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EXHIBIT 10.6
PEQUOT SUBORDINATION AGREEMENT
This PEQUOT SUBORDINATION AGREEMENT (this "Agreement"), dated as
of April 20, 2001, is entered into by and between PEQUOT PRIVATE EQUITY FUND II,
L.P., a Delaware limited partnership ("Subordinated Lender"), and FOOTHILL
CAPITAL CORPORATION, a California corporation ("Senior Lender"), with reference
to the following facts:
A. Senior Lender and Obligors have entered into the Senior Loan Documents
pursuant to which Senior Lender has agreed to make certain financial
accommodations to Borrowers and UK Borrower.
B. Subordinated Lender, Borrowers, and Canadian Obligors have entered
into the Subordinated Debt Documents, pursuant to which Subordinated Lender has
agreed to make certain financial accommodations to Parent.
C. The obligations of Obligors under the Senior Loan Documents and the
other Senior Indebtedness owing by Obligors to Senior Lender are secured by
security interests in and liens upon the Collateral.
D. The obligations of Borrowers and Canadian Obligors under the
Subordinated Debt Documents and the other Subordinated Indebtedness owing by
Borrowers and Canadian Obligors to Subordinated Lender are secured by a security
interest in all or a portion of the Collateral.
E. Subordinated Lender has agreed to the subordination of the
Subordinated Indebtedness to the Senior Indebtedness, upon the terms and subject
to the conditions set forth in this Agreement.
F. Senior Lender and Subordinated Lender wish to enter into this
Agreement to clarify their respective rights and priorities in the Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged by the parties hereto, the parties hereby agree as
follows:
1. Definitions.
a. As used in this Agreement, the following terms shall have the
following meanings:
"Agreement" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Blockage Period" means a Non-Payment Blockage Period or a Payment
Blockage Period.
"Borrowers" shall have the meaning ascribed thereto in the Loan
Agreement.
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"Canadian Obligors" shall have the meaning ascribed thereto in the
Loan Agreement.
"Collateral" means all tangible and intangible property of
Obligors, whether real or personal, including without limitation Obligors'
accounts, general intangibles, documents, chattel paper, instruments, investment
property, money, deposit accounts, securities, machinery, equipment,
furnishings, fixtures, inventory, and all products and proceeds of any of the
foregoing.
"Default" shall mean, individually and collectively, "Default" as
defined in the Loan Agreement and "Default" as defined in the UK Loan Agreement.
"Event of Default" shall mean, individually and collectively,
"Event of Default" as defined in the Loan Agreement and "Event of Default" as
defined in the UK Loan Agreement.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization, arrangement, or other similar relief.
"Loan Agreement" means that certain Loan and Security Agreement,
dated as of November 16, 2000, among Borrowers and Senior Lender.
"Non-Payment Blockage Period" means, with respect to any
Non-Payment Default Event, the period from and including the date of receipt by
Subordinated Lender of a Non-Payment Default Notice relating thereto until the
first to occur of (a) the 270th day after receipt of such Non-Payment Default
Notice; provided, however, that if, on or before such date (i) the Senior
Indebtedness is accelerated and (ii) Senior Lender has commenced and diligently
and in good faith is pursuing a judicial proceeding to collect the Senior
Indebtedness or diligently and in good faith is pursuing non-judicial remedies
to effect the foreclosure and sale of the Collateral securing the Senior
Indebtedness, then such period shall continue unless and until Senior Lender
rescinds such acceleration in writing or fails diligently to pursue such
judicial or non-judicial remedies, (b) the date on which Senior Lender shall
have expressly waived or acknowledged the cure of such Non-Payment Default
Event, in each case, in writing, or (c) the date on which Senior Lender shall
have expressly and irrevocably waived the application of Section 4.a and 4.b in
writing.
"Non-Payment Default Event" has the meaning specified in Section
4.b.
"Non-Payment Default Notice" means a written notice from or on
behalf of Senior Lender to Subordinated Lender of the existence of a Non-Payment
Default Event and specifically designating such notice as a "Non-Payment Default
Notice."
"Obligors" means, individually and collectively, Borrowers, UK
Borrower, Canadian Obligors, and UK Holding Company.
"Parent" means FutureLink Corp., a Delaware corporation.
