Exhibit 10(h)
SUBORDINATION AGREEMENT
This Subordination Agreement is made as of July 31, 2001,
by and between ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
("Creditor"), and SILICON VALLEY BANK, a California-chartered
bank, with its principal place of business at 0000 Xxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office
located at One Xxxxxx Executive Park, Suite 200, 0000 Xxxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under the
name "Silicon Valley East" ("Bank").
Recitals
A. NEWCHECK CORPORATION, D/B/A PRODUCTIVITY SOLUTIONS,
INC., a Delaware corporation with offices located at 00000
Xxxxxxxx Xxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxx 00000 ("Borrower") has
requested and/or obtained certain loans or other credit
accommodations from Bank to Borrower which are or may be from
time to time secured by assets and property of Borrower.
B. 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,
Creditor is willing to subordinate: (i) all of Borrower's
indebtedness and obligations to Creditor, evidenced by that
certain Amended and Restated 8% Convertible Note dated as of
February 11, 2000 (the "Subordinated Debt") to all of Borrower's
indebtedness and obligations to Bank under the Loan and Security
Agreement dated as of even date herewith between the Borrower
and the Bank; and (ii) all of 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. Creditor subordinates to Bank any security interest or
lien that Creditor may have in any property of Borrower.
Notwithstanding the respective dates of attachment or perfection
of the security interest of Creditor and the security interest
of Bank, the security interest of Bank in the Collateral
(hereinafter, the "Collateral"), as defined in a certain Loan
and Security Agreement between Borrower and Bank dated as of
July 31, 2001, as may be amended from time to time (the "Loan
Agreement"), shall at all times be prior to the security
interest of Creditor.
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").
3. Creditor will not demand or receive from Borrower (and
Borrower will not pay to Creditor) all or any part of the
Subordinated Debt, by way of payment, prepayment, setoff,
lawsuit or otherwise, nor will Creditor exercise any remedy with
respect to the Collateral, nor will Creditor accelerate the
Subordinated Debt, or commence, or cause to commence, prosecute
or participate in any administrative, legal or equitable action
against Borrower, until such time as all the Senior Debt is
fully paid in cash. The foregoing notwithstanding, Creditor
shall be entitled to receive each regularly scheduled payment of
interest that constitutes Subordinated Debt, provided that an
Event of Default, as defined in the Loan Agreement, has not
occurred and is not continuing and would not exist immediately
after such payment. Notwithstanding any provision to the
contrary contained in this Agreement, nothing in this Agreement
shall prohibit or constrain Creditor from converting all or any
part of the Subordinated Debt into equity securities of
Borrower.
4. Creditor shall promptly deliver to Bank in the form
received (except for endorsement or assignment by Creditor where
required by Bank) for application to the Senior Debt any
payment, distribution, security or proceeds received by 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 Creditor.
6. Until the Senior Debt is fully paid in cash, Creditor
irrevocably appoints Bank as Creditor's attorney-in-fact, and
grants to Bank a power of attorney with full power of
substitution, in the name of Creditor or in the name of Bank,
for the use and benefit of Bank, without notice to 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. 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 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.
8. This Agreement shall remain effective for so long as:
(i) Borrower owes any amounts to Bank under the Loan Agreement
or otherwise, and (ii) the Loan Agreement has not been
terminated. 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 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 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 rights hereunder.
9. This Agreement shall bind any successors or assignees
of Creditor and shall benefit any successors or assigns of Bank.
This Agreement is solely for the benefit of 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 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 Commonwealth of Massachusetts,
without giving effect to conflicts of laws principles. Creditor
and Bank submit to the exclusive jurisdiction of the state and
federal courts located in Boston, Massachusetts in any action,
suit, or proceeding of any kind, against it which arises out of
or by reason of this Agreement; provided, however, that if for
any reason Bank cannot avail itself of the Courts of The
Commonwealth of Massachusetts, Creditor accepts jurisdiction of
the Courts and venue in Santa Xxxxx County, California.
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. Creditor is not
relying on any representations by Bank or Borrower in entering
into this Agreement, and 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 Creditor and Bank.
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.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
"Creditor" "Bank"
ELECTRONIC RETAILING SYSTEMS SILICON VALLEY BANK,
INTERNATIONAL, INC. d/b/a SILICON VALLEY EAST
By: s/Xxxxxxx Xxxxxx By: s/Xxxxx Xxxxxxxx
----------------------- -------------------------
Title: President Title: Vice President
The undersigned approves of the terms of this Agreement.
"Borrower"
NEWCHECK CORPORATION, D/B/A PRODUCTIVITY SOLUTIONS, INC.
By: s/Xxxxxxx Xxxxxx
----------------------
Title: President
Corp/newcheck/agreement/subordination ers exhibit 10h
-5-
