EXHIBIT 10.3
INTERCREDITOR AND SUBORDINATION AGREEMENT
INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of January 2, 2002,
by and between CAMBRIDGE HOLDINGS, LTD., a Colorado corporation (the
"Subordinated Creditor, collectively, together with any other holders from time
to time of the Subordinated Obligations, the "Subordinated Creditors"), ADVANCED
NUTRACEUTICALS, INC., a Texas corporation, ("Holding Co.") BACTOLAC
PHARMACEUTICAL INC., a Delaware corporation and ANI PHARMACEUTICALS, INC., a
Mississippi corporation (each together with its successors and assigns, a
"Borrower"; collectively the "Borrowers"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation (together with its successors and assigns,
the "Senior Lender").
The parties hereto hereby agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, terms defined in the
Senior Loan Agreement and used herein shall have the meanings given to them in
the Senior Loan Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Intercreditor and Subordination Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.
"Collateral": the collective reference to any and all property from time to
time subject to security interests to secure payment or performance of the
Senior Obligations.
"Insolvency Event: (a) Any Borrower or any of its Subsidiaries or Holding
Co. commencing any case, proceeding or other action (1) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, conservatorship or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (2) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or any Borrower or any of its Subsidiaries or Holding Co. making a
general assignment for the benefit of its creditors; or (b) there being
commenced against any Borrower or any of its Subsidiaries or Holding Co.
any case, proceeding or other action of a nature referred to in clause (a)
above which (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) remains undismissed, undischarged or
unbonded for a period of 60 days; or (c) there being commenced against any
Borrower or any of its Subsidiaries or Holding Co. any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (d) any Borrower or any of its
Subsidiaries or Holding Co. taking any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (a), (b) or (c) above; or (e) any Borrower or any of
its Subsidiaries or Holding Co. generally not paying, or being unable to
pay, or admitting in writing its inability to pay, its debts as they become
due.
"Senior Loan Agreement": the Amended and Restated Loan and Security
Agreement dated as of December 12, 2001, among the Borrowers, Holding Co.
and the Senior Lender, as the same may be amended, modified or supplemented
from time to time, including, without limitation, amendments,
modifications, supplements and restatements thereof giving effect to
increases,
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 1 of 13
renewals, extensions, refundings, deferrals, restructurings, replacements
or refinancings of, or additions to, the arrangements provided in such Loan
Agreement (whether provided by the original Senior Lender or a successor
Senior Lender or other Lenders).
"Senior Loans": the loans made by the Senior Lender to any Borrower
pursuant to the Senior Loan Agreement.
"Senior Loan Documents": the collective reference to the Senior Loan
Agreement , the Senior Notes, the Senior Security Documents and all other
documents that from time to time evidence or govern the Senior Obligations
or secure or support payment or performance thereof.
"Senior Notes": the promissory notes of any Borrower outstanding from time
to time under the Senior Loan Agreement.
"Senior Obligations": the collective reference to the unpaid principal of
and interest on the Senior Notes and all other obligations and liabilities
of any Borrower or Holding Co. to the Senior Lender of whatever kind or
nature (including, without limitation, interest accruing at the then
applicable rate provided in the Senior Loan Agreement after the maturity of
the Senior Loans and interest accruing at the then applicable rate provided
in the Senior Loan Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Borrower or Holding Co., whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, whether arising under, out of, or in
connection with, the Senior Loan Agreement, the Senior Notes, this
Agreement, the other Senior Loan Documents or any other document made,
delivered or given by any Borrower or Holding Co., in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Senior Lender that are
required to be paid by any Borrower or Holding Co. pursuant to the terms of
the Senior Loan Agreement or this Agreement or any other Senior Loan
Document).
"Subordinated Documents: the collective reference to the Subordinated Note
and any other documents or instruments that from time to time evidence or
govern the Subordinated Obligations or secure or support payment or
performance thereof including, without limitation, the Subordinated Note.
