1
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT") is
dated for reference purposes only as of September 25, 1997 by and among Solo
Serve Corporation, a Delaware corporation ("BORROWER"), Sanwa Business Credit
Corporation, a Delaware corporation ("SENIOR LENDER"), and General Atlantic
Corporation, a Delaware corporation ("SUBORDINATE LENDER").
RECITALS:
A. Senior Lender has agreed to extend financial accommodations to
Borrower pursuant to the terms of the Senior Loan Documents (defined below).
B. As security for the financial accommodations made by Senior
Lender, Borrower has granted to Senior Lender a security interest in all of the
assets of Borrower, other than real property.
C. Subordinate Lender is one of the shareholders of Borrower.
D. As security for the indebtedness evidenced by the Senior Loan
Documents, Borrower has pledged a letter of credit (the "LETTER OF CREDIT")
issued by Chase Manhattan Bank upon the application of Subordinate Lender in
the face amount of $750,000.
E. Borrower and Subordinate Lender have entered into that certain
Letter of Credit and Security Agreement dated as of September 25, 1997 (the
"LETTER OF CREDIT AGREEMENT"), pursuant to which Borrower has agreed to
reimburse Subordinate Lender for any liabilities or obligations incurred by
Subordinate Lender with respect to the Letter of Credit.
F. As security for the obligations of Borrower pursuant to the
terms of the Letter of Credit Agreement, Borrower has granted Subordinate
Lender a security interest in certain of the assets of Borrower.
G. As a condition to agreeing to allow Borrower to grant the
security interest in favor of Subordinate Lender, Senior Lender has required
that Borrower and Subordinated Lender enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the mutuality, receipt and sufficiency of which hereby
are acknowledged, and intending to be legally bound, the parties hereto agree
as follows:
2
1. DEFINITIONS.
Certain terms used herein and not otherwise defined (including
capitalized terms used in the foregoing Recitals) shall have the following
meanings:
"BORROWER OBLIGATION" means the Senior Secured Obligations or the
Subordinate Obligations, as the context requires.
"COLLATERAL" means those assets of Borrower which have been pledged to
secure the Borrower Obligations.
"DIP FACILITY" shall have the meaning set forth in Section 2.5.
"PAYMENT IN FULL" or "PAID IN FULL" or any similar term(s) with
respect to any Borrower Obligation means (a) the indefeasible satisfaction and
final payment in full of such Borrower Obligation in cash or cash equivalents
reasonably acceptable to the payee and the termination of any obligation on the
part of the holder of such Borrower Obligation to make any loans or to afford
any financial accommodation to Borrower and the full and timely performance of
all other obligations to the holder of such Borrower Obligation or (b) in the
case of any Borrower Obligation consisting of contingent obligations (including
without limitation contingent obligations in respect of letters of credit or
other indemnifications under the Senior Loan Documents), the setting apart of
cash sufficient to discharge such portion of such Borrower Obligation in an
account for the exclusive benefit of the holders thereof, in which account such
holders shall be granted by Borrower a first priority perfected security
interest in a manner acceptable to such holders, which payment or perfected
security interest shall have been retained by the holders, in the case of each
of (a) and (b) above, for a period of time in excess of all applicable
preference or other similar periods under applicable bankruptcy, insolvency or
creditors' rights laws.
"PROCEEDS" means the proceeds of any of the Collateral in which both
Senior Lender and Subordinate Lender have security interests.
"SENIOR LOAN AGREEMENT" means that certain Loan and Security Agreement
dated for reference purposes only as of September 25, 1997, by and among Senior
Lender and Borrower, as the same may hereafter be amended, modified,
supplemented, restated, replaced or refinanced from time to time.
"SENIOR LOAN DOCUMENTS" means the Senior Loan Agreement and all other
instruments, agreements and documents which create, evidence or secure the
Senior Secured Obligations from time to time (including but not limited to any
promissory notes, security agreements, pledge agreements, hypothecation
agreements, mortgages, financing statements, and all other agreements of any
type whatsoever), delivered by Borrower to Senior Lender, as such may be
amended, modified, supplemented, restated, replaced or refinanced from time to
time.
"SENIOR SECURED OBLIGATIONS" means all "Secured Obligations" as that
term is defined in the Senior Loan Documents (which definition is hereby
incorporated herein by
2
3
reference), including but not limited to principal, interest, fees and all
other amounts owing to Senior Lender under the Senior Loan Documents, from time
to time.
