SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement")
is entered into as of June 14, 2006, by and among UNITED MORTGAGE TRUST,
a Maryland trust ("Subordinated Creditor"), UNITED DEVELOPMENT FUNDING,
L.P., a Nevada limited partnership (the "Company"), and TEXTRON
FINANCIAL CORPORATION, a Delaware corporation, as Agent for all Senior
Lenders party to the Senior Credit Agreement described below.
R E C I T A L S
A. The Company, UDF Tx One, L.P. ("UDF Tx" and, together with
the Company, the "Borrowers"), Agent and Senior Lenders (as hereinafter
defined) have entered into a Loan and Security Agreement of even date
herewith (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Senior Loan Agreement")
pursuant to which, among other things, Senior Lenders have agreed,
subject to the terms and conditions set forth in the Senior Loan
Agreement, to make certain loans and financial accommodations to the
Borrowers. All of the Company's obligations to Agent and Senior Lenders
under the Senior Loan Agreement and the other Senior Debt Documents (as
hereinafter defined) are secured by liens on and security interests in
substantially all of the now existing and hereafter acquired real and
personal property of the Company (the "Collateral").
B. Company is indebted to Subordinated Creditor pursuant to a
First Amended and Restated Secured Line of Credit Promissory Note dated
as of September 30, 2004 in the principal amount of $30,000,000 (the
"Subordinated Note"). All of Company's obligations evidenced by the
Subordinated Note are secured by liens on and security interests in the
Collateral.
C. As an inducement to and as one of the conditions precedent
to the agreement of Agent and Senior Lenders to consummate the
transactions contemplated by the Senior Loan Agreement, Agent and Senior
Lenders have required the execution and delivery of this Agreement by
Subordinated Creditor and the Company in order to set forth the relative
rights and priorities of Agent, Senior Lenders and Subordinated Creditor
under the Senior Debt Documents and the Subordinated Debt Documents (as
hereinafter defined).
NOW, THEREFORE, in order to induce Agent and Senior Lenders to
consummate the transactions contemplated by the Senior Loan Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby
agree as follows:
1. Definitions. The following terms shall have the following
meanings in this Agreement:
"Agent" means Textron Financial Corporation, as Agent for the
Senior Lenders, or any other Person appointed by the holders of the
Senior Debt as administrative agent for purposes of the Senior Debt
Documents and this Agreement.
"Bankruptcy Code" means Chapter 11 of Title 11 of the United
States Code, as amended from time to time and any successor statute and
all rules and regulations promulgated thereunder.
"Distribution" means, with respect to any indebtedness, obligation
or security, (a) any payment or distribution by any Person of cash,
securities or other property, by set-off or otherwise, on account of
such indebtedness, obligation or security, (b) any redemption, purchase
or other acquisition of such indebtedness, obligation or security by any
Person or (c) the granting of any lien or security interest to or for
the benefit of the holders of such indebtedness, obligation or security
in or upon any property of any Person.
"Enforcement Action" means (a) to take from or for the account of
the Company or any guarantor of the Subordinated Debt, by set-off or in
any other manner, the whole or any part of any moneys which may now or
hereafter be owing by the Company or any such guarantor with respect to
the Subordinated Debt, (b) to xxx for payment of, or to initiate or
participate with others in any suit, action or proceeding against the
Company or any such guarantor to (i) enforce payment of or to collect
the whole or any part of the Subordinated Debt or (ii) commence judicial
enforcement of any of the rights and remedies under the Subordinated
Debt Documents or applicable law with respect to the Subordinated Debt,
(c) to accelerate the Subordinated Debt, (d) to exercise any put option
or to cause the Company or any such guarantor to honor any redemption or
mandatory prepayment obligation under any Subordinated Debt Document,
(e) to notify account debtors or directly collect accounts receivable or
other payment rights of the Company or any such guarantor, or (f) to
take any action under the provisions of any state or federal law,
including, without limitation, the Uniform Commercial Code, or under any
contract or agreement, to enforce, foreclose upon, take possession of or
sell any property or assets of the Company or any such guarantor,
including the Collateral.
