EXHIBIT 10.4
INTERCREDITOR AND SUBORDINATION AGREEMENT
This INTERCREDITOR AND SUBORDINATION AGREEMENT is entered
into as of April 30, 2001, among FOOTHILL CAPITAL CORPORATON, a California
corporation ("Foothill"), LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LaSalle"), SUNROCK CAPITAL CORP., a Delaware corporation ("Sunrock", and
collectively with Foothill and LaSalle, the "Senior Lenders"), Foothill as agent
for the Senior Lenders ("Senior Agent") and DDJ CAPITAL MANAGEMENT, LLC, a
Massachusetts limited liability company as agent (the "Subordinated Agent") for
the lenders (the "Subordinated Creditors") pursuant to the Subordinated Credit
Agreement (defined below) in light of the following:
R E C I T A L S
A. Senior Agent and Senior Lenders (collectively, the
"Senior Creditors") and Xxxxxxx Jewelers, Inc., a Delaware corporation
("Debtor") have entered into that certain Loan and Security Agreement, dated as
of October 2, 1998 (as amended, the "Senior Creditor Loan Agreement"), pursuant
to which Senior Creditors have agreed to extend certain financial accommodations
to Debtor.
B. As security for the prompt payment and performance of
the Senior Creditor Indebtedness (as hereinafter defined), Debtor has granted
Senior Agent a security interest in all of its Collateral (as hereinafter
defined) for the benefit of the Senior Lenders.
C. DDJ Capital Management, LLC currently beneficially holds
an equity interest of approximately 49% in the Debtor.
D. The Debtor, the Subordinated Creditors and the
Subordinated Agent have entered into that certain Loan Agreement (the
"Subordinated Creditors Agreement") dated as of the date hereof pursuant to
which Subordinated Creditors have extended certain financial accommodations to
Debtor.
E. As security for the prompt payment and performance of
the Subordinated Creditors Indebtedness (as hereinafter defined) Debtor has
granted Subordinated Creditors a security interest in Debtor's Collateral under
the Subordinated Creditors Agreement.
F. Pursuant to Amendment No. 6 to the Senior Creditor Loan
Agreement, of even date herewith, the Senior Creditors have waived certain
existing Events of Default under the Senior Creditor Loan Agreement, and have
consented to the incurrence of the Subordinated Creditors Indebtedness and the
granting of the security interest in the Collateral to Subordinated Creditors,
in reliance upon obtaining this Agreement.
G. Senior Creditors and Subordinated Creditors wish to
agree as to their respective rights to repayment by, and liens upon and security
interests in the assets of Debtor and as to certain other rights, priorities,
and interests as between Senior Creditors and Subordinated Creditors.
A G R E E M E N T
In consideration of the foregoing, the mutual covenants
contained herein, and for other good and valuable consideration, the receipt of
which Senior Creditors and Subordinated Creditors hereby acknowledge, Senior
Creditors and Subordinated Creditors hereby agree as follows:
1. Definitions. The following terms, as used in this
Agreement, shall have the following meanings:
"Accounts", "Chattel Paper", "Documents", "Equipment",
"Fixtures", "General Intangibles", "Instruments", "Inventory", and "Investment
Property" shall have the meanings assigned to them under the UCC.
"Agreement" means this Intercreditor Agreement together
with any and all amendments, extensions, modifications, riders, addenda,
exhibits, and schedules hereto.
"Bankruptcy Case" means any proceeding commenced by or
against Debtor, under any provision of the Bankruptcy Code or under any other
federal or state bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, or proceedings
seeking reorganization, arrangement, or other similar relief, and all converted
or succeeding cases in respect thereof.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. Section 101, et seq.), as amended, and any successor statute.
"Blockage Notice" means a written notice from the Senior
Agent under the Senior Credit Agreement to the Debtor, a copy of which is sent
to the Subordinated Agent that a Non-Payment Event of Default has occurred and
is continuing.
"Blockage Period" means any period commencing on the date a
Blockage Notice is given and ending on the earlier to occur of:
(a) the date when the Event of Default that was the basis
for such notice has been cured or waived in a writing signed by the Senior
Lenders; and
(b) ninety (90) days after the date such Blockage Notice is
given, unless prior to the expiration of such ninety (90) day period, (i) the
Senior Agent commences and thereafter takes reasonable steps to continue a
Senior Liquidation, in which case, the date upon which all Senior Creditor
Indebtedness has been indefeasibly paid and satisfied and the Senior Credit
Agreements have been terminated or (ii) a Standstill Period is in effect, in
which case, upon the expiration of such Standstill Period.