"Subordinated Note": the reference to that certain promissory note of
Holding Co., bearing interest at 7% per annum, and payable to the
Subordinated Creditor in the original principal amount of $250,000.
"Subordinated Obligations": the collective reference to the unpaid
principal and interest on the Subordinated Note, any other obligations and
liabilities arising under the Subordinated Documents by any Borrower or
Holding Co. to any Subordinated Creditor, and all other obligations and
liabilities of any Borrower or Holding Co. to any Subordinated Creditor
(including, without limitation, interest accruing at the then applicable
rate, if any, provided in the Subordinated Documents after the maturity and
any such interest accruing at the then applicable rate provided in the
Subordinated Documents after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to any Borrower or Holding Co., whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Subordinated Creditors that are required to
be paid by any Borrower or Holding Co. pursuant to the terms of any other
Subordinated Document).
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 2 of 13
"Termination Date": the date on which the Senior Obligations are
indefeasibly paid in full and the obligations of Senior Lender to extend
credit under any Senior Loan Document shall have been irrevocably
terminated.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Subordination.
(a) Each Borrower, Holding Co. and the Subordinated Creditors
agrees, for itself and each future holder of the Subordinated Obligations, that
the Subordinated Obligations are expressly "subordinate and junior in right of
payment" (as that phrase is defined in paragraph 2(b)) to all Senior
Obligations.
(b) "Subordinate and junior in right of payment" means that
(1) no part of the Subordinated Obligations shall have any claim to the assets
of any Borrower or Holding Co. on a parity with or prior to the claim of the
Senior Obligations; and (2) unless and until the Senior Obligations have been
paid in full and the obligation of Senior Lender to extend credit to the
Borrowers or Holding Co. under the Senior Loan Documents shall have been
irrevocably terminated, without the express prior written consent of the Senior
Lender (A) no Subordinated Creditor will take, demand or receive from any
Borrower or Holding Co., and the Borrowers and Holding Co. will not make, give
or permit, directly or indirectly, by set-off, redemption, purchase or in any
other manner, any payment of (of whatever kind or nature, whether in cash,
property, securities or otherwise) or security for the whole or any part of the
Subordinated Obligations, including, without limitation, any letter of credit or
similar credit support facility to support payment of the Subordinated
Obligations; provided, however, that at any time when no Default has occurred
and is continuing or would result therefrom, a Borrower or Holding Co. may make,
and a Subordinated Creditor may receive, regularly scheduled payments on account
of the Subordinated Obligations in accordance with the terms thereof determined
on a pre-default non-accelerated basis, and (B) no Subordinated Creditor will
accelerate for any reason the scheduled maturities of any amount owing under the
Subordinated Documents; provided, however, that upon the occurrence of any event
or proceeding contemplated under clause (a) of the definition of Insolvency
Event the Subordinated Creditors may accelerate the scheduled maturities of the
Subordinated Note.
(c) If any Default has been cured or waived or shall have
ceased to exist, the Subordinated Creditors' right to receive payments as
provided in clause 2(b)(2)(A) shall be reinstated, and the Borrowers and Holding
Co. may resume making such payments to the Subordinated Creditors (including any
payments that were deferred as a result thereof).
(d) The expressions "prior payment in full," "payment in
full," "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Obligations shall mean the payment in full, in
immediately available funds, of all of the Senior Obligations.
3. Additional Provisions Concerning Subordination.
(a) The Subordinated Creditors, Holding Co. and the Borrowers
agree that upon the occurrence of any Insolvency Event:
(1) all Senior Obligations shall be paid in full
before any payment or distribution of whatever kind or nature
is made with respect to the Subordinated Obligations; and
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 3 of 13
(2) any payment or distribution of assets of any
Borrower or Holding Co., whether in cash, property or
securities, to which any Subordinated Creditor would be
entitled except for the provisions hereof, shall be paid or
delivered by any Borrower or Holding Co., or any receiver,
trustee in bankruptcy, liquidating trustee, disbursing agent
or other Person making such payment or distribution, directly
to the Senior Lender, to the extent necessary to pay in full
all Senior Obligations, before any payment or distribution of
any kind or nature shall be made to any Subordinated Creditor.
