SUBORDINATION AGREEMENT
Exhibit
10.6
THIS
AGREEMENT is made and entered into effective this 9th
day of
March, 2007, by and between MISCOR Group, Ltd. (an Indiana corporation
hereinafter referred to as the “Borrower”), MFB Financial (hereinafter referred
to as the “Bank”) and the holder(s) of all or any portion of a subordinated
secured convertible debenture (the “Debenture”) in an amount of up to
$4,025,000.00 (with such holder(s) being referred to herein as the
“Subordinating Party”), acting by and through its/their duly authorized agent,
Strasbourger Xxxxxxx Tulcin Xxxxx, Inc. (the “Agent”).
W
I T N E S S E T H:
WHEREAS,
Borrower is presently, or will hereafter become, indebted to Subordinating
Party
pursuant to the Debenture (a true and accurate copy of the Debenture is attached
hereto as Exhibit “A”); and
WHEREAS,
Borrower and Subordinating Party have requested that Bank extend credit to
Borrower, but Bank is willing to do so T and only it all of the indebtedness
owing or to become owing by Borrower to Subordinating Party, and all collateral
for such indebtedness, are expressly subordinated to any and all indebtedness
now or hereafter owing to Bank by Borrower and all collateral
therefor.
NOW,
THEREFORE, in consideration of the mutual terms and provisions contained herein,
and in order for Borrower and Subordinating Party to induce Bank to extend
credit to Borrower, the parties agree to as follows:
1. For
purposes hereof, the following terms shall have the following
meanings:
| a. |
“Bank”
shall mean and refer to MFB Financial, a banking institution with
its
principal place of business located in St. Xxxxxx County, Indiana,
as well
as to all related and affiliated financial institutions and entities,
as
well as to all successors, assigns and participants of MFB
Financial.
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| b. |
“Superior
Indebtedness” shall mean and refer to any and all indebtedness and
obligations now or hereafter owing by Borrower to Bank, including,
but not
limited to, future advances, and all obligations of Borrower to Bank
under
any and all promissory notes, mortgages, security agreements, assignments,
leases, guaranties, and all other agreements or documents heretofore
or
hereafter executed by Borrower to or in favor of Bank, including
any and
all interest, late charges, prepayment premiums, and all other amounts
accruing or payable under any such documents, including principal
and
interest accruing before or after commencement of any voluntary or
involuntary bankruptcy or reorganization, insolvency or similar
proceedings regarding Borrower, whether such indebtedness or obligations
be direct or indirect, absolute or contingent, or primary or secondary,
and all partial or full extensions, renewals or modifications thereof,
The
“Superior indebtedness” shall specifically include, but not be limited to,
the indebtedness owing by Borrower to Bank represented by a certain
promissory note dated February __, 2007, in the original principal
amount
of $5,000,000.00, together with all renewals, extensions and modifications
thereof, as well as all accrued and accruing interest and costs as
provided in paragraph 3.
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| c. |
“Subordinated
Debt” shall mean any and all indebtedness and obligations now or hereafter
owing by Borrower to Subordinating Party, or any of them, including,
but
not limited to, future advances, and all obligations of Borrower
under any
and all notes, mortgages, security agreements, assignments, leases,
guaranties, and all other agreements or documents heretofore or hereafter
executed by Borrower to or in favor of Subordinating Party, including
all
interest, late charges, prepayment premiums, and other amounts set
forth
in any such documents, and including principal and interest accruing
before or after commencement of any voluntary or involuntary bankruptcy
or
reorganization, insolvency or similar proceedings regarding Borrower,
whether such indebtedness or obligations be direct or indirect, absolute
or contingent, or primary or secondary, and all partial or full
extensions, renewals or modifications thereof. The “Subordinated Debt”
shall specifically include, but not be limited to, the Debenture
and all
amounts owing thereunder, together with all renewals, extensions
and
modifications thereof.