"Loan Documents" means the Senior Loan Agreement and all other
agreements, documents and instruments executed from time to time in
connection therewith, as the same may be amended, restated, supplemented
or otherwise modified from time to time.
"Permitted Subordinated Debt Payments" means payments of regularly
scheduled payments of principal and interest and discretionary payments
of principal on the Subordinated Debt due and payable on a non-
accelerated basis in accordance with the terms of the Subordinated Debt
Documents as in effect on the date hereof or as modified in accordance
with the terms of this Agreement.
"Person" means any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association,
government, governmental agency or other entity, whether acting in an
individual, fiduciary or other capacity.
"Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of
a custodian, receiver, trustee or other officer with similar powers or
any other proceeding for the liquidation, dissolution or other winding
up of a Person.
"Refinancing Senior Debt Documents" means any financing
documentation which replaces the Loan Documents and pursuant to which
the Senior Debt under the Loan Documents are refinanced, as such
financing documentation may be amended, restated, supplemented or
otherwise modified from time to time in compliance with this Agreement.
"Senior Debt" means all obligations, liabilities and indebtedness
of every nature of the Company from time to time owed to Agent or any
Senior Lender under the Senior Debt Documents, including, without
limitation, the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses, whether
primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and from time to time hereafter owing, due or payable, whether
before or after the filing of a Proceeding under the Bankruptcy Code
together with (a) any amendments, modifications, renewals or extensions
thereof to the extent not prohibited by the terms of this Agreement and
(b) any interest accruing thereon after the commencement of a
Proceeding, without regard to whether or not such interest is an allowed
claim. Senior Debt shall be considered to be outstanding whenever any
loan commitment under the Senior Debt Documents is outstanding.
"Senior Debt Documents" means the Loan Documents and, after any
refinancing of the Senior Debt under the Loan Documents, the Refinancing
Senior Debt Documents.
"Senior Default" means any "Event of Default" under the Senior
Debt Documents, or any condition or event that, after notice or lapse of
time or both, would constitute such an Event of Default if that
condition or event were not cured or removed within any applicable grace
or cure period set forth therein.
"Senior Default Notice" means a written notice from Agent to
Subordinated Creditor pursuant to which Subordinated Creditor is
notified of the occurrence of a Senior Default, which notice
incorporates a reasonably detailed description of such Senior Default
and which notice expressly states that it is a "Senior Default"
hereunder.
"Senior Lenders" means the holders of the Senior Debt.
"Subordinated Debt" means all of the obligations of the Company to
Subordinated Creditor evidenced by or incurred pursuant to the
Subordinated Debt Documents.
"Subordinated Debt Documents" means the Subordinated Note, any
guaranty with respect to the Subordinated Debt, any security agreement
or other collateral document securing the Subordinated Debt and all
other documents, agreements and instruments now existing or hereinafter
entered into evidencing or pertaining to all or any portion of the
Subordinated Debt.
"Subordinated Debt Default" means a default in the payment of the
Subordinated Debt or in the performance of any term, covenant or
condition contained in the Subordinated Debt Documents or any other
occurrence permitting Subordinated Creditor to accelerate the payment of
all or any portion of the Subordinated Debt.
"Subordinated Debt Default Notice" means a written notice from
Subordinated Creditor or the Company to Agent pursuant to which Agent is
notified of the occurrence of a Subordinated Debt Default, which notice
incorporates a reasonably detailed description of such Subordinated Debt
Default and which notice expressly states that it is a "Subordinated
Debt Default Notice" hereunder.
