SUBORDINATION AGREEMENT
Exhibit
99.2
THIS
SUBORDINATION AGREEMENT ("Agreement")
is made as of the 21st day of September, 2005, by and among GREENFIELD
COMMERCIAL CREDIT, L.L.C.,
a
Michigan limited liability company ("Lender"), AHPC
HOLDINGS, INC., a
Maryland corporation and AMERICAN
HEALTH PRODUCTS CORPORATION, a
Texas
corporation (collectively, "Borrower"), and Xxxxxxx Xxxxxx, as Collateral Agent
for the creditors party to the Junior Indebtedness Documents
("Creditor").
RECITALS
A. As
of the
date hereof, Borrower is indebted to Creditor on the Junior Indebtedness (as
defined below).
B. Borrower
is now borrowing, or proposes from time to time to borrow, from Lender and
Creditor has requested Lender to loan to Borrower, up to Five Million and 00/100
Dollars ($5,000,000.00), pursuant to a Second Amendment To Loan and Security
Agreement between Borrower and Lender ("Loan Agreement"). All amounts owing
to
Lender under the Loan Agreement, as amended from time to time (including any
amendment increasing the principal balance above $5,000,000.00) shall be
referred to herein as the "Senior Indebtedness." The Senior Indebtedness is
due
on demand.
C. The
Senior Indebtedness is secured by a security interest in all assets of Borrower
(“Lender Security Interest”).
NOW
THEREFORE,
in
consideration of the premises and for value received and as an inducement to
Lender to extend credit and lend money to Borrower, it is jointly and severally
agreed by the parties hereto as follows:
1. Any
and
all indebtedness of the Borrower to Creditor now existing or hereafter created
(the "Junior Indebtedness"), and the payment thereof by the Borrower, shall
be
and is hereby postponed and subordinated to the prior payment and satisfaction
in full of the Senior Indebtedness. As used in this Agreement, the term
"indebtedness" shall mean any and all indebtedness, liabilities, and obligations
of every kind, nature and description, owed to Creditor by the Borrower, whether
direct or indirect, absolute or contingent, whether now due and owing, or which
may hereafter, from time to time, be or become due and owing whether heretofore
or hereafter created or arising, including all indebtedness evidenced by any
promissory note or notes now or hereafter executed and delivered by the Borrower
to such creditor and any and all renewals, extensions, modifications, notations,
replacements or refinancings thereof, and including, without limitation,
reasonable attorney fees, costs, and expenses incurred by such creditor in
connection with the enforcement of this Agreement and any promissory note or
notes referenced herein as well as any other obligations of the
Borrower.
2. The
Senior Indebtedness shall be indefeasibly paid in full and discharged before
the
Borrower may make or before Creditor may require any payment as to the Junior
Indebtedness; provided, however, that Lender agrees that, except as otherwise
prohibited in paragraphs 3 and 4 hereof, the Borrower may pay (but not prepay)
to Creditor the required payments according to the terms of the Junior
Indebtedness Documents (as defined below), copies of which are attached hereto
as Exhibit A.
3. During
the continuance of a Default (as defined in the Loan Agreement) resulting from
the failure of the Borrower to pay, on a timely basis, any principal, interest
or other charges under the Loan Agreement ("Payment Default"), no payments
due
under the Junior Indebtedness Documents shall be made for a period beginning
on
the date which notice is given by the Lender to Borrower and Creditor and ending
on the date on which such Payment Default shall have been cured or waived in
writing or shall have ceased to exist or such Senior Indebtedness shall have
been discharged or paid in full in cash.
4. During
the continuance of a Default, other than a Payment Default ("Covenant Default"),
no payments due under the Junior Indebtedness Documents shall be made for a
period ("Blockage Period') beginning on the date which notice ("Blockage
Notice") is given by the Lender to Borrower and Creditor and ending on the
earliest to occur of the following: (a) the date on which such Covenant Default
shall have been cured or waived in writing or shall have ceased to exist; (b)
90
days have elapsed since the date such Blockage Notice was received; or (c)
such
Senior Indebtedness shall have been discharged or paid in full in cash. Further,
(i) no single Covenant Default may serve as the basis for more than one Blockage
Notice (other than a Covenant Default that has been cured or waived or otherwise
ceased to exist for a period of 90 consecutive days); and (ii) no more than
two
(2) Blockage Periods shall commence within any period of 360 consecutive days.
