SUBORDINATION AND INTERCREDITOR AGREEMENT
BETWEEN
XXXXXX EQUITY INVESTORS III, L.P.
AND
BANK ONE, TEXAS, N.A.
This Subordination and Intercreditor Agreement (herein called the
"Subordination Agreement" or the "Agreement"), dated May 4, 1998 is executed by
XXXXXX EQUITY INVESTORS III, L.P. ("XXXXXX") and BANK ONE, TEXAS, N.A.("BANK
ONE").
R E C I T A L S
WHEREAS, Advanced Telemarketing Corporation, a Nevada corporation
(together, with its successors and assigns and any receiver, trustee or
debtor-in-possession of any such Person, the "BORROWER") and Bank One have
entered into that certain Loan and Security Agreement dated February 8, 1996, as
amended, in respect to loans in the principal sum of up to $13,000,000. ATC
Communications Group, Inc., a Delaware corporation ("PARENT") and the owner of
98.94% of all of the issued and outstanding capital stock of Borrower, has
granted to Bank One a first priority security interest and pledge in and to the
capital stock (the "PLEDGED STOCK") of Borrower described in that certain Pledge
Agreement dated March 31, 1998, as amended, executed by Parent to secure all
indebtedness, now or hereafter existing, of Borrower to Bank One.
WHEREAS, Parent, ATC Merger Sub, Inc. and IQI, Inc. have entered into an
Agreement and Plan of Merger dated April 7, 1998 (the "PLAN OF MERGER"); and
WHEREAS, Borrower has requested a $2,000,000 bridge loan (the "BRIDGE
LOAN") from Bank One to finance working capital requirements pending the merger
contemplated by the Plan of Merger (the "MERGER"); and
WHEREAS, Xxxxxx has agreed to cause an irrevocable standby letter of credit
to be issued by The Bank of Nova Scotia in the amount of $2,000,000 of which the
Bank One will be the beneficiary to secure the repayment of the Bridge Loan
requested by Borrower (the "LETTER OF CREDIT"); and
WHEREAS, Borrower is granting to Xxxxxx xxxxxx security interests in all of
its assets to secure the obligations of Borrower to Xxxxxx under that certain
Reimbursement and Indemnification Agreement between Borrower and Xxxxxx and
dated on or about the date hereof (the "REIMBURSEMENT AGREEMENT"). Parent is
granting to Xxxxxx a junior security interest and pledge in
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the Pledged Stock and a promissory note made by Xxxxxxx Xxxxxx to the order of
Parent to secure the obligations of Borrower to Xxxxxx under such
Reimbursement and Indemnity Agreement; and
WHEREAS, Bank One will hold the certificates representing the Pledged Stock
for itself pursuant to the pledge by Parent and, with respect to Xxxxxx, Bank
One will hold such certificates for perfection purposes only and otherwise only
as set forth under this Agreement.
NOW, THEREFORE, Bank One and Xxxxxx agree to the following terms and
provisions:
AGREEMENT
1. Capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in SECTION 20 herein.
2. With respect to the Letter of Credit, Senior Creditor and Junior Creditor
agree as follows:
(a) The Letter of Credit shall be in the amount of $2,000,000 and have an
expiration date of no earlier than February 28, 1999. Bank One shall be
the beneficiary of the Letter of Credit.
(b) Senior Creditor may draw on the Letter of Credit only if it has
determined in good faith that an Event of Default has occurred and is
existing under the Loan Agreement either (i) as an Event of Default under
Section 16(a) of the Loan Agreement (a "PAYMENT DEFAULT") or (ii) as an
Event of Default arising under any one or more of the following subsections
of Section 16(n) of the Loan Agreement: subsection (i), (ii), (iii), (iv),
(v), (vi), (x), (xi) or (xii) (a "FINANCIAL COVENANT DEFAULT"). Senior
Creditor shall have no liability whatsoever to Junior Creditor for making
any draw under the Letter of Credit if it made a determination in good
faith that a Payment Default or a Financial Covenant default had occurred
and was existing even if a court of competent jurisdiction later finds that
such determination was incorrect.
(c) Any draws that Senior Creditor makes on the Letter of Credit will be
applied to principal and accrued interest outstanding under the Bridge
Loan.
(d) If the Operations Manager of the Asset Based Lending Group of Bank One
receives a written notice from Xxxxxx prior to 10:30 a.m. Dallas, Texas
time on any Business Day stating that it is exercising its right, under the
terms of the Reimbursement Agreement, to direct Bank One to cease making
Bridge Loans under the Loan Agreement, then that part of any draw
thereafter made on the Letter of Credit for principal outstanding under the
Bridge Loan shall not exceed the principal outstanding on the Bridge Loan
as of end of business on the Business Day immediately preceding the
Business Day on which such notice is actually received by such Manager. If
such notice is received by the Manager of the Asset Based
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Lending Group of Bank One after 10:30 a.m., Dallas, Texas time on any
Business Day, then that part of any draw thereafter made on the Letter of
Credit for principal outstanding under the Bridge Loan shall not exceed
the principal outstanding on the Bridge Loan as of end of business on the
Business Day on which such notice is actually received by such Manager,
including, without limitation, any advances on the Bridge Loan made on
such Business Day after receipt of such notice.
