SUBORDINATION AGREEMENT
THIS
SUBORDINATION AGREEMENT, dated as of April 6, 2007 (this “Subordination
Agreement”)
is by
and among Xxxxx
Xxxxxxxx,
a US
citizen and resident of the state of Texas, whose primary residence is 0 Xxxxx
Xxxxx, Xxx Xxxxxxx, XX 00000, (the
“Junior
Subordinated Obligation
Holder”),
Universal
Property Development and Acquisition Corporation,
a Nevada
corporation (the “Borrower”),
and
Sheridan
Asset Management, LLC,
a
Delaware limited liability company (the “Lender”).
WITNESSETH:
WHEREAS,
the Lender and Borrower have entered into a Loan Agreement dated as of April
6,
2007 (as the same may be modified or amended from time to time, the
“Loan
Agreement”)
the
indebtedness pursuant to which shall be evidenced by the a Senior Secured
Promissory Note due April 6, 2008 in the original aggregate principal amount
of
$3,635,000 (the “Senior
Note”);
and
WHEREAS,
the Junior Subordinated Obligation Holder has provided a loan to the Borrower
pursuant to a promissory note as described on Schedule
A
(the
“Subordinated
Note”)
that
sets forth the Borrower’s indebtedness to the Junior Subordinated Obligation
Holder (“Junior
Subordinated Obligation”).
NOW,
THEREFORE, in consideration of the premises, the Lender, Borrower and the
Subordinated Holder are entering into this Subordination Agreement in order
to
fully set forth the provisions by which all obligations or indebtedness of
the
Borrower under or pursuant to the Junior Subordinated Obligation is subordinate
and junior in right of payment, and as to any security interest in the
Borrower’s assets, to all Superior Indebtedness (as hereinafter
defined).
1. Subordination.
The
Junior Subordinated Obligation shall be subordinate and junior in right of
payment, and as to any security interest in the Borrower’s assets, to all
Superior Indebtedness to the extent provided in this §1.
(a) Agreement
to Subordinate.(i)
The
Junior Subordinated Obligation Holder hereby acknowledges and agrees that the
indebtedness created by, and other obligations of any nature payable in respect
of, the Junior Subordinated Obligation, including without limitation any
renewals, rearrangements, or modifications thereof, are at all times, and in
all
respects, subordinate and junior in right of payment, and as to any security
interest in the Borrower’s assets, to all Superior Indebtedness (as defined
herein) on the following terms and conditions:
(1) The
Junior Subordinated Obligation Holder postpones and subordinates the Junior
Subordinated Obligation and any and all other indebtedness, now or hereafter
existing from Borrower to any Junior Subordinated Obligation Holder, including,
but not limited to, all rights to receive payments, management fees or
distributions, whether in cash or property or otherwise, to any and all
obligation of the Borrower pursuant to the Superior Indebtedness. The Junior
Subordinated Obligation Holder agrees that, so long as Borrower is indebted
in
any way pursuant to the Superior Indebtedness, Borrower shall not make any
payment, whether in cash, property or otherwise, or grant any security interest,
with respect to the Junior Subordinated Obligation Holder or the Junior
Subordinated Obligation. If any payment or distribution, whether in cash,
property or otherwise, is made by Borrower in violation of this Section
1(a)(i)(1), the Junior Subordinated Obligation Holder shall hold such payment
in
trust for the holder of the Superior Indebtedness and pay it over to such
holder, or its representative, to the extent necessary to pay in full all
Superior Indebtedness then remaining unpaid.