"Collateral" means all of Debtor's presently existing and
hereafter acquired real property, personal property, including, without
limitation, Accounts, Chattel Paper, deposit accounts, Documents, Equipment,
Fixtures, General Intangibles, Instruments, Inventory, and Investment Property;
all of Debtor's and all proceeds and insurance proceeds of the foregoing, and
all of Debtor's books and records relating thereto.
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"Enforcement Action" means any action by Subordinated
Creditors to enforce payment or performance by Debtor of any of its Subordinated
Creditors Indebtedness or Subordinated Creditors Agreements, including any of
the following: (a) acceleration of the maturity of Subordinated Creditors
Indebtedness, (b) commencement of, prosecution of, or participation in any
lawsuit, action or proceeding, whether private, judicial, equitable,
administrative, or otherwise (including the commencement or joining with any
other creditors in the commencement of any Bankruptcy Case) against Debtor, (c)
the exercise of any right of setoff for the collection of any amounts due in
respect of the Subordinated Creditors Indebtedness, or (d) exercise of any
Secured Creditor Remedy. Notwithstanding the foregoing, none of the following
shall constitute an "Enforcement Action" for purposes of this Agreement: (x) the
delivery of any notice of default or other notice to Debtor pursuant to or in
connection with the Subordinated Creditors Agreements, (y) the acceleration of
the Subordinated Creditors Indebtedness if Senior Agent has already notified
Subordinated Creditors and Debtor in writing that it has accelerated the Senior
Creditors Indebtedness and has not rescinded such notice in writing, (z) the
exercise of rights and remedies available to Subordinated Creditors under the
Subordinated Creditors Agreements after the 90th day following notice to the
Senior Agent of the Subordinated Creditors' intention to exercise rights and
remedies so long as the Senior Creditors have not begun a Senior Liquidation,
(aa) the filing by Subordinated Creditors of a proof of claim in a Bankruptcy
Case, which proof of claim indicates Subordinated Creditors' subordination
hereunder.
"Maximum Amount" has the meaning set forth in the Senior
Creditor Loan Agreement.
"Non-Payment Event of Default" means any state of facts or
event (other than a Payment Event of Default) the existence or occurrence of
which entitles the Senior Creditors to accelerate the maturity of the Senior
Creditor Indebtedness and which has not been waived or cured in a writing signed
by the Senior Agent or Senior Creditors, as applicable.
"Payment Event of Default" means any default in the payment
of any or all of the Senior Creditor Indebtedness in accordance with the terms
of the Senior Creditor Agreements (whether upon maturity, mandatory prepayment,
acceleration or otherwise) beyond any applicable grace period with respect
thereto, and which has not been waived or cured in a writing signed by the
Senior Agent or Senior Creditors, as applicable.
"Secured Creditor" means any of the Senior Creditors or
Subordinated Creditors, or any successor or assignee of any of them, in its
capacity as a secured creditor under the Senior Creditor Agreements or the
Subordinated Creditors Agreements, respectively.
"Secured Creditor Remedies" means any action by a Secured
Creditor in furtherance of the sale, foreclosure, realization upon, or the
repossession or liquidation of any of the Collateral, including without
limitation, (i) the exercise of any remedies or rights of a "Secured Creditor"
under Division 9 of the UCC, such as, without limitation, the notification of
account debtors; (ii) the exercise of any remedies available to a judgment
creditor; or (iii) any other remedy available in respect of the Collateral
available to such Secured Creditor under any Secured Creditors' Agreement to
which it is a party.
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"Secured Creditors' Agreements" means, collectively, the
Senior Creditor Agreements and the Subordinated Creditors Agreements.
"Secured Creditors' Indebtedness" means, collectively, the
Senior Creditor Indebtedness and the Subordinated Creditors Indebtedness.
"Senior Creditor Agreements" means, collectively, the
Senior Creditor Loan Agreement, any Loan Documents referred to therein, and any
other document, instrument, or agreement entered into by or in favor of Senior
Creditors and Debtor in connection with the Senior Creditor Indebtedness and the
Collateral, together with any amendments, replacements, substitutions, or
restatements thereof.
"Senior Creditor Indebtedness" means any and all presently
existing or hereafter arising indebtedness, claims, debts, liabilities, and
obligations of Debtor owing to Senior Creditors, whether direct or indirect,
contingent or of any other nature, character, or description (including all
interest accruing after commencement of any case, proceeding, or other action
relating to the bankruptcy, insolvency, or reorganization of Debtor and all
amounts and interest that, but for the provisions of the Bankruptcy Code, would
have accrued and become due).