(b) Upon the occurrence of any Insolvency Event:
(1) each Subordinated Creditor irrevocably authorizes
and empowers the Senior Lender (A) to demand, xxx for, collect
and receive every payment or distribution on account of the
Subordinated Obligations payable or deliverable in connection
with such event or proceeding and give acquittance therefor,
and (B) to file claims and proofs of claim in any statutory or
non-statutory proceeding and take such other actions, in its
own name as Senior Lender, or in the name of the Subordinated
Creditors or otherwise, as the Senior Lender may deem
necessary or advisable for the enforcement of the provisions
of this Agreement; provided, however, that the foregoing
authorization and empowerment imposes no obligation on the
Senior Lender to take any such action;
(2) each Subordinated Creditor shall take such
action, duly and promptly, as the Senior Lender may request
from time to time (A) to collect the Subordinated Obligations
for the account of the Senior Lender and (B) to file
appropriate proofs of claim in respect of the Subordinated
Obligations; and
(3) each Subordinated Creditor shall execute and
deliver such powers of attorney, assignments or proofs of
claim or other instruments as the Senior Lender may request to
enable the Senior Lender to enforce any and all claims in
respect of the Subordinated Obligations and to collect and
receive any and all payments and distributions which may be
payable or deliverable at any time upon or in respect of the
Subordinated Obligations.
(c) If any payment or distribution, whether consisting of
money, property or securities, shall be collected or received by any
Subordinated Creditor in respect of the Subordinated Obligations, except
payments permitted to be made at the time of payment as provided in paragraph
2(b), such Subordinated Creditor forthwith shall deliver the same to the Senior
Lender, in the form received, duly indorsed to the Senior Lender, if required,
to be applied to the payment or prepayment of the Senior Obligations until the
Senior Obligations are paid in full. Until so delivered, such payment or
distribution shall be held in trust by such Subordinated Creditor as the
property of the Senior Lender, segregated from other funds and property held by
such Subordinated Creditor.
4. Subrogation. Subject to the payment in full of the Senior
Obligations, the Subordinated Creditors shall be subrogated to the rights of the
Senior Lender to receive payments or distributions of assets of the Borrowers
and Holding Co. in respect of the Senior Obligations until the Senior
Obligations shall be paid in full. For the purposes of such subrogation,
payments or distributions to the Senior Lender, of any money, property or
securities to which any Subordinated Creditor would be entitled except for the
provisions of this Agreement shall be deemed, as between each Borrower and its
creditors other than the Senior Lender and such Subordinated Creditor, to be a
payment by each Borrower to or on account of Subordinated Obligations, it being
understood that the provisions of this Agreement are, and are intended solely,
for the purpose of defining the relative rights of the Subordinated Creditor, on
the one hand, and the Senior Lender, on the other hand.
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 4 of 13
5. Consent of Subordinated Creditors. (a) The Subordinated Creditor
consents that, without the necessity of any reservation of rights against any
Subordinated Creditor, and without notice to or further assent by any
Subordinated Creditor:
(1) any demand for payment of any Senior Obligations
made by the Senior Lender may be rescinded in whole or in part
by the Senior Lender, and any Senior Obligations may be
continued, and the Senior Obligations, or the liability of the
Borrowers, Holding Co. or any guarantor or any other party
upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, or
any obligation or liability of the Borrowers, Holding Co. or
any other party under the Senior Loan Agreement or any other
agreement, may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived,
surrendered, or released by the Senior Lender; and
(2) the Senior Loan Agreement, the Senior Notes and
any other Senior Loan Document may be amended, modified,
supplemented or terminated, in whole or in part, as the Senior
Lender may deem advisable from time to time, and any
collateral security at any time held by the Senior Lender for
the payment of any of the Senior Obligations may be sold,
exchanged, waived, surrendered or released,
in each case all without notice to or further assent by any Subordinated
Creditor, which will remain bound under this Agreement, and all without
impairing, abridging, releasing or affecting the subordination provided for
herein.