In
the
event of any proceedings relative to the Borrower or its property under any
Debtor Relief Laws (as defined below), or in the event of any voluntary or
involuntary liquidation, winding up or dissolution of the Borrower,
or
assignment for the benefit of creditors, the Holder of Superior Indebtedness
shall be entitled to receive payment in full of the Superior Indebtedness
(including, without limitation, post-petition interest, regardless of whether
such interest is allowable under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy
Code) before any of the Junior Subordinated Obligation Holder is entitled to
receive any payment or distribution (whether in cash, property or securities)
on
account of the Junior Subordinated Obligation and, in the event any such payment
or distribution is made upon or in respect of the Junior Subordinated Obligation
from and after the commencement of any such proceedings, liquidation, winding-up
or dissolution, the Junior Subordinated Obligation Holder shall hold such
payment in trust for the holder of the Superior Indebtedness and pay it over
to
such holder, or its representative, on
demand, to the extent necessary to pay in full all Superior Indebtedness then
remaining unpaid;
(2) In
the
event
of
any dissolution, winding
up, liquidation, or reorganization of the Borrower under any Debtor Relief
Law (as
defined below) (whether voluntary or involuntary and whether in bankruptcy,
insolvency, or receivership proceedings, or upon an assignment for the benefit
of creditors or any other marshaling of the assets and liabilities of the
Borrower or otherwise), Borrower, by its acceptance of this Subordination
Agreement, and all Junior Subordinated Obligation Holder,
by their acceptance thereof,
covenant and agree as follows:
(A) all
Superior Indebtedness shall first be paid in full before any payment or
distribution is made in respect of the Junior Subordinated
Obligations;
(B) any
payment or distribution of assets of the Borrower or from the estate created
by
the commencement of any such proceedings, whether in cash, property, or
securities, to which any of the Junior Subordinated Obligation Holder would
be
entitled in respect of the Junior Subordinated Obligation except for the
provisions of this Section 1 (including any such payments or distributions
which
may
be payable
or deliverable by reason of the payment
of any
other
indebtedness of the Borrower being subordinated to the payments due in respect
of the Junior Subordinated Obligations), shall be paid or delivered by the
Borrower,
as the
case may be, or any
receiver, trustee in bankruptcy, liquidation trustee, agent, or other person
making such payment or distribution directly to the holder of Superior
Indebtedness or its representative, to the extent necessary to pay in full
all
Superior Indebtedness remaining unpaid, before any payment or distribution
is
made
to
any of the
Junior Subordinated Obligation Holder in respect of Junior Subordinated
Obligations; and
2
(C) in
the
event that any payment or distribution of cash, property, or securities shall
be
received by any of the Junior Subordinated Obligation Holder in contravention
of
subsection (A) or (B) of this subsection (3) (including any such payments or
distributions which may be payable or deliverable by reason of the payment
of
any other indebtedness of the Borrower being subordinated to the payments due
in
respect of the Junior Subordinated Obligation), before all Superior Indebtedness
is paid in full, such payment or distribution shall
be
segregated
and held in trust for the benefit of, and shall be paid over to, the holder
of
such Superior Indebtedness or its representative, to the extent necessary to
pay
in full all Superior Indebtedness then remaining unpaid, after giving effect
to
any concurrent payment or distribution to the holder of Superior
Indebtedness;
The
consolidation of the Borrower with, or the merger of the Borrower into, another
corporation or the liquidation or dissolution of the Borrower following the
sale, conveyance
or
lease
of all or substantially all of its property to another corporation shall not
be
deemed a dissolution, winding up, liquidation or reorganization for the purposes
of this subsection (3) if such other corporation shall, as a part of such
consolidation, merger, sale, conveyance or lease, expressly assume in writing
all
of
the Borrower’s,
as the case may be, obligations under this Subordination Agreement.
