Exhibit 10.11
SUBORDINATION AND INTERCREDITOR AGREEMENT
This Subordination and Intercreditor Agreement dated as of April 27,
2004 (as the same may from time to time be amended, restated, modified or
supplemented, this "Agreement") is by and between CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company (in its capacity as agent for the Junior
Lenders, together with its successors and assigns, "Junior Agent"), and in its
capacity as a Junior Lender, LASALLE BUSINESS CREDIT, LLC, a Delaware limited
liability company (in its capacity as agent for the Senior Lenders, together
with its successors and assigns, the "Senior Agent"), and in its capacity as a
Senior Lender and LASALLE BANK NATIONAL ASSOCIATION, in its capacity as a Senior
Lender.
WITNESSETH:
WHEREAS, Easy Gardener Products, Ltd., a Texas limited partnership
("EGP"), and the Loan Parties (as defined below) have entered into a Term Loan
and Security Agreement dated as of October 29, 2003 (as the same may from time
to time be amended, restated, modified or supplemented, the "Junior Loan
Agreement") with various financial institutions (together with any lender that
provides credit to replace or refinance in whole or in part the credit
accommodations under the Junior Loan Agreement, collectively, the "Junior
Lenders" and each individually a "Junior Lender") and Junior Agent, pursuant to
which the Junior Lenders have agreed to make certain term loans to EGP
(collectively, the "Junior Loans");
WHEREAS, EGP ("Borrower") and the other Loan Parties thereto have
entered into a Loan and Security Agreement dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time and in
effect, the "Senior Loan Agreement") with various financial institutions
(together with any lenders that provide credit to replace or refinance in whole
or in part the credit accommodations under the Senior Loan Agreement,
collectively, the "Senior Lenders" and each individually a "Senior Lender") and
the Senior Agent, pursuant to which the Senior Lenders have agreed to make loans
to Borrower (collectively, the "Senior Loans"), and such Senior Loans have been
guaranteed by the remaining Loan Parties pursuant to a certain Continuing
Unconditional Guaranty between such Loan Parties and the Senior Agent, for the
benefit of the Senior Lenders;
WHEREAS, the Junior Lenders acknowledge that the loans or advance of
monies or other extensions of any financial accommodation or credit to the
Borrower by the Senior Lenders is of value to the Junior Lenders, and that the
execution and delivery of this Agreement is a condition precedent to the
obligations of the Senior Lenders to extend the Senior Loans to the Borrower;
WHEREAS, the Senior Lenders acknowledge that the loans or advance of
monies or other extensions of any financial accommodation or credit to the
Borrower by the Junior Lenders have been of value to the Senior Lenders, and
that the execution and delivery
of this Agreement by Senior Agent is a condition precedent to the obligations of
the Junior Lenders to execute and deliver this Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, and in order to induce the Senior Lenders and
Junior Lenders, now or from time to time hereafter, to make loans or extend
credit or any other financial accommodations to or for the benefit of the
Borrower, or to grant such renewals, increases or extensions thereof as the
Senior Lenders and Junior Lenders may deem advisable, and to better secure the
Senior Lenders and Junior Lenders in respect of the foregoing, the Senior
Lenders, Junior Lenders, Senior Agent and Junior Agent hereby agree as
hereinafter set forth.
1. Certain Defined Terms. In addition to the terms defined above and
elsewhere in this Agreement, the following terms used in this Agreement shall
have the following meanings, applicable both to the singular and the plural
forms of the terms defined:
"Additional Obligations" means, except for any principal payable by
any Borrower to Senior Lenders pursuant to the Senior Loan Agreement, all costs,
fees and expenses payable by the Loan Parties under the Senior Loan Agreement as
in effect on the date hereof; indemnities; all interest and all fees and
expenses, including interest, fees and expenses incurred after the commencement
of an Insolvency Event or any other federal or state bankruptcy, insolvency or
reorganization act regardless of whether Senior Agent's or Senior Lenders' claim
therefore or the security interests asserted are valid, binding, enforceable,
void, voidable, voided, subordinated, reduced, disallowed or allowable in such
Insolvency Event.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through ownership interests in such Person, by contract, or
otherwise.
"Agreement" has the meaning set forth in the introduction hereto.
"Assignment Agreement" means an Assignment and Acceptance Agreement
in form and substance satisfactory to Junior Agent and Senior Agent.
"Blockage Period" has the meaning assigned to that term in Section
3(b) hereof.
"Borrower" has the meaning set forth in the recitals hereto.
"Borrowing Base" means the amount of Revolving Loans available to
Borrower from time to time pursuant to subsection 2(a) of the Senior Loan
Agreement.
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"Borrowing Base Collateral" means that portion of the Collateral
composed of Accounts (as such term is defined in the Senior Loan Agreement),
Inventory (as such term is defined in the Senior Loan Agreement) and payment
intangibles (as defined in the Illinois Uniform Commercial Code, as in effect
from time to time), and the proceeds of each of the foregoing.
"Business Days" means any day that is not a Saturday, Sunday, or
other day on which banks are authorized or required to close in the state of
Illinois or Maryland.
"Collateral" shall mean all now existing and hereafter acquired
(including after an Insolvency Event) or arising personal property of the Loan
Parties including, without limitation, all goods, accounts, inventory,
equipment, intangibles, investment property, deposit accounts, fixtures,
instruments, documents, chattel paper, intellectual property, letters of credit
and letters of credit rights, all supporting obligations, all commercial tort
claims and all products and proceeds of the foregoing including insurance
proceeds together with all "Collateral" as described in the Loan Documents and
the Subordinated Documents.
"Collection Action" shall mean (a) to demand, xxx for, take or
receive from or on behalf of the Loan Parties, by set-off or in any other
manner, the whole or any part of any moneys which may now or hereafter be owing
by the Loan Parties with respect to the Subordinated Debt, (b) to initiate or
participate with others in any suit, action or proceeding against the Loan
Parties to (i) enforce payment of or to collect the whole or any part of the
Subordinated Debt or (ii) commence judicial enforcement of any of the rights and
remedies under the Subordinated Documents or applicable law with respect to the
Subordinated Debt, (c) to accelerate the maturity of any Subordinated Debt, or
(d) to take any action to realize or foreclose upon any of the Collateral, other
than the Junior Collateral, or to exercise any other right or remedy with
respect to the Collateral, other than the Junior Collateral; provided, that in
no event shall any requirement of the Borrower, under the Subordinated
Documents, to pay interest in kind on the Subordinated Debentures (as defined in
the Junior Loan Agreement) be construed as a "Collection Action" hereunder.
"EGP" shall mean Easy Gardener Products, Ltd., a Texas limited
partnership.
"Excess Availability Certificate" means the certificate provided by
Senior Lender to Junior Lender, in substantially the form attached hereto as
Exhibit A.
"Excess Cash Flow Payment" means (a) a mandatory prepayment of the
Junior Loans in an amount equal to fifty percent (50%) of the Excess Cash Flow
(as presently defined in the Junior Loan Agreement) of EGP pursuant to Section
2.7(c)(i) of the Junior Loan Agreement, and (b) if a PIK Event (as presently
defined in the Junior Loan Agreement) shall have occurred (not otherwise cured
pursuant to the terms hereof) or if the Borrower otherwise elects or is required
to pay interest on the subordinated debentures issued pursuant to the Trust
Documents (as defined in the Senior Loan Agreement) in kind, on the 40th day
following the end of the quarter in which (or for which) such event has occurred
(or, if earlier, ten (10) days after delivery of the quarterly financial
statements) and continuing on the 40th day following each successive quarter
(or, if earlier, ten (10) days after delivery of
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the quarterly financial statements) until such time as the Borrower has been in
full compliance with the terms of the Senior Loan Agreement for two consecutive
quarters of the Borrower, a mandatory prepayment of the Junior Loans in an
amount equal to seventy-five percent (75%) of the Excess Cash Flow (as presently
defined in the Junior Loan Agreement) of EGP subject to the terms of Section
2.7(c)(ii) of the Junior Loan Agreement, and (c) if a Makewell Investment (as
presently defined in the Junior Loan Agreement) shall have occurred in any
fiscal year, a mandatory prepayment of the Junior Loan in an amount equal to
seventy-five percent (75%) of the Excess Cash Flow (as presently defined in the
Junior Loan Agreement) of EGP subject to the terms of Section 2.7(c)(iii) of the
Junior Loan Agreement.
"Exercise Notice" has the meaning assigned to that term in Section
18(c) hereof.
"Insolvency Event" shall mean any proceeding (whether voluntary or
involuntary) for dissolution, winding up, liquidation, reorganization,
arrangement, protection, relief or composition of any Loan Party or its debts,
whether voluntary or involuntary, total or partial, in bankruptcy, insolvency,
receivership, arrangement, reorganization, relief or other proceedings, or upon
an assignment for the benefit of creditors or any other marshaling of the assets
and liabilities of any Loan Party.
