Exhibit 4.9
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is entered into as of the 31 day
of August 2006, by and among Palisades Master Fund LP, a British Virgin Island
limited partnership ("Palisades" or the "Subordinated Lender"), and Laurus
Master Fund, Ltd. (the "Senior Lender"). Unless otherwise defined herein,
capitalized terms used herein shall have the meaning provided such terms in the
Security Agreement referred to below.
BACKGROUND
WHEREAS, it is a condition to the Senior Lender's making an investment in
Trinity Learning Corporation, a Utah corporation and certain of its subsidiaries
(collectively, the "Company") pursuant to, and in accordance with, (i) that
certain Security Agreement dated as of the date hereof by and between the
Company and Laurus (as amended, modified or supplemented from time to time, the
"Security Agreement") and (ii) the Ancillary Agreements referred to in the
Security Agreement that the Subordinated Lenders enter into this Agreement.
WHEREAS, the Subordinated Lenders have made or will make loans to the Company.
NOW, THEREFORE, each Subordinated Lender and the Senior Lender agree as follows:
TERMS
1. All obligations of the Company and/or any of its Subsidiaries to the
Senior Lender, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing, or due or to
become due are referred to as "Senior Liabilities". Any and all loans made by
the Subordinated Lenders to the Company and/or any of its Subsidiaries, together
with all other obligations (whether monetary or otherwise) of the Company and/or
any of its Subsidiaries to any Subordinated Lender (in each case, including any
interest, fees or penalties related thereto), howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent or now or
hereafter existing, or due or to become due are referred to as "Junior
Liabilities". It is expressly understood and agreed that the term "Senior
Liabilities", as used in this Agreement, shall include, without limitation, any
and all interest, fees and penalties accruing on any of the Senior Liabilities
after the commencement of any proceedings referred to in paragraph 4 of this
Agreement, notwithstanding any provision or rule of law which might restrict the
rights of the Senior Lender, as against the Company, its Subsidiaries or anyone
else, to collect such interest, fees or penalties, as the case may be.
2. Except as expressly otherwise provided in this Agreement or as the Senior
Lender may otherwise expressly consent in writing, the payment of the Junior
Liabilities shall be postponed and subordinated in right of payment and priority
to the payment in full of all Senior Liabilities. Furthermore, whether directly
or indirectly, no payments or other distributions whatsoever in respect of any
Junior Liabilities shall be made (whether at stated maturity, by acceleration or
otherwise), nor shall any property or assets of the Company or any of its
Subsidiaries be applied to the purchase or other acquisition or retirement of
any Junior Liability
until such time as the Senior Liabilities have been indefeasibly paid in full.
Notwithstanding anything to the contrary contained in this paragraph 2 or
elsewhere in this Agreement, the Company and its Subsidiaries may make regularly
scheduled principal and interest payments, as the case may be, to the
Subordinated Lenders with respect to the Junior Liabilities, so long as (i) no
Event of Default (as defined in the Security Agreement or any Ancillary
Agreement) has occurred and is continuing at the time of any such payment and
(ii) the amount of such regularly scheduled principal payments and the rate of
interest, in each case, with respect to the Junior Liabilities is not increased
from that in effect on the date hereof.
3. Each Subordinated Lender hereby subordinates all claims and security
interests it may have against, or with respect to, any of the assets of the
Company and/or any of its Subsidiaries (the "Subordinated Lender Liens"), to the
security interests granted by the Company and/or any of its Subsidiaries to the
Senior Lender in respect of the Senior Liabilities. The Senior Lender shall not
owe any duty to any Subordinated Lender as a result of or in connection with any
Subordinated Lender Liens, including without limitation any marshalling of
assets or protection of the rights or interests of any Subordinated Lender. The
Senior Lender shall have the exclusive right to manage, perform and enforce the
underlying terms of the Security Agreement, the Ancillary Agreements and each
other document, instrument and agreement executed from time to time in
connection therewith (collectively, the "Security Agreements") relating to the
assets of the Company and its Subsidiaries and to exercise and enforce its
rights according to its discretion. Each Subordinated Lender waives all rights
to affect the method or challenge the appropriateness of any action taken by the
Senior Lender in connection with the Senior Lender's enforcement of its rights
under the Security Agreements. Only the Senior Lender shall have the right to
restrict permit, approve or disapprove the sale, transfer or other disposition
of the assets of the Company or any of its Subsidiaries. As between the Senior
Lender and each Subordinated Lender, the terms of this Agreement shall govern
even if all or part of the Senior Lender's liens are avoided, disallowed, set
aside or otherwise invalidated.