(b) Each Subordinated Creditor waives any and all notice of
the creation, renewal, extension or accrual of any of the Senior Obligations and
notice of or proof of reliance by the Senior Lender upon this Agreement. The
Senior Obligations, and any of them, shall be deemed conclusively to have been
created, contracted or incurred in reliance upon this Agreement, and all
dealings between the Borrowers, Holding Co. and the Senior Lender shall be
deemed to have been consummated in reliance upon this Agreement. Each
Subordinated Creditor acknowledges and agrees that the Senior Lender has relied
upon the subordination provided for herein in entering into the Senior Loan
Agreement and in making funds available to the Borrowers thereunder. Each
Subordinated Creditor waives notice of or proof of reliance on this Agreement
and protest, demand for payment and notice of default.
(c) Each of the Subordinated Creditors waives any right it
might have to require that the Senior Lender marshal any Collateral.
(d) In the event that any Subordinated Creditor has or at any
time acquires any lien upon or security interest in the assets securing the
Senior Obligations, or any part thereof, such Subordinated Creditor hereby
waives any right that such Subordinated Creditor may have whether such right
arises under Sections 9-504 or 9-505 of the Uniform Commercial Code or other
applicable law, to receive notice of the Senior Lender's intended disposition of
such assets (or a portion thereof) or of the Senior Lender's proposed retention
of such assets in satisfaction of the Senior Obligations (or a portion thereof).
Each Subordinated Creditor further agrees that in the event any Borrower
consents or fails to object to a proposed retention of such assets (or a portion
thereof) by the Senior Lender in satisfaction of the Senior Obligations (or a
portion thereof), such Subordinated Creditor hereby consents to such proposed
retention regardless of whether such Subordinated Creditor is provided with
notice of such proposed retention.
(e) Each Subordinated Creditor hereby:
(i) consents to each Borrower's and Holding Co.'s
grant to the Senior Lender of a lien in all of such Borrower's and Holding Co.'s
rights in the Subordinated Documents and agrees that such grant or the exercise
of such rights and remedies in respect thereof shall not constitute a violation
of, or default under, any Subordinated Documents;
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 5 of 13
(ii) agrees that the Senior Lender or any third party
purchaser may enforce the provisions of the Subordinated Documents in the place
and stead of any Borrower or Holding Co. in connection with the exercise of its
rights and remedies in respect of the security interest granted therein upon the
occurrence of an event of default;
(iii) represents and warrants to the Senior Lender
that each Subordinated Document is in full force and effect; all conditions
required under each Subordinated Document that should have been satisfied as of
the date hereof have been satisfied; all obligations of each Borrower, Holding
Co. and any Subordinated Creditor which have been required to be performed as of
the date hereof have been timely performed; no default otherwise exists under
the terms of any Subordinated Document; the Borrowers, Holding Co. and
Subordinated Creditors have provided the Senior Lender with true, correct and
complete copies of each Subordinated Document which constitute the entire
agreement among the Borrowers, Holding Co. and the Subordinated Creditors
relating to the subject matter thereof and have not been amended or otherwise
modified; and
(iv) agrees to give the Senior Lender prompt written
notice in the event that any Borrower fails to perform or observe any of the
terms of any Subordinated Document and grants the Senior Lender the right (but
not the obligation) to cure such failure by any Borrower or Holding Co.
