EXHIBIT 2.4(A)(V) PRIVATE
SUBORDINATION AGREEMENT
This Subordination Agreement is executed by SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION ("Lender"), ECB, INC. ("Parent"), a Florida corporation,
Parent's subsidiaries (collectively, Parent and its current and future
subsidiaries are "Borrowers"), and HANDEX CORPORATION (the "Subordinate
Creditor"), a Delaware corporation, to induce Lender to extend credit to
Borrowers. Lender, Borrowers, and the Subordinate Creditor agree as follows:
BACKGROUND. This Subordination Agreement is executed pursuant to the
Loan and Security Agreement (the "Credit Agreement") between Lender and Borrow-
ers that is dated the same date as this Subordination Agreement. Lender
requires the execution of this Subordination Agreement as a condition precedent
to extending the line of credit and term loan facilities (collectively, the
"Loan") contemplated by the Credit Agreement. Proceeds of the Loan will be used
for Borrowers' working capital and to finance Parent's acquisition of the shares
of common stock of Handex Environmental, Inc. and its subsidiaries from
Subordinate Creditor pursuant to a Stock Purchase Agreement dated November ,
1996 ("Purchase Agreement"). In connection with the Acquisition, Parent has
delivered to Subordinate Creditor its $3,700,000 Promissory Note (the "Seller
Note"), which will be guaranteed by each of Parent's subsidiaries. Parent has
also delivered to Subordinate Creditor 2,000 shares of its Series A Preferred
Stock (the "Preferred Stock"), a warrant to purchase 300,000 shares of its
common stock at $1.32 per share, and a warrant to purchase 85,000 shares of its
common stock at $1.60 per share (collectively, the "Warrants"). The Warrants,
Preferred Stock, and common stock issuable on exercise of the Warrants are all
mandatorily redeemable by Parent at Subordinate Creditor's option under
circumstances described in the documents governing the Warrants and the
Preferred Stock. Unless otherwise expressly indicated, all capitalized terms
used in this Subordination Agreement have the respective meanings attributed to
them in the Credit Agreement, and the definitions of those terms in the Credit
Agreement are incorporated by reference in this Subordination Agreement.
SUBORDINATION. In consideration of the benefits that will inure to
the Subordinate Creditor and Borrowers from the extension of credit by Lender to
Borrowers, and according to the terms and conditions of this Subordi nation
Agreement, the Subordinate Creditor subordinates the liabilities, obligations,
and indebtedness of Borrowers to it under and only under (i) the Seller Note,
(ii) guarantees of the Seller Note, (iii) dividend payment and redemption
obligations under the Preferred Stock, and (iv) redemption and repurchase obliga
tions under the Warrants, and all renewals and extensions of any of the
foregoing (collectively, the "Subordinated Debt") to all liabilities,
obligations, and indebtedness (including interest) of Borrowers to Lender
(including all indebtedness pertaining to the Loan), however and whenever
incurred or evidenced, whether sole, joint, or several, whether due or to become
due, whether now existing or later owed, created, acquired, advanced, or con-
tracted, and whether direct, accrued, unaccrued, primary, secondary, absolute,
contingent, asserted, unasserted, liquidated, or unliquidated, and all renewals
and extensions of any of the foregoing and all costs incurred by Lender in
connection with the collection, enforcement, administration, and interpretation
of any of the foregoing liabilities, obligations, and indebtedness
(collectively, the "Senior Debt").
REPRESENTATION; PRIOR RIGHTS OF SENIOR DEBT. Borrowers and
Subordinate Creditor represent that Subordinate Creditor alone is entitled to
payment of the Subordinated Debt. The Subordinated Debt is subject to the right
of prior payment in full of all the Senior Debt. Except as otherwise provided
in Section 4 of this Subordination Agreement, Borrowers shall not make any
payment to the Subordinate Creditor on account of the Subordinated Debt, or give
the Subordinate Creditor any security or collateral for any of the Sub ordinated
Debt, or apply any assets or property of Borrowers to retire or purchase any of
the Subordinated Debt, unless all the Senior Debt has been fully paid and the
commitment to lend money pursuant to the Credit Agreement terminated. Except as
provided in Section 4 with respect to "Permitted Payments," regardless of the
due date of any Subordinated Debt, the Subordinate Creditor expressly waives all
rights to payment of the Subordinated Debt by Borrowers before Borrowers have
fully paid all the Senior Debt and the commitment to lend money pursuant to the
Credit Agreement terminated. The Subordinate Creditor shall not accept, demand,
or receive from Borrowers any payment or security interest in contravention of
this Subordination Agreement. If a claim is made against Lender for recovery or
repayment of any amount received by it in payment or on account of any Senior
Debt (for example, the avoidance of any payment of a Senior Debt as a preference
under the United States Bankruptcy Code), and if Lender repays all or a portion
of the claim pursuant to a judicial order, decree, or judgment or pursuant to a
settlement or compromise of the claim, the amount repaid or recovered will not
constitute payment of the Senior Debt and will be treated as if it had never
been received by Lender. In addition, the Subordinate Creditor shall not
transfer to a third party who is not a party to this Subordination Agreement any
obligation of Borrowers to the Subordinate Creditor that constitutes a
Subordinated Debt or take any other action designed to secure indirectly from
Borrowers any payment in contravention of this Subordination Agreement.