4. In the event of any dissolution, winding up, liquidation,
readjustment, reorganization or other similar proceedings relating to the
Company and/or any of its Subsidiaries or to its creditors, as such, or to its
property (whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the Company
and/or any of its Subsidiaries, or any sale of all or substantially all of the
assets of the Company and/or any of its Subsidiaries, or otherwise), the Senior
Liabilities shall first be paid in full before any Subordinated Lender shall be
entitled to receive and to retain any payment, distribution, other rights or
benefits in respect of any Junior Liability. In order to enable the Senior
Lender to enforce its rights hereunder in any such action or proceeding, the
Senior Lender is hereby irrevocably authorized and empowered in its discretion
as attorney in fact for each Subordinated Lender to make and present for and on
behalf of such Subordinated Lender such proofs of claims against the Company
and/or its Subsidiaries as Laurus may deem expedient or proper and to vote such
proofs of claims in any such proceeding and to receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form the
same may be paid or issued and to apply same on account of any the Senior
Liabilities. In the event, prior to indefeasible payment in full of the Senior
Liabilities, any Subordinated Lender shall
receive any payment in respect of the Junior Liabilities and/or in connection
with the enforcement of such Subordinated Lender's rights and remedies against
the Company and/or any of its Subsidiaries, whether arising in connection with
the Junior Liabilities or otherwise, then such Subordinated Lender shall
forthwith deliver, or cause to be delivered, the same to the Senior Lender in
precisely the form held by such Subordinated Lender (except for any necessary
endorsement) and until so delivered the same shall be held in trust by such
Subordinated Lender as the property of the Senior Lender.
5. Each Subordinated Lender will xxxx its/his books and records so as to
clearly indicate that its/his respective Junior Liabilities are subordinated in
accordance with the terms of this Agreement. Each Subordinated Lender will
execute such further documents or instruments and take such further action as
the Senior Lender may reasonably request from time to time to carry out the
intent of this Agreement.
6. Each Subordinated Lender hereby waives all diligence in collection or
protection of or realization upon the Senior Liabilities or any security for the
Senior Liabilities.
7. Until such time as the Senior Liabilities have been indefeasibly paid in
full, no Subordinated Lender will without the prior written consent of the
Senior Lender: (a) attempt to enforce or collect any Junior Liability or any
rights in respect of any Junior Liability or any other rights or remedies of any
kind or nature whatsoever against the Company and/or any of its Subsidiaries
whether in respect of the Junior Liabilities or otherwise; unless, in each case
(i) an event of default shall have occurred and be continuing under any one or
more agreements between and among such Subordinated Lender, the Company and/or
any of its Subsidiaries which would entitle such Subordinated Lender to take
such action (a "Subordinated Lender Default"), (ii) such Subordinated Lender
shall have provided Senior Lender written notice (a "Default Notice") of the
occurrence of such Subordinated Lender Default, (iii) such Subordinated Lender
shall have provided Senior Lender at least thirty (30) days prior written notice
(the "Action Notice") of its intention to take any such action and (iv) a period
of at least one hundred and eighty (180) days shall have elapsed from the time
of receipt by the Senior Lender of the Default Notice relating to the occurrence
of the Subordinated Lender Default; or (b) commence, or join with any other
creditor in commencing, any bankruptcy, reorganization or insolvency proceedings
with respect to the Company and/or any of its Subsidiaries.
8. The Senior Lender may, from time to time, at its sole discretion and
without notice to any Subordinated Lender, take any or all of the following
actions: (a) retain or obtain a security interest in any property to secure any
of the Senior Liabilities; (b) retain or obtain the primary or secondary
obligation of any other obligor or obligors with respect to any of the Senior
Liabilities; (c) extend or renew for one or more periods (whether or not longer
than the original period), alter, increase or exchange any of the Senior
Liabilities, or release or compromise any obligation of any nature of any
obligor with respect to any of the Senior Liabilities; and (d) release its
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Senior
Liabilities, or extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such property.
