SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Agreement") is made and entered into
effective as of August 9, 1996, by and among Winstar Communications, Inc., a
Delaware corporation (the "Subordinated Obligee"), and IBJ Xxxxxxxx Bank & Trust
Company, as agent ("Agent").
Background Information:
A. Winstar Global Products, Inc., a Delaware corporation formerly known
as Beauty Labs Inc. ("Borrower"), and Century Business Credit Corporation
("Century") entered into a Loan and Security Agreement, dated as of August 5,
1994 (the "Original Credit Agreement"). Century assigned its rights therein to
the Agent pursuant to an Assignment and Sale Agreement dated as of August 9,
1996, and the Agent, on behalf of the Agent and those banks named therein, have
amended and restated the Original Credit Agreement, entering into an amended and
restated Credit and Security Agreement, amended and restated as of the date
hereof, providing for the aggregate principal amount of $12,000,000 secured
credit facilities (as amended, restated, replaced or otherwise modified from
time to time, the "Credit Agreement"; all capitalized terms used herein not
otherwise defined shall have the meanings given in the Credit Agreement; the
Agent and the Banks being collectively referred to as the "Senior Lender").
B. Pursuant to the Credit Agreement, the Borrower has and may hereafter
issue the Revolving Notes payable to the order of the Banks (together with any
further amendments or modifications thereto and all replacements, increases,
transfers, exchanges and substitutions thereof and any and all instruments
issued to evidence such debt by the Borrower to the Banks, the "Senior Notes";
the Credit Agreement, the Senior Notes, and the other documents, agreements and
instruments executed in connection therewith, being collectively referred to
herein as the "Senior Loan Documents").
C. The Subordinated Obligee and the Borrower have entered into the
subordinated promissory note dated as of August 9, 1996 (as amended, restated,
replaced or otherwise modified from time to time, the "Subordinated Note")
pursuant to which, among other things, the Subordinated Obligee has provided to
the Borrower the aggregate amount of $3,100,000 of loans (the Subordinated Note
and any agreements and instruments executed or delivered in connection
therewith, being collectively referred to herein as the "Subordinated
Documents").
D. The Borrower may be presently and from time to time hereafter indebted
to the Senior Lender as a result of the advance of monies, the issuance of
letters of credit and/or other extensions of credit by the Senior Lender to the
Borrower
pursuant to the Senior Loan Documents.
E. The Subordinated Obligee acknowledges that any loan or advance of
monies, issuance of a letter of credit, or other extensions of any financial
accommodation or credit to the Borrower by the Senior Lender is of value to the
Subordinated Obligee.
G. The Subordinated Obligee has agreed to subordinate the payment and
priority of all indebtedness, distributions, dividends and obligations of the
Borrower owed to the Subordinated Obligee pursuant to the Subordinated Documents
to the payment and priority of the Senior Obligations (as defined herein) owed
by the Borrower to the Senior Lender pursuant to the Senior Loan Documents, all
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and in order to induce the Senior Lender, now or from
time to time hereafter, to make or maintain financial accommodations to or for
the benefit of the Borrower pursuant to the Senior Loan Documents, or to grant
such amendments, renewals, increases or extensions thereof as the Senior Lender
may deem advisable, and to better secure the Senior Lender in respect of the
foregoing, the Subordinated Obligee and Senior Lender hereby agree as follows:
Definitions. In addition to other terms defined herein, as used in this
Agreement, the following terms shall have the meanings set forth below:
"Acceleration Event" means an acceleration of the maturity of
the principal amount of the Senior Obligations (or any portion thereof) prior to
its scheduled maturity date, whether by exercise by the Senior Lender of a right
so to do or automatically pursuant to the terms of the Senior Loan Documents, or
a failure to pay such Senior Obligations at scheduled maturity.
"Senior Obligations" means (a) any and all indebtedness, obligations and
liabilities owing by Borrower whether now existing or hereafter arising or
acquired outright, conditionally, or as collateral security (whether as
principal, interest or otherwise, whether due or not due, direct, indirect,
absolute or contingent and whether or not evidenced by any note, instrument,
reimbursement agreement or writing), without any limitation as to the amount or
terms thereof, to the Senior Lender, including principal of and interest
(including without limitation interest at the rate provided for in the Senior
Loan Documents or other agreement governing or evidencing the Senior
Obligations, both before and after the institution of any bankruptcy,
receivership, insolvency or similar proceeding, even if
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the claim for such interest is not allowed pursuant to the provisions of
applicable law) on the Senior Note (provided, that principal under the Senior
Note which constitutes Senior Obligations shall not exceed $16,000,000 in the
aggregate without the prior consent of the Subordinated Obligee), all other
extensions of credit under or in connection with the Credit Agreement, if any,
or any other agreements governing or evidencing the Senior Obligations and all
fees, expenses, reimbursements, indemnities and other amounts payable under the
Credit Agreement or other agreement governing or evidencing the Senior
Obligations (including without limitation attorneys' fees and expenses incurred
by the Senior Lender, whenever incurred, including without limitation if
incurred in proceedings against the Borrower, the Subordinated Obligee or any
other party) and (b) all renewals, deferrals, amendments, increases provided,
that principal under the Senior Note as so increased which constitutes Senior
Obligations shall not exceed $16,000,000 in the aggregate without the prior
consent of the Subordinated Obligee), modifi-
cations, supplements, extensions, refundings, or refinancings of any of the
indebtedness, obligations or liabilities described in clause (a), including any
evidences of indebtedness issued in exchange therefor, and all other present and
future indebtedness for money borrowed or owed to the Senior Lender.
