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EXHIBIT 10.11
SUBORDINATION AGREEMENT
This Subordination Agreement is made as of January 5, 2001 by and among
each of the undersigned creditors (individually, a "Creditor" and, collectively,
the "Creditors"), and Imperial Bank ("Bank").
Recitals
A. MHL DEVELOPMENT COMPANY, an Oregon corporation ("Borrower"), has
requested and/or obtained certain loans or other credit accommodations from Bank
which are or may be from time to time secured by assets and property of
Borrower.
B. Each Creditor has extended loans or other credit accommodations to
Borrower, and/or may extend loans or other credit accommodations to Borrower
from time to time.
C. In order to induce Bank to extend credit to Borrower and, at any time
or from time to time, at Bank's option, to make such further loans, extensions
of credit, or other accommodations to or for the account of Borrower, or to
purchase or extend credit upon any instrument or writing in respect of which
Borrower may be liable in any capacity, or to grant such renewals or extension
of any such loan, extension of credit, purchase, or other accommodation as Bank
may deem advisable, each Creditor is willing to subordinate: (i) all of
Borrower's indebtedness and obligations to such Creditor, whether presently
existing or arising in the future (the "Subordinated Debt") to all of Borrower's
indebtedness and obligations to Bank; and (ii) all of such Creditor's security
interests, if any, to all of Bank's security interests in the Borrower's
property.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Each Creditor subordinates to Bank any security interest or lien that
such Creditor may have in any property of Borrower. Notwithstanding the
respective dates of attachment or perfection of the security interest of a
Creditor and the security interest of Bank, the security interest of Bank in the
Collateral, as defined in that certain Loan and Security Agreement between
Borrower and Bank, dated as of the date hereof, as amended from time to time
(the "Loan Agreement"), shall at all times be prior to the security interest of
such Creditor. Capitalized terms not otherwise defined herein shall have the
same meaning as in the Loan Agreement.
2. All Subordinated Debt is subordinated in right of payment to all
obligations of Borrower to Bank now existing or hereafter arising, together with
all costs of collecting such obligations (including attorneys' fees), including,
without limitation, all interest accruing after the commencement by or against
Borrower of any bankruptcy, reorganization or similar proceeding, and all
obligations under the Loan Agreement (the "Senior Debt").
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3. Each Creditor will not demand or receive from Borrower (and Borrower
will not pay to such Creditor) all or any part of the Subordinated Debt, by way
of payment, prepayment, setoff, lawsuit or otherwise, nor will such Creditor
execute any remedy with respect to the Collateral, nor will such Creditor
commence, or cause to commence, prosecute or participate in any administrative,
legal or equitable action against Borrower, for so long as any portion of the
Senior Debt remains outstanding.
4. Each Creditor shall promptly deliver to Bank in the form received
(except for endorsement or assignment by such Creditor where required by Bank)
for application to the Senior Debt any payment, distribution, security or
proceeds received by such Creditor with respect to the Subordinated Debt other
than in accordance with this Agreement.
5. In the event of Borrower's insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, these provisions shall remain in full force and effect, and Bank's
claims against Borrower and the estate of Borrower shall be paid in full before
any payment is made to any Creditor.
6. For so long as any of the Senior Debt remains unpaid, each Creditor
irrevocably appoints Bank as such Creditor's attorney-in-fact, and grants to
Bank a power of attorney with full power of substitution, in the name of such
Creditor or in the name of Bank, for the use and benefit of Bank, without notice
to such Creditor, to perform at Bank's option the following acts in any
bankruptcy, insolvency or similar proceeding involving Borrower:
(i) To file the appropriate claim or claims in respect of the
Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 30
days before the expiration of the time to file claims in such proceeding and if
Bank elects, in its sole discretion, to file such claim or claims; and
(ii) To accept or reject any plan of reorganization or
arrangement on behalf of Creditor and to otherwise vote Creditor's claims in
respect of any Subordinated Debt in any manner that Bank deems appropriate for
the enforcement of its rights hereunder.
