SUBORDINATION AGREEMENT
Exhibit
99.1
Crossroads Financial Group, LLC
c/o The Forumat Stonecrest, LLC
00000 Xxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Gentlemen:
The
undersigned, Xxxx Xxxxxxx with an address at (hereinafter referred
to as the "Creditor"),
represents that MusclePharm Corporation and/or Canada MusclePharm
Enterprises Corp. (hereinafter collectively referred to as the
"Borrower"), is indebted to
the Creditor as follows:
Outstanding
principal amount of indebtedness: $17,000,000 as of September 30,
2017.
Said
indebtedness is evidenced by Notes dated December 7, 2015 and
November 8, 2016.
The
indebtedness is secured by the assets listed in the UCC filing
Exhibit “A” attached hereto.
The
Creditor represents that said indebtedness has not heretofore been
assigned to or subordinated in favor of any other person, firm or
corporation.
In
order to induce CROSSROADS FINANCIAL GROUP, LLC (hereinafter
referred to as the "Lender")
to make loans and advances and/or to grant financial accommodations
or credit to the Borrower at any time (including the extension or
renewal, in whole or in part, of any antecedent or other debt),
upon such terms and for such amounts as may be mutually agreeable
to the Lender and the Borrower, and in consideration thereof, the
Creditor acknowledges, covenants and agrees as
follows:
1. The
Creditor does hereby subordinate the payment of the indebtedness of
the Borrower to the Creditor described above, and any renewals,
amendments, substitutions, revisions, etc., together with any and
all interest accrued or to accrue thereon, and any other
indebtedness, liabilities and obligations of Borrower (or any
Borrower) to Creditor of any kind now existing or hereafter arising
(all hereinafter referred to as the "Secondary Obligations") to the payment
of any and all debts, obligations and liabilities of the Borrower
to the Lender arising under, in connection with or evidenced by
that certain that certain Loan and Security Agreement (as may be
amended, restated, renewed, extended, supplemented, substituted and
otherwise modified from time to time, the “Loan Agreement”) by and between
Borrower and Lender, dated as of October 6, 2017 (all such
obligations hereinafter referred to as the "Primary Obligations").
Notwithstanding the
above prohibition on receipt of payments, so long as there is no
Event of Default which is continuing under the Primary Obligations,
both before and after the making of the payments, the Borrower may
make and the Creditor may receive payments of normal interest due
under the Note, but excluding default interest or penalty or any
amounts due by acceleration. In the event of written notice of an
Event of Default by Lender, all allowed payments shall cease so
long as such Event of Default is continuing.
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2. The
Creditor agrees to legend any note, debenture, or other interest
evidencing the Secondary Obligations and any and all documents
related to security for the Secondary Obligations, that the same
are subject to the terms of a certain Subordination Agreement with
CROSSROADS FINANCIAL GROUP, LLC dated September 30, 2017, and the
Creditor shall provide evidence to Lender that all such documents
contain the above described legend.
3. Upon
any distribution of any assets of the Borrower, whether by reason
of sale, reorganization, liquidation, dissolution, arrangement,
bankruptcy, receivership, assignment for the benefit of creditors,
foreclosure or otherwise, the Lender shall be entitled to receive
payment in full of the Primary Obligations prior to the payment of
all or any part of the Secondary Obligations. To enable the Lender
to assert and enforce its rights hereunder in any such proceeding
or upon the happening of any such event, the Lender or any person
whom the Lender may designate are hereby irrevocably appointed
attorney in fact for the undersigned with full power to act in the
place and stead of the undersigned, including the right to make,
present, file and vote such proofs of claim against the Borrower on
account of all or any part of the Secondary Obligations as the
Lender may deem advisable (provided that the rights of Lender with
respect to the filing of proofs of claim shall be limited to
circumstances where the Creditor fails to take any such action as
of the 10th day preceding the bar date therefore; provided that (x)
Lender shall promptly notify the Creditor that it has filed such
claim or proof of debt and shall provide a copy thereof to the
Creditor and (y) the Creditor shall retain the right to correct any
such claim or proof by amendment or otherwise) . By execution and
delivery of this Agreement, the undersigned grants to the Lender
full power and authority to effectuate the aforesaid power of
attorney; and no further documents or instruments of any kind
whatsoever shall be required to effectuate the Lender's rights
under this Agreement or to implement the provisions of this
Agreement. Notwithstanding the foregoing, Lender shall not have any
right to vote any claim that the Creditor may have in such
proceeding to accept or reject any plan or partial or complete
liquidation, reorganization, arrangement, composition or extension
(it being understood and agreed that Lender retains the right to
vote its own claim in any manner Lender may elect).