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"Payment Blockage Period" means, with respect to any Payment
Default Event, the period from and including the date of receipt by Subordinated
Lender of a Payment Default Notice relating thereto until the first to occur of
(a) the date on which Senior Lender shall have expressly waived or acknowledged
the cure of such Payment Default Event, in each case in writing, or (b) the date
on which Senior Lender shall expressly and irrevocably waive the application of
Section 4.a and 4.b in writing.
"Payment Default Event" has the meaning specified in Section 4.a.
"Payment Default Notice" means a written notice from or on behalf
of Senior Lender of the existence of a Payment Default and specifically
designating such notice as a "Payment Default Notice."
"Permitted Subordinated Debt Payments" has the meaning specified
in Section 3.a.
"Scheduled Payment" has the meaning specified in Section 4.a.
"Scheduled Payment Date" has the meaning specified in Section 4.a.
"Senior Indebtedness" means all payment obligations (whether now
outstanding or hereafter incurred) of any Obligor in respect of (a) principal
(including reimbursement obligations in respect of letters of credit) under the
Loan Agreement, the UK Loan Agreement, or other Senior Loan Documents (or any
refinancing agreement entered into with respect to such agreements or
documents), (b) interest and premium, if any, on the outstanding Indebtedness
referred to in clause (a) above, (c) all fees (including commitment and letter
of credit fees) payable pursuant to the Loan Agreement and the UK Loan Agreement
(or a refinancing agreement entered into with respect to such agreements), (d)
all other payment obligations (including costs, expenses, or otherwise) of any
Obligor to Senior Lender under or arising pursuant to the Loan Agreement, the UK
Loan Agreement, or other Senior Loan Documents (or to third Persons under
provisions of a refinancing agreement entered into with respect thereto),
including all costs and expenses incurred by Senior Lender in connection with
its enforcement of any rights or remedies under the Senior Loan Documents,
including, by way of example, reasonable attorneys fees, court costs, appraisal
and consulting fees, auctioneer fees, rent, storage, insurance premiums, and
like items, and irrespective of whether allowable as a claim against any Obligor
in any Insolvency Proceeding, and (e) post-petition interest on the Indebtedness
referred to in clauses (a) through (d) above, at the rate provided for in the
instrument or agreements evidencing such Indebtedness, accruing subsequent to
the commencement of an Insolvency Proceeding (whether or not such interest is
allowed as a claim in such Insolvency Proceeding).
"Senior Loan Documents" means the Loan Agreement and the other
Loan Documents (as such term is defined in the Loan Agreement), the UK Loan
Agreement and other UK Loan Documents (as such term is defined in the Loan
Agreement), or any refinancing agreements entered into with respect to such
agreements and documents.
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"Subordinated Debt Documents" means the Subordinated Note, the
Subordinated Security Agreement, the Subordinated Guaranty and each other
document or agreement entered into or delivered in connection therewith.
"Subordinated Guaranty" means that certain Subsidiary Guaranty,
dated as of April 20, 2001, executed by Borrowers (other than Parent) and
Canadian Obligors in favor of Subordinated Lender.
"Subordinated Indebtedness" shall mean, collectively, all
indebtedness and other obligations of Borrowers and Canadian Obligors to
Subordinated Lender under the Subordinated Debt Documents and of any Obligor to
Subordinated Lender under any other document, instrument, or agreement, whether
the sums represent principal, interest, dividends, costs, attorneys fees,
charges, or other obligations due or not due, whether incurred directly or
indirectly and whether absolute or contingent, including, without limitation,
any claim for breach of representation or warranty or any right of rescission,
provided, however, that Subordinated Indebtedness shall not include unsecured
obligations of Parent to Subordinated Lender under that certain Securities
Purchase Agreement by and among Parent, Subordinated Lender, and certain other
investors, dated as of October 15, 1999, and that certain Securities Purchase
Agreement by and among Parent, Subordinated Lender, and Pequot Endowment Fund,
L.P., dated as of April 28, 2000.
"Subordinated Note" means that certain Secured Subordinated
Convertible Promissory Note, dated as of April 20, 2001, and executed by Parent
in favor of Subordinated Lender in the original principal amount of $5,000,000.
"Subordinated Security Agreement" means that certain Security
Agreement, dated as of April 20, 2001, between, on the one hand, Subordinated
Lender and, on the other hand, Borrowers and Canadian Obligors.