7. Each Creditor shall immediately affix a legend to the instruments
evidencing the Subordinated Debt stating that the instruments are subject to the
terms of this Agreement. No amendment of the documents evidencing or relating to
the Subordinated Debt shall directly or indirectly modify the provisions of this
Agreement in any manner which might terminate or impair the subordination of the
Subordinated Debt or the subordination of the security interest or lien that
such Creditor may have in any property of Borrower. By way of example, such
instruments shall not be amended to (i) increase the rate of interest with
respect to the Subordinated Debt, or (ii) accelerate the payment of the
principal or interest or any other portion of the Subordinated Debt.
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8. This Agreement shall remain effective for so long as Borrower owes
any amounts to Bank under the Loan Agreement or otherwise. If, at any time after
payment in full of the Senior Debt any payments of the Senior Debt must be
disgorged by Bank for any reason (including, without limitation, the bankruptcy
of Borrower), this Agreement and the relative rights and priorities set forth
herein shall be reinstated as to all such disgorged payments as though such
payments had not been made and each Creditor shall immediately pay over to Bank
all payments received with respect to the Subordinated Debt to the extent that
such payments would have been prohibited hereunder. At any time and from time to
time, without notice to such Creditor, Bank may take such actions with respect
to the Senior Debt as Bank, in its sole discretion, may deem appropriate,
including, without limitation, terminating advances to Borrower, increasing the
principal amount, extending the time of payment, increasing applicable interest
rates, renewing, compromising or otherwise amending the terms of any documents
affecting the Senior Debt and any collateral securing the Senior Debt, and
enforcing or failing to enforce any rights against Borrower or any other person.
No such action or inaction shall impair or otherwise affect Bank's right
hereunder. Each Creditor waives the benefits, if any, of Civil Code Sections
2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.
9. This Agreement shall bind any successors or assignees of a Creditor
and shall benefit any successors or assigns of Bank. This Agreement is solely
for the benefit of each Creditor and Bank and not for the benefit of Borrower or
any other party. Creditor further agrees that if Borrower is in the process of
refinancing a portion of the Senior Debt with a new lender, and if Bank makes a
request of such Creditor, Creditor shall agree to enter into a new subordination
agreement with the new lender on substantially the terms and conditions of this
Agreement.
10. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
instrument.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to conflicts of laws
principles. Creditor and Bank submit to the exclusive jurisdiction of the state
and federal courts located in Santa Xxxxx County, California. EACH CREDITOR AND
BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.
12. This Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations, agreements and
commitments. No Creditor is relying on any representations by Bank or Borrower
in entering into this Agreement, and each Creditor has kept and will continue to
keep itself fully apprised of the financial and other condition of Borrower.
This Agreement may be amended only by written instrument signed by each Creditor
and Bank.
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13. In the event of any legal action to enforce the rights of a party
under this Agreement, the party prevailing in such action shall be entitled, in
addition to such other relief as may be granted, all reasonable costs and
expenses, including reasonable attorneys' fees, incurred in such action.
14. JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Agreement, which controversy, dispute or claim is not settled
in writing within thirty (30) days after the "Claim Date" (defined as the date
on which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Santa Xxxxx County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty- five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of the Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (a) be requested to set the matter for hearing within
sixty (60) days after the date of selection of the referee and (b) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall be entered
pursuant to CCP Section 644 in any court in the State of California having
jurisdiction. Any party may apply for a reference proceeding at any time after
thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents which cannot be resolved by the parties
shall be submitted to the referee as
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provided herein. The Superior Court is empowered to issue temporary and/or
provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provisions.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
"Bank"
IMPERIAL BANK
By: /s/ XXXX XXXXXXX
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Title: Venture Banking Officer
"Creditors"
/s/ XXXXXXX X. XXXX
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XXXXXXX X. XXXX
SASS REVOCABLE TRUST
By: /s/ XXXXXXX X. XXXX
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Title: Trustee
The undersigned approves of the terms of this Agreement.
"Borrower"
MHL DEVELOPMENT COMPANY
By: /s/ XXXX X. XXXXXX
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Title: Chief Financial Officer
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