EXHIBIT 10.38
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CREDITORS AGREEMENT
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THIS CREDITORS AGREEMENT (this "Agreement"), dated as of the 15th day
of May, 2000, is made by and among The Xxxxxx Family Trust, the Xxxx Family
Trust, First Fruit, Inc. a California corporation, Genesee Mutual
Investments, LLC, a California limited liability company (the "Secured
Creditors' Representative"), For His Adopted Children, Inc., a California
corporation, Xxxxx Xxxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxxxxxxx, (each,
including the Secured Creditors' Representative, a "Creditor", and,
collectively, the "Creditors") and Entrade, Inc. a Pennsylvania corporation
("Borrower").
WHEREAS, concurrently with this Agreement, the Creditors are loaning
an aggregate of $7,000,000 to Borrower (the "Loans") pursuant to a Note and
Warrant Purchase Agreement, and corresponding Secured Promissory Notes, by
and between Borrower and each of the Creditors, and a Pledge Agreement by
and between Borrower, Asset Liquidation Group, Inc., a Nevada corporation
("ALG"), Public Liquidation Group, Inc., a Nevada corporation ("PLS") and
Xxxxxx Capital Management all of even date herewith (each a "Loan Document"
and collectively, the "Loan Documents");
WHEREAS, Pursuant to the Pledge Agreement, Borrower has pledged as
collateral for the Loans, all of the shares of ALG and PLS. The parties
desire to enter into this Agreement for the purpose of agreeing as to the
management of the Loans and the Collateral and the Creditors respective
rights and obligations if an Event of Default should occur. Capitalized
terms used but not defined herein shall have the meaning set forth in the
Pledge Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreement set forth herein, the parties hereby agree as follows:
1. PRIORITY OF LOANS. The Creditors agree among themselves that
their Loans are in equal priority and that their security interests in the
Pledged Collateral rank equal in priority according to the ratio of
indebtedness.
2. CROSS-DEFAULT. The Borrower hereby agrees to pay each Creditor
pro rata according to the ratio of such Creditor's Loan to all of the Loans
and that a default on any of the Liabilities to any of the Creditors and an
acceleration thereof or a demand for payment by any of the Creditors shall
be deemed to be a default and an acceleration and demand for payment with
respect to or by the other Creditors.
3. DEFAULT. Each Creditor agrees to notify immediately the others
upon the occurrence of an Event of Default and an acceleration as a result
thereof or demand for payment under any of the obligations of the Borrower
to it in connection with the Loans or any Loan Document. Unless such
default and acceleration thereof or demand for payment is waived by all
Creditors, each Creditor shall, to the extent possible, cause each and
every obligation of Borrower in connection with this Agreement to become
and be forthwith due and payable. Each Creditor shall inform the others of
the total obligations of the Borrower then outstanding to such Creditors
after such default and acceleration thereof or demand for payment.
Subsequent to such a default and an acceleration as a result thereof or
demand for payment, the Creditors shall share pro rata according to the
ratio which the indebtedness owed to each one bears to the aggregate
indebtedness of Borrower under all Loans (exclusive of any other extension
of credit by any Creditor to Borrower or any affiliate thereof), in all of
the payments and/or receipts, including any setoffs, received by them on
account of any of Borrower's obligations to the Creditors whether
voluntary, involuntary or received as a result of offset, counterclaim or
otherwise and shall include all amounts received from any source
whatsoever, including but not limited to the proceeds of liquidation of the
Pledged Collateral, and payments by guarantors or third parties or from the
proceeds of any property securing such guaranties, such that, at any time,
each Creditor shall have received the same proportionate share of payment
of its Loan as all other Creditors. Collateral. Such pro rata
distributions shall be made as proceeds are realized from the liquidation
of the Pledged Collateral or obtained from any guarantors, or as proceeds
are realized from the liquidation of property securing such guaranties.
Such pro rata distributions shall be made as proceeds are realized from the
liquidation of the Pledged Collateral or obtained from any guarantors or
third parties, or as proceeds are realized from the liquidation of property
securing such guaranties.