"UK Borrower" shall have the meaning ascribed thereto in the Loan
Agreement.
"UK Holding Company" shall have the meaning ascribed thereto in
the Loan Agreement.
"UK Loan Agreement" means that certain loan agreement, dated as of
December 14, 2000, between Lender and UK Borrower.
b. Terms defined in the Loan Agreement and the UK Loan Agreement.
Unless otherwise defined in this Agreement, any and all initially capitalized
terms set forth in this Agreement shall have the meaning ascribed thereto in the
Loan Agreement and the UK Loan Agreement. In the event of a direct conflict
between the terms and provisions of this Loan Agreement and the UK Loan
Agreement, it is the intention of the parties hereto that such documents shall
be read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict between the
Loan Agreement and the UK Loan Agreement that cannot be resolved as aforesaid,
the terms and provisions of the Loan Agreement shall control and govern;
provided, however, that the inclusion in the UK Loan Agreement of additional
obligations on the part of Obligors and supplemental interests, rights,
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and remedies in favor of Senior Lender (whether under federal law or applicable
California law) in respect of the Collateral, shall not be deemed a conflict in
the Loan Agreement.
2. Subordination and Standby.
a. Indebtedness. Except as set forth in Section 3.a of this
Agreement, unless and until all Senior Indebtedness has been fully paid and
satisfied in cash and the commitments to advance Senior Indebtedness have been
terminated, Subordinated Lender shall not accept or receive, by payment, setoff,
or in any other manner, from any Obligor the whole or any part of any sums which
may now or hereafter be owing to Subordinated Lender on account of the
Subordinated Indebtedness;
b. Liens and Security Interests. Any and all of Subordinated
Lender's liens and security interests against any Collateral securing the
Subordinated Indebtedness, whether now existing or hereafter granted or arising,
shall in each case be subordinate to the rights, liens, and interests in the
Collateral held by Senior Lender to secure the Senior Indebtedness. Except as
set forth in Section 3.a, unless and until all of the Senior Indebtedness has
been fully paid and satisfied in cash and the commitments to advance Senior
Indebtedness have been terminated:
(1) Subordinated Lender shall not commence, prosecute, or
participate in any lawsuit, action, or proceeding, whether private, judicial,
equitable, administrative or otherwise (including, without limitation, any
bankruptcy case against any Obligor or any Obligor's assets), provided that, as
more fully set forth in Section 5 hereof, Subordinated Lender may file a proof
of claim in a bankruptcy or insolvency proceeding involving any Borrower or
Canadian Obligor, which proof of claim shall indicate Subordinated Lender's
subordination hereunder;
(2) Subordinated Lender shall not demand or accept any payment on
the Subordinated Indebtedness; or
(3) Subordinated Lender shall have no right either to (a) possess
any assets of any Obligor, or (b) enforce any liens or security interests in,
foreclose, levy, or execute upon, or collect or attach any Obligor's assets,
whether by private or judicial action or otherwise.
3. Permitted Payments.
a. Permitted Payments. Subject to the conditions set forth herein,
Parent may pay to Subordinated Lender, and Subordinated Lender may accept and
receive the following payments on account of the Subordinated Indebtedness: (i)
regularly scheduled payments of interest in accordance with the terms of the
Subordinated Debt Documents, (ii) so long as Parent receives cash in an amount
not less than $10,000,000 from the sale of capital stock on terms satisfactory
to Senior Lender in its sole discretion, payment of principal in accordance with
the terms of the Subordinated Note, and (iii) payment of Subordinated Lender's
attorneys' fees in an amount not to exceed $60,000 (collectively, the "Permitted
Subordinated Debt Payments"); provided, however, that no payment on the
Subordinated Indebtedness may be made, accepted, or received during any Blockage
Period instituted pursuant to Section 4 of this Agreement.
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b. Prepayment or Acceleration of Subordinated Indebtedness.
Subordinated Lender agrees that any payment or prepayment of the principal of
the Subordinated Indebtedness or any payments resulting from either the breach
of any covenant or representation or warranty contained in any Subordinated Debt
Document or any payment or prepayment as a result of the acceleration of any
amounts due under any Subordinated Debt Document shall not be Permitted
Subordinated Debt Payments for the purpose of this Agreement.
