SUBORDINATION AND INTERCREDITOR AGREEMENT
BETWEEN
FIRST UNION NATIONAL BANK
(SENIOR CREDITOR)
AND
APPLIED BIOSCIENCE INTERNATIONAL, INC.
(SUBORDINATE CREDITOR)
WITH REGARD TO
ENVIRON HOLDINGS, INC.
(DEBTOR)
ENVIRON INTERNATIONAL CORPORATION
(DEBTOR)
DATED AS OF MARCH 30, 1999
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SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS AGREEMENT made as of the 30th day of March, 1999, by and among:
FIRST UNION NATIONAL BANK, a national banking association, having an
address from which information concerning security interests may be obtained at
First Union National Bank, Portfolio Management - 3 South, 0000 Xxxxx Xxxxxx
Xxxx, XxXxxx, Xxxxxxxx 00000 (referred to herein as "Senior Creditor"),
APPLIED BIOSCIENCE INTERNATIONAL INC., a Delaware corporation ("ABI"),
having its chief executive office and mailing address at 0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and
PPD UK HOLDINGS LIMITED, a private company incorporated in England and
Wales ("PPDUK," and together with ABI, the "Subordinate Creditors"), having its
chief executive office and mailing address at 0000 Xxxxxxxxxxx Xxxxxx Xxxxxxxxx,
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRELIMINARY STATEMENTS
Senior Creditor and Subordinate Creditors have extended and may from
time to time extend certain financing or other credits to ENVIRON HOLDINGS,
INC., a Delaware corporation, having a mailing address at 0000 Xxxxx Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 ("EHI") and ENVIRON INTERNATIONAL
CORPORATION (formerly known as ENVIRON ENVIRONMENTAL SCIENCES GROUP, INC.), a
Virginia corporation, having a mailing address at 0000 Xxxxx Xxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 ("ENVIRON") (EHI and ENVIRON are each
referred to herein as a "Borrower" and are referred to herein collectively as
"Borrowers").
The financing or other credits extended by Senior Creditor or
Subordinate Creditor to the Borrowers may be guaranteed by ENVIRONMENTAL
ASSESSMENT GROUP LIMITED, a private company limited by shares incorporated in
England and Wales (referred to herein individually as a "Guarantor").
The Borrowers, the Guarantor and their respective subsidiaries each are
referred to herein individually as a "Debtor" and referred to herein
collectively as "Debtors."
Senior Creditor and Subordinate Creditors desire to set forth their
relative rights and priorities with respect to payment and performance of the
indebtedness and any other obligations of Debtors to them.
NOW, THEREFORE, in consideration of the foregoing, and the receipt of
One Dollar ($1.00) and other good and valuable consideration, the receipt of
which is hereby acknowledged, Senior Creditor and Subordinate Creditors hereby
covenant and agree as follows:
ARTICLE I
CONSTRUCTION AND DEFINED TERMS
Section 1.01. Articles and Sections. The Article and Section headings
and captions in this Agreement are for convenience only and shall not affect the
construction or interpretation of this Agreement.
Section 1.02. Schedules. The references in this Agreement to specific
Schedules shall be read as references to such specific Schedules attached, or
intended to be attached, to this Agreement and any counterpart of this Agreement
and regardless of whether they are in fact attached to this Agreement, and
including any amendments, supplements, and replacements thereto from time to
time.
Section 1.03. [Omitted.]
Section 1.04. Time. Time is of the essence of this Agreement.
Section 1.05. Defined Terms. Unless otherwise expressly stated in this
Agreement, capitalized terms used in this Agreement shall have the following
meanings:
"ACQUISITION LOAN" The term loan in the amount of up to Seven
Million Dollars ($7,000,000) made by the Senior Creditor to the Borrowers under
the Bank Credit Agreement. The Acquisition Loan may not, without the prior
written consent of the Subordinate Creditors, be amended, supplemented or
replaced in any manner which (i) increases the amount of principal or interest
due from Borrowers in respect thereof, or (ii) extends the term of the
Acquisition Loan.
"BANK CREDIT AGREEMENT" The Credit and Security Agreement dated
as of March 30, 1999 between Senior Creditor and the Borrowers, and, subject to
the limitation in the immediately following sentence, any amendments,
supplements, and replacements as may be made thereto or therefor from time to
time. The Credit and Security Agreement may not, without the prior written
consent of the Subordinate Creditors, be amended, supplemented or replaced in
any respect which (i) increases the amount of the Senior Creditor Obligations,
(ii) extends the term of the Acquisition Loan, or (iii) extends the term of the
Working Capital Loan beyond the fourth (4th) year (if the Working Capital Loan
is extended for a 4th year) of the term of the Working Capital Loan.
"BANK LETTER OF CREDIT APPLICATIONS" Any Letter of Credit
Application (as defined in the Bank Credit Agreement).
"BANK NOTES" The Term Note and any Revolving Credit Notes (as
defined in the Bank Credit Agreement) and, subject to the limitation in the
immediately following sentence, any amendments, supplements, and replacements as
may be made thereto or therefor from time to time. The Term Note and any
Revolving Credit Notes may not, without the prior written consent of the
Subordinate Creditors, be amended, supplemented, or replaced in any respect
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which (i) increases the amount of the Senior Creditor Obligations, (ii) extends
the term of the Acquisition Loan, or (iii) extends the term of the Working
Capital Loan beyond the fourth (4th) year (if the Working Capital Loan is
extended for a 4th year) of the term of the Working Capital Loan.
"BANK PLEDGE AGREEMENTS" The Pledge Agreements and any other
pledge agreements or share charges as may be made to or for the benefit of the
Bank from time to time, and any amendments, supplements, and replacements as may
be made thereto or therefor from time to time.
"BANKRUPTCY CODE" The United States Bankruptcy Code, as it may be
amended from time to time.
"COLLATERAL" Any Property in which Senior Creditor or Subordinate
Creditors have a Lien.
"CONSULTING AGREEMENT" The Consulting Agreement referred to in
Section 2.4(c) of the Stock Purchase Agreement which provides for consulting
payments to PPDI not to exceed One Hundred Twenty-Five Thousand Dollars
($125,000) in any fiscal quarter, or Five Hundred Thousand Dollars ($500,000) in
any fiscal year.
"DEBTOR" OR "DEBTORS" The same meaning given in the Preliminary
Statements to this Agreement.
"ENFORCEMENT ACTION" Any action to accelerate or declare due any
Obligations, or to demand payment of any Obligations, or any action taken and
any public or private proceeding commenced (including any litigation whether at
law or in equity, any mediation, and any arbitration) to collect any Obligations
from any borrower, guarantor or any other obligor, or to collect, repossess,
sell, liquidate, or otherwise dispose of any Collateral, or to foreclose any
Lien in any Collateral (including any foreclosure conducted pursuant to any
power-of-sale, or pursuant to any assent to the passage of a decree, or through
judicial foreclosure), or to otherwise enforce any Lien in any Collateral, or to
transfer or assign to Senior Creditor or Subordinate Creditors any Collateral in
full or partial satisfaction of any Obligations, or to enforce any Loan
Documents evidencing any Obligations secured by any Collateral, or to move or
store any Collateral, or to prepare any Collateral for sale or other
disposition, or to advertise or conduct any such sale or other disposition, or
to exercise any right of set-off or counterclaim, or to make demand for payment
of or under any standby letter of credit, bond, guaranty, or endorsement in
which Senior Creditor or Subordinate Creditors has a Lien, or to seek the
appointment of a Receiver to do any of the foregoing.
"EXCLUDED SUBORDINATE CREDITOR OBLIGATIONS" The following: (a)
payment obligations to PPDI in accordance with the terms of the Consulting
Agreement; (b) rental payments under the sublease for certain equipment referred
to in Section 2.4(d) of the Stock Purchase Agreement; and (c) Post-Closing
Service Contract Obligations. None of the provisions
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of this Agreement shall apply to the Excluded Subordinate Creditor Obligations,
except that the provisions of this Agreement shall apply with respect to any
Enforcement Action against the Collateral.
"GOVERNMENTAL AUTHORITY" Any executive, judicial, legislative or
other branch, department, office, commission, board, bureau, agency, or
instrumentality of the government of any jurisdiction, including any federal,
state, provincial, county, local or municipal government, and including the
Persons holding or exercising the powers, privileges, discretions, titles,
offices or authorities of any thereof.
"GUARANTOR" The same meaning given in the Preliminary Statements
to this Agreement.
