Securities and (vi) Taberna Preferred Funding VI, Ltd., holder of $10,625,000 of Securities
(collectively, the “CDOs”).
The Insiders are shareholders of Borrower and equity owners of Junior Lender. Pursuant to a
letter agreement between Borrower and Junior Lender, Borrower issued the Existing Note (as defined
below) to Junior Lender. An accurate and complete copy of the Existing Note as of the date of this
Agreement is attached hereto as Exhibit “A.”
Senior Lender and Junior Lender have previously agreed pursuant to letter agreements dated
October 31, 2007, November 29, 2007, and January 8, 2008, that for a period of days stated in each
such letter, and ending on January 14, 2008 (the “Standstill Period”) (i) Senior Lender will not
send (or cause to be sent to) Borrower a Notice of Default as provided under Section 5.1(c) of each
of the indentures for the Securities with respect to the Events of Default described in such letter
agreement (the “Existing Defaults”) and (ii) it will cause each holder of the Securities (or
instruct the Securities Trustee) to waive the Existing Defaults during the
Standstill Period. Borrower acknowledges the Existing Defaults and that, but for the Standstill
Period and this Agreement, upon the request of Senior Lender, the Securities Trustee is
entitled
to exercise its rights and remedies under the Securities Documents (as defined below) and
applicable law, including without limitation to accelerate the entire principal balance due under
the Securities (including all interest and other charges). Junior Lender and Borrower have
requested that Senior Lender continue to forbear from providing such notice and exercising such
rights, on the terms and conditions set forth in this Agreement. Senior Lender is unwilling to
forbear from exercising such rights unless the rights of Junior Lender under the Existing Note are
limited as set forth herein.
In consideration of the representations, warranties, covenants and agreements of the parties,
Senior Lender, Junior Lender and Borrower are willing to execute and deliver this Agreement, and
the Insiders have signed below to indicate their agreement to be bound by certain of its
provisions.
NOW, THEREFORE, in consideration of the foregoing, the Senior Lender, Junior Lender and
Borrower hereby covenant and agree as follows intending to be legally bound:
ARTICLE I
DEFINED TERMS
DEFINED TERMS
Section 1.01 Definitions. Unless otherwise defined herein, all capitalized terms used
herein and defined in the Securities Documents are used as therein defined. The following terms
shall have the meanings herein specified unless the context otherwise requires (such meanings to
apply to such terms in both the singular and plural forms):
“Affiliate” shall mean, with respect to a specified person, another person that
directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is
under common Control with the person specified.
“Agreement” shall have the meaning provided in the preamble.
“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended.
“CDOs” shall have the meaning provided in the Background Section.
“Control” shall mean, with respect to a specified person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of such
specified person, whether through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.
“Covenant Default” shall mean any Event of Default under, and as defined in, the
Securities Indentures arising under Section 5.1(c) of each Securities Indenture due to Borrower’s
failure to comply with the financial covenants of Sections 10.5(a) or 10.5(b) of any of the
Securities Indentures at any time with respect to any period ending on or prior to September 30,
2009.
“Default” shall mean (a) an Event of Default under, and as defined in, the Securities
Indentures, other than the Existing Defaults or any existing or future Covenant Defaults or (b)
Borrower or Junior Lender shall default in the due performance or observance by it of any
term, covenant or agreement contained in this Agreement or in the Option Agreement.
“Enforcement Action” shall mean the commencement of the exercise of any remedies
against Borrower or its property including, without limitation, the commencement of any litigation
or proceeding, including the commencement of any foreclosure proceeding, the exercise of any power
of sale, the sale by advertisement, the taking of a deed or assignment in lieu of foreclosure, the
obtaining of a receiver or the taking of any enforcement action against, or the taking of
possession or control of, any of the property of Borrower, but specifically excludes (a) requests
and demands made upon Borrower by delivery of notices to Borrower and the cure by Junior Lender of
any default by Borrower under the Securities Documents as provided herein, (b) the filing of claims
in any Insolvency Proceeding concerning Borrower as may be required to protect and preserve the
right of Junior Lender to participate in such Insolvency Proceeding as creditor and to participate
in distributions of assets of Borrower with respect to the Junior Indebtedness after payment and
satisfaction in full of the Senior Indebtedness, but subject in all respects to the rights of the
Senior Lender under and as provided in this Agreement and without in any way impairing or affecting
the right of the Senior Lender to require performance and observance by Junior Lender of or the
obligations of Junior Lender to perform and observe the covenants, undertakings and agreements of
Junior Lender under and as provided in this Agreement.
“Existing Defaults” shall have the meaning provided in the Background Section.
“Existing Note” means, collectively, (a) the letter agreement dated January 7, 2008,
among Borrower and Junior Lender, (b) the unsecured promissory note dated January 7, 2008, made by
Borrower in favor of Beachwold Partners, L.P. in the original principal amount of $26,032,861.12
and (c) the unsecured promissory note dated January 7, 2008, made by Borrower in favor of Xxxxxx
Xxxxxxxxxx in the original principal amount of $10,000,000.00, as each may be amended, extended,
supplemented, increased, consolidated, renewed or otherwise modified or replaced from time to time.
“Expiration Date” shall have the meaning provided in Section 2.02(a).
“Xxxxxxxx Family” means (a) Mr. Xxxxxxx Xxxxxxxx and Xx. Xxxx Xxxxxxxx, each
individually and jointly as husband and wife (including as tenants by the entireties); (b) any of
their respective family members, including, without limitation, any of their respective parents,
children, aunts, uncles or first cousins, (c) any person who would be the heir or descendant of any
individual person described in clause (a) or (b) above if he or she were not living and (d) any
entity (including any trust) under the Control of any of the foregoing; provided that, for purposes
of this Agreement, none of Junior Lender, Borrower or any person under the Control of Borrower
shall be considered part of the Xxxxxxxx Family, unless any such other person falls within the
definition of Xxxxxxxx Family other than by reason of being under the Control of Borrower.
“Insiders” shall have the meaning provided in the preamble.
“Insolvency Proceeding” shall mean any proceeding under the Bankruptcy Code or any
other insolvency, liquidation, reorganization or other similar proceeding concerning Borrower
any action for the dissolution of Borrower, any proceeding (judicial or otherwise) concerning
the application of the assets of Borrower for the benefit of its creditors, the appointment of or
any proceeding seeking the appointment of a trustee, receiver or other similar custodian for all or
any substantial part of the assets of Borrower or any other action concerning the adjustment of the
debts of Borrower the cessation of business by Borrower except following a sale, transfer or other
disposition of all or substantially all of the assets of Borrower in a transaction permitted under
the Securities Documents, if any.
“Junior Indebtedness” shall mean, collectively, all of the indebtedness, liabilities
and obligations of Borrower to Junior Lender evidenced by the Existing Note, including interest
thereof and any other amounts payable in respect thereof or in connection therewith.
“Junior Lender” shall have the meaning provided in the preamble.
“Option” shall have the meaning provided in Section 2.07.
“Option Agreement” shall have the meaning provided in Section 2.07.
