Exhibit 10.3
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT"), dated as
of December 13, 2004, is among DATATEC SYSTEMS, INC. AND DATATEC INDUSTRIES,
INC. (each a "BORROWER" and together, the "BORROWERS"), EAGLE ACQUISITION
PARTNERS, INC. (the "SUBORDINATED LENDER"), and ALPINE ASSOCIATES, A LIMITED
PARTNERSHIP (together with its successors and permitted assigns in such
capacity, the "SENIOR LENDER").
PRELIMINARY STATEMENTS
1. The Borrowers have issued a Senior Secured Note, dated the date hereof,
in the original principal amount of $585,000 to the Senior Lender (the "NOTE")
to evidence their obligation to repay a term loan made by the Senior Lender to
the Borrowers on the date hereof (the "SENIOR LOAN").
2. It is a condition to the Senior Lender making available the Senior Loan
that, among other things, the Borrowers and the Subordinated Lender shall have
executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the foregoing and in order to induce
the Senior Lender to make the Senior Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS
(a) Capitalized terms used in this Agreement, but not otherwise
defined in this Agreement, shall have the meanings assigned thereto in the Note.
(b) All obligations and liabilities of the Borrowers howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, or now or hereafter existing, or due or to become due, are
hereinafter called the "LIABILITIES". All Liabilities to the Senior Lender under
the Note Documents, or under any debtor-in-possession financing provided to the
either or both Borrowers by the Senior Lender on or after the date hereof
pursuant to sections 363 and 364 of title 11 of the United States Code, 11
U.S.C. xx.xx. 101 ET. SEQ., and any claim of the Senior Lender against the
Borrowers in connection with either of the foregoing are hereinafter called the
"SENIOR LIABILITIES"; and all Liabilities to the Subordinated Lender, and any
claim of the Subordinated Lender against the Borrowers are hereinafter called
the "JUNIOR LIABILITIES"; it being expressly understood and agreed that the term
Senior Liabilities, as used herein, shall include, without limitation, any and
all interest accruing on any of the Senior Liabilities after the commencement of
any proceedings referred to in Section 4 hereof, notwithstanding any provision
or rule of law that might restrict the rights of the Senior Lender, as against
the Borrowers, or anyone else, to collect such interest.
SECTION 2. SUBORDINATION OF CLAIMS. The payment and distribution in respect
of all Junior Liabilities shall be postponed and subordinated to the payment in
full of all Senior Liabilities, and no payments or other distributions
whatsoever in respect of any Junior Liabilities shall be made, nor shall any
property, assets or equity or other interests of the Borrowers be made or
applied to the payment, satisfaction, purchase or other acquisition or
retirement of any Junior Liabilities. For all purposes of this Agreement, no
Senior Liability shall be deemed to have been paid "in full" until the Senior
Lender shall have received indefeasible payment in full in cash, subject to
Section 11 of this Agreement.
SECTION 3. SUBORDINATION OF LIENS. The Senior Lender and the Subordinated
Lender hereby agree that, as between the Senior Lender and the Subordinated
Lender, and notwithstanding: (a) the terms (including the description of the
Collateral), dating, execution, or delivery of any document, instrument, or
agreement; (b) the time, order, occurrence (or nonoccurrence), method, or manner
of granting, or perfection of any security interest or lien; (c) the time of
filing or recording or the failure to file of any financing statements,
assignments, mortgages, or any other documents, instruments, or agreements under
the UCC as in effect from time to time in any relevant jurisdiction (the "UCC")
or any other applicable law; and (d) any provision of the UCC or any other
applicable law to the contrary, the Senior Lender shall have a first priority
security interest in and lien upon any and all of the Collateral to secure the
Senior Liabilities.
SECTION 4. BANKRUPTCY, INSOLVENCY, ETC. In the event of any dissolution,
winding up, liquidation, readjustment, reorganization or other similar
proceedings relating to either or both Borrowers, as such, or to its property
(whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Borrowers, or any sale of all or substantially all of the assets of the
Borrowers, or otherwise) the Senior Liabilities shall first be paid in full
before the Subordinated Lender shall be entitled to receive and to retain any
payment or distribution in respect of the Junior Liabilities, and, in order to
implement the foregoing, but not for any other purpose or under any other
circumstances other than as expressly set forth hereunder or in any other Note
Document any and all payments and distributions of any kind or character in
respect of the Junior Liabilities to which the Subordinated Lender would be
entitled if the Junior Liabilities were not subordinated pursuant to this
Agreement shall be made directly to the Senior Lender.