PERMITTED PAYMENTS; SUBORDINATE CREDITOR'S RIGHTS; TURNOVER OF
PAYMENTS; NOTICE OF DEFAULT; PERMITTED LIENS.
(A) CERTAIN PERMITTED PAYMENTS BEFORE A SENIOR DEBT DEFAULT. This
Subordination Agreement does not prohibit the making or accepting of the
"Permitted Payments" specified below to Subordinate Creditor by Borrowers, if
all of the following conditions precedent and subsequent are satisfied: (A) no
"Senior Debt Default" exists when the payment is made , (B) no Senior Debt
Default would result from the payment, and (C) Borrowers comply with the
financial covenants set forth in Section 6.21 ("Financial Covenants") of the
Credit Agreement each time Borrowers' compliance with those financial covenants
is measured for the period that includes the date on which the payment is made.
For purposes of this section, a "Permitted Payment" includes the following:
(i) payment of regular scheduled accrued interest (at non-
default rates) pursuant to Section 1.1 of the Seller Note for each
month after January 1, 1998;
(ii) payment under the Seller Note of mandatory scheduled
principal payments pursuant to Section 1.2 on and after April 30, 1999
and Section 1.6 (mandatory prepayment on a "Qualified Public
Offering"), and mandatory prepayment of the Seller Note on an Event of
Default under Sections 7(g) or 7(h) of the Seller Note;
(iii) payment of regular accruing dividends (at non-default
rates) on the Parent's Series A Preferred Stock (understood to accrue
at $13,334 per month) for each month after January 1, 1998;
(iv) payment of the mandatory redemption payments with respect
to the Parent's Series A Preferred Stock following (A) April 15, 2003,
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or (B) a "Qualified Public Offering," as described in Section 5(i) of
the Terms of Series A Preferred Stock attached as Exhibit 2.2(c) to the
Purchase Agreement, or (C) any of the events described in Section
5(i)(a), (b), or (c) of the foregoing preferred stock terms; and
(v) payment of the mandatory repurchase payments with respect
to the Warrants following (a) the sixth anniversary of issuance date of
the Warrants or (b) a "Qualified Public Offering," as described in
Sections 12.1 and 12.2 of the Warrants.
For purposes of this Section, a "Senior Debt Default" is a default arising from
Sections 10.1, 10.4, 10.5, 10.6, 10.9, 10.10, 10.12, 10.13, 10.15, 10.16, 10.17,
or 10.18 of the Credit Agreement, or a default under Section 10.3 that arises
from a default under the covenants set forth in Sections 6.1, 6.3, 6.4, 6.10,
6.15, 6.21, or Article 7 of the Credit Agreement. Any of the above payments
accepted by Subordinate Creditor without satisfaction of the specified
conditions precedent and subsequent (regarding the absence of a Senior Debt
Default and compliance with the Financial Covenants in Section 6.21 of the
Credit Agreement) will not be Permitted Payments and will be immediately paid by
the Subordinate Creditor to the Lender in accordance with Section 6 of this
Subordination Agreement.
(B) VOLUNTARY PREPAYMENTS. Without the prior written consent of the
Lender, Borrowers shall not make, and the Subordinate Creditor shall not accept,
any voluntary prepayment of the Subordinated Debt, any voluntary redemption or
repurchase of the Preferred Stock, or any voluntary redemption or repurchase of
the Warrants or securities issuable on exercise of the Warrants.
(C) THE SUBORDINATE CREDITOR'S RIGHTS FOLLOWING A DEFAULT. For 180 days
following its receipt of notice of a Senior Debt Default required to be
delivered pursuant to Section 4(e), the Subordinate Creditor shall not, without
Lender's prior written consent, ask, demand, accelerate, xxx for, accept, or
receive any part of the Subordinated Debt. This 180-day period will be
terminated early on any of the following: (i) cure or waiver of the Senior Debt
Default, or (ii) with respect to the Senior Note only, a Qualifying Public
Offering or an Event of Default under Section 7(g) or 7(h) of the Senior Note,
or (iii) with respect to the Preferred Stock only, any event requiring a
mandatory redemption before April 15, 2003, (iv) with respect to the Warrants
only, any event requiring a mandatory repurchase of the Warrants before the
sixth anniversary of their original issuance date, or (v) Lender's acceleration
of the Senior Debt and pursuit of its rights and remedies with respect thereto.
Following the termination or expiration of the 180-day period or the occurrence
of one of the events listed in clauses (ii), (iii), or (iv) above, and
notwithstanding the existence of a Senior Debt Default, Subordinate Creditor may
accelerate and pursue any of its other rights and remedies and collect amounts
due with respect to the Subordinated Debt, subject to Borrower's rights under
the terms and conditions of the Subordinated Debt, all of Lender's rights under
the Credit Agreement and other Loan Documents, and the provisions regarding
turnover of collected amounts of subsection (d) below.
(D) TURNOVER OF PAYMENTS. Notwithstanding any of the foregoing provisions
of subsection (c) regarding Subordinate Creditor's rights on a default, while a
Senior Debt Default exists, and until all of the Senior Debt has been fully paid
and any commitment to lend money pursuant to the Credit Agreement terminated,
Lender will enjoy prior right of payment in all cases and the Subordinate
Creditor immediately shall deliver to Lender any cash and property realized from
Borrowers with respect to the Subordinated Debt in the form received (except for
any assignment or endorsement requested by Lender) for application to the Senior
Debt (whether due or not due), and until so delivered, the Subordinate Creditor
shall hold all that cash and other property pursuant to an express trust for the
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benefit of Lender unless prohibited by law or by an order of any court. If
Subordinate Creditor does turn over to Lender amounts received from Borrower,
the amount turned over will not constitute payment of the Subordinated Debt, and
will be treated as if it had never been received by Subordinate Creditor. A
Senior Debt Default will be deemed to continue until cured or waived as
evidenced by Lender's notice required under Section 4(e) below.
(E) NOTICE REQUIREMENTS. Subordinate Creditor shall promptly notify Lender
of any default with respect to the Subordinate Debt. Lender shall promptly
notify Subordinate Creditor of any Senior Debt Default and of any waiver or cure
thereof. Any failure of Lender to send this notice will not be prejudicial to
Lender with respect to enforcement of its rights under this Subordination
Agreement after the notice date.
(F) PERMITTED LIEN. This Subordination Agreement does not prohibit the
granting of the security interests in the shares of Parent and its subsidiaries
contemplated by the Seller Note nor the taking of any action permitted by the
instruments granting such security interests after the expiration or termination
of the 180-day period specified in (c) above or the occurrence of one of the
events listed in clauses (c) (ii), (iii), or (iv) above, subject to the Subor-
dinate Creditor's obligation to turn over to Lender any proceeds pursuant to
subsection (d). Following any assumption of control over Parent by Subordinate
Creditor, Borrowers shall not make, and Subordinate Creditor shall not accept,
any payment of the Subordinated Debt, until the Senior Debt Default has been
cured or until all of the Senior Debt has been fully paid and any commitment to
lend money pursuant to the Credit Agreement terminated.
LIQUIDATION PROCEEDINGS. In the event of any bankruptcy, insolvency,
receivership, liquidation, reorganization, or other similar proceeding relating
to Borrowers or their creditors, as such, whether or not involving bankruptcy or
insolvency, and subject to the power of a court of competent jurisdiction to
make other equitable provision reflecting the rights conferred on the holders of
the Senior Debt under this Subordination Agreement, (a) all of the Senior Debt
will be paid first in full before any payment or distribution of any kind,
whether in cash, securities, obligations, or other property, is made on account
of the Subordinate Debt, and (b) Lender is entitled to receive for application
and payment on account of the Senior Debt any payment or distribution of any
kind and character (whether in cash, property, or securities) that is payable or
deliverable in any such proceeding in respect of the Subordinated Debt, except
for securities that are subordinate and junior in right of payment to the
payment of all the Senior Debt then outstanding.
PROHIBITED RECEIPTS AND PAYMENTS. Except for certain Permitted
Payments made in accordance with the conditions set forth in section 4(a)
(regarding the absence of a Senior Debt Default and compliance with the
financial covenants in Section 6.21 of the Credit Agreement), if the Subordinate
Creditor receives any cash or other property in payment or on account of any
Subordinated Debt before all of the Senior Debt has been fully paid and any
commitment to lend money pursuant to the Credit Agreement terminated, the
Subordinate Creditor immediately shall deliver the same to Lender in the form
received (except for any endorsement or assignment requested by Lender) for ap-
plication to the Senior Debt (whether due or not due), and, until so
deliverable, the Subordinate Creditor shall hold all that cash and other
property pursuant to an express trust for the exclusive benefit of Lender,
unless otherwise required by law or court order. If Subordinate Creditor does
turn over to Lender amounts received from Borrower, the amount turned over will
not constitute payment of the Subordinated Debt, and will be treated as if it
had never been received by Subordinate Creditor. In the event of the failure of
the Subordinate Creditor to make this assignment or endorsement or the similar
assignment or endorsement required under Section 4(d), Lender, or any of its
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officers or employees on behalf of Lender, is authorized in its own name or in
the name of Subordinate Creditor to make the same, and is hereby appointed the
Subordinate Creditor's attorney-in-fact for those purposes, that appointment
being coupled with an interest and irrevocable.
REVOCATION. This Subordination Agreement constitutes a continuing
agreement of subordination by the Subordinate Creditor, and Lender, without
notice to the Subordinate Creditor, may loan money, extend credit, and make
other financial accommodations to or for the account of Borrowers in reliance on
this Subordination Agreement until the Senior Debt has been fully paid and any
commitment to lend money pursuant to the Credit Agreement terminated.
EVIDENCE OF SUBORDINATED DEBT, PREFERRED STOCK, AND WARRANTS;
REPRESENTATIONS. (a) The Subordinate Creditor and Borrowers agree and warrant
that any instrument, agreement, security, or other writing now or hereafter
evidencing all or any portion of the Subordinate Debt, Preferred Stock, and
Warrants shall bear on its face a clear and conspicuous legend that it is
subject to the terms of this Subordination Agreement. True and complete copies
of all documents relating to
the Subordinate Debt, Preferred Stock, and Warrants in effect as of the date of
this Subordination Agreement have been furnished to Lender.
(b) The execution, delivery, and performance of this Agreement is within the
corporate powers of the Subordinate Creditor, has been duly authorized by all
necessary corporate action of the Subordinate Creditor, and does not contravene
any statute, regulation, rule, order, or judgment, any charter, bylaw, or
preference stock provision of Subordinate Creditor, or any provision of any
mortgage, indenture, contract, or other agreement binding on the Subordinate
Creditor or affecting its properties, which would prohibit, or cause a default
under or in any way prevent the execution, delivery, or carrying out of the
terms of this Subordination Agreement.
(c) Until the Senior Debt has been paid in full and the commitment to lend
money under the Credit Agreement terminated, Borrowers shall not issue any
instrument, security, or other writing evidencing any part of the Subordinated
Debt, Preferred Stock, or Warrants, except for the Seller Note, Warrants and
terms of Series A Preferred Stock, or amend or modify in any respect any such
instrument, security, preference stock provision, or other writing, if the
effect is to (i) increase the amount of indebtedness, stated value, or interest
or dividend rate thereunder or (ii) accelerate the repayment schedule.
SCOPE OF SUBORDINATION. The obligations of the Subordinate Creditor
under this Subordination Agreement will not be affected, released, diminished,
or discharged in any manner by any change or indulgence (including a gratuitous
indulgence not effected by legal modification) made or granted by Lender with
respect to any Senior Debt or by any circumstance whatsoever that might vary the
risk of the Subordinate Creditor under this Subordination Agreement, including
any of the following: (a) a waiver of, or acquiescence in, a default with
respect to any Senior Debt; (b) a settlement or compromise of any Senior Debt or
any collateral for it; (c) the sale, release, or other disposition of any
collateral for any Senior Debt; (d) any invalidity, irregularity, or
unenforceability of all or any portion of the Senior Debt (e) any action,
omission, or delay in the enforcement by Lender of any right or remedy against
Borrowers or others (including any guarantor) or any collateral or security with
respect to any Senior Debt; or (f) a change in the name, location, structure, or
composition of Borrowers, or a merger, consolidation, reorganization, or
dissolution of Borrowers, or any change in the shareholders of Borrowers.