"INSOLVENCY EVENT" Any of the following: (a) Any Debtor
commencing any case, proceeding or other action (i) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship, or relief from debtors, seeking to
have any order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (ii) seeking appointment of a Receiver for it or for all
or any substantial part of its assets, or any Debtor making a general assignment
for the benefit of its creditors, or (b) there being commenced against any
Debtor any case, proceeding or other action of a nature referred to in this
definition, or (c) there being commenced against any Debtor any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of any order for any such relief, or (d) any Debtor
taking any action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (a), (b) or (c) above,
or (e) any Debtor generally not paying, or being unable to pay, or admitting in
writing its inability to pay, its debts as they become due.
"LAWS" All laws, statutes, regulations, ordinances, rules, codes,
decrees, orders, and other directives of any Governmental Authority applicable
to any party to this Agreement, any Collateral, or Debtors.
"LEVEL I SENIOR CREDITOR LOAN DOCUMENTS" All Senior Creditor Loan
Documents that evidence, secure or guarantee the Level I Senior Creditor
Obligations.
"LEVEL I SENIOR CREDITOR OBLIGATIONS" means at any time all
Senior Creditor Obligations of the following types and amounts:
(a) the outstanding balance of the Acquisition Loan (including
principal (not to exceed Seven Million Dollars ($7,000,000)), and all
accrued interest and charges, fees, and expenses permitted under the
Level I Senior Creditor Loan Documents); plus
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(b) the outstanding balance of the Working Capital Loan
(including all advances and readvances of principal (and the stated
amount of any outstanding letters of credit) up to the Working Capital
Loan Maximum Amount at any time, and all accrued interest and charges,
fees, and expenses permitted under the Level I Senior Creditor Loan
Documents); plus
(c) at any time that the outstanding principal portion (including
loans and the stated amount of outstanding letters of credit) of the
outstanding balance of the Working Capital Loan is less than the Working
Capital Loan Maximum Amount, Non-Loan Bank Credits in an amount equal to
the lesser of (x) the amount by which the outstanding principal portion
(including loans and the stated amount of outstanding letters of credit)
of the balance of the Working Capital Loan is less than the Working
Capital Loan Maximum Amount or (y) the stated amount of outstanding
balance of Non-Loan Bank Credits; plus
(d) (to the extent not otherwise included in clauses (a), (b),
and (c) of this definition) the amount of Senior Creditor's charges,
fees and expenses permitted under the Bank Credit Agreement of
collecting the amounts referred to in clauses (a), (b), and (c) of this
definition and in enforcing Senior Creditor's rights and remedies under
the Level I Senior Creditor Loan Documents as to Level 1 Senior Creditor
Obligations, and including any such costs and expenses incurred in
enforcing Senior Creditor's rights and remedies under this Agreement
with respect to Level I Senior Creditor Obligations. In addition, any
proceeds of one or more advances under the Working Capital Loan that are
permitted under Section 2A.07 of the Bank Credit Agreement used for the
purpose of repaying any other non-Level I Senior Creditor Obligations
shall retain their status as Level I Senior Creditor Obligations. Except
for the Non-Loan Bank Credits, Senior Creditor shall not make, extend,
amend, supplement, or replace any non-Level I Senior Creditor
Obligations without the prior written consent of Subordinated Creditors.
"LIEN" Any security agreement, mortgage, deed of trust, factor's
lien, chattel mortgage, title retention contract, grant, pledge, security
interest, lien (statutory or otherwise), hypothecation, assignment, deed-in-lieu
of foreclosure or to secure debt, transfer for other than fair consideration, or
other arrangement for security purposes, condemnation or other governmental
taking, encumbrance, easement, franchise, license, judgment, right of
subrogation, charge of any kind, joint ownership, or co-ownership, or any
subordination agreement, and including any of the foregoing arising by operation
of Law or the application of equitable principles, whether perfected or
unperfected, avoidable or unavoidable, consensual or nonconsensual, and any Lien
Notice, whether or not filed, and any agreement to give a Lien Notice, and
including any rights under any letter of credit, bond, guaranty or endorsement
relating to any of the foregoing, and including the interest of a lessor under
any lease having the same or substantially the same economic effect as any of
the foregoing.
"LIEN DOCUMENTS" Any instrument, document, or agreement, and any
Lien Notice, that evidences, creates or otherwise relates to any Lien in any
Property, and all
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amendments, supplements, and continuations thereof, and all exhibits, schedules,
attachments and annexes thereto from time to time.
"LIEN NOTICE" Any instrument, document, agreement, or notice
given to, or filed, recorded, or registered with, any Person (including any
Governmental Authority), and regardless of whether required by any Law, to
perfect or giving notice of any Lien (or the possibility of a Lien and
regardless of whether any Lien other than the Lien Notice exists or the effect
of the Lien Notice) upon any Property of any Debtor, or for any precautionary
purposes, including any of the following that may be given to, or filed,
recorded, or registered with, any Person for any of the foregoing purposes:
Uniform Commercial Code financing statements and amendments and continuations
thereof, vehicle security interest or lien filings, mortgages, deeds of trust,
leases, indentures, security agreements, collateral assignments, and notices of
any of the foregoing.
"LOAN DOCUMENTS" Any Lien Documents and any promissory notes,
credit agreements, loan agreements, credit and security agreements, security
agreements, collateral assignments, pledge agreements, share charges, mortgage
debentures, guarantees, financing statements, control agreements, subordination
agreements, or other instruments, agreements or documents that evidence, secure,
perfect, guarantee or give notice of any Senior Creditor Obligations or
Subordinate Creditor Obligations.
"INCLUDE AND INCLUDING" Unless otherwise expressly limited
herein, the words "include" and "including" shall be read to mean "include,
without limitation," and "including, without limitation," as the case may be.
"NON-LOAN BANK CREDITS" means indebtedness, liabilities and other
obligations to Senior Creditor, other than in respect of loans, which arise out
of automated clearing house transactions, cash management transactions, interest
rate swap agreements, or other non-loan credit risks and which do not, in the
aggregate, exceed One Million Dollars ($1,000,000).
"OBLIGATIONS" All now existing and hereafter arising obligations,
indebtedness, and liabilities of Debtors to Senior Creditor and/or Subordinate
Creditors, as the case may be, of any kind, whether primary, secondary,
contingent, direct or indirect, joint or several, or for payment or for
performance, and including any claims for indemnity or to be held harmless, or
any claims for contribution or reimbursement or otherwise, and including
Debtors' obligations to pay to Senior Creditor or Subordinate Creditors as and
when due all principal, interest, costs and expenses and fees arising from or
relating to loans made, or other credits granted or created, or financial
accommodations extended, by Senior Creditor or Subordinate Creditors to Debtors
at any time and in any amount, and including future advances, and such thereof
as may arise in respect of letters of credit issued, advised, confirmed, or paid
by Senior Creditor or Subordinate Creditor on Debtors' application or for
Debtors' account, and including any other claims or judgments that Senior
Creditor or Subordinate Creditors may have against Debtors at any time, and
including any Debtor's obligations to Senior Creditor under any swap agreement
(as defined in 11 U.S.C. Section 101), and including any of the foregoing
arising before, during, or after the initial or any renewal term (as permitted
hereunder and under the applicable Loan Documents) of
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the applicable Loan Documents and after the commencement of any case with
respect to any Debtor under the Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the commencement and pendency of such case),
but expressly excluding the Excluded Subordinate Creditor Obligations.
"PAYMENT BLOCKAGE EVENT" The occurrence of any Default or Event
of Default, under and as defined in the Level I Senior Creditor Loan Documents,
with respect to Xxxxx 0 Senior Creditor Obligations or Subordinate Creditor
Obligations, it being understood and agreed that the Senior Creditor has the
right, but not the obligation, to send a Payment Blockage Event Notice at any
time after the occurrence of a Payment Blockage Event.
"PAYMENT BLOCKAGE EVENT NOTICE" A written notice from the Senior
Creditor to PPDI that a Payment Blockage Event has occurred.
"PERMITTED PURCHASE PRICE ADJUSTMENT PAYMENTS" The Adjustment
Amount to the Purchase Price to be paid under Section 2.5 of the Stock Purchase
Agreement.
"PERMITTED SUBORDINATED DEFAULT RATE INTEREST PAYMENTS" Payment
to Subordinate Creditors of interest at a default rate of eleven percent (11%)
per annum, as provided in the Seller Note, in respect of any Permitted
Subordinated Interest Payments or Permitted Subordinated Principal Payments, as
applicable, to the extent any such payments were not made to Subordinate
Creditors when due (or within the cure period stated in the Seller Note).