2. Subordination.
2.1 Subordination of Subordinated Debt to Senior Debt. The
Company covenants and agrees, and Subordinated Creditor by its
acceptance of the Subordinated Debt Documents (whether upon original
issue or upon transfer or assignment) likewise covenants and agrees,
notwithstanding anything to the contrary contained in any of the
Subordinated Debt Documents, that the payment of any and all of the
Subordinated Debt shall be subordinate and subject in right and time of
payment, to the extent and in the manner hereinafter set forth, to the
prior indefeasible payment in full in cash of all Senior Debt. Each
holder of Senior Debt, whether such Senior Debt is now outstanding or
hereafter created, incurred, assumed or guaranteed, shall be deemed to
have acquired Senior Debt in reliance upon the provisions contained in
this Agreement.
2.2 Liquidation, Dissolution, Bankruptcy. In the event of any
Proceeding involving the Company:
(a) All Senior Debt shall first be indefeasibly paid in
full in cash and all commitments to lend under the Senior Debt
Documents shall be terminated before any Distribution, whether in
cash, securities or other property, shall be made to Subordinated
Creditor on account of any Subordinated Debt.
(b) Any Distribution, whether in cash, securities or other
property which would otherwise, but for the terms hereof, be
payable or deliverable in respect of the Subordinated Debt shall
be paid or delivered directly to Agent (to be held and/or applied
by Agent in accordance with the terms of the Senior Debt
Documents) until all Senior Debt is indefeasibly paid in full in
cash and all commitments to lend under the Senior Debt Documents
shall have been terminated. Subordinated Creditor irrevocably
authorizes, empowers and directs any debtor, debtor in possession,
receiver, trustee, liquidator, custodian, conservator or other
Person having authority, to pay or otherwise deliver all such
Distributions to Agent. Subordinated Creditor also irrevocably
authorizes and empowers Agent, in the name of Subordinated
Creditor, to demand, xxx for, collect and receive any and all such
Distributions.
(c) Subordinated Creditor agrees not to initiate,
prosecute or participate in any claim, action or other proceeding
challenging the enforceability, validity, perfection or priority
of the Senior Debt or any liens and security interests securing
the Senior Debt.
(d) Subordinated Creditor agrees that Agent or any Senior
Lender may consent to the use of cash collateral or provide
financing to Company on such terms and conditions and in such
amounts as Agent or such Senior Lender, in its sole discretion,
may decide and, in connection therewith, Company may grant to
Agent or such Senior Lender liens and security interests upon all
of the property of Company, which liens and security interests (i)
shall secure payment of all Senior Debt (whether such Senior Debt
arose prior to the commencement of any Proceeding or at any time
thereafter) and all other financing provided by Agent or such
Senior Lender during such Proceeding and (ii) shall be superior in
priority to the liens and security interests, if any, in favor of
Subordinated Creditor on the property of Company. Subordinated
Creditor agrees that it will not object to or oppose a sale or
other disposition of any property securing all of any part of the
Senior Debt free and clear of security interests, liens or other
claims of Subordinated Creditor under Section 363 of the
Bankruptcy Code or any other provision of the Bankruptcy Code if
Agent or any Senior Lender has consented to such sale or
disposition. Subordinated Creditor agrees not to assert any right
it may have to "adequate protection" of Subordinated Creditor's
interest in any Collateral in any Proceeding and agrees that it
will not seek to have the automatic stay lifted with respect to
any Collateral without the prior written consent of Agent or such
Senior Lender. Subordinated Creditor waives any claim it may now
or hereafter have arising out of Agent's or any Senior Lender's
election, in any Proceeding instituted under the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code,
and/or any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code by Company, as debtor in possession.
Subordinated Creditor further agrees that it will not seek to
participate or participate on any creditor's committee without
Agent's or such Senior Lender's prior written consent. This
Agreement, which the parties hereto expressly acknowledge is a
"subordination agreement" under section 510(a) of the Bankruptcy
Code, shall be effective before, during and after the commencement
of a Proceeding.