6. Negative Covenants of the Subordinated Creditors. So long as any of
the Senior Obligations shall remain outstanding or the obligation of Senior
Lender to extend credit to the Borrowers remains in effect, no Subordinated
Creditor shall, without the prior written consent of the Senior Lender:
(a) sell, assign, or otherwise transfer, in whole or in part,
the Subordinated Obligations or any interest therein to any other Person (a
"Transferee") or create, incur or suffer to exist any security interest, lien,
charge or other encumbrance whatsoever upon the Subordinated Obligations in
favor of any Transferee unless (1) such action is made expressly subject to this
Agreement and (2) the Transferee expressly acknowledges to the Senior Lender, by
a writing in form and substance satisfactory to the Senior Lender, the
subordination provided for herein and agrees to be bound by all of the terms
hereof;
(b) permit to exist any security interest, lien, charge or
other encumbrance on any property or assets of any Credit Party to secure or
provide for payment or performance of the Subordinated Obligations or exercise
any right of set off or counterclaim which the Subordinated Creditor may have
with respect to any amounts payable or to be paid by the Subordinated Creditor
to any Credit Party;
(c) permit any of the Subordinated Documents to be amended,
modified or otherwise supplemented;
(d) commence, or join with any creditors other than the Senior
Lender in commencing any case or proceeding referred to in the definition of
Insolvency Event;
(e) assert, collect, or enforce all or any part of the
Subordinated Obligations or any claims in respect thereof, except as
specifically provided for herein; or
(f) take any action to foreclose upon, take possession of,
liquidate or proceed against any property or assets, or otherwise institute any
action or proceeding, to serve or provide for payment of the Subordinated
Obligations or otherwise exercise any rights or remedies under or with respect
to the Subordinated Obligations or hinder or delay the Senior Lender in the
exercise of any rights and remedies under or in respect of the Senior
Obligations.
Notwithstanding the foregoing provisions of this Section 6, if pursuant to
Section 2 (b) hereof the Subordinated Creditors are entitled to receive a
scheduled payment when due on the Subordinated Obligations (including, without
limitation, any such payment permitted under Section 2(c) hereof) and any
Borrower or Holding Co. fails to make any such permitted payment for a period of
at least 90 consecutive days after the permitted payment date, the Subordinated
Creditors shall be entitled to seek and obtain a
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 6 of 13
judgment against the Borrowers or Holding Co. with respect to such payment and
to enforce all the rights of an unsecured creditor in respect of such judgment.
7. Senior Obligations Unconditional. All rights and interests of the
Senior Lender hereunder, and all agreements and obligations of the Subordinated
Creditors and any Borrower or Holding Co. hereunder, shall remain in full force
and effect irrespective of:
(a) any lack of validity or enforceability of any Senior
Security Documents or any other Senior Loan Documents;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any amendment or
waiver or other modification, whether by course of conduct or otherwise, of the
terms of the Senior Loan Agreement or any other Senior Security Document;
(c) any exchange, release or non-perfection of any security
interest in any Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the Senior Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, any Borrower or Holding Co. in respect
of the Senior Obligations, or of any Subordinated Creditor or any Borrower or
Holding Co. in respect of this Agreement.
8. Representations and Warranties. Each Subordinated Creditor
represents and warrants to the Senior Lender that:
(a) the Subordinated Obligations owed to it (1) have been
incurred for good and valuable consideration, (2) are owned by the such
Subordinated Creditor free and clear of any security interests, liens, charges
or encumbrances whatsoever arising from, through or under such Subordinated
Creditor, other than the interest of the Senior Lender under this Agreement, (3)
are payable solely and exclusively to such Subordinated Creditor and to no other
Person and are payable without deduction for any defense, offset or
counterclaim, and (4) the Subordinated Documents constitute the only evidence of
the obligations evidenced thereby;
(b) such Subordinated Creditor has the legal capacity and the
legal right to execute and deliver and to perform its obligations under this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Agreement;
(c) this Agreement constitutes a legal, valid and binding
obligation of such Subordinated Creditor;
(d) the execution, delivery and performance of this Agreement
will not violate any provision of any Requirement of Law or Contractual
Obligation of such Subordinated Creditor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of such Subordinated
Creditor pursuant to any Requirement of Law affecting or any Contractual
Obligation of such Subordinated Creditor, except the interest of the Senior
Lender under this Agreement; and
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
such Subordinated Creditor), is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement.