(e) Senior Creditor agrees to provide to Junior Creditor a copy of any
demand for payment of, or notice of intent to accelerate, the Senior
Obligations contemporaneously with sending such demand or notice to
Borrower. Junior Creditor agrees to provide to Senior Creditor a copy of
any demand for payment of, or notice of intent to accelerate, the
Subordinated Obligations contemporaneously with sending such demand or
notice to Borrower.
3 Except as otherwise provided herein, during the term hereof, Junior
Creditor agrees to subordinate and does hereby subordinate payment and
performance by Borrower of all or any part of the Subordinated Obligations
(except as provided in SECTION 5), together with all Liens of Junior Creditor in
any Assets owned by Borrower and in the Pledged Stock securing the payment and
performance of the Subordinated Obligations, to the prior payment and
performance in full in cash to Senior Creditor of any and all Senior Obligations
and any Liens granted to Senior Creditor therefor.
4 Except as otherwise provided herein and as otherwise permitted by Senior
Creditor by a prior written consent, during the term hereof, Junior Creditor
agrees (i) not to receive or accept payment or prepayment of all or any part of
the Subordinated Obligations, (ii) not to enforce Junior Creditor's rights to
any security for the Subordinated Obligations (other than as permitted in
SECTION 6(b)), (iii) not to ask for, demand, take or receive any security for
the Subordinated Obligations (other than as permitted in SECTION 6(b)), (iv)
not to commence any action against Borrower or any other Person now or hereafter
liable for any of the Subordinated Obligations (other than as permitted in
SECTION 6(b)(ii)), (v) not to commence or join with any creditor in bringing any
Proceeding against Borrower or any other Person now or hereafter liable for any
of the Subordinated Obligations, and (vi) that it shall not be entitled to
exercise any right of subrogation or contribution with respect to Senior
Obligations.
5 (a) Notwithstanding any other provision herein and as long as no Event of
Default has occured and is continuing under the Loan Agreement, Junior Creditor
may accept and retain for its own account regularly scheduled payments of
interest and principal on the Subordinated Obligations on or after February 28,
1999.
(b) In the event that the Senior Obligations have been accelerated
(whether upon maturity or otherwise), Senior Creditor shall have no obligation
to Junior Creditor to liquidate the collateral securing the Senior Obligations
but may, without affecting or impairing the subordination set forth herein,
accept payments from Borrower over any time period deemed reasonable by Senior
Creditor
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in its sole discretion during which period Senior Creditor may, in its sole
discretion, continue to finance the operations of Borrower.
6. (a) Borrower and Junior Creditor acknowledge and agree that the
Subordinated Obligations are not secured by any Asset of Borrower except the
Second Lien Properties and, during the term hereof, with respect to the
Subordinated Obligations, Junior Creditor shall not acquire, by subrogation,
contract or otherwise, any Lien or other right, title or interest upon any
estate, right, title and/or interest in the Assets of Borrower other than the
its junior Lien in the Second Lien Properties (including but not limited to (i)
any which may arise in respect to taxes, assessments or other governmental
charges and (ii) any right, claim or Lien which Junior Creditor may acquire by
subrogation as a result of the reimbursement of The Bank of Nova Scotia for
draws made under the Letter of Credit) which is or may be prior in right to, or
pari passu with, the Liens therein of Senior Creditor. Any Lien granted in
violation hereof shall be null and void.