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| d. |
Notwithstanding
any other provision of this Agreement, including, but not limited
to,
subparagraph b of this paragraph, the amount of the Superior Indebtedness
which shall have priority pursuant hereto shall be limited to the
principal sum of $5,500,000.00, plus accrued and accruing interest
on said
principal sum and the costs described in paragraph 3 hereof unless
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2
Agent,
on
behalf of Subordinating Party, agrees in writing to a greater amount. Any
indebtedness owing by Borrower to Bank in excess of said amount ($5,500,000.00
plus interest and costs) shall not be included in the term “Superior
Indebtedness” for purposes of this Agreement, The remainder of this Agreement
shall be interpreted with the limitation contained in this subparagraph in
mind
and the provisions of this subparagraph shall take precedence and priority
over
each and every conflicting provision of this Agreement.
| e. |
It
is understood and agreed that the “Superior Indebtedness” shall include
any and all indebtedness and liabilities of each and every nature
and
description owing or to become owing to Bank by Borrower either alone
or
in combination with others.
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2. Subordinating
Party hereby agrees that any and all of the Subordinated Debt shall be and
hereby is absolutely and unconditionally subordinated in every manner and to
every extent to the Superior Indebtedness and to the prior payment and
satisfaction in full of the Superior Indebtedness. The Subordinating Party
further agrees that each and every security interest, mortgage, lien, claim,
right or title of Bank in, to or against any real or personal property or assets
of Borrower shall be superior to each and every security interest, mortgage
or
lien which Subordinating Party has or may acquire in the same property or
assets. Each and every security interest, mortgage or lien held by or in favor
of Subordinating Party in, to or against such property or assets is and shall
remain absolutely and unconditionally subordinated, junior, inferior and
postponed in priority, operation and effect to the priority, operation and
effect of any security interest, mortgage or lien held by or in favor of Bank,
all with the same force and effect as though such security interest, mortgage
or
hen held by or in favor of Bank had attached and was perfected prior to the
perfection of any such security interest, mortgage or lien of Subordinating
Party. Subordinating Party agrees to execute such instruments and documents
as
Bank may request from time to time in order to evidence or accomplish the intent
of this Agreement, and Subordinating Party and Borrower expressly consent to
the
delivery, filing and recording of any such instruments or documents with such
persons and authorities as Bank shall
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deem
appropriate. Bank makes no representation or warranty concerning any collateral
or the validity, perfection or priority of any security interest, lien or
mortgage. Bank shall have no duty to preserve, protect, care for, insure, take
possession of, collect, dispose of or realize upon any property. Bank may in
its
discretion apply the proceeds of c0Uateral to any indebtedness then owing by
Borrower to Bank secured thereby in any order as Bank deems
appropriate.
3. Borrower
agrees that any and all of the Superior Indebtedness must be fully paid and
discharged, together with all interest thereon and all expenses of collecting
the same or otherwise protecting and/or enforcing the rights and/or interests
of
Bank, including, but not limited to, attorneys’ and legal assistants fees and
collection expenses, before any payment to Subordinating Party, by way of cash,
setoff or otherwise, may be paid to Subordinating Party by
Borrower.
4. Borrower,
and Agent on behalf of Subordinating Party, represent to Bank and agree that
the
amount of the Subordinated Debt is not and shall not hereafter be represented
by
any notes or other negotiable instruments, except the Debenture. Agent, on
behalf of Subordinating Party, and Borrower will cause each instrument
evidencing Subordinated Debt to be endorsed with the following
legend:
“The
obligations of the Company created by this Debenture are subordinate in right
of
payment to any the Company pursuant to that certain Loan Agreement dated March
9th,
2007 by
and between Company (now known as MISCOR Group, Ltd.”) and MFB Financial
creating a $5.5 million credit facility (the “Credit Facility”), and each
promissory note given by Company pursuant thereto.
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Agent,
Subordinating Party and Borrower also agree that each and every financing
statement filed with any governmental office pertaining to the Subordinated
Indebtedness and/or the security therefor shall contain the
following:
Notwithstanding
the order of filing of financing statements concerning the Debtor, the security
interests described herein are, and shall at ad Xxxx remain, subordinate and
inferior to any and all security interests now or hereafter held by or in favor
of MFB Financial and its successors and assigns.