"Senior Liquidation" means the conduct by the Senior Agent
of any of the following: (i) any Secured Creditor Remedy following acceleration
of the Senior Credit Agreements or (ii) any other plan or program for the sale
or other realization upon the Collateral, in either case, with a view to the
full collection as determined in good faith by the Senior Agent, and payment and
satisfaction of the Senior Creditor Indebtedness, whether or not the Senior
Creditors extend any credit to the Debtor pursuant to the Senior Credit
Agreement during the conduct of either of the foregoing.
"Standstill Notice" means a written notice from Senior
Agent under the Senior Credit Agreement to the Subordinated Agent, with a copy
to Debtor, that a Standstill Period is in effect or that Senior Agent is
commencing a Senior Liquidation.
"Standstill Period" means the period commencing on the date
a Standstill Notice is given and ending on the date that is ninety (90) days
after the date such Standstill Notice is given, unless prior to the expiration
of such ninety (90) day period, the Senior Agent commences and thereafter takes
reasonable steps to continue a Senior Liquidation, in which case, the date upon
which all Senior Indebtedness has been indefeasibly paid and satisfied and the
Senior Credit Agreements have been terminated.
"Subordinated Creditors Agreements" means, collectively,
the Subordinated Credit Agreement, and any other document, instrument, or
agreement now existing or in the future entered into by or in favor of
Subordinated Creditors and Debtor in connection with the Subordinated Creditors
Indebtedness or the Collateral, together with any amendments, replacements,
substitutions, or restatements thereof.
"Subordinated Creditors Indebtedness" means any and all
presently existing or hereafter arising indebtedness, claims, debts,
liabilities, and obligations of Debtor owing to Subordinated Creditors, whether
direct or indirect, whether contingent or of any other nature, character, or
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description (including all interest accruing after commencement of any case,
proceeding, or other action relating to the bankruptcy, insolvency, or
reorganization of Debtor to the extent such interest is an allowable claim in
any such proceeding).
"Tranche B" means any and all presently existing or
hereafter arising indebtedness, claims, debts, liabilities and obligations of
Debtor owing to the Subordinated Creditors pursuant to the Tranche B Loans
provided to Debtor by Subordinated Creditors pursuant to the Subordinated
Creditors Agreements.
"UCC" means the Uniform Commercial Code as adopted in the
State of California, or in such other jurisdiction as governs the perfection of
the liens and security interests in the Collateral for the purposes of the
provisions hereof relating to such perfection or effect of perfection.
2. Subordination and Standby.
(a) Indebtedness. Until the Senior Creditor Indebtedness
has been fully paid in cash and the obligations of Senior Creditors to extend
credit under the Senior Creditor Agreements have been terminated, Subordinated
Creditors shall not accept or receive, by payment, setoff, or in any other
manner, from Debtor or any other obligor under the Subordinated Creditors
Indebtedness, the whole or any part of any sums which may now or hereafter be
owing to Subordinated Creditors on account of the Subordinated Creditors
Indebtedness; provided, however, the Debtor may pay and the Subordinated
Creditors may receive (A) the Closing Fee in the amount of $300,000, (B)
reasonable attorneys' fees incurred in connection with the negotiation, delivery
and enforcement of the Subordinated Credit Agreement, and (C) except during a
Blockage Period or when a Payment Event of Default has occurred and is
continuing, scheduled monthly payments due on account of interest owing under
the Subordinated Credit Agreement and additional compensation under Section
2.7(b) of the Subordination Credit Agreement, in each case in accordance with
the terms of the Subordinated Credit Agreement as in effect on the date hereof
(a "Permitted Payment"). Notwithstanding anything to the contrary herein, the
Senior Agent shall not deliver more than one (1) Blockage Notice in any
consecutive one hundred twenty (120) day period. Upon the termination of any
Blockage Period or if any Payment Event of Default has been cured or waived in a
writing signed by the Senior Creditor, the rights of the Subordinated Creditors
to receive payments as provided in the immediately preceding sentence shall be
reinstated and the Debtor shall to the extent permitted hereunder be permitted
to immediately pay to the Subordinated Creditors any such payments due and
unpaid and shall resume making future Permitted Payments to the Subordinated
Creditors. In the event that, notwithstanding the foregoing, Debtor shall make
any payment to Subordinated Creditors prohibited by the foregoing provisions of
this Section 2(a), then and in such event such payment shall be segregated by
Subordinated Creditors and held in trust for the benefit of and immediately
shall be paid over to Senior Agent (in the same form received, with all
necessary endorsements) for application against the Senior Creditor Indebtedness
remaining unpaid until the Senior Creditor Indebtedness is fully paid in cash,
and all obligations of Senior Creditors to extend credit under the Senior
Creditor Agreements have been terminated.
