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Exhibit 10.31
FORM OF
ABS SUBORDINATION AGREEMENT
ABS SUBORDINATION AGREEMENT, dated as of October 15, 1997, among
AIRCRAFT BRAKING SYSTEMS CORPORATION, a Delaware corporation (the "Borrower"), K
& F INDUSTRIES, INC., a Delaware corporation ("K&F") and The First National Bank
of Chicago, as administrative agent (in such capacity, the "Administrative
Agent") for the Senior Lenders (as defined below).
W I T N E S S E T H :
WHEREAS, the Borrower has entered into the Credit Agreement, dated
as of the date hereof (as amended, supplemented or otherwise modified from time
to time, the "Senior Credit Agreement") with Engineered Fabrics Corporation, the
Senior Lenders, the Syndication Agent and the Administrative Agent, pursuant to
which the Senior Lenders will make Senior Loans (as defined below) to the
Borrower and the Issuing Lender will issue Letters of Credit for the account of
the Borrower; and
WHEREAS, pursuant to the terms of the Intercompany Note, dated as of
April 28, 1989, made by the Borrower in favor of K&F (the "Intercompany Note"),
K&F has made a loan in the amount of $304,600,000 (the "Subordinated Loan") to
the Borrower; and
WHEREAS, it is a condition precedent to the making and maintaining
of the Senior Loans by the Senior Lenders to the Borrower under the Senior
Credit Agreement and the issuance of the Letters of Credit by the Issuing Lender
for the account of the Borrower that K&F and the Borrower shall have entered
into this Agreement; and
WHEREAS, the Borrower is a wholly-owned subsidiary of K&F; and
WHEREAS, K&F will benefit from the making of the Senior Loans by the
Senior Lenders to the Borrower and the issuance of the Letters of Credit for the
account of the Borrower by the Issuing Lender under the Senior Credit Agreement;
NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Lenders to make the Senior Loans under the Senior Credit
Agreement and the Issuing Lender to issue the Letters of Credit for the account
of the Borrower, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions. Each capitalized term used herein and not otherwise
defined shall have the definition assigned to such term in the Senior Credit
Agreement, and the following terms shall have the following meanings:
"Agreement" means this ABS Subordination Agreement, as the same may
from time to time be amended or supplemented.
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"Junior Debt" means all indebtedness, obligations and liabilities of
the Borrower arising out of or in connection with the Subordinated Loan or
the Intercompany Note, including, without limitation, all principal of,
premium (if any) and interest on the Subordinated Loan and any and all
renewals and extensions thereof.
"Senior Debt" means all Obligations of the Borrower, including,
without limitation, all principal of, premium (if any) and interest on all
extensions of credit made to or for the account of the Borrower under the
Senior Credit Agreement and any and all renewals and extensions thereof
(including any interest accruing subsequent to the commencement of
bankruptcy, insolvency or similar proceedings with respect to the
Borrower).
"Senior Loans" has the meaning assigned to the term "Loan" in
subsection 1.1 of the Senior Credit Agreement.
"Subordinated Lender" means K&F and any successor or assignee of K&F
which at any time shall be the holder of or obligee on any Junior Debt.
SECTION 2. SUBORDINATION
2.1 Subordination to Senior Secured Obligations. The Borrower, for
itself and its successors and assigns, and the Subordinated Lender, on its
behalf and on behalf of each of its successors and assigns that is a holder of
Junior Debt, agree that the Junior Debt shall be subordinate and junior in right
of payment on the terms of this subsection 2.1 to the prior payment in full in
cash of all of the Senior Debt.
2.2 No Payment. No payment on account of principal of, premium (if
any) or interest on Junior Debt shall be made except in accordance with Section
7.6 of the Credit Agreement. In addition, no payment on account of principal of,
premium (if any) or interest on Junior Debt shall be made (a) unless full
payment of all amounts then due in respect of all Senior Debt has been made or
(b) if, at the time of such payment or immediately after giving effect thereto,
there shall exist any Event of Default or Default (as such terms are defined in
the Senior Credit Agreement). In the event that, notwithstanding the foregoing,
the Borrower shall make any payment or distribution to the Subordinated Lender
prohibited by the foregoing sentence, such payment or distribution shall be held
in trust for the benefit of, and shall be paid over to, the Senior Lenders (pro
rata to each Senior Lender on the basis of the respective amounts of Senior Debt
held by such Senior Lender).
