SUBORDINATION AGREEMENT
Exhibit
10.10
This
Subordination Agreement, dated as of January 14, 2008, is made by STRASBOURGER,
PEARSON, TULCIN, WOLFFE,
INC., a New York corporation, acting as the authorized agent for
the holders of certain Subordinated Secured Convertible Debentures (the
“Subordinated Creditors”), for the benefit of XXXXX FARGO BANK, NATIONAL
ASSOCIATION, acting through its Xxxxx Fargo Business Credit operating division
(the “Lender”).
MISCOR
GROUP, LTD., an Indiana corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES,
INC., an Indiana corporation (“MIS”), XXXXXXX ELECTRIC, LLC, an Indiana
limited liability company (“Xxxxxxx”), HK ENGINE COMPONENTS, LLC, an Indiana
limited liability company (“HK”), MAGNETECH POWER SERVICES, LLC, an Indiana
limited liability company (“MPS”), IDEAL CONSOLIDATED, INC., an Indiana
corporation (“Ideal”), 3-D SERVICE, LTD., an Ohio limited liability company
(“3D”), and AMERICAN MOTIVE POWER, INC., a Nevada corporation (“AMP” and
together with MISCOR, MIS, Xxxxxxx, XX, MPS, Ideal and 3D, the “Borrowers” and
each a “Borrower”) are now or hereafter may be indebted to the Lender on account
of loans or the other extensions of credit or financial accommodations from
the
Lender to the Borrowers, or to any other person under the guaranty or
endorsement of the Borrowers.
The
Subordinated Creditors have made loans or granted other financial accommodations
to one or more of the Borrowers.
As
a condition to making any loan or extension of credit to the Borrowers, the
Lender has required that the Subordinated Creditors subordinate the payment
of
the Subordinated Creditors’ loans and other financial accommodations to the
payment of any and all indebtedness of the Borrowers to the
Lender. Assisting the Borrowers in obtaining credit accommodations
from the Lender and subordinating its interests pursuant to the terms of this
Agreement are in the Subordinated Creditors’ best interest.
ACCORDINGLY,
in consideration of the loans and other financial accommodations that have
been
made and may hereafter be made by the Lender for the benefit of the Borrower,
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Subordinated Creditors hereby agree as
follows:
1.
Definitions. As
used herein, the following terms have the meanings set forth
below:
“Borrower
Default” means a Default or Event of Default as defined in any agreement or
instrument evidencing, governing, or issued in connection with Lender
Indebtedness, including, but not limited to, the Credit Agreement, or any
default under or breach of any such agreement or
instrument.
“Collateral”
means all collateral now or hereafter securing payment of the Lender
Indebtedness, including all proceeds thereof.
“Credit
Agreement” means that certain Credit and Security Agreement dated as of January
14, 2008, by and among the Borrowers and the Lender as the same may hereafter
be
amended, supplemented or restated from time to time.
“Lender
Indebtedness” means each and every debt, liability and obligation of every type
and description which the Borrowers may now or at any time hereafter owe to
the
Lender, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or
to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest thereon
and
all fees, costs and other charges related thereto (including all interest,
fees,
costs and other charges accruing after the commencement of any case, proceeding
or other action relating to the bankruptcy insolvency or reorganization of
any
Borrower, whether or not allowed in such proceeding or other action), all
renewals, extensions and modifications thereof and any notes issued in whole
or
partial substitution therefor.
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any
assets or properties of a person, whether now owned or hereafter acquired and
whether arising by agreement or operation of law.
“Subordinated
Indebtedness” means all obligations arising under the Debentures and each and
every other debt, liability and obligation of every type and description which
any Borrower may now or at any time hereafter owe to the Subordinated Creditors,
whether such debt, liability or obligation now exists or is hereafter created
or
incurred, and whether it is or may be direct or indirect, due or to become
due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
joint, several or joint and several.
“Debentures”
means the Subordinated Secured Convertible Debentures issued in March 2005
by
MISCOR Group, Ltd. f/k/a Magnetech Integrated Services Corp. and payable to
the
order of the Subordinated Creditors in the original principal amounts set forth
on Exhibit A
hereto,
which debentures are scheduled to be paid in full on or before
February 28, 2008, together with all renewals, extensions and modifications
thereof and any note or notes issued in substitution
therefor.
2.