After the end of a Blockage Period, Borrower shall resume making any and all
required payments in respect of the Junior Indebtedness including any missed
payments (but only to the extent such payments are not otherwise prohibited
under the terms hereof).
6. In
the
event Creditor receives payment from the Borrower in violation of this
Agreement, whether such payment is in cash or otherwise, Creditor shall be
liable and accountable to Lender for such payment, shall be deemed to have
received such payment for the use and benefit of Lender, shall not commingle
such payment with any other funds and shall pay over and deliver such payment
to
Lender immediately upon receipt, to be applied upon the indebtedness of the
Borrower to Lender if in cash, and if in form other than cash, then as the
same
is converted into cash.
7. This
subordination by Creditor of the Junior Indebtedness and its security interests,
if any, securing the Junior Indebtedness, shall survive and remain in full
force
and effect in the event of any administration of the property or affairs of
the
Borrower arising from any assignment for the benefit of creditors, bankruptcy,
receivership, liquidation or other like proceeding. In the event the property
or
affairs of the Borrower are so administered, indebtedness of the Borrower to
Lender shall include interest accrued subsequent to the date of the commencement
of such administration until the Senior Indebtedness is indefeasibly paid in
full.
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8. This
Agreement shall continue to be effective, or be reinstated, as the case may
be,
if at any time any payment to Lender is rescinded or returned by Lender upon
the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower, or upon or as a result of the appointment of a receiver, intervenor
or
conservator of, or trustee or similar office for the Borrower or any substantial
part of its property, or otherwise, all as though such payment(s) had not been
made. Creditor agrees to remit to Lender any payment(s) received by Creditor
after said rescinded or returned payment is originally made by
Lender.
9. Creditor
shall not, for a period ending on the earliest to occur of: (a) 120 days after
receipt by Lender of the occurrence of an Event of Default (as defined in the
Junior Indebtedness Documents); (b) 120 days after any action by Lender to
foreclose against the Collateral (as defined in the Loan Agreement) which does
not involve the institution of legal proceedings; or (c) the institution of
legal proceedings by Lender to foreclose against the Collateral (as defined
in
the Loan Agreement), the commencement of any insolvency or bankruptcy case
or
proceeding or any receivership, liquidation, reorganization, readjustment,
composition or other similar case relating to the Borrower, any liquidation,
dissolution, reorganization or winding up of the Borrower whether voluntary
or
involuntary or any assignment for the benefit of creditors or any other
marshalling of the assets of the Borrower; without Lender's prior consent,
(i)
take any action to (y) obtain a judgment against Borrower or (z) foreclose
or
otherwise enforce its security interests against any assets of Borrower, (ii)
commence or join with any other creditor or creditors of the Borrower in
commencing any bankruptcy, reorganization, receivership or insolvency proceeding
against the Borrower, (iii) exercise any other rights or remedies it may have
under the Junior Indebtedness Documents (as defined below), the Uniform
Commercial Code or any other applicable law with respect to any of the
Borrower's assets or (iv) take or permit any action prejudicial to or
inconsistent with Lender's priority position over Creditor that is created
by
this Agreement.
10. In
the
event the Borrower defaults on its obligations to Lender and, as a result,
Lender undertakes to enforce the Lender Security Interest, Creditor agrees
that
it will not hinder, delay or otherwise prevent Lender from taking any and all
action which Lender deems necessary to enforce the Lender Security Interest
and
to realize thereon.
11. Creditor
and the Borrower represent to Lender that the Junior Indebtedness is evidenced
by the promissory notes, a form of which is attached hereto as Exhibit A (the
"Creditor Notes"). Creditor and the Borrower further represent to Lender that
said Junior Indebtedness is not evidenced by any notes or negotiable
instruments, other than the Creditor Notes. To the extent any Junior
Indebtedness subordinated by this Agreement is hereafter evidenced by a note
or
negotiable instrument (also a "Creditor Note"), Creditor agrees to promptly,
upon receipt, deliver a copy of same to Lender.