"Junior Agent" has the meaning set forth in the introduction hereto.
"Junior Collateral" shall mean the partnership interests in EGP
pledged by each of EG Product Management, LLC and EG, LLC for the benefit of the
Junior Lenders pursuant to certain Subordinated Documents, together with all
proceeds and products thereof.
"Junior Lenders" has the meaning set forth in the introduction
hereto.
"Junior Lender Mandatory Prepayment Amount" has the meaning set
forth in Section 2(d) hereof.
"Junior Loan Agreement" has the meaning set forth in the recitals
hereto.
"Loan Documents" means the Senior Loan Agreement and the "Other
Agreements", as such term is defined in the Senior Loan Agreement.
"Loan Parties" shall mean, collectively, the Borrower, Xxxxxxxxx
Consumer Products, Inc., a Delaware corporation, Xxxxxxxxx Consumer Products
Group, Inc., a Delaware corporation, EYAS International, Inc., a Texas
corporation, EG, L.L.C., a Nevada limited liability company, EG Product
Management, L.L.C., a Texas limited liability company, and NBU Group, LLC, a
Texas limited liability company, and "Loan Party" shall mean any of them.
"Mandatory Prepayments" means those prepayments of principal,
together with accrued interest thereon, as required by Section 2.7(b) of the
Junior Loan Agreement, in an amount equal to one hundred percent (100%) of the
proceeds arising from (a) the sale of
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any material assets or properties of the Borrower (other than sales of assets
that are promptly (and in any event within one hundred eighty (180) days)
replaced with similar assets or assets which serve the same function as the sold
assets or sales of Inventory in the ordinary course of business), (b) the sale
or issuance of any Stock (as presently defined in the Junior Loan Agreement) of
the Borrower (other than in connection with the exercise of the Central Garden
Options (as presently defined in the Junior Loan Agreement)), including, but not
limited to, any sale or issuance undertaken in connection with or as part of a
public offering, but specifically excluding, for the avoidance of doubt, any
contributions received by the Borrower in connection with the sale or issuance
of any Permitted Securities (as presently defined in the Junior Loan Agreement),
(c) the receipt of any property damage insurance award or any other insurance
proceeds of any kind in excess of $250,000 in the aggregate at any one time that
is not used promptly (and in any event within one hundred eighty (180) days)
after receipt to repair or replace the property or assets covered thereby, and
(d) the incurrence of any Indebtedness other than Permitted Indebtedness (as
presently defined in the Junior Loan Agreement) and indebtedness incurred in
connection with the refinancing of the Senior Debt.
"Option Trigger Date" has the meaning assigned to that term in
Section 18(b) hereof.
"Payment Block Notice" means any notice from the Senior Agent to any
Loan Party notifying any such Loan Party that a Senior Default has occurred,
with a copy to Junior Agent.
"Permitted Payments" has the meaning assigned to that term in
Section 2(b) hereof.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Purchase Option" has the meaning assigned to that term in Section
18(a) hereof.
"Purchase Option Closing Date" means the date on which the purchase
and sale of the Senior Debt is consummated in connection with the Junior
Lenders' exercise of the Purchase Option referred to in Section 18 hereof.
"Purchase Price" has the meaning assigned to that term in Section
18(a) hereof.
"Reorganization Senior Securities" shall mean (a) any equity
securities issued in substitution of all or any portion of the Senior Debt that
are senior in right of payment to the Subordinated Debt (or any notes or other
securities issued in
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substitution of all or any portion of the Subordinated Debt), and (b) any notes
or other debt securities issued in substitution of all or any portion of the
Senior Debt that are senior to the Subordinated Debt (or any notes or other
securities issued in substitution of all or any portion of the Subordinated
Debt), in each case on substantially the same terms that the Senior Debt is
subordinated to the Subordinated Debt and that the Subordinated Debt is
subordinated to the Senior Debt pursuant to the terms of this Agreement.
"Reorganization Subordinated Securities" shall mean (a) any equity
securities issued in substitution of all or any portion of the Subordinated Debt
that are subordinated in right of payment to the Senior Debt (or any notes or
other securities issued in substitution of all or any portion of the Senior
Debt), and (b) any notes or other debt securities issued in substitution of all
or any portion of the Subordinated Debt that are subordinated to the Senior Debt
(or any notes or other securities issued in substitution of all or any portion
of the Senior Debt), in each case on substantially the same terms that the
Subordinated Debt is subordinated to the Senior Debt and that the Senior Debt is
subordinated to the Subordinated Debt pursuant to the terms of this Agreement.
"Required Senior Lenders" has the meaning assigned to the term
"Requisite Lenders" in the Senior Loan Agreement.
"Senior Agent" has the meaning set forth in the introduction hereto.
"Senior Collateral" shall mean all Collateral and proceeds thereof
other than the Junior Collateral.
"Senior Collection Action" shall mean to take any action to realize
or foreclose upon any of the Junior Collateral, or to exercise any other right
or remedy with respect to the Junior Collateral.
"Senior Debt" shall mean all indebtedness, fees, expenses,
obligations and liabilities of the Loan Parties or any of them to the Senior
Agent and any Senior Lender pursuant to the Loan Documents or any agreements or
instruments that provide for credit to replace or refinance in whole or in part
the credit accommodations under the Loan Documents, whether now existing or
hereafter arising (and whether such indebtedness arises or accrues before or
after an Insolvency Event) directly, including without limitation the Senior
Loans and any interest, fees or prepayment penalties thereon accruing
pre-petition or post-petition and costs, expenses, and attorneys' and
paralegals' fees, whenever incurred (and whether or not such interest, costs,
expenses or fees are allowed or allowable as claims in bankruptcy); provided,
that the "Senior Debt" shall not exceed an amount equal to $27,500,000 in
principal amount plus the Additional Obligations, as reduced by the amount of
any Commitment (as defined in the Senior Loan Agreement) reductions under the
Senior Loan Agreement to the extent such reduction may not be reborrowed.
"Senior Debt" shall include all amendments and modifications of the foregoing
that do not cause the aggregate principal amount to exceed the maximum amount
described above and that are otherwise permitted under Section 5(b) of this
Agreement.
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"Senior Default" shall mean a Senior Payment Default and any "Event
of Default" (as defined in the Senior Loan Agreement) with respect to (a) any
negative or financial covenant of the Senior Loan Agreement or (b) any material
misstatement of fact by any Loan Party to the Senior Agent or any Senior Lender.
"Senior Default Notice" shall mean a written notice from the Senior
Agent to Junior Agent pursuant to which Junior Agent is notified of the
occurrence of a Senior Default, which notice incorporates a reasonably detailed
description of such Senior Default.
"Senior Lender" or "Senior Lenders" has the meaning set forth in the
recitals hereto.
"Senior Loan Agreement" has the meaning set forth in the recitals
hereto.
"Senior Payment Default" shall mean a default in the payment or
direction of proceeds from the foreclosure of, or realization upon, any Senior
Collateral of any principal, interest or fee or other amount owing to the Senior
Lenders with respect to Senior Debt, including, without limitation, any default
in payment of Senior Debt after acceleration thereof.
"Subordinated Debt" shall mean (a) all principal of, premium, if
any, and interest on, the obligations owed by the Borrower to the Junior Lenders
pursuant to the Subordinated Documents, and (b) all other indebtedness, fees,
expenses, obligations and liabilities of the Loan Parties to the Junior Lenders,
whether now existing or hereafter incurred or created, under or pursuant to the
terms of the Subordinated Documents or separately under any other document,
instrument or agreement executed in connection therewith which relates to the
indebtedness evidenced by the Subordinated Documents or any agreements or
instruments that provide for credit to replace or refinance in whole the credit
accommodations under the Subordinated Documents, in each case, whether such
amounts are due or not due, direct or indirect, absolute or contingent.
"Subordinated Debt" shall include all amendments and modifications of the
foregoing that are otherwise permitted under Section 5(a) of this Agreement.
"Subordinated Documents" shall mean the Junior Loan Agreement, the
"Loan Documents" as defined in the Junior Loan Agreement, and such other
agreements, documents and instruments as create, evidence or secure any of the
Subordinated Debt from time to time.
2. Subordination.
(a) General. Notwithstanding anything in the terms of the
Subordinated Documents to the contrary, the Junior Lenders agree and covenant
that, to the extent set forth herein and on the terms and conditions set forth
herein, the payment and performance of the Subordinated Debt is and shall be
subordinated in right of payment to the Senior Debt.