Further,
Subordinating Party, Agent and Borrower will xxxx their respective books of
account in such a manner as shall be effective to give proper notice of the
effect of this Subordination Agreement and will, in the case of any hereafter
arising Subordinated Debt which is not evidenced by an instrument, upon Bank’s
request, cause such Subordinated Debt to be evidenced by an appropriate
instrument or instruments containing the language required above; provided
however, that the foregohg shall not permit Borrower to incur or assume any
indebtedness in violation of the terms governing the Superior Indebtedness.
Agent on behalf of Subordinabng Party, and Borrower each will, at it’s own
expense and at any time and from time to time, promptly execute and deliver
all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Bank may reasonably request in order to protect
any right or interest granted or purported to be granted hereby or to enable
Bank to exercise and enforce its rights and remedies hereunder.
5. Borrower
shall not make any payment, and Subordinating Party shall not receive or accept
any payment, with respect to any of the Subordinated Debt in violation of this
Agreement. In the event Subordinating Party receives any payment from Borrower
that is not expressly permitted hereby, whether such payment be in cash, by
setoff or otherwise, Subordinating Party shall be liable and accountable
therefor to Bank. Subordinating Party shall
5
be
deemed
to have received each and every such payment in trust for the use and benefit
of
Bank, and Subordinating Party shall not commingle the same with any other funds
and shall pay over and deliver each such payment immediately to Bank, even
if
Bank does not make demand for such payment or delivery.
6. This
subordination shall survive and remain in full force and effect in the event
of
any administration of the property and/or affairs of Borrower arising from
any
assignment for the benefit of creditors, bankruptcy, receivership, liquidation
or other like proceedings.
7. This
Agreement is a continuing subordination and shall continue in full force and
effect, and Bank may make extensions of credit to Borrower in reliance upon
this
Agreement, at any time any Superior Indebtedness or costs described in Paragraph
3 hereof remain unpaid. Subordinating Party agrees that Bank, at any time and
from time to time, may enter into such agreements with Borrower as Bank may
deem
proper affecting any property which secures all or any portion of the Superior
Indebtedness (the “Collateral”), and may sell, surrender or otherwise deal with
any of the Collateral without notice to Subordinating Party and without in
any
way impairing or affecting this Agreement. The obligations of Subordinating
Party, and the subordinations provided for herein, shall not be affected or
impaired by any compromise, release, renewal, extension, forbearance,
indulgence, alteration, change in, modification of, grant of participation
in,
or other disposition of any documents or instruments executed by Borrower in
favor of Bank, any release of any guarantor of the obligabons of Borrower to
Bank or any other person, any failure of Bank to pursue its remedies against
the
Collateral or any one or more of the guarantors or any other person, any failure
to collect any of the indebtedness owing by Borrower to Bank when due, any
failure to give notice of acquisition or expected acquisition of a
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purchase
money security interest, or any delay or omission by Bank in the exercise of
any
right or remedy against Borrower or any guarantor of the obligations of
Borrowerto Bank.
8. In
the
event of the liquidation of Borrower or the Collateral, or distribution of
Borrower’s assets, any obligation of Borrower to Bank shall be satisfied and
discharged before Subordinating Party receives any distributive share or payment
on account of its obligations against Borrower. Any dividends or other payments
with respect to the Collateral, by virtue of any insolvency proceedings
instituted by or against Borrower, shall also be distributed first to Bank,
in
an amount required to satisfy the full about of the Superior Indebtedness.