SECTION 5. STANDSTILL ON REMEDIES RELATED TO JUNIOR LIABILITIES. The
Subordinated Lender agrees that, without the written consent of the Senior
Lender, it shall not exercise remedies or take any enforcement action (except as
otherwise permitted by order of a bankruptcy court) available upon the
occurrence of any default or event of default under any agreements or
instruments evidencing any Junior Liabilities or take any action toward the
collection of any Junior Liabilities until the Senior Liabilities are paid in
full.
SECTION 6. PAYMENTS HELD IN TRUST. In the event that the Subordinated
Lender receives any payment or other distribution of any kind or character from
the Borrowers, or from any other source whatsoever in respect of any of the
Junior Liabilities such payment or other distribution shall be received and held
in trust for the Senior Lender and promptly turned over by such Subordinated
Lender to the Senior Lender. The Subordinated Lender shall xxxx its books and
records, and cause each Borrower to xxxx its books and records, so as to clearly
indicate that the Junior Liabilities are subordinated in accordance with the
terms of this Agreement, and will cause to be clearly inserted in or marked on
any promissory note or other instrument that at any time evidences any of the
Junior Liabilities a statement to the effect that the payment thereof is
subordinated in accordance with the terms of this Agreement. The Subordinated
Lender shall execute such further documents or instruments and take such further
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action as the Senior Lender may from time to time reasonably request to carry
out the intent of this Agreement.
SECTION 7. APPLICATION OF PAYMENTS; NO SUBROGATION. All payments and
distributions received by the Senior Lender in respect of the Junior
Liabilities, to the extent received in or converted into cash, may be applied by
the Senior Lender first to the payment of any and all expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by the Senior
Lender in enforcing this Agreement or in endeavouring to collect or realize upon
any of the Junior Liabilities or any security therefor, and any balance thereof
shall, solely as between the Subordinated Lender and the Senior Lender, be
applied toward the payment of the Senior Liabilities remaining unpaid; but, as
between each Borrower and its creditors, no such payments or distributions of
any kind or character shall be deemed to be payments or distributions in respect
of the Senior Liabilities, and, notwithstanding any such payments or
distributions received by the Senior Lender in respect of Junior Liabilities and
so applied by the Senior Lender toward the payment of the Senior Liabilities,
the Subordinated Lender shall be subrogated to the then existing rights of the
Senior Lender, if any, in respect of the Senior Liabilities only at such time as
the Senior Lender shall have received payment in full of the Senior Liabilities.
SECTION 8. ABILITY OF SUBORDINATED LENDER TO PURCHASE BORROWERS' ASSETS.
The provisions of this Agreement shall not prohibit or limit the Subordinated
Lender's right to enter into an agreement to purchase the assets of the
Borrowers or otherwise submit a bid for the assets of Borrowers in any
insolvency or bankruptcy proceeding so long as any such bid and agreement
provides for the Senior Liabilities to be paid in full in cash concurrently with
the closing of any such transaction and such payment in fact occurs.
SECTION 9. REPRESENTATIONS AND WARRANTIES. Then Subordinated Lender
represents and warrants to the Senior Lender that:
(a) ORGANIZATION. It is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
(b) POWER AND AUTHORITY. The execution, delivery and performance by
the Subordinated Lender of this Agreement are within the Subordinated Lender's
corporate power, have been duly authorized by all necessary or proper corporate
action and; does not require the consent or approval of any governmental
authority or any other Person.
(c) ENFORCEABLE AGREEMENT. This Agreement has been duly executed and
delivered by the Subordinated Lender and constitutes a legal, valid and binding
obligation of the Subordinated Lender, enforceable against the Subordinated
Lender in accordance with its terms.
(d) OWNERSHIP OF JUNIOR LIABILITIES. The Subordinated Lender is the
full and complete owner of the Junior Liabilities and all rights under the
Junior Liabilities. The Subordinated Lender is authorized to subordinate the
Junior Liabilities.
SECTION 10. NOTICES.
(a) The Subordinated Lender shall provide the Senior Lender with
notice of any event of default under any agreements or instruments evidencing
any Junior Liabilities occurring after the date hereof promptly upon the
occurrence thereof; provided that the failure to give such notice(s) shall not
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alter, amend, or affect the provisions of this Agreement.
(b) The Senior Lender shall provide the Subordinated Lender with
notice of any event of default under any agreements or instruments evidencing
any Senior Liabilities occurring after the date hereof promptly upon the
occurrence thereof; provided that the failure to give such notice(s) shall not
alter, amend, or affect the provisions of this Agreement.