(e) Subordinated Creditor agrees to execute, verify,
deliver and file any proofs of claim in respect of the
Subordinated Debt requested by Agent in connection with any such
Proceeding and hereby irrevocably authorizes, empowers and
appoints Agent its agent and attorney-in-fact to (i) execute,
verify, deliver and file such proofs of claim upon the failure of
Subordinated Creditor promptly to do so prior to 30 days before
the expiration of the time to file any such proof of claim and
(ii) vote such claim in any such Proceeding upon the failure of
Subordinated Creditor to do so prior to 15 days before the
expiration of the time to vote any such claim; provided Agent
shall have no obligation to execute, verify, deliver, file and/or
vote any such proof of claim. In the event that Agent votes any
claim in accordance with the authority granted hereby,
Subordinated Creditor shall not be entitled to change or withdraw
such vote.
(f) The Senior Debt shall continue to be treated as Senior
Debt and the provisions of this Agreement shall continue to govern
the relative rights and priorities of Senior Lenders and
Subordinated Creditor even if all or part of the Senior Debt or
the security interests securing the Senior Debt are subordinated,
set aside, avoided, invalidated or disallowed in connection with
any such Proceeding, and this Agreement shall be reinstated if at
any time any payment of any of the Senior Debt is rescinded or
must otherwise be returned by any holder of Senior Debt or any
representative of such holder.
2.3 Subordinated Debt Payment Restrictions.
(a) Notwithstanding the terms of the Subordinated Debt
Documents, the Company hereby agrees that it may not make, and
Subordinated Creditor hereby agrees that it will not accept, any
Distribution with respect to the Subordinated Debt until the
Senior Debt is indefeasibly paid in full in cash and all
commitments to lend under the Senior Debt Documents have
terminated, other than Permitted Subordinated Debt Payments
subject to the terms of Section 2.2 of this Agreement; provided,
however, that the Company and Subordinated Creditor further agree
that no Permitted Subordinated Debt Payment may be made by the
Company or accepted by Subordinated Creditor unless (i) at the
time of such Permitted Subordinated Debt Payment no Senior Default
shall exist immediately prior to or immediately after such
Permitted Subordinated Debt Payment, and (ii) after giving pro
forma effect to such Permitted Subordinated Debt Payment, if such
Permitted Subordinated Debt Payment shall cause the principal
balance of the Subordinated Debt to be less than $28,000,000, then
the Company, prior to making any such Permitted Subordinated Debt
Payment, shall certify to the Senior Lenders in form and substance
satisfactory to Agent and containing projections or supporting
analysis as Agent may reasonably request, that the Company shall
be in compliance with Section 7.6 of the Senior Loan Agreement as
of the date of such Permitted Subordinated Debt Payment.
(b) No Senior Default shall be deemed to have been waived
for purposes of this Section 2.3 unless and until the Company
shall have received a written waiver from Agent or all Senior
Lenders.
(c) Notwithstanding any provision of this Section 2.3 to
the contrary, the failure of the Company to make any Distribution
with respect to the Subordinated Debt by reason of the operation
of this Section 2.3 shall not be construed as preventing the
occurrence of a Subordinated Debt Default under the applicable
Subordinated Debt Documents.
2.4 Subordinated Debt Standstill Provisions. Until the Senior
Debt is indefeasibly paid in full in cash and all commitments to lend
under the Senior Debt Documents shall be terminated, Subordinated
Creditor shall not, without the prior written consent of Agent, take any
Enforcement Action with respect to the Subordinated Debt or the
Collateral. Notwithstanding the foregoing, Subordinated Creditor may
file proofs of claim against the Company in any Proceeding involving the
Company. Any Distributions or other proceeds of any Enforcement Action
obtained by Subordinated Creditor in violation of the foregoing
prohibition shall in any event be held in trust by it for the benefit of
Agent and Senior Lenders and promptly paid or delivered to Agent for the
benefit of Senior Lenders in the form received until all Senior Debt is
indefeasibly paid in full in cash and all commitments to lend under the
Senior Debt Documents shall have been terminated.