Interest at the default rate provided above shall accrue only on the Permitted
Subordinated Interest Payment or Permitted Subordinated Principal Payment, as
applicable, which was not paid when due and shall accrue from the due date
thereof until such time as the missed payment is paid in full. The Permitted
Subordinated Default Rate Interest Payments shall be paid to Subordinate
Creditors at the same time as and with the payment of the missed Permitted
Subordinated Interest Payments or Permitted Subordinated Principal Payments, as
applicable, which are made as permitted in this Subordination Agreement.
"PERMITTED SUBORDINATED INTEREST PAYMENTS" One (1) interest
payment to the Subordinate Creditors per calendar year that satisfies each of
the following requirements:
(i) such payment is made not more frequently than once
each calendar year (each such
period referred to herein as an "Interest Accrual Period");
(ii) such interest payment is made in arrears in the
amount of the interest accrued
on the outstanding principal balance of the Seller Note at the interest rate of
eight percent (8%) per annum simple interest (using an actual days/360 accrual)
during the Interest Accrual Period most recently ended prior to such interest
payment;
(iii) such payment is made on or within one hundred eighty
(180) days after the last day of the Interest Accrual Period for which it is
made;
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(iv) on the last day of the Interest Accrual Period for
which such payment is made and on the date that such payment is made no Payment
Event Blockage Notice has been given; and
(v) such interest payment is not made prior to January 31,
2000;
provided; however, if for any reason no Permitted Subordinated Interest Payment
can be made (or could have been made, but is not made within the one hundred
eighty (180) day period referred to in clause (iii) of this definition) in
respect of an Interest Accrual Period, then no interest payment shall be made on
the Seller Note in respect of such Interest Accrual Period without the Senior
Creditor's prior written consent.
"PERMITTED SUBORDINATED PRINCIPAL PAYMENTS" One (1) principal
payment to the Subordinate Creditors per calendar year that satisfies each of
the following requirements:
(i) the principal payments are made not more frequently
than annually;
(ii) each principal payment is in an amount not in excess
of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000);
(iii) each principal payment is made on or within one
hundred eighty (180) days after January 31;
(iv) on January 31 of the year in which the principal
payment is to be paid, and on the day the principal payment is made no Payment
Event Blockage Notice has been given;
(v) no principal payment shall be made on the Seller Note
prior to January 31, 2004; and, provided, however, accelerated payments
(regardless of the terms or basis of acceleration) shall not under any
circumstances be Permitted Subordinated Principal Payments, and if for any
reason no Permitted Subordinated Principal Payment can be made (or could have
been made but is not made within the one hundred eighty (180) day period in
clause (iii) of this definition) for any year, then no principal payment shall
be made on the Seller Note for such year without the Senior Creditor's prior
written consent.
"PERMITTED SUBORDINATED PAYMENTS" Permitted Subordinated Interest
Payments, Permitted Subordinated Principal Payments, Permitted Subordinated Tax
and Indemnity Payments, and Permitted Subordinated Default Rate Interest
Payments.
"PERMITTED SUBORDINATED TAX AND INDEMNITY PAYMENTS" means
payments in respect of tax refund (as applicable) obligations referred to in
Section 11.4 of the Stock Purchase Agreement, and payments in respect of
obligations to indemnify or hold harmless the Subordinate Creditors from and
against any expense, loss, damage, penalty, claim, indebtedness,
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liability, or obligation (including indemnity provisions of the Stock Purchase
Agreement), and obligations of Debtors to reimburse the Subordinate Creditors
any amounts; provided that on the day the payment is made no Payment Event
Blockage Notice has been given; and provided further that the total amount of
all Permitted Subordinated Tax and Indemnity Payments shall not exceed the
Permitted Subordinated Tax and Indemnity Maximum Amount, so that any such
obligations (referred to in this definition) of the Debtors to the Subordinate
Creditors in excess of the Permitted Subordinated Tax and Indemnity Maximum
Amount shall not be Permitted Subordinated Tax and Indemnity Payments.
"PERMITTED SUBORDINATED TAX AND INDEMNITY MAXIMUM AMOUNT" One
Million Two Hundred Fifty Thousand Dollars ($1,250,000).
"PERSON" Any natural person, corporation, limited liability
company, partnership, joint venture, entity, association, joint-stock company,
trust or unincorporated organization and any Governmental Authority.
"POST-CLOSING SERVICE CONTRACT OBLIGATIONS" Means obligations for
services rendered in transactions in the ordinary course of business between any
Debtor and any Subordinate Creditor after the date of this Agreement that are
not restricted by the terms of the Level I Senior Creditor Loan Documents.
"PPDI" Means PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North
Carolina corporation ("PPDI"), having its chief executive office and mailing
address at 0000 Xxxxxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
"PRIME RATE" As of any date, the prime rate published in the
"Money Rates" column of The Wall Street Journal on such date, or if the prime
rate is not published on such date, then the prime rate most recently published
prior to such date. If The Wall Street Journal ceases to publish the prime rate,
then Senior Creditor shall select a new comparable interest rate to use as the
Prime Rate.
"PROPERTY" Any and all of Debtors' right, title or interest in or
to property of any kind whatsoever, now owned and hereafter acquired, and
wherever located, whether real property, personal property, or mixed, and
whether tangible property or intangible property, and including all property
included within the definition of "Collateral" in the Bank Credit Agreement and
any other property described as collateral in any other Senior Creditor Loan
Documents.
"QUALIFIED ENFORCEMENT ACTION" Has the meaning set forth in
Section 3.04.
"RECEIVER" Any receiver, trustee, custodian, conservator,
liquidator or other similar court-appointed fiduciary or official.
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"STANDSTILL PERIOD" As to the Subordinate Creditor Obligations, a
180-day period commencing on the date the Subordinated Creditors receive a
Payment Blockage Event Notice.
"STANDSTILL TERMINATION DATE" The date of the last day of a
Standstill Period.
"SELLER NOTE" The seller take-back promissory note dated as of
February 2, 1999 in the original principal amount of Eighteen Million Dollars
and no/100 Dollars ($18,000,000.00) made payable by Borrowers to the Subordinate
Creditors, and any amendments, supplements, and replacements as may be made
thereto or therefor from time to time; provided, that the Seller Note shall not,
without the prior written consent of the Senior Creditor, be amended,
supplemented or replaced in any respect which (i) increases the amount of
principal or interest due under the Seller Note, or (ii) shortens the term of
the Seller Note.
"SENIOR CREDITOR LOAN DOCUMENTS" Loan Documents regarding Senior
Creditor Obligations, including, without limitation, the Bank Credit Agreement
(and the Credit Documents referred to therein), the Bank Notes, the Bank Letter
of Credit Applications, the Bank Pledge Agreements, the U.K. Mortgage
Debentures, and any documentation relating to any swap agreements.
"SENIOR CREDITOR OBLIGATIONS" All Obligations of the Debtors,
jointly and severally, to Senior Creditor.
"STOCK PURCHASE AGREEMENT" The Stock Purchase Agreement dated as
of January 31, 1999 by and among PPDI (as joinder party), ABI, PPDUK, and EHI,
and any amendments, supplements, and replacements as may be made thereto or
therefor from time to time.
"SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT" As between the
Subordinate Creditor Obligations and the Level I Senior Creditor Obligations,
that:
(i) no part of the Subordinate Creditor Obligations shall
have any claim to the assets of any Debtor on parity with or prior to any claims
of Senior Creditor to such assets for payment or satisfaction of Level I Senior
Creditor Obligations; and
(ii) unless and until each of the Level I Senior Creditor
Obligations shall have been paid in full, Subordinate Creditors shall not,
except as otherwise expressly permitted herein, without the express prior
written consent of Senior Creditor:
(A) take or receive from Debtors, and Debtors shall
not make, give or permit, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment of any nature or type or security
(other than any Lien that is a Permitted Lien under the Bank Credit Agreement)
for the whole or any part of the Subordinate Creditor Obligations,
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(B) demand or accelerate any amount owing under the
Subordinate Creditor Obligations,
(C) take or accept, and Debtors will not grant or
permit to be granted, any Lien (other than any Lien that is a Permitted Lien
under the Bank Credit Agreement) to secure payment or performance of the
Subordinate Creditor Obligations, and
(D) commence or prosecute, or permit to be
commenced or prosecuted in the name of any Subordinate Creditor or on behalf of
any Subordinate Creditor, any Enforcement Action pertaining to the Subordinate
Creditor Obligations, excepting actions to declare any default or event of
default under the Subordinate Creditor Loan Documents;
and it is expressly provided further that if Senior Creditor shall consent to
any such act or circumstance set forth above that would not otherwise be
permitted without such consent, Senior Creditor's consent shall not be construed
as giving parity or priority in payment to any Subordinate Creditor Obligations
which shall in each and every case be and remain "subordinate and junior in
right of payment" to all Level I Senior Creditor Obligations.