4. Notwithstanding
anything contained in the provisions of the Uniform Commercial Code
or any other applicable law relative to the priority of such
security interests of the parties hereto as may now or in the
future be perfected by the parties hereto, the Creditor
acknowledges and agrees that (a) its security interests (if any) in
the Borrower's assets are hereby made subordinate and junior in
priority to the security interests of the Lender and its successors
and assigns and (b) it shall not, prior to repayment in full of all
Primary Obligations, foreclose any security interest or lien
(consensual or non-consensual) it may now or hereafter have in or
upon any asset or property of any Borrower or take any action that
would, or could reasonably be expected to, hinder, in any manner,
any exercise of remedies by Lender. Notwithstanding the foregoing
or anything to the contrary herein, (i) Creditor may (x) exercise
any and all available rights and remedies as an unsecured creditor
(including, without limitation, declaring a default under the
Secondary Obligations, accelerating the Secondary Obligations,
commencing a suit thereon and pursuing judgment) except that Creditor may not
enforce any judgment lien except as and to the extent permitted
under subsection (ii) below and (y) file
proofs of claim against the Borrower in any proceeding and may make
such other demands or file such claims as may be necessary to
prevent the waiver or bar of such claims under applicable statutes
of limitations or other statutes, court orders or rules of
procedure, provided that the Creditor may not take any other action
or receive any cash payment in connection therewith that is not
permitted hereunder and (ii) after the passage of 180 days from the
delivery of a notice by Creditor to Lender of the occurrence of an
event of default in respect of the Secondary Obligations, Creditor
may take any enforcement action and/or exercise any remedy,
including the foreclosure of any lien, permitted under the
agreements evidencing the Secondary Obligations; provided that (i)
such 180 day period shall be tolled for any period during which
Lender is stayed by an insolvency proceeding or court order from
exercising any right or remedy against Borrower or any collateral
securing the Primary Obligations and (ii) notwithstanding
expiration of such 180 day period, Creditor shall not take any such
enforcement actions or exercise any such remedies if Lender has
commenced and is diligently pursuing in good faith and in
accordance with applicable law the exercise of any right or remedy
against any Borrower or any collateral securing the Primary
Obligations.
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5.
Except as expressly permitted in Sections 1 or 4 above, the
Creditor agrees not to ask, demand, xxx for, take or receive
payment of or security for all or any part of the Secondary
Obligations or to exercise any rights which the Creditor may have
by agreement or by law, unless and until all and every part of the
Primary Obligations have been fully paid and
discharged.
6. The
Creditor has, to the extent deemed necessary by the Creditor,
reviewed the existing agreements between the Lender and the
Borrower, and understands that there is no commitment or obligation
on the Lender's part to make any loans or advances or to extend
credit to the Borrower; provided, however, that the Creditor
further understands that such agreements may be modified, altered,
or amended, without notice to or consent of the
Creditor.
7. The
Creditor agrees not to sell, assign, transfer, pledge or
hypothecate all or any part of the Secondary Obligations without
first (a) disclosing to any such third party that said Secondary
Obligations are subject to the terms of this Agreement and (b)
delivering to Lender a written agreement, in form and substance
reasonably satisfactory to Lender, of such third party to be bound
by the terms of this Agreement to the same extent as Creditor
hereunder. The Creditor shall legend any documents evidencing the
Secondary Obligations, any security documents and/or financing
statements to indicate that the Secondary Obligations are subject
to the terms of this Agreement.
8. The
Lender may at any time, in its discretion, renew or extend the time
of payment of all or any of the Primary Obligations or waive or
release any collateral which may be held therefor, and the Lender
may enter into such agreements with the Borrower as the Lender may
deem desirable without notice to or further assent from the
undersigned and without in any way affecting the Lender's rights
hereunder.
9. In
the event the indebtedness is not evidenced by an instrument in
writing, the Creditor and the Borrower agree, at the Lender's
request, to reduce the Secondary Obligations to writing and the
Creditor further agrees to endorse such instruments as aforesaid.
Failure to comply with this paragraph does not limit and other
parts of this Agreement.
10. The
Lender shall have no obligation to collect the Secondary
Obligations. Further, the Lender shall have no obligation
whatsoever for maintenance, protection, preservation or liquidation
of any security for the Secondary Obligations.
11. In
the event any payments are made by the Borrower to the Creditor or
any amounts are received by the Creditor contrary to the provisions
of this Agreement, the Creditor will promptly remit said payments
or amounts to the Lender. Upon failure to so remit, the Lender
shall have the right to proceed directly against the Creditor for
any such amount.