2.5 Incorrect Payments. If any Distribution on account of the
Subordinated Debt not permitted to be made by the Company or accepted by
Subordinated Creditor under this Agreement, such Distribution shall not
be commingled with any of the assets of Subordinated Creditor, shall be
held in trust by Subordinated Creditor for the benefit of Agent and
Senior Lenders and shall be promptly paid over to Agent for application
(in accordance with the Senior Debt Documents) to the payment of the
Senior Debt then remaining unpaid, until all of the Senior Debt is paid
in full.
2.6 Subordination of Liens and Security Interests; Agreement Not
to Contest; Agreement to Release Liens. Until the Senior Debt has been
indefeasibly paid in full in cash and all lending commitments under the
Senior Debt Documents have terminated, all liens and security interests
of Subordinated Creditor in the Collateral shall be and hereby are
subordinated for all purposes and in all respects to the liens and
security interests of Agent (for its benefit and the benefit of the
Senior Lenders) in the Collateral, regardless of the time, manner or
order of perfection of any such liens and security interests.
Subordinated Creditor agrees that it will not at any time contest the
validity, perfection, priority or enforceability of the Senior Debt, the
Senior Debt Documents, or the liens and security interests of Agent in
the Collateral securing the Senior Debt. In the event that Agent
releases or agrees to release any of its liens or security interests in
the Collateral in connection with the sale or other disposition thereof
or any of the Collateral is sold or retained pursuant to a foreclosure
or similar action, Subordinated Creditor shall (or shall cause its
agent) to promptly execute and deliver to Agent such termination
statements and releases as Agent shall reasonably request to effect the
release of the liens and security interests of Subordinated Creditor in
such Collateral. In furtherance of the foregoing, Subordinated Creditor
hereby irrevocably appoints Agent its attorney-in-fact, with full
authority in the place and stead of Subordinated Creditor and in the
name of Subordinated Creditor or otherwise, to execute and deliver any
document or instrument which Subordinated Creditor may be required to
deliver pursuant to this Section 2.6.
2.7 Application of Proceeds from Sale or other Disposition of the
Collateral. In the event of any sale, transfer or other disposition
(including a casualty loss or taking through eminent domain) of the
Collateral, the proceeds resulting therefrom (including insurance
proceeds) shall be applied in accordance with the terms of the Senior
Debt Documents or as otherwise consented to by Agent and the Senior
Lenders until such time as the Senior Debt is indefeasibly paid in full
in cash and all commitments to lend under the Senior Debt Documents have
been terminated.
2.8 Exclusive Enforcement. Until the Senior Debt has been
indefeasibly paid in full in cash and all lending commitments under the
Senior Debt Documents have terminated, whether or not a Proceeding has
been commenced by or against the Company, Agent shall have the exclusive
right to take and continue any Enforcement Action with respect to the
Collateral, without any consultation with or consent of Subordinated
Creditor. Upon the occurrence and during the continuance of a default
or an event of default under the Senior Debt Documents, Agent may take
and continue any Enforcement Action with respect to the Senior Debt and
the Collateral in such order and manner as it may determine in its sole
discretion.
2.9 Sale, Transfer or other Disposition of Subordinated Debt.
(a) Subordinated Creditor shall not sell, assign, pledge,
dispose of or otherwise transfer all or any portion of the
Subordinated Debt or any Subordinated Debt Document.
(b) Notwithstanding the foregoing, the subordination
effected hereby shall survive any sale, assignment, pledge,
disposition or other transfer of all or any portion of the
Subordinated Debt in violation of the foregoing prohibition, and
the terms of this Agreement shall be binding upon the successors
and assigns of Subordinated Creditor, as provided in Section 10
hereof.