"SUBORDINATE CREDITOR LOAN DOCUMENTS" Loan Documents regarding
Subordinate Creditor Obligations, including the Seller Note, the Stock Purchase
Agreement, the Credit and Security Agreement between Borrowers and ABI dated
February 2, 1999, and all other documents or instruments evidencing, securing or
guaranteeing the Seller Note and the Subordinate Creditor Obligations.
"SUBORDINATE CREDITOR OBLIGATIONS" All Obligations of Debtors,
jointly and severally, to Subordinate Creditors, other than Excluded Subordinate
Creditor Obligations, including, without limitation, all costs and fees
permitted under the Subordinate Creditor Loan Documents of collecting the
Subordinate Creditor Obligations and enforcing the Subordinate Creditor's rights
and remedies under the Subordinated Creditor Loan Documents, and including any
such costs and expenses incurred in enforcing Subordinated Creditors' rights and
remedies under this Agreement with respect to the Subordinated Creditor
Obligations. Without limiting the generality of the preceding sentence, the
Obligations of any Debtors under any Subordinate Creditor Loan Documents that
secure or guarantee obligations under the Seller Note, are Subordinate Creditor
Obligations.
"SUBORDINATION NOTICE" OR "SUBORDINATION NOTICES" Any instrument,
deed, memorandum, agreement, letter, notice, and any termination statement or
other Uniform Commercial Code filing relating to any financing statement, or
other document made for the purpose of being given to, or filed, recorded, or
registered with, any Person to give notice (public or private) of this Agreement
or any of the relative rights or priorities established by this Agreement or to
give further necessary or appropriate legal effect to this Agreement and/or any
of such relative rights or priorities, including any release or Uniform
Commercial Code termination statement (UCC-3) with the effect of releasing,
terminating or rendering unperfected any Lien that secures any Subordinate
Creditor Obligations.
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"U.K. MORTGAGE DEBENTURES" Any Mortgage Debentures made by any
Guarantor in favor of the Senior Creditor, and any amendments, supplements, and
replacements as may be made thereto or therefor from time to time.
"UNSECURED" means not secured by any Lien.
"WORKING CAPITAL LOAN" The Working Capital Loan in the form of a
revolving line of credit available for direct advances (and for standby letters
of credit) in accordance with the Bank Credit Agreement in a maximum aggregate
principal amount equal to the Working Capital Loan Maximum Amount. Senior
Creditor shall not, without the prior written consent of the Subordinate
Creditors, extend the term of the Working Capital Loan beyond the fourth (4th)
year of the term of the Working Capital Loan.
"WORKING CAPITAL LOAN MAXIMUM AMOUNT" means the lesser of (a)
Three Million Five Hundred Thousand Dollars ($3,500,000), or (b) the sum of (x)
Two Million Dollars ($2,000,000) plus (y) the amount equal to one-third of the
amount of the principal payments made by Borrowers to the Senior Creditor on the
Acquisition Loan.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 2.01. Representations and Warranties of Subordinate Creditors.
Each Subordinate Creditor makes the following representations and warranties to
Senior Creditor:
(a) Such Subordinate Creditor is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and has the corporate power to
execute, deliver and perform this Agreement.
(b) The execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate action on the
part of such Subordinate Creditor and will not (i) contravene any provision of
law, any order of any court or other agency of government, or (ii) contravene
the Articles of Incorporation or By-laws or any indenture, agreement or other
instrument binding upon such Subordinate Creditor, or (iii) be in conflict with,
result in the breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument binding upon
such Subordinate Creditor, or (iv) result in the creation or imposition of any
Lien upon the property or assets of such Subordinate Creditor, except pursuant
to this Agreement.
(c) This Agreement constitutes a legal, valid and binding
obligation of such Subordinate Creditor, which is enforceable against such
Subordinate Creditor in accordance with its terms.
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(d) The Subordinate Creditor Loan Documents listed on
Schedule 2.01 to this Agreement as of the date hereof are the only Loan
Documents that evidence, create, perfect or otherwise relate to any interest of
Subordinate Creditors in the Collateral or any other Property of the Debtors,
and Schedule 2.01 is true, accurate and complete in all material respects. The
Subordinate Creditor Obligations have been created for good and valuable
consideration, are owned by Subordinate Creditors free and clear of any security
interests, Liens, charges or encumbrances whatsoever arising from, through or
under Subordinate Creditors, other than the interest of Senior Creditor under
this Agreement, and are payable solely and exclusively to Subordinate Creditors
and to no other Person and are payable without deduction for any defense,
set-off or counterclaim.
(e) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or regulatory body or Governmental
Authority and no consent of any other Person (including any stockholder, holder
of partnership interests or creditor of Subordinate Creditors), is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement.
(f) Other than the Seller Note, the Subordinate Creditor
Obligations are Unsecured.
Section 2.02 Representations and Warranties of Senior Creditor. Senior
Creditor makes the following representations and warranties to each of the
Subordinate Creditors:
(a) Such Senior Creditor is a national banking association
duly created, validly existing, and has the power to execute, deliver and
perform this Agreement.
(b) The execution, delivery and performance of this
Agreement has been duly authorized by all requisite action on the part of such
Senior Creditor and will not (i) contravene any provision of law, any order of
any court or other agency of government, or (ii) contravene the Articles of
Incorporation or By-laws or any indenture, agreement or other instrument binding
upon such Senior Creditor, or (iii) be in conflict with, result in the breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument binding upon such Senior Creditor,
or (iv) result in the creation or imposition of any Lien upon the property or
assets of such Senior Creditor, except pursuant to this Agreement.
(c) This Agreement constitutes a legal, valid and binding
obligation of such Senior Creditor, which is enforceable against such Senior
Creditor in accordance with its terms.
(d) The Senior Creditor Loan Documents listed on Schedule
2.02 to this Agreement are as of the date hereof, the only Loan Documents that
evidence, create, perfect or otherwise relate to any interest of Senior
Creditors in the Collateral or any other Property of the Debtors, and Schedule
2.02 is true, accurate and complete in all material respects. The Senior
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Creditor Obligations are owned by Senior Creditors free and clear of any
security interests, Liens, charges or encumbrances whatsoever arising from,
through or under Senior Creditors, other than the interest of Subordinate
Creditor under this Agreement, and are payable solely and exclusively to Senior
Creditors and to no other Person and are payable without deduction for any
defense, set-off or counterclaim.
(e) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or regulatory body or Governmental
Authority and no consent of any other Person (including any stockholder, holder
of partnership interests or creditor of Senior Creditors), is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement.
ARTICLE III
-----------
COVENANTS
---------
Senior Creditor and Subordinate Creditors covenant and agree to the
following:
Section 3.01. Subordination. (a) Each Subordinate Creditor, for itself
and each future holder of the Subordinate Creditor Obligations, hereby agrees
that the Subordinate Creditor Obligations relating to or held by such
Subordinate Creditor are expressly "subordinate and junior in right of payment"
to all Level I Senior Creditor Obligations. Without limiting the generality of
the preceding sentence, and to further confirm the intent of the parties to this
Agreement, each Subordinate Creditor hereby subordinates the legal operation and
effect and priority of the Subordinate Creditor Loan Documents and the
Subordinate Creditor Obligations relating to or held by such Subordinate
Creditor to the legal operation and effect and priority of the Level I Senior
Creditor Loan Documents and the Level I Senior Creditor Obligations, so that the
legal operation and effect of the Level I Senior Creditor Loan Documents and the
Level I Senior Creditor Obligations shall be superior to the legal operation and
effect of the Subordinate Creditor Loan Documents and the Subordinate Creditor
Obligations.
(b) The expressions "prior payment in full," "payment in full,"
"paid in full" and any other similar terms and phrases when used in this
Agreement with respect to any of the Obligations shall mean the irrevocable
payment in full, in immediately available funds and in United States dollars (or
such other currency as may be required by the terms of the Loan Documents or as
may be otherwise satisfactory to Senior Creditor in its sole and absolute
discretion), of the Obligations.