12. The
Creditor agrees to pay all reasonable counsel fees and expenses
which the Lender may incur in protecting or enforcing any of its
rights hereunder against the Creditor.
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13. The
parties acknowledge that breach of this Agreement by the Creditor
could cause irreparable harm to the Lender for which there may be
no adequate remedy at law; and, therefore, the Lender is entitled
to seek injunctive relief in the event of an anticipated or actual
breach by the Creditor of the terms hereof.
14. This
Agreement shall be binding upon the Creditor and their successors
and assigns, and all of the Lender's rights hereunder shall inure
to the benefit of its successors and assigns.
15. This
Agreement shall be construed and interpreted in accordance with the
laws of the State of North Carolina, including its conflict of laws
principles. Any
suit, action or proceeding arising hereunder, or the
interpretation, performance or breach hereof, shall, if Lender so
elects, be instituted in any court sitting in the North Carolina,
in the city in which Lender’s chief executive office is
located, or if none, any court sitting in the Chosen State (the
“Acceptable Forums”). Creditor agrees that the
Acceptable Forums are convenient to it, and submits to the
jurisdiction of the Acceptable Forums and waives any and all
objections to jurisdiction or venue. Should such proceeding be
initiated in any other forum, Creditor waives any right to oppose
any motion or application made by Lender to transfer such
proceeding to an Acceptable Forum.
16. Any
written notice required or permitted by this Agreement shall be
delivered by depositing it (registered or certified mail, return
receipt requested) in the U.S. mail, postage prepaid, addressed to
the appropriate party at the address set forth on page 1 hereof, or
by recognized overnight courier which provides evidence of delivery
addressed to the appropriate party at the address set forth on page
1 hereof. A facsimile copy of this Agreement shall have the same
force as an original version.
18. WAIVER
OF JURY TRIAL. THE PARTIES HERETO MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS CONTEMPLATED
TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS, WHETHER VERBAL OR WRITTEN, OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF LENDER
RELATING TO THE ADMINISTRATION OF THE TRANSACTION CONTEMPLATED
HEREBY OR ENFORCEMENT OF THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE
SUBORDINATING CREDITOR HEREBY WAIVES ANY RIGHT SUCH PARTY MAY HAVE
TO CLAIM OR RECOVER ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN OR IN ADDITION
TO, ACTUAL DAMAGES. THE SUBORDINATING CREDITOR CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF SENIOR CREDITOR HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SENIOR CREDITOR WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR SENIOR
CREDITOR TO ENTER INTO THIS AGREEMENT AND ENTER INTO THE
TRANSACTION CONTEMPLATED HEREBY.
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IN
WITNESS WHEREOF, the Creditor and Lender have executed this
Agreement as of the 30 day of September, 2017.
Xxxx Xxxxxxx
/s/ Xxxx Drexler_______________________
Name:
Xxxx Xxxxxxx
Crossroads Financial Group, LLC
By: /s/ Xxx Xxxxxx
Name: Xxx
Xxxxxx
Title:
CEO
STATE
OF
Colorado
)
COUNTY OF
Denver
)
On this
the 30 day of September, 2017, before me Xxxx Xxxxxxx, the undersigned
officer, personally appeared Xxxx Xxxxxxx, who executed the
foregoing instrument for the purposes therein contained as his free
act and deed.
IN WITNESS WHEREOF, I hereunto set my
hand.
/s/ Xxxx
Xxxxxxx
Notary
Public
My
Commission Expires: 5/9/2020
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Crossroads Financial Group, LLC, a North Carolina limited liability
company
C/o The Forum at Stonecrest, LLC
00000 Xxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Gentlemen:
As of
the 30th day of September, 2017, MusclePharm Corporation and
MusclePharm Enterprises Corp. (collectively, the
“Borrower”) hereby acknowledges notice of the within
and foregoing Subordination Agreement and agrees to all of the
terms, provisions and conditions thereof. Borrower further agrees
that, except as may be specifically permitted under the foregoing
Subordination Agreement or with Lender’s written consent
thereto first procured, Borrower shall not repay all or any part of
the Secondary Obligations.
MusclePharm
Corporation:
By:/s/ Xxxx
Drexler______________
Name:
Xxxx Xxxxxxx
Title:
CEO & President
Canada
MusclePharm Enterprises Corp:
By:
/s/ Xxxx
Drexler______________
Name:
Xxxx Xxxxxxx
Title:
CEO & President
[Notary
Stamp]
/s/
Xxxx Xxxxxxx
Denver,
CO
9/30/17
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Exhibit A
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