(b) Permitted Payments. Except as otherwise provided in this
Agreement, the Junior Lender shall be entitled to receive the following
payments:
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(i) subject to the provisions of Section 2(c) below and upon
receipt of an Excess Availability Certificate as provided in Section 2(c)
below, Excess Cash Flow Payments;
(ii) subject to the provisions of Section 2(d) below,
Mandatory Prepayments;
(iii) regularly scheduled payments of principal under the
Junior Loan Agreement;
(iv) regularly scheduled payments of interest (including,
without limitation, all PIK Interest (as defined in the Junior Loan
Agreement)) under the Junior Loan Agreement when due in accordance with
the terms of the Junior Loan Agreement;
Other than in connection with a refinancing of the Subordinated Debt to
the extent permitted under the Senior Loan Agreement (but solely out of
the proceeds of such refinancing), in no event, without the prior written
consent of the Senior Agent, shall the Junior Lenders be entitled to
receive any of the following (whether voluntary or mandatory, as a result
of acceleration or otherwise):
(v) any other prepayments of principal, whether scheduled or
otherwise;
(vi) any whole or partial prepayments of interest;
(vii) any payments of interest in cash at any rate greater
than that provided for (in the absence of a default) in the Subordinated
Documents as of the date hereof.
Payments permitted to be made under the terms of this Section 2 are
referred to herein as "Permitted Payments".
(c) Excess Cash Flow Payments; Excess Availability Certificate.
(i) The Junior Agent and the Senior Agent hereby agree that
Junior Lenders will not be permitted to receive any Excess Cash Flow
Payments as set forth in Section 2(b) above if (a) the Excess Availability
(as defined in the Senior Loan Agreement, as in effect as of the date
hereof) for the 30 consecutive day period preceding the date of any such
payment is less than $1,500,000 after giving effect to such payment, (b)
the Excess Availability on the date of any such payment is less than
$1,500,000 after giving effect to such payment, and (c) five (5) Business
Days prior to any such payment, Borrower fails to provide financial
information to Junior Agent and Senior Agent, in form and substance
satisfactory to Senior Agent, evidencing that the Excess Availability on
the date of such payment and for the 30 day period following the date of
such payment will be at least $1,500,000 at all times.
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(ii) Borrower shall provide to the Junior Agent and Senior
Agent an Excess Availability Certificate on the date any Excess Cash Flow
Payment is due.
(d) Mandatory Prepayments. The Junior Agent and the Senior Agent
hereby agree that upon receipt of the proceeds of any Mandatory Prepayments,
such proceeds shall be allocated to the Senior Agent and the Junior Agent in the
following order of priority: (i) first, to the Senior Agent in an amount equal
to the lesser of $1,000,000 and the amount of such proceeds; and (ii) second, to
each of the Junior Agent and the Senior Agent in an amount equal to fifty
percent (50%) of the remaining amount of such proceeds; provided, that
notwithstanding the foregoing, all proceeds of Borrowing Base Collateral shall
be allocated to Senior Agent. The amount of any such proceeds allocated to the
Junior Agent under this Section 2(d) shall be designated as "Junior Lender
Mandatory Prepayment Amounts" and shall be distributed in accordance with
Section 2(b) above. The amount of any such proceeds allocated to the Senior
Agent under this Section 2(d) shall be distributed to the Senior Agent and may
be applied by the Senior Agent in its discretion in accordance with the Senior
Loan Agreement; provided, however, that if the Senior Agent elects, in its
discretion, to apply such proceeds to block or otherwise limit the Availability
under the Senior Loan Agreement, then such blockage or limitation of
Availability under the Senior Loan Agreement shall be permanent.
3. Priority, Blockage of Payments and Suspension of Remedies.
(a) Insolvency or Dissolution of a Loan Party. Upon the occurrence
of any Insolvency Event, any payment or distribution of assets or securities of
any Loan Party of any kind or character, whether in cash, property or securities
(other than any Reorganization Subordinated Securities), to which the Junior
Lenders would be entitled, except for the provisions of this Agreement, shall be
made by such Loan Party or by any receiver, trustee in bankruptcy, liquidating
trustee, or other person making such payment or distribution, directly to the
Senior Agent for application (in the case of cash) to, or as collateral (in the
case of non-cash property or securities) for, the Senior Debt until the payment
in full in cash of all Senior Debt; provided, that notwithstanding the
foregoing, all proceeds of the Junior Collateral shall be paid to Junior Agent
for application to the Subordinated Debt.
(b) Default under the Senior Loan Agreement. No direct or indirect
payment or distribution by or on behalf of the Loan Parties in respect of the
Subordinated Debt (including, without limitation, Permitted Payments), whether
pursuant to the terms of the Subordinated Documents or upon acceleration or
otherwise, shall be made, and no other consideration in respect of Subordinated
Debt shall be given if, at the time such payment or distribution is to be made
the Senior Agent has given Junior Agent a Senior Default Notice or has given any
Loan Party a Payment Block Notice; provided, that the Loan Parties may resume
payments (and make any missed payments due to application of this Section 3(b))
with respect to the Subordinated Debt upon the earlier to occur of (i) the
Senior Agent's written acknowledgement of the cure or waiver in accordance with
the terms of the Loan Documents of all Senior Defaults referenced in the
applicable Senior Default Notice or applicable Payment Block Notice (which
written acknowledgement, in each case, the Senior
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Agent agrees to promptly give to Junior Agent upon such cure or waiver, but in
no event later than one Business Day after such cure or waiver), (ii) the
expiration of a period of one hundred eighty (180) days, in the case of such
defaults which are payment defaults (including upon acceleration), and ninety
(90) days, in the case of all such other defaults, in each case from the date
such Senior Default Notice or Payment Block Notice was received by Junior Agent
or such Loan Party, or (iii) the payment of the Purchase Price pursuant to
Section 18 hereof, and the termination of any commitment by the Senior Lenders
to provide financing to the Borrower under the Loan Documents (the "Blockage
Period"). Notwithstanding any provision of this Section 3(b) to the contrary:
(I) the Loan Parties shall not be prohibited from making, and the Junior Lenders
shall not be prohibited from receiving, payments under this Section 3(b) on more
than one occasion within any period of three hundred sixty-five (365)
consecutive days and on more than three occasions during the period this
Agreement is in effect with respect to the Subordinated Debt; and (II) no Senior
Default existing on the date a Senior Default Notice or Payment Block Notice is
given pursuant to this Section 3(b) shall be used as a basis for any subsequent
Senior Default Notice or Payment Block Notice unless such default has been cured
or waived for a period of at least ninety (90) days. The failure of the Borrower
to make any payment with respect to the Subordinated Debt by reason of the
operation of this Section 3 shall not be construed as preventing the occurrence
of a default under the Subordinated Documents. The provisions of this Section
3(b) shall not apply to any payment with respect to which Section 3(a) would be
applicable.
(c) Certain Payments Held in Trust. In the event that,
notwithstanding the foregoing provisions prohibiting such payment or
distribution or such giving of consideration, the Junior Lenders shall have
received any payment or distribution or consideration in respect of the
Subordinated Debt contrary to such provisions, then and in such event such
payment or distribution or consideration shall be received and held in trust for
the Senior Lenders and shall be paid over or delivered to the Senior Lenders for
application to or as collateral for the payment or prepayment of all Senior Debt
after giving effect to any concurrent payment or distribution to the Senior
Lenders in respect of the Senior Debt.
(d) Notice of Default. If Junior Agent gives any of the Loan Parties
notice of any default under the Subordinated Documents, Junior Agent agrees to
provide concurrently a copy of such notice to the Senior Agent. Nothing in this
Section 3(d) shall create any third party beneficiary rights in any Loan Party
or in any way affect the right of the Senior Lenders to accelerate the maturity
of the Senior Debt under the Senior Loan Agreement.
(e) Suspension of Remedies.
(i) During any period commencing on the date on which a
default under the Subordinated Documents shall have occurred (and of which
Junior Agent has provided notice of such default to Senior Agent together
with a stated intention to exercise a Collection Action) and ending on the
earliest of (A) one hundred eighty (180) days after receipt by the Senior
Agent of such notice of such default, (B)
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acceleration of the Senior Debt, (C) the occurrence of any Insolvency
Event, (D) the occurrence of any Senior Default or default under the
Subordinated Documents to the extent such Senior Default or default under
the Subordinated Documents arises from the merger, s ale, liquidation,
dissolution, or change of control of any Loan Party or (E) the
commencement by the Senior Agent or any holder of the Senior Debt of any
judicial or non judicial action or proceeding against any Loan Party to
(I) enforce payment of or to collect the whole or any part of the Senior
Debt, (II) enforce any of the rights and remedies available to the Senior
Agent or any holder of the Senior Debt with respect to the Senior Debt or
any collateral securing the Senior Debt, or (III) realize upon any of the
Senior Collateral securing the Senior Debt or exercise any other right or
remedy with respect to such collateral, the Junior Lenders shall not take
any Collection Action, and, if taken, any such prohibited Collection
Action shall be ineffective, provided that until the Senior Debt is paid
in full, the Junior Lenders shall not take any Collection Action to
realize or foreclose upon any of the Senior Collateral or to exercise any
other right or remedy with respect to the Senior Collateral to the extent
that Senior Agent has accelerated the Senior Debt and is diligently
realizing or foreclosing on the Senior Collateral or exercising any of its
rights or remedies in respect thereof. Notwithstanding the foregoing, the
Junior Lenders may vote, file proofs of claim and otherwise act with
respect to the Subordinated Debt in any Insolvency Event to the extent
permitted by Section 11(a).