4. Blockage Periods.
a. If (i) any Obligor shall default in the payment of any Senior
Indebtedness (whether principal, interest, or other amount) when the same
becomes due and payable, whether at maturity or at a date fixed for scheduled
payment or by declaration or acceleration or otherwise (a "Payment Default
Event"), and (ii) the Subordinated Lender shall have received a Payment Default
Notice, then no Obligor shall make, and Subordinated Lender shall not accept or
receive, any direct or indirect payment or distribution of any kind or character
(whether in cash, securities, assets, by set-off, or otherwise), on account of
the Subordinated Indebtedness during the Payment Blockage Period applicable to
such Payment Default Event; provided, however, that in the case of any payment
on or in respect of any Subordinated Indebtedness that would (in the absence of
any such Payment Default Notice) have been due and payable on any date (a
"Scheduled Payment Date") during such Payment Blockage Period, the provisions of
this Section 4.a shall not prevent the making of such payment (a "Scheduled
Payment") on or after the date immediately following the termination of such
Payment Blockage Period. The foregoing provisions of this subsection to the
contrary notwithstanding, the failure by Parent to make a Scheduled Payment on a
Scheduled Payment Date during a Payment Blockage Period shall constitute a
default to the extent provided under the Subordinated Debt Documents; provided,
however, that if Parent makes such Scheduled Payment within 5 Business Days
following the termination of such Payment Blockage Period at a time when such
Scheduled Payment is otherwise permitted to be made hereunder, such default
shall be deemed to have been cured.
In the event that, notwithstanding the foregoing, any Obligor
shall make any payment to Subordinated Lender prohibited by the foregoing
provisions of this Section 4.a, then and in such event such payment shall be
segregated by Subordinated Lender and held in trust for the benefit of and
immediately shall be paid over to Senior Lender (in the same form received, with
all necessary endorsements) for application against the Senior Indebtedness
remaining unpaid until the Senior Indebtedness is paid in full.
b. Except under circumstances when the terms of Section 4.a or
Section 5 are applicable, if (i) a Default or Event of Default (other than a
Payment Default Event) shall have occurred and be continuing under the Senior
Loan Documents (a "Non-Payment Default Event"), and (ii) Subordinated Lender
shall have received a Non-Payment Default Notice, then no Obligor shall make,
and Subordinated Lender shall not accept or receive, any direct or indirect
payment or distribution of any kind or character (whether in cash, Assets,
securities, by set-off, or otherwise) on account of the Subordinated
Indebtedness during the Non-Payment Blockage Period applicable to such
Non-Payment Default Event; provided, however, that in the case of any Scheduled
Payment on or in respect of any Subordinated Obligation that would (in the
absence of any such Non-Payment Default Notice) have been due and payable on any
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Scheduled Payment Date during such Non-Payment Blockage Period, the provisions
of this Section 4.b shall not prevent the making of such Scheduled Payment on or
after the date immediately following the termination of such Non-Payment
Blockage Period. The foregoing provisions of this Section 4.b to the contrary
notwithstanding, (a) the failure by Parent to make a Scheduled Payment on a
Scheduled Payment Date during a Non-Payment Blockage Period shall constitute a
default to the extent provided under the Subordinated Debt Documents, provided,
however, that if Parent makes such Scheduled Payment within 5 Business Days
following the termination of such Non-Payment Blockage Period at a time when
such Scheduled Payment is otherwise permitted to be made hereunder, such default
shall be deemed to have been cured, and (b) the aggregate number of days that
Subordinated Lender shall be subject to one or more Non-Payment Blockage Periods
shall not exceed 270 days in any 360 consecutive day period; provided, however,
that if the Senior Indebtedness is accelerated and Senior Lender has commenced
and diligently and in good faith is pursuing a judicial proceeding to collect
the Senior Indebtedness or diligently and in good faith is pursuing non-judicial
remedies to effect the foreclosure and sale of the Collateral securing the
Senior Indebtedness, then any applicable Non-Payment Blockage Period shall
continue until Senior Lender rescinds such acceleration in writing or fails
diligently to pursue such judicial or non-judicial remedies.