2.10 Legends. Until the termination of this Agreement in
accordance with Section 16 hereof, Subordinated Creditor will cause to
be clearly, conspicuously and prominently inserted on the face of the
Subordinated Note and any other Subordinated Debt Document, as well as
any renewals or replacements thereof, the following legend:
"This instrument and the rights and obligations evidenced
hereby are subordinate in the manner and to the extent set forth
in that certain Subordination and Intercreditor Agreement (the
"Subordination Agreement") dated as of June ___, 2006 among United
Mortgage Trust, United Development Funding, L.P. (the "Company")
and Textron Financial Corporation ("Agent"), to the indebtedness
(including interest) owed by the Company pursuant to that certain
Loan and Security Agreement dated as of June ___, 2006 among the
Company, UDF Tx One, L.P., Agent and the lenders from time to time
party thereto, as such Loan and Security Agreement may be amended,
restated, supplemented or otherwise modified from time to time and
to indebtedness refinancing the indebtedness under that agreement
as contemplated by the Subordination Agreement; and each holder of
this instrument, by its acceptance hereof, irrevocably agrees to
be bound by the provisions of the Subordination Agreement."
3. Modifications.
3.1 Modifications to Senior Debt Documents. Senior Lenders may
at any time and from time to time without the consent of or notice to
Subordinated Creditor, without incurring liability to Subordinated
Creditor and without impairing or releasing the obligations of
Subordinated Creditor under this Agreement, change the manner or place
of payment or extend the time of payment of or renew or alter any of the
terms of the Senior Debt, or amend in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise
relating to the Senior Debt.
3.2 Modifications to Subordinated Debt Documents. Until the
Senior Debt has been indefeasibly paid in full in cash and all lending
commitments under the Senior Debt Documents have terminated, and
notwithstanding anything to the contrary contained in the Subordinated
Debt Documents, Subordinated Creditor shall not, without the prior
written consent of Agent, agree to any amendment, modification or
supplement to the Subordinated Debt Documents.
4. Waiver of Certain Rights by Subordinated Creditor.
4.1 Marshaling. Subordinated Creditor hereby waives any rights
it may have under applicable law to assert the doctrine of marshaling or
to otherwise require Agent and the Senior Lenders to marshal any
property of Company or any guarantor of the Senior Debt for the benefit
of Subordinated Creditor.
4.2 Rights Relating to Agent's Actions with respect to the
Collateral. Subordinated Creditor hereby waives, to the extent permitted
by applicable law, any rights which it may have to enjoin or otherwise
obtain a judicial or administrative order preventing Agent from taking,
or refraining from taking, any action with respect to all or any part of
the Collateral. Without limitation of the foregoing, Subordinated
Creditor hereby agrees (a) that it has no right to direct or object to
the manner in which Agent applies the proceeds of the Collateral
resulting from the exercise by Agent of rights and remedies under the
Senior Debt Documents to the Senior Debt and (b) that Agent has not
assumed any obligation to act as the agent for Subordinated Creditor
with respect to the Collateral.
5. Representations and Warranties.
5.1 Representations and Warranties of Subordinated Creditor.
Subordinated Creditor hereby represents and warrants to Agent and Senior
Lenders that as of the date hereof: (a) Subordinated Creditor is a
[corporation] duly formed and validly existing under the laws of the
State of Maryland; (b) Subordinated Creditor has the power and
authority to enter into, execute, deliver and carry out the terms of
this Agreement, all of which have been duly authorized by all proper and
necessary action; (c) the execution of this Agreement by Subordinated
Creditor will not violate or conflict with the organizational documents
of Subordinated Creditor, any material agreement binding upon
Subordinated Creditor or any law, regulation or order or require any
consent or approval which has not been obtained; (d) this Agreement is
the legal, valid and binding obligation of Subordinated Creditor,
enforceable against Subordinated Creditor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by equitable principles;
and (e) Subordinated Creditor is the sole owner, beneficially and of
record, of the Subordinated Debt Documents and the Subordinated Debt.
