SUBORDINATION AGREEMENT
Exhibit
10.9
This
Subordination Agreement, dated as of January 14, 2008, is made by XXXX X.
XXXXXXX (the “Subordinated Creditor”), for the benefit of XXXXX FARGO BANK,
NATIONAL ASSOCIATION, acting through its Xxxxx Fargo Business Credit operating
division (the “Lender”).
MISCOR
GROUP, LTD., an Indiana corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES,
INC., an Indiana corporation (“MIS”), XXXXXXX ELECTRIC, LLC, an Indiana
limited liability company (“Xxxxxxx”), HK ENGINE COMPONENTS, LLC, an Indiana
limited liability company (“HK”), MAGNETECH POWER SERVICES, LLC, an Indiana
limited liability company (“MPS”), IDEAL CONSOLIDATED, INC., an Indiana
corporation (“Ideal”), 3-D SERVICE, LTD., an Ohio limited liability company
(“3D”), and AMERICAN MOTIVE POWER, INC., a Nevada corporation (“AMP” and
together with MISCOR, MIS, Xxxxxxx, XX, MPS, Ideal and 3D, the “Borrowers” and
each a “Borrower”) are now or hereafter may be indebted to the Lender on account
of loans or the other extensions of credit or financial accommodations from
the
Lender to the Borrowers, or to any other person under the guaranty or
endorsement of the Borrowers.
The
Subordinated Creditor has made or may make loans or grant other financial
accommodations to one or more of the Borrowers.
As
a condition to making any loan or extension of credit to the Borrowers, the
Lender has required that the Subordinated Creditor subordinate the payment
of
the Subordinated Creditor’s loans and other financial accommodations to the
payment of any and all indebtedness of the Borrowers to the
Lender. Assisting the Borrowers in obtaining credit accommodations
from the Lender and subordinating his interests pursuant to the terms of this
Agreement are in the Subordinated Creditor’s best interest.
ACCORDINGLY,
in consideration of the loans and other financial accommodations that have
been
made and may hereafter be made by the Lender for the benefit of the Borrower,
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Subordinated Creditor hereby agrees as
follows:
1.
Definitions. As
used herein, the following terms have the meanings set forth below:
“Borrower
Default” means a Default or Event of Default as defined in any agreement or
instrument evidencing, governing, or issued in connection with Lender
Indebtedness, including, but not limited to, the Credit Agreement, or any
default under or breach of any such agreement or instrument.
“Collateral”
means all collateral now or hereafter securing payment of the Lender
Indebtedness, including all proceeds thereof.
“Credit
Agreement” means that certain Credit and Security Agreement dated as of January
14, 2008, by and among the Borrowers and the Lender as the same may hereafter
be
amended, supplemented or restated from time to time.
“Lender
Indebtedness” means each and every debt, liability and obligation of every type
and description which the Borrowers may now or at any time hereafter owe to
the
Lender, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or
to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest thereon
and
all fees, costs and other charges related thereto (including all interest,
fees,
costs and other charges accruing after the commencement of any case, proceeding
or other action relating to the bankruptcy insolvency or reorganization of
any
Borrower, whether or not allowed in such proceeding or other action), all
renewals, extensions and modifications thereof and any notes issued in whole
or
partial substitution therefor.
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any
assets or properties of a person, whether now owned or hereafter acquired and
whether arising by agreement or operation of law.
“Subordinated
Indebtedness” means all obligations arising under the Subordinated Note and each
and every other debt, liability and obligation of every type and description
which any Borrower may now or at any time hereafter owe to the Subordinated
Creditor, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or
to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several.
“Subordinated
Note” means the Borrower’s Promissory Note, dated as of January 1, 2004, payable
to the order of the Subordinated Creditor in the original principal amount
of
Three Million Dollars ($3,000,000), together with all renewals, extensions
and
modifications thereof and any note or notes issued in substitution
therefor.
2.
Subordination. The
payment of all of the Subordinated Indebtedness is hereby expressly subordinated
to the extent and in the manner hereinafter set forth to the payment in full
of
the Lender Indebtedness; and regardless of any priority otherwise available
to
the Subordinated Creditor by law or by agreement, the Lender shall hold a first
priority Lien in the Collateral, and any Lien claimed therein (including any
proceeds thereof) by the Subordinated Creditor shall be and remain fully
subordinate for all purposes to the Lien of the Lender therein for all purposes
whatsoever. The Subordinated Indebtedness shall continue to be
subordinated to the Lender Indebtedness even if the Lender Indebtedness
is
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subordinated,
avoided or disallowed under the United States Bankruptcy Code or other
applicable law.