In the event that, notwithstanding the foregoing, any Obligor
shall make any payment to Subordinated Lender prohibited by the foregoing
provisions of this Section 4.b, then and in such event such payment shall be
segregated by Subordinated Lender and held in trust for the benefit of and
immediately shall be paid over to Senior Lender (in the same form received, with
all necessary endorsements) for application against the Senior Indebtedness
remaining unpaid until the Senior Indebtedness is paid in full.
5. Insolvency Proceeding.
a. In the event of (i) any Insolvency Proceedings relative to any
Obligor, (ii) any proceedings for voluntary liquidation, dissolution, or other
winding up of any Obligor, whether involving any Insolvency Proceedings, or
(iii) any arrangement, adjustment, composition or relief of any Obligor or such
Obligor's debts or any marshaling of the assets of any Obligor, then, in each
case, (A) all Senior Indebtedness shall first be paid in full in cash before any
payment is made by or on behalf of Parent, the other Borrowers, or the Canadian
Obligors on the Subordinated Indebtedness; (B) any payment or distribution of
any kind or character (whether in cash, securities, assets, by set-off, or
otherwise) to which Subordinated Lender would be entitled but for the provisions
of this Section 5.a (including, without limitation, any payment or distribution
which may be payable or deliverable to Subordinated Lender by reason of the
payment of any other Indebtedness of such Obligor or its Subsidiaries being
subordinated to payment of the Subordinated Indebtedness) shall be paid or
delivered by the Person making such payment or distribution, whether a trustee
in bankruptcy, a receiver, a liquidating trustee, or otherwise, directly to
Senior Lender to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid. In the event that, in the circumstances
contemplated by this Section 5.a, and notwithstanding the foregoing provisions
of this Section 5.a, Subordinated Lender shall have received any payment or
distribution of any kind or character (whether in cash, securities, assets, by
setoff, or otherwise) that it is not entitled to receive by the foregoing
provisions, before all Senior Indebtedness is paid in full, then and in such
event such payment or distribution shall be segregated and held in trust for the
benefit of
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and immediately shall be paid over to Senior Lender for application against the
payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full.
b. If Subordinated Lender does not file a proper claim or proof of
debt or other document or amendment thereof in the form required in any
proceeding under the Bankruptcy Code prior to 30 days before the expiration of
time to file such claim or other document or amendment thereof, then Senior
Lender shall have the right (but not the obligation) in such proceeding, and
hereby irrevocably is appointed lawful attorney of Subordinated Lender for the
purpose of enabling Senior Lender to demand, xxx for, collect, receive and give
receipt for the payments and distributions in respect of the Subordinated
Indebtedness that are made in such proceeding and that are required to be paid
or delivered to Senior Lender as provided in Section 5.a, and to file and prove
all claims therefor and to execute and deliver all documents in such proceeding
in the name of Subordinated Lender or otherwise in respect of such claims, as
Senior Lender reasonably may determine to be necessary or appropriate.
6. Modifications of Indebtedness.
a. Senior Indebtedness. Nothing contained in this Agreement shall
preclude Senior Lender from discontinuing the extension of credit to Borrowers
or UK Borrower (whether under the Loan Agreement, the UK Loan Agreement, or
otherwise) or from taking (without notice to Subordinated Lender, any Obligor,
or any other person) any other action in respect of the Senior Indebtedness or
the Collateral which Senior Lender is otherwise entitled to take with respect to
the Senior Indebtedness or the Collateral. Senior Lender shall have the right,
without notice to or consent from Subordinated Lender, to amend, supplement or
modify the Senior Indebtedness, in any manner whatsoever, including, without
limitation, any renewals, extensions or shortening of time of payments (even if
such shortening causes any Senior Indebtedness to be due on demand or
otherwise), any revision of any amortization schedule with respect thereto, and
any increase in the amount of the Senior Indebtedness, and Subordinated Lender
consents and agrees to any such amendment, supplement or modification.
Subordinated Lender waives notice of any such amendment, supplement, or
modification, and agrees that no such amendment, supplement, or modification
shall affect, release, or impair the subordinations contained herein.
b. Subordinated Indebtedness. Subordinated Lender understands and
agrees that none of the Subordinated Debt Documents or any other document,
instrument or agreement evidencing all or any part of the Subordinated
Indebtedness may be modified or amended without the prior written consent of
Senior Lender.
