EXHIBIT 10.20
SUBORDINATION AGREEMENT
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THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of
December 21, 1995 among GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation and sucessor by merger to GMH Acquisition Corp., a Delaware
corporation ("Borrower"), GMH HOLDINGS, INC., a Delaware corporation ("Parent"),
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York insurance
company ("Senior Subordinated Lender"), RFE INVESTMENT PARTNERS V, L.P., a
Delaware limited partnership ("RFE"), STERLING COMMERCIAL CAPITAL, INC., a New
York corporation ("Sterling"), STATE TREASURER OF THE STATE OF MICHIGAN,
Custodian of the Michigan Public School Employees' Retirement System, State
Employees' Retirement System, Michigan State Police Retirement System and
Michigan Judges Retirement System (the "State of Michigan") (RFE, Sterling and
the State of Michigan hereinafter are referred to collectively as "Junior
Subordinated Lenders"), STRATEGIC INVESTMENTS & HOLDINGS, INC., a Delaware
corporation ("Strategic"), and FIRST SOURCE FINANCIAL LLP, an Illinois
registered limited liability partnership ("Senior Lender").
R E C I T A L S
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A. Borrower and Senior Lender have entered into a Secured Credit
Agreement of even date herewith (as the same hereafter may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
subject to the terms and conditions of which Senior Lender will make certain
loans and other financial accommodations to Borrower.
B. Borrower is indebted to Senior Subordinated Lender in the principal
amount of $17,243,295, which indebtedness is evidenced by a certain senior
subordinated note of even date herewith issued by Borrower payable to Senior
Subordinated Lender, a copy of which is attached hereto as EXHIBIT A (the
"Senior Subordinated Note").
C. Borrower is indebted to Junior Subordinated Lenders in the aggregate
principal amount of $5,000,000, which indebtedness is evidenced by certain
junior subordinated notes of even date herewith issued by Borrower payable to
Junior Subordinated Lenders, copies of which are attached hereto as EXHIBIT B
(the "Junior Subordinated Notes").
D. Parent owns 100% of the issued and outstanding capital stock of
Borrower.
E. Junior Subordinated Lenders collectively own 100% (8,000,000 shares)
of the issued and outstanding Series A Preferred Stock of Parent (the "Preferred
Stock").
F. One of the conditions precedent to Senior Lender's obligations under
the Credit Agreement is that this Agreement shall have been executed and
delivered.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. RECITALS AND DEFINITIONS.
1.1 RECITALS. The Recitals set forth above are acknowledged by the
parties hereto to be true and correct and are incorporated herein by this
reference.
1.2 DEFINITIONS. All capitalized terms used but not elsewhere
defined herein shall have the respective meanings ascribed to such terms in
the Credit Agreement. As used herein, the following terms shall have the
following meanings:
ADDITIONAL PRINCIPAL AMOUNT: with respect to each Principal
Payment Date, an amount equal to the quotient obtained by dividing (a)
the amount of any Permitted Increase by (b) the number of Principal
Payment Dates remaining after the effective date of such Permitted
Increase.
APPLICABLE PERIOD: with respect to the calculation of Total
Cash Sources or Non-Subordinated Fixed Charges as of (a) April 30,
1996, the three month period then ended, (b) July 31, 1996, the six
month period then ended and (c) any other Determination Date, the nine
month period then ended.
ARTICLES: the Restated Certificate of Incorporation of Parent as
in effect on the date hereof.
AVAILABLE CASH: as of any Determination Date, an amount equal to
the remainder of (a) the quotient obtained by dividing (i) Total Cash
Sources for the Applicable Period ending on such Determination Date by
(ii) 1.10 MINUS (b) Non-Subordinated Fixed Charges for the Applicable
Period ending on such Determination Date MINUS (c) for any
Determination Date which occurs on or after July 31, 1996, all
Subordinated Payments actually paid with respect to the (i) first
Fiscal Quarter of 1996, in the case of the Determination Date which
occurs on July 31, 1996 and (ii) in the case of any other
Determination Date, the last two Fiscal Quarters ending during the
Applicable Period ending on such Determination Date (which
Subordinated Payments correspond to the calculation of Available Cash
for the first two Determination Dates of such Applicable Period).
CASH OVERAGE: as of any Determination Date, an amount equal
to the remainder of (a) Total Cash Sources for the Applicable Period
ending on such Determination Date MINUS (b) Non-Subordinated Fixed
Charges for such Applicable Period MINUS (c) the aggregate amount of
all accrued and unpaid Senior Subordinated Payments (including for the
current period) MINUS (d) 110% of the amount of the accreted discount
on the Senior Subordinated Notes with respect to such Applicable
Period.