"SUBORDINATE DEBT" means all principal, interest, fees and other
amounts owing to Subordinate Lender under the Subordinate Loan Documents from
time to time, whether in respect of principal, interest or otherwise.
"SUBORDINATE LOAN DOCUMENTS" means (i) the Letter of Credit Agreement,
and (ii) financing statements filed or to be filed with the Secretary of State
of Texas and the recorder of Mortgages for New Orleans Parish, Louisiana,
evidencing the security interest granted pursuant to the Letter of Credit
Agreement.
"SUBORDINATE OBLIGATIONS" means any of Borrower's Obligations to
Subordinate Lender under any of the Subordinate Loan Documents.
2. SUBORDINATION AND INTERCREDITOR PROVISIONS.
2.1. Subordination.
(a) Senior Lender hereby consents to Borrower obtaining the
financial accommodation from and granting a security interest in certain of
Borrower's property to Subordinate Lender in accordance with the Subordinate
Loan Documents.
(b) Subordinate Lender hereby acknowledges that Senior Lender has
been granted a security interest in the Collateral, and Senior Lender hereby
acknowledges that Subordinate Lender has been granted a security interest in
the Collateral.
(c) Borrower and Subordinate Lender hereby represent and warrant
to Senior Lender that attached hereto as Exhibit A is a true, accurate and
complete copy of all Subordinate Loan Documents.
(d) Subordinate Lender agrees, for itself and each future holder
of the Subordinate Obligations, that:
(i) Notwithstanding the order of time of attachment or
the order, time or manner of perfection, or the order or time
of filing or recordation of any document, instrument,
financing statement or other method of perfecting a security
interest in favor of each of Subordinate Lender or Senior
Lender, as applicable, in any Collateral, and notwithstanding
any conflicting terms or conditions which may be contained in
any of the Senior Loan Documents or the Subordinate Loan
Documents, the security interests and liens of Senior Lender
in and upon the Collateral have and shall have priority over
the Subordinate Lender's security interests and liens in and
upon the Collateral and the security interests and liens in
favor of Subordinate Lender are and shall be, in all respects,
subject and subordinate to the security interests of Senior
Lender therein to the full extent of the Senior Secured
Obligations;
3
4
(ii) Subordinate Lender's interest in any of Borrower's
property and in and to the Proceeds, is subordinate to the
interest of Senior Lender and subject to the terms of this
Agreement, and
(iii) Senior Lender has advanced funds and shall from time
to time advance additional funds in reliance upon the
subordination of the Subordinate Obligations to the Senior
Secured Obligations.
2.2. Standby; Non-Interference.
(a) At any time prior to the date the Senior Secured Obligations
are Paid in Full, Subordinate Lender shall not, without Senior Lender's prior
consent (which consent may be withheld in Senior Lender's sole and absolute
discretion): (i) except as expressly provided in Sections 2.2(d), (e) or (f),
exercise any rights or remedies it may have under the Subordinate Loan
Documents or otherwise; (ii) commence or join with any other creditors of
Borrower in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against Borrower; or (iii) commence any action or
proceeding against Borrower to enforce or collect any Subordinate Obligation,
to obtain possession of property of Borrower, to exercise control over property
of Borrower or to create, perfect or enforce any lien against property of
Borrower.; or (iv) exercise any control over or power to direct the use or
distribution of insurance proceeds, condemnation proceeds, or any other
property of Borrower.
(b) In the event Borrower defaults on its obligations to Senior
Lender and, as a result, Senior Lender undertakes to enforce Senior Lender's
security interests and liens in Borrower's assets, Subordinate Lender agrees
that Subordinate Lender will not hinder, delay or otherwise prevent Senior
Lender from taking any and all action which Senior Lender deems necessary to
enforce Senior Lender's security interests and liens in Borrower's assets and
to realize thereon or take any action which interferes with or impairs Senior
Lender's rights and remedies, in any manner whatsoever. Subordinate Lender
covenants that it will not contest the validity, perfection, priority or
enforceability of any security interest granted or purported to be granted by
Borrower to Senior Lender, and that, as between Senior Lender and Subordinate
Lender, the terms of this Agreement shall govern payment and enforcement of the
Borrower Obligations, even if the Senior Secured Obligations, or any portion
thereof, are avoided, disallowed, set aside or otherwise invalidated in any
proceeding in bankruptcy, any other judicial proceeding, or otherwise.
(c) If any insolvency, bankruptcy , receivership, liquidation,
reorganization or other similar proceedings are commenced by or against
Borrower or its property, if any proceedings for involuntary liquidation,
dissolution or other winding up of Borrower whether or not involving insolvency
or bankruptcy are commenced by or against Borrower, then Senior Lender shall be
entitled in any such proceeding to receive Payment in Full of all Senior
Secured Obligations before Subordinate Lender is entitled in any such
proceedings to receive any payment on account of the Subordinate Obligations,
and to that end, in any such proceedings, any payment or distribution of any
kind or character, whether in cash or in property to which Subordinate Lender
would be entitled but for the provisions hereof, shall be delivered to Senior
Lender to the extent necessary to make Payment in Full of all
4
5
Senior Secured Obligations remaining unpaid, after giving effect to any
concurrent payment or distribution to or for Senior Lender in respect thereof.
(d) Upon the occurrence of a default under the terms of the
Subordinate Loan Documents, Subordinate Lender may accelerate payments due
pursuant to the Letter of Credit Agreement, may make demand for payment from
Borrower and may obtain a judgment against Borrower; provided that except as
provided in Section 2(e), Subordinate Lender shall not seek to enforce its lien
against any Collateral pledged to secure the Subordinate Obligations, shall not
seek to enforce any judgment against the assets of Borrower and, except as
permitted pursuant to Section 2.4, shall not accept or retain payment.
(e) In the event Senior Lender has commenced an action to
foreclose the lien of its security interest against any Collateral pledged to
secure the Senior Secured Obligations, Subordinate Lender may file an action
and may seek to enforce its lien upon such Collateral, and only such
Collateral, with respect to which Senior Lender shall have commenced an action;
provided that Subordinate Lender shall have no right to receive any payments or
monies resulting from such action or proceeding until the Senior Secured
Obligations are Paid in Full.
(f) Subject to the provisions of Section 2.4, Subordinate Lender
may, in any proceedings described in Section 2.2 (c), in the name of
Subordinate Lender, file claims, proofs of claims and other instruments of
similar character necessary to enforce the obligations of Borrower in respect
of the Subordinate Obligations. Neither this Section 2.2(f) nor any other
provision hereof shall be construed to give Subordinate Lender any right to
vote any Borrower Obligation held by Senior Lender, any related claim or any
portion of such claim, whether in connection with any resolution, arrangement,
plan or reorganization, compromise, settlement, election of trustees or
otherwise.
(g) Nothing in this Agreement shall restrict the ability of Senior
Lender to declare a default or accelerate all or any portion of the Senior
Secured Obligations. Senior Lender shall have the sole and exclusive right to
enforce the Senior Loan Documents, to exercise any right or remedy thereunder,
to grant any waiver or forbearance thereunder, and to compel performance by
Borrower thereunder, in any manner whatsoever, which Senior Lender deems (in
its sole and absolute discretion) advisable, including without limitation the
right to take control of, sell, lease, dispose, or liquidate the Collateral,
without notice to or consultation with Subordinate Lender or regard for the
rights or interests of Subordinate Lender in such Collateral.
2.3. Marshaling Waiver. Subordinate Lender hereby waives any rights
it has or may have in the future to require Senior Lender to marshal Senior
Lender's Collateral, and agrees that, in addition to Senior Lender's other
rights hereunder, Senior Lender may proceed against Senior Lender's Collateral
in any order that Senior Lender deems appropriate in the exercise of Senior
Lender's absolute discretion. Subordinate Lender also waives any right to be
subrogated to the Senior Secured Obligations unless and until the Senior
Secured Obligations are Paid in Full.
5
6
2.4. Payments of Borrower Obligations.
(a) The following provisions shall govern Subordinate Lender's
right to receive and Borrower's right to pay any amount due and owing under the
Subordinate Loan Documents:
(i) Provided no Default or Unmatured Default shall have
occurred and be continuing or would be created thereby under
the terms of the Senior Loan Documents, Subordinate Lender may
receive and Borrower may pay amounts due and owing pursuant to
Sections 3(a) and (b) of the Letter of Credit Agreement, when
due and owing on an unaccelerated basis and without reference
to the rate of interest applicable on default.