4. DELEGATION OF AUTHORITY TO SECURED CREDITORS' REPRESENTATIVE. In
order that the Creditors shall maximize the efficiency of their efforts and
receive the greatest benefit from their security interests, it is agreed
that upon the occurrence of an Event of Default under any Loan, then as
between the Creditors and the Borrower, any trustee, receiver or other
representative of Borrower under the bankruptcy, reorganization,
arrangement, insolvency or other debtors' relief laws, that the Secured
Creditors' Representative shall direct Xxxxxx Capital Management, the
Pledgee under the Pledge Agreement, enforce its security interest and the
security interests of all Creditors and share pro rata with the other
Creditors based on their respective ratios provided hereinabove. Upon the
occurrence of an Event of Default, the Secured Creditors' Representative is
hereby irrevocably authorized by each of the other Creditors to take any
and all actions with respect to the collection of the Loans, the exercise
of any rights of the Creditors under any of the Loan Documents, including
any rights to foreclose or otherwise deal with the Pledged Collateral,
including the exercise of any rights under the Collateral Agent Agreement,
of even date herewith, by and among the Creditors and Xxxxxx Capital
Management. The Creditors each agree that, upon the occurrence of an Event
of Default, no Creditor other than the Secured Creditors' Representative
shall take any action with respect to the enforcement of the Loan Documents
or the collection of the Loans, including without limitation, any
compromise, waiver or other action with respect to the Loans without the
prior written approval of the Secured Creditors' Representative and that
each Creditor will promptly execute any and all documents and take any
actions requested by the Secured Creditors' Representative in connection
with the enforcement of the Loans Documents or the collection of the Loans.
The Secured Creditors' Representative shall be entitled to exercise its
discretion in connection with the enforcement of the Loan Documents and the
collection of the Loans and neither the Secured Creditors' Representative
nor any of its employees, officers, members managers or agents shall have
any liability to any Creditor as a result of any and all lawful action
which the Secured Creditors' Representative or any such person takes or
omits to take (including any actions with respect to the foreclosure upon
or sale of the Pledged Collateral, release of security interest, waiver of
claims or failure to realize upon any of the Pledged Collateral or to
institute or prosecute or fail to institute or prosecute any claims in
connection with the Loans), regardless of whether such actions or omissions
may adversely affect any Creditor's rights under any Loan Document or in
connection with its Loan. The Borrower acknowledges the appointment of the
Secured Creditors' Representative hereunder and agrees to accept its
authority to act as provided herein.
5. INDEMNITY; EXCULPATION. Each of the Creditors, severally in
accordance with the ratio of its Loan to all the Loans, agrees to
indemnify, defend and hold Secured Creditors' Representative and its
employees, officers, members managers or agents, harmless from and against
any liabilities, claims, costs or expenses, including reasonable attorneys'
fees incurred or suffered by Secured Creditors' Representative or any such
person in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, the Loan Documents, or the
taking of any lawful actions or omissions arising out of or relating to the
enforcement of the Loan Documents or the collections of the Loans. The
Creditors agree to promptly (and in any event within 30 days after written
request therefor) reimburse the Secured Creditors' Representative for their
pro rata share of any reasonable out-of-pocket expenses, costs and legal
fees incurred by it in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, the Loan Documents or this
Agreement, or the taking of any lawful actions or omissions arising out of
or relating to the enforcement of the Loan Documents or the collections of
the Loans or the enforcement of this Agreement. Without limiting the
foregoing, the Secured Creditors' Representative (a) may treat the payee of
any Loan as the holder thereof until it receives written notice of the
assignment or transfer thereof signed by such payee and in form
satisfactory to it; (b) may consult with legal counsel (including counsel
for the Borrower), independent public accountants and other experts
selected by it and shall not be liable to any Creditor for any action taken
or omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts, even if not lawful; (c) makes no
warranty or representation to any Creditor and shall not be responsible to
any Creditor for any statements, warranties or representations made in or
in connection with any Loan Document; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of any Loan Document on the part of the
Borrower or to inspect the property (including the books and records) of
the Borrower; (e) shall not be responsible to any Creditor for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant thereto; and (f) shall incur no liability under or in respect of
any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier or telex) believed by it
to be genuine and signed or sent by the proper party or parties.