“Permitted Indebtedness” shall mean secured, unsecured, mezzanine or similar
indebtedness for borrowed money incurred from Borrower’s existing lenders (including Junior Lender)
or other lenders that are not Affiliates and that are similar to lenders with which Borrower has
existing relationships that (a) is expressly subordinated to the Securities by its terms, (b) is
trade debt incurred in the ordinary course of business, (c) [INTENTIONALLY DELETED], (d) is
incurred to extend, refinance or replace any indebtedness existing as of the date of this Agreement
or otherwise constitutes Permitted Indebtedness, (e) is a guarantee of project-level indebtedness
incurred in the ordinary course of Borrower’s business consistent with past practices by wholly
owned subsidiaries of Borrower or joint venture investments with a non-Affiliate of Borrower, (f)
is incurred directly or as a guarantee of any deficiency indebtedness resulting from the sale or
disposition of mortgaged property for less than the indebtedness secured by such property by wholly
owned subsidiaries of Borrower or joint venture investments with a non-Affiliate of Borrower or (g)
is incurred with the prior written consent of Senior Lender.
“Plan Voting Rights” shall mean, with respect to any person, the rights of such person
to vote to approve or reject any plan or reorganization in respect of Borrower in an Insolvency
Proceeding.
“Prohibited Payment” shall have the meaning provided in Section 2.06.
“Senior Indebtedness” shall mean, collectively, all of the indebtedness, liabilities
and obligations of Borrower to Senior Lender or the CDOs pursuant to the Securities or the
Securities Documents.
“Securities” shall have the meaning provided in the Background Section.
“Securities Documents” shall have the Securities Indentures, the Securities, the
Securities Purchase Agreements and each other agreement, instrument or other document executed or
delivered in connection therewith.
“Securities Indentures” shall have the meaning provided in the Background Section.
“Securities Purchase Agreements” shall mean, collectively, (a) the Purchase Agreement
dated as of June 15, 2005, between Borrower and Xxxxxxx Xxxxx International, (b) the Purchase
Agreement dated as of September 12, 2005, between Borrower and Xxxxxxx Xxxxx International and (c)
the Purchase Agreement dated as of March 1, 2006, among Borrower, Taberna Preferred Funding IV,
Ltd. and Xxxxxxx Xxxxx International.
“Securities Trustee” shall have the meaning provided in the Background Section.
“Senior Lender” shall have the meaning provided in the preamble.
“Senior Parties” shall mean Senior Lender, the CDOs and Securities Trustee.
“Standstill Agreement” shall have the meaning provided in Section 2.04.
ARTICLE II
SUBORDINATION; STANDSTILL; PAYMENTS; OPTION
SUBORDINATION; STANDSTILL; PAYMENTS; OPTION
Section 2.01 Permanent Subordination. Junior Lender hereby agrees that the Junior
Indebtedness is and shall be permanently subordinated, to the extent and in the manner hereinafter
set forth, to the prior indefeasible payment in full of the Senior Indebtedness. Except as
permitted under this Agreement, no payment shall be made by or on behalf of Borrower or any person
under the Control of Borrower for or on account of any Junior Indebtedness, and neither Junior
Lender nor any member of the Xxxxxxxx Family shall take or receive from Borrower or any person
under the Control of Borrower, directly or indirectly, or seek to collect from Borrower or any
person under the Control of Borrower, in cash or other property or by setoff or in any other
manner, including, without limitation, from or by way of collateral, payment of all or any of the
Junior Indebtedness, or exercise any right or remedy otherwise available to Junior Lender. To the
fullest extent permitted by law, Junior Lender waives all rights of setoff or charging or other
claims it may have against any property of Borrower or any person under the Control of Borrower.
Any prohibition of payment of Junior Indebtedness pursuant to this Agreement shall encompass
any direct or indirect payment (whether in cash, property or securities, any form of compensation
from Borrower), or by way of set-off, counterclaim, or otherwise, and whether made to Junior Lender
or to any Insider or any other entity for the benefit of Junior Lender or any Insider of Junior
Indebtedness, provision of any sinking fund for Junior Indebtedness, any redemption, retirement,
purchase or other acquisition of Junior Indebtedness, any provision for defeasance of Junior
Indebtedness, any provision of any letter of credit, guaranty or surety obligation to provide for
payment of Junior Indebtedness and any provision for any collateral security for Junior
Indebtedness, in each of the foregoing cases whether by Borrower or any person under the Control of
Borrower. Borrower and Junior Lender shall give Senior Lender prior written notice of any payment
of compensation permitted by this Section (other than periodic and regularly scheduled salary
payments in accordance with the 8K Cap (as defined
below) or the financial information provided to Senior Lender in writing, both pursuant to the
following sentence).
The foregoing paragraph shall not apply to payments by Borrower to Xxxxxxx Xxxxxxxx of
compensation or other amounts payable with respect to current and existing employment with Borrower
to the extent that such compensation or other amounts are made in the ordinary course of Borrower’s
business, are consistent with past practices, do not, for any fiscal year of Borrower, exceed the
8K Cap, cumulatively with all other compensation paid to Xxxxxxx Xxxxxxxx, in whatever form or
manner (subject to the proviso below), and (i) have been approved in advance in writing (including
any approval evidenced by board minutes) by a majority of the disinterested members of Borrower’s
board of directors, or are (ii) expressly permitted in writing by Senior Lender; provided, however,
that for purposes of determining payments of compensation by Borrower to Xxxxxxx Xxxxxxxx, only
compensation paid in cash shall be included in such computation, and no amount shall be included in
respect of compensation paid in the form of equity or other non-cash compensation (provided that
such equity or non-cash compensation complies with the other provisions of this Agreement,
including without limitation all requirements for subordination of the form of such compensation to
Borrower’s obligations to the holders of the Securities pursuant to this Agreement and the
Securities; and further provided that payments of salary cumulatively in excess of the 8K Cap shall
require the prior written, specific approval of Senior Lender). As used in this Agreement, the
term “8K Cap” shall mean the amount of salary and bonus compensation per fiscal year of Borrower as
follows: (a) Nine Hundred Thousand Dollars ($900,000) for fiscal year 2008; (b) Nine Hundred and
Forty Thousand Dollars ($940,000) for fiscal year 2009; and (c) Nine Hundred and Eighty-four
Thousand Dollars ($984,000) for fiscal year 2010 and each fiscal year thereafter.
Notwithstanding any other provision of this Section 2.01, Borrower may, subject to express
subordination to the Senior Indebtedness and approval by Senior Lender hereunder pursuant to the
provisions of section 2.08, deliver to Xxxxxxx Xxxxxxxx equity securities of Borrower, or
additional indebtedness of Borrower (i) as compensation pursuant to the preceding paragraph, or
(ii) into which the Junior Indebtedness may be converted or which may be issued in payment of the
Junior Indebtedness or any interest thereon, including any payment-in-kind interest.
Borrower and Junior Lender may amend, extend, supplement, increase, consolidate, renew or
otherwise modify or replace the Existing Note from time to time so long as any such amendment,
extension, supplement, increase, consolidation, renewal or other modification or replacement, and
the Junior Indebtedness evidenced thereby, shall be subject to this Agreement in all respects, and
Junior Lender shall provide Senior Lender prior written notice of any such amendment, extension,
supplement, increase, consolidation, renewal or other modification or replacement.