3.
Payments. Until
all of the Lender Indebtedness has been paid in full and the Lender has released
its Lien in the Collateral, the Subordinated Creditor shall not, without the
Lender’s prior written consent, demand, receive or accept any payment (whether
of principal, interest or otherwise) from any Borrower in respect of the
Subordinated Indebtedness, or exercise any right of or permit any setoff in
respect of the Subordinated Indebtedness, except that the Subordinated Creditor
may accept (a) scheduled payments (but not prepayments) of interest
required to be paid under the Subordinated Note, so long as no Borrower Default
has occurred and is continuing or will occur as a result of or immediately
following any such payment and (b) payments of salaries and bonuses to the
extent that the payment thereof does not cause a Borrower Default to
occur.
4.
Receipt of Prohibited
Payments. If the Subordinated Creditor receives any payment on
the Subordinated Indebtedness that the Subordinated Creditor is not entitled
to
receive under the provisions of this Agreement, the Subordinated Creditor will
hold the amount so received in trust for the Lender and will forthwith turn
over
such payment to the Lender in the form received (except for the endorsement
of
the Subordinated Creditor where necessary) for application to then-existing
Lender Indebtedness (whether or not due), in such manner of application as
the
Lender may deem appropriate. If the Subordinated Creditor exercises
any right of setoff which the Subordinated Creditor is not permitted to exercise
under the provisions of this Agreement, the Subordinated Creditor will promptly
pay over to the Lender, in immediately available funds, an amount equal to
the
amount of the claims or obligations offset. If the Subordinated
Creditor fails to make any endorsement required under this Agreement, the
Lender, or any of its officers or employees or agents on behalf of the Lender,
is hereby irrevocably appointed as the attorney-in-fact (which appointment
is
coupled with an interest) for the Subordinated Creditor to make such endorsement
in the Subordinated Creditor’s name.
5.
Action on Subordinated
Indebtedness. The Subordinated Creditor will not commence any
action or proceeding against any Borrower to recover all or any part of the
Subordinated Indebtedness, or join with any creditor (unless the Lender shall
so
join) in bringing any proceeding against any Borrower under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt receivership,
liquidation or insolvency law or statute of the federal or any state government,
or take possession of, sell, or dispose of any Collateral, or exercise or
enforce any right or remedy available to the Subordinated Creditor with respect
to any such Collateral, unless and until the Lender Indebtedness has been paid
in full and the Lender has released its Lien in the Collateral.
6.
Action Concerning
Collateral.
(a)
Notwithstanding any Lien now held or hereafter acquired by the Subordinated
Creditor, the Lender may take possession of, sell, dispose of, and otherwise
deal with all or any part of the Collateral, and may enforce any right or
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remedy
available to it with respect to any Borrower or the Collateral, all without
notice to or consent of the Subordinated Creditor except as specifically
required by applicable law.
(b)
In addition, and without limiting the generality of the foregoing, if (i) a
Borrower Default has occurred and is continuing, (ii) a Borrower or the Lender
intends to sell or otherwise dispose of any Collateral to an unrelated third
party outside the ordinary course of business, (iii) the Lender has given
written notice thereof to the Subordinated Creditor, and (iv) the Subordinated
Creditor has failed, within ten (10) days after receipt of such notice, to
purchase for cash the Lender Indebtedness for the full amount thereof, the
Subordinated Creditor shall be deemed to have consented to such sale or
disposition, to have released any Lien it may have in such Collateral and to
have authorized the Lender and its agents to file partial releases with respect
to such Collateral.
(c)
The Lender shall have no duty to preserve, protect, care for, insure, take
possession of, collect, dispose of, or otherwise realize upon any of the
Collateral, and in no event shall the Lender be deemed the Subordinated
Creditor’s agent with respect to the Collateral. All proceeds
received by the Lender with respect to any Collateral may be applied, first,
to
pay or reimburse the Lender for all costs and expenses (including reasonable
attorneys’ fees) incurred by the Lender in connection with the collection of
such proceeds, and, second, to any Lender Indebtedness secured by the Lender’s
Lien in that Collateral in any order that it may choose.
7.
Bankruptcy and
Insolvency. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or
arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale
of all or substantially all of the assets of any Borrower, dissolution,
liquidation or any other marshalling of the assets or liabilities of any
Borrower, the Subordinated Creditor will file all claims, proofs of claim or
other instruments of similar character necessary to enforce the obligations
of
such Borrower in respect of the Subordinated Indebtedness and will hold in
trust
for the Lender and promptly pay over to the Lender in the form received (except
for the endorsement of the Subordinated Creditor where necessary) for
application to the then-existing Lender Indebtedness, any and all moneys,
dividends or other assets received in any such proceedings on account of the
Subordinated Indebtedness, unless and until the Lender Indebtedness has been
paid in full and the Lender’s Lien in the Collateral has been
terminated. If the Subordinated Creditor shall fail to take any such
action, the Lender, as attorney-in-fact for the Subordinated Creditor, may
take
such action on the Subordinated Creditor’s behalf. The Subordinated
Creditor hereby irrevocably appoints the Lender, or any of its officers or
employees on behalf of the Lender, as the attorney-in-fact for the Subordinated
Creditor (which appointment is coupled with an interest) with the power but
not
the duty to demand, xxx for, collect and receive any and all such moneys,
dividends or other assets and give acquittance therefor and to file any claim,
proof of claim or other instrument of similar character, to vote claims
comprising Subordinated Indebtedness to accept or reject any planof partial or complete liquidation, reorganization,
arrangement,
composition or extension and
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to
take such other action in the Lender’s own name or in the name of the
Subordinated Creditor as the Lender may deem necessary or advisable for the
enforcement of the agreements contained herein; and the Subordinated Creditor
will execute and deliver to the Lender such other and further powers-of-attorney
or instruments as the Lender may request in order to accomplish the
foregoing. If the Lender desires to permit the use of cash collateral
or to provide post-petition financing to a Borrower, the Subordinated Creditor
shall not object to the same or assert that its interests are not being
adequately protected.
8.
Restrictive Legend;
Transfer of Subordinated Indebtedness. The Subordinated
Creditor will cause the Subordinated Note and all other notes, bonds, debentures
or other instruments evidencing the Subordinated Indebtedness or any part
thereof to contain a specific statement thereon to the effect that the
indebtedness thereby evidenced is subject to the provisions of this Agreement,
and the Subordinated Creditor will xxxx its books conspicuously to evidence
the
subordination effected hereby. Attached hereto is a true and correct
copy of the Subordinated Note bearing such legend. At the request of
the Lender, the Subordinated Creditor shall deposit with the Lender the
Subordinated Note and all of the other notes, bonds, debentures or other
instruments evidencing the Subordinated Indebtedness, which notes, bonds,
debentures or other instruments may be held by the Lender so long as any Lender
Indebtedness remains outstanding or the Lender’s Lien in the Collateral has not
been terminated. The Subordinated Creditor is the lawful holder of
the Subordinated Note and has not transferred any interest therein to any other
person or entity. Without the prior written consent of the Lender,
the Subordinated Creditor will not assign, transfer or pledge to any other
person any of the Subordinated Indebtedness or agree to a discharge or
forgiveness of the same.
9.
Continuing
Effect. This Agreement shall constitute a continuing agreement
of subordination, and the Lender may, without notice to or consent by the
Subordinated Creditor, modify any term of the Lender Indebtedness in reliance
upon this Agreement. Without limiting the generality of the
foregoing, the Lender may, at any time and from time to time, without the
consent of or notice to the Subordinated Creditor and without incurring
responsibility to the Subordinated Creditor or impairing or releasing any of
the
Lender’s rights or any of the Subordinated Creditor’s obligations
hereunder:
(a)
change the interest rate or change the amount of payment or extend the time
for
payment or renew or otherwise alter the terms of any Lender Indebtedness or
any
instrument evidencing the same in any manner;
(b)
sell, exchange, release or otherwise deal with any property at any time securing
payment of the Lender Indebtedness or any part thereof;
(c)
release anyone liable in any manner for the payment or collection of the Lender
Indebtedness or any part thereof;
(d)
exercise or refrain from exercising any right against any Borrower or any other
person (including the Subordinated Creditor); and
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(e)
apply any sums received by the Lender, by whomsoever paid and however realized,
to the Lender Indebtedness in such manner as the Lender shall deem
appropriate.
10.
No
Commitment. None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on
the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrowers.
11.
Marshalling. The
Subordinated Creditor hereby waives any and all rights to require the
marshalling of assets in connection with the exercise of any of the Lender’s
remedies permitted by applicable law or agreement.
12.
Notice. All
notices and other communications hereunder shall be in writing and shall be
(i) personally delivered, (ii) transmitted by registered mail, postage
prepaid, or (iii) transmitted by telefacsimile, in each case addressed to
the party to whom notice is being given at its address as set forth
below:
If
to the Lender:
Xxxxx
Fargo Business Credit
000
Xxxx Xxxxx Xxxxxx, 0xx
Xxxxx
MAC
X0000-00X
Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx
X. Xxxxxx
Telefacsimile: 260/461-6037
If
to the Subordinated Creditor:
Xxxx
X. Xxxxxxx
_________________________________
_________________________________
Telefacsimile: _______/______________
Attention: ________________________
or
at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to
have been given on (i) the date received if delivered personally,
(ii) the date of posting if delivered by mail, or (iii) the date of
transmission if delivered by telefacsimile.
13.
Conflict in
Agreements. If the subordination provisions of any instrument
evidencing Subordinated Indebtedness conflict with the terms of this Agreement,
the terms of this Agreement shall govern the relationship between the Lender
and
the Subordinated Creditor.
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14.
No
Waiver. No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the 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 the Lender or the obligations of the Subordinated
Creditor to the Lender in any other respect at any time.
15.
Binding Effect;
Acceptance. This Agreement shall be binding upon the
Subordinated Creditor and the Subordinated Creditor’s heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether
this
or any similar agreement is executed by any other subordinated creditor of
any
Borrower. Notice of acceptance by the Lender of this Agreement or of
reliance by the Lender upon this Agreement is hereby waived by the Subordinated
Creditor.
16.
Miscellaneous. The
paragraph headings herein are included for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
17.
Governing Law; Consent
to Jurisdiction and Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Wisconsin. Each party
consents to the personal jurisdiction of the state and federal courts located
in
the State of Wisconsin in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient,
and agrees that any litigation initiated by any of them in connection with
this
Agreement may be venued in either the state or federal courts located in
Milwaukee County, Wisconsin.
THE
PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.
IN
WITNESS WHEREOF, the Subordinated Creditor has executed this Subordination
Agreement as of the date and year first above-written.
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/s/
Xxxx X. Xxxxxxx
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Xxxx
X. Xxxxxxx
|
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ACKNOWLEDGMENT
BY BORROWERS
The
undersigned, being the Borrowers referred to in the foregoing Agreement, hereby
(i) acknowledges receipt of a copy thereof, (ii) agrees to all of the
terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the Subordinated Indebtedness that the Subordinated
Creditor would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the
Lender Indebtedness, and (v) agrees to xxxx its books conspicuously to
evidence the subordination of the Subordinated Indebtedness effected
hereby.
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MAGNETECH
POWER SERVICES, LLC
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||||
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By:
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/s/
Xxxxxxx X. Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx, Treasurer
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Xxxxxxx
X. Xxxxxx, Treasurer
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MAGNETECH
INDUSTRIAL SERVICES, INC.
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IDEAL
CONSOLIDATED, INC.
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By:
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/s/
Xxxxxxx X. Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx, Treasurer
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Xxxxxxx
X. Xxxxxx, Treasurer
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XXXXXXX
ELECTRIC, LLC
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3-D
SERVICE, LTD.
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By:
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/s/
Xxxxxxx X. Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx, Treasurer
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Xxxxxxx
X. Xxxxxx, Treasurer
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HK
ENGINE COMPONENTS, LLC
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AMERICAN
MOTIVE POWER, INC.
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By:
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/s/
Xxxxxxx X. Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx, Treasurer
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Xxxxxxx
X. Xxxxxx, Treasurer
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Exhibit
A
Attach
copy of Subordinated Note with following legend:
THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY XXXX X.
XXXXXXX IN FAVOR OF XXXXX FARGO BANK, NATIONAL ASSOCIATION, ACTING THROUGH
ITS
XXXXX FARGO BUSINESS CREDIT OPERATING DIVISION, DATED AS OF JANUARY 14,
2008.