(ii) During any period commencing on the date on which a
default under the Loan Documents shall have occurred (and of which Senior
Agent has provided notice of such default to Junior Agent together with a
stated intention to exercise a Senior Collection Action) and ending on the
earliest of (A) one hundred eighty (180) days after receipt by Junior
Agent of such notice of such default, (B) acceleration of the Subordinated
Debt, (C) the occurrence of any Insolvency Event, (D) the occurrence of
any Senior Default or default under the Subordinated Documents to the
extent such Senior Default or default under the Subordinated Documents
arises from the merger, sale, liquidation, dissolution, or change of
control of any Loan Party or (E) the commencement by Junior Agent or any
Junior Lender of any judicial or non judicial action or proceeding against
any Loan Party to (I) enforce payment of or to collect the whole or any
part of the Subordinated Debt, (II) enforce any of the rights and remedies
available to Junior Agent or the Junior Lenders with respect to the
Subordinated Debt or any collateral securing the Subordinated Debt, or
(III) realize upon any of the Junior Collateral securing the Subordinated
Debt or exercise any other right or remedy with respect to such
collateral, the Senior Lenders shall not take any Senior Collection
Action, and, if taken, any such prohibited Senior Collection Action shall
be ineffective, provided that until the Subordinated Debt is paid in full,
the Senior Lenders shall not take any Senior Collection Action to realize
or foreclose upon any of the Junior Collateral or to exercise any other
right or remedy with respect to the Junior Collateral to the extent that
Junior Agent has accelerated the Subordinated Debt and is diligently
realizing or foreclosing on the Junior Collateral or exercising any of its
rights or remedies in respect thereof.
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(iii) The foregoing Section 3(e)(i) notwithstanding, during
any period commencing on the date on which a default under the
Subordinated Documents shall have occurred and be continuing, if the
Junior Lenders realize or foreclose upon any of the Junior Collateral or
exercise any other rights or remedy with respect to the Junior Collateral,
the Junior Lenders shall not sell the Junior Collateral unless:
(A) Junior Agent gives Senior Agent ten (10) days prior
written notice thereof; and
(B) upon its receipt of the net proceeds from the sale
of the Junior Collateral, Junior Lenders shall pay in full in cash
the Purchase Price to the Senior Lenders, in accordance with Section
18 hereof.
(f) Rights of Senior Lenders and Junior Lenders Not to be Impaired.
No right of the Senior Agent, the Senior Lenders, Junior Agent or the Junior
Lenders to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act taken in good faith, or failure to act,
which failure to act is in good faith, by the Senior Agent, the Senior Lenders,
Junior Agent or the Junior Lenders, as applicable, or by any noncompliance by
the Loan Parties, with the terms and provisions and covenants herein or of the
terms of the Loan Documents or Subordinated Documents. The Senior Agent, the
Senior Lenders, Junior Agent, the Junior Lenders and the Loan Parties agree not
to take any action to avoid or to seek to avoid the observance and performance
of the terms and conditions hereof, and shall at all times in good faith carry
out all such terms and conditions.
(g) Obligation of Loan Parties Unconditional; Subrogation; Nature of
Agreement.
(i) The Junior Lenders shall not be subrogated to the rights
of the holders of the Senior Debt to receive payments or distributions of
assets of the Loan Parties unless and until all of the Senior Debt shall
have been fully and indefeasibly paid and satisfied in cash (including by
way of payments to the holders of the Senior Debt pursuant to this
Agreement) and all financing arrangements to extend Senior Debt among the
Borrower, the Senior Agent and the Senior Lenders have been terminated;
and, for the purposes of such subrogation, no payments or distributions
made to the holders of the Senior Debt of any cash, property or securities
to which the Junior Lenders would be entitled except for this Agreement
and no payments pursuant to the provisions of this Agreement to the
holders of Senior Debt by the Junior Lenders shall, as among any of the
Loan Parties, its creditors and the Junior Lenders, be deemed to be a
payment by any Loan Party to or on account of the Senior Debt.
(ii) Subject to the full and indefeasible payment and
satisfaction in cash of the Senior Debt and the termination of all
financing arrangements to extend Senior Debt among the Borrower, the
Senior Agent and the Senior Lenders, the Junior Lenders shall be
subrogated to the rights of the holders of Senior Debt to receive payments
or distributions of cash, property or securities of the Borrower
applicable to
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the Senior Debt until all amounts owing on the Subordinated Debt shall be
paid in full. For purposes of such subrogation, no payments or
distributions to the holders of any Senior Debt of cash, property,
securities or other assets by virtue of the subrogation herein provided
which otherwise would have been made to the Junior Lenders shall, as
between the Loan Parties, their creditors and the Junior Lenders, be
deemed to be a payment to or on account of the Senior Debt. Subject to the
full and indefeasible payment and satisfaction in cash of the Junior Debt
and the termination of all financing arrangements to extend Junior Debt
among the Borrower, the Junior Agent and the Junior Lenders, the Senior
Lenders shall be subrogated to the rights of the holders of Junior Debt to
receive payments or distributions of cash, property or securities of the
Borrower applicable to the Junior Debt until all amounts owing on the
Senior Debt shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of any Junior Debt of cash,
property, securities or other assets by virtue of the subrogation herein
provided which otherwise would have been made to the Senior Lenders shall,
as between the Loan Parties, their creditors and the Senior Lenders, be
deemed to be a payment to or on account of the Junior Debt
(iii) The provisions of this Agreement are and are intended
solely for the purposes of defining the relative rights of the Junior
Lenders, on the one hand, and the holders of the Senior Debt, on the other
hand, as among themselves. As between the Loan Parties and the Junior
Lenders, nothing contained herein shall impair the unconditional and
absolute obligation of the Loan Parties to the Junior Lenders to pay the
Subordinated Debt as such Subordinated Debt shall become due and payable
in accordance with the Subordinated Documents. As between the Loan Parties
and the Senior Lenders, nothing contained herein shall impair the
unconditional and absolute obligation of the Loan Parties to the Senior
Lenders to pay the Senior Debt as such Senior Debt shall become due and
payable in accordance with the Senior Loan Agreement and the Loan
Documents. No person other than the Senior Agent, the Senior Lenders,
Junior Agent and the Junior Lenders and their respective successors and
assigns shall have any rights hereunder; provided, that all Junior Lenders
and Senior Lenders and the other holders of any Senior Debt are expressly
entitled to the benefits of this Agreement.
(iv) This is a continuing agreement of subordination and the
Senior Lenders may continue, at any time and without notice to Junior
Agent or the Junior Lenders, to extend credit or other financial
accommodations and loan monies to or for the benefit of the Borrower on
the faith hereof, provided, however, that the continuing agreement of
subordination will apply only to the Senior Debt as set forth in Section 2
hereof.
4. Actions to Effectuate Subordination.
(a) Authorization for the Senior Lenders. If the Junior Lenders do
not file proper claims or proof of debt in the form required in connection with
any dissolution, winding-up, liquidation or reorganization of any Loan Party in
any bankruptcy, insolvency, or receivership proceedings prior to fifteen (15)
calendar days before the expiration of the
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time to file such claims or proofs, then after giving five (5) Business Days
notice to Junior Agent, if the Junior Lenders do not then file such claims, the
Senior Agent, on behalf of the Senior Lenders shall have the right to file and
prove all claims therefor and to take all such other action in the name of the
Junior Lenders or otherwise, as the Senior Lenders may determine to be necessary
or appropriate for the enforcement of the provisions of this Agreement;
provided, that no such prior notice shall be required if the remaining time
period for filing proper claims or proof of debt is less than five (5) Business
Days; provided, further, that the Junior Lenders shall at all times (subject to
the terms of this Agreement, including, without limitation, Section 11) have the
right to participate in any such proceedings with respect to claims.
Notwithstanding anything to the contrary set forth herein, if, following any
such vote by the Senior Agent, the Junior Lenders timely vote their claims, then
such vote by the Junior Lenders shall be deemed to control and supersede any
such previous vote by Senior Agent and, upon the written request of Junior Agent
or the Junior Lenders, Senior Agent will withdraw such previous vote.
(b) Priority of Security Interests. Notwithstanding any financing
statements or other instruments perfecting liens securing any of the
Subordinated Debt, the Senior Agent's liens and security interests in the Senior
Collateral shall at all times be prior and senior to each and every lien and
security interest held by Junior Agent or the Junior Lenders in the Senior
Collateral regardless of the order or timing of filing, and Junior Agent and the
Junior Lenders hereby expressly subordinate all of its liens and security
interests on any Senior Collateral securing the Subordinated Debt to each and
every lien and security interest now or hereafter held by Senior Agent in the
Senior Collateral securing Senior Debt. The Junior Lenders shall have a second
and subordinate security interest in the Senior Collateral. Notwithstanding any
financing statements or other instruments perfecting liens securing any of the
Senior Debt, the liens and security interests of Junior Agent and the Junior
Lenders in the Junior Collateral shall at all times be prior and senior to each
and every lien and security interest held by Senior Lenders in the Junior
Collateral regardless of the order or timing of filing, and Senior Agent, on
behalf of the Senior Lenders, hereby expressly subordinate all of its liens and
security interests on any Junior Collateral securing the Senior Debt to each and
every lien and security interest now or hereafter held by Junior Agent and the
Junior Lenders in the Junior Collateral securing the Subordinated Debt. The
Senior Lenders shall have a second and subordinate security interest in the
Junior Collateral.
(c) The Senior Agent agrees and acknowledges that (i) the
Subordinated Debt is secured by the Junior Lenders' Liens which, except for the
Liens on the Junior Collateral, are junior and subordinate to the Senior Agent's
Liens and are subject to this Agreement, (ii) any Senior Collateral from time to
time in the Senior Agent's possession also constitutes Collateral in favor of
the Junior Lenders and is held for benefit of the Junior Lenders solely for the
purposes of perfecting the Junior Lenders' Lien therein and (iii) when the
Senior Debt is indefeasibly paid in full and the commitments under the Senior
Debt terminated, the Senior Agent shall, within a reasonable time following the
written request of Junior Agent and unless otherwise enjoined or prevented by
operation of law, deliver to Junior Agent (and the Loan Parties hereby consent
to such delivery) without representation, warranty or recourse, all of such
Collateral in its possession in order to permit the Junior
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Lenders to continue to maintain its perfected security interest in such
Collateral and shall assign to Junior Lenders the Senior Agent's interest in any
lock box accounts, blocked accounts, deposit account control agreements, UCC-1
financing statements and take such other actions as may be reasonably requested
by Junior Agent or any Junior Lender with respect to the transfer of any
remaining Collateral.
(d) Specific Performance.
(i) The Senior Agent and the Senior Lenders are hereby
authorized to demand specific performance of the provisions of this
Agreement, at any time when Junior Agent or the Junior Lenders shall have
failed to comply with any of the provisions of this Agreement. Junior
Agent and the Junior Lenders hereby irrevocably waive any defense based on
the adequacy of a remedy at law that might be asserted as a bar to such
remedy of specific performance. Junior Agent and the Junior Lenders hereby
acknowledge that the provisions of this Agreement are to be enforceable at
all times, whether before or after the commencement of an Insolvency
Event, it being understood that this Section 4(d)(i) does not limit and
shall not be applied to limit the rights of Junior Agent and the Junior
Lenders to enforce the provisions of the Subordinated Documents in
conformity with the provisions of this Agreement.
(ii) Junior Agent and the Junior Lenders are hereby authorized
to demand specific performance of the provisions of this Agreement, at any
time when the Senior Agent or the Senior Lenders shall have failed to
comply with any of the provisions of this Agreement. The Senior Agent and
the Senior Lenders hereby irrevocably waive any defense based on the
adequacy of a remedy at law that might be asserted as a bar to such remedy
of specific performance. The Senior Agent and the Senior Lenders hereby
acknowledge that the provisions of this Agreement are to be enforceable at
all times, whether before or after the commencement of an Insolvency
Event, it being understood that this Section 4(d)(ii) does not limit and
shall not be applied to limit the rights of the Senior Agent or the Senior
Lenders to enforce the provisions of the Loan Documents in conformity with
the provisions of this Agreement.
5. Amendments.
(a) Amendment to Subordinated Debt. Junior Agent and the Junior
Lenders agree that it will not amend the terms of the Subordinated Documents
without the prior written consent of the Senior Agent and the Required Senior
Lenders if the effect of which is (i) to increase the maximum principal amount
of the Subordinated Debt (unless such increase does not increase the amount of
cash interest expense or other debt service associated with the Subordinated
Debt payable prior to repayment in full of the Senior Debt), (ii) to increase
the rate of interest on any of the Subordinated Debt (unless such increase is
added to the principal amount of the Subordinated Debt and is not due and
payable prior to the actual repayment in full of the Senior Debt), (iii) to
change any date upon which regularly scheduled payments of principal or interest
on the Subordinated Debt are due to an
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earlier date or the terms relating to any mandatory prepayments on the
Subordinated Debt, (iv) to add or make more restrictive any event of default or
any covenant with respect to the Subordinated Debt, provided that if the Senior
Loan Agreement or the Loan Documents are amended to provide for additional
covenants or events of default or to make more restrictive any existing
covenants or events of default applicable to the Borrower or the other Loan
Parties, then the Subordinated Documents may be amended to provide for
additional covenants or events of default or to make more restrictive any
existing covenants or events of default so long as such covenants or events of
default set forth in the Subordinated Documents are not more restrictive than
those set forth in the Senior Loan Agreement or Loan Documents, as so amended,
(v) to change the final maturity date of any Subordinated Debt to a date that is
earlier than the date which is one hundred twenty (120) days after the maturity
date of the Senior Debt, or (vi) to take any liens or security interests in
assets of any Loan Party or any other assets securing the Senior Debt, other
than liens and security interests in the Collateral that exist as of the date
hereof, and other liens and security interests in such assets or properties
provided that the Senior Agent for the benefit of the Senior Lenders are also
granted liens and security interests thereon to secure the Senior Debt;
provided, however, that nothing contained in Paragraph 5 or elsewhere in this
Agreement shall be construed to limit the rights set forth in the Subordinated
Documents as in effect on the date hereof to charge and accrue the default
interest rate and other fees, charges and expenses permitted thereunder when an
Event of Default exists or to require the consent of the Senior Lenders to any
waiver by the Junior Lenders of any Event of Default or Default under the
Subordinated Documents or of any of the rights and remedies of the Junior
Lenders thereunder.
(b) Amendment to Senior Debt, Other Agreements.
(i) The Senior Agent and the Senior Lenders may from time to
time amend, restate, modify, extend, renew or supplement the Senior Loan
Agreement, the Loan Documents and the Senior Debt from time to time
without the consent of Junior Agent and the Junior Lenders; provided, that
notwithstanding the foregoing, the Senior Agent and the Senior Lenders
shall not amend the Senior Loan Agreement, the Loan Documents or the
Senior Debt in a manner that (I) increases the interest rate payable on
any component of the Senior Debt that may apply from time to time as
provided in the Senior Loan Agreement as in effect on the date hereof;
provided, however, that, upon the occurrence of any Insolvency Event, if
the Senior Lenders, or any one of them, consent to the use of cash
collateral (irrespective of the conditions thereto) or provide financing
to the Borrower on such terms and conditions and in such amounts as the
Senior Lenders, in their sole discretion, may decide, the Senior Loan
Agreement may be amended to increase the interest rate payable by up to
one percent (1%) per annum over the maximum interest rate applicable at
any time as provided in the Senior Loan Agreement, (II) accelerates the
Original Term or any Renewal Term (as applicable) (as defined in the
Senior Loan Agreement) of the Senior Debt (other than on or after an Event
of Default as defined in the Senior Loan Agreement) by more than one year,
(III) extends the final maturity of the Senior Debt more than one year
beyond the Maturity Date as defined in the Senior Loan
-16-
Agreement (it being acknowledged that nothing herein shall be deemed to
prevent the Subordinated Debt from becoming due and payable on the
Maturity Date as defined in the Subordinated Documents, subject to the
other provisions hereof), (IV) increases principal amortization payments
on any Senior Debt, (V) changes the arithmetic formula by which the
Borrowing Base is presently calculated if the effect of such change is to
increase the Availability (as defined in the Senior Loan Agreement as in
effect as the date hereof), (VI) change the definition of "Excess
Availability" as such term (including all such defined terms therein) is
defined in the Senior Loan Agreement, or otherwise amend the Loan
Documents if the effect of such change is to make the covenant set forth
in Section 13(l) of the Senior Loan Agreement more restrictive; provided,
however, that nothing contained in Paragraph 5 or elsewhere in this
Agreement shall be construed to limit the rights set forth in the Loan
Documents as in effect on the date hereof to charge and accrue the default
interest rate and other fees, charges and expenses permitted thereunder
when an Event of Default exists or to require the consent of the Junior
Lenders to any waiver by the Senior Lenders of any Event of Default or
Default under the Loan Documents or of any of the rights and remedies of
the Senior Lenders thereunder.
(ii) Subject to subsection (b)(i) above and without waiving or
limiting any right of Senior Agent under the Loan Documents to determine
the eligibility of collateral for lending purposes under the lending
formula under the Borrowing Base, if (A) Junior Agent or the Junior
Lenders obtain an appraisal of the collateral undertaken at its request or
the results of a field examination by Junior Agent or the Junior Lenders
that indicate that the collateral or portion thereof has declined in value
or (B) a Default or an Event of Default (as such terms are defined in the
Senior Loan Agreement) exists, Junior Agent or the Junior Lenders may
propose that Senior Agent establish additional reserves or increase the
amount of existing reserves to address the conditions or events identified
by Junior Agent or the Junior Lenders, as applicable, and Senior Agent, in
the exercise of its reasonable discretion, will consider (without
obligation to agree or do so) Junior Agent's or the Junior Lenders'
request, as applicable, and establish reserves that Senior Agent
determines to be appropriate under the Loan Documents. Notwithstanding any
provision hereof to the contrary, none of Junior Agent, the Junior Lenders
nor Senior Agent have agreed to provide, or shall be required to provide
to the other, appraisals or other information it may obtain concerning the
Loan Parties or any of their Affiliates.
If Senior Agent intends to enter into any contract or agreement with any
Person including, without limitation, any liquidation Senior Agent for the
sale or liquidation of any material assets, Senior Agent agrees to give
Junior Agent notice of any such agreement or agency agreement at least
three (3) Business Days in advance of execution of such contract or
agreement so as to give the Junior Lenders an opportunity to either (A)
exercise its Purchase Option pursuant to Section 1 8 hereof or (B) make
comments on material terms including, without limitation, timing, pricing
and methodology of any sale or liquidation, provided that Senior Agent
shall be under no obligation to accept such comments.
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The Senior Agent agrees to use its best efforts to provide Junior
Lenders copies of any field audits of the Collateral it prepares in
accordance with the terms of the Loan Documents.
(c) Release of Senior Security Interests. Junior Agent and the
Junior Lenders agree that the Senior Agent may, from time to time at its sole
discretion and without notice to Junior Agent or the Junior Lenders, (i) retain
or obtain a security interest in any property to secure any of the Senior Debt,
subject to the prior lien and security interest of the Junior Lenders with
respect to the Junior Collateral, (ii) retain or obtain the primary or secondary
obligation of any other obligor or obligors with respect to any of the Senior
Debt, or (iii) release its security interest in, or surrender, release or permit
any substitution or exchange for, all or any part of any Senior Collateral
securing any of the Senior Debt. Upon the Senior Agent's release of any security
interest in any Senior Collateral or any other assets of any of the Loan Parties
in connection with any sale of such Senior Collateral or assets (including after
an Insolvency Event) and provided that the proceeds of the sale of such Senior
Collateral or assets so released are applied to the payment and permanent
reduction of first (after payment of all costs, fees and expenses related to the
sale or the necessary expense of preserving, storing or encumbering the items to
be sold), the Senior Debt, and second, the Subordinated Debt, Junior Agent shall
immediately and without further condition release any and all security interest
it may have in the Senior Collateral or assets and Senior Agent shall have the
right to file any termination statements or releases and take all such other
action in the name of Junior Agent and the Junior Lenders or otherwise, as the
Senior Agent may determine to be necessary or appropriate for the effectuation
of Junior Agent's release of its security interest.
6. Subordinated Debt Owed Only to the Junior Lenders. The Junior
Lenders warrant and represent that as at the date hereof (a) the Junior Lenders
have not previously assigned any interest in the-Subordinated Debt or any
security interest in connection therewith, if any; (b) no other party owns an
interest in the Subordinated Debt or security therefor other than the Junior
Lenders (whether as joint holders of the Subordinated Debt, participants or
otherwise); and (c) the entire Subordinated Debt is owing only to the Junior
Lenders.
7. Senior Debt Owed Only to the Senior Lenders. The Senior Lenders
warrant and represent that as at the date hereof (a) the Senior Lenders have not
previously assigned any interest in the Senior Debt or any security interest in
connection therewith, if any; (b) no other party owns an interest in the Senior
Debt or security therefor other than the Senior Lenders (whether as joint
holders of the Senior Debt, participants or otherwise); and (c) the entire
Senior Debt is owing only to the Senior Lenders.
8. Instrument Legend. Any instrument evidencing any of the
Subordinated Debt or the Senior Debt, or any portion thereof, will, on the date
hereof or promptly hereafter, be conspicuously inscribed with the following
legend:
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AND SUBORDINATION AGREEMENT OF
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EVEN DATE HEREWITH AMONG THE PARTIES HERETO, AND CERTAIN OTHER PARTIES TO
WHICH REFERENCE IS MADE FOR THE TERMS THEREOF AND FOR LIMITATIONS ON
ENFORCEMENT OF THE PROVISIONS HEREOF AND OF RETENTION OF PAYMENTS RECEIVED
HEREUNDER.
A copy of the Subordinated Documents and Loan Documents, as so legended, will be
delivered to the Senior Agent and Junior Agent, respectively, on the date
hereof. Any instrument evidencing any of the Subordinated Debt or Senior Debt,
or any portion thereof, which is hereafter executed will, on the date thereof,
be inscribed with the aforesaid legend and a copy thereof will be delivered to
the Senior Agent or Junior Agent, respectively, on the date of its execution.
9. Assignment of Claims. The Junior Lenders agree that until the
Senior Debt has been paid in full in cash and satisfied, the Junior Lenders will
not assign or transfer to others any claim the Junior Lenders have or may have
against the Loan Parties, unless such assignment or transfer is made expressly
subject to this Agreement, provided, however, that nothing contained herein
shall be deemed to prohibit Junior Lenders from securitizing or granting
participation interests in, or pledging or transferring to a commercial paper
conduit or transferring to any parent, affiliate or subsidiary of the Junior
Lenders, all or any portion of the Subordinated Debt, in each case without
notice to or consent of the Senior Agent and without any requirement of becoming
a signatory to this Agreement.
10. Waivers. All of the Senior Debt and Subordinated Debt shall be
deemed to have been made or incurred in reliance upon this Agreement. The Junior
Lenders, Junior Agent, the Senior Lenders and the Senior Agent expressly waive
all notices not specifically required pursuant to the terms of this Agreement
whatsoever, and each of them expressly waive reliance by the other parties
hereto upon the subordination and other agreements as herein provided. The
Junior Lenders and Junior Agent agree (a) that neither the Senior Agent nor any
Senior Lender has made any warranties or representations with respect to the due
execution, legality, validity, completeness or enforceability of the Senior Loan
Agreement, or the collectibility of the Senior Debt, (b) that the Senior Agent
and the Senior Lenders shall be entitled to manage and supervise their loans to
the Borrower in accordance with applicable law and their usual practices,
modified from time to time as deemed appropriate under the circumstances (but
subject to the other terms and provisions hereof), without regard to the
existence of any rights that the Junior Lenders or Junior Agent may now or
hereafter have in or to any of the assets of the Borrower, and (c) that the
Senior Agent and the Senior Lenders shall have no liability to the Junior
Lenders or Junior Agent for, and the Junior Lenders and Junior Agent shall waive
any claim (other than a claim resulting from a breach of this Agreement) which
the Junior Lenders and/or Junior Agent may now or hereafter have against the
Senior Agent or any Senior Lender arising out of, any actions which the Senior
Agent or any Senior Lender, in good faith, takes or omits to take (including,
without limitation, actions with respect to the creation, perfection or
continuation of liens or security interests in the Collateral and other security
for the Senior Debt, actions with respect to the occurrence of a Senior Default,
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any of the Senior Collateral
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and actions with respect to the collection of any claim for all or any part of
the Senior Debt from any account debtor, guarantor or any other party) with
respect to the Senior Loan Agreement or any other agreement related thereto or
to the collection of the Senior Debt or the valuation, use, protection or
release of the Senior Collateral. The Senior Lenders and Senior Agent agree (a)
that neither Junior Agent nor any Junior Lender has made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Subordinated Documents, or the
collectibility of the Subordinated Debt, (b) that Junior Agent and the Junior
Lenders shall be entitled to manage and supervise their loans to the Borrower in
accordance with applicable law and their usual practices, modified from time to
time as deemed appropriate under the circumstances (but subject to the other
terms and provisions hereof), without regard to the existence of any rights that
the Senior Lenders or the Senior Agent may now or hereafter have in or to any of
the assets of the Borrower, and (c) that Junior Agent and the Junior Lenders
shall have no liability to the Senior Lenders or the Senior Agent for, and the
Senior Lenders and the Senior Agent shall waive any claim (other than a claim
resulting from a breach of this Agreement) which the Senior Lenders and/or the
Senior Agent may now or hereafter have against Junior Agent or any Junior Lender
arising out of, any actions which Junior Agent or any Junior Lender, in good
faith, takes or omits to take (including, without limitation, actions with
respect to the creation, perfection or continuation of liens or security
interests in the Collateral and other security for the Subordinated Debt,
actions with respect to the occurrence of a default under the Subordinated
Documents, actions with respect to the foreclosure upon, release, or
depreciation of, or failure to realize upon, any of the Junior Collateral and
actions with respect to the collection of any claim for all or any part of the
Subordinated Debt from any account debtor, guarantor or any other party) with
respect to the Subordinated Documents or any other agreement related thereto or
to the collection of the Subordinated Debt or the valuation, use, protection or
release of the Junior Collateral.