Notwithstanding anything herein to the contrary, Senior Lender agrees that Borrower may,
subject to Section 2.08, (a) pay Junior Lender cash interest or dividends on the principal amount
of the Junior Indebtedness (including any accrued and unpaid interest added to the principal amount
of the Junior Indebtedness) or any equity securities into which the Junior Indebtedness may be
converted at a rate not to exceed 5% per annum, (b) convert the Junior Indebtedness into equity
securities of Borrower and (c) issue equity securities of Borrower or
additional indebtedness of Borrower that is subordinated to the Senior Indebtedness hereunder
to Junior Lender in payment of the Junior Indebtedness or any interest thereon, including
payment-in-kind interest;
provided, however, that compliance with Section 2.08 shall not be required in the case of
Junior Lender’s payment of interest on Junior Indebtedness (including payment-in-kind interest) or
conversion of Junior Indebtedness into equity securities of Borrower which are otherwise subject to
and compliant with this Agreement, and further provided that any such action contemplated
by clause (a) shall have been approved by a majority of the disinterested members of Borrower’s
board of directors, and further provided that such payments may be made only so long as (i) no
Default has occurred and is continuing, (ii) immediately after giving effect to such payment,
Borrower has unrestricted cash in an amount in excess of $10,000,000, (iii) such interest payments
are made on a quarterly basis during a ten day period commencing after all interest and other fees
or charges (other than principal) due to Senior Lender under the Securities Indentures at such time
has been paid in full and (iv) such payment is not made until the expiration of the period
commencing with the date of this Agreement and ending on the date six months from date of
agreement),.
Section 2.02 Standstill; Limitation on Junior Lender Rights.
(a) Notwithstanding Junior Lender’s rights under applicable law or any provision of the
Existing Note to the contrary, Junior Lender hereby acknowledges and agrees that it shall not (A)
accelerate the Junior Indebtedness or any portion thereof, or (B) take any Enforcement Action
until, in any case, the earlier of (i) ninety-one (91) days following the satisfaction in full of
the Senior Indebtedness, or (ii) ninety-one (91) days following the acquisition of the Senior
Indebtedness under the Option (collectively, the “Expiration Date”). Junior Lender hereby waives
any right it may have to require that any party marshal any assets of Borrower in favor of Junior
Lender, and Junior Lender agrees that it shall not acquire, by subrogation or otherwise, any lien,
estate, right or other interest in any of the property of Borrower or the proceeds therefrom.
(b) Until the Expiration Date, Junior Lender hereby covenants and agrees that it will not
acquiesce, petition or otherwise invoke or cause any other person to invoke the process of the
United States of America, any state or other political subdivision thereof or any other
jurisdiction, any entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government for the purpose of commencing or sustaining an Insolvency
Proceeding.
Section 2.03 Non-Interference by Junior Leader. Until the Expiration Date, Junior
Lender shall not exercise any pledge or substitute any member of Borrower or institute any judicial
or administrative proceeding against Borrower, the Securities Trustee, the Senior Lender or any
holder of Securities or any interest therein, direct or indirect which directly or indirectly
would, or could reasonably be expected to interfere with, prejudice, impart or delay the exercise
by any of those parties of any rights and remedies in respect of Borrower, any property of
Borrower, whether arising under the Securities Documents or this Agreement or otherwise. Without
limiting the generality of the foregoing, in the event of an Insolvency Proceeding, Junior Lender
shall not object to or oppose any efforts by the Senior Lender, Securities Trustee or any holder of
the Securities or their representatives to obtain relief from the automatic stay under
Section 362 of the Bankruptcy Code or to seek to cause such entity’s bankruptcy estate to
abandon the property or Borrower (or any portion thereof).
Section 2.04 Existing and Covenant Default Standstill. Notwithstanding Senior
Lender’s rights under applicable law or any provision of the Securities Documents, Senior Lender
hereby acknowledges and agrees that it shall not allege, act upon or exercise any of its rights or
remedies under the Securities Documents or applicable law with respect to the Existing Defaults or
any existing or future Covenant Default (the “Standstill Agreement”) until the earlier of (a)
September 30, 2009; (b) the date on which an Insolvency Proceeding is commenced by or against
Borrower; (c) the date on which any payment due under the Securities is not made; (e) Borrower
incurs any unsecured, mezzanine or similar indebtedness for borrowed money that is not Permitted
Indebtedness; or (d) the date of a Default.
Senior Lender agrees that for the period during which the Standstill Agreement is in effect,
Senior Lender will not send (or cause to be sent to) Borrower a Notice of Default as provided under
Section 5.1(c) of each Securities Indentures with respect to the Existing Defaults or any existing
or future Covenant Default and (ii) it will cause each holder of the Securities (or instruct the
Securities Trustee) to waive the Existing Defaults or any existing or future Covenant Default
during such period; provided that nothing in this Agreement or the Option Agreement shall waive any
other rights of Senior Lender with respect to the Existing Defaults, or concerning any time period
when the Standstill Agreement is not in effect.
Senior Lender reserves all rights under applicable law and the Securities Documents with
respect to (i) any Event of Default under, and as defined in, the Securities Indentures other than
the Existing Defaults or (ii) any Default.
Section 2.05 Assignment of Voting Rights. Junior Lender hereby absolutely, irrevocably
and unconditionally assigns and sets over to the Senior Lender all of Junior Lender’s Plan Voting
Rights in any Insolvency Proceeding respecting Borrower until such time as ninety-one (91) days
have elapsed after the day on which the Senior Indebtedness has been repaid in full.
Section 2.06 Distributions Held in Trust. If either Junior Lender or any member of
the Xxxxxxxx Family shall receive any payments from Borrower, or cash distributions in respect of,
or other proceeds of, any property of Borrower (including, without limitation, (i) any distribution
arising directly or indirectly from any lien of the Senior Lender or of the Securities Trustee
being avoided, declared to be fraudulent, or otherwise set aside under the provisions of any law
governing fraudulent conveyances or transfers, and (ii) any distribution arising directly or
indirectly by reason of or in connection with an Insolvency Proceeding), not permitted by this
Agreement and in excess of what Junior Lender is entitled to pursuant to the Existing Note (or
would have been entitled to if such Insolvency Proceeding had not occurred or if any such lien had
not been avoided, declared to be fraudulent, or otherwise set aside under the provisions of any law
governing fraudulent conveyances or transfers)(a “Prohibited Payment”), Junior Lender or such
member of the Xxxxxxxx Family shall hold the same in trust, as trustee, for the benefit of the
Senior Lender or of the Securities Trustee, shall not credit such amount against the Junior
Indebtedness, and shall promptly deliver the same to or at the direction of the Senior Lender or of
the Securities Trustee, for the benefit of the Senior Lender or of the Securities Trustee in
precisely the form received (except for the endorsement or assignment thereof by such Junior
Lender or such member of the Xxxxxxxx Family without recourse or warranty), it being
understood that it is the intention of the parties that until the Senior Indebtedness (without
regard to any modifications thereof arising by reason of or in connection with an Insolvency
Proceeding) is repaid in full, the Securities Trustee shall receive all proceeds relating to any
realization upon, distribution in respect of or interest in any of the property of Borrower as and
to the extent set forth in the Securities Documents. In the event either Junior Lender or any
member of the Xxxxxxxx Family fails to make any such endorsement or assignment, the Senior Lender,
or any of its officers or employees, is hereby irrevocably authorized to make the same, and for
such purpose Junior Lender and the Xxxxxxxx Family hereby irrevocably constituting and appoints
each of them as its proxy and attorney-in-fact with full power of substitution to do so, which
appointment is coupled with an interest.