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(b) Enforcement. Except as otherwise permitted herein,
until the Senior Creditor Indebtedness has been fully paid in cash and the
obligations of Senior Creditors to extend credit under the Senior Creditor
Agreements have been terminated, Subordinated Creditors shall not commence,
prosecute, or participate in any Enforcement Action.
3. Permitted Liens and Relative Priorities. As between the
Secured Creditors, notwithstanding: (a) the terms (including the description of
collateral), dating, execution, or delivery of any document, instrument, or
agreement; the time, order, occurrence, method, or manner of granting, or
perfection of any security interest or lien; the time of filing or recording of
any financing statements, assignments, deeds of trust, mortgages, or any other
documents, instruments, or agreements under the UCC or any other applicable law;
(b) the existence of (or the order in which any Secured Creditor becomes a party
to or a beneficiary of) any collateral agency arrangement with any party other
than a Secured Creditor, or the appointment of such other party as a collateral
agent to perfect the Secured Creditors' liens and security interests, in all or
in any part of the Collateral; (c) the existence of any control agreement in
favor of any Secured Creditor; or (d) any provision of the UCC or any other
applicable law to the contrary, the Secured Creditors agree that, as to the
Collateral of Debtor:
(i) Senior Agent shall have a first priority security
interest in and lien thereon for the benefit of the
Senior Creditors to secure the Senior Creditor
Indebtedness; and
(ii) Subordinated Creditors shall have a junior and
subordinate security interest in and lien on the
Collateral to secure the Subordinated Creditors
Indebtedness;
For purposes of the foregoing allocation of priorities, any
claim or a right to a set-off shall be treated in all respects as a security
interest and no claimed right of set-off shall be asserted to defeat or diminish
the rights or priorities provided for herein.
4. No Alteration of Priority. The lien and security
interest priorities provided in Section 3 shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, renewal,
restatement, or refinancing of any of the Secured Creditor Indebtedness, nor by
any action or inaction which either Secured Creditor may take or fail to take in
respect of the Collateral, or otherwise. Each Secured Creditor consents to
Debtor's granting to each other Secured Creditor the liens and security
interests reflected in Section 3.
5. Perfection. Subordinated Creditors shall be solely
responsible for perfecting and maintaining the perfection of its lien or
security interest in any of the Collateral. Subordinated Creditors agrees that
it will not directly or indirectly take any action to contest or challenge the
validity, legality, perfection, priority, avoidability, or enforceability of the
liens or security interests of Senior Agent upon the Collateral or seek to have
the same avoided, disallowed, set aside, or otherwise invalidated in any
judicial proceeding or otherwise. In the event that Subordinated Creditors
(either individually or together with others) breaches or causes to be breached
the terms of the preceding sentence, resulting (directly or indirectly) in the
avoidance or imperfection of Senior Agent's lien or security interest in some or
all of the Collateral, then the priority of the lien or security interest of
Subordinated Creditors in any such affected Collateral shall continue to be
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governed by the terms of Section 3 irrespective of the avoidance or imperfection
of Senior Agent's lien or security interest.
6. Management of Collateral. Notwithstanding anything to
the contrary contained in any of the Senior Creditor Agreements or the
Subordinated Creditors Agreements:
(a) Until the Senior Creditor Indebtedness has been fully
paid in cash, and all obligations of Senior Creditors to extend credit under the
Senior Creditor Agreements have been terminated: (i) Senior Agent shall have the
exclusive right to perform and enforce the terms of the Senior Creditor
Agreements with respect to the Collateral and to exercise and enforce all
privileges and rights thereunder according to Senior Agent's sole discretion,
including, without limitation, the exclusive right to enforce or settle
insurance claims with respect to the Collateral, take or retake control or
possession of the Collateral and to hold, prepare for sale, sell, lease, or
liquidate the Collateral; and (ii) any and all proceeds of the Collateral which
shall come into the possession, control, or custody of Subordinated Creditors
will be deemed to have been received for the account of Senior Creditors and
shall be immediately paid over to Senior Agent to reduce the principal amount
available to the Debtor pursuant to the Senior Creditor Agreements, without
penalty. In connection with the provisions of clause 6(a)(i) above, Subordinated
Creditors waives any and all rights to affect the method or challenge the
appropriateness of any action by any Senior Creditor with respect to the
Collateral, and waives any claims or defenses it may have against Senior
Creditors, including any such claims or defenses based on any actions or
omissions of any such person, in connection with the perfection, maintenance,
enforcement, foreclosure, sale, liquidation, or release of any lien or security
interest therein by Senior Agent, or any modification or waiver of any Senior
Creditor Agreements, except as provided or limited under this Agreement.