(3) If
the
Borrower or the Lender notifies the Junior Subordinated Obligation
Holder that a Default
or Event of Default (as defined in the Loan Agreement) in
respect
of any Superior Indebtedness shall have occurred (whether as a consequence
of a
failure to make a payment or otherwise), the Junior Subordinated Obligation
Holder shall not take or receive any payment or distribution (whether in cash,
property or securities) upon or in respect of all or any part of the Junior
Subordinated Obligation unless and until
such Default
or Event of Default shall have been fully cured or waived and,
in
the
event that
the
Junior Subordinated
Obligation Holder receives any such payment or distribution, it shall hold
such
payment or distribution in trust for the Holder of Superior Indebtedness and
pay
it over to the holder or its representative, on demand;
3
(4) Junior
Subordinated Obligation Holder shall not demand, xxx for, take, or receive
by
set-off or otherwise, any payment, whether in cash, property or otherwise with
respect to the Junior Subordinated Obligations. Junior Subordinated Obligation
Holder shall not proceed against Borrower if Borrower fails to make any payments
of the Junior Subordinated Obligations, and will take no action to levy,
execute, seize, or otherwise acquire any assets or property of the Borrower.
The
Junior Subordinated Obligation Holder specifically covenants and agrees that
the
position and security of the Lender with respect to all assets of the Borrower
shall remain in all situations prior and superior to any rights of Junior
Subordinated Obligation Holder in such assets or property.
(5) If
and so
long as (i) the payment of the principal in respect of the Senior Note has
not
been accelerated by the Holder thereof, and (ii) no Event of Default described
in Section 12 of the Loan Agreement shall then exist, the Junior Subordinated
Obligation Holder shall not demand, xxx for, or commence (or join in the
commencement of) any action or proceeding against the Borrower under any Debtor
Relief Laws unless and until the Superior Indebtedness shall have been paid
in
full;
(ii) As
used
herein, “Superior
Indebtedness” means
the
principal of, premium, if any, and interest on the Senior Note, and all fees,
expenses, reimbursements, indemnities, premiums and other amounts payable under
the
Loan
Documents (as defined in the Loan Agreement).
(iii) As
used
herein, “Debtor Relief Laws” shall mean the Bankruptcy Code of the United States
of America, and all other applicable federal and state liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, or similar debtor relief
laws from time to time in effect affecting the rights of creditors
generally.
(b) Proofs
of Claim.
The
Junior Subordinated Obligation Holder undertakes and agrees for the benefit
of
each holder of Superior Indebtedness to execute, verify, deliver and file any
proofs of claim in order to prove and realize upon any rights or claims
pertaining to the Junior Subordinated Obligation and to effectuate the full
benefit of the subordination contained herein.
(c) Further
Rights.
No
right
of the
holder
of any Superior Indebtedness to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act
on
the part of the Borrower or by any act or failure to act by any such holder,
or
by any noncompliance by the Borrower with the terms and provisions and covenants
hereof, regardless of any knowledge thereof with which any such holder may
have
to be otherwise charged. The holder of Superior Indebtedness may extend, renew,
modify, supplement or amend the terms of the Superior Indebtedness or any
security therefor or guaranty thereof and
release, sell, exchange
or enforce such security or guaranty or elect any right or remedy, or delay
in
enforcing or release any right or remedy and otherwise deal freely with the
Borrower, all without notice to the Junior Subordinated Obligation Holder and
all without affecting the liabilities and obligations of the Borrower or the
Junior Subordinated Obligation Holder under this Subordination Agreement. The
Junior Subordinated Obligation Holder shall not, so long as any Superior
Indebtedness shall
be
outstanding, obtain a security interest in any property of the Borrower in
order
to secure the payment of the Junior Subordinated Obligations.
4
(d) Defaults.
The
failure to make any payment due by reason of any provision of this §1 shall not
be construed as preventing the occurrence of a default under such Junior
Subordinated Obligation.
(e) Obligations
Not Impaired.
The
foregoing provisions are solely for the purpose of defining the relative rights
of the holder of Superior Indebtedness on the one hand, and the Junior
Subordinated Obligation Holder on the other hand, and nothing therein shall
between
the Borrower and Lender, the obligation of the Borrower to pay the Junior
Subordinated Obligation in accordance with their terms; nor shall anything
herein prevent the
Junior Subordinated
Obligation Holder from exercising all remedies otherwise
permitted by applicable
law or hereunder upon default hereunder, subject to the rights of the Holder
of
Superior Indebtedness as herein provided for.