Section 2.07 Option. Simultaneously with the signing of this Agreement, and in
consideration for the benefits provided to Borrower and to Junior Lender under this Agreement,
Senior Lender has issued, as collateral manager of the CDOs, an option (the “Option”) to Junior
Lender (pursuant to the Option Agreement (the “Option Agreement”) attached hereto as Exhibit “B”)
for the Junior Lender, or its nominee or assignee, to purchase all, but not less than all, of the
Securities on the terms and conditions stated in the Option Agreement. The Option is assignable by
Junior Lender subject to the terms stated in the Option Agreement (a) to Borrower without the
consent of Senior Lender and (b) to any other person with the prior written consent of Senior
Lender, which will not be unreasonably withheld.
Section 2.08 Subordination of Indebtedness or Compensation. In all cases where
Borrower proposes to incur indebtedness after the date of this Agreement or to incur an obligation
to pay compensation (other than salary) payable pursuant to Section 2.01, other than Permitted
Indebtedness, or interest on Junior Indebtedness (including payment-in-kind interest), (i) such
indebtedness or obligation to pay compensation shall be expressly subordinated to the Securities as
set forth in this Agreement, and (ii) such indebtedness or obligation to pay compensation must be
set forth in a writing which Senior Lender, in its sole, unfettered discretions has determined in
writing is satisfactory to it in form and in substance prior to the issuance of such indebtedness
by Borrower or payment of such compensation by Borrower. Notwithstanding the foregoing, the
language contained in Exhibit “C” sets forth provisions which Junior Lender and Borrower agree must
appear, in substantially the form set forth on that schedule, subject to modification as needed, in
each instrument evidencing such indebtedness or obligation to pay compensation, and which shall be
deemed satisfactory evidence of such subordination without the prior approval of Senior Lender.
Section 2.09 No Further Advances. Borrower and Junior Lender acknowledge and agree
that the Senior Parties have no obligation to advance any additional funds to Borrower or Junior
Lender under the Securities Documents or this Agreement.
ARTICLE III
NOTICE OF DEFAULT;
SUBSTITUTE PERFORMANCE CONSENT
NOTICE OF DEFAULT;
SUBSTITUTE PERFORMANCE CONSENT
Section 3.01 Notice of Default. In the event of a default by Borrower under the
Existing Note, Junior Lender will provide to the Senior Lender a copy of any related notice of
default delivered to Borrower and such notice shall be sent to the Senior Lender in the manner
provided for in Section 5.01.
Section 3.02 Performance by Junior Lender; Waiver of Subrogation. Senior Lender shall
accept performance by Junior Lender or any member of the Xxxxxxxx Family of any of the obligations
of Borrower within the cure period, if any, set forth in the Securities Documents as though
performed by Borrower. Notwithstanding any such performance by Junior Lender or a member of the
Xxxxxxxx Family of any such obligations of Borrower, Junior Lender and each member of the Xxxxxxxx
Family hereby absolutely and irrevocably waives, to the fullest extent permitted by applicable law,
any rights it may have, by contract, at law or in equity, to be subrogated to the Senior Lender’s
or the Securities Trustee’s rights against Borrower under the Securities Documents or any lien
created thereby on any property of Borrower until the Expiration Date.
Section 3.03 Consent by Junior Lender. Junior Lender hereby consents and agrees that
any lawful action taken by or on behalf of the Senior Lender or the Securities Trustee in the
exercise of the Senior Lender’s or the Securities Trustee’s rights and/or remedies under the
Securities Documents are hereby deemed to be consented to and approved by Junior Lender in all
respects.
Section 3.04 Cross Default. Any Default shall constitute an Event of Default under,
and as defined in, the Securities Indentures, as a result of which any Senior Party may exercise
any and all of its rights and remedies under the Securities Indentures, and any of its rights and
remedies at law or in equity.
Section 3.05 Equitable Relief. Without limiting the generality of any other provision
of this Agreement, Borrower and Junior Lender acknowledge and agree that a breach or threatened
breach by them of any of the provisions contained in Article II or Sections 4.08 or 5.18 of this
Agreement (the “Performance Sections”) would result in irreparable harm and ongoing damages to
Senior Parties, and that the Senior Parties may not be adequately compensated for such damages by
the payment of the money damages awarded by a court. Borrower and Junior Lender therefore agree
that in the event of any such breach or threatened breach of a Performance Section, and in addition
to any other remedies available to the Senior Parties at law or otherwise, Senior Parties shall be
entitled as a matter of right to apply to a court of competent jurisdiction for relief by way of
injunction, restraining order, decree or otherwise as may be appropriate to ensure compliance by
Borrower and Junior Lender with any Performance Section of this Agreement. Borrower and Junior
Lender agree that all provisions in those Performance Sections are reasonable, necessary and
fundamental to the protection of the business of the Senior Parties and are reasonable in relation
to the potential harm to the Senior Parties from a breach by Borrower or Junior Lender.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND COVENANTS
ADDITIONAL REPRESENTATIONS AND COVENANTS
Section 4.01 Representations and Warranties of Junior Lender. Junior Lender hereby
represents and warrants to the Senior Lender, which representations and warranties are true in all
respects as of the date hereof, as follows:
(i) Junior Lender has the power, authority and legal right to execute, deliver and perform
this Agreement. This Agreement has been duly authorized by all necessary action of Junior Lender,
duly executed and delivered by Junior Lender and constitutes a valid and binding obligation of
Junior Lender enforceable against Junior Lender in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(ii) Neither the execution, delivery or performance by Junior Lender of this Agreement nor
compliance by it with the terms and provisions hereof (a) will contravene any provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any court or governmental
instrumentality or (b) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any lien upon any of the property
or assets of Junior Lender pursuant to the terms of any indenture, mortgage, mortgage, credit
agreement, loan agreement, partnership agreement or any other agreement, contract or instrument to
which Junior Lender is a party or by which it or any of its property or assets is bound or to which
it may be subject.
(iii) No order, consent, approval, license, authorization or validation of, or filing,
recording or registration with (except as have been obtained or made prior to the date hereof), or
exemption by, any governmental or public body or authority, or any subdivision thereof, is required
to authorize, or is required in connection with (a) the execution, delivery and performance by
Junior Lender of this Agreement, or (b) the legality, validity, binding effect or enforceability of
this Agreement with respect to Junior Lender.
(iv) Junior Lender entered into the transactions contemplated by the Existing Note without
reliance upon any information or advice from the Senior Lender. Junior Lender made its own
underwriting analysis in connection with the transactions contemplated by the Existing Note, its
own credit review of Borrower and investigated all matters pertinent, in Junior Lender’s judgment,
to its determination to enter into the transactions contemplated by the Existing Note and to
execute and deliver the Existing Note.