(ii) Except as expressly permitted pursuant to Section
2.4(a)(i), Subordinate Lender shall not be entitled to receive
or retain any direct or indirect payment (in cash, cash-
equivalents, property, by set-off or otherwise) of or on
account of any Subordinate Obligation at any time prior to
Payment in Full of the Senior Secured Obligations. At any time
that any Senior Secured Obligation is outstanding, Borrower
shall not make and Subordinate Lender shall not receive or
accept any payment (in cash, cash-equivalents, property, by
set-off or otherwise) of any kind or nature with respect to
the Subordinate Obligations, including but not limited to any
reimbursement of principal or payment of interest provided for
in Sections 3(c) or (d) of the Letter of Credit Agreement.
(b) If Subordinate Lender receives any payment with respect to the
Subordinate Obligations which Subordinate Lender is not permitted to receive
and retain pursuant to this Agreement, then such payment shall be held in trust
for the benefit of, and shall be paid over promptly to Senior Lender, for
application to the payment of the Senior Secured Obligations, in such order of
priority as Senior Lender shall determine, in its sole and exclusive
discretion. If Subordinate Lender pays over any payment or distribution as
provided above, then such payment or distribution shall be deemed to have been
made by Borrower directly to Senior Lender and not to Subordinate Lender and no
Subordinate Obligation shall be discharged by reason of its receipt of any
payment or distribution which is so paid over to Senior Lender.
(c) In the event of any distribution, division, or application
(partial or complete, voluntary or involuntary, by operation of law or
otherwise) of all or any part of the assets of Borrower or the proceeds thereof
to the creditors of Borrower or readjustment of the obligations and
indebtedness of Borrower, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors, marshaling
of assets of Borrower or any other action or proceeding involving the
readjustment of all or any part of the indebtedness or other obligations of
Borrower or the application of the assets of Borrower to the payment or
liquidation thereof, or upon the dissolution or other winding up of Borrower's
business, or upon the sale of all or substantially all of Borrower's assets,
then, and in any such event; (i) Senior Lender shall first receive Payment in
Full in cash of all of the Senior Secured Obligations prior to the payment of
all or any part of the Subordinated Obligations, and (ii) until Payment in Full
of the Subordinate Obligations, Senior Lender shall be entitled to receive any
payment or distribution of any kind or character, whether in cash,
6
7
securities or other property, which is payable or deliverable in respect of any
or all of the Subordinate Obligations.
(d) In order to enable Senior Lender to enforce its rights under
Section 2.4(c), Senior Lender is hereby irrevocably authorized and empowered
(in its own name or in the name of Subordinate Lender or otherwise), but shall
have no obligation to, enforce claims comprising any of the Subordinate
Obligations by proof of debt, proof of claim, suit or otherwise and take
generally any action which Subordinate Lender may deem necessary or advisable
for the enforcement of its rights or interests hereunder.
(e) To the extent necessary for Senior Lender to realize the
benefits of the subordination of the Subordinate Obligations provided for
herein (including the right to receive any payment and distributions which
might otherwise be payable or deliverable in respect of the Subordinate
Obligations in any proceeding described in Section 2.4(c) or otherwise),
Subordinate Lender shall execute and deliver to Senior Lender such instruments
or documents (together with such assignments or endorsements as Senior Lender
shall deem necessary), as may be reasonably requested by Senior Lender.
(f) In the event Subordinate Lender at any time incurs any
obligation to pay money to Borrower, Subordinate Lender hereby irrevocably
agrees that it shall pay such obligation in cash or cash equivalents in
accordance with the terms of the document or instrument governing such
obligation without deduction or set-off against the Subordinate Obligations.
2.5. DIP Facility.
(a) This Agreement shall be applicable both before and after the
filing of any petition by or against Borrower under the U.S. Bankruptcy Code
and all converted or succeeding cases in respect thereof, and all references
herein to Borrower shall be deemed to apply to a trustee for Borrower and
Debtor as debtor-in-possession. The relative rights of Senior Lender and
Subordinate Lender to repayment of the Borrower Obligations, and in or to any
distributions from or in respect of Borrower or any Collateral or proceeds of
Collateral, shall continue after the filing thereof on the same basis as prior
to the date of the petition, subject to any court order approving the financing
of, or use of cash collateral by, Debtor as debtor-in-possession.
(b) References herein to Borrower shall include any successor to,
or assign of, Borrower, including without limitation any debtor-in-possession
or trustee for Borrower in any proceeding under the United States Bankruptcy
Code.
(c) If Borrower shall become subject to a proceeding under the
United States Bankruptcy Code and Senior Lender shall desire to permit the use
of cash collateral by Borrower or to provide financing to Borrower on
substantially similar terms as the Senior Loan Documents under either Section
363 or 364 of the United States Bankruptcy Code, with or without obtaining a
priority lien under Section 364(d) thereof (the "DIP FACILITY"), Subordinate
Lender hereby agrees as follows: (a) adequate notice to Subordinate Lender
shall have been given for the DIP Facility if Subordinate Lender receives
notice thereof at least two (2) business days prior to the hearing on the
motion requesting the DIP Facility;
7
8
and (b) if Senior Lender proposes to provide a DIP Facility, Subordinate Lender
may seek adequate protection of its interest by demanding the same treatment as
provided in the Subordinate Loan Documents, provided, however, that failure by
Subordinate Lender to obtain such adequate protection shall not be grounds for
objecting to the DIP Facility. Senior Lender and Borrower agree to use their
best efforts to obtain the treatment provided in the Subordinate Loan Documents
as adequate protection for Subordinate Lender. For purposes hereof, notice of a
proposed financing or use of cash collateral shall be deemed received by
Subordinate Lender upon the sending of notice by overnight delivery service,
telecopy or hand delivery by Subordinate Lender. Senior Lender is irrevocably
authorized and empowered to receive and collect any and all dividends, payments
and distributions made on account of any proof of claim relating to the
Subordinate Debt in whatever form the same may be paid or issued until the
Senior Secured Obligations are Paid in Full. Subordinate Lender agrees to file
a proof of claim in respect of the Subordinate Debt and to execute and deliver
to Senior Lender such assignments or other instruments as Senior Lender may
reasonably require to enable Senior Lender to collect all dividends, payments
and distributions which may be made at any time on account of the Subordinated
Debt until the Senior Secured Obligations are Paid in Full. Nothing contained
herein shall prohibit Subordinate Lender from objecting to or demanding
additional adequate protection if such financing is provided by a lender other
than Senior Lender.
2.6. Borrower's Obligations Absolute. The provisions of this
Agreement are solely for the benefit of Borrower, Senior Lender and Subordinate
Lender for the purpose of defining the relative rights of the parties thereto.
Nothing herein shall impair, as between Borrower and any other party hereto,
the obligations of Borrower, which are unconditional and absolute, to Senior
Lender and to Subordinate Lender, respectively.
2.7. Transfers. Subordinate Lender shall not sell, assign or
otherwise transfer, in whole or in part, any of the Borrower Obligations or any
interest therein to any other person or entity without Senior Lender's prior
written consent, which consent shall be granted or withheld in Senior Lender's
sole discretion. If Senior Lender grants such consent, the transferee of the
Subordinate Obligations shall expressly acknowledge to the other parties to
this Agreement, in writing, that it agrees to be bound by all of the terms
hereof. Senior Lender and Subordinate Lender each hereby represents and
warrants to the others that as of the execution date hereof neither Senior
Lender nor Subordinate Lender has transferred or entered into any agreement or
understanding with a proposed transferee that it will transfer any of the
Borrower Obligations.
2.8. Modification of Documents.
(a) Senior Lender may amend, modify or otherwise alter any Senior
Loan Document in any manner whatsoever, without notice to or consent of
Subordinated Lender. Senior Lender shall have the right to exercise any and all
rights and remedies granted to Senior Lender pursuant to the Senior Loan
Documents, without notice to or consent of Subordinate Lender.
(b) The relative priority of the security interests of Senior
Lender and Subordinate Lender, as set forth herein, shall not be altered or
modified by any amendment,
8
9
modification, supplement, extension, renewal, replacement, or restatement of
the Senior Loan Documents, the Subordinate Loan Documents, any other agreement,
instrument or document between Borrower and Subordinate Lender or Senior
Lender, or any action or omission of any party hereto with respect to the
applicable Borrower Obligation or the Collateral. The relative priority of such
security interests may only be modified by a writing executed by both Senior
Lender and Subordinate Lender expressly making reference to Section 2.1 and
this Section 2.8(b) and expressly stating that it is the intent of the parties
thereto to modify the provisions of this Agreement relating to the relative
priority of the security interests in the Collateral.
(c) At any time prior to the time the Senior Secured Obligations
are Paid in Full, Subordinate Lender shall not: (i) amend, modify or otherwise
alter any Subordinate Loan Document in any manner whatsoever, including but not
limited to modifications of the interest rate, payment terms, time for
payments, or events of default; (ii) accept, retain, request or take any
additional security for the Subordinated Debt; (iii) transfer, sell or assign
any portion of the Subordinate Obligations; provided that, Subordinate Lender
may assign the Subordinate Obligations in accordance with Section 2.7; (iv)
increase the Subordinated Debt; (v) except as expressly permitted pursuant to
Section 2.4(a)(i), accept payment of, demand payment of, xxx for or receive all
or any part of the Subordinated Debt; (vi) except as expressly permitted in
Section 2.2, commence any action or proceeding to enforce or collect any
Subordinate Obligation, or (vii) exercise any control over or power to direct
the use or distribution of insurance proceeds, condemnation proceeds, or any
other property of Borrower; or (viii) commence any action to obtain possession
of the property of Borrower, to exercise control over the property of Borrower,
or to create, perfect or enforce any lien against any property of Borrower.
(d) Any instrument at any time evidencing the Subordinate
Obligations, or any portion thereof, shall be permanently marked on its face
with a legend conspicuously indicating that payment thereof is subordinate in
right of payment to the Senior Obligations and subject to the terms and
conditions of this Agreement, and (a) after being so marked certified copies
thereof shall be delivered to Senior Lender, and (b) an original of any such
instrument shall be immediately delivered to Senior Lender upon Senior Lender's
request, at any time on or after the occurrence of an Event of Default under
the Senior Loan Documents. In the event any legend or endorsement is omitted,
Senior Lender or any of its officers or employees are hereby irrevocably
authorized on behalf of Subordinate Lender to make the same. No specific
legend, further assignment or endorsement or delivery of notes, guarantees or
instruments shall be necessary to subject any Subordinate Obligations to the
subordination thereof contained in this Agreement.
(e) Subordinate Lender and Senior Lender each shall be solely
responsible for attaching, perfecting and maintaining the perfection of its
respective security interest in the Collateral; provided that either party's
failure to perfect or maintain the perfection of such security interest shall
not modify, amend or in any manner alter the relative priorities of such
security interests, as set forth herein.
2.9. Additional Representations and Warranties. Subordinate Lender
and Borrower represent and warrant to Senior Lender that:
9
10
(a) as of the date hereof, the total principal amount of the
Subordinate Obligations is $100.00 plus reimbursement of letter of credit fees
incurred by Subordinate Lender under the Subordinate Loan Documents as in
effect on the date hereof, which fees shall not exceed $30,000 for any calendar
year that the Subordinate Loan Documents are in effect;
(b) as of the date hereof, no default or event of default, or
event which with notice or passage of time or both would constitute an event of
default exists or has occurred under the Subordinate Loan Documents;
(c) Subordinate Lender is the exclusive legal and beneficial owner
of all of the Subordinate Obligations;
(d) none of the Subordinate Obligations is subject to any lien,
security interest, financing statements, subordination, assignment or other
claim, and
(e) this Agreement constitutes the legal, valid and binding
obligations of Subordinate Lender, enforceable in accordance with its terms.
3. AGREEMENT BY BORROWER.
(a) Borrower hereby acknowledges and agrees to the foregoing terms
and provisions, and agrees that it will, together with its successors and
assigns, be bound by the provisions hereof. In the event of a conflict or
inconsistencies between the terms of this Agreement and the Senior Loan
Documents or the Subordinate Loan Documents, the terms of the Senior Loan
Documents or the Subordinate Loan Documents, as applicable, shall govern as
between the applicable lender and Borrower.
(b) Borrower agrees that any party hereto (other than Borrower)
holding Collateral does so as bailee (under the Uniform Commercial Code as
enacted in Illinois) for the other and is hereby authorized to and may turn
over to such other party hereto (other than Borrower) upon request therefor any
such Collateral, after all obligations and indebtedness of the undersigned to
the bailee party have been paid in full.
(c) Borrower acknowledges and agrees that: (i) although it may
sign this Agreement it is not a party hereto and does not and will not receive
any right, benefit, priority or interest under or because of the existence of
the foregoing Agreement; (ii) in the event of a breach by Borrower or
Subordinate Lender of any of the terms and provisions contained in this
Agreement, such a breach shall constitute an Event of Default, as defined in
and under the Senior Loan Documents, and (iii) it will execute and deliver such
additional documents and take such additional action as may be necessary or
desirable in the opinion of either Subordinate Lender or Senior Lender to
effectuate the provisions and purposes of this Agreement.
4. MISCELLANEOUS.
4.1. Notices. Any and all notices given in connection with this
Agreement shall be deemed adequately given only if in writing and addressed to
the party for whom such
10
11
notices are intended at the address set forth below. All notices shall be sent
by personal delivery, Federal Express or other over-night messenger service,
first class registered or certified mail, postage prepaid, return receipt
requested or by other means at least as fast and reliable as first class mail.
A written notice shall be deemed to have been given to the recipient party on
the earlier of (a) the date it shall be delivered to the address required by
this Agreement; (b) the date delivery shall have been refused at the address
required by this Agreement; or (c) with respect to notices sent by mail, the
date as of which the postal service shall have indicated such notice to be
undeliverable at the address required by this Agreement. Any and all notices
referred to in this Agreement, or which either party desires to give to the
other, shall be addressed as follows:
if to Borrower: Solo Serve Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxx, Chief
Financial Officer
with a copy to: Xxx and Xxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx, Esq.
if to Senior Lender: Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: First Vice President,
Commercial Finance Division
with a copy to: Xxxxxxxx & Xxxxxx, Ltd.
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
if to Subordinate Lender: General Atlantic Corporation
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
The above addresses may be changed by notice of such change, mailed as
provided herein, to the last address designated.
4.2. No Fiduciary Duty. Nothing in this Agreement shall be
construed to create or impose upon Senior Lender any fiduciary duty to
Subordinate Lender, or any other implied obligation to act or refrain from
acting with respect to Borrower or the Senior Secured Obligations or the
Collateral security securing the Senior Secured Obligations in any manner
contrary to what Senior Lender may determine is in its own best interests. The
11
12
provisions of this Agreement are intended solely to govern the respective
priorities of the security interest in the Collateral and shall not be deemed
to impose upon Senior Lender any obligation with respect to the disposition of
Proceeds which would conflict with prior perfected claims therein in favor of
any other person or any order or decree of any court or other governmental
authority or any applicable law.
4.3. Notice of Default. In addition to any other notices which may
be required hereunder, Subordinate Lender shall use its best efforts to give
written notice to Senior Lender, promptly upon the occurrence of: (a) an event
of default under the terms of the Subordinate Loan Documents, (b) the cure of
any such event of default, (c) the payment in full of the Subordinate Debt.
4.4. Successors; Continuing Effect.
(a) This Agreement is being entered into for the benefit of, and
shall be binding upon, Borrower, Senior Lender and Subordinate Lender and their
respective successors and assigns, including each subsequent or additional
holder of Senior Secured Obligations, or Subordinate Debt, and any participant
(whether now existing or hereafter arising) in the Senior Secured Obligations.
The terms "SENIOR LENDER" and "SUBORDINATE LENDER" shall include, respectively,
any such subsequent or additional holder of or participant in Senior Secured
Obligations or Subordinate Obligations whenever the context permits. This
Agreement shall inure to the benefit of and be enforceable by any future holder
or holders of the Borrower Obligations or any part of any of the same; provided
that, nothing contained in this Section 4.4 shall be deemed to permit the
transfer of the Subordinate Obligations in violation of the provisions of
Section 2.7.
(b) Senior Lender reserves the right to grant participations in,
or otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, the Senior Secured Obligations and the Collateral securing same.
In connection with any participation or other transfer or assignment, Senior
Lender (i) may disclose to such assignee, participant or other transferee or
assignee all documents and information which Senior Lender now or hereafter may
have relating to the Senior Secured Obligations or the Collateral, and (ii)
shall disclose to such participant or other transferee or assignee the
existence and terms and conditions of this Agreement.
4.5. Amendments. This Agreement may be amended only by a written
instrument executed by Senior Lender and Subordinate Lender and, if such
amendment affects Borrower, by Borrower.
4.6. Term. This Agreement shall remain in full force and effect
until the Payment in Full of the Senior Secured Obligations.
4.7. Waivers. No waiver shall be deemed to be made by any party of
any of its rights hereunder unless the same shall be in writing and then only
with respect to the specific instance involved, and no such waiver shall impair
or offset the rights of the waiving party or the obligations of the party
benefited by such waiver in any other respect or at any other time.
12
13
4.8. Governing Law. This Agreement, including the validity hereof
and the rights and obligations of the parties hereunder, shall be governed by
and construed and enforced in accordance with the laws of the State of
Illinois.
4.9. Subordination May Not Be Impaired by the Borrower. No right of
Senior Lender or Subordinate Lender to enforce the subordination created hereby
shall be impaired by any act or failure to act by Borrower or by the failure by
Borrower to comply with this Agreement, regardless of any knowledge which
Senior Lender or Subordinate Lender may have or be otherwise charged with.
4.10. Specific Performance. The parties hereto acknowledge that
legal remedies may be inadequate and therefore Senior Lender and Subordinate
Lender are hereby authorized to demand specific performance of the provisions
of this Agreement at any time when Borrower, Senior Lender or Subordinate
Lender shall have failed to comply with any provision hereof. Each party hereto
hereby irrevocably waives any defense based on the adequacy of a remedy at law
that might be asserted as a bar to such remedy of specific performance.
4.11. Further Actions. After the execution of this Agreement each
party will execute and deliver all such documents and instruments and do all
such other acts and things as may be reasonably necessary to carry out the
provisions of this Agreement.
4.12. Agreement to Control. If any provision in any document or
instrument relating to the Senior Secured Obligations or the Subordinate Debt
differs with the terms of this Agreement regarding the same or any similar
matter, the provisions of this Agreement shall control and each other provision
shall be interpreted so as to give effect to the provisions of this Agreement.
4.13. Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior written and oral agreements, and all contemporaneous oral agreements,
relating to such matters.
4.14. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
4.15. Facsimile. For purposes of negotiating and finalizing this
Agreement (including any subsequent amendments thereto), any signed document
transmitted by facsimile machine ("FAX") shall be treated in all manner and
respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document, provided that an original of the faxed document was mailed by first
class U.S. Mail or personally delivered to the recipient, on the date of its
transmission with proof of the fax transmission. At the request of any party,
any FAX document subject to this Agreement shall be re-executed by both parties
in an original form. The undersigned parties hereby agree that neither shall
raise the use of the FAX or the fact that any signature or document was
transmitted or communicated through the use of a FAX
13
14
as a defense to the formation of this Agreement. This Agreement may be signed
in one or more counterparts, each of which shall be an original, but all of
which together shall constitute one agreement, binding on all of the parties
hereto notwithstanding that all of the parties hereto are not signatories to
the same counterpart. Each of the undersigned parties authorizes the assembly
of one or more original copies of this Agreement through the combination of the
several executed counterpart signature pages with one or more copies of this
Agreement, including the Exhibits, if any, to this Agreement. Each such
compilation of this Agreement shall constitute one original of this Agreement.
4.16. Effect on Other Documents. Nothing in this Agreement shall be
deemed to amend, modify or impair Subordinate Lender's rights as a limited
partner under the partnership agreement creating Borrower. No provision of the
Senior Loan Documents limiting the liability of any limited partner of the
Borrower shall amend, modify or impair any obligation of Subordinate Lender as
a party to this Agreement.
4.17. Consent to Jurisdiction; Waiver of Jury Trial.
(a) BORROWER, SUBORDINATE LENDER AND SENIOR LENDER EACH HEREBY (i)
TO THE EXTENT PERMITTED BY APPLICABLE LAW, IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OVER
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR
RELATED TO THIS AGREEMENT; (ii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER, SUBORDINATE LENDER AND SENIOR LENDER MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT; (iii) AGREES THAT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT
ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (iv) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST ANY PARTY HERETO OR ANY OF PARTY'S DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING
TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED IN XXXX COUNTY, ILLINOIS.
(b) NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR SENIOR LENDER'S
RIGHT TO SERVE LEGAL PROCESS ON BORROWER IN ANY MANNER PERMITTED BY LAW OR
SENIOR LENDER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR
BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. BORROWER, SENIOR LENDER AND SUBORDINATE
LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF EITHER PARTY.
14
15
EACH PARTY HERETO HEREBY EXPRESSLY ACKNOWLEDGES THIS WAIVER IS A MATERIAL
INDUCEMENT FOR SENIOR LENDER TO ENTER INTO THIS AGREEMENT AND TO MAKE THE LOAN
EVIDENCED BY THE SENIOR LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day, month and year first above written.
SOLO SERVICE CORPORATION
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Xxxx X. Xxxxx, Chief Financial Officer
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
GENERAL ATLANTIC CORPORATION
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President
15