11. Invalidated Payments. To the extent that the Senior Lenders
receive payments on, or proceeds of Senior Collateral for, the Senior Debt 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 received, the Senior Debt, 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 Lenders. To the extent that the Junior Lenders receive payments on, or
proceeds of Junior Collateral for, the Subordinated Debt 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 received, the Subordinated Debt, 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 Junior
Lenders.
12. Bankruptcy Issues.
(a) At any meeting of creditors or in the event of any Insolvency
Event, the Junior Lenders shall retain the right to vote, file a proof of claim
and otherwise act with
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respect to the Subordinated Debt (including the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization, arrangement,
composition, or extension), provided that the Junior Lenders shall not initiate,
join in or prosecute any claim or action in such Insolvency Event challenging
the enforceability of the Senior Debt, this Agreement, or any liens and security
interests securing the Senior Debt.
(b) The Junior Lenders acknowledge and agree that upon the
occurrence of any Insolvency Event, the Senior Lenders, or any one of them may
consent to the use of cash collateral or provide financing to the Borrower on
such terms and conditions and in such amounts as the Senior Lenders, in their
sole discretion, may decide and that, in connection with such cash collateral
usage or such financing, the Loan Parties (or a trustee appointed for the
estates of the Loan Parties) may grant to the Senior Agent or the Senior Lenders
liens and security interests upon all assets of the Loan Parties, other than the
Junior Collateral, which 1iens and security interests (i) shall secure payment
of all Senior Debt (whether such Senior Debt arose prior to the filing of the
petition for relief thereafter) and (ii) shall be superior in priority to the
liens and security interests held by the Junior Lenders on the assets of the
Loan Parties, other than the Junior Collateral. All allocations of payments
between the Senior Lenders and the Junior Lenders shall continue to be made
after the occurrence of any Insolvency Event on the same basis that the payments
were to be allocated prior to the date of such Insolvency Event. The Junior
Lenders waive any claim it may now or hereafter have against the Senior Lenders
arising out of the Senior Lenders' 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 grant of a security interest or administrative
claim to the Senior Lenders under Sections 503, 507, 361 or 364 of the
Bankruptcy Code by the Loan Parties, as debtor in possession or by their or its
trustee. The Junior Lenders agree that it will not take, join in or otherwise
support in any manner any challenge to the validity, perfection, priority or
enforceability of the Senior Agent's liens and security interests in the
Collateral or any post petition property of the Loan Parties. The Senior Lenders
agree that it will not take, join in or otherwise support in any manner any
challenge to the validity, perfection; priority or enforceability of Junior
Agent's or the Junior Lenders' liens and security interests in the Collateral or
any post petition property of the Loan Parties, except to enforce the terms of
this Agreement.
13. Waivers. No waiver shall be deemed to be made by the Senior
Agent, any Senior Lender, Junior Agent or any Junior Lender of any of their
respective rights hereunder, unless the same shall be in writing signed by the
waiving party, as applicable, 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 Agent, any Senior Lender, Junior Agent or any Junior Lender
or the obligations of Junior Agent and the Junior Lenders to the Senior Agent
and the Senior Lenders or the obligations of the Senior Agent and the Senior
Lenders to Junior Agent and the Junior Lenders in any other respect at any other
time.
14. Information Concerning Financial Condition of Borrower. Junior
Agent and the Junior Lenders hereby assume responsibility for keeping informed
of the financial condition of the Loan Parties, any and all endorsers and any
and all guarantors of the Senior Debt and of all other circumstances bearing
upon the risk of nonpayment of the
-21-
Senior Debt and/or Subordinated Debt that diligent inquiry would reveal, and
Junior Agent and the Junior Lenders hereby agree that neither the Senior Agent
nor any Senior Lender shall have any duty to advise either Junior Agent or the
Junior Lenders of information known to the Senior Agent or any Senior Lender
regarding such condition or any such circumstances. In the event the Senior
Agent or any Senior Lender, in its sole discretion, undertakes, at any time or
from time to time, to provide any such information to Junior Agent or the Junior
Lenders, neither the Senior Agent nor any Senior Lender shall be under any
obligation (a) to provide any such information to Junior Agent or the Junior
Lenders on any subsequent occasion, or (b) to undertake any investigation not a
part of Senior Agent's or Senior Lender's regular business routine and shall be
under no obligation to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, the Senior Agent or the Senior Lender
wishes to maintain confidential.
15. Warranties and Representations.
(a) Each of Junior Agent and the Junior Lenders hereby represents
and warrants that: (i) it has not relied nor will it rely on any representation
or information of any nature made by or received from Senior Agent relative to
any Borrower or any other Loan Party in deciding to execute this Agreement; (ii)
no part of the Subordinated Debt is evidenced by any instrument or writing
except the Subordinated Documents; (iii) as of the date hereof Junior Lenders
are the lawful owners of the Subordinated Debt; (iv) as of the date hereof
Junior Lenders have not heretofore assigned or transferred the Subordinated
Debt, any interest therein or any collateral or security pertaining thereto; and
(v) Junior Lenders have not heretofore given any subordination in respect of the
Subordinated Debt.
(b) Each of the Senior Agent and the Senior Lenders hereby
represents and warrants that: (i) it has not relied nor will it rely on any
representation or information of any nature made by or received from Junior
Agent relative to any Borrower or any other Loan Party in deciding to execute
this Agreement; (ii) no part of the Senior Debt is evidenced by any instrument
or writing except the Loan Documents; (iii) Senior Agent and the Senior Lenders
have the authority to enter into this Agreement and that it and the other Senior
Lenders are, as of the date hereof, the lawful owners of the Senior Debt; (iv)
Senior Agent and the other Senior Lenders have not heretofore assigned or
transferred any of the Senior Debt, any interest therein or any collateral or
security pertaining thereto; and (v) Senior Agent and the other Senior Lenders
have not heretofore given any subordination in respect of the Senior Debt.
(c) Each of the parties hereto represents and warrants to each of
the other parties that this Agreement has been duly executed and delivered by
such party and is the valid and binding obligation of such party, enforceable
against such party in accordance with the terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by principles of equity.
16. CONSENT TO JURISDICTION; JURY TRIAL WAIVERS. EACH OF THE JUNIOR
LENDERS, JUNIOR AGENT, THE SENIOR AGENT AND THE SENIOR LENDERS HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION
-22-
OF THE UNITED STATES DISTRICT COURT IN THE STATE OF NEW YORK] AND OF ANY NEW
YORK STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH OF THE JUNIOR LENDERS, JUNIOR AGENT, THE SENIOR
AGENT AND THE SENIOR LENDERS, TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY
WAIVES ANY OBJECTION BASED UPON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE
OF ANY ACTION INSTITUTED HEREUNDER. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
17. Notices. Except as otherwise expressly provided below, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) three (3) days after deposit in the United States Mails, by registered mail,
with proper postage prepaid or provided for, (b) when sent after receipt of
confirmation if sent by telecopy or other similar facsimile transmission, (c)
one (1) Business Day after deposited with a reputable overnight courier with all
charges prepaid or (d) when delivered, if hand-delivered by messenger, all of
which shall be properly addressed to the party to be notified and sent to the
address or number indicated as follows:
(i) If to the Senior Agent or any Senior Lender at:
LaSalle Business Credit, LLC
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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(ii) If to Junior Agent or the Junior Lenders at:
CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Corporate Finance Group,
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as any party designates to the other parties in the
manner herein prescribed.
18. Purchase Option.
(a) Subject to the terms of this Section 18, the Senior Lenders
hereby grant to the Junior Lenders the option (the "Purchase Option") to
purchase the Senior Debt from the Senior Lenders at a price (the "Purchase
Price") equal to the sum of (i) all amounts outstanding and/or due in connection
with the Senior Loan Agreement as of the date of the payment of the Purchase
Price, including principal up to the maximum amount permitted under the Senior
Loan Agreement together with the Additional Obligations (including audit fees,
attorneys fees, etc.), other reasonable expenses and all other Obligations
under, and as defined in, the Senior Loan Agreement, but excluding any
prepayment premium fee due under the Senior Loan Agreement.
(b) The Junior Lenders may exercise the Purchase Option commencing
on the date (the "Option Trigger Date") which is (i) the date a Blockage Period
expires if such Blockage Period is triggered by the issuance of a Senior Default
Notice issued as a result of a payment default or a financial covenant default
under the Senior Loan Agreement, unless the Senior Lender terminates such
Blockage Period prior to the expiration thereof in accordance with clause (i) of
the definition of "Blockage Period" or unless such Blockage Period is extended
in accordance with the last sentence of such definition; (ii) five (5) days
after the Senior Agent's delivery of a Senior Default Notice to the Loan Parties
and the Junior Agent; or (iii) the date the Junior Agent receives written notice
that the Senior Lenders shall be conducting a sale or otherwise liquidating a
material portion of Senior Collateral after the occurrence of a Senior Default.