7. Subordinated Indebtedness Owed Only to Subordinated Lender.
Subordinated Lender warrants and represents that Subordinated Lender has not
previously assigned any interest in the Subordinated Indebtedness, that no other
party owns an interest in any of the Subordinated Indebtedness (whether as joint
holders, participants, or otherwise), and that the entire Subordinated
Indebtedness is owing only to Subordinated Lender.
8. Payments Received by Subordinated Lender. Except as permitted in
Section 3.a hereof, if any payment, distribution, Collateral, or proceeds
thereof is received by Subordinated Lender from any Obligor with respect to the
Subordinated Indebtedness prior to the satisfaction
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in full of all the Senior Indebtedness in cash and the termination of the
commitments to advance Senior Indebtedness, Subordinated Lender shall receive
and hold the same in trust as trustee for the benefit of Senior Lender and shall
forthwith deliver such payment, distribution, or proceeds to Senior Lender in
precisely the form received (except for the endorsement or assignment by
Subordinated Lender where necessary), for application on any of the Senior
Indebtedness, due or not due. In the event of the failure of Subordinated Lender
to make any such endorsement or assignment to Senior Lender, Senior Lender and
any of its officers or agents are hereby irrevocably authorized to make such
endorsement or assignment.
9. Postpetition Financing, Liens. In the event of any bankruptcy case
against any Obligor or any of the assets of any Obligor, Subordinated Lender
hereby expressly consents to the granting by such Obligor to Senior Lender of
senior liens and priorities in connection with any post-petition financing of
such Obligor by Senior Lender.
10. Sale of Assets. In the event of a sale of some or all of the assets
of any Obligor that is permitted by Senior Lender, Subordinated Lender agrees to
release its security interest in such assets, or any of them, upon the request
of Senior Lender and agrees that it will not object to same.
11. Instrument Legends. The face of each of the Subordinated Debt
Documents and any other instrument evidencing the Subordinated Indebtedness or
any portion thereof or any security therefor shall be inscribed with a legend
conspicuously indicating that payment thereon or performance thereof is
subordinated to the claims of Senior Lender pursuant to the terms of this
Agreement, and copies thereof shall be delivered to Senior Lender. Any
instrument evidencing any of the Subordinated Indebtedness or any portion
thereof which is hereafter executed will, on the date thereof, be inscribed with
the aforesaid legend, and copies thereof will be delivered to Senior Lender on
the date of its execution or within five (5) business days thereafter.
12. Additional Remedies. If Subordinated Lender violates any of the terms
of this Agreement, in addition to any remedies in law, equity, or otherwise,
Senior Lender may restrain such violation in any court of law and may interpose
this Agreement as a defense in any action by Subordinated Lender.
13.Subordinated Lender's Waivers. Subordinated Lender expressly waives
all notice of the acceptance by Senior Lender of the subordination and other
provisions of this Agreement and agrees that Senior Lender has made no
warranties or representations with respect to the legality, validity,
enforceability, collectability or perfection of the Senior Indebtedness or any
liens or security interests held in connection therewith.
Subordinated Lender agrees that Senior Lender shall be entitled to
manage and supervise its loans in accordance with applicable law without regard
to the existence of any rights that Subordinated Lender may now or hereafter
have in or to any assets of any Obligor. Senior Lender shall have no liability
to Subordinated Lender as a result of any and all lawful actions which Senior
Lender takes or omits to take (including, without limitation, actions with
respect to the creation, perfection or continuation of its liens or security
interests, actions with respect to the occurrence of a Default or Event of
Default, actions with respect to the foreclosure
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upon, sale, release or failure to realize upon, any of its Collateral, and
actions with respect to the collection of any claim for all or any part of the
Senior Indebtedness from any account debtor or any other party), regardless of
whether any such actions or omissions may affect Senior Lender's rights to
deficiency or Subordinated Lender's rights of subrogation or reimbursement.
Senior Lender may, from time to time, enter into agreements and
settlements with Obligors as it may determine, including, without limitation,
any substitution of Collateral, any release of any lien or security interest and
any release of Obligors. Subordinated Lender waives any and all rights it may
have to require Senior Lender to marshal assets, to exercise rights or remedies
in a particular manner, or to forbear from exercising such rights and remedies
in any particular manner or order.