In
order to enable Bank to enforce its rights hereunder in any such action or
proceeding, Bank is hereby irrevocably authorized and empowered, in its
discretion, to make and present, for and on behalf of Subordinating Party such
proofs of claims against Borrower or against any Bankruptcy trustee or debtor
in
possession on account of indebtedness hereby subordinated as Bank may deem
expedient or proper, and to vote such proofs of claims in any such proceedings,
and to receive and collect any and all dividends or other payments or
disbursements made thereof in whatever form the same may be paid or issued,
and
to apply same on account of any indebtedness owing to Bank by Borrower which
relate to the Superior Indebtedness; and Agent and Subordinating Party, further
agree to execute and deliver to Bank such assignment(s), release(s) or other
instruments as may be required by Bank in order to enable it to enforce any
and
all such claims and to collect any and all dividends or other payments or
disbursements which may be made at any time (a) in connection with any such
liquidation of Borrower or the Collateral or the distribution of Borrower’s
assets and/or (b) on account of all or any of the indebtedness hereby
subordinated.
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9. All
persons executing the Agreement in a representative capacity warrant that they
have authority to execute this Agreement and bind the entities they purport
to
represent. In particular, but not in limitation of the foregoing, the person
signing this Agreement on behalf of the Agent for Subordinating Party
represents, warrants and certifies that the execution and delivery of this
Agreement by Agent on behalf of Subordinating Party (i) do not violate the
provisions of the Debenture and the documents pertaining thereto (ii) are
binding acts of Subordinating Party, and (iii) this Agreement will be an
enforceable obligation of Subordinating Party according to the terms and
provisions hereof. Agent and Borrower further represent, warrant and agree
as
follows:
| A. |
A
true and accurate copy of the Debenture is attached hereto as Exhibit
“A.”
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| B. |
The
Debenture has not been amended, supplemented, modified in any respect
or
to any extent, except that the maturity date has been extended to
February
28, 2008, and the amount of the “Credit Facility” to which the Debenture
is subordinated has been increased to
$5,500,000.00.
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| C. |
The
“Company” under the Debenture is the Borrower, notwithstanding the name
difference, as “Magnetech Integrated Services Corp.” is the former legal
name of the Borrower, and “Magnetech Integrated Services Corp.” and the
Borrower are one and the same entity. The same name change was effected
by
an amendment to Borrower’s Articles of Incorporation filed with the
Indiana Secretary of State on September 23,
2005.
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| D. |
The
Debenture has been, and hereby is, deemed amended to the extent necessary
to be consistent with, and to give full effect to, this Agreement
and the
subordinations provided for herein. To the extent any provision hereof
is
inconsistent in any respect or to any extent with this Subordination
Agreement, and/or to the extent the provisions of this Agreement
are
inconsistent with the Debenture, the Debenture is hereby deemed modified
and amended so that this Subordination Agreement is in all respects
authorized by, and consistent with, the
Debenture.
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10. This
Agreement constitutes the entire understanding of the parties hereto pertaining
to the matters covered hereby and may only be modified or amended by a writing
8
signed
by
all parties. This Agreement is binding on, and shall inure to, the parties
hereto and their respective heirs, representatives, successors and
assigns.
11. Agent,
on
behalf of the Subordinating Party, and Borrower, each acknowledges and agrees
that (i) it has been given the opportunity to consult with counsel and other
advisors of its choice, and after having the opportunity to consult with such
counsel and advisors, knowingly, voluntarily and without duress, coercion,
unlawful restraint, intimidation or compulsion, enters into this Agreement,
(ii)
this Agreement has been entered into in exchange for good and valuable
consideration, the receipt and sufficiency of which Borrower and the
Subordinating Party each acknowledges, and (iii) it has carefully and completely
read all of the terms and provisions of this Agreement and is not relying on
the
opinions or advice of Bank or its agents or representatives in entering into
this Agreement.
12. The
parties agree that this Agreement is the product of theirjoint efforts, that
it
expresses their agreement, and that it should not be interpreted in favor of
or
against any party merely because of that party’s efforts in preparing
it.
13. This
Agreement shall be enforceable in, and interpreted under, the laws of the State
of Indiana. The parties hereto acknowledge that the transactions contemplated
by
this Subordination Agreement bear a reasonable relation to the state of Indiana.