5.2 Representations and Warranties of Agent. Agent hereby
represents and warrants to Subordinated Creditor that as of the date
hereof: (a) Agent is a corporation duly formed and validly existing
under the laws of the State of Delaware; (b) Agent has the power and
authority to enter into, execute, deliver and carry out the terms of
this Agreement, all of which have been duly authorized by all proper and
necessary action; (c) the execution of this Agreement by Agent will not
violate or conflict with the organizational documents of Agent, any
material agreement binding upon Agent or any law, regulation or order or
require any consent or approval which has not been obtained; and (d)
this Agreement is the legal, valid and binding obligation of Agent,
enforceable against Agent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles.
6. Subrogation. Subject to the indefeasible payment in full in cash
of all Senior Debt and the termination of all lending commitments under
the Senior Debt Documents, Subordinated Creditor shall be subrogated to
the rights of Agent and Senior Lenders to receive Distributions with
respect to the Senior Debt until the Subordinated Debt is paid in full.
Subordinated Creditor agrees that in the event that all or any part of a
payment made with respect to the Senior Debt is recovered from the
holders of the Senior Debt in a Proceeding or otherwise, any
Distribution received by Subordinated Creditor with respect to the
Subordinated Debt at any time after the date of the payment that is so
recovered, whether pursuant to the right of subrogation provided for in
this Agreement or otherwise, shall be deemed to have been received by
Subordinated Creditor in trust as property of the holders of the Senior
Debt and Subordinated Creditor shall forthwith deliver the same to the
Agent for the benefit of the Senior Lenders for application to the
Senior Debt until the Senior Debt is paid in full. A Distribution made
pursuant to this Agreement to Agent or Senior Lenders which otherwise
would have been made to Subordinated Creditor is not, as between the
Company and Subordinated Creditor, a payment by the Company to or on
account of the Senior Debt.
7. Modification. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any party from the terms
hereof, shall not be effective in any event unless the same is in
writing and signed by Agent and Subordinated Creditor, and then such
modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose given. Any notice to or demand on
any party hereto in any event not specifically required hereunder shall
not entitle the party receiving such notice or demand to any other or
further notice or demand in the same, similar or other circumstances
unless specifically required hereunder.
8. Further Assurances. Each party to this Agreement promptly will
execute and deliver such further instruments and agreements and do such
further acts and things as may be reasonably requested in writing by any
other party hereto that may be necessary or desirable in order to effect
fully the purposes of this Agreement.
9. Notices. Unless otherwise specifically provided herein, any
notice delivered under this Agreement shall be in writing addressed to
the respective party as set forth below and may be personally served,
telecopied or sent by overnight courier service or certified or
registered United States mail and shall be deemed to have been given (a)
if delivered in person, when delivered; (b) if delivered by telecopy, on
the date of transmission if transmitted on a business day before 4:00
p.m. (Providence, Rhode Island time) or, if not, on the next succeeding
business day; (c) if delivered by overnight courier, one business day
after delivery to such courier properly addressed; or (d) if by United
States mail, four business days after deposit in the United States mail,
postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Subordinated Creditor:
United Mortgage Trust
0000 Xxxxx Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxxx, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Telecopy: (000) 000-0000
If to the Company:
United Development Funding, L.P.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxxx, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Telecopy: (000) 000-0000
If to Agent or Senior Lenders:
Textron Financial Corporation
00000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Portfolio Manager
Telecopy: (00) 000-0000
With a copy to:
Textron Financial Corporation
00000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 8.
10. Successors and Assigns. This Agreement shall inure to the benefit
of, and shall be binding upon, the respective successors and assigns of
Agent, Senior Lenders and Company, and, subject to Section 2.9 hereof,
Subordinated Creditor. To the extent permitted under the Senior Debt
Documents, Senior Lenders may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Debt
or any interest therein to any Person and, notwithstanding any such
assignment or transfer, or any subsequent assignment or transfer, the
Senior Debt shall, subject to the terms hereof, be and remain Senior
Debt for purposes of this Agreement, and every permitted assignee or
transferee of any of the Senior Debt or of any interest therein shall,
to the extent of the interest of such permitted assignee or transferee
in the Senior Debt, be entitled to rely upon and be the third party
beneficiary of the subordination provided under this Agreement and shall
be entitled to enforce the terms and provisions hereof to the same
extent as if such assignee or transferee were initially a party hereto.