14. Waivers. No waiver shall be deemed to be made by Senior Lender or
Subordinated Lender of any of their respective rights hereunder unless it is in
writing signed by the waiving party. Each such waiver shall be a waiver only
with respect to the specific instance involved and shall in no way impair the
rights of the waiving party or the obligations of the other party to the waiving
party in any other respect at any other time.
15. Information Concerning Financial Condition. Subordinated Lender
hereby assumes responsibility for keeping itself informed of the financial
condition of Obligors and of all other circumstances bearing upon the risk of
nonpayment of the Subordinated Indebtedness, and agrees that Senior Lender shall
have no duty to advise Subordinated Lender of information known to Senior Lender
regarding such condition or any such circumstances. In the event Senior Lender,
in its sole discretion, undertakes, at any time or from time to time, to provide
any such information to Subordinated Lender, Senior Lender shall be under no
obligation (i) to provide any such information to Subordinated Lender on any
subsequent occasion, (ii) to undertake any investigation, or (iii) to disclose
any information which, pursuant to its commercial finance practices, Senior
Lender wishes to maintain confidential.
16. Third Party Beneficiaries. This Agreement is solely for the benefit
of Senior Lender, Subordinated Lender, and their respective successors and
assigns, and neither any Obligor nor any other persons or entities are intended
to be third party beneficiaries hereunder or to have any right, benefit,
priority or interest under, or because of the existence of, or to have any right
to enforce, this Agreement. Senior Lender and Subordinated Lender shall have the
right to modify or terminate this Agreement at any time without notice to or
approval of any Obligor or any other person or persons.
Nothing in this Agreement is intended to or shall impair, as
between Parent and Subordinated Lender, the obligation of Parent, which is
absolute and unconditional, to pay its obligations with respect to the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with its terms, or affect the relative rights of Subordinated Lender
and creditors of Obligors other than Senior Lender.
17. Subrogation. After the repayment in full in cash of the Senior
Indebtedness and the termination of the commitments to advance Senior
Indebtedness, and prior to repayment in full of the Subordinated Indebtedness,
the Subordinated Lender shall be subrogated to the rights of Senior Lender to
the extent that distributions otherwise payable to the Subordinated Lender
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have been applied to the payment of the Senior Indebtedness in accordance with
the provisions of this Agreement. Senior Lender shall have no obligation or duty
to protect the Subordinated Lender's rights of subrogation arising pursuant to
this Agreement or under any applicable law, nor shall Senior Lender be liable
for any loss to, or impairment of, any subrogation rights held by the
Subordinated Lender.
18. Notices. For the purposes of this Agreement, written notices shall be
sent by U.S. first class mail, postage prepaid; or by U.S. certified mail,
return receipt requested, postage prepaid; or by personal delivery; or by
facsimile confirmed by the recipient; and addressed to the notified party at its
address set forth below:
If to Senior Lender: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy: 310.453.7413
Attention: Business Finance Division Manager
with a copy to: XXXXXXX, XXXXXXX & XXXXXXXX LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: 213.745.3345
Attention: Xxxx Xxxxxxx Hilson, Esq.
If to Subordinated Lender: PEQUOT PRIVATE EQUITY FUND II, L.P.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203.291.5563
Attention: Xxxxx Xxxxxx and Xxxxx Xxxxxx
with copies to: FutureLink Corp.
0 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy: 949.672.3117
Attention: Xxxxx Xxxxxxxx, Esq.
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this section, other
than notices in connection with Section 9504 or 9505 of the UCC, shall be deemed
received on the earlier of the date of actual receipt or 3 days after deposit
thereof in the mail. Notices sent in connection with Section 9504 or 9505 of the
UCC shall be deemed sent when deposited in the mail or personally delivered, or
, where permitted by law, transmitted by telefacsimile or other similar method
set forth above.
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19. Costs and Attorneys Fees. In the event it becomes necessary for
either Senior Lender or Subordinated Lender to commence or become a party to any
proceeding or action to enforce the provisions of this Agreement, the court or
body before which the same shall be tried shall award to the prevailing party
all costs and expenses thereof, including, but not limited to, reasonable
attorneys' fees, the usual and customary and lawfully recoverable court costs,
and all other expenses in connection therewith.