Subordination. The
payment of all of the Subordinated Indebtedness is hereby expressly subordinated
to the extent and in the manner hereinafter set forth to the payment in full
of
the Lender Indebtedness; and regardless of any priority otherwise available
to
the Subordinated Creditors by law or by agreement, the Lender shall hold a
first
priority Lien in the Collateral, and any Lien claimed therein (including any
proceeds thereof) by the
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Subordinated
Creditors shall be and remain fully subordinate for all purposes to the Lien
of
the Lender therein for all purposes whatsoever. The Subordinated
Indebtedness shall continue to be subordinated to the Lender Indebtedness even
if the Lender Indebtedness is subordinated, avoided or disallowed under the
United States Bankruptcy Code or other applicable law.
3.
Payments. Until
all of the Lender Indebtedness has been paid in full and the Lender has released
its Lien in the Collateral, the Subordinated Creditors shall not, without the
Lender’s prior written consent, demand, receive or accept any payment (whether
of principal, interest or otherwise) from any Borrower in respect of the
Subordinated Indebtedness, or exercise any right of or permit any setoff in
respect of the Subordinated Indebtedness, except that the Subordinated Creditors
may accept scheduled payments of interest and principal required to be paid
under the Debentures, so long as no Borrower Default has occurred and is
continuing or will occur as a result of or immediately following any such
payment.
4.
Receipt
of Prohibited Payments. If the Subordinated Creditors receive
any payment on the Subordinated Indebtedness that the Subordinated Creditors
are
not entitled to receive under the provisions of this Agreement, the Subordinated
Creditors will hold the amount so received in trust for the Lender and will
forthwith turn over such payment to the Lender in the form received (except
for
the endorsement of the Subordinated Creditors where necessary) for application
to then-existing Lender Indebtedness (whether or not due), in such manner of
application as the Lender may deem appropriate. If the Subordinated
Creditors exercise any right of setoff which the Subordinated Creditors are
not
permitted to exercise under the provisions of this Agreement, the Subordinated
Creditors will promptly pay over to the Lender, in immediately available funds,
an amount equal to the amount of the claims or obligations offset. If
the Subordinated Creditors fail to make any endorsement required under this
Agreement, the Lender, or any of its officers or employees or agents on behalf
of the Lender, is hereby irrevocably appointed as the attorney-in-fact (which
appointment is coupled with an interest) for the Subordinated Creditors to
make
such endorsement in the Subordinated Creditors’ names.
5.
Action
on Subordinated Indebtedness. The Subordinated Creditors will
not commence any action or proceeding against any Borrower to recover all or
any
part of the Subordinated Indebtedness, or join with any creditor (unless the
Lender shall so join) in bringing any proceeding against any Borrower under
any
bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any
state government, or take possession of, sell, or dispose of any Collateral,
or
exercise or enforce any right or remedy available to the Subordinated Creditors
with respect to any such Collateral, unless and until the Lender Indebtedness
has been paid in full and the Lender has released its Lien in the
Collateral.
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6.
Action
Concerning Collateral.
(a)
Notwithstanding any Lien now held or hereafter acquired by the Subordinated
Creditors, the Lender may take possession of, sell, dispose of, and otherwise
deal with all or any part of the Collateral, and may enforce any right or remedy
available to it with respect to any Borrower or the Collateral, all without
notice to or consent of the Subordinated Creditors except as specifically
required by applicable law.
(b)
In addition, and without limiting the generality of the foregoing, if (i) a
Borrower Default has occurred and is continuing, (ii) a Borrower or the Lender
intends to sell or otherwise dispose of any Collateral to an unrelated third
party outside the ordinary course of business, (iii) the Lender has given
written notice thereof to the Subordinated Creditors, and (iv) the Subordinated
Creditors have failed, within ten (10) days after receipt of such notice, to
purchase for cash the Lender Indebtedness for the full amount thereof, the
Subordinated Creditors shall be deemed to have consented to such sale or
disposition, to have released any Lien it may have in such Collateral and to
have authorized the Lender and its agents to file partial releases with respect
to such Collateral.
(c)
The Lender shall have no duty to preserve, protect, care for, insure, take
possession of, collect, dispose of, or otherwise realize upon any of the
Collateral, and in no event shall the Lender be deemed the Subordinated
Creditors’ agent with respect to the Collateral. All proceeds
received by the Lender with respect to any Collateral may be applied, first,
to
pay or reimburse the Lender for all costs and expenses (including reasonable
attorneys’ fees) incurred by the Lender in connection with the collection of
such proceeds, and, second, to any Lender Indebtedness secured by the Lender’s
Lien in that Collateral in any order that it may choose.
7.
Bankruptcy
and
Insolvency. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or
arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale
of all or substantially all of the assets of any Borrower, dissolution,
liquidation or any other marshalling of the assets or liabilities of any
Borrower, the Subordinated Creditors will file all claims, proofs of claim
or
other instruments of similar character necessary to enforce the obligations
of
such Borrower in respect of the Subordinated Indebtedness and will hold in
trust
for the Lender and promptly pay over to the Lender in the form received (except
for the endorsement of the Subordinated Creditors where necessary) for
application to the then-existing Lender Indebtedness, any and all moneys,
dividends or other assets received in any such proceedings on account of the
Subordinated Indebtedness, unless and until the Lender Indebtedness has been
paid in full and the Lender’s Lien in the Collateral has been
terminated. If the Subordinated Creditors shall fail to take any such
action, the Lender, as attorney-in-fact for the Subordinated Creditors, may
take
such action on the Subordinated Creditors’ behalf. The Subordinated
Creditors hereby irrevocably appoint the Lender, or any of its officers or
employees on behalf of the Lender, as the attorney-in-fact for the Subordinated
Creditors
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(which
appointment is coupled with an interest) with the power but not the duty to
demand, xxx for, collect and receive any and all such moneys, dividends or
other
assets and give acquittance therefor and to file any claim, proof of claim
or
other instrument of similar character, to vote claims comprising Subordinated
Indebtedness to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension and to take such other
action in the Lender’s own name or in the name of the Subordinated Creditors as
the Lender may deem necessary or advisable for the enforcement of the agreements
contained herein; and the Subordinated Creditors will execute and deliver to
the
Lender such other and further powers-of-attorney or instruments as the Lender
may request in order to accomplish the foregoing. If the Lender
desires to permit the use of cash collateral or to provide post-petition
financing to a Borrower, the Subordinated Creditors shall not object to the
same
or assert that its interests are not being adequately
protected.
8.
Restrictive
Legend; Transfer of Subordinated Indebtedness. The
Subordinated Creditors will cause the Debentures and all other notes, bonds,
debentures or other instruments evidencing the Subordinated Indebtedness or
any
part thereof to contain a specific statement thereon to the effect that the
indebtedness thereby evidenced is subject to the provisions of this Agreement,
and the Subordinated Creditors will xxxx their books conspicuously to evidence
the subordination effected hereby. Attached hereto is a true and
correct copy of the Debentures bearing such legend. At the request of
the Lender, the Subordinated Creditors shall deposit with the Lender the
Debentures and all of the other notes, bonds, debentures or other instruments
evidencing the Subordinated Indebtedness, which notes, bonds, debentures or
other instruments may be held by the Lender so long as any Lender Indebtedness
remains outstanding or the Lender’s Lien in the Collateral has not been
terminated. The Subordinated Creditors are the lawful holder of the
Debentures and have not transferred any interest therein to any other person
or
entity. Without the prior written consent of the Lender, the
Subordinated Creditors will not assign, transfer or pledge to any other person
any of the Subordinated Indebtedness or agree to a discharge or forgiveness
of
the same.
9.
Continuing
Effect. This Agreement shall constitute a continuing agreement
of subordination, and the Lender may, without notice to or consent by the
Subordinated Creditors, modify any term of the Lender Indebtedness in reliance
upon this Agreement. Without limiting the generality of the
foregoing, the Lender may, at any time and from time to time, without the
consent of or notice to the Subordinated Creditors and without incurring
responsibility to the Subordinated Creditors or impairing or releasing any
of
the Lender’s rights or any of the Subordinated Creditors’ obligations
hereunder:
(a)
change the interest rate or change the amount of payment or extend the time
for
payment or renew or otherwise alter the terms of any Lender Indebtedness or
any
instrument evidencing the same in any manner;
(b)
sell, exchange, release or otherwise deal with any property at any time securing
payment of the Lender Indebtedness or any part thereof;
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(c)
release anyone liable in any manner for the payment or collection of the Lender
Indebtedness or any part thereof;
(d)
exercise or refrain from exercising any right against any Borrower or any other
person (including the Subordinated Creditors); and
(e)
apply any sums received by the Lender, by whomsoever paid and however realized,
to the Lender Indebtedness in such manner as the Lender shall deem
appropriate.
10.
No
Commitment. None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on
the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrowers.
11.
Marshalling. The
Subordinated Creditors hereby waive any and all rights to require the
marshalling of assets in connection with the exercise of any of the Lender’s
remedies permitted by applicable law or agreement.
12.
Notice. All
notices and other communications hereunder shall be in writing and shall be
(i) personally delivered, (ii) transmitted by registered mail, postage
prepaid, or (iii) transmitted by telefacsimile, in each case addressed to
the party to whom notice is being given at its address as set forth
below:
If
to the Lender:
Xxxxx
Fargo Business Credit
000
Xxxx Xxxxx Xxxxxx, 0xx
Xxxxx
MAC
X0000-00X
Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx
X. Xxxxxx
Telefacsimile: 260/461-6037
If
to the Subordinated Creditors:
Strasbourger,
Pearson, Tulcin, Wolffe, Inc.
00
Xxxxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Telefacsimile: (000)
000-0000
Attention: Xx.
Xxxxxxx X. Xxxxxxxxxx and
Xx.
Xxx
Xxxxxxxxx
or
at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to
have been given on (i) the date received
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if
delivered personally, (ii) the date of posting if delivered by mail, or
(iii) the date of transmission if delivered by
telefacsimile.
13.
Conflict
in Agreements. If the subordination provisions of any
instrument evidencing Subordinated Indebtedness conflict with the terms of
this
Agreement, the terms of this Agreement shall govern the relationship between
the
Lender and the Subordinated Creditors.
14.
No
Waiver. No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the Lender, and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in
no
way impair the rights of the Lender or the obligations of the Subordinated
Creditors to the Lender in any other respect at any time.
15.
Binding
Effect; Acceptance. This Agreement shall be binding upon the
Subordinated Creditors and the Subordinated Creditors’ heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether
this
or any similar agreement is executed by any other subordinated creditor of
any
Borrower. Notice of acceptance by the Lender of this Agreement or of
reliance by the Lender upon this Agreement is hereby waived by the Subordinated
Creditors.
16.
Miscellaneous. The
paragraph headings herein are included for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
17.
Governing
Law;
Consent to Jurisdiction and Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Wisconsin. Each party
consents to the personal jurisdiction of the state and federal courts located
in
the State of Wisconsin in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient,
and agrees that any litigation initiated by any of them in connection with
this
Agreement may be venued in either the state or federal courts located in
Milwaukee County, Wisconsin.
THE
PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.
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IN
WITNESS WHEREOF, the Subordinated Creditors have executed this Subordination
Agreement as of the date and year first above-written.
STRASBOURGER
XXXXXXX TULCIN XXXXX INC.
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||||||||
By:
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/s/
Xxxxxxx X. Xxxxxxxxxx
|
By:
|
/s/
Rom Xxxxxxxxx
|
|||||
Printed
Name:
|
Xxxxxxx
X. Xxxxxxxxxx
|
Printed
Name:
|
Rom
Xxxxxxxxx
|
|||||
Title:
|
President
|
Title:
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||||||
Date:
|
1/7/08
|
Date:
|
1/02/08
|
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ACKNOWLEDGMENT
BY BORROWERS
The
undersigned, being the Borrowers referred to in the foregoing Agreement, hereby
(i) acknowledges receipt of a copy thereof, (ii) agrees to all of the
terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the Subordinated Indebtedness that the Subordinated
Creditors would not be entitled to receive under the provisions of the
Agreement, (iv) agrees that any such payment will constitute a default
under the Lender Indebtedness, and (v) agrees to xxxx its books
conspicuously to evidence the subordination of the Subordinated Indebtedness
effected hereby.
MAGNETECH
POWER SERVICES, LLC
|
||||
By:
|
/s/
Xxxxxxx X. Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
|
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
Xxxxxxx
X. Xxxxxx, Treasurer
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|||
MAGNETECH
INDUSTRIAL SERVICES, INC.
|
IDEAL
CONSOLIDATED, INC.
|
|||
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
|||
XXXXXXX
ELECTRIC, LLC
|
3-D
SERVICE, LTD.
|
|||
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
|||
HK
ENGINE COMPONENTS, LLC
|
AMERICAN
MOTIVE POWER, INC.
|
|||
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
Xxxxxxx
X. Xxxxxx, Treasurer
|
Exhibit
A
Attach
copy of Debentures with following legend:
THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY STRASBOURGER, PEARSON, TULCIN,
WOLFFE,
INC., AS AUTHORIZED AGENT, IN FAVOR OF XXXXX FARGO BANK, NATIONAL
ASSOCIATION, ACTING THROUGH ITS XXXXX FARGO BUSINESS CREDIT OPERATING DIVISION,
DATED AS OF JANUARY 14, 2008.