(v) No consent approval, authorization or other action by, or filing with or notification to,
any governmental or regulatory authority or other third party is required to be made or obtained by
Junior Lender in connection with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
(vi) The written information prepared by or furnished by or on behalf of Junior Lender,
including any exhibit, document, certificate or schedule furnished to Senior Lender, but excluding
financial projections, when taken as a whole, does not contain any untrue statement of material
fact, or omit to state a material fact necessary to make any statement of fact contained therein,
in light of the circumstances when made, not misleading. Any financial projections prepared by or
furnished by or on behalf of Borrower to Senior Lender were prepared on behalf of Borrower in good
faith after taking into account information, assumptions and estimates considered by management of
Borrower to be reasonable at the time. Junior Lender has disclosed to Senior Lender in any and all
facts which could reasonably be expected to have a
material and adverse effect on the business, operations or financial condition of Borrower and
its subsidiaries, taken as a whole.
Section 4.02 Representations and Warranties of Borrower. Borrower hereby represents
and warrants to the Senior Lender, which representations and warranties are true in all respects as
of the date hereof, as follows:
(i) No consent approval, authorization or other action by, or filing with or notification to,
any governmental or regulatory authority or other third party is required to be made or obtained by
Borrower in connection with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
(ii) The written information prepared by or furnished by or on behalf of Borrower, including
any exhibit, document, certificate or schedule furnished to Senior Lender, but excluding financial
projections, when taken as a whole, does not contain any untrue statement of material fact, or omit
to state a material fact necessary to make any statement of fact contained therein, in light of the
circumstances when made, not misleading. Any financial projections prepared by or furnished by or
on behalf of Borrower to Senior Lender were prepared on behalf of Borrower in good faith after
taking into account information, assumptions and estimates considered by management of Borrower to
be reasonable at the time.
(iii) Except as disclosed on Schedule 4.02(iii) or in the financial statements and reports of
Borrower attached as Exhibit “D”, Borrower does not have any secured indebtedness or indebtedness
senior to the Securities other than Permitted Indebtedness.
(iv) Except as disclosed on Schedule 4.02(iv), the representations and warranties made by
Borrower in the Securities Purchase Agreements are true and correct in all material respects as of
the date of this Agreement, except to the extent that such representations and warranties expressly
relate to an earlier specified date, in which case such representations and warranties shall have
been true and correct in all material respects as of the date when made.
Section 4.03 Representations and Warranties of Junior Lender, Borrower and Insiders.
Borrower, Junior Lender and the Insiders (each individually and jointly and severally) hereby
represent and warrant to the Senior Lender, which representations and warranties are true in all
respects as of the date hereof, as follows:
(i) Schedule 4.03(i) sets forth all of the business relationships or interests (whether as
shareholders, lenders, creditors, parties to an agreement or in any other capacity) between
Borrower and any person under the Control of Borrower, on one hand, and Junior Lender, the Insiders
and the Xxxxxxxx Family, on the other. Schedule 4.03(i) also lists all amounts (A) paid to or on
behalf of Junior Lender, the Insiders or any member of the Xxxxxxxx Family from Borrower or any
person under the Control of Borrower since January 1, 2007___(whether or not such payments or
interests have been or were required to be disclosed in any public filing by Borrower), and (B) to
be paid to or on behalf of Junior Lender, any Insider or member of the Xxxxxxxx Family after the
date of this Agreement (excluding (a) compensation paid, whether cash, equity or other rights, and
other amounts payable with respect to employment with Borrower, (b) amounts paid under the Existing
Notes and subject to the terms of this Agreement, and (c) amounts paid under the Agreements listed
on Schedule 4.03(ii)).
(ii) Schedule 4.03(ii) sets forth a list of all leases, contracts, agreements or other
arrangements of any sort between Borrower and any person under the Control of Borrower, on one
hand, and Junior Lender, the Insiders and the Xxxxxxxx Family, on the other. All material
obligations of Borrower or any person under the Control of Borrower to Junior Lender, any Insider
or any member of the Xxxxxxxx Family are listed on Schedule 4.03(ii).
(iii) The total amount of the consolidated indebtedness of Borrower outstanding at any time
(including all Permitted Indebtedness) does not and shall not exceed an amount equal to 80% of the
consolidated indebtedness of Borrower as of September 30, 2007, without the prior written consent
of Senior Lender.
Section 4.04 Representations and Warranties of Senior Lender. Senior Lender hereby
represents and warrants to Borrower and Junior Lender, which representations and warranties are
true in all respects as of the date hereof, that (a) the CDOs are the holders of 100% of the
Securities, (b) Senior Lender has been authorized by the CDOs to execute, deliver and perform this
Agreement and the Option Agreement on behalf of the CDOs and (c) by Senior Lender’s execution
hereof and thereof, this Agreement and the Option Agreement constitute valid and binding
obligations of the CDOs enforceable against the CDOs in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors
generally, and subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
Section 4.05 Reaffirmation of Indebtedness. Borrower and Junior Lender acknowledge
and agree that the amounts set forth on Schedule 4.05 to this Agreement represent the entire
principal balance and unpaid interest on the Senior Indebtedness and the Junior Indebtedness as of
the date of this Agreement, all of which Borrower and Junior Lender confirm are owing without
off-set, counterclaim, recoupment or defense as and when due under the terms of the Existing Note
and the Securities Documents (at maturity, by acceleration or otherwise under the terms of the
Securities Indentures, the Existing Note or this Agreement). Borrower and Junior Lender
acknowledge that all of the agreements, documents and other matters described in Schedule 1 and
attached as Exhibit A evidencing the Junior Indebtedness and the Senior Indebtedness remain in full
force and effect, without amendment, and are legally valid, effective, binding upon and enforceable
against Borrower and Junior Lender, and that no default has occurred (or will occur, with the
passage of time or the giving of notice) thereunder.
Section 4.06 Other Information. From the date hereof until the termination of this
Agreement, and subject to applicable law, Borrower shall furnish to Senior Lender during such
period, upon reasonable notice, all such information relating to Borrower as Senior Lender may from
time to time reasonably request; provided that prior to the furnishing of such information Senior
Lender shall have executed a confidentiality agreement, in form and substance reasonably
satisfactory to Borrower, with respect to such information (the “Confidentiality Agreement”). Any
information provided to or obtained by Senior Lender pursuant to this Section 4.06 shall be subject
to the Confidentiality Agreement and must be held by Senior Lender in accordance with and be
subject to the terms of the Confidentiality Agreement.
Section 4.07 Voluntary Action. This Agreement and the documents executed pursuant to
it hereof are executed and delivered at the request of Borrower and Junior Lender. In executing
this Agreement and such documents, neither Borrower nor Junior Lender is acting
under any duress, undue influence or misrepresentation by Senior Lender, its agents, attorneys
or employees, and the execution by Borrower and Junior Lender of this Agreement and said related
documents represents the free and voluntary act of Borrower and Junior Lender.
