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Exhibit 10.5
FULCRUM DIRECT, INC.
0000 XXXXXXX XXX XX
XXX XXXXXX, XX 00000
October 21, 1996
Whitney Subordinated Debt Fund, L.P.
000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Re: Subordination Provisions
Ladies and Gentlemen:
In connection with that certain Securities Purchase Agreement,
dated as of the date hereof (the "Securities Purchase Agreement") between you
and us ("Fulcrum") Fulcrum issued to you a 10.01% Senior Subordinated
Promissory Note (the "Subordinated Note") dated the date hereof which contains
provisions relating to subordination of such debt to Senior Indebtedness (as
defined in the Subordinated Note). You and we acknowledge that such
subordination provisions may not be acceptable to a senior lender in the event
of a refinancing or refunding of the currently existing Senior Indebtedness.
Accordingly, you agree that in order to facilitate such a
refinancing or refunding, at the request of the Company you will enter into a
subordination agreement containing "market terms." You further agree that the
following terms shall constitute "market terms" as of the date hereof.
The indebtedness under the Subordinated Note (the "Subordinated Debt")
will be subordinated in right of payment to Senior Indebtedness (as
defined in the Subordinated Note) upon customary terms and conditions,
including, without limitation the following:
there shall be no payments or distributions in respect of the
Subordinated Debt (i) out of any insolvency or bankruptcy
proceeding of Fulcrum, or any dissolution or liquidation of
Fulcrum unless and until the Senior Indebtedness is paid in
full in cash, (ii) at such time as the holder of Senior
Indebtedness shall have accelerated its debt, (iii) during
any "payment" default under the Senior Indebtedness, provided
that the blockage period arising out of a payment default shall
expire following 360 days and (iv) during any "non-payment"
default under the Senior Indebtedness, provided that
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Whitney Subordinated Debt Fund, L.P.
October 21, 1996
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the blockage period arising out of a non-payment default shall
expire following 179 days and shall only apply once during each
12-month period. The Subordination provisions will include other
usual and customary terms, including subrogation to Senior
Indebtedness, payments held in trust, etc.
You further agree that if the foregoing does not constitute
"market terms" as of the date of such refinancing or refunding you shall
negotiate in good faith with the provider of such debt in order to agree
to "market" subordination provisions.
Each of us further agree not to disclose the terms contained
in or the existence of this letter agreement to any holder or
prospective holder of Senior Indebtedness.
By your execution in the space provided below, each of you
hereby agrees to the terms set forth herein.
Very truly yours,
FULCRUM DIRECT, INC.
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------
Name:
Title:
Agreed this 21st day of October, 1996
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ XXX X. XXXXXX
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Name:
A General Partner