SECTION 11. WAIVERS BY SUBORDINATED LENDER. The Subordinated Lender hereby
waives: (a) notice of acceptance by the Senior Lender of this Agreement; (b)
notice of (i) the existence, (ii) the creation or (iii) except as otherwise set
forth herein, the non-payment of all or any of the Senior Liabilities; and (c)
all diligence in collection or protection of or realization upon the Senior
Liabilities or any thereof or any security therefor. The rights and priorities
set forth in this Agreement shall remain binding irrespective of the terms of
any plan of reorganization in any bankruptcy case.
SECTION 12. ADDITIONAL OBLIGATIONS OF SUBORDINATED LENDER. The Subordinated
Lender shall not without the prior written consent of the Senior Lender: (a)
cancel, waive, forgive, transfer or assign, or attempt to accelerate, enforce or
collect (unless such enforcement or collection actions are made in accordance
with this Agreement), or subordinate any Junior Liabilities or any rights in
respect thereof to any Liabilities other than the Senior Liabilities; (b) take
any collateral security for any Junior Liabilities; (c) convert any Junior
Liabilities into equity of the either of the Borrowers; or (d) commence, or join
with any other creditor in commencing, any bankruptcy, reorganization or
insolvency proceedings with respect to either or both Borrowers. Any promissory
notes and loan agreements evidencing additional Junior Liabilities incurred by
either Borrower after the date hereof shall include subordination provisions
acceptable to the Senior Lender.
SECTION 13. CONTINUING SUBORDINATION. This Agreement shall in all respects
be a continuing agreement and shall remain in full force and effect or be
reinstated, as the case may be, if at any time payment or other transfer in
respect of any of the Senior Liabilities is rescinded, avoided or must otherwise
be returned by the Senior Lender in connection with the insolvency, bankruptcy,
reorganization or similar proceeding or action in respect of either or both
Borrowers or otherwise (an "AVOIDED SENIOR TRANSFER"), all as though such
payment had not been made, and, in such event, the Senior Lender shall be able
to enforce this Agreement against the Subordinated Lender with respect to any
payments or other transfers made to such Subordinated Lender as if such avoided
senior transfer had not been made.
SECTION 14. RECOGNITION OF NOTE DOCUMENTS.. The Subordinated Lender hereby
recognizes the first priority ranking of the Senior Liabilities and consents to
the Note and the Security Agreement, and agrees not to contest or challenge the
enforceability, validity, due authorization, or ranking of the Senior
Liabilities and the Note Documents or any Lien securing such Senior Liabilities.
As between the Senior Lender and the Subordinated Lenders, the Senior Lender
hereby recognizes the second priority (after the payment in full of the Senior
Liabilities) ranking of the Junior Liabilities and agrees not to contest or
challenge the enforceability, validity, due authorization, or ranking of the
Junior Liabilities or any Lien securing such Junior Liabilities.
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SECTION 15. RIGHTS OF THE SENIOR LENDER. The Senior Lender may, from time
to time, at its sole discretion and without notice to the Subordinated Lender,
take any or all of the following actions: (a) retain or obtain a security
interest in any property to secure any of the Senior Liabilities, (b) retain or
obtain the primary or secondary obligation of any other obligor or obligors with
respect to any of the Senior Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Senior Liabilities, or release or compromise any obligation of any nature
of any obligor with respect to any of the Senior Liabilities; provided, however,
that the Senior Lender shall not increase the principal amount of the Senior
Loan by more than $100,000 unless the Senior Lender believes, in good faith,
that such increase is necessary to preserve the value of the Collateral, (d)
grant any waiver, amendment, modification or forbearance in respect of Senior
Liabilities and (e) release its security interest in, or surrender, release, or
permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter, or exchange any obligations of any nature of any obligor with respect to
any such property.
SECTION 16. TRANSFER OF SENIOR LIABILITIES. The Senior Lender may, from
time to time, with notice to the Subordinated Lender but without the consent of
the Subordinated Lender, assign or transfer any or all of the Senior Liabilities
payable to the Senior Lender or any interest therein; and, notwithstanding any
such assignment or transfer or any subsequent assignment or transfer thereof,
such Senior Liabilities shall be and remain Senior Liabilities for the purposes
of this Agreement, and every immediate and successive assignee or transferee of
any of the Senior Liabilities or of any interest therein shall, to the extent of
the interest of such assignee or transferee in the Senior Liabilities, be
entitled to the benefits of this Agreement to the same extent as if such
assignee or transferee were the Senior Lender.
SECTION 17. NO PREJUDICE. The Senior Lender shall not be prejudiced in its
rights under this Agreement by any act of or failure to act by either Borrower
or the Subordinated Lender, or any noncompliance of either Borrower or the
Subordinated Lender with any agreement or obligation, regardless of any
knowledge thereof which the Senior Lender may have or with which the Senior
Lender may be charged; and no action of the Senior Lender permitted hereunder
shall in any way affect or impair the rights of the Senior Lender and the
obligations of the Subordinated Lender under this Agreement.
SECTION 18. DELAY NOT WAIVER. No delay on the part of the Senior Lender in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Senior Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any right or
remedy; nor shall any modification or waiver of any of the provisions of this
Agreement be binding upon the Senior Lender except as expressly set forth in a
writing duly signed and delivered by the Senior Lender. For the purposes of this
Agreement, Senior Liabilities shall include all obligations of each of the
Borrowers to the Senior Lender pursuant to or arising out of the Note Documents,
notwithstanding any right or power of either or both Borrowers or anyone else to
assert any claim or defenses as to the invalidity or unenforceability of any
such obligation, and no such claim or defense shall affect or impair the
agreements and obligations of the Subordinated Lender hereunder.
SECTION 19. AGREEMENTS OF THE BORROWERS. Each Borrower hereby waives notice
of the acceptance of this Agreement by the Senior Lender, and agrees to be bound
by the terms and provisions hereof, to make no payments or distributions
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contrary to the terms and provisions hereof, and to do every other act and thing
necessary or appropriate to carry out such terms and provisions. In the event of
any violation of any of the terms and provisions of this Agreement, there shall
be an event of default under the Note, and, then, at the election of the Senior
Lender (in accordance with the Note), any and all obligations of the Borrowers
to the Senior Lender shall forthwith become due and payable and any and all
agreements of the Senior Lender to make loans, advances, or other financial
accommodations to either or both Borrowers shall forthwith terminate,
notwithstanding any provisions thereof to the contrary.
SECTION 20. BINDING EFFECT; SUCCESSORS. This Agreement shall be binding
upon the Subordinated Lender and upon the legal representatives, successors and
assigns of the Subordinated Lender and all references herein to either or both
Borrowers or to any Subordinated Lender, shall be deemed to include any
successor or successors, whether immediate or remote, to the applicable Borrower
or Borrowers or such Subordinated Lender. The Subordinated Lender may not sell,
assign or otherwise transfer any interest in any Junior Liabilities to any
Person, unless such transferee, by written instrument reasonably acceptable to
the Senior Lender, agrees to be bound by the provisions of this Agreement. The
benefits of this Agreement shall inure to the benefit of any assign or other
transferee of the Senior Lender, including, without limitation, any holder of a
Note.
SECTION 21. GOVERNING LAW, SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) Each Borrower and the Subordinated Lender (i) hereby expressly and
irrevocably submits and consents to the non-exclusive jurisdiction of the courts
sitting in New York County in any action to resolve any controversy or claim
arising out of this Agreement, (ii) agrees that all claims in such action may be
decided in any such court, (iii) waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum and (iv) consents to the
service of process by registered or certified mail, postage prepaid and return
receipt requested, or by personal service within or without the State of New
York, in accordance with Section 21. A final judgment in any such action shall
be conclusive and may be enforced in other jurisdictions. Nothing herein shall
affect the right of any party to effect service of process in any other manner
permitted by applicable law or any right to bring legal action or proceedings in
any other competent jurisdiction.
SECTION 22. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTE OR ANY OTHER NOTE DOCUMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SENIOR
LENDER'S ENTERING INTO THIS AGREEMENT.
SECTION 23. NOTICES, ETC. Notices and communications under this Agreement
shall be given in the manner described in the Note at the respective addresses
listed on the signature pages hereto.
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[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
BORROWERS:
DATATEC SYSTEMS, INC.,
By:________________________________________
Name:______________________________________
Title: ____________________________________
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
DATATEC INDUSTRIES, INC.,
By:_________________________________________
Name:_______________________________________
Title: _____________________________________
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Facsimile: 000-000-0000
SIGNATURE PAGE 1 TO
SUBORDINATION AND INTERCREDITOR AGREEMENT
SENIOR LENDER:
ALPINE ASSOCIATES, A LIMITED
PARTNERSHIP, a New Jersey limited partnership
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
Address: 000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xx. Xxx Xxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
WITH A COPY TO:
Xxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
SIGNATURE PAGE 2 TO
SUBORDINATION AND INTERCREDITOR AGREEMENT
SUBORDINATED LENDER:
EAGLE ACQUISITION PARTNERS, INC. (
By:
---------------------------------------
Name:
Title:
ADDRESS FOR NOTICES:
Eagle Acquisition Partners, Inc.
c/o Xxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: [_____]
Telecopier: [_____]
SIGNATURE PAGE 3 TO
SUBORDINATION AND INTERCREDITOR AGREEMENT