(b) In the event that (i) any Permitted Payment is not made
when due under the Subordinated Credit Agreement (as in effect on the date
hereof), and after the expiration of any applicable grace or cure period
thereunder, or (ii) a default occurs under the Subordinated Credit Agreement and
is not cured within the applicable grace or cure period thereunder and is
continuing, then the Subordinated Agent may provide written notice (the
"Subordinated Liquidation Notice") to the Senior Agent of its intention, at any
time ninety (90) days after the Senior Agent's receipt of such Subordinated
Liquidation Notice, to (A) enforce the Subordinated Creditors' rights to payment
of the Subordinated Indebtedness by way of suit for collection of a money debt
against the Debtor and may continue such enforcement to judgment and execution
thereon, (B) exercise any of the Subordinated Creditors' rights or remedies
under the Subordinated Credit Agreements or otherwise, (C) seek to foreclose or
realize upon (judicially or non-judicially) any lien on any Collateral held by
the Subordinated Creditors or assert any claims or interests therein (including,
without limitation, by setoff or notification of account debtors), or (D) take
any other Enforcement Action.
(c) Upon receipt of the Subordinated Liquidation Notice,
the Senior Agent may, within ninety (90) days, deliver to the Subordinated
Creditors a Standstill Notice. Upon receipt by the Subordinated Agent of a
Standstill Notice, the Subordinated Creditors may not commence or conduct any
Enforcement Action or any other action pursuant to Clause 6(b) hereof at any
time during a Standstill Period. If the Subordinated Agent does not receive a
Standstill Notice within such ninety (90) day period, the Subordinated Creditors
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may commence an Enforcement Action or any other action pursuant to Clause 6(b);
provided, that (x) all such actions must cease immediately if the Senior
Creditors at any time commence and thereafter take steps to continue, a Senior
Liquidation and (y) in the absence of the commencement of or such reasonable
steps to continue a Senior Liquidation, the turnover to the Senior Creditors of
all amounts collected and recovered by the Subordinated Creditors upon such
permitted actions for application by the Senior Agent to the payment of the
Senior Creditor Indebtedness in such order and manner as the Senior Creditors
shall determine, until the Senior Creditor Indebtedness is fully and
indefeasibly paid and satisfied and all obligations of the Senior Creditors to
provided further financing under the Senior Credit Agreements have been
terminated or all such obligations have expired according to their terms.
(d) The rights and priorities set forth in this Agreement
shall remain binding irrespective of the terms of any plan of reorganization in
a Bankruptcy Case or other provisions of the Bankruptcy Code or any similar
federal or state statute.
7. Sale of Collateral. Until the Senior Creditor
Indebtedness has been fully paid in cash and all obligations of Senior Creditors
to extend credit under the Senior Creditor Agreements have been terminated: (i)
unless the Subordinated Creditors have begun an Enforcement Action in accordance
with the provisions of 6(b) and 6(c) hereof, only Senior Agent shall have the
right to restrict or permit, or approve or disapprove, the sale of the
Collateral; provided that if the proceeds of any sale of Collateral in any
fiscal year are in excess of $1,000,000 in any single transaction or more than
$2,000,000 in the aggregate, then the proceeds from such sales shall be paid to
the Senior Creditors and applied to the Obligations as defined in the Senior
Loan Agreement (the "Obligations"), and shall permanently reduce the Maximum
Amount. For the sake of example only, if the Maximum Amount were $40,000,000,
the outstanding Obligations were $19,000,000 and proceeds of sales were
$10,000,000, the Obligations would be temporarily reduced to $9,000,000 and the
Maximum Amount would permanently be reduced to $30,000,000; and (ii)
Subordinated Creditors will, immediately upon the request of Senior Agent,
release or otherwise terminate its liens and security interests upon the
Collateral, to the extent such Collateral is sold by Debtor with the consent of
Senior Agent in accordance with the Senior Creditor Agreements, and Subordinated
Creditors will promptly deliver (at Debtor's expense) such release documents as
Senior Agent or any Debtor may reasonably require in connection therewith.