"Subordinated Default" means any Default or Event of Default
arising under the Subordinated Documents.
"Subordinated Obligations" means any and all indebtedness, obligations,
right to receive dividends and distributions, reimbursement obligations and
liabilities, including any such evidenced by the Subordinated Note or any other
of the Subordinated Documents owing or to be performed by the Borrower or owing,
paid or to be performed by any other person, firm, partnership, corporation or
entity (inbcluding without limitation any guarantor or surety) for the benefit
of the Borrower, whether now existing or hereafter arising or acquired outright,
conditionally, or as collateral security, to the Subordinated Obligee (whether
as principal, interest, dividends or distributions or otherwise, whether due or
not due, direct, indirect, absolute or contingent and whether or not evidenced
by any note, instrument, certificate or writing), including without limitation
any obligation to pay expenses, attorneys' fees, monitoring fees, collection
fees, indemnities, and all registration rights, put rights and all other rights
related to any equity interests held by the Subordinated Obligee.
In this Agreement, "including" is used by way of illustration and not
by way of limitation and the singular includes the plural and conversely.
2. Subordination. (a) The payment and performance of the
Subordinated Obligations is hereby subordinated in right of
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payment to the prior payment in full of the Senior Obligations and, except as
specifically set forth in Sections 3, 4, 5 and 7 below, the Subordinated Obligee
will not ask, demand, xxx for, take or receive from or on behalf of the Borrower
(by way of payment, loan, setoff, guaranty or in any other manner) the whole or
any part of the Subordinated Obligations (whether the Subordinated Note shall
have become payable at maturity, by acceleration or otherwise), including,
without limitation, the taking of any negotiable instrument evidencing any
Subordinated Obligation or any security therefor, unless and until all of the
Senior Obligations shall have been fully and finally indefeasibly paid and
satisfied and all financing arrangements constituting the Senior Obligations
among the Borrower and the Senior Lender have been terminated. All liens and
security interests of the Subordinated Obligee, whether now or hereafter arising
and howsoever existing, in any assets of the Borrower or any other assets
securing the Senior Obligations shall be and hereby are subordinated to the
rights and interests of the Senior Lender in those assets. The Subordinated
Obligee shall have no right to possession or control of any such assets or to
foreclose upon any such assets, whether by judicial action or otherwise, unless
and until all of the Senior Obligations shall have been fully and finally
indefeasibly paid and satisfied and all financing arrangements constituting the
Senior Obligations among the Borrower and the Senior Lender have been
terminated.
(b) The Subordinated Obligee shall promptly release and
discharge any lien or security interest it may acquire in any
assets or property of the Borrower.
(c) The Subordinated Obligee acknowledges and agrees that, to the
extent the terms and provisions of this Agreement are inconsistent with the
Subordinated Documents, the terms of this Agreement shall control and the
Subordinated Documents shall be deemed to be subject to this Agreement.
3. Permitted Payments and Actions. (a) Notwithstanding the provisions
of Section 2 of this Agreement, and provided that (i) there shall not then exist
any breach of this Agreement by the Subordinated Obligee which has not been
waived, in a writing signed by the Senior Lender, (ii) there does not then exist
any Default or Event of Default, (iii) the payment described in this Section
3(a), if made, would not give rise to the occurrence of any Default or Event of
Default, (iv) following the payment described in this Section 3(a), if made
(plus any concurrent payment of dividends permitted by Section 7.09 of the
Credit Agreement), there would exist no Overadvance, and there would exist under
the Formula Amount not less than $850,000 of availability (i.e. the Formula
Amount less Loans outstanding less the face amount of Letters of Credit
outstanding less trade payables more than 60 days past due less the amount of
checks outstanding less uncovered book overdrafts), (v) [intentionally
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omitted],
(vi) the amount of the payment (plus any concurrent payment of dividends
permitted by Section 7.09 of the Credit Agreement) is not in excess of 50 per
cent of Consolidated EBITDA for the fiscal year for which such audited financial
statements were delivered; then the Subordinated Obligee may accept from the
Borrower, payments of interest and principal, on 10 days' notice to the Senior
Lender such payments being "Permitted Payments"); and (vii) either (x) there
shall have been no Overadvance outstanding in six of the last 12 months, or (y)
if there shall have been an Overadvance in six of the last 12 months, if an
Overadvance is thereafter made, the payee of such dividend shall repay the
dividend to the Borrower.
(b) Notwithstanding anything contained herein to the contrary, the
Subordinated Obligee agrees and covenants that in no event shall the
Subordinated Obligee accept payment of any penalty interest, late fees or other
payments representing interest in excess of the rate of interest otherwise
payable under the Subordinated Note until after payment and performance in full
of all of the Senior Obligations.