Creditor
agrees to endorse all Creditor Notes substantially as follows:
"The
indebtedness hereby evidenced has been subordinated in favor of Greenfield
Commercial Credit, L.L.C. ("Lender") by Subordination Agreement dated September
21, 2005, to which reference is hereby made, to secure all indebtedness now
or
hereafter owing by AHPC Holdings, Inc. and American Health Products Corporation,
to the Lender."
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Creditor
represents, warrants and covenants to Lender that:
(a) It
has
not relied and will not rely on any representations or information of any nature
made by or received from Lender relating to the Borrower in deciding to execute
this Agreement;
(b) As
of the
date hereof, the total amount of the Junior Indebtedness is
$1,200,000.00;
(c) A
true
and correct description of each document evidencing the Junior Indebtedness,
including the Creditor Note(s) and any security interests relating thereto,
is
listed on Exhibit A hereto, a true and accurate copy of each such document,
including any amendments thereto, is attached to Exhibit A, and, as of the
date
hereof, no documents or agreement evidencing or otherwise relating to any Junior
Indebtedness (the "Junior Indebtedness Documents") exist except as set forth
on
Exhibit A;
(d) Creditor
is the lawful owner (or agent on behalf of the owners) of the Junior
Indebtedness free and clear of all liens and encumbrances, and it has not
subordinated, encumbered, assigned or transferred, and agrees that it will
not
subordinate, encumber, assign or transfer at any time while this Agreement
remains in effect, any right, claim or interest of any kind in or to the Junior
Indebtedness. Any subordination, assignment or transfer in violation of this
subparagraph 13(d) shall be null and void; and
(e) Creditor
has received all consents and approvals required in order for it to execute
and
deliver this Agreement.
12. Lender
may at any time or times, in its discretion, (i) renew, extend or otherwise
modify the rate of interest on, the time and/or terms of payment of, and/or
any
other of the terms and provisions relative to the Senior Indebtedness or any
of
the other provisions of the Loan Agreement, (ii) lend additional monies, extend
additional credit and make other financial accommodations to or for the account
of the Borrower, (iii) waive or release any collateral or guaranties which
may
be held as security for all or any part of the Senior Indebtedness, and/or
(iv)
renew, extend, modify, amend, supplement and/or restate any and all of Lender's
agreements with the Borrower, including the Loan Agreement, in any manner,
in
each case, without the necessity of consent from Creditor and without impairing
or affecting this Agreement or any of Lender's rights hereunder; provided,
however, that no renewal, extension, modification, amendment or supplement
of
any of the Lender's agreements with the Borrower shall be permitted without
the
consent of Creditor if the effect of any of the foregoing shall result in (a)
an
increase (by funding, commitment, increase in advance rates or otherwise),
in
the maximum principal amount of the Senior Indebtedness; (b); or an increase
in
the interest rate in the Loan Agreement. The parties acknowledge that the Loan
Agreement matures on the earlier of demand or the Maturity Date set forth
therein. Creditor shall provide Lender with copies of any modifications or
amendments to the Junior Indebtedness Documents promptly upon the execution
thereof.
13. Creditor
hereby waives any rights it has or may have in the future to require Lender
to
marshal its collateral, and agrees that Lender may, in addition to Lender's
other rights hereunder, proceed against its collateral in any order that Lender
deems appropriate in the exercise of its absolute discretion. Creditor also
waives any right to be subrogated to the Senior Indebtedness unless and until
the Senior Indebtedness is indefeasibly paid in full.
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14. After
the
payment in full of all Senior Indebtedness, the rights of the holders of the
Creditor Note(s) shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities made to the holders of the Senior Indebtedness to which the holders
of the Creditor Note(s) would be entitled except for the provisions of this
Agreement until the principal of, premium, if any, and interest on the Creditor
Note(s) shall be paid in full in cash or cash equivalents. For purposes of
such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the holders of the Creditor Note(s)
would be entitled except for the provisions of this Agreement, and no payments
over pursuant to the provisions of this Agreement to the holders of Senior
Indebtedness, by holders of the Creditor Note(s) shall, as among the Borrower,
its creditors other than holders of Senior Indebtedness, and the holders of
the
Notes, be deemed to be a payment or distribution by the Borrower to or on
account of the Senior Indebtedness.