The parties hereto agree that the internal laws of the state of Indiana shall
govern this Subordination Agreement and the exhibits hereto, including, but
not
limited to, ad issues related to usury. Any action to enforce the terms of
this
Subordination Agreement or any of its exhibits Shall be brought exclusively
in
the state and/or federal courts situated in St. Xxxxxx County, Indiana. Service
of process in any action to enforce the terms of this Subordination Agreement
may be made by serving a copy of
9
the
summons and complaint, in addition to any other relevant documents, by
commercial overnight courier to the other party at its principal address set
forth in this Subordination Agreement.
14. The
subordination’s and priorities specified in this Subordination Agreement are not
conditioned upon the nonavoidability and perfection of the security interest
to
which another security interest is subordinated and, if the security interest
to
which another security interest is subordinated is not perfected or is
avoidable, for any reason, then the subordinations and relative priority
agreements provided herein shall continue to be effective as to the particular
Collateral which is the subject of the unperfected or avoidable security
interest. In no event shall Subordinating Party institute, or join as a party
in
the institution of any action, suit or proceeding or take any action of any
kind
whatsoever seeking a determination that a security interest held by Bank is
unperfected or avoidable, or in any way make any assertions to that
effect.
15. The
following miscellaneous provisions shall apply to this Agreement:
| a. |
Waiver.
The failure of any party hereto at any time or from time to time
to
require performance of another party’s obligations under this Agreement
shall in no manner affect the right to enforce any provision of this
Agreement at a subsequent time, and the waiver of any rights arising
out
of any breach shall not be construed as a waiver of any rights arising
out
of any subsequent breach.
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| b. |
Severability.
If any one or more of the provisions of this Agreement shall be held
invalid or unenforceable, the validity and enforceability of all
other
provisions of this Agreement shall not be
affected.
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| c. |
Counterparts.
This Agreement may be executed in one or more counterparts, each
of which
shall be deemed an original but all of which together shall constitute
one
and the same instrument, and shall become effective when one or more
counterparts have been signed by each of the
parties.
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10
| d. |
Fees
and Expenses.
In the event any party breaches this Agreement, all costs and expenses,
including attorneys’ fees, incurred by a non-breaching party shall be
included in the damages which may be recovered as a result of such
breach
or default. In any litigation relating to this Agreement and the
transactions contemplated hereby, the prevailing party shall be entitled
to recover its costs and reasonable attorneys’
fees.
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| e. |
Limitations
on Rights of Third Parties.
Nothing expressed or implied in this Agreement is intended or shall
be
construed to confer upon or give any person or entity other than
the
parties hereto any rights or remedies under or by reason of this
Agreement
or the transactions contemplated
hereby.
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| f. |
Contents
of Agreement.
Each person signing this Agreement (whether for herself or for himself
Individually or on behalf of an entity or organization) acknowledges
that
this Agreement may reflect changes from previous drafts, if any,
and that
he or she has read and reviewed this Agreement carefully. Each person
signing this Agreement also acknowledges that he or she has not relied
on
any other party to this Agreement, or on any officer, agent, partner,
employee or attorney of any other party to this Agreement, to explain
the
provisions of this Agreement to him or her, or to identify changes
that
have been made from prior drafts or versions of this Agreement, if
any.
Rather, each person signing this Agreement agrees to be solely responsible
for being aware of the contents of this
Agreement.
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16. Borrower
agrees to give Bank written notice, by registered or certified mail,
postage-prepaid, of any action or inaction by Bank or any of its officers,
directors, employees, agents or attorneys in connection with this Agreement,
the
Superior Indebtedness, the Collateral, or any related transactions, that may
be
actionable against Bank or any officer, director, employee, agent or attorney
of
Bank, or a defense to the enforcement hereof or payment of any loans or any
promissory note, including, but not limited to, any commission of a tort or
violation of any contractual duty or duties implied by law. Borrower agrees
that
unless such notice is given as promptly as possible (and in any event within
ninety (90) days) after Borrower has knowledge, or with the exercise of
reasonable diligence should have had knowledge, of any such action or inaction,
Borrower shall not assert, and shall be deemed to have waived, any such claim
or
defense.