20. Consent to Jurisdiction; Additional Waivers. Subordinated Lender and
Senior Lender each consent to the jurisdiction of any state or federal court
located within the County of Los Angeles, California; provided, however, that
any suit seeking enforcement against any Collateral or other property may be
brought, at Senior Lender's option, in the courts of any jurisdiction where
Senior Lender elects to bring such action or where such Collateral or other
property may be found. Subordinated Lender waives personal service of any and
all process upon it, and consents that all service of process be made in the
manner set forth in Section 18 of this Agreement. Subordinated Lender and Senior
Lender each waive, to the fullest extent each may effectively do so, any defense
or objection based upon forum non conveniens and any defense or objection to
venue of any action instituted within the County of Los Angeles, State of
California. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
AGREEMENT.
21. Governing Law. This Agreement has been delivered and accepted at and
shall be deemed to have been made in the State of California, and shall be
interpreted, and the rights and liabilities of the parties hereto determined, in
accordance with the laws of the State of California.
22. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties' respective successors and assigns,
subject to the provisions hereof.
23. Integrated Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the within matters and may not be
modified or amended except upon a writing signed by all parties.
24. Authority. Each of the parties hereto certifies that such party has
all necessary authority to execute this Agreement.
25. Counterparts. This Agreement may be executed in one or more
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
26. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
27. Severability. Any provision of this Agreement that is prohibited by
law or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision. To the extent
permissible, the parties waive any law that prohibits any provision of this
Agreement or renders any provision hereof unenforceable.
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28. Conflicts. To the extent that there is a conflict or inconsistency
between any provision hereof, on the one hand, and any provision of any
Subordinated Debt Document, on the other hand, this Agreement shall control and
prevail.
29. Termination. This Agreement shall continue in full force and effect
until Obligors have satisfied in full in cash the Senior Indebtedness and the
commitments to advance Senior Indebtedness have been terminated.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ XXXX XXXXXX
-------------------------------------
Name: Xxxx Xxxxxx
-----------------------------------
Title: Vice President, Senior Account
Executive
----------------------------------
PEQUOT PRIVATE EQUITY FUND II, L.P.,
a Delaware limited partnership
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ XXXXX X. X'XXXXX
-------------------------------------
Name: Xxxxx X. X'Xxxxx
-----------------------------------
Title: General Counsel
----------------------------------
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OBLIGORS' ACKNOWLEDGEMENT
The undersigned Obligors hereby approve of, and agree and consent
to, the foregoing Pequot Subordination Agreement, dated as of April 20, 2001,
between Foothill Capital Corporation, a California corporation, and Pequot
Equity Fund II, L.P., a Delaware limited partnership (the "Pequot Subordination
Agreement"). Unless otherwise defined in this Acknowledgement, terms defined in
the Pequot Subordination Agreement have the same meanings when used in this
Acknowledgement.
Each Borrower and Canadian Obligor agrees to be bound by the
Pequot Subordination Agreement, and agrees that any default, event of default,
or unmatured event of default by any Borrower or Canadian Obligor under any
present or future instrument or agreement among Obligors and Subordinated Lender
shall constitute an immediate default, event of default, and unmatured event of
default under all present and future instruments and agreements among Obligors
and Senior Lender. Each Obligor agrees that the Pequot Subordination Agreement
may be amended by Senior Lender and Subordinated Lender without notice to, or
the consent of, any Obligor.
FUTURELINK CORP., a Delaware corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
FUTURELINK MICRO VISIONS CORP., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
FUTURELINK ASYNC CORP., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
FUTURELINK PLEASANTON CORP., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
[signature pages continue]
16
FUTURELINK MADISON CORP., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
FUTURELINK VSI CORP., a Maryland corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
3045207 NOVA SCOTIA COMPANY, a company
organized under the laws of Nova Scotia
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
1423280 ONTARIO INC., a company organized
under the laws of Ontario
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
FUTURELINK CANADA CORP., a company organized
under the laws of Ontario
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Title: President and Chief Executive Officer
[signature pages continue]
17
FUTURELINK EUROPE LTD., a corporation
organized under the laws of England
By: /s/ XXXX X. PASEA
---------------------------------------
Title: Managing Director (Europe)
KNS HOLDINGS LIMITED, a company organized
under the laws of England
By: /s/ XXXX X. PASEA
---------------------------------------
Title: Managing Director (Europe)