LEGAL PROCEEDINGS. The validity, construction, enforcement, and
interpretation of this Subordination Agreement are governed by the laws of the
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State of Florida and the United States of America, excluding the laws of those
jurisdictions relating to resolution of conflict with laws of other
jurisdictions. Lender, Borrowers, and the Subordinate Creditor consent and
agree that a proper and convenient (although nonexclusive) venue for any
litigation relating to this Subordination Agreement or any agreement or
instrument executed by the parties pursuant to this Subordination Agreement, is
any court in the State of Alabama having subject matter jurisdiction, and each
party waives any defense whether asserted by motion or pleading that the State
of Alabama is an improper or inconvenient venue.
CONTINUED EFFECTIVENESS OF THIS AGREEMENT. In the event of any sale or
transfer of Subordinated Debt, the Subordinate Creditor shall cause the
transferee to execute and deliver to Lender an agreement substantially identical
to this Subordination Agreement providing for the continued subordination of the
Subordinated Debt and for the continued effectiveness of all of the rights of
Lender under this Subordination Agreement (although this provision is not a
waiver of the above prohibition on transfer of the Subordinated Debt).
FURTHER ASSURANCES. At any time and from time to time, on request by
Lender, Borrowers and the Subordinate Creditor shall promptly make, execute, and
deliver to Lender any further amendments, assignments, instruments, or further
assurance or other documents that Lender may deem desirable to (i) negotiate or
assign the documents pertaining to the Loan, or (ii) enable Lender to sell
participations in the Loan.
MISCELLANEOUS. Time is of the essence with respect to the performance by
Borrowers and Subordinate Creditor of their obligations under this Subordination
Agreement. This Subordination Agreement will become effective as of its stated
date of execution, when it has been executed by Lender, Borrowers, and the
Subordinate Creditor. A waiver, amendment, modification, or termination of this
Subordination Agreement will be valid and effective only if it is in writing and
signed by Lender, Borrowers, and Subordinate Creditor. In addition, a written
waiver of a breach of any provision of this Subordination Agreement will not
operate as a waiver of a breach of any other provision or of a succeeding breach
of the same provision or as a waiver of the provision itself. A delay,
omission, or course of dealing on the part of Lender in exercising any right,
power, or remedy will not operate as a waiver of it, and a single or partial
exercise of any right, power, or remedy does not preclude any further exercise
of it or the exercise of any other right, power, or remedy. The exercise or
nonexercise by Lender of any right, power, or remedy does not constitute a
waiver of any breach by the Subordinate Creditor or Borrowers of any provision
of this Subordination Agreement. As used in this Subordination Agreement, (a)
the word "including" is always without limitation, (b) words in the singular
number include words of the plural number and vice versa, and (c) the term
"costs" includes all fines, penalties, interest, internal expenses, amounts paid
in settlement, fees, costs, and expenses of experts, witnesses, collection
agents, and supersedeas bonds, and reasonable attorneys' fees, costs, and
expenses, whether incurred before or after demand for payment or the
commencement of legal proceedings, and whether incurred pursuant to trial,
appellate, mediation, bankruptcy, arbitration, administrative, or judgment-
execution proceedings. This Subordination Agreement inures to the benefit of
Lender and its assigns and successors and is binding on Borrowers, the
Subordinate Creditor and their respective assigns and successors, provided,
however, that Lender shall not assign the Loan, the Credit Agreement, or the
Loan Documents to any person or entity that is not a bank, financial
institution, or investment company without the prior written consent of
Subordinate Creditor.
EXECUTED: , 199 , in
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-------------- --- ----------------------
ECB, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX ENVIRONMENTAL, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX ENVIRONMENTAL MANAGEMENT,
INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF NEW JERSEY, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
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HANDEX OF NEW ENGLAND, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF MARYLAND, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF THE CAROLINAS, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
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Secretary
HANDEX OF FLORIDA, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF OHIO, INC.
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By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF ILLINOIS, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
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Secretary
HANDEX OF COLORADO, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF PENNSYLVANIA, LLC
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By:
----------------------------
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Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
bca2(415) 11/12/96 2:00 PM
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