(c) Provided that no notice pursuant to Section 3(d) is then
outstanding, the Subordinated Obligee shall be permitted to keep and retain any
Permitted Payments received by the Subordinated Obligee from or on behalf of the
Borrower, provided that the Subordinated Obligee has no knowledge that such
payment was made in violation of Section 3(a), provided that if within 91 days
after receipt by the Subordinated Obligee of such payment, the Subordinated
Obligee receives as specified in this Agreement written notice from the Agent or
Borrower to the effect that such payment was made in violation of this
Agreement, the Subordinated Obligee shall pay such amount received over to the
Agent.
(d) Without limiting the restrictions on payments to the Subordinated
Obligee set forth in this Agreement, should the Agent deliver to the
Subordinated Obligee a notice that a Default or Event of Default is then
existing, the Subordinated Obligee shall not accept any direct or indirect
payment or distribution or security or reimbursement or dividend or instrument
or proceeds thereof (including without limitation due to, or paid in accordance
with, guaranties by any Person, or insurance policies, whether policies upon
assets of the Borrower, key-man policies upon officers, employees or directors
of the Borrower, or any other policies) from the Borrower, or on behalf of the
Borrower, on account of the Subordinated Obligations unless and until such
Default or Event of Default shall have been cured or waived, or certified not to
exist, in a writing signed by the Agent or the Senior Obligations shall have
been indefeasibly discharged or paid in full, after which, subject to all of
Section 3 (if applicable), the Borrower may resume making any and all required
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Permitted Payments (but not premium or accelerated) payments in respect of the
Subordinated Obligations, including any Permitted Payments not paid as scheduled
due to the provisions of this Agreement.
4. Receipt of Payment-in-Kind Notes by the Subordinated Obligee. To the
extent that Scheduled Payments are not made due to the provisions of this
Agreement, the Borrower may deliver to the Subordinated Obligee non-cash
payment-in-kind notes ("PIK's"), in form substantially similar to the
Subordinated Note, in the amount of the deficiency in Scheduled Payments made.
PIK's may be paid, in cash, at such time that such cash payments may be made in
compliance with Section 3 hereof. The parties hereto acknowledge that no PIK's
are provided for at present by the Subordinated Documents, and that there is no
obligation to agree to such PIK's by the Subordinated Obligee.
5. Enforcement Rights. (a) Prior to the indefeasible payment in full of
the Senior Obligations and the termination of all financing arrangements
constituting Senior Obligations among the Borrower and the Senior Lender, the
Subordinated Obligee shall have no right to accelerate or enforce any claim with
respect to the Subordinated Obligations, or otherwise to take any action, either
judicially or through self-help or otherwise (including without limitation the
institution of bankruptcy or insolvency proceedings with respect to the
Borrower), against the Borrower or their property without the Senior Lender's
prior written consent.
(b) Notwithstanding the limitations in subdivision (a) above, the
Subordinated Obligee may take the following actions, and solely the following
actions, to the extent permitted in the Subordinated Documents:
(i) The Subordinated Obligee may, with prior written notice to the
Senior Lender, seek equitable relief to cause the Borrower to perform its
obligations under the Subordinated Documents, to the extent not in contravention
or breach of this Agreement or any of the Senior Loan Documents.
(ii) Upon an Acceleration Event, or a failure to pay the Senior
Obligations in full at maturity, the Subordinated Obligee may accelerate the
Subordinated Obligations, to the extent constituting debt.
(iii) Upon the bankruptcy or insolvency of the Borrower, the
Subordinated Obligee may file as appropriate proofs of claim.
6. Subordinated Obligations Owed Only to the Subordinated
Obligee The Subordinated Obligee warrants and represents that
it has not previously assigned any interest in its Subordinated
Obligations, that no other party owns an interest in its
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Subordinated Obligations other than itself (whether as joint holders of the
Subordinated Obligations, participants or otherwise) and that the entire
Subordinated Obligations is owing only to it, and covenants that the entire
Subordinated Obligations shall continue to be owing only to it unless assigned
in accordance with, and subject to, the terms of this Agreement.