2.3 Payment Over of Proceeds Upon Dissolution, etc. In the event of
(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Borrower or its creditors, as such, or to its assets,
or (b) any liquidation, dissolution or other winding up of the Borrower, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Borrower, then and in any such event
(1) the Senior Debt (including, without limitation, any such amounts
declared due prior to their stated maturity and any interest accruing
after the occurrence of any
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default or event of default specified in subsection 8(f) of the Senior
Credit Agreement, whether or not such interest is allowed as a claim in
any bankruptcy or insolvency proceeding) shall be entitled to receive
payment in full in cash of all amounts due or to become due on or in
respect of all Senior Debt, before the Subordinated Lender is entitled to
receive any payment on account of principal of (or premium, if any) or
interest or otherwise on the Junior Debt;
(2) any payment or distribution of assets of the Borrower of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Subordinated Lender would be entitled but for the
provisions hereof, including, with respect to the Junior Debt, any such
payment or distribution which may be payable or deliverable by reason of
the payment of any other debt of the Borrower being subordinated to the
payment of the Junior Debt, shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the Senior Lenders (pro rata to each such Senior Lender on the
basis of the respective amounts of Senior Debt held by such Senior
Lender), to the extent necessary to make payment in full in cash of all
Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the Senior Lenders; and
(3) in the event that, notwithstanding the foregoing, the
Subordinated Lender shall have received any such payment or distribution
of assets of the Borrower of any kind or character whether in cash,
property or securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other debt
of the Borrower being subordinated to the payment of the Junior Debt,
before all Senior Debt is paid in full in cash, then and in such event
such payment or distribution shall be paid over or delivered forthwith to
the Senior Lenders (pro rata to each Senior Lender on the basis of the
respective amounts of the Senior Debt held by such Senior Lender) to the
extent necessary to make payment in full in cash of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Senior Lenders.
2.4 Authorization of Holders of Senior Debt to File Claims, etc. The
Subordinated Lender hereby irrevocably authorizes and empowers (without imposing
any obligation on) each Senior Lender and such Senior Lender's representatives,
under the circumstances set forth in the immediately preceding paragraph, to
demand, ▇▇▇ for, collect and receive every such payment or distribution
described therein and give acquittance therefor, to file claims and proofs of
claims in any statutory or nonstatutory proceeding, to vote such Senior Lender's
ratable share of the full amount of Junior Debt in its sole discretion in
connection with any resolution, arrangement, plan of reorganization, compromise,
settlement or extension and to take all such other action (including, without
limitation, the right to participate in any composition of creditors and the
right to vote such Senior Lender's ratable share of Junior Debt at creditors'
meetings for the election of trustees, acceptances of plans and otherwise), in
the name of the Subordinated Lender or otherwise, as such Senior Lender's
representatives may deem necessary or desirable for the enforcement of the
subordination provisions hereof. The Subordinated Lender shall execute and
deliver to each Senior Lender and such Senior Lender's representatives all such
further instruments confirming the foregoing authorization, and all such powers
of attorney, proofs of claim, assignments of claim and
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other instruments, and shall take all such other action as may be reasonably
requested by such holder or such holder's representatives in order to enable
such holder to enforce all claims upon or in respect of such Senior Lender's
ratable share of Junior Debt.
2.5 Limitation on Remedies. The Subordinated Lender shall not,
without the prior written consent of the Senior Lenders, have any right to
accelerate the maturity of, or institute any proceedings to enforce, any Junior
Debt so long as any Senior Debt is outstanding or otherwise commence, prosecute
or participate in any administrative, legal or equitable action against the
Borrower. If the Subordinated Lender, in violation of the provisions herein set
forth, shall commence, prosecute or participate in any suit, action, case or
proceeding against the Borrower, the Borrower may interpose as a defense or plea
the provisions hereof, and any Senior Lender may intervene and interpose such
defense or plea in its own name or in the name of the Borrower, and shall, in
any event, be entitled to restrain the enforcement of the payment provisions of
the Junior Debt in its own name or in the name of the Borrower, as the case may
be, in the same suit, action, case or proceeding or in any independent suit,
action, case or proceeding.
2.6 Subrogation. After the payment in full of all amounts due in
respect of Senior Debt, the Subordinated Lender shall be subrogated to the
rights of the Senior Lenders to receive payments or distributions of cash,
property or securities of the Borrower applicable to Senior Debt until the
principal of, premium, if any, interest on and all other amounts due or to
become due with respect to Junior Debt shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the Senior Lenders
of any cash, property or securities to which the Subordinated Lender would be
entitled except for these provisions, and no payment over pursuant to these
provisions to the Senior Lenders by the Subordinated Lender shall, as among the
Borrower, its creditors other than the Senior Lenders and the Subordinated
Lender, be deemed to be a payment by the Borrower to or on account of Senior
Debt. No payments or distributions to the Senior Lenders which the Subordinated
Lender shall be entitled to receive pursuant to such subrogation shall, as among
the Borrower, its creditors other than the Senior Lenders and the Subordinated
Lender, be deemed to be a payment by the Borrower to or on account of Junior
Debt.