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All
notices and other communications required or permitted to be given pursuant
to
the terms of this Subordination Agreement shall be in writing and mailed by
registered or certified mail with return receipt requested, and delivered to
the
applicable party at the address indicated below:
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If
to Agent and/or
Subordinating
Party:
|
Strasbourger
Xxxxxxx Tulcin Xxxxx, Inc.
00
Xxxxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
|
|
|
If
to the Borrower:
|
0000
Xxxxx Xxxxxx Xxxxxx
Xxxxx
Xxxx, Xxxxxxx 00000
Attn:
President
|
|
|
If
to Bank:
|
MFB
Financial
0000
Xxxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxx 00000
Attn:
Xxxxxx X. Xxxx, Chief Operating Officer
|
|
|
With
a copy to:
|
Xxxxxx
X. Xxxxxxxxx, Esq.
X.X.
Xxx 0000
Xxxxxxxxx,
Xxxxxxx 00000-0000
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17. WAIVER
OF JURY TRIAL.
THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY
OF
THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT
OF
THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALINGS, STATEMENTS,
WHETHER ORAL OR WRITTEN, OR ACTIONS OF ANY OF THEM. NONE OF THE PARTIES HERETO
SHALL SEEK TO
12
CONSOLIDATE,
BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY ANY OF THE PARTIES EXCEPT BY A WRITTEN INSTRUMENT EXECUTED
BY
ALL OF THEM.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
and
year first above written.
“BORROWER”
MISCOR
Group, Ltd., an Indiana corporation
By:
/s/
XXXX X. XXXXXXX
Xxxx
X.
Xxxxxxx, President and Chief
Executive
Officer
“SUBORDINATING
PARTY” by its “AGENT”
Strasbourger
Xxxxxxx Tulcin Xxxxx, Inc., a New York Corporation
By:
/s/
Xxxxxxx Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx
MFB
Financial
By:
/s/
Xxxxxx X. Xxxx
Xxxxxx
X.
Xxxx, Chief Operating Officer
13
STATE
OF
INDIANA )
)
SS:
ST.
XXXXXX COUNTY )
Before
me, the undersigned, a Notary Public in and for said County and State personally
appeared Xxxx X. Xxxxxxx, President and Chief Executive Officer, on behalf
of
MISCOR Group, Ltd., an Indiana Corporation and acknowledged of the execution
of
the foregoing Subordination Agreement this 8th
day of
March, 2007.
/s/
Xxxxx X. Xxxxx
Xxxxx
X.
Xxxxx, Notary Public
Residing
in St. Xxxxxx County, Indiana
Xxxxx
X.
Xxxxx
Notary
Public, State of Indiana
St.
Xxxxxx County
My
Commission Expires
STATE
OF
NEW YORK )
)
SS:
NEW
YORK
COUNTY )
Before
me, the undersigned, a Notary Public in and for said County and State personally
appeared Xxxxxxx Xxxxxxxxxx, on behalf of Strasbourger Xxxxxxx Tulcin Xxxxx,
Inc., a New York Corporation and acknowledged of the execution of the foregoing
Subordination Agreement this 9th
day of
March, 2007.
/s/
illegible
Notary
Public, State of New York
No.
02G06031473
Qualified
in New York County
Commission
Expires September 20, 0000
XXXXX
XX
XXXXXXX )
)
SS:
ST.
XXXXXX COUNTY )
Before
me, the undersigned, a Notary Public in and for said County and State personally
appeared Xxxxxx X. Xxxx, Chief Operating Officer, on behalf of MFB Financial,
and acknowledged of the execution of the foregoing Subordination Agreement
this
9th day of March, 2007.
/s/
Xxxxx X. Xxxxx
Xxxxx
X.
Xxxxx, Notary Public
Residing
in St. Xxxxxx County, IN
My
commission expires:
1-21-2014
14