(b) Senior Creditor has agreed, subject to the terms of this Agreement,
that Borrower may grant to Junior Creditor a second and subordinate Lien in all
assets of Borrower and that Parent may grant to Junior Creditor a second and
subordinate Lien in the Pledged Stock and that certain promissory note dated as
of September 16, 1997 from Xxxxxxx Xxxxxx to Parent in the original principal
amount of $3,661,505.39 (such assets of Borrower, Pledged Stock and such note
are referred to herein as the "SECOND LIEN PROPERTIES"). Junior Creditor agrees
(1) that its Lien in the Second Lien Properties (whether acquired directly from
Borrower or Parent, acquired by subrogation or otherwise) shall at all times be
subordinate and junior to the Lien of Senior Creditor, (2) that the terms and
provisions of this Agreement shall be applicable to Junior Creditor in its
status as a junior lienholder as well as in its status as the holder of the
Subordinated Obligations (such as, by way of example, but not limitation, the
waiver of marshalling set forth in SECTION 12) and (3) that Junior Creditor
also agrees to the following:
(i) Junior Creditor's Liens in and to the Second Lien Properties
(including, without limitation, Liens acquired by subrogation as a result
of the reimbursement of The Bank of Nova Scotia for draws made under the
Letter of Credit or otherwise) shall at all times be and remain second and
subordinate to Senior Creditor's Liens therein, whether Senior Creditor's
Lines are now existing or are hereafter created, (as such senior Liens may
be extended, amended or modified from time to time), regardless of the
order of creation, attachment, perfection, filing, recording, execution or
delivery of such Liens and regardless of any law, rule or regulation which
can be varied by agreement. Junior Creditor agrees to take such further
action and to execute and record such agreements as Senior Creditor shall
at any time request to confirm that the Senior Creditor's Liens are first
and prior to Junior Creditor's Liens. In the event that any agreement
creating any Lien held by Senior Creditor is declared void or unenforceable
so that with respect to any of the Second Lien Properties, Junior
Creditor's Lien becomes the first Lien, Junior Creditor agrees (i) that any
subsequent Lien in such Asset granted to Senior Creditor shall be first and
prior and agrees to execute and record such agreements as may be requested
by Senior Creditor to establish that such new Lien held by Senior Creditor
is first and prior and that the Lien held by Junior Creditor is
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second and junior and (ii) that any proceeds Junior Creditor receives by
virtue of its Lien will be held in trust for Senior Creditor and promptly
paid to Senior Creditor for application on the Senior Obligations until
the Senior Obligations are paid in full in cash.
(ii) Except as permitted by this subsection (ii), Junior Creditor agrees
that it will not take any action to enforce its junior Liens against the
Second Lien Properties, or any part thereof, until all of the Senior
Obligations have been paid in full in cash to Senior Creditor and the Loan
Agreement has been terminated. Furthermore, Junior Creditor will not take
any action (including without limitation pursuing any action or filing any
motion or pleading before any judicial tribunal) to hinder or obstruct
Senior Creditor from exercising any of its rights as a secured creditor or
lienholder against the Second Lien Properties or any part thereof.
Nevertheless, if the Letter of Credit is drawn upon by Senior Creditor and
Borrower fails to reimburse Junior Creditor in full, on or before the later
of (i) March 30, 1999 or (ii) thirty (30) days after Junior Creditor
demands payment from Borrower (the "DEMAND"), for all amounts Junior
Creditor has paid or owes to The Bank of Nova Scotia as a result of such
draw on the Letter of Credit, then Junior Creditor may exercise its rights
as a junior secured creditor against the Pledged Stock of Borrower; the
exercise of any of such rights shall not alter or impair Senior Creditor's
first and prior Lien in the Pledged Stock. Furthermore, commencing on that
date which is 360 days after Junior Creditor makes the Demand, Junior
Creditor may exercise any of its rights as a secured creditor against the
Second Lien Properties; the exercise of any of such rights shall not alter
or impair Senior Creditor's first and prior Lien in the Second Lien
Properties.
(iii) Junior Creditor agrees that until the Senior Obligations have
been paid in full in cash to Senior Creditor and the Loan Agreement has
been terminated, Junior Creditor will not exercise any of its rights or
remedies as the holder of a Lien in the Second Lien Properties (other than
as permitted by subsection (ii) immediately preceding) and Junior
Creditor's only right as the holder of a Lien in the Second Lien Properties
shall be to receive the excess, if any, of the proceeds of the Second Lien
Properties after payment in full in cash of the Senior Obligations.
(iv) JUNIOR CREDITOR AGREES THAT SENIOR CREDITOR MAY ACT WITH RESPECT TO
THE SECOND LIEN PROPERTIES AS IF JUNIOR CREDITOR'S LIENS THEREIN DID NOT
EXIST AND WILL HAVE NO OBLIGATIONS TO JUNIOR CREDITOR AS THE HOLDER OF A
SECOND LIEN, AND JUNIOR CREDITOR EXPRESSLY WAIVES AND RELEASES ANY AND ALL
CLAIMS AND CAUSES OF ACTION THAT IT MAY AT ANY TIME HAVE AGAINST SENIOR
CREDITOR THAT RELATE IN ANY WAY TO THE SECOND LIEN PROPERTIES OR ANY PART
THEROF OR THE LIEN OF JUNIOR CREIDTOR THEREIN OR THE ACTIONS OF SENIOR
CREDITOR WITH RESPECT TO THE SECOND LIEN PROPERTIES, WHETHER SUCH CLAIMS OR
CAUSES OF ACTION ARISE IN CONTRACT, TORT OR OTHERWISE. SENIOR CREDITOR
WOULD NOT HAVE AGREED TO THE GRANT OF THE JUNIOR LIENS TO JUNIOR CREDITOR
WITHOUT ALL OF THE PROVISIONS OF THIS AGREEMENT AND IN PARTICULAR THE
WAIVER OF CLAIMS AND CAUSES OF ACTION SET FORTH HEREIN.