(c) Except as otherwise provided in this Agreement, Subordinate
Creditors and Senior Creditor further agree that:
(i) all Level I Senior Creditor Obligations shall be paid
in full before any payment or distribution is made with respect to the
Subordinate Creditor Obligations, provided, however, that so long as Senior
Creditor has not given Subordinate Creditors a Payment Blockage Event Notice (or
if Senior Creditor has given a Payment Blockage Event Notice, but
14
the Senior Creditor has advised the Subordinated Creditors that the Event of
Default or Default giving rise to the Payment Blockage Event Notice has been
cured by Debtors or waived by Senior Creditor), Senior Creditor consents to the
payment of Permitted Subordinated Payments to Subordinate Creditors.
(ii) any payment or distribution of any Debtor's assets,
or payments or distributions for or on account of any Subordinate Creditor
Obligations (in each case other than Permitted Subordinated Payments made in
accordance with Section 3.01(c)(i) above), whether in cash, Property or
securities, to which the Subordinate Creditors would be entitled except for the
provisions of this Agreement (including from any Collateral or security pledged
for the benefit of the Subordinate Creditor Obligations or payment on
guarantees) shall be paid or delivered by Debtors or any Receiver, trustee in
bankruptcy, disbursing agent, or other Person making such payment or
distribution, directly to Senior Creditor, to the extent necessary to pay in
full all Level I Senior Creditor Obligations, before any payment or distribution
shall be made to the Subordinate Creditors.
(d) Prior to payment in full of the Level I Senior Creditor
Obligations, Subordinate Creditors and Senior Creditor further agree that upon
the occurrence of any event or proceeding described in the definition of
"Insolvency Event" commenced by or against any Debtor, Subordinate Creditors
shall take such action, duly and promptly, as Senior Creditor may request from
time to time, (A) to collect for the account of Senior Creditor to the extent
necessary to pay in full all Level I Senior Creditor Obligations, any
Subordinate Creditor Obligations that are secured by Collateral in which Senior
Creditor holds a Lien, and (B) to file appropriate proofs of claim in respect of
such Subordinate Creditor Obligations.
(e) Subordinate Creditors and Senior Creditor further agree that
this Agreement shall be applicable both before and after the filing of any
petition by or against any Debtor under the Bankruptcy Code and all converted or
succeeding cases in respect thereof, and all references herein to any Debtor
shall be deemed to apply to a trustee for it or as debtor-in-possession. A copy
of this Agreement may be filed with any court as evidence of the respective
rights, powers, and authority of the parties hereunder.
(f) Subordinate Creditors and Senior Creditor further agree that
if any payment or distribution, whether consisting of money, Property or
securities, be collected or received by any Subordinate Creditors in respect of
the Subordinate Creditor Obligations (from any source, including Collateral or
other security or payment on guarantees), other than any Permitted Subordinated
Payments made in accordance with Section 3.01(c)(i) above (or Permitted
Subordinated Payments made prior to receipt of any Payment Blockage Event Notice
or that such payments otherwise were not made in accordance with Section
3.01(c)(i) above), Subordinate Creditors immediately shall deliver the same to
Senior Creditor, in the form received, duly endorsed to Senior Creditor, if
required, to be applied to the payment of the Level I Senior Creditor
Obligations until the Level I Senior Creditor Obligations are paid in full.
Until so delivered, such payment or distribution shall be held in trust by
Subordinate Creditors as
15
Property of Senior Creditor, segregated from other funds and Property held by
Subordinate Creditors.
(g) Subordinate Creditors shall not take any Enforcement Actions
against any Debtor, or any Property of any Debtor during any Standstill Period.
After the expiration of any Standstill Period the Subordinate Creditors may take
Enforcement Actions upon compliance with Section 3.04(b) hereof. Notwithstanding
anything in this Agreement to the contrary, (i) in any action instituted by or
on behalf of any Debtor against one or more of the Subordinate Creditors or the
Senior Creditor, such Subordinate Creditors and/or Senior Creditor may exercise
all rights and defenses available to them (including, without limitation, rights
of set-off and counterclaim in any such action), and (ii) in the event that in
violating the pertinent Loan Documents any stock or a substantial part of the
Property of any Debtor is sold by or on behalf of the Senior Creditor without
payment in full of the Subordinated Obligations, then the Subordinate Creditors
shall be permitted to take any and all Enforcement Actions with respect to the
Subordinated Obligations, including, without limitation, the right to accelerate
the Subordinated Obligations and to exercise all rights and remedies available
to them against the Collateral.
(h) Upon payment in full of the Level I Senior Creditor
Obligations, Senior Creditor and Subordinate Creditors agree that the following
provisions shall apply:
(i) All payment restrictions related to the Subordinate
Creditor Obligations, except for the provisions in Section 3.04(b) below, and
all restrictions on the exercise of rights and remedies by the Subordinate
Creditor as set forth herein shall cease to apply and shall no longer be of any
further force and effect as against the Subordinate Creditors; and
(ii) Any payments made by any Debtor against the
Obligations shall be made only as follows and in the following order of
priority:
(A) First, to pay any payments missed in respect of
the Subordinate Creditor Obligations, including Permitted Subordinated Default
Rate Interest Payments, but excluding accelerated principal payments whether
missed as a result of any Standstill Period or otherwise;
(B) Second, after satisfaction of all obligations
described in clause (A) immediately above, payments shall be split equally by
the Subordinate Creditors and the Senior Creditor, until such time as the Senior
Creditor has been paid the lesser of (x) all amounts due in respect of the
Non-Loan Bank Credits, or (y) One Million Dollars ($1,000,000), in the
aggregate, in respect of the Non-Loan Bank Credits.
(C) Third, after satisfaction of all obligations
detailed in clauses (A) and (B) immediately above, payments shall be applied to
the Subordinate Creditors Obligations until such time as all of the Subordinate
Creditor Obligations (including, without limitation, all reasonable charges,
fees and expenses related thereto and all attorneys' fees, costs
16
and expenses associated with collection of the same or enforcement of this
Agreement) have been paid in full.
(iii) Except as provided in paragraph (h)(ii) above, after
payment in full of the Level I Senior Creditor Obligations the payment of all
Senior Creditor Obligations shall be expressly Subordinate and Junior in Right
of Payment to all Subordinate Creditor Obligations, and the rights, powers and
privileges contained in Sections 3.01(a)(c), (e) and (f), 3.02, 3.08 and 3.09
hereof shall apply in favor of Subordinate Creditors (as though named as the
Senior Creditor therein) with respect to its Subordinate Creditor Obligations
against Senior Creditor (as though named as the Subordinate Creditor therein)
with respect to its Senior Creditor Obligations. Notwithstanding the foregoing,
Subordinate Creditors acknowledge and agree that, in the event Subordinate
Creditors do not extend a working capital line of credit to Borrowers upon the
expiration of the Working Capital Loan (as provided in the Bank Credit
Agreement), then Subordinate Creditors will subordinate the Subordinate Creditor
Obligations at that time to a new third party working capital line of credit
which does not exceed $3,500,000 and which is upon the same terms and conditions
as the Working Capital Loan in all material respects.
(iv) Except as provided in paragraph (h)(ii) above, after
payment in full of the Level I Senior Creditor Obligations, the legal operation
and effect of the Subordinate Creditors' Liens then and thereafter held in the
Collateral shall be superior to the Liens of the Senior Creditor then and
thereafter held in the Collateral, and the provisions of Section 3.10 shall
apply in favor of Subordinate Creditors (as though named as the Senior Creditor
in such section) and against Senior Creditor (as though named as the Subordinate
Creditor in such section) and with respect to its Subordinate Creditor
Obligations against Senior Creditor (as though named as a Subordinate Creditor
in such section ) and with respect to its Senior Creditor Obligations.
(v) After payment in full of the Level I Senior Creditor
Obligations except for payment of the amount payable to Senior Creditor under
paragraph (h)(ii)(B) above, no payments shall be made by any Debtors in respect
of any Senior Creditor Obligations unless and until all of the Subordinate
Creditor Obligations (including, without limitation, all reasonable charges,
fees and expenses related thereto and all attorneys' fees, costs and expenses
associated with collection of the same or enforcement of this Agreement) have
been paid in full to Subordinate Creditors.
(vi) All shares of capital stock held by Senior Creditor
under or pursuant to the Bank Pledge Agreements after payment in full of the
Level I Senior Creditor Obligations, shall be forthwith delivered to Subordinate
Creditors in order to give Subordinate Creditors first lien priority in respect
of such shares as against Senior Creditor.