7. Senior Lender Priority. In the event that 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 the Borrower
or the proceeds thereof to the creditors of the Borrower or readjustment of the
obligations and indebtedness of the 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 part
of the Senior Obligations or the Subordinated Obligations, or the application of
the assets of the Borrower to the payment or liquidation thereof, or upon the
dissolution or other winding up of the Borrower's business, or upon the sale of
all or substantially all of the Borrower's assets, then, and in any such event,
(a) the Senior Lender shall be entitled to receive payment in full of any and
all of the Senior Obligations then owing prior to the payment of all or any part
of the Subordinated Obligations, and (b) any payment or distribution of any kind
or character, whether in cash, securities or other property, including without
limitation adequate protection payments, which shall be payable or deliverable
upon or with respect to any or all of the Subordinated Obligations shall be paid
or delivered directly to the Senior Lender for application on any of the Senior
Obligations, due or not due, until such Senior Obligations shall have first been
fully paid and satisfied. Notwithstanding any statute, including the Bankruptcy
Code (as hereinafter defined), any rule of law or bankruptcy proceeding to the
contrary, the right of the Senior Lender hereunder to have all of the Senior
Obligations (whether accrued before or after the filing of such bankruptcy
proceeding) paid and satisfied in full prior to the payment of any of the
Subordinated Obligations shall include, without limitation, the right of the
Senior Lender to be paid in full all interest accruing on the Senior Obligations
due to them after the filing of any petition by or against Borrower in
connection with any bankruptcy or similar proceeding or any other proceeding
referred to in this Section 7, prior to the payment of any amounts in respect of
the Subordinated Obligations, including any interest due to the Subordinated
Obligee accruing after such date. Notwithstanding the foregoing, in connection
with a Plan (as defined in Section 8 below), a Subordinated Obligee may receive
debt or equity securities of the Borrower or any successor corporation provided
for by such Plan that are subordinated to the Senior Obligations at least to the
same extent that the Subordinated Documents, and the obligations arising
thereunder, are subordinated to the Senior Obligations
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pursuant to this Agreement (including at least the same subordination and
limitations on rights of action imposed hereunder; such debt or equity
securities being "Permitted Junior Securities"); provided that if a new
corporation results from such Reorganization, such corporation shall have
assumed all Senior Obligations, not paid in full in cash in connection with such
Plan; provided further that such Permitted Junior Securities received shall be
pledged and the Senior Lender granted a first lien therein, pursuant to
documents in form and substance satisfactory to the Agent, to secure the Senior
Obligations in an amount not reduced by any "cramdown" under the Bankruptcy Code
(as defined below) or other means, other than payment of cash on a
dollar-for-dollar basis.
8. Grant of Authority to Senior Lender; Voting of Proofs of Claim. In
the event of the occurrence of any event described in Section 7 above, if the
Subordinated Obligee does not act within 10 days prior to the last date for
filing claims, the Senior Lender is hereby irrevocably authorized and empowered,
in its sole and absolute discretion, to make and present for and on behalf of
that Subordinated Obligee such proofs of claims against the Borrower on account
of the Subordinated Obligations as the Senior Lender may deem expedient or
proper. Whether proofs of claim with respect to the Subordinated Obligations are
made and presented by Senior Lender or Subordinated Obligee, the Subordinated
Obligee does hereby irrevocably authorize the Senior Lender to vote, and does
hereby assign and transfer to the Senior Lender all rights to vote, any and all
claims in such proceedings related to the Subordinated Obligations, including
without limitation with respect to expressing consent or disapproval to any plan
of reorganization (a "Plan") or other matter put to the Borrower's creditors for
approval. The Senior Lender agrees that should two or more proposed Plans, which
each provide for a payment in full of the Senior Obligations upon confirmation,
be approved by the relevant court, and if such proposed Plans are feasible, and
otherwise satisfactory to the Senior Lender in its reasonable discretion, then
the Senior Lender will vote for such of the proposed Plans as instructed by the
holders of a majority of the claims arising under the Subordinated Obligations.
In all events, the Senior Lender shall have authority to receive and collect any
and all dividends or other payments, distributions or disbursements made in any
such proceedings in whatever form the same may be paid or issued and to apply
the same on account of any of the Senior Obligations, subject to the last
sentence of Section 7 above. To the extent that payments or distributions are
made in property other than cash, the Subordinated Obligee authorize the Senior
Lender to sell such property to such buyers and on such terms as the Senior
Lender, in its sole discretion, shall determine, subject to the last sentence of
Section 7 above. The Subordinated Obligee will execute and deliver to the Senior
Lender such powers of attorney, assignments and other instruments or documents,
including notes and stock certificates (together
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with such assignments or endorsements as the Senior Lender shall deem
necessary), as may be requested from time to time by the Senior Lender in order
to enable the Senior Lender to exercise any and all rights granted hereunder
including the right to collect and receive any and all payments and
distributions which may be payable or deliverable at any time upon or with
respect to the Subordinated Obligations (subject to the last sentence of Section
7), all for the Senior Lender's own benefit. Following the indefeasible payment
in full of the Senior Obligations, the Senior Lender will remit to the
Subordinated Obligee to the extent of the Subordinated Obligee's interest
therein, all dividends or other payments or distributions paid to and held by
the Senior Lender in excess of the Senior Obligations.
9. Payments Received by the Subordinated Obligee. Except for Permitted
Payments received by the Subordinated Obligee pursuant to and in accordance with
the provisions of Section 3 above and for PIK's paid in accordance with Section
4, and as stated in the last sentence of Section 7, should any payment or
distribution or reimbursement or dividend or instrument or proceeds thereof
(including without limitation due to, or paid in accordance with, insurance
policies, whether policies upon assets of the Borrower, key-man policies upon
officers, employees or directors of the Borrower, or any other policies) be
received by the Subordinated Obligee upon or with respect to the Subordinated
Obligations or any other obligations of the Borrower to the Subordinated Obligee
prior to the full and final indefeasible satisfaction of all of the Senior
Obligations and the termination of all financing arrangements among the Borrower
and the Senior Lender, the Subordinated Obligee shall receive and hold the same
in trust, as trustee, for the benefit of the Senior Lender, and shall forthwith
deliver the same to the Agent in precisely the form received (except for the
indorsement or assignment of the Subordinated Obligee where necessary), for
application on any of the Senior Obligations, due or not due, and, until so
delivered, the same shall be held in trust by the Subordinated Obligee as the
property of the Senior Lender. In the event of the failure of the Subordinated
Obligee to make any such indorsement or assignment to the Senior Lender, the
Senior Lender, or any of its officers or employees, is hereby irrevocably
authorized to make the same.
10(A). Instrument Legend. Any instrument evidencing any of the
Subordinated Obligations, or any portion thereof, will, on the date hereof or,
if issued hereafter, not later than the earlier of the issue thereof or the
first transfer of any interest therein, be inscribed with a legend conspicuously
indicating that payment thereof (and security therefor, if any) is subordinated
to the claims of the Senior Lender pursuant to the terms of this Agreement, in
substantially the following form:
"The indebtedness evidenced by this instrument
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(and security therefor, if any should in the future exist) is subordinated to
the prior payment in full and priority of the Senior Obligations (as defined in
the and Subordination Agreement hereinafter referred to) pursuant to, and to the
extent provided in the Subordination Agreement dated as of August 9, 1996 made
by the payee hereunder in favor of the Senior Lender as defined therein."
A copy of any instrument evidencing any of the Subordinated Obligations, or any
portion thereof, which is executed by the Borrower, will be delivered to the
Senior Lender on the date of its execution or within five Business Days
thereafter.
(B) Further Actions. The Subordinated Obligee will, with no charge to the Senior
Lender, and at any time and from time to time, promptly execute and deliver all
further instruments, financing statements and documents, and take all further
action, that may be reasonably necessary or desirable, or that the Senior Lender
may reasonably request, in order to protect, establish or maintain any right,
priority or interest granted or purported to be granted hereby or to enable the
Senior Lender to enforce the rights and remedies afforded to it hereunder.
(C) No Lien or Prior Benefit to Subordinated Obligee. The Subordinated Obligee
hereby covenants and agrees that to the extent it has taken or received any
lien, pledge or security interest, or has received the benefit of any
encumbrance or negative pledge, with respect to any property or rights, whether
real, personal or otherwise, owned, held or controlled by the Borrower or any
Affiliate thereof, then such lien, pledge or security interest in favor of the
Subordinated Obligee shall be assigned to the Senior Lender, and such
Subordinated Obligee shall turn such benefit over to Senior Lender, or if Senior
Lender for any reason has no lien, pledge or security interest in such property
or rights or is not entitled to such benefit, the Subordinated Obligee is acting
on behalf of the Senior Lender, and shall hold any benefit received therefrom in
trust for the Senior Lender, and shall pay over such benefit to the Senior
Lender upon request.
11. Reimbursements for Expenses and Borrowings from Borrower;
Assignment of Claims. Except as permitted in Section 3 hereof, the Subordinated
Obligee agree that until the Senior Obligations have been paid in full and
satisfied and all financing arrangements constituting Senior Obligations between
the Borrower and the Senior Lender have been terminated, the Subordinated
Obligee will not, directly or indirectly, accept or receive the benefit of any
remuneration or reimbursement for expenses from or on behalf of the Borrower,
and will not assign or transfer to others any claim the Subordinated Obligee
have or may have against the Borrower, unless such assignment or transfer
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is made expressly subject to this Agreement.
12. Continuing Nature of Subordination. All rights and
interests of the Senior Lender hereunder, and all agreements and
obligations of the Subordinated Obligee under this Agreement,
shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Senior
Loan Documents or the Senior Obligations, or any lien purported
to be created thereby;
(b) any change in the time, manner, amount or place of payment of, or
any other term of, all or any of the Senior Obligations, or any other amendment,
increase, modification or supplement to, or renewal, extension, waiver or
termination of, or any consent to departure from, or any other action or
omission in respect of, the Senior Loan Documents;
(c) any failure of any lien purported to be created by the Senior Loan
Documents to be created, to attach to property of the Borrower, or to be
perfected, or any lapse in priority of such lien;
(d) any exchange, release, sale, surrender, or non- perfection, in
whole or in part, of any collateral now or hereafter existing, or any release or
amendment or waiver of or consent to departure from any guaranty, for all or any
of the Senior Obligations;
(e) any exercise or failure to exercise any right, power or
remedy under or in respect of the Senior Loan Documents or the
Senior Obligations;
(f) any action or failure to act, or default by, by the Subordinated
Obligee, under this Agreement, the Subordinated Documents, or any other
agreement or document; or
(g) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, any one or more of the
Subordinated Obligee or a subordinated creditor;
in each case, whether or not the Subordinated Obligee shall have had notice or
knowledge of any of the foregoing and whether or not they shall have consented
or objected thereto. This Agreement shall be effective and may not be terminated
or otherwise revoked by the Subordinated Obligee until the Senior Obligations
shall have been fully discharged by full and final indefeasible payment and all
financing arrangements between the Borrower and the Senior Lender constituting
Senior Obligations have been terminated. This is a continuing agreement of
subordination and the Senior Lender may, subject to the terms hereof, continue,
at any time and without notice to the
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Subordinated Obligee, extend or increase credit or other financial
accommodations and loan monies to or for the benefit of the Borrower on the
faith hereof. Any termination or revocation by the Subordinated Obligee of this
Agreement shall not be effective until accepted and consented to in writing by
the Senior Lender, and in any event shall not affect this Agreement in relation
to (i) any of the Senior Obligations which arose prior to the effective date of
such notice or (ii) any of the Senior Obligations created after that date, if
such Senior Obligations were incurred either through readvances by the Senior
Lender pursuant to the Senior Lender's financing arrangements with the Borrower,
and/or for the purpose of protecting any collateral, including, but not limited
to, all protective advances, costs, expenses, and attorneys' and paralegals'
fees, whensoever made, advanced or incurred by the Senior Lender in connection
with the Senior Obligations. If, in reliance on this Agreement, the Senior
Lender makes loans or other advances to or for the benefit of the Borrower or
takes other action under the Senior Loan Documents after such aforesaid
termination or revocation by the Subordinated Obligee, the rights of the Senior
Lender with respect to such loans, other advances or other actions shall be the
same as if such termination or revocation had not occurred; and, in any event,
no obligation of the Subordinated Obligee hereunder shall be affected pursuant
to this Section 12 by the written revocation of the Subordinated Obligee or any
other subordinated party, pledgor, endorser or guarantor, if any.