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7 In the event of any Proceeding involving Borrower, all amounts payable
under or on account of the Senior Obligations shall first be paid in full in
cash before Junior Creditor shall be entitled to receive any Distribution on
account of the Subordinated Obligations.
8 During the term hereof, if any Distribution is received by Junior Creditor
for application on the Subordinated Obligations which Junior Creditor is not
entitled to retain under the terms of this Subordination Agreement, Junior
Creditor will hold such Distribution in trust for Senior Creditor and will
deliver same to Senior Creditor not later than five (5) business days following
(a) Junior Creditor's determination that it has received any such Distribution
or (b) a written request therefor from Senior Creditor.
9 Junior Creditor irrevocably authorizes and empowers Senior Creditor, and
appoints Senior Creditor as attorney-in-fact, effective upon the institution of
any Proceeding in which Borrower is a debtor to file a proof of claim in the
name and stead of Junior Creditor with respect to the Subordinated Obligations
if thirty (30) days before the bar date in any such Proceeding, Junior Creditor
has not filed a proof of claim describing the Subordinated Obligations.
10 No right or remedy of any present or future holder of any Senior
Obligation, and no covenant, agreement, obligation or liability hereunder of any
present or future holder of any Subordinated Obligations, shall at any time in
any way be discharged, prejudiced, impaired or otherwise affected by any of the
following, regardless of any knowledge of any of the following that any holder
of the Senior Obligations or any holder of the Subordinated Obligations may or
may not have or otherwise be charged with: (i) any act or failure to act on the
part of the Borrower and/or any of its affiliates or any act or failure to act,
or any waiver, consent or acquiescence by any holder of any of the Subordinated
Obligations or any noncompliance by Borrower and/or any of its affiliates with
the terms, provisions and covenants of this Subordination Agreement, the Senior
Obligations or the Subordinated Obligations, or (ii) as applicable, any
consolidation, merger or amalgamation of, or the effectuation of any other
change whatever in the name, membership, constitution or place of formation of,
Borrower and/or any of its affiliates. Without in any way limiting the
generality of the foregoing sentence, the Senior Creditor may, at any time and
from time to time, with or without the consent of or notice to the Junior
Creditor, without incurring responsibility to the Junior Creditor and without
impairing or releasing the subordination provided herein or the obligations of
the Junior Creditor to the Senior Creditor, do any one or more of the following:
(w) change the manner, place or terms of payment of, or renew, extend or alter,
any of the Senior Obligations, accept partial payment thereon, or otherwise
amend, supplement, modify or increase in any manner any of the Senior
Obligations or any Loan Document; (x) take, add, substitute, sell, exchange,
release or otherwise deal with any property pledged, mortgaged, or otherwise
securing any of the Senior Obligations; (y) add, substitute or release any
Person liable in any manner for the colection of any of the Senior Obligations
other than Borrower; and (z) exercise or refrain from exercising any rights
and/or remedies against Borrower and/or any of its affiliates and/or any other
Person or any collateral for any of the Senior Obligations.
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11. Senior Creditor shall have no liability to Junior Creditor with respect to,
and Junior Creditor waives any claim or defense which Junior Creditor may now or
hereafter have against Senior Creditor with respect to the Subordinated
Obligations or this Subordination Agreement arising from (i) any and all actions
which Senior Creditor takes or omits to take (including, without limitation,
actions with respect to the creation, perfection or continuation of Liens in any
collateral securing any of the Senior Obligations, actions with respect to the
occurrence of any default under any Loan Document, actions with respect to the
foreclosure upon, sale, release of, depreciation of or failure to realize upon
any of such 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 Person) with respect to the Senior Obligations or the valuation,
use, protection or release of any collateral now or hereafter securing same;
(ii) any right, now or hereafter existing, to require the Senior Creditor to
proceed against or exhaust any collateral at any time securing the Senior
Obligations or to marshal any assets in favor of Junior Creditor; (iii) any
notice of the incurrence of Senior Obligations, it being understood that Senior
Creditor may make advances under the Loan Agreement and increase the
indebtedness due under the Loan Agreement, or any other Loan Document, now or
hereafter relating to the Senior Obligations, without notice to or authorization
of Junior Creditor, in reliance upon these subordination provisions, subject to
the cap on the principal amount of Senior Obligations contained in the
definition thereof; and/or (iv) any defense based upon or arising by reason of
(a) any disability or other defense of Borrower or any other Person; (b) any
lack of authority of any agent or any other Person acting or purporting to act
on behalf of Borrower; (c) any act or omission by Senior Creditor which directly
or indirectly results in or aids the discharge of Borrower with respect to
any of the Senior Obligations by operation of law or otherwise, except any
act or omission which arises from the gross negligence or willful misconduct
of Senior Creditor; or (d) any failure by Senior Creditor to properly perfect
any Lien in any Asset of Borrower, which Senior Creditor purports to now or
hereafter have as security and collateral for the payment and performance of
any of the Senior Obligations.
12. This is a continuing agreement of subordination and Senior Creditor may
continue, without notice to Junior Creditor, to extend credit or other
accommodation or benefit and lend moneys to or for the account of Borrower.
Junior Creditor hereby expressly waives notice of acceptance by Senior Creditor
of the subordination and other provisions of this Subordination Agreement,
notice of the creation of any indebtedness or liability of Borrower to Senior
Creditor, notice of the giving or extension of credit by Senior Creditor to
Borrower, notice of protest and default, notice of acceleration or intent to
accelerate, and notice of foreclosure or payment and performance of the Senior
Obligations. Junior Creditor consents and agrees that Senior Creditor shall be
under no obligation to marshal any assets in favor of Junior Creditor or against
or in payment of any or all of the Senior Obligations.
13. No course of dealing between Borrower and/or Junior Creditor and/or Senior
Creditor and no delay or omission by Senior Creditor or Junior Creditor in
exercising any right or remedy hereunder shall operate as a waiver thereof or of
any other right or remedy, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. All rights and remedies of Senior Creditor or Junior Creditor
hereunder are cumulative.
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14. Junior Creditor agrees not to assign, grant a participation interest in or
transfer at any time while this Subordination Agreement remains in effect any
rights, claim or interest of any kind in or to any of the Subordinated
Obligations, either principal or interest, unless such assignment is made
expressly subject to this Subordination Agreement.
15. Junior Creditor agrees that Senior Creditor has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of any Loan Document, or the collectability or
enforceability of the Senior Obligations, that Senior Creditor shall be entitled
to manage and supervise the Senior Obligations with Borrower in accordance with
its usual practices, modified from time to time as it deems reasonably
appropriate under the circumstances, without regard to the existence of any
rights that Junior Creditor may now or hereafter have (except such rights as are
expressly provided herein).
16. Senior Creditor agrees that Junior Creditor has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of any documents evidencing the Subordinated
Obligations, or the collectability or enforceability of the Subordinated
Obligations, that, except as provided in this Agreement, Junior Creditor shall
be entitled to manage and supervise the Subordinated Obligations with Borrower
in accordance with its usual practices, modified from time to time as it deems
reasonably appropriate under the circumstances.
17. Junior Creditor hereby assumes responsibility for keeping itself informed
of the financial condition of Borrower and of all other circumstances bearing
upon the risk of nonpayment of the Subordinated Obligations that diligent
inquiry would reveal, and Junior Creditor hereby agrees that Senior Creditor
shall have no duty to advise Junior Creditor of information known to Senior
Creditor regarding such condition or any such circumstances.
18. Senior Creditor hereby assumes responsibility for keeping itself informed
of the financial condition of Borrower and of all other circumstances bearing
upon the risk of nonpayment of the Senior Obligations that diligent inquiry
would reveal, and Senior Creditor hereby agrees that Junior Creditor shall have
no duty to advise Senior Creditor of information known to Junior Creditor
regarding such condition or any such circumstances.
19. This Subordination Agreement is binding on and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Whenever
reference is made in this Subordination Agreement to Borrower, such term shall
include any successor or assign of Borrower, including, without limitation, a
receiver, trustee or debtor-in-possession. This Subordination Agreement is and
is intended solely for the purpose of defining the relative rights of Senior
Creditor and Junior Creditor and there are no third party beneficiaries hereof,
including, without limitation, the Borrower. Nothing contained herein shall
impair Borrower's obligations to Junior Creditor, which obligations are
unconditional, affect the relative rights against Borrower of Junior Creditor
and other creditors of Borrower or prevent the exercise of Junior Creditor's
rights or remedies, subject to the express terms of this Subordination
Agreement.
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20. When used herein, the following terms shall have the following meanings:
"ASSETS" means, as applied to any Person, any interest of such Person
and/or any of its subsidiaries in any kind of right, interest, property or
asset, whether real, personal, or mixed real and personal, or whether tangible
or intangible, or whether cash, securities or other property.
"BORROWER" means Advanced Telemarketing Corporation, a Nevada corporation,
together, with its successors, transferees and assigns and any receiver, trustee
or debtor-in-possession of any such Person.
"BUSINESS DAY" means any day other than a Saturday, Sunday or holiday on
which Bank One is open for all or substantially all of its domestic and
international commercial banking business in Dallas, Texas.