2.7 Provisions Solely to Define Relative Rights. Nothing contained
in this Agreement is intended to or shall impair as between the Borrower, its
creditors other than the Senior Lenders, and the Subordinated Lender, the
obligation of the Borrower to pay the Junior Debt to the Subordinated Lender, as
and when the same shall become due and payable in accordance with its terms, or
to affect the relative rights of the Subordinated Lender and creditors of the
Borrower other than the Senior Lenders.
2.8 Further Assurances. Each holder of Junior Debt by its acceptance
thereof authorizes and directs the Borrower on its behalf to take such further
action as may be necessary or appropriate from time to time to effectuate the
subordination as provided herein and appoints the Borrower its attorney-in-fact
for any and all such purposes.
2.9 No Waiver of Subordination Provisions. The subordination
effected hereby, and the rights of the Senior Lender, shall not be affected by
(a) any amendment of, or addition or supplement to, the Senior Credit Agreement
or any of the Loan Documents or any instrument or agreement relating thereto or
to any Senior Debt, (b) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Credit Agreement or any of the Loan
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Documents or any instrument or agreement relating thereto or to any Senior Debt,
(c) any waiver, consent, release, indulgence, extension, renewal, modification,
delay, or other action, inaction or omission, in respect of the Senior Credit
Agreement or any of the other Loan Documents or any instrument or agreement
relating thereto or to any Senior Debt, (d) any extension, renewal, modification
or refunding of the Senior Debt, or (e) any sale of the Borrower or any interest
therein or any sale, lease or transfer of any or all assets of the Borrower to
any other person; whether or not the Subordinated Lender shall have had notice
or knowledge of any of the foregoing.
2.10 Reinstatement of Subordination. The obligations of the
Subordinated Lender under this Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment in respect of any
Senior Debt, or any other payment to any Senior Lender, is rescinded or must
otherwise be restored or returned by such Senior Lender upon the occurrence of
any proceeding referred to in subsection 2.3 hereof, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, the Borrower or any substantial part of its property, or
otherwise, all as though such payment had not been made.
2.11 Legend on Junior Debt. Each instrument evidencing any Junior
Debt including, without limitation, the Intercompany Note, shall contain the
following legend conspicuously noted on the face thereof: "THIS [NAME OF
INSTRUMENT] IS SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN THE ABS
SUBORDINATION AGREEMENT, DATED AS OF OCTOBER 15, 1997, AMONG AIRCRAFT BRAKING
SYSTEMS CORPORATION, K & F INDUSTRIES, INC., ▇▇▇▇▇▇ COMMERCIAL PAPER INC., AS
SYNDICATION AGENT, AND THE FIRST NATIONAL BANK OF CHICAGO, AS ADMINISTRATIVE
AGENT, AS THE SAME MAY FROM TIME TO TIME BE AMENDED" and shall specifically
state that a copy of this Agreement is on file with the Borrower and is
available for inspection at the Borrower's offices.
SECTION 3. MISCELLANEOUS.
3.1 No Waiver. No failure to exercise and no delay in exercising, on
the part of the Administrative Agent or any Senior Lender, any right, remedy,
power or privilege provided herein or by statute or at law or in equity shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
3.2 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
3.3 Succession. This Agreement shall be binding upon and inure to
the benefit of the Senior Lenders and the parties hereto and their respective
successors and assigns, but no assignment hereof shall in any event relieve the
Subordinated Lender of its obligations hereunder.
3.4 Amendments, etc. This Agreement may be amended or modified only
with the written consent of the Borrower, the Administrative Agent and the
Subordinated Lender.
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3.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
3.6 Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications hereunder
shall be duly given or made if sent in writing by registered or certified mail,
or by tested or otherwise authenticated telex or telecopy, in each case
addressed to the party to which such notice is requested or permitted to be
given or made, at the address specified beneath the heading "Address for
Notices" under the name of the applicable party on the signature pages hereof,
or at such other address of which such Person shall have notified in writing the
party giving such notice. All notices shall be deemed given when received by the
party to whom such notice was sent.
3.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and the parties hereto may execute this Agreement by signing any
such counterpart.
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IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, have caused this ABS Subordination Agreement to be duly executed and
delivered as of the date first above written.
AIRCRAFT BRAKING SYSTEMS
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Address for Notices:
Aircraft Braking Systems Corporation
c/o K & F Industries, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
K & F INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
Address for Notices:
K & F Industries, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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THE FIRST NATIONAL BANK OF CHICAGO, as
Administrative Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
The First National Bank of Chicago
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