DETERMINATION DATE: the last day of each January, April, July
and October.
INCENTIVE MANAGEMENT FEES: the management fees payable by
Borrower to Strategic pursuant to Section 2.3(b) of the Management
Agreement, in an aggregate amount not to exceed (a) $69,500 with
respect to the last ten days of December, 1995 and the first Fiscal
Quarter of 1996 and (b) $62,500 with respect to any other Fiscal
Quarter.
JUNIOR SUBORDINATED DEFAULT: a default in the payment of the
Junior Subordinated Indebtedness or any other occurrence permitting
Junior Subordinated Lenders to accelerate the payment of all or any
portion of the Junior Subordinated Indebtedness.
JUNIOR SUBORDINATED DEFAULT NOTICE: a written notice from Junior
Subordinated Lenders to Borrower of the occurrence of a
Junior Subordinated Default.
JUNIOR SUBORDINATED INDEBTEDNESS: all of the obligations of
Borrower to Junior Subordinated Lenders under the Junior Subordinated
Instruments and all other amounts now or hereafter owed by Borrower to
Junior Subordinated Lenders other than the Preferred Obligations.
JUNIOR SUBORDINATED INSTRUMENTS: the Junior Subordinated Notes,
the Junior Subordinated Note Purchase Agreement and all other
documents and instruments evidencing or pertaining to any portion of
the Junior Subordinated Indebtedness.
JUNIOR SUBORDINATED NOTE PURCHASE AGREEMENT: the Securities
Purchase Agreement of even date herewith among Borrower, Parent and
the Junior Subordinated Lenders.
JUNIOR SUBORDINATED PAYMENTS: quarterly cash payments of
interest on the Junior Subordinated Indebtedness (other than any
Junior Subordinated Indebtedness representing accrued and unpaid
interest added to the principal amount of the Junior Subordinated
Indebtedness) required by the Junior Subordinated Notes at a rate not
to exceed 13.00% per annum.
LIEN: any lien, mortgage, security interest, financing
statement, pledge, hypothecation, assignment or judgment lien of any
kind or nature whatsoever, whether arising by contract, operation of
law, or otherwise.
MANAGEMENT AGREEMENT: that certain Management Agreement of even
date herewith between Borrower and Strategic.
NON-SUBORDINATED FIXED CHARGES: for any Applicable Period,
the sum of (a) all scheduled payments of interest on account of the
Senior Indebtedness for such Applicable Period, PLUS (b) all Senior
Principal Payments for such Applicable Period, PLUS (c) without double
counting, all income taxes accrued (but not less than zero) by
Borrower and Parent with respect to such Applicable Period.
PREFERRED DIVIDENDS: quarterly cash dividends from Borrower
to Parent in an amount sufficient to enable Parent to pay the
Parent Preferred Dividends.
PARENT PREFERRED DIVIDENDS: quarterly cash dividends on the
Preferred Stock required by the Articles in an amount not to exceed
$240,000 per quarter. Parent Preferred Dividends shall not include any
accrued and unpaid interest on any unpaid Parent Preferred Dividends
from prior quarters.
PERMITTED INCREASE: any and all increases in the Commitments
agreed to by Borrower and Senior Lender after the date hereof in an
aggregate amount not to exceed $2,600,000.
PREFERRED DIVIDEND INSTRUMENTS: the Articles and all other
documents and instruments evidencing or pertaining to the payment
of the Preferred Dividends or the Parent Preferred Dividends.
PREFERRED OBLIGATIONS: all of the obligations of Borrower to
Parent and Parent to Junior Subordinated Lenders under the
Preferred Dividend Instruments and all other amounts now or hereafter
owed by Borrower to Parent and by Parent to Junior Subordinated
Lenders, in their capacity as owners of the Preferred Stock.
PRINCIPAL PAYMENT DATE: the last day of each Fiscal Quarter.
PROCEEDING: any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, assignment for the benefit
of creditors or other proceeding for the liquidation, dissolution or
other winding up of Borrower or its property.
SENIOR INDEBTEDNESS: the Liabilities, together with post-
petition interest thereon, whether or not allowed in any Proceeding.