13. Subordinated Obligee's Waivers. All of the Senior Obligations shall
be deemed to have been made or incurred in reliance upon this Agreement. The
Subordinated Obligee expressly waive promptness, diligence, all notice of the
acceptance by the Senior Lender of the subordination and other provisions of
this Agreement and all other notices, not specifically required pursuant to the
terms of this Agreement or required by applicable law, whatsoever and any
requirement that the Senior Lender protect, secure, perfect or insure any
security interest or lien on any property subject thereto or exhaust any right
or take any action against the Borrower or any other person or entity or any
collateral, and the Subordinated Obligee expressly waive reliance by the Senior
Lender upon the subordination and other agreements as herein provided. The
Subordinated Obligee agree that the Senior Lender has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Senior Loan Documents or other agreements
governing or evidencing the Senior Obligations, or the collectability of the
Senior Obligations, or as to the creation, attachment, perfection or priority of
any lien purported to be created by the Senior Loan Documents, that the Senior
Lender shall be entitled to manage and supervise its loans and credit facilities
to the Borrower in accordance with applicable law and the Senior Lender's usual
practices, modified from time to time
12
as it deems appropriate under the circumstances, without regard to the existence
of any rights that the Subordinated Obligee may now or hereafter have in or to
any of the assets of the Borrower, and that the Senior Lender shall have no
liability to the Subordinated Obligee, to the fullest extent permitted by law,
arising out of, any and all actions which the Senior Lender, acting in a
commercially reasonable manner, takes or omits to take including actions with
respect to the creation, perfection or continuation of liens or security
interests in any collateral and other security for the Senior Obligations,
actions with respect to the occurrence of an Event of Default or Default under
the Senior Loan Documents, or other agreements governing or evidencing the
Senior Obligations, actions with respect to the foreclosure upon, sale, release,
or depreciation of, or failure to realize upon, any of the collateral and
actions with respect to the collection of any claim for all or any part of the
Senior Obligations from any account debtor, guarantor or any other party) with
respect to the Senior Loan Documents or other agreements governing or evidencing
the Senior Obligations or any other agreement related thereto or to the
collection of the Senior Obligations or the valuation, use, protection or
release of any collateral and/or other security for the Senior Obligations, for
the Subordinated Obligee waive any claim arising therefrom which they may now or
hereafter have against the Senior Lender, to the fullest extent permitted by
law.
14. Bankruptcy Issues. If the Borrower becomes the subject of
proceedings under Title 11 of the United States Code (11 U.S.C. ss. 101 et
seq.), as amended, (the "Bankruptcy Code"), and if the Senior Lender desires to
permit the use of cash collateral or to provide financing to the Borrower under
either Section 363 or Section 364 of the Bankruptcy Code, the Subordinated
Obligee agree that adequate notice of such financing to the Subordinated Obligee
shall have been provided if the Subordinated Obligee receive written notice in
accordance with the Bankruptcy Code. All allocations of payments between the
Senior Lender and the Subordinated Obligee shall continue to be made after the
filing of a petition under the Bankruptcy Code on the same basis that the
payments were to be allocated prior to the date of such filing. The Subordinated
Obligee waives any claim any one or more of them may now or hereafter have
arising out of the Senior Lender's election, in any proceeding instituted under
Chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of
the Bankruptcy Code, and/or any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code by the Borrower, as debtors-in-possession. To
the extent that the Senior Lender receives payments on, or proceeds of
collateral for, the Senior Obligations which are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law, or equitable cause, then, to the extent of such
payment or proceeds
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received, the Senior Obligations, or part thereof, intended to be satisfied
shall be revived and continue in full force and effect as if such payments or
proceeds had not been received by the Senior Lender.
15. Restrictions on Subordinated Obligee. Prior to the indefeasible
payment in full of the Senior Obligations and notwithstanding anything contained
in any agreement, instrument or document executed and delivered in connection
with the Subordinated Obligations to the contrary, and without limitation of the
restrictions on and obligations of the Subordinated Obligee set forth in this
Agreement, the Subordinated Obligee shall not without the prior written consent
of the Senior Lender, do any of the following:
(a) amend, modify, supplement or waive, or agree to any amendment,
modification, supplement or waiver of or to, the Subordinated Obligations or the
Subordinated Documents if such amendment, modification or supplement: amends or
affects the interest rate, principal amount, financial covenants (other than to
make less stringent such covenants), aggregate amount due, maturity, terms of
payment or stated events of default of the Subordinated Obligations; adds or
modifies (adversely to Borrower) any material covenant of Borrower under the
Subordinated Obligations or the Subordinated Documents; or provides additional
collateral (subject to Section 10(C) hereof) for, or modifies (adversely to
Borrower) the rights or remedies of the Subordinated Obligee upon default on,
the Subordinated Obligations. In all events Borrower will provide the Senior
Lender with a copy of each amendment, waiver modification or supplement to the
Subordinated Obligations and the Subordinated Documents within ten Business Days
after execution thereof by Borrower; or
(b) except as expressly permitted by Section 5 hereof, accelerate the
maturity of all or any portion of the Subordinated Obligations, or take any
action towards collection of all or any portion of the Subordinated Documents or
enforcement of any rights, powers or remedies under the Subordinated Documents
or other agreements entered into pursuant thereto, or applicable law, upon the
occurrence of any event of default under and as defined in any of the
Subordinated Documents or any event which, with the passage of time, or giving
of notice, or both, would constitute such a default.
16. Subordinated Obligations Unimpaired; Subrogation.
(a) Nothing contained herein shall impair, as between the Borrower and
the Subordinated Obligee, the obligation of the Borrower, which is absolute and
unconditional, to pay or deliver to the Subordinated Obligee the Subordinated
Obligations, including without limitation the principal of and interest on the
14
Subordinated Documents as and when the same shall become due and payable in
accordance with the terms thereof, subject to the rights of the Senior Lender
hereunder.
(b) Upon the indefeasible payment in full of all Senior Obligations,
the Subordinated Obligee shall be subrogated to the rights of the Senior Lender
thereafter to receive payments or distributions of assets of the Borrower made
on the Senior Obligations to the extent (and only such extent) that Senior
Lender receives cash, property or securities that would have been distributed or
paid to the Subordinated Obligee but for this Agreement. For the purposes of
such subrogation, no payments or distributions to the Senior Lender of any cash,
property or securities to which the Subordinated Obligee would be entitled
except for the provisions of this Agreement, and no payment over pursuant to the
provisions of this Agreement to the Senior Lender by the Subordinated Obligee,
shall, as between the Borrower and the creditors of Borrower (other than the
Senior Lender and the Subordinated Obligee), be deemed to be a payment by the
Borrower to or on account of the Senior Obligations. Notwithstanding the
foregoing subrogation right, Subordinated Obligee shall not be subrogated to any
of Senior Lender's rights in the collateral security for the Senior Obligations.
17. Senior Lender's Waivers. No waiver shall be deemed to be made by
the Senior Lender, or the Subordinated Obligee, of any of its rights hereunder,
unless the same shall be in writing signed by the Senior Lender or Subordinated
Obligee, respectively, and each waiver, if any, shall be a waiver only with
respect to the specific instance involved and shall in no way impair the rights
of the Senior Lender or the obligations of the Subordinated Obligee to the
Senior Lender, or the rights of the Subordinated Obligee, in any other respect
at any other time.
18. Information Concerning Financial Condition of the Borrower. The
Subordinated Obligee hereby assumes responsibility for keeping themselves
informed of the financial condition of the Borrower, any and all endorsers and
any and all guarantors of the Senior Obligations and of all other circumstances
bearing upon the risk of nonpayment of the Senior Obligations and/or
Subordinated Obligations that diligent inquiry would reveal, and the
Subordinated Obligee hereby agree that the Senior Lender shall have no duty to
advise the Subordinated Obligee of information known to it regarding such
condition or any such circumstances. In the event the Senior Lender in its sole
discretion, undertakes, at any time or from time to time, to provide any such
information to the Subordinated Obligee, the Senior Lender shall be under no
obligation (a) to provide any such information to the Subordinated Obligee on
any subsequent occasion, or (b) to undertake any investigation not a part of the
regular business routine of the Senior Lender and shall be under no obligation
to disclose any information which, pursuant to
15
accepted or reasonable commercial finance practices, the Senior Lender wishes to
maintain confidential. The Subordinated Obligee hereby agree that all payments
received by the Senior Lender may be applied, reversed, and reapplied, in whole
or in part, to any of the Senior Obligations, as the Senior Lender, in its sole
discretion, deems appropriate and the Subordinated Obligee assent to any
extension or postponement of the time of payment of the Senior Obligations or to
any other indulgence with respect thereto, to any substitution, exchange or
release of collateral which may at any time secure the Senior Obligations and to
the addition or release of any other party or person primarily or secondarily
liable therefor.
19. No Offset. In the event any one or more of the Subordinated Obligee
at any time purchases goods or services from the Borrower, the Subordinated
Obligee hereby irrevocably agrees that it shall pay for such goods or services
in cash or cash equivalents in accordance with the terms of such purchases and
shall not deduct from or setoff against any amounts billed to it by the Borrower
in connection with such purchases any amounts the Subordinated Obligee's claim
are due to them with respect to the Subordinated Obligations.