(f) References.
All
references herein to the Junior Subordinated Obligation Holder shall refer
to
them solely in their capacities as Holder of the Junior Subordinated
Obligation.
(g) Assignment
of Indebtedness.
No
Junior Subordinated Obligation Holder shall assign or transfer any of the Junior
Subordinated Obligation to any third party without Lender’s prior written
consent.
2. Acceleration
of Obligations.
Should
Borrower or Junior Subordinated Obligation Holder violate any term or condition
of this Subordinated Agreement, such violation shall constitute an Event of
Default (as defined in the Loan Agreement) under the Superior Indebtedness,
and
Lender shall have the right to immediately and without notice to Borrower or
Junior Subordinated Obligation Holder, accelerate the maturity of any Superior
Indebtedness.
3. Legend
on Instruments.
Junior
Subordinated Obligation Holder shall place a legend, in form and substance
acceptable to Lender, referencing the subordination provided under this
Subordination Agreement on any paper, document or instrument evidencing any
of
the Junior Subordinated Obligations.
5
4. Expenses.
Should
it be necessary for Lender to initiate legal action in order to enforce and
protect its rights under this Subordination Agreement, Junior Subordinated
Obligation Holder shall reimburse Lender for all costs and expenses incurred
in
respect to such action, including, but not limited to, reasonable attorney’s
fees (which may include those allocable to Lender’s in-house
counsel).
5. Governing
Law.
The
validity, meaning and effect of this Subordination Agreement shall be determined
in accordance with the laws of New York applicable to contracts made and to
be
performed within that state.
6. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered, or shall be sent by certified or registered
mail, return receipt requested, postage
prepaid and addressed (i) if
to the
Borrower, as set forth in Section 13 of the Loan Agreement, or to such other
address as may have been furnished to
the
other parties
to this Subordination Agreement by written notice,
(ii) if to the Lenders, as set
forth
in Section 13 of the Loan Agreement, or to such other address as may have been
furnished to
the
other
parties to this Subordination Agreement by written notice, and (iii) if to
any
of the Junior Subordinated Obligation Holder, as set forth on Schedule A,
attached hereto, next to such Junior Subordinated Obligation Holder’s name, or
to such other address as may have been furnished to
the
other
parties to this Subordination Agreement by written notice.
7. Counterparts.
This
Subordination Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute one and the same document.
8. Headings.
The
headings used herein are solely for the convenience of the parties and shall
not
serve to modify or interpret the text of the Sections at the beginning of which
they appear.
9. Successors
and Assigns.
The
provisions hereof shall be binding upon and shall inure to the benefit of the
Borrower, Lender and each of the Junior Subordinated Obligation Holder, and
their respective heirs, legatees, successors and permitted assigns.
10. Amendments
and Waivers.
No
amendment, modification, supplement, extension, termination or waiver of
any
provision
hereof, and no approval or consent hereunder, shall be effective
unless approved in writing by the Borrower and Lender.
11. Severability.
If any
provision of this Subordination Agreement shall be held by any court of
competent
jurisdiction to be illegal, void or unenforceable, such provision shall
be
of no
force or effect, but the illegality or unenforceability shall have no effect
upon, and shall not impair the enforceability of, any other provision
of
this
Subordination
Agreement.
12. Attorney’s
Fees.
If any
party shall commence a proceeding to enforce any provisions of this
Subordination Agreement, then the prevailing party in such proceeding shall
be
reimbursed by the other party for its reasonable attorney’s fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such proceeding.
[Signature
Page Follows.]
6
IN
WITNESS WHEREOF,
the
undersigned has executed this Subordination
Agreement as
of the
date
first above written.
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7
Schedule
A
1. Promissory
Note with Confessed Judgment Provisions of $853,696, immediately due and payable
by the Borrower to Xxxxx Xxxxxxxx.
8