9. No Representation by Senior Lender. The Senior Lender has not made
and does not hereby or otherwise makes to the Subordinated Creditors, any
representations or warranties, express, or implied, nor does the Senior Lender
assume any liability to any Subordinated Creditor with respect to: (a) the
financial or other condition of obligors under any instruments of guarantee with
respect to the Senior
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 7 of 13
Obligations, (b) the enforceability, validity, value or collectibility of the
Senior Obligations or the Subordinated Obligations, any collateral therefor, or
any guarantee or security which may have been granted in connection with any of
the Senior Obligations or the Subordinated Obligations or (c) any Borrower's or
Holding Co.'s title or right to transfer any collateral or security.
10. Waiver of Claims. To the maximum extent permitted by law, each
Subordinated Creditor waives any claim it might have against the Senior Lender
with respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
Senior Lender, or its directors, officers, employees or agents with respect to
any exercise of rights or remedies under the Senior Loan Documents or any
transaction relating to the Collateral. Neither the Senior Lender, nor any of
its directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Borrower, Holding Co. or any Subordinated
Creditor or any other Person or to take any other action whatsoever with regard
to the Collateral or any part thereof.
11. Provisions Applicable After Bankruptcy. The provisions of this
Agreement shall continue in full force and effect notwithstanding the occurrence
of any Insolvency Event. Each of the Subordinated Creditors agrees that the
Senior Lender may consent to the use of cash collateral or provide financing to
the Borrowers or Holding Co. on such terms and conditions and in such amounts as
the Senior Lender, in its sole discretion may decide and that, in connection
with such cash collateral usage or such financing, any Borrower or Holding Co.
(or a trustee appointed for the estate of any Borrower or Holding Co.) may grant
to the Senior Lender liens and security interests upon all or any part of the
assets of any Borrower or Holding Co., which liens and security interests (i)
shall secure payments of all Senior Obligations (whether such Senior Obligations
arose prior to the filing of the petition for relief or arise thereafter); and
(ii) shall be superior in priority to the liens on and security interests in the
assets of any Borrower or Holding Co., if any, held by the Subordinated
Creditors. All allocations of payments between the Senior Lender and the
Subordinated Creditors shall, subject to any court order, continue to be made
after the filing of a petition under the United States Bankruptcy Code, as
amended (the 'Bankruptcy Code), or any similar proceeding on the same basis that
the payments were to be allocated prior to the date of such filing. Each of the
Subordinated Creditors agrees that it will not object to or oppose a sale or
other disposition of any assets securing the Senior Obligations (or any portion
thereof) free and clear of security interests, liens or other claims under
Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code
if the Senior Lender has consented to such sale or disposition of such assets.
In the event that any Subordinated Creditor has or at any time acquired any
security for the Subordinated Obligations, such Subordinated Creditor agrees not
to assert any right it may have to "adequate protection" of its interest in such
security in any bankruptcy proceeding and agrees that it will not seek to have
the automatic stay lifted with respect to such security, without the prior
written consent of the Senior Lender. Each of the Subordinated Creditors waives
any claim it may now or hereafter have arising out of the Senior Lender's
election, in any proceeding instituted under Chapter 11 of the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code by any Borrower or Holding Co., as debtor in possession (or any trustee for
any Borrower or Holding Co.). Each of the Subordinated Creditors (both in its
capacity as Subordinated Creditor and in its capacity as a party which may be
obligated to the Borrowers and the Borrowers' Affiliates or Holding Co. with
respect to contracts which are part of the Senior Lender's Collateral) agrees
not to initiate or prosecute or encourage any other Person to initiate or
prosecute any claim, action or other proceeding (i) challenging the
enforceability of the Senior Lender's claim (ii) challenging the enforceability
of any liens or security interests in assets securing the Senior Obligations or
(iii) asserting any claims which any Borrower or Holding Co. may hold with
respect to the Senior Lender.