8. Notice and Waiver of Marshaling. Each Secured Creditor
hereby acknowledges that this Agreement shall constitute notice of the other
Secured Creditor's respective interests in the Collateral as provided by the UCC
and each of the Secured Creditors waives any right to compel the other Secured
Creditor to marshal any of the Collateral or to seek payment from any particular
assets of Debtor or from any third party.
9. Insurance. In the event of the occurrence of a fire or
other casualty resulting in damage to all or any portion of any Collateral
(collectively, a "Casualty"):
(a) Subordinated Creditors hereby waive any right to
participate or join in any adjustment, compromise, or settlement of any claims
resulting from a Casualty with respect to any Collateral;
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(b) all proceeds received or to be received on account of a
Casualty shall be applied in the manner or manners provided for in the Senior
Creditor Agreements; provided, however, that in the event that the Senior
Creditors elect to use such proceeds to prepay the amounts outstanding under the
Senior Creditor Agreements, such prepayment shall be applied to the Obligations
and shall permanently reduce the Maximum Amount; and
(c) Subordinated Creditors agrees to execute and deliver to
Senior Agent any documents, instruments, agreements or further assurances
reasonably required to effectuate any of the foregoing.
10. Bankruptcy Issues.
(a) Except as provided in this Section 10, this Agreement
shall continue in full force and effect after the commencement of a Bankruptcy
Case (all references herein to Debtor being deemed to apply to Debtor as
debtor-in-possession and to a trustee for Debtor's estate in a Bankruptcy Case),
and shall apply with full force and effect with respect to all Collateral
acquired by Debtor, and to all Secured Creditors' Indebtedness incurred by
Debtor, subsequent to such commencement.
(b) If Debtor shall become subject to a Bankruptcy Case,
and if Senior Creditors shall desire to permit the use of cash collateral or to
provide post-petition financing to Debtor ("DIP Financing"), Subordinated
Creditors shall be deemed to have consented to any DIP Financing provided by
Senior Creditors provided that (i) Subordinated Creditors are provided with
replacement liens on the same assets and provided with the same type of priority
as the DIP Financing junior only to the liens and priority of the DIP Financing
and the Senior Creditor Indebtedness, (ii) the aggregate amount of the DIP
Financing and the Senior Creditor Indebtedness does not exceed the Maximum
Amount (as defined in the Senior Creditor Agreement) and (iii) the Subordinated
Creditors are provided with current payment of reasonable fees and expenses of
counsel and financial advisors. In the event that the DIP Financing is provided
by a third party or by the Senior Creditors on terms different from those set
forth in the immediately preceding sentence, the Subordinated Creditors shall be
free to seek relief from the automatic stay or adequate protection. No objection
will be raised by Subordinated Creditors to Senior Agent's motion for relief
from the automatic stay in any proceeding under the Bankruptcy Code to foreclose
on and sell the Collateral.
(c) In the event of (i) any Bankruptcy Case, or (ii) any
proceedings for voluntary liquidation, dissolution, or other winding up of
Debtor, then, in each case, (1) all Senior Creditor Indebtedness shall first be
paid in full in cash before any payment is made by or on behalf of Debtor on the
Subordinated Creditors Indebtedness; (2) any direct or indirect payment or
distribution of assets of the Debtor, whether in cash, property or securities,
to which any Subordinated Creditors would be entitled except for the provisions
hereof, shall be paid or delivered by the Debtor, or any receiver, trustee in
bankruptcy, liquidation trustee, disbursing agent or other person making such
payment or distribution, directly to the Senior Creditors to the extent
necessary to pay the Senior Creditor Indebtedness, before any payment or
distribution shall be made to any Subordinated Creditors, except that
Subordinated Creditors may receive equity of the Debtor or securities
subordinated to Senior Creditors in the same manner as the Subordinated
Creditors Indebtedness.
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(d) If Subordinated Creditors does not file a proper claim
or proof of debt or other document or amendment thereof in the form required in
any proceeding under the Bankruptcy Code prior to 15 days before the expiration
of time to file such claim or other document or amendment thereof, then Senior
Agent shall have the right (but not the obligation) in such proceeding, and
hereby irrevocably is appointed lawful attorney of Subordinated Creditors for
the purpose of enabling Senior Agent to file and prove all claims therefor and
to execute and deliver all documents in such proceeding in name of Subordinated
Creditors or otherwise in respect of such claims, as Senior Agent reasonably may
determine to be necessary or appropriate to prevent forfeiture of such claims.