Section 4.08 Carryover of this Agreement in the Event of Bankruptcy. The following
provisions contained in this Section 4.08 are of particular applicability in the event that
Borrower files for relief under the Bankruptcy Code, or an order of relief is entered under the
Bankruptcy Code:
(i) Borrower and Junior Lender agree that, in the event Borrower files with any bankruptcy
court of competent jurisdiction, or is subjected to any petition under the Bankruptcy Code which
results in the entry of an order of relief under the Bankruptcy Code, Senior Lender and the
Securities Trustee shall have relief from the automatic stay under §362 of the Bankruptcy Code
effective as of the date of the entry of the order for relief, and such relief shall include but
shall not be limited to modification of the stay to enforce the provisions of this Agreement;
(ii) Borrower and Junior Lender agree that if Borrower is a debtor in a Chapter 11 proceeding
under the Bankruptcy Code, and the bankruptcy court enters a cash collateral order, or any order
affecting the rights of any Secured Party, or of Senior Lender hereunder, or under the Senior
Indebtedness, then, subject to court approval, that order shall provide that if Borrower does not
file a plan of reorganization within the 120-day exclusive period provided by §1121(b) of the
Bankruptcy Code, Senior Lender and each Secured Party shall, without the necessity of any
additional notice to the debtor or to other creditors, any hearing or any further order of the
court, have immediate relief from stay under Bankruptcy Code §362 to implement and enforce the
provisions of this Agreement, and Borrower shall not file any pleading to oppose said relief from
the automatic stay.
(iii) Borrower and Junior Lender agree that neither this Agreement, nor any or all transfers
or transactions contemplated by this Agreement shall be deemed voidable transfers pursuant to the
Bankruptcy Code, including but not limited to transfers under Sections 544, 547 or 105 of the
Bankruptcy Code.
(iv) For purposes, specifically of Section 4.08, the subordination set forth in Section 2.01
shall continue in full force and effect.
(v) For purposes, specifically of Section 4.08, of the Agreement, all parties agree that they
have been advised by counsel of the legal consequences of these provisions in an Insolvency
Proceeding pursuant to the Bankruptcy Code and understand and agree to such consequences.
Section 4.09 Release and Waiver of Claims; Covenant Not to Xxx. In consideration for
the benefits provided to Borrower, Junior Lender and the Xxxxxxxx Family under this Agreement and
the Option Agreement, Borrower and Junior Lender and their heirs, executors, administrators,
personal representatives, successors and assigns, individually and as current or former partners,
officers, directors or shareholders of any corporation, partnership, limited liability company or
other entity (collectively, the “Releasors”), remise, release, quitclaim and forever discharge
Senior Lender and the Securities Trustee, any holder of the Securities, and all
holders of the CDOs, any trustee of the CDOS, and any other corporation, partnership, trust or
other entity controlled by, controlling or under common control with the any of them, and their
respective employees, officers, directors, contractors, shareholders, partners, agents, attorneys
(including without limitation Xxxxxxx Gadon & Xxxxx, P.C., and each of its shareholders and
employees), accountants, heirs, executors, administrators, Affiliates and personal representatives
(collectively, the “Releasees”), of and from any and all damages, losses, expenses, claims,
demands, actions, causes of action, suits, judgments, orders, decrees, and any execution thereon,
whether at law, in equity or otherwise, which Releasors had, have on the date of this Agreement, of
any kind of nature whatsoever, past, present or future, known or unknown, and whether the same were
or could have been discovered, against any other party, fixed or contingent, from the beginning of
time to the date of these presents and forever, under the laws of any state or the United States of
America, or any other nation, which Releasors may have or claim to have against Releasees as a
result of (i) with respect to Borrower or Junior Lender, any transaction or agreement between
Releasors and Releasees and (ii) with -respect to the Xxxxxxxx Family, the transactions
contemplated by the Securities Documents and this Agreement; provided that the foregoing
shall not be construed to excuse the Releasees from liability to the Releasors (i) to the extent
resulting from a breach on the part of the Releasees of their obligations under the terms of this
Agreement or the Securities Documents and (ii) arising from the bad faith, gross negligence or
willful misconduct (as finally determined by a court of competent jurisdiction) of the Releasees.
Releasors covenant and agree not to file a lawsuit or any action to assert any claims
described above against Releasees. If Releasors do, equitable relief shall be available to
Releasees to, inter alia, preclude Releasors from pursuing any such action and entitle Releasees to
payment from Releasors of any attorneys fees, costs and expenses which may be incurred as a result
of responding to or defending against any such action.
ARTICLE V
MISCELLANEOUS
MISCELLANEOUS
Section 5.01 Notices. All notices requested hereunder or pertaining hereto shall be
in writing, shall be deemed delivered and effective upon the earlier of (a) delivery, or (b)
refusal of the addressee to accept delivery or failure of delivery after at least one attempt, in
each case under this clause (b) as such events are recorded in the ordinary business records of the
delivery entity, if such notice is sent by a nationally recognized express courier service, with
all charges prepaid or charged to the sender’s account, or by the United States Postal Service,
certified or registered, return receipt requested, and with all postage and other charges prepaid,
in either case to the applicable addresses as set forth in this Agreement, and shall be addressed
as follows:
If to Senior Lender:
Taberna Capital Management, LLC
0000 Xxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
0000 Xxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
With a copy to:
Xxxxxxx Gadon & Xxxxx, PC
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
If to Junior Lender:
Beachwold Partners, LP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
With a copy to:
Xxxxxxx X. Xxxxxxxx
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Borrower:
With a copy to:
or to each such party at such other addresses as such party may designate in a written notice to
the other parties. Notices to either the Senior Lender or Junior Lender shall be deemed effective
if delivered by the Senior Lender or Junior Lender pursuant to this Section 5.01 notwithstanding
the lack of delivery to or receipt by any other party specified in this Section 5.01.
Section 5.02 Modification. No provision of this Agreement may be changed, waived,
discharged or terminated orally, by telephone or by any other means except by an instrument in
writing signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
Section 5.03 WAIVER OF JURY TRIAL. SENIOR LENDER AND JUNIOR LENDER EACH EXPRESSLY AND
UNCONDITIONALLY WAIVES, IN CONNECTION
WITH ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY AND EVERY RIGHT IT MAY
HAVE TO A TRIAL BY JURY.
Section 5.04 Governing Law.
(a) This Agreement was negotiated in the State of New York and made and accepted in the State
of New York, which jurisdiction the parties agree has a reasonable and substantial relationship to
the parties and to the underlying transaction embodied hereby, and in all respects, including,
without limiting the generality of the foregoing, matters of enforceability, construction,
interpretation, validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the local law of the State of
New York and any applicable law of the United States of America. To the fullest extent permitted
by law, Junior Lender and Borrower hereby unconditionally and irrevocably waive any claim to assert
that the law of any other jurisdiction governs this Agreement.
(b) Any legal suit, action or proceeding against Junior Lender or the Senior Lender arising
out of or relating to this Agreement shall be instituted in any Federal or state court in the State
of New York, and Junior Lender waives any objection which it may now or hereafter have to the
laying of venue of any such suit, action or proceeding, and Junior Lender hereby irrevocably
submits to the jurisdiction of any such court in any suit, action or proceeding.