12. Invalidated Payments. To the extent that the Senior Lender receives
payments on, or proceeds of Collateral for, the Senior Obligations which are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to Borrowers or Holding Co., a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law, or
equitable cause, then to the extent of such payment or proceeds received, the
Senior Obligations, or part thereof, intended to
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 8 of 13
be satisfied shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by the Senior Lender.
13. Further Assurances. The Subordinated Creditors and the Borrowers or
Holding Co., at their own expense and at any time from time to time, upon the
written request of the Senior Lender will promptly and duly execute and deliver
such further instruments and documents and take such further actions as the
Senior Lender reasonably may request for the purposes of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted.
14. Expenses.
(a) The Borrowers and Holding Co. will pay or reimburse the
Senior Lender, upon demand, for all its costs and expenses in connection with
the enforcement or preservation of any rights under this Agreement, including,
without limitation, fees and disbursements of counsel to the Senior Lender.
(b) Each Borrower and Holding Co. will pay, indemnify, and
hold each Senior Lender harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions (whether sounding in contract,
tort or on any other ground), judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of, or in any other way arising out
of or relating to this Agreement or any action taken or omitted to be taken by
any Senior Lender with respect to any of the foregoing.
15. Provisions Define Relative Rights. This Agreement is intended
solely for the purpose of defining the relative rights of the Senior Lender on
the one hand and the Subordinated Creditors on the other, and no other Person
shall have any right, benefit or other interest under this Agreement.
16. Legend. Each Subordinated Creditor and Holding Co. will cause the
Subordinated Note to bear upon its face the following legend:
ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER
INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND SUBORDINATION AGREEMENT,
DATED JANUARY 2, 2002 (THE "SUBORDINATION AGREEMENT"), AS THE SAME MAY BE
AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG
bactolac pharmaceuticals inc. and ani pharmaceuticals, inc., AS BORROWERS,
ADVANCED NUTRACEUTICALS, INC. , AS HOLDING CO., GENERAL ELECTRIC CAPITAL
CORPORATION, AS SENIOR LENDER, AND THE HOLDERS FROM TIME TO TIME OF THE
OBLIGATIONS ARISING UNDER THE SUBORDINATED DOCUMENTS REFERRED TO IN THE
SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS NOTE.
17. Specific Performance. The Senior Lender is hereby authorized to
demand specific performance of this Agreement at any time when any Subordinated
Creditor shall have failed to comply with any of the provisions of this
Agreement applicable to such Subordinated Creditor whether or not any Borrower
shall have complied with any of the provisions hereof applicable to any Borrower
or Holding Co., and the Subordinated Creditor hereby irrevocably waives any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to such remedy of specific performance.
18. Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and the obligation of
the Senior Lender to extend credit under the Senior Loan Documents is
irrevocably terminated.
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 9 of 13
19. Notices. All notices, requests and demands to or upon the Senior
Lender or the Borrowers or Holding Co. or any Subordinated Creditor to be
effective shall be in writing (or by telex, fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly given or made (1)
when delivered by hand or (2) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (3) if by telex, fax or similar
electronic transfer, when sent and receipt has been confirmed, addressed as
follows:
If to the Senior Lender:
General Electric Capital Corporation
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Advanced Nutraceuticals, Inc.
Account Manager
If to the Borrowers or Holding Co.:
Advanced Nutraceuticals, Inc.
000 X. Xxxxxxxxxx Xxxx., Xxxx 00
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx Xxxxx, President
If to any Subordinated Creditor, at its address or transmission number
for notices set forth under its signature below.