"DISTRIBUTION" means, as applied to any Person, any distribution of Assets
of such Person of any kind or character, whether in cash, property, or
securities, and whether in respect of repayment or prepayment of indebtedness or
otherwise, and whether direct or indirect, by setoff, or otherwise, including,
but not limited to, (i) any payment or prepayment of Assets on account of the
Subordinated Obligations made by Borrower and/or any of its subsidiaries, (ii)
any redemption, purchase, or other acquisition of the Subordinated Obligations
by Borrower and/or any of its subsidiaries, (iii) the granting of any Lien on or
in any Assets of Borrower and/or any of its subsidiaries for the benefit of
Junior Creditor or (iv) any dividends or other payments payable with respect to
any Proceeding; provided, however, with respect to Junior Creditor,
"Distribution" shall not include any right it may have to receive any warrants
or other equity securities in Borrower.
"EVENT OF DEFAULT" means an Event of Default as defined in the Loan
Agreement.
"JUNIOR CREDITOR" means Xxxxxx Equity Investors III, L.P., together with
any and all of its assigns or transferees, any other present or future holders
of any Subordinated Obligations, any Person refinancing, refunding or replacing
all or any part of any Subordinated Obligations and any and all successors,
assigns or transferees of any such Persons and any receiver, trustee or debtor-
in-possession of any such Person.
"LIEN" means any lien, mortgage, pledge, or security interest.
"LOAN AGREEMENT" means that certain Loan and Security Agreement dated
February 8, 1996, as amended, in respect to loans in the principal sum of
$13,000,000 by and between Bank One, Texas, N.A. and Borrower, as amended,
modified, increased, renewed, extended or supplemented from time to time.
"LOAN DOCUMENTS" is as defined in the Loan Agreement.
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"PARENT" means ATC Communications Group, Inc., a Delaware corporation.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and governments and agencies and political
subdivisions thereof.
"PROCEEDING" means with respect to any Person (i) any insolvency,
bankruptcy, receivership, liquidation, reorganization, readjustment, composition
or other similar proceeding relating to such Person or substantially all of its
property or creditors as such, (ii) any proceedings for any liquidation,
dissolution or other winding-up of such Person, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment for the benefit of creditors of such Person or (iv) any marshaling of
the assets of such Person.
"SENIOR CREDITOR" means Bank One, Texas, N.A., together with any other
Persons who may from time to time be parties to and lenders under, or acquire a
participation interest in, the Loan Agreement, any other present or future
holder of the Senior Obligations, any Person refinancing, refunding or replacing
all or any part of any of the Senior Obligations and any successors, assigns or
transferees of any such Persons.
"SENIOR OBLIGATIONS" mean any and all indebtedness, obligations and
liabilities for which Borrower may now or hereafter be obligated to Senior
Creditor with respect to the Loan Agreement, together with interest and fees
accruing thereon and costs and expenses (including attorneys' fees and costs of
litigation) of collection thereof and including, without limitation, interest
thereon at the rate provided in the Loan Agreement which, but for the
commencement of any Proceeding relating to Borrower, would have accrued and been
payable with respect to such indebtedness, whether or not otherwise permitted by
law; together with any and all renewals, amendments, modifications, increases,
supplements, extensions, replacements, refinancing and refunding thereof; and
the amount of any indebtedness hereafter owing to any Person who extends credit
to Borrower to the extent such indebtedness was incurred by Borrower and used to
refund, replace or refinance any such indebtedness, and indebtedness for which
Borrower may now or hereafter be obligated to Bank One Leasing Corporation;
provided, however, that the principal amount of Senior Obligations and
indebtedness due to Bank One Leasing Corporation entitled to the benefits of
this Agreement shall not exceed $16,000,000.00, and interest entitled to the
benefits of this Agreement shall be limited to interest on principal not
exceeding such $16,000,000 cap; such limitation on the principal and interest
shall not limit the amount of fees, costs and expenses (including attorneys'
fees and costs of litigation) that are included in "Senior Obligations" and
entitled to the benefits of this Agreement.
"SUBORDINATED OBLIGATIONS" means any and all obligations and indebtedness
of Borrower to Junior Creditor, whether now existing or hereafter arising, and
including, without limitation, the obligations of Borrower to Junior Creditor
arising from any draws made by Senior Creditor under the Letter of Credit or any
rights with respect thereto that Junior Creditor may have under the
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Reimbursement and Indemnity Agreement between Borrower and Junior Creditor dated
on or about the date hereof, together with interest and fees accruing thereon
and costs and expenses (including attorneys' fees and costs of litigation) of
collection thereof; together with any and all amendments, renewals, extensions,
and any replacements, refinancings or refundings thereof and the amount of any
indebtedness now or hereafter owing to any Person who extends credit to Borrower
for the purpose of refunding, refinancing or replacing any such indebtedness.
21. Any notice or notification required, permitted or contemplated hereunder
shall be in writing, shall be addressed to the party to be notified at the
address set forth below or at such other address as each party may designate for
itself from time to time by notice hereunder, and shall be deemed to have been
validly served, given or delivered (i) three (3) days following deposit in the
United States mails, with proper first class postage prepaid, (ii) the next
business day after such notice was delivered to a regularly scheduled overnight
delivery carrier (such as Federal Express) with delivery fees either prepaid or
an arrangement, satisfactory with such carrier, made for the payment of such
fees, or (iii) upon receipt of the notice given by telecopy, mailgram, telegram,
telex, or personal delivery:
To Senior Creditor: Bank One, Texas, N.A.
0000 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: Asset Based Lending
Telecopy No.: 000-000-0000
With a copy to: Little, Pedersen, Xxxxxxxxxx & Xxx, L.L.P.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telecopy No.: 214-573-2323
To Junior Creditor: Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx Xxxxxxx
Telecopy No.: 000-000-0000
With a copy to: Paul, Hasting, Xxxxxxxx & Xxxxxx LLP
Twenty-Third Floor
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
Telecopy No.: 000-000-0000
11
22. Notwithstanding any other provision in this Agreement, this Agreement shall
remain in full force and effect and shall not terminate until (i) the Senior
Obligations have been indefeasibly paid in full in cash or (ii) Senior Creditor
and Junior Creditor agree in writing to terminate this Subordination Agreement;
the subordinations, agreements and priorities set forth in this Agreement shall
remain in full force and effect regardless of whether any party hereto in the
future seeks to rescind, amend, terminate, or reform, by litigation or
otherwise, its respective agreements with Borrower.
23. This Subordination Agreement may be signed in any number of counterparts,
each of which will constitute an original, and all of which, taken together,
shall constitute but one and the same agreement with the same effect as if the
signatures thereon were upon the same instrument.
24. Borrower agrees by its acknowledgment hereof that Junior Creditor and
Senior Creditor may discuss any matters affecting Borrower in any way and
exchange whatever information either Junior Creditor and Senior Creditor may
have concerning Borrower.
25. Bank One agrees that (a) in addition to holding the Pledged Stock on behalf
of itself as Senior Creditor, it will hold the Pledged Stock for as long as it
is a Senior Creditor on behalf of the Junior Creditor but only for purposes of
perfecting the security interests of the Junior Creditor under the Subordinated
Pledge Agreement that Parent has executed for the benefit of Junior Creditor on
or about the date hereof (the "SUBORDINATED PLEDGE AGREEMENT"), (b) Bank One
will deliver the Pledged Stock to Junior Creditor under the Subordinated Pledge
Agreement upon the payment in full of the Senior Obligations and all other
amounts owing to Bank One by Borrower, provided that Bank One is then the Senior
Creditor and has not previously foreclosed upon the Pledged Stock, (c) Bank One
will not release any Pledged Stock to Parent or Borrower without the prior
written consent of Junior Creditor (other than in connection with a foreclosure
or other exercise of remedies against the Pledged Stock by Bank One as Senior
Creditor), and (d) in the event that Senior Creditor releases any Pledged Stock
to any other Senior Creditor, Bank One (or such other Senior Creditor) will
obtain such Senior Creditor's agreement to comply with the obligations of Bank
One (or such other Senior Creditor) under this Section 25 with respect to such
Pledged Stock and, upon obtaining such agreement, Bank One (or such other Senior
Creditor) shall be released from any obligation under this Section 25 with
respect to any Pledged Stock released to another Senior Creditor that has agreed
to hold such Pledged Stock in accordance with this Section 25. In no event will
Bank One be liable or responsible for the compliance or noncompliance by any
such Senior Creditor with this Section 25. Nothing contained in this Section 25
or elsewhere in this Agreement is intended to or should be deemed to limit or
restrict any of Senior Creditor's rights or remedies following a default or an
event of default under the Loan Agreement or the Loan Documents to the extent
permitted by applicable law, all of which are expressly reserved, including,
without limitation, the right to foreclose out Junior Creditor's interest in the
Pledged Stock or to transfer the Pledged Stock by private or public sale free
and clear of any claims of Junior Creditor to the extent permitted by applicable
law. Any such foreclosure or sale will extinguish and cancel all obligations
and undertakings under this
12
Section 25 to the extent permitted by applicable law. Parent is executing this
Agreement solely for the purpose of evidencing its agreement to the terms and
provisions of this Agreement relating to the Pledged Stock.
26. The rights granted to Senior Creditor hereunder are solely for its
protection and nothing herein contained shall impose on Senior Creditor any
duties with respect to any property of Parent, Borrower or Junior Creditor
received hereunder, except as expressly provided in Section 25 with respect to
the holding of the Pledged Stock on behalf of the Junior Creditor for perfection
purposes only. Senior Creditor shall have no duty to preserve rights against
prior parties in any instrument or chattel paper received hereunder.