11. Relative Rights. This Agreement shall define the relative rights
of Agent, Senior Lenders and Subordinated Creditor. Nothing in this
Agreement shall (a) impair, as among the Company, Agent and Senior
Lenders and as between the Company and Subordinated Creditor, the
obligation of the Company with respect to the payment of the Senior Debt
and the Subordinated Debt in accordance with their respective terms or
(b) affect the relative rights of Agent, Senior Lenders or Subordinated
Creditor with respect to any other creditors of the Company.
12. Conflict. In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of
any of the Subordinated Debt Documents, the provisions of this Agreement
shall control and govern.
13. Headings. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
14. 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.
15. Severability. In the event that any provision of this Agreement
is deemed to be invalid, illegal or unenforceable by reason of the
operation of any law or by reason of the interpretation placed thereon
by any court or governmental authority, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not
in any way be affected or impaired thereby, and the affected provision
shall be modified to the minimum extent permitted by law so as most
fully to achieve the intention of this Agreement.
16. Continuation of Subordination; Termination of Agreement. This
Agreement shall remain in full force and effect until the indefeasible
payment in full in cash of the Senior Debt and the termination of all
lending commitments under the Senior Debt Documents after which this
Agreement shall terminate without further action on the part of the
parties hereto.
17. Applicable Law. This Agreement shall be governed by and shall be
construed and enforced in accordance with the internal laws of the State
of Rhode Island, without regard to conflicts of law principles.
18. CONSENT TO JURISDICTION. EACH OF SUBORDINATED CREDITOR AND THE
COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE STATE OF RHODE ISLAND AND IRREVOCABLY AGREES
THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.
EACH OF SUBORDINATED CREDITOR AND THE COMPANY EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. EACH OF SUBORDINATED CREDITOR AND THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUBORDINATED
CREDITOR AND THE COMPANY AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE
SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER
DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT, ALL DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS OF SUBORDINATED CREDITOR, THE COMPANY OR
ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR
MANAGING AGENTS OF SUBRODINATED CREDITOR OR THE COMPANY, AS APPLICABLE,
FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES REGARDING THE
PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A
DEPOSITION, AT TRIAL OR OTHERWISE). EACH OF SUBORDINATED CREDITOR AND
THE COMPANY AGREES THAT AGENT'S OR ANY LENDER'S COUNSEL IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF
UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM
MAY BE USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION.
EACH OF SUBORDINATED CREDITOR AND THE COMPANY IN ANY EVENT WILL USE ALL
COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE
RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT
OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC
OR OTHER FORM) OR OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE
DISPUTE.
19. WAIVER OF JURY TRIAL. SUBORDINATED CREDITOR, THE COMPANY AND
AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF
THE SUBORDINATED DEBT DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS.
EACH OF SUBORDINATED CREDITOR, THE COMPANY AND AGENT ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE SENIOR DEBT DOCUMENTS AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF
SUBORDINATED CREDITOR, THE COMPANY AND AGENT WARRANTS AND REPRESENTS
THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS.
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IN WITNESS WHEREOF, Subordinated Creditor, the Company and Agent
have caused this Agreement to be executed as of the date first above
written.
SUBORDINATED CREDITOR:
UNITED MORTGAGE TRUST, a Maryland
trust
By:
Name:
Title:
COMPANY:
UNITED DEVELOPMENT FUNDING, L.P., a
Nevada limited partnership
By: United Development Funding,
Inc., its general partner
By:
Name:
Title:
AGENT:
TEXTRON FINANCIAL CORPORATION, a
Delaware corporation
By:
Name:
Title:
12
LEGAL_US_E # 70846154.6 13
LEGAL_US_E # 70846154.6
SUBORDINATION AND INTERCREDITOR AGREEMENT