The Senior Lender, the Borrowers, Holding Co. and any Subordinated Creditor may
change their respective addresses and transmission numbers for notices by notice
in the manner provided in this Section.
20. Counterparts. This Agreement may be executed by one or more of the
parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the counterparts of this Agreement signed by all the parties shall be lodged
with the Senior Lender.
21. 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 provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
22. Integration. This Agreement represents the agreement of the Senior
Lender and the Subordinated Creditors with respect to the subject matter hereof
and there are no promises or representations by the Senior Lender or any
Subordinated Creditor relative to the subject matter hereof not reflected
herein.
23. Amendments in Writing; No Waiver: Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Senior Lender, the Borrowers, Holding Co. and each
Subordinated Creditor; provided that any provision of this Agreement may be
waived by the Senior Lender in a letter or agreement executed by the Senior
Lender or by telex or facsimile transmission from the Senior Lender.
(b) No failure to exercise, nor any delay in exercising, on
the part of the Senior Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 10 of 13
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
24. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
25. Successors and Assigns.
(a) This Agreement shall be binding upon the successors,
heirs, administrators, executors and assigns of the Borrowers, Holding Co. and
the Subordinated Creditors and shall inure to the benefit of the Senior Lender
and their successors and assigns.
(b) Upon a successor Senior Lender becoming the Senior Lender
under the Senior Loan Agreement, such successor Senior Lender automatically
shall become the Senior Lender hereunder with all the rights and powers of the
Senior Lender hereunder without the need for any further action on the part of
any party hereto.
26. GOVERNING LAW: CONSENT TO JURISDICTION AND VENUE. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF New York APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. EACH OF THE BORROWERS, HOLDING CO., THE SUBORDINATED
CREDITORS AND THE SENIOR LENDER HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN New York SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES AMONG THE BORROWERS, THE SUBORDINATED CREDITORS
AND THE SENIOR LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE SENIOR LOAN DOCUMENTS, PROVIDED,
THAT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF New York AND, PROVIDED, FURTHER THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE SENIOR
LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SENIOR OBLIGATIONS,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE SENIOR LENDER.
EACH OF THE BORROWERS, HOLDING CO., AND THE SUBORDINATED CREDITORS EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH OF THE BORROWERS AND THE SUBORDINATED
CREDITORS HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH OF THE
BORROWERS, HOLDING CO., AND THE SUBORDINATED CREDITORS HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINTS AND OTHER PROCESS ISSUED IN ANY SUCH ACTION
OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO IT AT THE ADDRESS SET
FORTH IN THE CREDIT AGREEMENT OR BENEATH ITS SIGNATURE LINE BELOW, AS THE CASE
MAY BE, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH BORROWER'S OR HOLDING CO.'S OR ANY SUBORDINATED CREDITOR'S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 11 of 13
27. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE SENIOR LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
[SIGNATURE PAGE FOLLOWS ON SEPARATE PAGE]
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 12 of 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SENIOR LENDER:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
------------------------------------------------------
, Duly Authorized Signatory
---------------
BORROWERS:
BACTOLAC PHARMACEUTICAL INC.
By:
------------------------------------------------------
Xxxxxxx X. XxXxxxxxx, Vice President and Secretary
ANI PHARMACEUTICALS, INC.
By:
------------------------------------------------------
Xxxxxxx X. XxXxxxxxx, President and Treasurer
HOLDING CO.:
ADVANCED NUTRACEUTICALS, INC.
By:
------------------------------------------------------
Xxxxxxx X. XxXxxxxxx, Senior Vice President of Finance
And Secretary
SUBORDINATED CREDITOR:
CAMBRIDGE HOLDINGS, LTD.
---------------------------------------------------------
Xxxxxxx Xxxxx, President
Address:
000 X. Xxxxxxxxxx Xxxx., Xxxx 00
Xxxxxx, XX 00000
Fax: (000) 000-0000
INTERCREDITOR AND SUBORDINATION AGREEMENT-Page 13 of 13