(c) The Junior Agent shall deliver written notice (the "Exercise
Notice"), on behalf of the Junior Lenders, that they intend to exercise the
Purchase Option within five (5) Business Days of the Option Trigger Date. Such
notice shall be irrevocable by the Junior Lenders. The Junior Agent shall (i)
tender payment of the Purchase Price in immediately available funds and (ii)
deliver an Assignment Agreement executed by the Junior Lenders to the Senior
Lenders on a Business Day that not later than the 5th Business Day after the
delivery of the Exercise Notice (or, if such 5th Business Day is not a Business
Day, the next Business Day). Subject to Section 8(d), the Junior Lenders shall
have no right to purchase, and the Senior Lenders shall have no obligation to
sell, the Senior Debt unless the Senior
-24-
Agent shall have timely received (x) an Exercise Notice, (y) the Purchase Price
in immediately available funds, and (z) an Assignment Agreement executed by the
Junior Lenders.
(d) The Purchase Option shall terminate with respect to the Senior
Default giving rise thereto if the Senior Agent does not receive an Exercise
Notice within five (5) Business Days following the Option Trigger Date.
(e) The Loan Parties and the Junior Lenders shall indemnify the
Senior Lenders for all third party fees and expenses incurred by the Senior
Lenders before the Purchase Option Closing Date, to the extent invoices relating
thereto have not been received or paid by such date. The Senior Lenders shall
make any such claims for indemnification as soon as practicable following the
Purchase Option Closing Date and shall make any such claim in a writing
accompanied by the applicable third party invoices. The Senior Lenders will use
their best efforts to cause third parties to promptly remit invoices for fees
and expenses to the Senior Lenders.
At all times prior to Purchase Option Closing Date, the Senior Lenders shall be
free to administer the credit (which shall include, without limitation,
incurring reasonable ordinary course expenses), lend or refuse to lend, adjust
advance rates, institute or release reserves, and otherwise act or refuse to act
in accordance with the terms of the Senior Loan Agreement, the Loan Documents,
this Agreement and applicable law. During the period between the Option Trigger
Date and the Purchase Option Closing Date, the Senior Lenders shall not sell or
otherwise liquidate any of the Borrower's assets.
19. Governing Law. This Agreement 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], shall be immediately binding upon
and inure to the benefit of the parties hereto and each of their respective
successors and assigns.
20. 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.
21. Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
22. Authority. The signatories to this Agreement on behalf of each
of the parties hereto hereby certify that they have all necessary authority to
grant the subordination evidenced hereby and execute this Agreement on behalf of
such party.
23. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the
-25-
parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
24. Full Agreement. This Agreement constitutes the complete
agreement between the parties with respect to the subject matter hereof. Any
document, instrument or agreement executed by the parties hereto with respect to
the financing which is the subject of this Agreement predating this Agreement
shall be merged with and into and superseded by this Agreement.
25. Reliance. Upon any payment or distribution of assets of any Loan
Party in connection with any Insolvency Event with respect thereto, the Junior
Lenders shall be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such Insolvency Event is pending, delivered to
the Junior Lenders, purporting to enforce or interpret this Agreement for the
purpose of ascertaining the holders of Senior Debt entitled to participate in
such payment or distribution in accordance with this Agreement, the amount
thereof, and all other matters related thereto. The Junior Lenders shall not at
any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or the receipt of any payment by it,
unless and until the Junior Lenders shall have received written notice thereof
from the Loan Parties or the Senior Agent, and prior to the receipt of any such
written notice the Junior Lenders shall be entitled to assume conclusively that
no such facts exist.
26. Attorneys' Fees. In the event of a dispute between the parties
arising from this Agreement, the prevailing party shall be entitled to all
attorneys' fees and costs and expenses related thereto.
27. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties and separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Agreement by facsimile shall
be effective as delivery of a manually executed counterpart of this Agreement.
28. Third-Party Collateral Access Agreements. Junior Agent and
Junior Lenders hereby acknowledge and agree that all references in the various
landlord's agreements, warehouseman's agreements and other third-party
collateral access agreements executed by various third parties in favor of
Junior Agent (collectively, the "Collateral Access Agreements") to (i) the
Subordination and Intercreditor Agreement among Junior Agent, Junior Lenders and
Xxxxx Fargo Foothill, Inc., as agent ("WFF") shall be deemed to be references to
this Agreement, (ii) all references to WWF in the Collateral Access Agreements
shall be deemed to be references to Senior Agent, and (iii) all references to
any loan documents among the Loan Parties and WWF in the Collateral Access
Agreements shall be deemed to be references to the Loan Documents.
[remainder of this page is intentionally blank; signature pages follow]
-26-
IN WITNESS WHEREOF, Junior Agent, the Junior Lenders, the Senior
Agent and the Senior Lenders have each executed and delivered this Agreement as
of the day and year first above written.
LASALLE BUSINESS CREDIT, LLC, as Senior
Agent and as a Senior Lender
By /s/ Xxxxxxx Staple
--------------------------------------
Name Xxxxxxx Staple
------------------------------------
Title First Vice President
-----------------------------------
LASALLE BANK NATIONAL ASSOCIATION,
as a Senior Lender
By /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Name Xxxxxx Xxxxxxxx
------------------------------------
Title Commercial Lending Officer
-----------------------------------
CAPITALSOURCE FINANCE LLC,
as Junior Agent and as a Junior Lender
By /s/ Xxxxxx Xxxxxx
--------------------------------------
Name Xxxxxxx Xxxxxx
------------------------------------
Title General Counsel
-----------------------------------
-27-
Acknowledged and agreed to this 27th day of April, 2004:
EASY GARDENERS PRODUCTS, LTD.
By /s/ Xxxxxxx X. Xxxx
-------------------------------
Name Xxxxxxx X. Xxxx
-----------------------------
Title CFO
----------------------------
EYAS INTERNATIONAL, INC.
By /s/ Xxxxxxx X. Xxxx
-------------------------------
Name Xxxxxxx X. Xxxx
-----------------------------
Title CFO
----------------------------
EG, L.L.C.
By /s/ Xxxxxxx X. Xxxx
-------------------------------
Name Xxxxxxx X. Xxxx
---------------
Title CFO
----------------------------
EG PRODUCT MANAGEMENT, L.L.C.
By /s/ Xxxxxxx X. Xxxx
-------------------------------
Name Xxxxxxx X. Xxxx
-----------------------------
Title CFO
----------------------------
XXXXXXXXX CONSUMER PRODUCTS, INC.
By /s/ Xxxxxxx X. Xxxx
-------------------------------
Name Xxxxxxx X. Xxxx
-----------------------------
Title CFO
----------------------------
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XXXXXXXXX CONSUMER PRODUCTS, GROUP, INC.
By /s/ Xxxxxxx X. Xxxx
--------------------------------
Name Xxxxxxx X. Xxxx
------------------------------
Title CFO
-----------------------------
NBU GROUP, LLC
By /s/ Xxxxxxx X. Xxxx
--------------------------------
Name Xxxxxxx X. Xxxx
------------------------------
Title CFO
-----------------------------
-29-
EXHIBIT A
Form of Excess Availability Certificate
[Letterhead of Easy Gardener Products, Ltd.]
[Date]
TO: CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Corporate Finance Group, Portfolio Manager
In accordance with the terms set forth in Section 2(c) of that
certain Subordination and Intercreditor Agreement, dated as of April 27, 2004,
entered into by and among CapitalSource Finance LLC, a Delaware limited
liability company, in its capacity as agent for the Junior Lenders, LaSalle
Business Credit, LLC, a Delaware limited liability company, in its capacity as
agent for the Senior Lenders and in its capacity as a Senior Lender, and LaSalle
Bank National Association, in its capacity as a Senior Lender (as amended,
amended and restated, or otherwise modified from time to time, the
"Intercreditor Agreement"), the Excess Availability requirements in Sections
7.7(b)(ii)(B)(a), 7.7(b)(ii)(B)(b) and 7.7(b)(ii)(B)(c) of the Junior Loan
Agreement [have] [have not] been satisfied and EGP may make and Junior Lender
may receive the Excess Cash Flow Payment for the [quarter] [year] ended [march
31] [June 30] [September 30] [December 31], 200_.
Capitalized terms used herein but not otherwise defined shall have
the meaning ascribed to them in the Intercreditor Agreement.
Dated:____________, 200_
Very truly yours,
EASY GARDENER PRODUCTS, LTD., a Texas
limited partnership
By: E G PRODUCT MANAGEMENT, L.L.C.,
its General Partner
By:__________________________________
Name:________________________________
Title:_______________________________
-30-