20. CONSENT TO JURISDICTION; WAIVERS. THE SUBORDINATED OBLIGEE CONSENTS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED AT NEW YORK, NEW YORK,
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE SUBORDINATED
OBLIGEE, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED
MAIL DIRECTED TO THE SUBORDINATED OBLIGEE AT THE ADDRESSES STATED BELOW AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE DAYS AFTER THE SAME SHALL
HAVE BEEN POSTED AS AFORESAID. THE SUBORDINATED OBLIGEE WAIVES TRIAL BY JURY,
ANY OBJECTION BASED UPON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER. NOTHING IN THIS SECTION 20 SHALL AFFECT THE RIGHT
OF THE SENIOR LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT THE RIGHT OF THE SENIOR LENDER TO BRING ANY ACTION OR PROCEEDING
AGAINST THE SUBORDINATED OBLIGEE OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
21. Notices. (a) Except as otherwise expressly provided herein and
except as to any service of legal process, any notice required or desired to be
given hereunder shall be in writing and shall be deemed to have been received
upon the earlier of actual receipt by manual delivery or teletransmission or
five days after being mailed by registered mail, postage prepaid, to the party
as set forth below:
(i) if to the Subordinated Obligee at:
Xx. Xxxxxxx xxx Xxxxxx
Winstar Communications, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(Tcp.: 212-867-1565)
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or to such other address as may be given in a notice in
compliance herewith.
(ii) if to the Borrower or Senior Lender, as stated in the Credit Agreement
or to such other address as may be given in a notice in compliance herewith.
(b) Senior Lender and Subordinated Obligee shall give written notice to
the other of the declaration of an event of default with respect to indebtedness
owed by the Borrower to such party relatively concurrently with the delivery of
such notice to the Borrower, as the case may be, provided that the failure to
give such notice shall not offset the provisions of this Agreement or the rights
or remedies of the parties.
22. GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED AT
AND SHALL BE DEEMED TO HAVE BEEN MADE AT NEW YORK, NEW YORK, AND SHALL BE
INTERPRETED, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF NEW YORK, NEW YORK, SHALL
BE IMMEDIATELY BINDING UPON THE SUBORDINATED OBLIGEE AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT OF THE SENIOR LENDER AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
23. Severability. 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 applicable 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.
24. Counterparts. This Agreement may be executed in any
number of counterparts which, when taken together, shall be
deemed to constitute one and the same instrument.
25. No Third Party Beneficiary. This Agreement is for the sole benefit
of the parties hereto and no other person or entity shall have any rights to
enforce this Agreement nor shall the consent of any such other person or entity
be required in order to amend, modify or terminate this Agreement.
26. Binding Action. Each of the Senior Lender and the
Subordinated Obligee confirms, represents, warrants and agrees
that its officer executing this Agreement is fully and
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irrevocably authorized to act on its behalf in all respects in connection with
this Agreement and the transactions referred to herein and Subordinated Obligee
and Senior Lender, respectively, shall have no obligation to inquire as to such
authority.
27. Lenders' Representations. The Subordinated Obligee and
the Senior Lender hereby represents and warrants to Senior Lender
and Subordinated Obligee, respectively, as follows:
(a) If an entity, it is duly organized and validly existing under the
laws of the State of its organization, and it has full power and authority to
enter into transactions and make legally binding obligations;
(b) The execution and delivery and performance of this Agreement is
authorized by its organizational documents and this Agreement has been duly
authorized, executed and delivered and constitutes its legal and validly binding
agreement enforceable in accordance with these terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally; and
(c) The execution, delivery and performance by it of this Agreement
will not violate, conflict with, require consent, authorization or approval of
any person under (i) any law, statute, rule, regulation court or administrative
order, decree, injunction or judgment applicable to it, (ii) any agreement,
instrument, indenture, security document, franchise, license or permit to which
it is a party or by which it is bound or affected, or (iii) if applicable, under
its organizational documents.
28. Section Titles. The section titles contained in this
Agreement are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreement
between the parties hereto.
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IN WITNESS WHEREOF, this instrument has been signed to be effective as
of the day and year first above written.
SENIOR LENDER:
IBJ XXXXXXXX BANK & TRUST COMPANY,
As Agent
By: /s/ Xxxxx X. Xx Xxxx
Name: Xxxxx X. Xx Xxxx
Its: Vice President
SUBORDINATED OBLIGEE
WINSTAR COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Its: Vice President
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ACKNOWLEDGMENT
Winstar Global Products, Inc. hereby accepts, and acknowledges
receipt of a copy of, the foregoing Subordination Agreement (the "Agreement") as
of August 9, 1996, and agrees that it will not pay or enact any of the
"Subordinated Obligations" (as defined in the Agreement) or grant any security
therefor, except as the Agreement may expressly provide. In the event of an
action by the Borrower causing a breach of any of the provisions in the
Agreement, all of the "Senior Obligations" (as defined in the Agreement) shall,
without presentment, demand, protest or notice of any kind, become immediately
due and payable, unless the Senior Lender shall otherwise elect and give notice
of that election in writing.
WINSTAR GLOBAL PRODUCTS, INC.
By: /s/ Xxxxxxx Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Vice President