11. Notice of Default and Certain Events. Subordinated
Creditors shall promptly notify Senior Agent in writing of the occurrence of any
of the following as applicable:
(a) any default or event of default under the Subordinated
Creditors Agreements, unless such default or event of default is waived by the
Subordinated Creditors in accordance with the terms of the Subordinated
Creditors Agreements; or
(b) the demand for payment of, acceleration of or
termination of any of the Subordinated Creditors Indebtedness.
12. Additional Documents. Each Secured Creditor agrees to
execute and deliver, upon the request of any other Secured Creditor, such
documents and instruments (appropriate for filing, if requested) as may be
necessary or appropriate to fully implement or to fully evidence the
understandings and agreements contained in this Agreement. Without limiting the
foregoing, in the event that all or part of any of the Senior Creditor
Indebtedness is hereafter refinanced, Subordinated Creditors agrees to enter
into one or more new agreements with the refinancing lender or lenders on terms
identical to those of this Agreement; provided, however, that the refinancing
does not increase the amount of the Senior Creditor Indebtedness being
refinanced, extend the Maturity Date (as defined in the Senior Credit Agreement)
or contain terms or conditions less favorable than the terms and conditions
contained in the Senior Creditor Agreements.
13. Representations and Warranties. Subordinated Creditors
represents and warrants to Senior Creditors that Subordinated Creditors is the
holder of the liens and security interests which secure or will secure the
Subordinated Creditors Indebtedness. Subordinated Creditors agrees that it shall
not assign or transfer any of such liens and security interests without (i)
prior notice being given to Senior Agent and (ii) such assignment or transfer
being made expressly subject to the terms of this Agreement. Subordinated
Creditors further warrants to Senior Creditors that it has full right, power,
and authority to enter into this Agreement and, to the extent Subordinated
Creditors is an agent or trustee for other parties, that this Agreement shall
fully bind all such other parties.
14. Modification of Senior Creditor Indebtedness.
Subordinated Creditors agrees that other than the restrictions set forth herein,
the Senior Creditor shall have absolute power and discretion, without notice to
Subordinated Creditors, to deal in any manner with the Senior Creditor
Indebtedness, including, but not by way of limitation, the power and discretion
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to do any of the following: (a) any demand for payment of any Senior Creditor
Indebtedness may be rescinded in whole or in part, and the Senior Creditor
Indebtedness or the liability of Debtor upon or for any part thereof, or
guaranty therefor, or right of offset with respect thereto, may, from time to
time, in whole or in part, be modified, accelerated, compromised, waived,
surrendered, or released; and (b) the Senior Creditor Agreements may be amended,
modified, supplemented, or terminated, in whole or in part, as Senior Creditors
may deem advisable from time to time (but in no event shall the definition of
"Maximum Amount" in the Senior Creditor Loan Agreement be amended to exceed
$40,000,000 without the consent of a majority of the Subordinated Creditors),
and any Collateral may be sold, and any Collateral may be exchanged, waived,
surrendered, or released. Subordinated Creditors will remain bound under this
Agreement, and the subordination provided for herein shall not be impaired,
abridged, released, or otherwise affected notwithstanding any such modification,
acceleration, compromise, amendment, supplement, termination, sale, exchange,
waiver, surrender, or release. The waivers and consents contained in Amendment
No.6 to the Senior Creditor Loan Agreement shall conclusively be deemed to have
been granted in reliance upon this Agreement, and all dealings between Senior
Creditors and Debtor shall be deemed to have been consummated in reliance upon
this Agreement.
15. Subordinated Creditors' Waivers. Subordinated
Creditors: (a) waives any and all notice of or proof of reliance by Senior
Creditors upon this Agreement; and (b) agrees not to assert against Senior
Creditors, any rights which a guarantor or surety could exercise; but nothing in
this Agreement shall constitute Subordinated Creditors a guarantor or surety.
16. Continuing Agreement; Other. This Agreement shall be a
continuing agreement, shall be irrevocable, and shall remain in full force and
effect until the Senior Creditor Indebtedness shall have been paid in full in
cash, and the obligation of Senior Creditors to extend credit under the Senior
Creditor Agreements shall have been irrevocably terminated, but shall continue
to be effective, or be reinstated, as the case may be, if any payment, or any
part thereof of any amount paid by or on behalf of Debtor with regard to any
Senior Creditor Indebtedness is rescinded or must otherwise be restored or
returned as a result of a Bankruptcy Case, or otherwise, all as though such
payments had not been made. Any waiver or amendment hereunder must be evidenced
by a signed writing of a party to be bound thereby, and shall only be effective
in the specific instance. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. The parties agree that
actions may be tried and litigated in the state and federal courts located in
the County of Los Angeles, in the State of California. The headings in this
Agreement are for convenience of reference only, and shall not alter or
otherwise affect the meaning hereof.
17. Parties Intended to be Benefited. All of the
understandings, covenants, and agreements contained herein are solely for the
benefit of Senior Creditors and Subordinated Creditors, and there are no other
parties, including Debtor or any of the creditors, successors, or assigns of
Debtor, which are intended to be benefited, in any way, by this Agreement.
18. No Limitation Intended. Nothing contained in this
Agreement is intended to or shall affect or limit, in any way, the rights that
the Secured Creditors have with respect to any third parties. The Secured
Creditors hereby specifically reserve all of their respective rights against
Debtor and all other third parties.
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19. Notice. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration, or other communication shall or
may be given to or served upon any of the parties hereto, or whenever any of the
parties desires to give or serve upon the other communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing and shall be delivered
either in person, with receipt acknowledged, or by regular, registered, or
certified United States mail, postage prepaid, or by telefacsimile, addressed as
follows:
(a) If to Senior Creditors, c/o Senior Agent at:
Foothill Capital Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000X
Xxxxx Xxxxxx, XX 00000
Attn: Business Finance Division Manager
Fax: (000) 000-0000
with a copy to:
Buchalter, Nemer, Fields & Younger
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
(b) If to Subordinated Creditors, at:
DDJ Capital Management, LLC
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Procter LLP
Exchange Place
Boston, MA 02109
Attn: Xxx X. Xxxxxxxxx, P.C.
Fax: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. Giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or actually received via telefacsimile transmission,
or three days after the same shall have been deposited in the United States
mail.
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20. Appraisals. Senior Agent will use its best efforts to
deliver to Subordinated Agent a copy of each third party appraisal of Debtor,
within five Business Days of Senior Agent's actual receipt of any such
appraisal.
21. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
22. Complete Agreement. This Agreement constitutes the
complete agreement and understanding of each of the Secured Creditors and
supersedes all prior or contemporaneous oral and written negotiations,
agreements and understandings, express or implied, with respect to the subject
matter hereof.
23. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the successors and assigns of Senior
Creditors and Subordinated Creditors.
24. Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular, the
singular includes the plural, the part includes the whole, "including" is not
limiting, and "or" has the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Article, section, subsection, exhibit, and schedule
references are to this Agreement unless otherwise specified.
25. Counterparts. This Agreement may be executed in any
number of counterparts, and by Senior Creditors and Subordinated Creditors in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same Agreement.
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26. Waiver of Jury Trial. SENIOR CREDITORS AND SUBORDINATED
CREDITORS HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
SENIOR CREDITORS AND SUBORDINATED CREDITORS WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE. SENIOR CREDITORS AND SUBORDINATED CREDITORS HEREBY AGREE AND
CONSENT THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT JURY, AND THAT EITHER OF THEM MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT TO THE WAIVER OF RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first herein above set forth.
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Senior Agent and
as a Senior Lender
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------------
Title: Vice President
------------------------------------------
LASALLE BUSINESS CREDIT, INC.,
a Delaware corporation, as a Senior Lender
By: /s/ Xxxxxxx X Xxxx, XX
---------------------------------------------
Title: SVP
------------------------------------------
SUNROCK CAPITAL CORP.,
a Delaware corporation, as a Senior Lender
By: /s/ Xxxx X. Xxxxx
---------------------------------------------
Title: S.V.P.
------------------------------------------
DDJ CAPITAL MANAGEMENT, LLC,
a Massachusetts limited liability company,
as Subordinated Agent
By: /s/ Xxxxx X. Beazzano
---------------------------------------------
Title: Xxxxx X. Beazzano, Member
------------------------------------------
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ACKNOWLEDGMENT
The undersigned, XXXXXXX JEWELERS, INC. (the "Debtor")
hereby acknowledges receipt of a copy of the foregoing Intercreditor and
Subordination Agreement and consents thereto, and agrees to recognize all rights
granted thereby to the parties thereto, and will not do any act or perform any
obligation which is not in accordance with the agreements set forth in such
Intercreditor and Subordination Agreement. Debtor further acknowledges that
Debtor is not intended beneficiary under the Intercreditor and Subordination
Agreement.
Dated as of April 30, 2001.
XXXXXXX JEWELERS, INC,
a Delaware corporation
By: /s/ Xxxxx XxXxxxxxxx
-----------------------------------
Title: President and CEO
--------------------------------
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