Exhibit 10.3
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") dated June 28, 2006, is
between ______________________ ("Creditor"), and Silicon Valley Bank ("Bank").
RECITALS
A. GlobalOptions Group, Inc., a Nevada corporation ("Guarantor")
has guaranteed payment and performance of certain loans from Bank to Guarantor's
wholly-owned subsidiary, GlobalOptions, Inc., a Delaware corporation
("Subsdiary").
B. Guarantor is now offering on a "best efforts" basis (the
"Offering") a minimum of 5,000 promissory notes ("Notes") at a purchase price of
$1,000 per Note, up to a maximum of 50,000 Notes for up to an aggregate purchase
price of $50,000,000.
C. Pursuant to the Offering, Guarantor has issued a Note to the
Creditor.
D. To induce Bank to grant its consent for the Offering, Creditor
will subordinate all of Guarantor's indebtedness and obligations to Creditor
arising under its Note, existing now or later (the "Subordinated Debt"), to all
of Subsidiary's indebtedness and obligations to Bank.
THE PARTIES AGREE AS FOLLOWS:
1. Creditor subordinates to Bank any security interest or lien
that it has in any property of Guarantor. Despite attachment or perfection dates
of Creditor's security interest and Bank's security interest, Bank's security
interest in the Collateral (defined in the Security Agreement between Guarantor
and Bank, dated March 8, 2006, the "Security Agreement") is prior to Creditor's
security interest, if any.
2. All Subordinated Debt payments are subordinated to all of
Guarantor's obligations to Bank existing now or later, together with collection
costs of the Obligations (including attorneys' fees), including, interest
accruing after any bankruptcy, reorganization or similar proceeding and all
obligations (the "Senior Debt") under the Amended and Restated Loan and Security
Agreement dated February 3, 2006 between GlobalOptions, Inc., a Delaware
corporation and wholly-owned subsidiary of Borrower, and Bank (the "Loan
Agreement").
3. Creditor will not:
(a) demand or receive from Guarantor (and Guarantor will
not pay, other than through payment described in (i) Section 1(c) of
the Note permitting payment in equity of Guarantor or (ii) Section 6 of
the Note permitting conversion or exchange of the Note into equity,
including warrants, of Guarantor) any part of the Subordinated Debt, by
payment, prepayment, or otherwise, or
(b) accelerate the Subordinated Debt, or begin to or
participate in any action against Guarantor, until all the Senior Debt
is paid.
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4. Creditor must deliver to Bank in the form received (except for
endorsement or assignment by Creditor) any payment, distribution, security or
proceeds it receives on the Subordinated Debt other than according to this
Agreement.
5. These provisions remain in full force and effect, despite
Guarantor's insolvency, reorganization or any case or proceeding under any
bankruptcy or insolvency law, and Bank's claims against Guarantor and
Guarantor's estate will be fully paid before any payment is made to Creditor.
6. Until the Senior Debt is paid, Creditor irrevocably appoints
Bank as its attorney-in-fact, with power of attorney with power of substitution,
in Creditor's name or in Bank's name, for Bank's use and benefit without notice
to Creditor, to do the following in any bankruptcy, insolvency or similar
proceeding involving Guarantor:
(i) File any claims for the Subordinated Debt for
Creditor if Creditor does not do so at least 30 days before the
time to file claims expires, and
(ii) Accept or reject any plan of reorganization or
arrangement for Creditor and vote Creditor's claims in respect
of the Subordinated Debt in any way it chooses.
7. Creditor will immediately put a legend on the Subordinated Debt
instruments that the instruments are subject to this Agreement. No amendment of
the Subordinated Debt documents will modify this Agreement in any way that
terminates or impairs the subordination of the Subordinated Debt or the
subordination of the security interest or lien that Bank has in Subsidiary's
property. For example, instruments may not be amended to (i) increase the
interest rate of the Subordinated Debt, or (ii) accelerate payment of principal
or interest or any other portion of the Subordinated Debt.
8. All necessary action on the part of Creditor, its officers,
directors, partners, members and shareholders, as applicable, necessary for the
authorization of this Agreement and the performance of all obligations of the
Creditor hereunder has been taken. Additionally, the execution, delivery and
performance of and compliance with this Agreement will not result in any
material violation or default of any term of any of its charter, formation or
other organizational documents (such as Articles or Certificate of
Incorporation, bylaws, partnership agreement, operating agreement, etc.).
9. This Agreement is effective while Subsidiary or Guarantor owes
any amounts to Bank. If after full payment of the Senior Debt, Bank must
disgorge any payments made on the Senior Debt, this Agreement and the relative
rights and priorities provided in it, will be reinstated as to all disgorged
payments as though the payments had not been made, and Creditor will immediately
pay Bank all payments received under the Subordinated Debt to the extent the
payments would have been prohibited under this Agreement. At any time without
notice to Creditor, Bank may take actions it considers appropriate on the Senior
Debt such as terminating advances, increasing the principal, extending the time
of payment, increasing interest rates, renewing, compromising or otherwise
amending any documents affecting the Senior Debt and any collateral securing the
Senior Debt, and enforcing or failing to enforce any rights against Subsidiary
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or any other person. No action or inaction will impair or otherwise affect
Bank's rights under this Agreement. Creditor waives any benefits of California
Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and
3433.
10. This Agreement binds Creditor, its successors or assigns, and
benefits Bank's successors or assigns. This Agreement is for Creditor's and
Bank's benefit and not for the benefit of Guarantor, Subsidiary or any other
party. If Subsidiary is refinancing any of the Senior Debt with a new lender,
upon Bank's request of creditor, Creditor will enter into a new subordination
agreement with the new lender on substantially the terms of this Agreement.
11. This Agreement may be executed in two or more counterparts,
each of which is an original and all of which together constitute one
instrument.
12. California law governs this agreement without giving effect to
conflicts of laws principles. Creditor and Bank submit to the exclusive
jurisdiction of the courts in Santa Xxxxx County, California. CREDITOR AND BANK
EACH WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION FROM
THIS AGREEMENT.
13. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. Creditor is not
relying on any representations by Bank, Subsidiary or Guarantor in entering into
this Agreement. Creditor will keep itself informed of Guarantor's and
Subsidiary's financial and other conditions. This Agreement may be amended only
by written instrument signed by Creditor and Bank.
14. If there is an action to enforce the rights of a party under
this Agreement, the party prevailing will be entitled, in addition to other
relief, all reasonable costs and expenses, including reasonable attorneys' fees,
incurred in the action.
"Creditor" "Bank"
SILICON VALLEY BANK
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(Print Name)
By: By:
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Title: Title:
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Each of the Guarantor and Subsidiary approthe terms of this Agreement.
"Guarantor"
GLOBALOPTIONS GROUP, INC.
By:
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Title: Chairman and Chief Executive Officer
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"Subsidiary"
GLOBALOPTIONS, INC.
By:
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Title: Chairman