SENIOR PRINCIPAL PAYMENTS: with respect to each Applicable
Period, the sum of the amounts set forth below opposite each Principal
Payment Date which occurs during such Applicable Period plus the
Additional Principal Amount, if any, applicable to each such Principal
Payment Date:
PRINCIPAL PAYMENT DATE AMOUNT
March 31, 1996 $350,000
June 30, 1996 $700,000
September 30, 1996 $1,050,000
December 31, 1996 $1,050,000
March 31, 1997 $1,075,000
June 30, 1997 $1,100,000
September 30, 1997 $1,125,000
December 31, 1997 $1,125,000
March 31, 1998 $1,687,500
June 30, 1998 $2,250,000
September 30, 1998 $2,812,500
December 31, 1998 $2,812,500
March 31, 1999 $3,250,000
June 30, 1999 $3,687,500
September 30, 1999 $4,125,000
December 31, 1999 $4,125,000
March 31, 2000 $4,250,000
June 30, 2000 $4,375,000
September 30, 2000 $4,500,000
December 31, 2000 $4,500,000
SENIOR SUBORDINATED DEFAULT: a default in the payment of the
Senior Subordinated Indebtedness or any other occurrence permitting
Senior Subordinated Lender to accelerate the payment of all or any
portion of the Senior Subordinated Indebtedness.
SENIOR SUBORDINATED DEFAULT NOTICE: a written notice from Senior
Subordinated Lender to Borrower of the occurrence of a Senior
Subordinated Default.
SENIOR SUBORDINATED INDEBTEDNESS: all of the obligations of
Borrower to Senior Subordinated Lender under the Senior Subordinated
Instruments and all other amounts now or hereafter owed by Borrower to
Senior Subordinated Lender.
SENIOR SUBORDINATED INSTRUMENTS: the Senior Subordinated Note,
the Senior Subordinated Note Purchase Agreement and all other
documents and instruments evidencing or pertaining to any portion of
the Senior Subordinated Indebtedness.
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT: the Note and
Warrant Purchase Agreement of even date herewith among Borrower,
Parent and Senior Subordinated Lender.
SENIOR SUBORDINATED PAYMENTS: quarterly cash payments of
interest on the Senior Subordinated Indebtedness (other than any
Senior Subordinated Indebtedness representing accrued and unpaid
interest added to the principal amount of the Senior Subordinated
Indebtedness) required by the Senior Subordinated Note at a rate not
to exceed 10.87% per annum through March 31, 2001 and 14.50% per annum
thereafter, or, if the Liabilities have been paid in full and the
Commitments have been terminated, any other applicable rate set forth
in the Senior Subordinated Instruments.
SUBORDINATED HOLDERS: Senior Subordinated Lender, Junior
Subordinated Lenders, Parent and Strategic.
SUBORDINATED INSTRUMENTS: the Senior Subordinated Instruments,
the Junior Subordinated Instruments, the Preferred Dividend
Instruments and the Management Agreement.
SUBORDINATED OBLIGATIONS: the Senior Subordinated Indebtedness,
the Junior Subordinated Indebtedness, the Preferred Obligations and
the Incentive Management Fees.
SUBORDINATED PAYMENTS: the Senior Subordinated Payments, the
Junior Subordinated Payments, the Preferred Dividends and the
Incentive Management Fees.
TOTAL CASH SOURCES: for any Applicable Period, (a) the amount
which, in conformity with GAAP, would be set forth opposite the
caption "net income" (or any like caption) (plus, to the extent
subtracted from gross income in determining such net income, any
dividends paid or payable by Borrower) on an income statement of
Borrower for such Applicable Period, PLUS (b) the amount which, in
conformity with GAAP, would be set forth opposite the caption
"interest expense" (or any like caption) on such an income statement,
PLUS (c) the amount (but not less than zero) which, in conformity with
GAAP, would be set forth opposite the caption "income tax expense" (or
any like caption) on such an income statement, PLUS (d) the amount
which, in conformity with GAAP, would be set forth opposite the
caption "depreciation and amortization expenses" (or any like caption)
on such an income statement, PLUS (e) the amount accrued by Borrower
related to Incentive Management Fees during such Applicable Period in
an aggregate amount not to exceed (i) $62,500 for the Applicable
Period ending Xxxxx 00, 0000, (xx) $125,000 for the Applicable Period
ending July 31, 1996 and (iii) $187,500 for any Applicable Period
thereafter, LESS (f) the amount which, in conformity with GAAP, would
be set forth opposite the caption "extraordinary pre-tax gain" (or any
like caption) on such an income statement, LESS (g) capital
expenditures (as determined in conformity with GAAP) incurred during
such Applicable Period.
2. SUBORDINATION OF THE SUBORDINATED OBLIGATIONS TO SENIOR
INDEBTEDNESS.
2.1 SUBORDINATION. The payment of any and all of the (a)
Subordinated Obligations is hereby expressly subordinated to the prior
payment in full of the Senior Indebtedness, (b) Junior Subordinated
Indebtedness, Preferred Dividends and Incentive Management Fees is hereby
expressly subordinated to the prior payment in full of the Senior
Subordinated Indebtedness and (c) Preferred Dividends and Incentive
Management Fees is hereby expressly subordinated to the prior payment in
full of the Junior Subordinated Indebtedness.
2.2 RESTRICTIONS ON PAYMENTS. Notwithstanding any provision of the
Subordinated Instruments to the contrary and in addition to any other
limitations set forth herein or therein, no payment of principal, interest,
dividends, fees or any other amount due with respect to the Subordinated
Obligations shall be made, and no Subordinated Holder shall exercise any
right of set-off (other than a set-off by Senior Subordinated Lender of the
exercise price of the warrant issued to it by Parent on the Closing Date
against the Senior Subordinated Indebtedness provided the amount of such
set-off does not exceed $3,500 in the aggregate) or recoupment with respect
to any Subordinated Obligations, until all of the Senior Indebtedness is
paid in full, except that, subject to the proviso at the end of this
Section 2.2, (i) on April 1, 1996, Borrower may make and the applicable
Subordinated Holder may receive and retain all Subordinated Payments
accrued through March 31, 1996 and (ii) on the first Business Day after the
end of each Fiscal Quarter commencing with the Fiscal Quarter ending June
30, 1996 Borrower may make and the applicable Subordinated Holder may
receive and retain accrued and unpaid Subordinated Payments in an aggregate
amount not to exceed Available Cash as of the most recent Determination
Date in the following order of priority:
(a) first, all accrued and unpaid Senior Subordinated Payments;
(b) second, all accrued and unpaid Junior Subordinated Payments;
and
(c) third, all accrued and unpaid Preferred Dividends and
Incentive Management Fees, pro rata to the aggregate amount thereof
then outstanding;
provided, that in the event that due to the payment restrictions of this
Section 2.2 any Junior Subordinated Payments, Preferred Dividends or
Incentive Management Fees have accrued with respect to any prior Fiscal
Quarter and remain unpaid, no Junior Subordinated Payments, Preferred
Dividends and Incentive Management Fees shall be paid except to the extent
of any Cash Overage.
2.3 PROCEEDINGS. In the event of any Proceeding, (i) all Senior
Indebtedness first shall be paid in full in cash before any payment of or
with respect to the Subordinated Obligations shall be made; (ii) any
payment which, but for the terms hereof, otherwise would be payable or
deliverable in respect of the Subordinated Obligations shall be paid or
delivered directly to Senior Lender (to be held and/or applied by Senior
Lender in accordance with the terms of the Credit Agreement) until all
Senior Indebtedness is paid in full, and each Subordinated Holder
irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments
and deliveries, and each Subordinated Holder also irrevocably authorizes,
empowers and directs Senior Lender to demand, xxx for, collect and receive
every such payment or distribution upon the failure of such Subordinated
Holder to do so within a reasonable period of time after requested to do so
by Senior Lender; (iii) each Subordinated Holder agrees to execute and
deliver to Senior Lender or its representative all such further instruments
reasonably requested by Senior Lender confirming the authorization referred
to in the foregoing clause (ii) and (iv) each Subordinated Holder agrees to
execute, verify, deliver and file any proofs of claim in respect of the
Subordinated Obligations reasonably requested by Senior Lender in
connection with any such proceeding at least 15 days prior to the bar date
for filing such proofs of claim and, upon the failure of such Subordinated
Holder to do so, such Subordinated Holder hereby irrevocably authorizes,
empowers and appoints Senior Lender its agent and attorney-in-fact to (A)
execute, verify, deliver and file such proofs of claim and (B) vote such
proofs of claim in any such proceeding if such Subordinated Holder fails to
do so within a reasonable time prior to t he deadline for voting such
proofs of claim. Notwithstanding the provisions of this Section 2.3, in the
event of any Proceeding and if so ordered by a court of competent
jurisdiction, Subordinated Holders may receive securities (including equity
securities) of Borrower as reorganized, or securities of Borrower or any
other Person provided for by a plan of reorganization, composition,
arrangement, adjustment or readjustment of Borrower or of its securities,
the payment of which is subordinate, at least to the extent provided in
this Agreement with respect to the Subordinated Obligations, to the payment
of all Senior Indebtedness of Borrower at the time outstanding and to the
payment of all securities issued to Senior Lender in exchange therefor.
2.4 INCORRECT PAYMENTS. If any payment not permitted under subsection
2.2 is received by any Subordinated Holder on account of the Subordinated
Obligations before all Senior Indebtedness is paid in full, such payment
shall not be commingled with any asset of such Subordinated Holder, shall
be held in trust by such Subordinated Holder for the benefit of Senior
Lender and shall be paid over to Senior Lender, or its designated
representative, for application (in accordance with the Credit Agreement)
to the payment of the Senior Indebtedness then remaining unpaid, until all
of the Senior Indebtedness is paid in full.
2.5 SALE, TRANSFER. No Subordinated Holder shall sell, assign,
dispose of or otherwise transfer all or any portion of the Subordinated
Obligations unless, prior to the consummation of any such action, the
transferee thereof executes and delivers to Senior Lender an agreement
substantially identical to this Agreement, providing for the continued
subordination and forbearance of the Subordinated Obligations to the Senior
Indebtedness as provided herein and for the continued effectiveness of all
of the rights of Senior Lender arising under this Agreement.
Notwithstanding the failure to execute or deliver any such agreement, the
subordination effected hereby shall survive any sale, assignment,
disposition or other transfer of all or any portion of the Subordinated
Obligations, and the terms of this Agreement shall be binding upon the
successors and assigns of each Subordinated Holder, as provided in Section
10 below.
2.6 LEGENDS. Until the Senior Indebtedness is paid in full, each of
the Subordinated Instruments at all times shall contain in a conspicuous
manner the following legend:
"The obligations evidenced hereby are subordinate in the manner and to
the extent set forth in that certain Subordination Agreement (the
"Subordination Agreement") dated as of December 21, 1995 among General
Manufactured Housing, Inc. ("Borrower"), GMH Holdings, Inc., The
Equitable Life Assurance Society of the United States, RFE Investment
Partners V, L.P., Sterling Commercial Capital, Inc., the State
Treasurer of the State of Michigan, as Custodian of the Michigan
Public School Employees' Retirement System, the Michigan State
Employees' Retirement System, the Michigan State Police Retirement
System and the Michigan Judges Retirement System, Strategic
Investments & Holdings, Inc. and First Source Financial LLP ("Senior
Lender") to the obligations (including interest) owed by Borrower to
the holders of all of the notes issued pursuant to that certain
Secured Credit Agreement dated as of December 20, 1995 between
Borrower and Senior Lender, as such Secured Credit Agreement has been
and hereafter may be supplemented and amended from time to time; and
each holder hereof, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement."
2.7 RESTRICTION ON ACTION BY EACH SUBORDINATED HOLDER.
(a) Until the Senior Indebtedness is paid in full and notwithstanding
anything contained in the Subordinated Instruments, the Credit Agreement or
the other Related Documents to the contrary, no Subordinated Holder shall
agree to any amendment or modification of, or supplement to, the
Subordinated Instruments as in effect on the date hereof, the effect of
which is to (i) increase the amount of the Subordinated Obligations, (ii)
increase the rate of interest or dividends on or fees payable in respect of
any of the Subordinated Obligations, (iii) shorten the maturity date of any
of the Subordinated Obligations, (iv) accelerate the terms under which the
Subordinated Obligations are payable or (v) make the covenants or events of
default contained therein, taken as a whole, materially more restrictive to
Borrower or Parent.
(b) Until the Senior Indebtedness is paid in full, no Subordinated
Holder shall exercise any of the remedies with respect to the Subordinated
Obligations set forth in any of the Subordinated Instruments or that
otherwise may be available to such Subordinated Holder, either at law or in
equity, except that:
(1) in the event Senior Lender accelerates the Senior
Indebtedness, Senior Subordinated Lender may accelerate the Senior
Subordinated Indebtedness and Junior Subordinated Lenders may
accelerate the Junior Subordinated Indebtedness, and, in the event
Senior Subordinated Lender is entitled under clause (3) below to
accelerate and does accelerate the Senior Subordinated Indebtedness,
Junior Subordinated Lenders may accelerate the Junior Subordinated
Indebtedness;
(2) in the event of any Proceeding not initiated by any
Subordinated Holder, such Subordinated Holder may participate in such
Proceeding;
(3) in the event the aggregate amount of all accrued and unpaid
Senior Subordinated Payments exceeds $937,500, or in the event that
Senior Subordinated Lender receives less than $237,500 in the
aggregate on account of the Senior Subordinated Payments
with respect to any two successive Fiscal Quarters, then, provided
Senior Subordinated Lender, at any time after either such event
occurs, gives Senior Lender not less than 30 days' prior notice of its
intent to exercise such remedies, Senior Subordinated Lender may
exercise any of the remedies set forth in the Senior Subordinated
Instruments;
(4) in the event the aggregate amount of all accrued and unpaid
Junior Subordinated Payments exceeds $650,000, then, provided provided
Junior Subordinated Lenders, at any time after such event occurs, give
Senior Lender not less than 120 days' prior notice of their intent to
exercise such remedies, Junior Subordinated Lenders may exercise any
of the remedies set forth in the Junior Subordinated Instruments;
(5) in the event Junior Subordinated Lenders give the notice
referred to in clause (4) above, Senior Subordinated Lender may
exercise any of the remedies set forth in the Senior Subordinated
Instruments provided Senior Subordinated Lender, at any time after the
Junior Subordinated Lenders give the notice referred to in clause (4)
above, gives Senior Lender not less than 60 days' prior notice of its
intent to exercise such remedies;
(6) Junior Subordinated Lenders may exercise their rights to
elect a majority of the Board of Directors of Parent pursuant to
Article C, Section 4(f) of the Articles and Section 10(g) of the
Stockholders Agreement;
(7) in the event any Subordinated Payment permitted to be made
under the terms of this Agreement is not made by Borrower, the
applicable Subordinated Holder may take action to collect the amount
of such Subordinated Payment provided such Subordinated Holder gives
Senior Lender not less than 15 days' prior notice of its intent to
take such action; and
(8) each Subordinated Holder may take action to enforce its
rights under the Articles, the Investors Rights Agreement and the
Stockholders Agreement other than any such rights pertaining to the
acceleration or payment of the Subordinated Obligations.
2.8 AMENDMENTS OF CREDIT AGREEMENT AND RELATED DOCUMENTS. Until
the Senior Indebtedness is paid in full and notwithstanding anything
contained in the Subordinated Instruments, the Credit Agreement or the
other Related Documents to the contrary, Senior Lender shall not agree to
any amendment or modification of, or supplement to, the Credit Agreement or
the Related Documents as in effect on the date hereof, the effect of which
is to (i) increase the Commitments (except for any Permitted Increase),
(ii) increase the rate of interest on or fees payable in respect of any of
the Senior Indebtedness, (iii) shorten the maturity date of any of the
Senior Indebtedness, (iv) accelerate the terms under which the Senior
Indebtedness (other than any Permitted Increase) is payable or (v) make the
covenants or events of default contained therein, taken as a whole,
materially more restrictive to Borrower or Parent.
3. CONTINUED EFFECTIVENESS OF THIS AGREEMENT. The terms of this
Agreement, the subordination effected hereby, and the rights and the obligations
of each Subordinated Holder and Senior Lender arising hereunder, shall not be
affected, modified or impaired in any manner or to any extent by: (a) any
amendment or modification of or supplement to the
Credit Agreement, any of the other Related Documents or any of the Subordinated
Instruments; (b) the validity or enforceability of any of such documents; or (c)
any exercise or non-exercise of any right, power or remedy under or in respect
of the Senior Indebtedness or the Subordinated Obligations or any of the
instruments or documents referred to in clause (a) above.
4. REPRESENTATIONS AND WARRANTIES. Each party hereto hereby represents
and warrants that this Agreement, when executed and delivered, will constitute
the valid and legally binding obligation of such party enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by equitable principles.
5. CUMULATIVE RIGHTS, NO WAIVERS. Each and every right, remedy and power
granted to Senior Lender hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein, in the Credit
Agreement or the other Related Documents, in the Subordinated Instruments or now
or hereafter existing in equity, at law, by virtue of statute or otherwise, and
may be exercised by Senior Lender, from time to time, concurrently or
independently and as often and in such order as Senior Lender may deem
expedient. Any failure or delay on the part of Senior Lender in exercising any
such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect Senior
Lender's right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of Senior
Lender's rights hereunder shall be deemed to establish a custom or course of
dealing or performance among the parties hereto.
6. MODIFICATION. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any Subordinated Holder therefrom,
shall not be effective in any event unless the same is in writing and signed by
Senior Lender and the Subordinated Holder against whom enforcement of such
modification, waiver or consent is sought, and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. Any notice to or demand on any Subordinated Holder in any event
not specifically required of Senior Lender hereunder shall not entitle any
Subordinated Holder to any other or further notice or demand in the same,
similar or other circumstances unless specifically required hereunder.
7. ADDITIONAL DOCUMENTS AND ACTIONS. Each Subordinated Holder at any
time, and from time to time, after the execution and delivery of this Agreement,
upon the request of Senior Lender and at the expense of such Subordinated
Holder, promptly will execute and deliver such further documents and do such
further acts and things as Senior Lender reasonably may request in order to
effect fully the purposes of this Agreement.
8. NOTICES. All notices under this Agreement shall be in writing and
shall be (a) delivered in person, (b) sent by telecopy or (c) mailed, postage
prepaid, either by registered or certified mail, return receipt requested, or by
overnight express courier, addressed as follows:
To Borrower or Parent: c/o General Manufactured Housing, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxx Xxxxx
Telecopy No.: (000) 000-0000
and
Strategic Investments & Holdings, Inc.
Cyclorama Building
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telecopy No.: (000) 000-0000
To Senior Subordinated
Lender: c/o Alliance Corporate Finance Group
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
To Junior Subordinated
Lenders: c/o RFE Investment Partners V, L.P.
00 Xxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
and
Alternative Investments Division
Bureau of Investments
Michigan Department of Treasury
X.X. Xxx 00000 (X.X. Xxxx)
Xxxxxxx, XX 00000 (U.S. Mail)
000 X. Xxxxxxx (Xxxxxxxxx Xxxxxxx)
Xxxxxxx, XX 00000 (Overnight Courier)
Attention: Xxxxx Xxxx
Xxxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
and
Finance and Development Division
Department of Attorney General
X.X. Xxx 00000 (X.X. Xxxx)
Xxxxxxx, XX 00000 (U.S. Mail)
000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxxx (Overnight
Courier)
Xxxxxxx, XX 00000 (Overnight Courier)
Attention: Xxxxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
To Strategic: Strategic Investments & Holdings, Inc.
Cyclorama Building
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telecopy No.: (000) 000-0000
To Senior Lender: c/o First Source Financial, Inc.
0000 Xxxx Xxxx Xxxx, 0xx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
Attention: Contract Administration
Telecopy No.: (000) 000-0000
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a notice to the other parties hereto. All notices
sent pursuant to the terms of this Section 8 shall be deemed received (i) if
personally delivered, then on the Business Day of delivery, (ii) if sent by
telecopy, on the day sent if a Business Day or if such day is not a Business
Day, then on the next Business Day, (iii) if sent by registered or certified
mail, on the earlier of the third Business Day following the day sent or when
actually received or (iv) if sent by overnight, express courier, on the next
Business Day immediately following the day sent. Any notice by telecopy shall be
followed by delivery of a copy of such notice on the next Business Day by
overnight, express courier or by personal delivery.
9. SEVERABILITY. In the event that any provision of this Agreement is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, this
Agreement shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provisions hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
the successors and assigns of Senior Lender and shall be binding upon the
successors and assigns of Borrower and each Subordinated Holder.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.
12. DEFINES RIGHTS OF CREDITORS. The provisions of this Agreement are
solely for the purpose of defining the relative rights of each Subordinated
Holder and Senior Lender and shall not be deemed to create any rights or
priorities in favor of any other Person, including, without limitation,
Borrower.
13. CONFLICT. In the event of any conflict between any term, covenant or
condition of this Agreement and any term, covenant or condition of any of the
Subordinated Instruments, the provisions of this Agreement shall control and
govern. For purposes of this Section 13, to the extent that any provisions of
any of the Subordinated Instruments provide rights, remedies and benefits to
Senior Lender that exceed the rights, remedies and benefits provided to Senior
Lender under this Agreement, such provisions of the applicable Subordinated
Instruments shall be deemed to supplement (and not to conflict with) the
provisions hereof.
14. STATEMENT OF INDEBTEDNESS TO SUBORDINATED HOLDERS. Pursuant to the
Credit Agreement, Borrower is obligated to furnish to Senior Lender a monthly
Compliance Certificate containing, among other things, computations of Available
Cash and the Subordinated Payments owing from Borrower to each Subordinated
Holder. Borrower will furnish a copy of such computations to each Subordinated
Holder as and when furnished to Senior Lender. Senior Lender may rely without
further investigation upon such computations unless the affected Subordinated
Holder notifies Senior Lender of its objections to such computations within 30
days after receipt.
15. HEADINGS. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. TERMINATION. All obligations of Senior Lender under this Agreement
shall terminate upon the indefeasible payment in full of the Senior
Indebtedness. All obligations of all other parties under this agreement shall
terminate upon the indefeasible payment in full of the Senior Subordinated
Indebtedness.
17. DEFAULT NOTICES. Senior Subordinated Lender shall provide Senior
Lender with a copy of each Senior Subordinated Default Notice concurrently with
the sending thereof to Borrower, and promptly shall notify Senior Lender in the
event the Senior Subordinated Default which is the subject of such Senior
Subordinated Default Notice is cured or waived. Junior Subordinated Lenders
shall provide Senior Lender with a copy of each Junior Subordinated Default
Notice concurrently with the sending thereof to Borrower, and promptly shall
notify Senior Lender in the event the Junior Subordinated Default which is the
subject of such Junior Subordinated Default Notice is cured or waived.
18. NO CONTEST OF LIENS; NO SECURITY FOR SUBORDINATED OBLIGATIONS. Each
Subordinated Holder agrees that it will not at any time contest the validity,
perfection, priority or enforceability of the Liens in the Collateral granted to
Senior Lender pursuant to the Credit Agreement and the other Related Documents
or accept or take any collateral security for the Subordinated Obligations. The
provisions of this Agreement shall apply regardless of any invalidity,
unenforceability or lack of perfection of the Liens in the Collateral granted to
Senior Lender pursuant to the Credit Agreement and the other Related Documents.
19. SUBMISSION TO JURISDICTION. SENIOR LENDER MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS AGREEMENT, THE CREDIT AGREEMENT OR THE RELATED DOCUMENTS IN
ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN
CHICAGO, ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH
RESPECT TO ANY SUCH CLAIM, BORROWER AND EACH SUBORDINATED HOLDER OTHER THAN THE
STATE OF MICHIGAN HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS.
BORROWER AND PARENT EACH HEREBY IRREVOCABLY DESIGNATE XXXXXXXX-XXXX, WITH
OFFICES ON THE DATE HEREOF AT 00 XXXXX XXXXXXX XXXXXX, XXXXX 0000, XXXXXXX,
XXXXXXXX 00000, TO RECEIVE FOR AND ON BEHALF OF SUCH PERSON SERVICE OF PROCESS
IN ILLINOIS. EACH OTHER SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN AND
SENIOR SUBORDINATED LENDER HEREBY IRREVOCABLY DESIGNATES THE PERSON WHOSE NAME
AND ADDRESS ARE SET FORTH ON EXHIBIT C TO RECEIVE FOR AND ON BEHALF OF SUCH
SUBORDINATED HOLDER SERVICE OF PROCESS IN ILLINOIS. SENIOR SUBORDINATED LENDER
ACKNOWLEDGES AND AGREES THAT IT HAS A PRESENCE IN THE STATE OF ILLINOIS AND IS
SUBJECT TO SERVICE OF PROCESS IN ILLINOIS. BORROWER AND EACH SUBORDINATED HOLDER
OTHER THAN THE STATE OF MICHIGAN FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL,
POSTAGE PREPAID, TO BORROWER OR SUCH SUBORDINATED HOLDER AND AGREES THAT SUCH
SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (i) SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR
PROCEEDING AND (ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON
AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF
SENIOR LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE
SENIOR LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY
OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. BORROWER AND
EACH SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN CHICAGO,
ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
[remainder of this page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
GENERAL MANUFACTURED HOUSING, INC.,
a Georgia corporation and successor by
merger to GMH Acquisition Corp., a
Delaware corporation
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxx
President
GMH HOLDINGS, INC., a Delaware
corporation
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxx
President
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES, a New York
insurance company
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------
Title: Investment Officer
-----------------------------
RFE INVESTMENT PARTNERS V, L.P., a
Delaware limited partnership
By: RFE Associates V, L.P., a
Delaware limited partnership, its
sole general partner
By: /s/ Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx
General Partner
STERLING COMMERCIAL CAPITAL, INC., a
New York corporation
By: /s/ Xxxxxx Xxxxxxxxxx
----------------------------------
Xxxxxx Xxxxxxxxxx
Executive Vice President
STATE TREASURER OF THE STATE OF MICHIGAN,
Custodian of the Michigan Public School
Employees' Retirement System, State
Employees' Retirement System, Michigan
State Police Retirement System and
Michigan Judges Retirement System
By: /s/ Xxxx X. Xxxx
----------------------------------
Xxxx X. Xxxx
Administrator, Alternative
Investments Division
STRATEGIC INVESTMENTS & HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxx
----------------------------------
Xxxx X. Xxxxx
President
FIRST SOURCE FINANCIAL LLP, an Illinois
registered limited liability partnership
By: First Source Financial, Inc., a
Delaware corporation, its
Agent/Manager
By: /s/ Xxxxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxxxxxx
----------------------
Title: Vice President
----------------------
EXHIBIT A
(SEE ATTACHED)
EXHIBIT B
(SEE ATTACHED)
EXHIBIT C
AGENT FOR SERVICE OF PROCESS IN ILLINOIS
RFE INVESTMENT PARTNERS V, X.X.
XXXXXXXX-XXXX
00 XXXXX XXXXXXX XXXXXX
XXXXX 0000
XXXXXXX, XX 00000
STERLING COMMERCIAL CAPITAL, INC.
XXXXXXXX-XXXX
00 XXXXX XXXXXXX XXXXXX
XXXXX 0000
XXXXXXX, XX 00000
STRATEGIC INVESTMENTS & HOLDINGS, INC.
XXXXXXXX-XXXX
00 XXXXX XXXXXXX XXXXXX
XXXXX 0000
XXXXXXX, XX 00000