6. AMENDMENTS, ETC. This agreement constitutes the full and
complete agreement of the parties with respect to the subject matter hereof
and supersedes any prior agreements, writings or discussions. No amendment
or waiver of any provision of this Agreement, or consent to any departure
by therefrom, shall in any event be effective unless the same is in writing
and signed by all Creditors representing at least a two-thirds interest in
the Loans (after the sharing provisions of Section 3 above are applied).
7. NOTICES, ETC. All notices, demands and other communications
provided for hereunder shall be in writing (including communication by
telecopier) and shall be mailed, telecopied or delivered, as provided in
the Pledge Agreement.
8. BINDING EFFECT; ASSIGNMENT OR PARTICIPATION. This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Secured
Creditors' Representative and each Creditor, and their respective succes-
sors and assigns, except that the Borrower shall not have the right to
assign any of its rights or obligations hereunder or any interest herein
without the prior written consent of the Creditors. Each Creditors may
assign to one or more other entities all or any part of, and may grant
participations to one or more other entities in or to all or any part of,
the Loan made by such Creditor and to the extent of any such assignment or
participation (unless otherwise stated therein) the assignee or participant
of such assignment or participation shall have the same rights and
obligations hereunder.
9. Severability. The provisions of this Agreement are severable,
and if any clause or provision is held to be invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part
thereof, in such jurisdiction and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an originally
executed counterpart of this Agreement.
11. Jurisdiction, Etc. Each of the parties hereto hereby irrevocably
and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any California state court or United States
federal court sitting in Los Angeles, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such state or,
to the extent permitted by law, federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any of the other Loan
Documents in the courts of any other jurisdiction. Each of the parties
hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Loan Documents in any
state or federal court specified in Section 11. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of any such action or
proceeding in any such court.
12. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE-OF-LAW PRINCIPLES THEREOF.
13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE CREDITORS
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY OR ANY OF THE ACTIONS OF THE BORROWER,
THE SECURED CREDITORS' REPRESENTATIVE OR THE CREDITORS IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
14. RESIGNATION AND REMOVAL OF SECURED CREDITORS' REPRESENTATIVE. The
Secured Creditors' Representative may resign at any time, without liability
hereunder, upon two days prior written notice to the Creditors. The Secured
Creditors' Representative may be removed upon the written consent of
Creditors holding at least two-thirds of the total amount of the Loans
(after the sharing provisions of Section 3 above are applied). In the
event of the resignation or removal of the Secured Creditors'
Representative, the Creditor may, by written consent of Creditors holding
at least a two-third interest in the Loans (after the sharing provisions of
Section 3 above are applied), appoint another party, who may or may not be
a Creditor, as Secured Creditors' Representative. If no successor Secured
Creditors' Representative is appointed within 10 days after the resignation
or removal of the Secured Creditors' Representative, this Agreement shall
terminate and be of no further force or effect, except that the provisions
of Section 5 et. seq. shall continue in effect.
15. ATTORNEYS' FEES. If an arbitration or other legal proceeding is
brought to enforce or interpret the provisions of this Agreement or any
other agreement or instrument provided for herein or as to the rights or
obligations of any party to this Agreement or such other agreement or
instrument, the prevailing party in such action shall be entitled to
recover as an element of such party's costs of suit, and not as damages, a
reasonable attorney's fee to be fixed by the court or the arbitrator. The
prevailing party shall be the party who is entitled to recover its costs of
suit as ordered by the arbitrator, the court or by applicable law or court
rules. A party not entitled to recover its costs shall not recover
attorney's fee.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
THE XXXXXX FAMILY TRUST
By:
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Xxxxxxx X. Xxxxxx, TTEE
THE XXXX FAMILY TRUST
By:
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Xxxxx X. Xxxx, TTEE
FIRST FRUIT, INC.
By:
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Xxxxx X. Xxxx, President
GENESEE MUTUAL INVESTMENTS, LLC
By:
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Xxxx X. Xxxx, Manger
FOR HIS ADOPTED CHILDREN, INC.
By:
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Xxxx X. Xxxx, President
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Xxxxxx Xxxxx
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Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxx
ENTRADE INC.
By
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Its:
