SUBORDINATION AGREEMENT
Exhibit
10.9
This
Subordination Agreement (the “Agreement”)
is
made and entered into as of August 31, 2006, by and among Xxxxx Xxxxxxx, (the
“Subordinated
Creditor”),
Welund Fund, Inc., a Nevada Corporation (the “Senior
Creditor”)
and
Solar Power, Inc., a California corporation, (the “Borrower”).
RECITALS
Borrower
has entered into that certain loan of even date herewith with Senior Creditor
pursuant to which Senior Creditor has agreed to lend to Borrower the principal
amount of $150,000, as evidenced by the Unsecured Promissory Note of even date
herewith. As a condition to extending to Borrower the credit, Senior Creditor
requires the execution of this Agreement by Subordinated Creditor in order
to
subordinate the indebtedness of Borrower under four demand promissory notes
in
the aggregate of $300,000 plus accrued interest owed to Subordinated Creditor
and any future loans or credits given to Borrower by the Subordinated Creditor.
Subordinated Creditor is willing to enter into this Agreement because he is
the
majority shareholder of Borrower and will benefit as such from the use of the
funds provided by Senior Creditor.
AGREEMENT
For
good
and valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, Subordinated Creditor hereby agrees with Senior Creditor
as follows:
1. Incorporation
of Recitals.
The
above stated recitals are incorporated herein and made a part hereof by this
reference.
2. Certain
Definitions.
All
capitalized terms used but not defined herein shall have the meanings given
them
in the other loan documents. The following terms shall have the following
meanings for the purposes of this Agreement:
“Senior
Indebtedness”
shall
mean all indebtedness, obligations and liabilities of Borrower (including,
without limitation, principal, interest, fees, costs, expenses and reasonable
attorneys’ fees), now or hereafter owed by Borrower to Senior Creditor,
including, without limitation, the principal of, interest on and all other
amounts owing to Senior Creditor, and any renewals, replacements, substitutions,
amendments, modifications, refinancings, refundings or additional fundings
thereof.
“Subordinated
Indebtedness”
shall
mean all indebtedness, obligations and liabilities of Borrower (including,
without limitation, principal, interest, fees, costs, expenses, additional
advances and reasonable attorneys’ fees), now or hereafter owed by Borrower to
Subordinated Creditor, including, without limitation, the principal of, interest
on and all other amounts owing to Subordinated Creditor and any renewals,
replacements, substitutions, amendments, modifications, refinancings, refundings
or additional fundings thereof.
3. Subordination.
Subordinated Creditor agrees that payment of the Subordinated Indebtedness
is
expressly subordinated to the prior payment in full of all Senior Indebtedness.
Unless and until the Senior Indebtedness shall have been fully paid and
satisfied and all financing have been terminated, Subordinated Creditor will
not, without the prior written consent of Senior Creditor (i) accelerate, ask,
demand, xxx for, take or receive from or on behalf of Borrower, by set-off
or in
any other manner, the whole or any part of any monies which may now or hereafter
be owing to Subordinate Creditor on the Subordinated Indebtedness, (ii) initiate
or participate with others in any suit, action or proceeding against Borrower
to
collect the whole or any part of the Subordinated Indebtedness, or (iii) ask,
demand, take or receive any security for any of the Subordinated Indebtedness.
This subordination provision shall apply with respect to all of the Senior
Indebtedness, regardless of the amount of the Senior Indebtedness or how or
in
what manner the Senior Indebtedness is incurred, or whether the Senior
Indebtedness has already been incurred or may be incurred in the future by
future advances or other financial accommodations made or extended by Senior
Creditor, or whether such future advances or other financial accommodations
are
made at the discretion of Senior Creditor or pursuant to commitment or
otherwise. If Subordinate Creditor, in violation of this Agreement, shall
commence, prosecute or participate in any suit, action or proceeding against
Borrower or shall attempt to enforce, foreclose or realize upon any security
for
the Subordinated Indebtedness, Borrower or Senior Creditor may interpose as
a
defense or plea the making of this Agreement and Senior Creditor or any Lender
individually may intervene and interpose such defense in its name or in the
name
of Borrower, and Borrower or Senior Creditor may by virtue of this Agreement
restrain the enforcement thereof in the name of Borrower or Senior
Creditor
4. Enforcement.
Subordinated Creditor, prior to the payment in full of the Senior Indebtedness
and the termination of all financing arrangements between Borrower and Senior
Creditor, shall not have any right to enforce payment of any of the Subordinated
Indebtedness or to otherwise take any action against Borrower or its property
without Senior Creditor’s prior written consent.
5. Subordinated
Indebtedness Owed Only to Subordinated Creditor.
Subordinated Creditor warrants and represents to Senior Creditor that
Subordinated Creditor has not previously assigned any interest in the
Subordinated Indebtedness to any party, that no party owns an interest in the
Subordinated Indebtedness other than Subordinated Creditor (whether as joint
holder of the Subordinated Indebtedness, participants or otherwise), that the
entire Subordinated Indebtedness is owing to Subordinated Creditor, and
Subordinated Creditor covenants that the Subordinated Indebtedness shall
continue to be owing only to Subordinated Creditor, unless assigned, transferred
or disposed of in accordance with the terms of this Agreement as provided in
Section 9 hereof.
6. Priority
on Distribution.
In the
event of any distribution, division or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or any part
of the assets of Borrower or the proceeds thereof to the creditors of Borrower
or of any readjustment of the obligations and indebtedness of Borrower, whether
by reason of liquidation, bankruptcy, arrangement, receivership, assignment
for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any of Borrower’s indebtedness, or the application of the
assets of Borrower to the payment or liquidation thereof, or the dissolution
or
winding up of Borrower’s business, or of the sale of all or substantially all of
Borrower’s assets, then, and in any such event, Senior Creditor shall be
entitled to receive payment in full of all Senior Indebtedness prior to the
payment of all or any part of the Subordinated Indebtedness.
7. Payments
Received by Subordinated Creditor.
Should
any payment or distribution be received by Subordinated Creditor upon or with
respect to the Subordinated Indebtedness prior to the satisfaction of all Senior
Indebtedness and the termination of all financing arrangements between Borrower
and Senior Creditor, Subordinated Creditor shall receive and hold the same
in
trust, as trustee, for the benefit of Senior Creditor and shall forthwith
deliver the same to Senior Creditor in precisely the same form received (except
for the endorsement or assignment of Subordinated Creditor where necessary)
for
application on the Senior Indebtedness, due or not due, and until so delivered,
the same shall be held in trust by Subordinated Creditor as the property of
Senior Creditor
8. Subrogation.
After
all of the Senior Indebtedness has been paid in full and until the Subordinated
Indebtedness has been paid in full, Subordinated Creditor shall be subrogated
to
the rights of Senior Creditor to receive payments and distributions of assets
with respect to the Senior Indebtedness, to the extent that distributions
otherwise payable to Subordinated Creditor have been applied to the payment
of
Senior Indebtedness in accordance with the provisions of this Agreement. As
between Borrower and Subordinated Creditor, a distribution applied to the
payment of the Senior Indebtedness in accordance with the provisions of this
Agreement which otherwise would have been made to Subordinated Creditor shall
not be deemed a payment by Borrower on the Subordinated Indebtedness, it being
understood that the subordination provisions of this Agreement are and are
intended solely for the purpose of defining the relative rights of Subordinated
Creditor, on the one hand, and Senior Creditor, on the other hand, and nothing
contained in this Agreement shall impair the obligations of Borrower, which
are
absolute and unconditional, to pay to Subordinated Creditor the Subordinated
Indebtedness as and when the same shall become due and payable in accordance
with its terms, except as such obligation is modified by the rights confirmed
hereunder in favor of Senior Creditor, or affect the relative rights of
Subordinated Creditor and the creditors of Borrower other than Senior
Creditor.
9. Assignment
of Subordinated Indebtedness.
Subordinated Creditor agrees that until the Senior Indebtedness has been paid
in
full and satisfied and all financing arrangements between Borrower and Senior
Creditor have been terminated in writing, Subordinated Creditor will not assign,
transfer or otherwise dispose of the Subordinated Indebtedness or any portion
thereof unless such assignment, transfer or other disposition is made expressly
subject to this Agreement.
10.
Term.
This
Agreement shall constitute a continuing agreement between Subordinated Creditor
and Senior Creditor, and Senior Creditor may continue, without notice to
Subordinated Creditor, to lend monies, extend credit and make other
accommodations to or for the account of Borrower. This Agreement shall be
irrevocable by Subordinated Creditor until all of the Senior Indebtedness shall
have been paid and fully satisfied and all financing arrangements between
Borrower and Senior Creditor have been terminated in writing, or until the
Subordinated Indebtedness shall have been paid and fully satisfied, whichever
first occurs.
11. Additional
Agreements Between Senior Creditor and Borrower.
Senior
Creditor, at any time and from time to time, may enter into such agreement
or
agreements with Borrower as Senior Creditor may deem proper, extending the
time
of payment of or renewing or otherwise altering the terms of all or any of
the
Senior Indebtedness or affecting the security underlying any or all of the
Senior Indebtedness, and may exchange, sell, release, surrender or otherwise
deal with any such security without in any way impairing or affecting this
Agreement.
12. Waivers
of Subordinated Creditor.
All of
the Senior Indebtedness shall be deemed to have been made or incurred in
reliance upon this Agreement, and Subordinated Creditor expressly waives all
notice of the acceptance by Senior Creditor of the subordination and other
provisions of this Agreement, notice of the incurring of Senior Indebtedness
from time to time and all other notices not specifically required pursuant
to
the terms of this Agreement or by law, and Subordinated Creditor expressly
waives reliance by Senior Creditor upon the subordination and other agreements
as herein provided.
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13.
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Miscellaneous.
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(a) Amendments
and Waivers.
Any
term of this Agreement may be amended with the written consent of the parties
or
their respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 13(a) shall be binding upon the parties and
their respective successors and assigns.
(b) Successors
and Assigns.
The
terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties and their successors and assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. The term “Borrower” as used herein shall
also refer to the successors and assigns of Borrower, including, without
limitation, a receiver, trustee, custodian or debtor-in-possession.
(c) Governing
Law.
This
Agreement and all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
in accordance with the laws of the State of California, without giving effect
to
principles of conflicts of law.
(d) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one
instrument.
(e) Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
(f)
Notices.
Any
notice required or permitted by this Agreement shall be in writing and shall
be
deemed sufficient upon receipt, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express or UPS) or
confirmed facsimile, or forty-eight (48) hours after being deposited in the
U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as
set
forth below or as subsequently modified by written notice.
(g) Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of the Agreement shall be interpreted
as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) Entire
Agreement.
This
Agreement and the documents referred to herein are the product of both of the
parties hereto, constitute the
entire agreement between such parties pertaining to the subject matter hereof
and thereof, and merge all prior negotiations and drafts of the parties with
regard to the transactions contemplated herein and therein. Any and all other
written or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled.
(i)
Advice
of Legal Counsel.
Each
party acknowledges and represents that, in executing this Agreement, it has
had
the opportunity to seek advice as to its legal rights from legal counsel and
that the person signing on its behalf has read and understood all of the terms
and provisions of this Agreement. This Agreement shall not be construed against
any party by reason of the drafting or preparation thereof.
[Signature
Page Follows]
This
Agreement has been duly executed under seal by the parties hereto as of the
day
and year first above written.
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SUBORDINATED
CREDITOR:
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/s/
Xxxxxxx
Xxxxxxx
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Xxxxxxx
Xxxxxxx
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SENIOR
CREDITOR:
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Welund
Fund Inc.
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By:
/s/ Xxxxxx X.
Xxxxxxxx
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Xxxxxx
X. Xxxxxxxx, President
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BORROWER:
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By:
/s/ Xxxxx
Xxxxxxxx
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Xxxxx
Xxxxxxxx, Chief Financial Officer
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