Section 5.05 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original. Such counterparts shall constitute but one and the
same instrument and shall be binding upon, and shall inure to the benefit of, each of the
undersigned individually as fully and completely as if all had signed one instrument.
Section 5.06 Entire Agreement; Successors and Assigns. This Agreement and the Option
Agreement constitute the entire understanding between the parties hereto concerning the subject
matter of this Agreement. All representations, warranties, covenants, terms, conditions and
provisions of this Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and permitted assigns of the parties hereto, including, as to the
Senior Lender, without limitation, any holder of the Securities and any Affiliate of the Senior
Lender.
Section 5.07 Third Party Beneficiaries. The Securities Trustee and the CDOs are
intended third party beneficiaries of this Agreement; however, nothing contained in this Agreement
shall be deemed to indicate that this Agreement has been entered into for the benefit of any other
person other than Borrower, Senior Lender and Junior Lender and Securities Trustee.
Section 5.08 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 5.09 No Waiver; Cumulative Rights. No waiver shall be deemed to be made by
the Senior Lender of any of its rights hereunder, or under the Securities Documents, unless the
same shall be in writing and signed by the Senior Lender, and each waiver, if any, shall be a
waiver only with respect to the specific instances involved and shall in no way impair the
rights of the Senior Lender in any other respect or at any other time. Notwithstanding any other
provision of this Agreement, nothing in this Agreement is intended to constitute or be deemed to or
construed to constitute a waiver of any existing default with respect to any obligations of
Borrower or Junior Lender hereunder, or a waiver, suspension, deferral or modification of any other
obligations of Borrower or Junior Lender hereunder. Rights and remedies of Senior Lender under the
this Agreement and the Securities Documents shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any other right or remedy.
Section 5.10 Agreement by Borrower. By its execution of this Agreement, Borrower
agrees to be bound by the terms hereof, to observe the priorities of payments set forth herein and
to conduct their affairs consistently with the terms hereof.
Section 5.11 Incorporation of Background. The Parties acknowledge the accuracy of
each statement in the Background Section of this Agreement, and agree that each statement in that
Background section shall be a legally binding and operative part of this Agreement.
Section 5.12 Continuing Obligation to Pay Attorneys’ Fees, Costs and Expenses.
Borrower and Junior Lender agree jointly and severally that they will pay to Senior Lender up to
$150,000 (inclusive of any fees and other costs and expenses incurred by Senior Lender in
connection with the Option Agreement) of documented reasonable attorneys’ fees and other
out-of-pocket costs and expenses incurred by Senior Lender in connection with the negotiation and
preparation or this Agreement and all documents described in it, or as a result of the occurrence
of any Default, and/or otherwise in connection with the performance of this Agreement and/or the
transactions contemplated hereby. Upon signing of this Agreement, Borrowers and Junior Lender will
pay Senior Lender One Hundred Fifty Thousand Dollars ($150,000).
Section 5.13 Press Releases and Public Announcements. Except as the disclosing party
may determine to be required by applicable law or any listing agreement with any national
securities exchange or The NASDAQ Stock Market, so long as this Agreement is in effect, the parties
shall consult with each other before issuing any press release or otherwise making public
statements with respect to this Agreement, the Option Agreement and the transactions contemplated
hereby and thereby and shall not issue any press release or make any public announcement relating
to the subject matter of this Agreement without the prior written approval of the other party
(which written approval shall not be unreasonably withheld or delayed).
Section 5.14 Disclosure; Separate Counsel. Borrower and Junior Lender acknowledge
that they have been advised and understand that they should seek the advice of independent counsel
in connection with this Agreement, particularly Section 4.08, and that they have had the
opportunity to seek the advice of independent counsel, and that they have received no
representations from Senior Lender or its counsel about the consequences of this Agreement upon
Borrower, Junior Lender, or any of their properties.
Section 5.15 Survival. All of the representations, warranties and covenants of the
parties contained in this Agreement shall survive the signing of this Agreement and the performance
of the transactions described in it.
Section 5.16 Construction. The language in this Agreement shall be construed as a
whole according to its fair meaning, strictly neither for nor against any party, and without
implying a presumption that its terms shall be more strictly construed against one party by reason
of the rule of construction that a document is to be construed more strictly against the person who
drafted it. In the event of any inconsistency between this Agreement, on the one hand, and the
terms of any of the Securities or the Securities Indentures, on the other hand, the provisions of
this Agreement shall control. Any reference to amounts owed to Senior Lender shall mean amounts
owed to the holders of the Securities for which Senior Lender is Collateral Manager under the terms
of the CDOs.
Section 5.17 Effect of Headings. The subject headings of the sections and subsections
of this Agreement are included for convenience only and shall not affect the construction or
interpretation of any of its provisions.
Section 5.18 Further Actions. At any time and from time to time after the date of
execution of this Agreement, each party shall, without further consideration, take such actions and
execute and deliver such documents as the other party may reasonably request to carry out the
transactions contemplated by this Agreement. Without limitation, Borrower and Junior Lender agree,
at their expense, to execute and file any and all documents, and otherwise to do everything
reasonably necessary under applicable law, to perfect and confirm the rights and interests granted
to Senior Parties under this Agreement, and to facilitate and effect the rights and remedies of the
Senior Parties following a Default.
[Signature blocks on next page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first
above written.
| SENIOR LENDER: TABERNA CAPITAL MANAGEMENT, LLC, as collateral manager |
||||
| By: Name: |
/s/ Xxxxxxx Xxxxx
|
|||||
| Title: | Secretary | |||||
| JUNIOR LENDER: | ||||||
| BEACHWOLD PARTNERS, LP | ||||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxxxxx
|
|||||
| Title: | General Partner | |||||
| /s/ Xxxxxx Xxxxxxxxxx | ||||||
| Xxxxxx Xxxxxxxxxx | ||||||
| BORROWER: | ||||||
| TARRAGON CORPORATION | ||||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxxxxxxx
|
|||||
| Title: | Executive Vice President | |||||
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
The undersigned Affiliates of Junior Lender, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxxxx, each individually
and jointly and severally, and as husband and wife and as tenants by the entireties, have signed to
indicate their agreement to be bound by the provisions of Articles 2, 3 and 4 of this Agreement, to
guarantee the performance of this Agreement by Borrower and Junior Lender (which, for purposes of
clarity, does not include the obligations of Borrower under the Securities Documents, including the
repayment of the Senior Indebtedness), to be responsible for the performance or compliance with
this Agreement by all members of the Xxxxxxxx Family who are not parties to this Agreement
(including the granting of all consents and agreements purported to be granted pursuant to this
Agreement), and to make the representations, warranties and covenants to and for the benefit of
Senior Lender stated in those sections as fully as if they were parties to this Agreement..
| /s/ Xxxxxxx X. Xxxxxxxx | ||||
| Xxxxxxx X. Xxxxxxxx | ||||
| /s/ Xxxx Xxxxxxxx | ||||
| Xxxx Xxxxxxxx | ||||
EXHIBIT “C”
SAMPLE SUBORDINATION LANGUAGE
(to be modified as necessary)
(to be modified as necessary)
By execution of this [Agreement/other defined term for the document] by [Payee/other defined
term for credit provider] and by [Tarragon’s/other defined term for borrowing entity] the parties
agree to be bound by all the provisions of this Section ____.
(a) Subordination.
(i) Payee subordinates all debt and all claims and demands arising herefrom to all the Senior
Debt [Senior Debt being defined as the debt from Tarragon to Taberna]. Subject to Section
_(a)(ii) hereof, Payee and Tarragon agree that (i) all of the Senior Debt shall be paid before
Payee shall be paid anything (of any kind or character) on account of the principal of or
interest on any Subordinated Debt or any other sums payable in connection therewith and (ii)
until all of the Senior Debt is finally paid, performed and complied with in full and any
payments received by Senior Lender with respect to the Senior Debt may no longer be set aside as
preferential under any federal or state bankruptcy act, state or federal law, common law or
equitable cause, Tarragon will not make, and Payee will not demand or accept, either directly or
indirectly, payment (of any kind or character) of all or any part of the Subordinated Debt
without the prior written consent of Senior Lender.
(ii) Tarragon may make the regularly scheduled, non-accelerated payments of non-default interest
due to Payee, provided that, (a) no event of default, or event which, with the giving of notice,
passage of time or both, would constitute an event of default with respect to the Senior Debt or
any documents executed in connection therewith, has occurred; and (b) such payment would not
result in such an event of default.
(iii) The right of Senior Lender to enforce the subordination provisions and any other
provisions hereof shall not in any way be prejudiced or impaired by any act or failure to act on
the part of Senior Xxx xxxxxx, Tarragon or Payee, or by any noncompliance by Tarragon or the
Payee with the terms, provisions and covenants of this Section _.
(b) In Furtherance of Subordination:
(i) Upon any distribution of any of the assets of Tarragon, any guarantor of any of the
Subordinated Debt or any collateral securing the Subordinated Debt, upon or in connection with
any dissolution, winding up, liquidation, arrangement or reorganization of Tarragon, any
guarantor of any of the Subordinated Debt or any other person or entity, or upon any assignment
for the benefit of creditors or any other marshalling of the assets and/or liabilities of
Tarragon or any guarantor of any of the Subordinated Debt or otherwise, any payment, dividend or
distribution of any kind (whether in cash, securities or other property) which would otherwise
be payable or deliverable with respect to the Subordinated Debt, shall be paid or delivered
directly to Senior Lender for application (in the case of cash) to or as collateral (in the case
of securities or other property) for the Senior Debt.
(ii) If any proceeding described in subsection _(b)(i) above is commenced, Senior Lender is
irrevocably authorized (in its own name or in the name of Payee or otherwise), but shall have no
obligation, to demand, xxx for, collect and receive all such payments, dividends and
distributions referred to in subsection _(b)(i), give acquittances therefor, file claims, proofs
of claim and take such other actions (including without limitation, voting the Subordinated
Debt) as it may deem necessary or advisable. Senior Lender is granted a power of attorney by
Payee with full power of substitution to execute and file such documentation and take any other
action Senior Lender may deem advisable to accomplish the foregoing, and to protect Senior
Lender’s interest in the Subordinated Debt and its right of enforcement thereof. Such power
being coupled with an interest is irrevocable.
(iii) If the Senior Debt is refinanced by another lender or group of lenders or another lender
or group of lenders acquires the Senior Lender’s interest in the Senior Debt, the provisions of
this Section ___ shall inure to the benefit of such other lender or lenders with the same force
and effect as if such other lender or lenders were originally the “Senior Lender”. Without in
any way limiting the generality of the foregoing, in any such event, (iv) Tarragon and Payee
shall, upon request, execute and deliver to such other lender or lenders an acknowledgement that
all provisions of this Section ___ are applicable to such lender’s debt.
(c) Limitations on Payee’s Rights. Without the prior written consent of Senior Lender, Payee
agrees that it will not: (1) demand or accelerate any of the Subordinated Debt, (2) institute any
court proceedings against Tarragon or any guarantor of any of the Subordinated Debt to collect any
Subordinated Debt, (3) exercise any right or remedy against Tarragon, Tarragon’s assets, any
guarantor of any of the Subordinated Debt or any of such guarantor’s assets, (4) amend, modify,
alter, increase or extend the terms of any of the Subordinated Debt.
(d) Payments Held In Trust. In the event that Payee receives any dividend, distribution or payment
referred to in Section ___ (b)(i), or receives any payment (of any kind or character) of any
Subordinated Debt or security therefor in violation of this Section ___, Payee will (1) not credit
such payments against the Subordinated Debt, (2) notify Senior Lender immediately thereof, and (3)
receive the same in trust for Senior Lender and will immediately pay and deliver the same to Senior
Lender in precisely the form received, except for any requisite endorsement or assignment, which
Payee will make and authorizes Senior Lender or any of its officers or employees to make in the
event that Payee does not make the same. Senior Lender will apply any such moneys so received by
it in reduction of the Senior Debt and will hold any property other than money so received by it as
collateral security therefor. In the event Payee shall obtain any lien, judgment or decree against
Senior Lender, Payee will immediately assign the same to Senior Lender, or xxxx the same to Senior
Lender’s use. If Payee fails to make any endorsement or assignment required hereunder, Senior
Lender is hereby appointed attorney for Payee with full power of substitution to make any such
endorsement or assignment. Such power of attorney being coupled with an interest is irrevocable.
(e) Senior Lender’s Rights. Without notice to Payee and without affecting or releasing any
obligation or agreement of Payee under this Note or the subordination provided herein, Senior
Lender may at any time or times do any of the following with respect to any of the Senior Debt:
(1) amend, modify, alter or waive any of the terms thereof or any of the documents executed in
connection therewith, (2) renew or extend the time for payment of all or any part thereof, (3)
decrease the amount thereof, (4) accept collateral security or guaranties therefor and sell,
exchange, fail to perfect, release or otherwise deal with all or any part of any such collateral or
guaranties, (5) release any party primarily or secondarily obligated thereon, (6) grant indulgences
and take or refrain from taking any action with regard to the collection or enforcement thereof,
and (7) take any action which might otherwise constitute a defense to or a discharge of Borrower or
any guarantor. Nothing contained herein shall impair any right of Senior Lender with respect to
any of the Senior Debt or any collateral security or guaranties therefor or the proceeds thereof.
(f) Amendment
of Agreement. Payee and Tarragon agree that Section ___ of this Agreement may not be
amended without the prior written consent of Senior Lender.
ACKNOWLEDGEMENT
The Trustees of the CDOs (as defined in the foregoing Agreement) have signed below to indicate
that they have received a copy of that Agreement, and make no representations concerning its terms.
| THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee for TABERNA PREFERRED FUNDING II, LTD., TABERNA PREFERRED FUNDING III, LTD., TABERNA PREFERRED FUNDING IV, LTD., and TABERNA PREFERRED FUNDING VI, LTD. |
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| By: | ||||
Printed Name: |
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Title: |
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| US BANK NATIONAL ASSOCIATION, as
Trustee for TABERNA PREFERRED FUNDING V, LTD. |
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| By: | ||||
Printed Name: |
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Title: |
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