Section 3.02 Waivers. Subordinate Creditors waive the
right to compel that Collateral or any other Property of any Debtor or any other
subordinate creditors first be applied to discharge of the Senior Creditor
Obligations. Subordinate Creditors expressly waive the right to require Senior
Creditor to proceed against any Debtor, any Collateral or any other Subordinate
Creditors, or to pursue any other remedy in Senior Creditor's power which
Subordinate Creditors
17
cannot pursue and which would be of benefit to Subordinate Creditors,
notwithstanding that the failure of Senior Creditor to do so may thereby
prejudice Subordinate Creditors. Subordinate Creditors agree that Subordinate
Creditors shall not be discharged, exonerated or have their liability hereunder
reduced by Senior Creditor's delay in proceeding against or enforcing any remedy
against any Debtor, any Collateral or any other Subordinate Creditors; by Senior
Creditor releasing any Debtor, any Collateral or any other Subordinate Creditors
from all or any part of the Senior Creditor Obligations; or by the discharge of
any Debtor, the Collateral or any other Subordinate Creditors by an operation of
law or otherwise, with or without the intervention or omission of Senior
Creditor. Senior Creditor's vote to accept or reject any plan of reorganization
relating to any Debtor, the Collateral, or any other Subordinate Creditors, or
Senior Creditor's receipt on account of all or part of the Senior Creditor
Obligations of any cash, Property, or securities distributed in any bankruptcy,
reorganization, or insolvency case, shall not discharge, exonerate, or reduce
the liability of Subordinate Creditors hereunder.
Section 3.03. Notices. Senior Creditor and Subordinate Creditors shall
give each other notice of any event of default under the Senior Creditor Loan
Documents and the Subordinate Creditor Loan Documents, respectively, promptly
when either of them becomes aware thereof, and Senior Creditor and Subordinate
Creditors shall also give each other a copy of any notice that either of them
may give to Debtors (which copy shall be given contemporaneously with the notice
given to Debtors) regarding any breach or default under the Senior Creditor Loan
Documents or the Subordinate Creditor Loan Documents (or any indebtedness or
other obligations secured thereby.
Section 3.04. Enforcement Actions. Senior Creditor and the Subordinate
Creditors agree that in order to maximize the value of the Collateral and ensure
that such Collateral is sold in a coordinated manner, that certain Qualified
Enforcement Actions (as hereinafter defined) should be taken only after notice
to the other party. In furtherance of this, the Senior Creditor and Subordinate
Creditors agree that after the occurrence of any event of default under any of
the Loan Documents that any Enforcement Actions taken against any of the
Collateral (other than any action to accelerate or declare due any Obligations,
to demand payment of any Obligations, to exercise any right of set-off or
counterclaim, or to preserve the value of the Collateral) (each such Enforcement
Actions being called a "Qualified Enforcement Action") shall be exercised by
such party only in accordance with the provisions of this Section.
(a) Prior to the Repayment in Full of the Level I Senior Creditor
Obligations. Prior to the Repayment in Full of the Level I Senior Creditor
Obligations, the Senior Creditor will, prior to taking any Qualified Enforcement
Action(s), provide the Subordinated Creditors with written notice of the action
or actions which it proposes to take. Subordinated Creditors will then have a
period of fifteen (15) days from the date of receipt of such notice to consent
or object to the proposed Qualified Enforcement Action (such period being called
the "Consent Period"). In the event no Subordinated Creditor objects in writing
to such Qualified Enforcement Action within the Consent Period, the Senior
Creditor may, without further notice, proceed to take the proposed Qualified
Enforcement Action. In the event any Subordinated Creditor objects in writing to
such Qualified Enforcement Action, within the Consent Period and with such
18
objection proposes an alternative Qualified Enforcement Action, the Senior
Creditor agrees that prior to taking such Qualified Enforcement Action it will
discuss with the Subordinated Creditors the proposed alternative Qualified
Enforcement Action. In the event the Senior Creditor and the Subordinated
Creditors are unable to agree upon a mutually agreeable course of action after
such discussion, the Senior Creditor may, and each of the Subordinated Creditors
hereby authorize the Senior Creditor to, proceed with the Qualified Enforcement
Action proposed by the Senior Creditor. The Subordinated Creditors agree that
provided such Qualified Enforcement Action constitutes a commercially reasonable
sale under the applicable Uniform Commercial Code they will promptly take such
steps as the Senior Creditor may request to effectuate such sale, including, but
not limited to, the release of each Subordinated Creditor's lien on the
Collateral. (provided that such release will not affect the Subordinate
Creditor's rights to any excess proceeds realized on the sale of the Collateral
in accordance with the priorities established in this Agreement and by
applicable law). In addition, the Subordinate Creditors agree that, in the event
the Subordinate Creditors are entitled to take Enforcement Actions prior to the
repayment in full of the Level 1 Senior Creditor Obligations as permitted in
Section 3.01(a) above, the Subordinate Creditors shall not take any Qualified
Enforcement Action(s) without complying with the same notice and consent
procedures set forth in this Section. The Senior Creditor agrees that, during
any Standstill Period, the Subordinate Creditors may give notice to the Senior
Creditor and otherwise comply with the consent and discussion procedures set
forth in this Section 3.04(a) at any time prior to a Standstill Termination
Date, but will refrain from taking any Qualified Enforcement Actions until any
Standstill Period has expired. The Subordinate Creditors agree that, if a
Consent Period extends beyond a Standstill Termination Date, they will refrain
from taking any Qualified Enforcement Action(s) until such Consent Period has
expired.
(b) After Repayment in Full of the Level I Senior Creditor
Obligations. After the repayment in full of the Level I Senior Creditor
Obligations, the Senior Creditor and the Subordinated Creditors will, prior to
taking any Qualified Enforcement Action(s), provide the other party with written
notice of the action or actions which it proposes to take (the party taking any
Qualified Enforcement Action under this Section being called, the "Liquidating
Party" and the party having the opportunity to consent being called the "Non
Liquidating Party"). The Non Liquidating Party shall have a Consent Period to
consent or object to the proposed Qualified Enforcement Action. In the event the
Non Liquidating Party does not object in writing to such Qualified Enforcement
Action within the Consent Period, the Liquidating Party may, without further
notice, proceed to take the proposed Qualified Enforcement Action. In the event
the Non Liquidating Party objects in writing to such Qualified Enforcement
Action, within the Consent Period and with such objection proposes an
alternative Qualified Enforcement Action, the Liquidating Party agrees that
prior to taking such Qualified Enforcement Action it will discuss with the Non
Liquidating Party the proposed alternative Qualified Enforcement Action. In the
event the Subordinated Creditors and the Senior Creditor are unable to agree
upon a mutually agreeable course of action after such discussion, either party
may proceed with the Qualified Enforcement Actions proposed by the Liquidating
Party. Each party agrees that provided such Qualified Enforcement Action
constitutes a commercially reasonable sale under the applicable Uniform
Commercial Code that it will promptly take such steps as the Liquidating Party
may request to effectuate such sale, including, but not limited to, the release
of the Non Liquidating
19
Party's lien on the Collateral if, and only if the Liquidating Party has a
senior lien to the lien of the Non Liquidating Party at the time of such
Qualified Enforcement Action (and provided that such release will not affect the
Non-Liquidating Party's right to any excess proceeds realized on the sale of the
Collateral in accordance with the priorities established in this Agreement and
by applicable Law).
(c) General Considerations for Enforcement Actions. Subject to
the terms of this Agreement, each of the parties hereto acknowledge and agree
that the Liquidating Party shall have all of the rights and remedies of a
secured party under the applicable Uniform Commercial Code and other applicable
Laws. Accordingly, the Liquidating Party may (in addition to, but no in
limitation of any other rights set forth in the Loan Documents), in accordance
with the priorities and rights set forth in this Section, sell or redeem the
Collateral, or any part thereof, in one or more sales, at public or private
sale, conducted by any officer or agent of, or auctioneer or attorney for the
Liquidating Party, at the Liquidating Party's place of business or elsewhere,
for cash, upon credit or future delivery, and at such price or prices as the
Liquidating Party shall, in its sole discretion, determine, and the Liquidating
Party may be the purchaser of any or all of the Collateral so sold. Subject to
the provisions of subsections (a) and (b), above, any written notice of the
sale, disposition or other intended action by a Liquidating Party with respect
to the Collateral which is sent by regular mail, postage prepaid, to the other
parties at the address set forth in Section 4.02 of this Agreement, at least ten
(10) days prior to such sale, disposition or other action, shall constitute
commercially reasonable notice to each party hereunder.
Each party recognizes that the Liquidating Party may be unable to effect
a public sale of all or a part of the Collateral consisting of securities by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable federal and state Laws. The Liquidating Party,
may, therefore, in its discretion, take such steps as it may deem appropriate to
comply with such Laws and may, for example, at any sale of the Collateral
consisting of securities restrict the prospective bidders or purchasers as to
their number, nature of business and investment intention, including, without
limitation, a requirement that the Persons making such purchases represent and
agree to the satisfaction of the Liquidating Party that such Person is
purchasing such securities for their account, for investment, and not with a
view to the distribution or resale of any thereof. Each party hereto covenants
and agrees to do or cause to be done promptly all such acts and things as the
Liquidating Party conducting such sale may reasonably request from time to time
and as may be necessary to offer and/or sell the securities or any part thereof
in a manner which is valid and binding and in conformance with all applicable
Laws.
Section 3.05. Loan Documents. Senior Creditor and Subordinate Creditors
shall provide to each other upon request copies of all Senior Creditor Loan
Documents and Subordinate Creditor Loan Documents. For purposes of determining
the relative priorities and rights by and among Senior Creditor and Subordinate
Creditors, the provisions of this Agreement shall govern in the event of any
conflict between the provisions hereof and of any Senior Creditor Loan Documents
or of any Subordinate Creditor Loan Documents.
20
Section 3.06. Information. Senior Creditor and Subordinate Creditors
shall have no duty to advise each other of information known to them regarding
the financial condition of Debtors or any circumstances bearing upon the risk of
nonpayment of any indebtedness or impairment of any Lien. In the event that
Senior Creditor or Subordinate Creditors in its or their discretion undertake,
at any time or from time to time, to provide any such information to the other,
it or they shall be under no obligation (a) to provide any such information to
the other on any subsequent occasion or (b) to undertake any investigation not
part of its or their regular business routine and shall be under no obligation
to disclose any information which such party wishes to maintain confidential.
Debtors authorize and consent to the disclosure of any such information by any
party to this Agreement to any other party to this Agreement.
Section 3.07. Certain Actions. (a) If Senior Creditor or Subordinate
Creditors shall sell any participation interest in any Lien or any indebtedness
or obligation secured thereby or any other Senior Creditor Obligations or
Subordinate Creditor Obligations, such participation interest shall be subject
to this Agreement.
(b) The subordinations, agreements, and priorities
provided by this Agreement shall remain in full force and effect regardless of
whether either party hereto shall at any time seek to rescind, amend, terminate
or reform, by liquidation or otherwise, its Liens in the Collateral or its
respective agreements or Obligations with the Debtors.
Section 3.08. Expense Payments. If Senior Creditor shall commence an
Enforcement Action with respect to a Level I Senior Creditor Obligation, Senior
Creditor shall be entitled to reimbursement for its costs of collection
(including attorneys' fees) and other expense payments in such Enforcement
Action from the proceeds obtained through such Enforcement Action. Except as
expressly set forth in this Agreement with regard to the application of proceeds
of Collateral, this Agreement does not obligate Senior Creditor or Subordinate
Creditors to pay (or reimburse any other Person for) any costs of collection
(including attorneys' fees) and other expense payments.
Section 3.09. Provisions Applicable after Bankruptcy. The provisions of
this Agreement shall continue in full force and effect notwithstanding the
occurrence of any Insolvency Event. Upon any distributions to creditors of any
Debtor in a liquidation or dissolution of the Debtor, or in bankruptcy,
reorganization, insolvency, receivership, administration, or similar proceedings
relating to the Debtor or its property or in an assignment for the benefit of
creditors or any marshaling of assets and liabilities of the Debtor: (i) holders
of the Level I Senior Creditor Obligations shall be entitled to receive payment
in full of all Level I Senior Creditor Obligations (including interest after
commencement of any proceeding at the interest rate specified in the applicable
Level I Senior Creditor Loan Documents, whether or not such interest is an
allowable claim in any such proceeding (and also including all attorney's fees
and other costs incurred in any such proceedings, including attorney's fees and
costs incurred after the commencement of any case under the Bankruptcy Code))
before Subordinate Creditors shall be entitled to receive any payment of any
Subordinate Creditor Obligations.
21
Section 3.10. Liens. To further confirm the intent of the parties to
this Agreement, (i) the legal operation and effect of the Subordinate Creditor's
now and hereafter held Liens in the Collateral are, and upon payment in full of
the Level I Senior Creditor Obligations shall be subordinate to the legal
operation and effect of the Senior Creditor's now and hereafter held Liens in
the Collateral, and (ii) each Subordinate Creditor hereby subordinates the legal
operation and effect and priority of all of such Subordinate Creditor's now and
hereafter held Liens in the Collateral to the legal operation and effect and
priority of the Senior Creditor's now and hereafter held Liens in the
Collateral, so that the legal operation and effect of the Senior Creditor's
Liens in the Collateral shall be superior to the legal operation and effect of
the Subordinate Creditor's Liens in the Collateral to the same extent as though
the Senior Creditor's Liens in the Collateral were created, and perfected, as
the case may be, and all Obligations secured thereby were incurred, prior to the
creation and perfection, as the case may be, of the Subordinate Creditor's Liens
in the Collateral.
Section 3.11. Further Assurances. Senior Creditor and Subordinate
Creditors shall execute and deliver, or cause to be executed and delivered, and
do or make, or cause to be done or made, upon the request of Senior Creditor or
Subordinate Creditors, any and all instruments, papers, acts or things,
supplemental, confirmatory or otherwise, as may be required for the purpose of
effecting the agreements and transactions described herein, including such
further assurances of this Agreement as may be requisite, and including
Subordination Notices, in recordable form, as applicable, to be given to Persons
who are not parties to this Agreement, or to be filed among the appropriate
public records, to give notice of and effect to the provisions of this
Agreement.
ARTICLE IV
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GENERAL PROVISIONS
------------------
Section 4.01. Term. The term of this Agreement shall commence with the
date of this Agreement and continue in full force and effect and be binding upon
Senior Creditor and Subordinate Creditors until all Senior Creditor Obligations
and Subordinate Creditor Obligations shall have been fully paid and satisfied.
Section 4.02. Notices. Any notice or request required or permitted by or
in connection with this Agreement shall be in writing and shall be made by
telecopy, or by hand delivery, or by overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to Senior Creditor or
Subordinate Creditors, as the case may be, at the appropriate address set forth
below or to such other address as may be hereafter specified by written notice
by Senior Creditor or Subordinate Creditors, as the case may be. Notice shall be
considered given as of the earlier of the date of actual receipt, or the date of
the telecopy or hand delivery, one (1) calendar day after delivery to Federal
Express, UPS (or other nationally recognized overnight delivery service), or
three (3) calendar days after the date of mailing, independent of the date of
actual delivery or whether delivery is ever in fact made, as the case may be,
provided the giver of notice can establish that notice was given as provided
herein. Subordinate Creditors hereby irrevocably designate PPDI as the agent for
Subordinate Creditors for receiving notices
22
from Senior Creditor, and PPDI hereby accepts such designation and agrees to be
the agent of Subordinate Creditors for purposes of receiving notices from Senior
Creditor relating to this Agreement. Subordinate Creditors agree that any notice
given to PPDI shall be effective notice to all Subordinate Creditors, whether or
not Subordinate Creditors other than PPDI actually receive the notice given to
PPDI.
If to Senior Creditor: First Union National Bank
Portfolio Management - 3 South
0000 Xxxxx Xxxxxx Xxxx
XxXxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
If to Subordinate Creditors: Pharmaceutical Product Development, Inc.
0000 Xxxxxxxxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: X.X. Xxxxxxxxx, Xx., Esquire
Nothing in this Section shall be construed as requiring Senior Creditor to give
any notice to Subordinate Creditors.
Section 4.03. Amendments, Waivers and Consents. This Agreement shall not
be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by Senior Creditor
and Subordinate Creditors.
Section 4.04. Entire Agreement. This Agreement is a complete and
exclusive expression of all the terms of the matters expressed herein and all
prior agreements, statements, and representations, whether written or oral,
which relate thereto in any way are hereby superseded and shall be given no
force and effect. This Agreement shall inure to the benefit of Senior Creditor
and Subordinate Creditors and its and their successors and assigns and shall
burden the parties and their successors and assigns.