15. Creditor
agrees that it will not at any time directly or indirectly contest the validity,
perfection, priority or enforceability of the Lender Security Interest, and
hereby agrees not to hinder Lender or take a position adverse to Lender in
the
defense of any action contesting the validity, perfection, priority or
enforceability of the Lender Security Interest. Creditor further agrees that
the
provisions of this Agreement shall remain in full force and effect
notwithstanding a successful challenge to the validity, perfection, priority
or
enforceability of all or any of the Senior Indebtedness or the liens and
security interests securing the Senior Indebtedness.
16. This
Agreement and the subordinations, agreements and priorities set forth herein
shall remain in full force and effect and Lender may make extensions of credit
to the Borrower in reliance upon this Agreement, until the Senior Indebtedness
has been indefeasibly paid in full, regardless of whether any party hereto
in
the future seeks to rescind, revoke, amend, terminate or reform, by litigation
or otherwise, any part or all of this Agreement or any of such party's
respective agreements with the Borrower; and, Lender may hereafter continue
to
grant to the Borrower renewals or extensions of time, and may otherwise proceed
in its sole discretion in the enforcement of the Senior Indebtedness until
all
of said sums shall have been indefeasibly paid in full, without in any manner
impairing, lessening, or invalidating the force and effect of this
Agreement.
17. This
Agreement shall be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
18. No
delay,
forbearance, or omission by Lender in the exercise of any right or power
accruing to it upon any default in the performance hereof by the other parties
hereto, shall impair any such right or power or shall be construed to be a
waiver of any such default or acquiescence therein. This Agreement may be
modified, and any of Lender's rights hereunder waived, only by an Agreement
in
writing signed by Lender.
19. Upon
the
request of Lender, the Borrower and Creditor shall execute and deliver such
further documents and do such other acts as Lender may reasonably request in
order to affect fully the purpose of this Agreement.
20. All
notices, demands, instructions, and other communications required or permitted
to be given to or made upon any party hereto shall be in writing at the
following addresses:
5
If
to
Lender:
Greenfield
Commercial Credit, L.L.C.
000
Xxxx
Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
If
to the
Borrower:
00
Xxxxxxxxxxxxxx Xxxx Xxxx X
Xxxxxxxx
Xxxxxxx, XX 00000
If
to
Creditor:
LaSalle
St. Securities, LLC
000
X. Xxxx Xx., Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxx
21. This
Agreement may be executed in any number of counterparts. Each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one in
the
same agreement. This Agreement shall become effective upon the execution of
a
counterpart hereof by each of the parties hereto. A facsimile signature shall
be
effective as an original signature.
22. This
Agreement is intended by the parties as a final expression of their agreement
and it is intended as a complete statement of the terms and conditions of their
agreement.
23. The
validity of this Agreement, its construction, interpretation and enforcement,
and the rights of the parties hereto shall be determined under, governed by,
construed in accordance with internal laws of the State of Michigan without
regard to principles or conflicts of law.
LENDER: BORROWER:
GREENFIELD
COMMERCIAL CREDIT, L.L.C., AHPC
HOLDINGS, INC.
a
Michigan limited liability
company
a
Maryland corporation
By: GCC
Management, Inc.
Its: Manager
By:__________________________________
By:_______________________________
Xxxxxx
X.
Xxxxx
Xxxx
Xxxxxx
Its: Vice
President
Its: President
AMERICAN
HEALTH PRODUCTS
CORPORATION
a
Texas
corporation
By:________________________________
Xxxx
Xxxxxx
Its: President
CREDITOR:
____________________________,
By:
Xxxxxxx Xxxxxx, as Collateral Agent
6
EXHIBIT
A
TO
BETWEEN
GREENFIELD
COMMERCIAL CREDIT L.L.C.,
AMERICAN
HEALTH PRODUCTS CORPORATION
AND
JUNIOR
INDEBTEDNESS DOCUMENTS
1. Security
Agreement
2. Promissory
Note
3.
[TRUE
AND
ACCURATE COPIES OF EACH OF THE ABOVE DOCUMENTS,
INCLUDING
ANY AMENDMENTS, ARE ATTACHED HERETO]
A-1