Notwithstanding any other provision of this Agreement, Senior Creditor shall
have no fiduciary duty or fiduciary obligation to and shall not be deemed to be
the agent of Parent, Borrower or Junior Creditor. In the event that Junior
Creditor seeks to foreclose on the Pledged Stock prior to such foreclosure by
Senior Creditor, Senior Creditor will cooperate with Junior Creditor to the
extent necessary to effect a sale of the Pledged Stock pursuant to Junior
Creditor's rights as a junior secured creditor but in no event will Senior
Creditor be required to release possession of the Pledged Stock or do any other
act that would jeopardize the perfection or priority of its first priority
security interest in the Pledged Stock. Junior Creditor agrees to indemnify and
hold Senior Creditor harmless from any and claims, causes of action, damages,
expenses, costs and fees (including fees of Senior Creditor's legal counsel)
arising out of or related to any sale, whether public or private, of the Pledged
Stock conducted by or on behalf of Junior Creditor. Without in any manner
limiting the scope of the foregoing indemnity, Senior Creditor will have no
obligation to take any action with respect to any such sale unless it has
received from Junior Creditor such cash deposit or collateral as Senior Creditor
may reasonably require to assure itself that Junior Creditor will promptly
perform under the foregoing indemnity with respect to expenses and fees that
Senior Creditor anticipates it will incur in connectio with such sale.
27. The parties hereto shall in good faith undertake to exercise their rights
and perform their obligations under this Subordination Agreement.
28. THE VALIDITY, ENFORCEABILITY AND CONSTRUCTION OF THIS SUBORDINATION
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE
STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT
OTHERWISE REFER CONSTRUCTION OR INTERPRETATION OF THIS SUBORDINATION AGREEMENT
TO THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.
29. SENIOR CREDITOR AND JUNIOR CREDITOR EACH HEREBY WAIVES TRIAL BY JURY WITH
RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF
THIS SUBORDINATION AGREEMENT AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
SENIOR CREDITOR AND JUNIOR CREDITOR.
30. THIS SUBORDINATION AGREEMENT SETS FORTH EXHAUSTIVELY THE COMPLETE
UNDERTAKING AND AGREEMENTS OF SENIOR CREDITOR AND JUNIOR
13
CREDITOR WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND THERE ARE NO OTHER
AGREEMENTS OR UNDERSTANDINGS BINDING UPON THEM WITH RESPECT TO THE
SUBORDINATED OBLIGATIONS AS DEFINED HEREIN.
IN WITNESS WHEREOF, this Subordination Agreement has been duly executed by
Junior Creditor as of May 4, 1998.
XXXXXX EQUITY INVESTORS III, L.P.
By: T.C. Equity Partners L.L.C.
General Partner
By
-------------------------------
Name:
----------------------------
Title:
---------------------------
Accepted as of May 4, 1998.
BANK ONE, TEXAS, N.A.
By
-----------------------------
Name:
--------------------------
Title:
-------------------------
STATE OF ________________ )
) ss.
COUNTY OF __________________ )
Before me, ______________________________, a Notary Public in and for said
County and State, on this ____ day of May, 1998, personally appeared _________
_________________________, known to me to be the ______________ of T.C. Equity
Partners L.L.C., the general partner of Xxxxxx Equity Investors III, L.P., and
acknowledged to me that he executed this Agreement for the considerations and
purposes therein set forth, on behalf of said limited liability company as
general partner of said limited partnership.
Given under my hand and seal of office this ____ day of May, 1998.
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
-----------------------------
14
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
Before me, ______________________________, a Notary Public in and for said
County and State, on this ____ day of May, 1998, personally appeared ________
_____________________ known to me to be the ____________________ , of Bank One,
Texas, N.A., and acknowledged to me that he executed this Agreement for the
considerations and purposes therein set forth on behalf of said banking
association.
Given under my hand and seal of office this ____ day of May, 1998.
---------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
-----------------------------
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ACKNOWLEDGMENT BY BORROWER
Borrower hereby acknowledges receipt of a copy of the foregoing
Subordination Agreement and agrees that Borrower will not pay any indebtedness
subordinated by the foregoing Subordination Agreement (except as otherwise
permitted by the Subordination Agreement) until all indebtedness of Borrower to
Senior Creditor now existing and hereafter arising shall have been paid in full
in cash and Senior Creditor's financing arrangements with Borrower are
terminated. In the event of any breach of the provisions of the foregoing
Subordination Agreement, Borrower agrees that, in addition to any other rights
and remedies Senior Creditor may have, all of Borrower's obligations and
liabilities to Senior Creditor shall, without notice or demand, become
immediately due and payable, unless Senior Creditor shall otherwise elect. By
execution of this acknowledgment, Borrower agrees to the terms of such
Subordination Agreement.
DATED: May __, 1998
ADVANCED TELEMARKETING CORPORATION
By
-------------------------------
Name:
----------------------------
Title:
---------------------------
CONSENT
The undersigned executes this Consent to evidence its consent to the
foregoing Agreement and in particular Section 24 thereof.
DATED: May __, 1998
ATC COMMUNICATIONS GROUP, INC.
By
-------------------------------
Name:
----------------------------
Title:
---------------------------
16