Section 4.05. Governing Law. This Agreement and all other related
instruments and documents and the rights and obligations of the parties
hereunder and thereunder shall, in all respects, be governed by, and construed
in accordance with, the laws of the Commonwealth of Virginia (excluding Virginia
conflict of laws rules).
Section 4.06. Jurisdiction; Venue. Senior Creditor and Subordinate
Creditors hereby irrevocably consent to the non-exclusive personal jurisdiction
of the courts of the Commonwealth of Virginia and, if a basis for federal
jurisdiction exists, the non-exclusive jurisdiction of the United States
District Court for the Eastern District of Virginia. Senior Creditor and
Subordinate Creditors agree that venue shall be proper in any circuit court of
the Commonwealth of Virginia or, if a basis for federal jurisdiction exists, in
any Division of the United States District Court for the Eastern District of
Virginia. Senior Creditor and Subordinate Creditors waive any right to object to
the maintenance of any suit or claim in any of the state or
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federal courts of the Commonwealth of Virginia on the basis of improper venue or
of inconvenience of forum.
Section 4.07. No Third Party Beneficiaries. This Agreement and the terms
and provisions of this Agreement are for the benefit of Senior Creditor and
Subordinate Creditors and its and their successors and assigns, and shall not in
any event benefit in any way any person not specifically a party to this
Agreement. Neither the Debtors or any other obligors, nor any other creditor,
shall be a beneficiary of this Agreement in any way. Nothing in this Agreement
shall affect, lessen or impair the Liens that Senior Creditor and Subordinate
Creditors hold in any Collateral vis a vis the Debtors or any third parties.
Senior Creditor and Subordinate Creditors expressly reserve each and every of
their Liens and their right to assert their Liens as against Debtors and any
third parties. This Agreement does not amend any Loan Documents or waive any
rights or remedies under any Loan Documents as between any party to this
Agreement and Debtors.
Section 4.08. No Agency or Partnership. Nothing in this Agreement shall
be construed as creating any agency relationship between Senior Creditor and
Subordinate Creditors, or establishing any fiduciary responsibility between them
(excepting any obligation under this Agreement for Subordinate Creditors to hold
any funds in trust for the benefit of Senior Creditor, and any obligation to act
as bailee for each other to perfect certain security interests in Collateral),
or as creating any partnership between them, and each of the foregoing are
expressly disclaimed. Without limiting the generality of the foregoing, rights
and benefits provided to Senior Creditor and Subordinate Creditors pursuant to
this Agreement are solely for the benefit of Senior Creditor and Subordinate
Creditors, respectively, and do not impose any duties upon either party for any
benefit of the other. Neither Senior Creditor nor Subordinate Creditors shall,
for example, have any duty or responsibility to the other with regard to the
manner in which either party may exercise any rights or remedies that such party
may have, or any Enforcement Actions that such party may pursue, as against any
Property of any Debtor, or as against any Debtor, or as against any guarantor or
other obligor of any Obligations.
Section 4.09. Legend. Subordinate Creditors, as to all Subordinate
Creditor Loan Documents, and Senior Creditor, as to all Senior Creditor Loan
Documents other than Level I Senior Creditor Loan Documents, shall cause such
documents to bear upon their face the following legend:
"THE INDEBTEDNESS (AND ANY SECURITY INTERESTS) EVIDENCED BY THIS INSTRUMENT IS
SUBORDINATED TO CERTAIN INDEBTEDNESS (AND SECURITY INTERESTS), AND IS SUBJECT TO
THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF MARCH 30, 1999, AMONG FIRST
UNION NATIONAL BANK, PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., APPLIED
BIOSCIENCE INTERNATIONAL, INC., AND PPD UK HOLDINGS LIMITED, AS THE SAME MAY BE
AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME."
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Section 4.10. Filing and Recording. Either party may file or record this
Agreement (or a photocopy of this Agreement) with any governmental authority to
give notice of, and to further the legal operation and effect of, this
Agreement, including any filing or recording in any public office for recording
Uniform Commercial Code financing statements and any land records office.
Debtors shall be obligated to pay any applicable out-of-pocket fees, costs,
expenses and taxes of filing or recording this Agreement and any other
Subordination Notice or Lien Notice.
Section 4.11. Miscellaneous. Any provision of this Agreement or of any
related instrument or document executed pursuant hereto which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. This Agreement may be
executed in counterparts and each shall be effective as an original, and a
telecopy of this executed Agreement shall be effective as an original. In making
proof of this Agreement, it shall not be necessary to produce more than one
counterpart of this Agreement. The parties to this Agreement hereby waive any
right to require any other party to this Agreement to marshal any security or
collateral or otherwise to compel the other party to seek recourse against or
satisfaction of any indebtedness owed to it from one source before seeking
recourse or satisfaction from another source. Senior Creditor and Subordinated
Creditors shall be protected in acting upon any notice, request, consent,
demand, statement, note or other paper or document believed by either of them to
be genuine and to have been signed by the party or parties purporting to have
signed the same. The Preliminary Statements to this Agreement, and the terms
provided and defined therein, are incorporated herein and intended to be a part
of this Agreement.
Section 4.12. ARBITRATION; WAIVER OF JURY TRIAL. Upon demand of any
party hereto, whether made before or after institution of any judicial
proceeding, any claim or controversy arising out of, or relating to this
Agreement or the Loan Documents between the parties hereto (a "Dispute") shall
be resolved by binding arbitration conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and the Federal Arbitration Act.
Disputes may include, without limitation, tort claims, counterclaims, disputes
as to whether a matter is subject to arbitration, claims brought as class
actions, or claims arising from documents executed in the future. A judgment
upon the award may be entered in any court having jurisdiction. Notwithstanding
the foregoing, this arbitration provision does not apply to disputes under or
related to swap agreements.
Special Rules. All arbitration hearings shall be conducted in the city
in which the office of Senior Creditor first stated above is located. A hearing
shall begin within 90 days of demand for arbitration and all hearings shall be
concluded within 120 days of demand for arbitration. These time limitations may
not be extended unless a party shows cause for extension and then for no more
than a total of 60 days. The expedited procedures set forth in Rule 51 et seq.
of the Arbitration Rules shall be applicable to claims of less than $1,000,000.
Arbitrators shall be licensed attorneys selected from the Commercial Financial
Dispute Arbitration Panel of the
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AAA. The parties do not waive applicable Federal or state substantive law except
as provided herein.
Preservation and Limitation of Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties agree to preserve, without
diminution, certain remedies that any party may exercise before or after an
arbitration proceeding is brought. The parties shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute.
Each party agrees that it shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute, whether the Dispute is resolved by
arbitration or judicially.
Waiver of Jury Trial. The parties acknowledge that by agreeing to
binding arbitration they have irrevocably waived any right they may have to a
jury trial with regard to a Dispute.
[REMAINDER OF PAGE BLANK]
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IN WITNESS WHEREOF, and intending to be legally bound hereby, Senior
Creditor and Subordinate Creditors execute this Agreement under seal as of the
day and year first above written.
WITNESS: FIRST UNION NATIONAL BANK
By: /s/ Xxxxxxx Xxxxxxxx (SEAL)
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
WITNESS: APPLIED BIOSCIENCE INTERNATIONAL
INC.
Xxxx Xxxxxxx By: /s/ Xxxx X. Xxxxxxxxx, Xx. (SEAL)
Name: Xxxx X. Xxxxxxxxx, Xx.
Title: Vice President
WITNESS: PPD UK HOLDINGS LIMITED
Xxxx Xxxxxxx By: /s/ Xxxx X. Xxxxxxxxx, Xx. (SEAL)
Name: Xxxx X. Xxxxxxxxx, Xx.
Title: Director
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Each Debtor (other than the Guarantor) signs this Agreement under seal
at the requests of Senior Creditor and Subordinate Creditors, to acknowledge
that each Debtor consents to the terms of the foregoing Agreement and covenants
and agrees to be bound thereby for the benefit of Senior Creditor.
WITNESS: ENVIRON HOLDINGS, INC.
Xxx Xxxxx By: /s/ Xxxxxxxx Xxxxx (SEAL)
Name: Xxxxxxxx Xxxxx
Title: President / COO
WITNESS: ENVIRON INTERNATIONAL CORPORATION
Xxx Xxxxx By: /s/ Xxxxxxxx Xxxxx (SEAL)
Name: Xxxxxxxx Xxxxx
Title: President / COO
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