9. The Senior Lender may, from time to time, whether before or after any
discontinuance of this Agreement, without notice to any Subordinated Lender,
assign or transfer any or all of the Senior Liabilities or any interest in the
Senior Liabilities; and, notwithstanding any such assignment or transfer or any
subsequent assignment or transfer of the Senior Liabilities, such Senior
Liabilities shall be and remain Senior Liabilities for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any of
the Senior Liabilities or of any interest in the Senior Liabilities shall, to
the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were the Senior Lender, as applicable; provided,
however, that, unless the Senior Lender shall otherwise consent in writing, the
Senior Lender shall have an unimpaired right, prior and superior to that of any
such assignee or transferee, to enforce this Agreement, for the benefit of the
Senior Lender, as to those of the Senior Liabilities which the Senior Lender has
not assigned or transferred.
10. The Senior Lender shall not be prejudiced in its rights under this
Agreement by any act or failure to act of any Subordinated Lender, or any
noncompliance of any Subordinated Lender with any agreement or obligation,
regardless of any knowledge thereof which the Senior Lender may have or with
which the Senior Lender may be charged; and no action of the Senior Lender
permitted under this Agreement shall in any way affect or impair the rights of
the Senior Lender and the obligations of any Subordinated Lender under this
Agreement.
11. No delay on the part of the Senior Lender in the exercise of any right
or remedy shall operate as a waiver of such right or remedy, and no single or
partial exercise by the Senior Lender of any right or remedy shall preclude
other or further exercise of such right or remedy or the exercise of any other
right or remedy; nor shall any modification or waiver of any of the provisions
of this Agreement be binding upon the Senior Lender except as expressly set
forth in a writing duly signed and delivered on behalf of the Senior Lender.
For the purposes of this Agreement, Senior Liabilities shall have the meaning
set forth in Section 1 above, notwithstanding any right or power of any
Subordinated Lender or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation, and no such claim or
defense shall affect or impair the agreements and obligations of any
Subordinated Lender under this Agreement.
12. This Agreement shall continue in full force and effect after the filing
of any petition ("Petition") by or against the Company and/or any of its
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Subsidiaries under the United States Bankruptcy Code (the "Code") and all
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converted or succeeding cases in respect thereof. All references herein to the
Company and/or Subsidiary shall be deemed to apply to the Company and such
Subsidiary as debtor-in-possession and to a trustee for the Company and/or such
Subsidiary. If the Company or any of its Subsidiaries shall become subject to a
proceeding under the Code, and if the Senior Lender shall desire to permit the
use of cash collateral or to provide post-Petition financing from the Senior
Lender to the Company or any such Subsidiary under the Code, each Subordinated
Lender agrees as follows: (1) adequate notice to such Subordinated Lender
shall be deemed to have been provided for such consent or post-Petition
financing if such Subordinated Lender receives notice thereof three (3) business
days (or such shorter notice as is given to the Senior Lender) prior to the
earlier of (a) any hearing on a request
to approve such post-petition financing or (b) the date of entry of an order
approving same and (2) no objection will be raised by any Subordinated Lender to
any such use of cash collateral or such post-Petition financing from the Senior
Lender.
13. This Agreement shall be binding upon each Subordinated Lender and upon
the heirs, legal representatives, successors and assigns of each Subordinated
Lender and the successors and assigns of any Subordinated Lender.
14. This Agreement shall be construed in accordance with and governed by the
laws of New York without regard to conflict of laws provisions. Wherever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
[signature page follows]
IN WITNESS WHEREOF, this Agreement has been made and delivered this 31 day
of August 2006.
PALISADES MASTER FUND LP
By: ____________________________
Name:
Title:
LAURUS MASTER FUND, LTD.
By: ________________________
Name:
Title:
Acknowledged and Agreed to by:
TRINITY LEARNING CORPORATION
By: ________________________
Name:
Title:
TRINITY WORKPLACE LEARNING CORPORATION
By: ________________________
Name:
Title:
