Attached files
| file | filename |
|---|---|
| 8-K - Digital Turbine, Inc. | v188837_8k.htm |
| EX-4.1 - Digital Turbine, Inc. | v188837_ex4-1.htm |
| EX-10.1 - Digital Turbine, Inc. | v188837_ex10-1.htm |
| EX-10.7 - Digital Turbine, Inc. | v188837_ex10-7.htm |
| EX-10.8 - Digital Turbine, Inc. | v188837_ex10-8.htm |
| EX-10.6 - Digital Turbine, Inc. | v188837_ex10-6.htm |
| EX-10.4 - Digital Turbine, Inc. | v188837_ex10-4.htm |
| EX-10.5 - Digital Turbine, Inc. | v188837_ex10-5.htm |
| EX-10.2 - Digital Turbine, Inc. | v188837_ex10-2.htm |
| EX-10.9 - Digital Turbine, Inc. | v188837_ex10-9.htm |
| EX-10.11 - Digital Turbine, Inc. | v188837_ex10-11.htm |
| EX-10.12 - Digital Turbine, Inc. | v188837_ex10-12.htm |
| EX-10.10 - Digital Turbine, Inc. | v188837_ex10-10.htm |
SUBORDINATION
AGREEMENT
This Subordination Agreement is made as
of June 21, 2010, by and between TRINAD CAPITAL MASTER FUND, LTD., (together
with its successors and assigns in such capacity, the “First Lien Agent”),
having a business address at 2121 Avenue of the Stars, Suite 2550, Los Angeles,
CA 90067, acting in its capacity as agent for the First Lien Creditors (as
defined below) and VALUEACT SMALLCAP MASTER FUND, L.P., having a business
address at 435 Pacific Avenue, 4th Floor,
San Francisco, CA 94133 (together with its successors and assigns, “Subordinated
Creditor”), and each of NeuMedia, Inc. (f/k/a Mandalay Media, Inc.), a
Delaware corporation, with its principal place of business at 2121 Avenue
of the Stars, Suite 2550, Los Angeles, CA 90067 (“First Lien Borrower”)
and Twistbox Entertainment, Inc., a Delaware corporation with its principal
place of business at 14242 Ventura Boulevard, Third Floor, Sherman Oaks, CA
91423 and a wholly-owned subsidiary of First Lien Borrower (“Second Lien
Borrower,” and collectively, jointly or severally with the First Lien
Borrower and any entity or person named at any time as an “Obligor” or
“Subsidiary Guarantor” or otherwise obligated under the First Lien Documents or
the Subordinated Debt Documents (as defined below), together with its respective
successors and assigns, including any related receiver, trustee or
debtor-in-possession, each an “Obligor” and
collectively, the “Obligors”).
Recitals
A. The
First Lien Agent, as administrative agent and collateral agent for certain
investors in the First Lien Borrower (together with their successors and
assigns, the “First
Lien Creditors”) and the First Lien Creditors, have agreed to make loans
in the aggregate original principal amount of $2,500,000 to be evidenced by one
or more Senior Secured Notes (as amended and/or restated from time to time, the
“First Lien
Notes” and together with any documents and instruments evidencing,
guaranteeing, securing or entered into in connection with the First Lien Debt,
the “First Lien
Documents”) to be issued by the First Lien Borrower and secured by the
Collateral (as defined below) pursuant to the terms of a letter agreement, dated
as of June __, 2010, by and among Subordinated Creditor, First Lien Borrower,
Jonathan Cresswell and Nathaniel MacLeitch (the “Letter
Agreement”).
B.
Subordinated Creditor holds one or more
secured promissory notes issued by Second Lien Borrower (as the same may be
amended, restated and/or replaced with a “Amended VAC Note” as
defined in and pursuant to the terms of the Letter Agreement, collectively, the
“Subordinated
Notes,” and together with any documents and instruments evidencing,
guaranteeing, securing or entered into in connection with the Subordinated Debt,
in each case, as amended, restated, supplemented, modified, replaced,
substituted or renewed from time to time, the “Subordinated Debt
Documents”) and all other amounts, obligations, and indebtedness of every
kind, nature and description owing at any time by the First Lien Borrower, the
Second Lien Borrower and/or any other Obligor to Subordinated Creditor under and
pursuant to any of the Subordinated Debt Documents, including, without
limitation, all interest accruing after the commencement by or against any
Obligor of any Insolvency Proceeding with respect to such Obligor are referred
to herein as the “Subordinated
Debt.”
1
C.
In order to induce the First Lien Agent and
the other First Lien Creditors to extend credit to First Lien Borrower,
Subordinated Creditor is willing to subordinate: (i) the Subordinated Debt to
the First Lien Debt (as defined in Section 2 hereof) and (ii) all of
Subordinated Creditor’s Liens, if any, to all of the Liens of the First Lien
Agent in the Collateral (as defined below) as provided herein; and (iii) in
accordance with Section 3, payment of the Subordinated Debt to the prior payment
in full in cash of the First Lien Debt.
NOW,
THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, INCLUDING THE EXTENSION OF THE
FIRST LIEN DEBT TO THE FIRST LIEN BORROWER, THE PARTIES AGREE AS
FOLLOWS:
1.
Until the Discharge of the First Lien Debt, Subordinated Creditor
subordinates any and all Liens that Subordinated Creditor may have or obtain at
any time in any Collateral to secure the Subordinated Debt to the Liens therein
at any time securing the First Lien Debt (as the same may be reduced over time
by the aggregate amount of all permanent repayments) and agrees that until such
time as the First Lien Debt has been Discharged any and all Liens of
Subordinated Creditor in respect of any Collateral shall be second, junior and
subordinate to the Liens securing the First Lien Debt, and the Liens securing
the First Lien Debt shall be first, senior and prior to each Lien held by the
Subordinated Creditor. The priority specified in the preceding sentence shall be
applicable irrespective of the dates, times or order of attachment or perfection
of Liens, the time or order of filing of Liens, the time or order of filing of
financing statements, the time or order of obtaining control or possession, the
giving or failure to give notice of the acquisition or expected acquisition of
any purchase money liens, the failure to perfect or maintain the perfection or
priority of the Liens securing the First Lien Debt or the failure of the First
Lien Agent to obtain control or possession of any Collateral. Subordinated
Creditor, to the fullest extent permitted by applicable law, waives as to the
First Lien Agent and the First Lien Creditors any requirement regarding, and
agrees not to demand, request, plead or otherwise claim the benefit of, any
marshalling, appraisement, valuation or other similar right that may otherwise
be available under applicable law.
2.
As used in this Agreement, the following terms shall have
the meanings specified below:
“Agreement” shall mean
this Subordination Agreement.
“Bankruptcy Code”
shall mean Title 11 of the United States Code entitled “Bankruptcy,” as now or
hereafter in effect, or any successor statute.
“Blockage Period”
shall have the meaning set forth in Section
3.
“Collateral” means all
assets and properties of any kind whatsoever, real or personal, tangible or
intangible and wherever located, of any Obligor, whether now owned or hereafter
acquired, upon which a Lien (including, without limitation, any Liens granted in
any Insolvency Proceeding) is now or hereafter granted or purported to be
granted by such Person in favor of a Secured Creditor, as security for all or
any part of the Obligations.
2
“Debt Action” shall
mean: (i) the imposition of the “default rate” as defined in any Subordinated
Debt Document, (ii) the receipt of any payment or distribution under or pursuant
to any plan of reorganization which has been confirmed pursuant to a
non-appealable order in a case under the Bankruptcy Code in a manner not
inconsistent with the terms of this Agreement, (iii) voting on any plan of
reorganization, (iii) the filing of any proof or notice of claim in any
Insolvency Proceeding involving any Obligor or the filing of defensive pleadings
in a manner not inconsistent with the terms of this Agreement, (iv) the
acceleration of any Subordinated Debt obligations, (iv) the filing and pursuit
of a lawsuit by Subordinated Creditor to collect any Subordinated Debt
obligations so long as such lawsuit seeks only a money judgment and does not
seek to enforce or impose any Lien on any Collateral or enjoin, limit, interfere
with or otherwise affect any of the rights of the First Lien Agent or any First
Lien Creditor under the First Lien Documents, or (v) the delivery of default
notices, cease and desist letters and similar notices by Subordinated Creditor
to any Obligor.
“Discharged” shall
mean, with respect to the First Lien Debt, that: (a) the
outstanding principal amount of the First Lien Debt (as defined in and limited
by the definition of “First Lien Debt”) has been paid in full in cash and (b)
all other Obligations (other than contingent indemnification
obligations for which no underlying claim has been asserted) under the First
Lien Documents have been paid or discharged in full (with all such obligations consisting of monetary or payment obligations
having been paid in full in cash).
“Documents” means,
collectively, the First Lien Documents and the Subordinated Debt
Documents.
“Enforcement Action”
means (a) any action by any Secured Creditor to foreclose on the Lien of
such Person in any Collateral, (b) any action by any Secured Creditor to
take possession of, or sell or otherwise realize upon, or to exercise any other
rights or remedies with respect to, any Collateral, including any Disposition
after the occurrence of an event of default of any Collateral by an Obligor with
the consent of, or at the direction of, a Secured Creditor, (c) the taking of
any other actions by a Secured Creditor against any Collateral, including the
taking of control or possession of, or the exercise of any right of setoff with
respect to, any Collateral and/or (d) the commencement by any Secured
Creditor of any legal proceedings or actions against or with respect to any
Obligor or any of such Obligor’s property or assets or any Collateral to
facilitate any of the actions described in clauses (a), (b) and (c) above,
including the commencement of any Insolvency Proceeding; provided that this
definition shall not include any Debt Action.
“Event of Default”
means each “Event of Default” or similar term, as such term is defined in any
First Lien Document or any Subordinated Debt Document.
“First Lien Covenant Default”
means an “Event of Default” arising under the First Lien Documents that does not
constitute a First Lien Payment Default.
3
“First Lien Debt”
shall mean all obligations, liabilities and indebtedness of every kind,
nature and description of the First Lien Borrower and each other Obligor to the
First Lien Creditors or any of them now existing or hereafter arising under the
First Lien Documents, together with all costs of collecting such obligations
(including attorneys’ fees), including, without limitation, all interest
accruing after the commencement by or against any Obligor of any Insolvency
Proceeding (and including the payment of any principal, interest, cost, expenses
and other amounts (including default rate interest) which would accrue and
become due but for the commencement of such bankruptcy, reorganization or other
Insolvency Proceeding whether or not such amounts are allowed or allowable in
whole or in part in any such Proceeding); provided that the principal amount of
such First Lien Debt shall not exceed $2,500,000 (which principal amount shall
be reduced by all payments of principal thereon received by the First Lien
Creditors pursuant to the First Lien Documents and this Agreement and increased
by the amount of any accrued and unpaid (to the extent added to principal) or
capitalized interest (including default interest and interest which would accrue
and become due but for the commencement of such bankruptcy, reorganization or
similar Proceeding whether or not such amounts are allowed or allowable in whole
or in part in any such Proceeding)).
“First Lien Payment
Default” means a default in the payment of the principal of, premium, if
any, or interest on, or fees or any other amount payable with respect to, the
First Lien Debt beyond any applicable grace period.
“First Lien Termination
Date” means the date on which all First Lien Debt have been
Discharged.
“Insolvency
Proceeding” means, as to any Obligor, any of the following:
(a) any case or proceeding with respect to such Obligor under the
Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency,
reorganization or other law affecting creditors’ rights or any other or similar
proceedings seeking any stay, reorganization, arrangement, composition or
readjustment of the obligations and indebtedness of such Obligor, (b) any
proceeding seeking the appointment of any trustee, receiver, liquidator,
custodian or other insolvency official with similar powers with respect to such
Obligor or any of its assets, (c) any proceeding for liquidation,
dissolution or other winding up of the business of such Obligor or (d) any
assignment for the benefit of creditors or any marshalling of assets of such
Obligor.
“Lien” means any
security interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge against or
interest in property, or other priority or preferential arrangement of any kind
or nature whatsoever, to secure payment of a debt or performance of an
obligation, including any obligation under a judgment or order issued by any
court.
“Limited Blockage
Period” shall have the meaning set forth in Section
3.
“Obligations” means
the First Lien Debt and the Subordinated Debt, or any of them.
“Permitted Collateral
Sale” means any Disposition of Collateral so long as such Disposition is
permitted under the First Lien Documents (or a consent thereto is granted by the
First Lien Agent on behalf of the First Lien Creditors) and the Subordinated
Debt Documents (or a consent thereto is granted by the Subordinated
Creditor). The term Permitted Collateral Sale shall not include any
Disposition occurring or effected under any circumstance or condition described
in the definition of “Release Event.”
4
“Person” means an
individual, partnership, corporation (including a business trust and a public
benefit corporation), joint stock company, estate, association, firm,
enterprise, trust, limited liability company, unincorporated association, joint
venture, governmental authority or any other entity or regulatory
body.
“Proceeding” means any
action or proceeding involving the dissolution, winding up, liquidation,
rearrangement, reorganization, adjustment, protection, relief or composition of
any Obligor or guarantor of any Obligations, whether in any Insolvency
Proceeding or similar proceedings or otherwise.
“Release Event” means
the taking of any Enforcement Action by the First Lien Agent on behalf of the
First Lien Creditors (in accordance with its duties under the UCC as in effect
in the applicable jurisdiction ) against all or any portion of the Collateral
(including a Disposition conducted by any Obligor with the consent of the First
Lien Agent) or, after the occurrence and during the continuance of an Insolvency
Proceeding by or against any Obligor, the entry of an order of the Bankruptcy
Court pursuant to Section 363 of the Bankruptcy Code authorizing the sale
of all or any portion of the Collateral.
“Secured Creditors”
means the First Lien Creditors and the Subordinated Creditor, or any of
them.
“Standstill Period”
shall mean the period beginning on the date of the occurrence of a Event of
Default under the Subordinated Debt Documents and ending upon the date which is
the earlier of (a) 180 days after the First Lien Agent has received written
notice from the Subordinated Creditor that an Event of Default has occurred
under the Subordinated Debt Documents and (b) the date on which the First Lien
Debt has been Discharged; provided that in the event that as of any day during
such 180 days, such Event of Default under the Subordinated Debt Documents is no
longer continuing (as the result of having been cured or waived by the
Subordinated Creditor), then the Standstill Period shall be deemed not to have
commenced.
“UCC” means the
Uniform Commercial Code of any applicable jurisdiction and, if the applicable
jurisdiction shall not have any Uniform Commercial Code, the Uniform Commercial
Code as in effect in the State of California.
3.
(a) Anything contained in
the Subordinated Debt Documents to the contrary notwithstanding, until the Discharge of
the First Lien Debt, the Second Lien Borrower may not make and the Subordinated
Creditor may not receive any payment on account of the principal of, premium, if
any, or interest on, or fees or any other amount payable in respect of the
Subordinated Debt if, at the time of, or after giving effect to, such payment:
(i) a First Lien Payment Default exists, the Subordinated Creditor and the
Second Lien Borrower shall have received written notice of such default and such
First Lien Payment Default shall not have been cured or waived in accordance
with the terms of the First Lien Documents (the period during which such
conditions exists being referred to as a “Blockage Period”); or
(ii) the Second Lien Borrower and the Subordinated Creditor shall have received
a written notice from the First Lien Agent stating that a First Lien Covenant
Default then exists and is continuing, each such First Lien Covenant Default
shall not have been cured or waived in accordance with the terms of the First
Lien Documents and 120 days shall not have elapsed since the date such notice
was received (the period during which such conditions exists being referred to
as a “Limited Blockage
Period”).
5
(b)
The Second Lien Borrower may resume making scheduled
payments of the interest in respect of the Subordinated Debt (and make any such
payments missed due to the existence of a Blockage Period or a Limited Blockage
Period) and may again make voluntary payments of principal in respect of the
Subordinated Debt upon the expiration of the Blockage Period or Limited Blockage
Period, whether by cure or waiver of the applicable First Lien Payment Default
or First Lien Covenant Default or expiration of the 120 day period with respect
to the Limited Blockage Period.
(c)
Any provision of this Section 3 to the
contrary notwithstanding: The Second Lien Borrower shall not be prohibited from
making, and the Subordinated Creditor shall not be prohibited from receiving,
scheduled payments of interest or voluntary payments of principal during a
Limited Blockage Period for more than an aggregate of 120 days within any period
of 360 consecutive days. Furthermore, so long as (i) an Event of Default
under the First Lien Documents has not occurred, is not continuing and would not
exist immediately after the payment to Subordinated Creditor was made and (ii)
no Insolvency Proceeding is pending with respect to any Obligor, the Second Lien
Borrower may make and Subordinated Creditor may (x) receive regularly scheduled
cash payments of interest (at the non-default rate of interest) on the
Subordinated Debt as and when due and payable in accordance with the terms of
the Subordinated Notes, and (y) receive voluntary prepayments of principal as
and when permitted in accordance with the terms of the Subordinated Notes.
Nothing in this Section 3 shall
prevent the Second Lien Borrower from paying, or the Subordinated Creditor from
receiving, capitalized non-cash (i.e., “paid-in-kind”)
interest in accordance with the Subordinated Notes. Except as expressly
permitted in Section
3(a) above, the Second Lien Borrower will not (and it will not allow any
other Obligor to) make any payment of any of the Subordinated Debt, or take any
other action, in contravention of the provisions of this Agreement.
(d) Except as otherwise provided for in
this Section 3, notwithstanding the occurrence and continuation beyond any
applicable cure period of any default or Event of Default (however defined)
under the Subordinated Debt Documents or any provisions of the Subordinated Debt
Documents to the contrary, until Discharge of the First Lien Debt Subordinated
Creditor will not demand or receive from the Second Lien Borrower or any other
Obligor (and no Obligor will pay to Subordinated Creditor) all or any part of
the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or
otherwise, nor will Subordinated Creditor commence any Enforcement Action with
respect to or against any portion of the Collateral, until such time as the
First Lien Debt has been Discharged. Notwithstanding the preceding
sentence, (a) Subordinated Creditor may bid for or purchase Collateral at any
private or judicial foreclosure upon such Collateral initiated by any Secured
Creditor (provided that the cash portion of any such bid shall be in an amount
that is not less than the amount necessary to Discharge the First Lien Debt),
(b) Subordinated Creditor may join (but not control) any foreclosure or other
judicial lien enforcement proceeding with respect to the Collateral initiated by
the First Lien Creditors for the purpose of protecting Subordinated Creditor’s
Lien on the Collateral, so long as it does not hinder, delay or otherwise
interfere with the exercise by the First Lien Agent, on behalf of the First Lien
Creditors, of its rights under this Agreement, the First Lien Documents and
under applicable law, (c) the Subordinated Creditor may receive any
remaining proceeds of Collateral after the First Lien Debt has been Discharged,
(d) Subordinated Creditor may take any Debt Action following the occurrence and
during the continuation of any Event of Default with respect to the Subordinated
Debt, and (e) Subordinated Creditor may take any Enforcement Action with respect
to the Collateral after the termination of the Standstill Period. Any
proceeds of Collateral received by a Secured Party in connection with any such
Enforcement Action taken by Subordinated Creditor shall be applied in accordance
with this Agreement until the Discharge of the First Lien Debt.
6
(e) Notwithstanding anything to the
contrary contained herein (including, without limitation, Sections 1 and
3(a)–(d)) or any First Lien Document, in accordance with Section 1(d) of the
Letter Agreement, if and to the extent that, First Lien Borrower or any other
Obligor receives cash proceeds from the sale of the Assets (as defined in the
Letter Agreement) pursuant to Section 1(d)(x) of the Letter Agreement, First
Lien Borrower or such Obligor shall promptly: (i) first, remit (and the First
Lien Agent and the First Lien Creditors consent to such remittance) such cash
sales proceeds to Subordinated Creditor to the extent necessary to pay in cash
the principal obligations then outstanding under the Amended VAC Note until such
time as the principal balance of the Amended VAC Note (which shall not exceed
$3,500,000) has been satisfied by payment in full in cash (and Subordinated
Creditor agrees that it will accept such amounts in payment of, and apply them
towards, the reduction of the interest and principal then outstanding under the
Subordinated Debt and, to the extent such payments equal or aggregate to the
full amount of principal (which shall not exceed $3,500,000) and interest
outstanding under the Amended VAC Note, such payment(s) shall represent a
satisfaction in full in cash of the outstanding principal and interest under the
Subordinated Debt and Subordinated Creditor will mark the Amended VAC Note
“Cancelled” and return it to the Second Lien Borrower), and (ii) thereafter,
remit any remaining cash sales proceeds to the First Lien Agent for application
to the First Lien Debt. Upon any full satisfaction in cash of the
Subordinated Debt pursuant to this Section 3(b), Subordinated Creditor will, at
the request and expense of the Second Lien Borrower, (i) promptly release or
otherwise terminate its Liens on any and all Collateral and any other assets or
rights of any Obligor and release each Guarantor from its obligations under the
relevant Subordinated Debt Documents; (ii) promptly deliver such
terminations of financing statements, full lien releases, mortgage satisfactions
and discharges, endorsements, assignments or other instruments of transfer,
termination or release and (iii) take such further actions as the First Lien
Agent shall reasonably require in order to release and/or terminate its Liens on
the Collateral (or release such Guarantor) and/or any other assets and rights of
any Obligor.
4. (a)
In the event that the First Lien Agent takes possession of or has “control” (as
such term is used in the UCC as in effect in each applicable jurisdiction) over
any Collateral for purposes of perfecting its Lien therein, the First Lien Agent
agrees that it shall hold, and shall be deemed to be holding, such Collateral as
representative for the Secured Creditors, including the Subordinated Creditor,
solely for purposes of perfection of its Lien under the UCC; provided that the
First Lien Agent shall not have any duty or liability to protect or preserve any
rights pertaining to any of the Collateral for the Subordinated Creditor.
Promptly following the First Lien Termination Date, the First Lien Agent shall,
upon the request of Subordinated Creditor, deliver the remainder of the
Collateral, if any, in its possession to the designee of Subordinated Creditor
(except as may otherwise be required by applicable law or court
order).
7
(b) In the event that Subordinated
Creditor takes possession of or has “control” (as such term is used in the UCC
as in effect in each applicable jurisdiction) over any Collateral for purposes
of perfecting its Lien therein, Subordinated Creditor shall be deemed to be
holding such Collateral as representative for the Secured Creditors, including
the First Lien Creditors, solely for purposes of perfection of their Liens under
the UCC; provided that
Subordinated Creditor shall not have any duty or liability to protect or
preserve any rights pertaining to any of the Collateral for the First Lien
Creditors.
(c) It is understood and agreed that
this Section 4 is intended solely to assure continuous perfection of the Liens
granted under the applicable Documents, and nothing in this Section 4 shall be
deemed or construed as altering the priorities or obligations set forth
elsewhere in this Agreement. The duties of each party under this Section 4
shall be mechanical and administrative in nature, and no party shall have, or be
deemed to have, by reason of this Agreement or otherwise a fiduciary
relationship in respect of the other party.
(d) So long as the First Lien
Termination Date has not occurred, the First Lien Agent shall have the exclusive
right, subject to the rights of the Obligors under the First Lien Documents, to
settle and adjust claims in respect of Collateral under policies of insurance
and to approve any award granted in any condemnation or similar proceeding, or
any deed in lieu of condemnation, in respect of the Collateral. After the
occurrence of the First Lien Termination Date, Subordinated Creditor shall have
the exclusive right, subject to the rights of the Obligors under the
Subordinated Debt Documents, to settle and adjust claims in respect of
Collateral under policies of insurance and to approve any award granted in
condemnation or similar proceeding, or any deed in lieu of condemnation, in
respect of the Collateral.
5. Until
Discharge of the First Lien Debt, any Collateral or proceeds thereof received by
Subordinated Creditor including, without limitation, any such Collateral
constituting proceeds, or any payment or distribution, that may be received by
Subordinated Creditor (a) in connection with the exercise of any right or remedy
(including any right of setoff) with respect to the Collateral, (b) in
connection with any insurance policy claim or any condemnation award (or deed in
lieu of condemnation), (c) from the collection or other Disposition of, or
realization on, the Collateral, whether or not pursuant to an Insolvency
Proceeding (including, pursuant to any Debt Action) or (d) in violation of this
Agreement (including any amount not permitted to be paid or received pursuant
hereto), shall be segregated and held in trust and promptly paid over to the
First Lien Agent, for the benefit of the First Lien Creditors, in the same form
as received, with any necessary endorsements, and Subordinated Creditor hereby
authorizes the First Lien Agent to make any such endorsements as agent for the
Subordinated Creditor (which authorization, being coupled with an interest, is
irrevocable). All Collateral and proceeds thereof received by any First
Lien Creditor prior to the Discharge of the First Lien Debt shall be applied to
the repayment of the First Lien Debt as provided in the First Lien Documents,
and Collateral and all proceeds thereof received after the Discharge of the
First Lien Debt shall be forthwith paid over, in the kind or funds and currency
received, to Subordinated Creditor for application to the Subordinated Debt
(unless otherwise required by law or court order). For the avoidance of
doubt, this paragraph shall not apply to any interest or principal payments
received by Subordinated Creditor that are not prohibited by this Agreement
including payments received pursuant to Section 3(e).
8
6.
This Agreement shall be applicable both before and after the filing
of any petition by or against any Obligor under the Bankruptcy Code or any other
Insolvency Proceeding and all converted or succeeding cases in respect thereof,
and all references herein to any Obligor shall be deemed to apply to the trustee
for such Obligor and such Obligor as a debtor-in-possession. The relative
rights of the First Lien Creditors and Subordinated Creditor in respect of any
Collateral or proceeds thereof shall continue after the filing of such petition
on the same basis as prior to the date of such filing, subject to any court
order approving the financing of, or use of cash collateral by, any
Obligor. This Agreement shall constitute a “subordination agreement” for
the purposes of Section 510(a) of the Bankruptcy Code and shall be enforceable
in any Insolvency Proceeding (or other Proceeding) in accordance with its
terms.
7. Subject
to the other terms and conditions of this Agreement (including the right of the
Subordinated Creditor to take Enforcement Action after the termination of the
Standstill Period), until the Discharge of the First Lien Debt, the First Lien
Agent shall have the exclusive right to manage, perform and enforce the terms of
the First Lien Documents with respect to the Collateral, to exercise and enforce
all privileges and rights thereunder according to its sole discretion and the
exercise of its sole business judgment, including the exclusive right to take or
retake control or possession of the Collateral and to hold, prepare for sale,
process, dispose of, or liquidate the Collateral and to incur expenses in
connection with such Disposition and to exercise all the rights and remedies of
a secured lender under the UCC (or any similar or equivalent foreign law) of any
applicable jurisdiction. In conducting any public or private sale under
the UCC, the First Lien Agent shall give the Subordinated Creditor such notice
(a “UCC
Notice”) of such sale as may be required by the applicable UCC; provided, however, that 10
days’ notice shall be deemed to be commercially reasonable notice. Except
as specifically provided in this Section 7 below, notwithstanding any rights or
remedies available to Subordinated Creditor under any of the Subordinated Debt
Documents, applicable law or otherwise, Subordinated Creditor shall not,
directly or indirectly, take any Enforcement Action; provided that, subject at all
times to the provisions of Sections 1 and 3, upon the expiration of the
applicable Standstill Period, Subordinated Creditor may take any Enforcement
Action (provided that it gives the First Lien Agent at least 5 Business Days
written notice prior to taking such Enforcement Action); provided, however, that
notwithstanding the expiration of the Standstill Period or anything herein to
the contrary, in no event shall Subordinated Creditor exercise or continue to
exercise any such rights or remedies, or commence or petition for any such
action or proceeding (including any foreclosure action or proceeding or any
Insolvency Proceeding) if the First Lien Agent or any other First Lien Creditor
shall, prior to the termination of the Standstill Period, have commenced any
Enforcement Action with respect to any of the Collateral or any such action or
proceeding (including, without limitation, any of the following (if undertaken
and pursued to consummate a Disposition of such Collateral within a commercially
reasonable time): the solicitation of bids from third parties to conduct the
liquidation of all or any material portion of the Collateral, the engagement or
retention of sales brokers, marketing agents, investment bankers, accountants,
auctioneers or other third parties for the purpose of valuing, marketing,
promoting or selling all or any material portion of the Collateral, the
notification of account debtors to make payments to the First Lien Agent or its
agents, the initiation of any action to take possession of all or any material
portion of the Collateral or the commencement of any legal proceedings or
actions against or with respect to the foreclosure and sale of all or any
material portion of the Collateral), or diligently attempting in good faith to
vacate any stay prohibiting an Enforcement Action with respect to all or any
material portion of the Collateral.
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8.
At any time, without notice to Subordinated Creditor, the First
Lien Agent, on behalf of the First Lien Creditors, may take actions it considers
appropriate on the First Lien Debt such as charging default interest rates when
permitted under the First Lien Documents, renewing, compromising or otherwise
amending any documents affecting the First Lien Debt and any Collateral, and
enforcing or failing to enforce any rights against any Obligor or any other
Person; provided, however, that without
the written consent of the Subordinated Creditor, the First Lien Creditors shall
not amend, restate, supplement, modify, substitute, renew or replace any or all
of the First Lien Documents to (i) increase the interest rates on the First Lien
Debt (excluding the imposition of a default rate when permitted under the First
Lien Documents), (ii) extend the final maturity date of the First Lien
Debt, (iii) increase the principal amount of the First Lien Debt, other
than as a result of the capitalization of accrued interest and expenses, (iii)
add or modify in a manner adverse to any Obligor or any Subordinated Creditor
any covenant, agreement or default, or Event of Default under the First Lien
Documents, (iv) or amend or modify any First Lien Debt Document in a manner that
would prohibit or restrict any Obligor from making interest payments to
Subordinated Creditor under the Subordinated Debt Documents, except as provided
in this Agreement, or (v) impose any fees, penalties or premiums. No
action or inaction of the First Lien Agent (under the First Lien Documents or
pursuant to this Agreement) or any Obligor will impair or otherwise affect the
First Lien Agent’s rights under this Agreement.
9.
Until the First Lien Termination Date has occurred, and
notwithstanding anything to the contrary contained in the Subordinated Debt
Documents, Subordinated Creditor shall not, without the prior written consent of
the First Lien Agent, except as expressly contemplated by the terms of the
Letter Agreement, agree to any amendment, restatement, modification, supplement,
substitution, renewal or replacement of or to any or all of the Subordinated
Debt Documents that (a) would result in an increase in the interest rates in
respect of the Subordinated Debt (excluding the imposition of a default rate
when permitted under the Subordinated Debt Documents), (b) shorten the maturity
or weighted average life to maturity of the Subordinated Debt or require that
any payment on the Subordinated Debt be made earlier than the date originally
scheduled for such payment or that any commitment expire any earlier than the
date originally scheduled therefor, (c) add or modify in a manner adverse to any
Obligor or any First Lien Creditor any covenant, agreement or default, or Event
of Default under the Subordinated Debt Documents, (d) increase the amount of the
Subordinated Debt, other than as a result of the capitalization of accrued
interest and expenses, or (e) impose any fees, penalties or
premiums.
10
10.
Each of the First Lien Agent and Subordinated Creditor shall
provide to each other concurrently with the giving thereof to any Obligor
(a) a copy of any written notice by any Secured Creditor of an Event of
Default under any of its Documents or a written notice of demand for payment
from any Obligor and (b) a copy of any written notice sent by such Secured
Creditor to any Obligor stating such Secured Creditor’s intention to exercise
any material enforcement rights or remedies against such Obligor, including
written notice pertaining to any foreclosure on all or any part of the
Collateral or other judicial or non-judicial remedy in respect thereof, and any
legal process served or filed in connection therewith; provided that the
failure of any Secured Creditor to give such required notice shall not result in
any liability to such Secured Creditor or affect the enforceability of any
provision of this Agreement, including the relative priorities of the Liens of
the Secured Creditors as provided herein, and shall not affect the validity or
effectiveness of any such notice as against any Obligor; provided, further, that the
foregoing shall not in any way impair any claims that any Secured Creditor may
have against any other Secured Creditor as a result of any failure of any
Secured Party to provide a UCC Notice in accordance with the provisions of this
Agreement and applicable law (including without limitation any liability that
any Secured Creditor may have to any other Secured Creditor as a result of any
such failure). Each of the First Lien Agent and Subordinated Creditor will
provide such information as it may have to the other as the other may from time
to time reasonably request concerning the status of the exercise of any
Enforcement Action and shall be available on a reasonable basis during normal
business hours to review with the other alternatives available in exercising
such rights, including, but not limited to, advising each other of any offers
which may be made from time to time by prospective purchasers of the Collateral;
provided that
(i) the failure of any party to do any of the foregoing shall not affect the
relative priorities of the Secured Creditors’ respective liens as provided
herein or the validity or effectiveness of any notices or demands as against any
Obligor and (ii) in no event will the First Lien Agent or any First Lien
Creditor have any obligation to obtain the consent of Subordinated Creditor with
respect to any actions taken or contemplated to be taken (or not taken) with
respect to any Enforcement Action. Each Obligor, by its acknowledgment
hereto, hereby consents and agrees to each Secured Creditor providing any such
information to the other Secured Creditor(s) and to such actions by the Secured
Creditors and waives any rights or claims against any Secured Creditors arising
as a result of such information or actions.
11.
Until such time as the First Lien Debt has been Discharged,
Subordinated Creditor shall at any time in connection with any Permitted
Collateral Sale in connection with which the First Lien Agent releases or
otherwise terminates its Liens on the Collateral (and/or, in the case of a
Permitted Collateral Sale consisting of the sale or disposition of all or
substantially all of the equity interests or assets of any Guarantor, release
such Guarantor from its obligations under the relevant First Lien Documents)
subject to such sale (but not its Lien in the proceeds of such sale):
(a) upon the request of the First Lien Agent with respect to the Collateral
subject to such Permitted Collateral Sale (which request will specify the
principal proposed terms of the sale and the type and amount of consideration
expected to be received in connection therewith), release or otherwise terminate
its liens on such Collateral (it being understood that Subordinated Creditor
shall still, subject to the terms of this Agreement, have a security interest
with respect to the proceeds of such Collateral) (and/or, in the case of a
Permitted Collateral Sale consisting of the sale or disposition of all or
substantially all of the equity interests or assets of any Guarantor, release
such Guarantor from its obligations under the relevant Subordinated Debt
Documents); (b) promptly, at the expense of the Second Lien Borrower and
other Obligors, deliver such terminations of financing statements, partial lien
releases, mortgage satisfactions and discharges, endorsements, assignments or
other instruments of transfer, termination or release (collectively, “Release Documents”)
and take such further actions as the First Lien Agent shall reasonably require
in order to release and/or terminate Subordinated Creditor’s Liens on the
Collateral (or release such Guarantor) subject to such Permitted Collateral
Sale; provided
that if the closing of the Disposition of the Collateral is not consummated
within 15 business days from the proposed closing date or any agreement
governing such Permitted Collateral Sale is terminated by any of the parties
thereto, the First Lien Agent shall, upon Subordinated Creditor’s request,
promptly return all Release Documents to Subordinated Creditor. In
connection with a Permitted Collateral Sale with respect to any Collateral, the
First Lien Agent shall promptly apply the net cash proceeds received by it upon
the closing of the Permitted Collateral Sale to the repayment of the First
Lien Debt as provided in the First Lien Documents. Subordinated Creditor
shall have no obligation to deliver any such release or authorization documents
(A) to the First Lien Agent, the Second Lien Borrower or any other Obligor at
any time or (B) to any party more than 5 business days prior to the proposed
date of the closing of the sale or disposition of such Collateral.
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12. Subordinated
Creditor shall, at any time in connection with a Release Event with respect to
any Collateral: (a) upon the request of the First Lien Agent with
respect to the Collateral subject to such Release Event (which request will
specify the principal proposed terms of the sale and the type and amount of
consideration expected to be received in connection therewith), release or
otherwise terminate its liens on such Collateral (and/or, in the case of a
Disposition consisting of the sale or disposition of all or substantially all of
the equity interests or assets of any Guarantor, release such Guarantor from its
obligations under the relevant Documents), to the extent the Disposition of such
Collateral is either by (i) the First Lien Agent or its agents or
representatives or (ii) any Obligor with the consent of the First Lien
Creditors, (b) shall grant such consents under the Subordinated Debt
Documents as the First Lien Agent reasonably deems necessary to effect such
Disposition free and clear of Subordinated Creditor’s Liens (it being understood
that Subordinated Creditor shall still, subject to the terms of this Agreement,
have a security interest with respect to the proceeds of such Collateral), and
(c) deliver such Release Documents and take such further actions as First Lien
Agent may reasonably require in connection therewith; provided that,
(i) such release by Subordinated Creditor shall not extend to or otherwise
affect any of the rights of Subordinated Creditor to the proceeds from any such
Disposition of Collateral, (ii) the First Lien Agent shall promptly apply
such proceeds to permanently pay the First Lien Debt in accordance with the
terms of the First Lien Documents until the same have been
Discharged, (iii) after such application, any excess proceeds from such
Disposition shall be applied in accordance with the provisions of Section 5 and
(iv) no such release and/or authorization documents shall be delivered (A)
to any Obligor or (B) more than 2 Business Days prior to the date of the
closing of the Disposition of such Collateral; provided further that if the
closing of the Disposition of the Collateral subject to such Release Event is
not consummated within 15 business days of the proposed date of closing or any
agreement governing such Disposition is terminated, the First Lien Agent shall
promptly, upon Subordinated Creditor’s request, return all Release Documents to
Subordinated Creditor. Subordinated Creditor waives any benefits of
California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850,
2899 and 3433.
13.
[Intentionally Omitted]
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14.
In any Insolvency Proceeding, if the First Lien Creditors (or any
subset thereof) are granted adequate protection in the form of Senior Adequate
Protection Liens, Subordinated Creditor may seek (and the First Lien Creditors
may not oppose) adequate protection of their interests in any portion of the
Collateral securing the Subordinated Debt in the form of a replacement lien on
the additional collateral subject to the Senior Adequate Protection Liens, if
granted, will be subordinate to all Liens securing the First Lien Debt
(including, without limitation, the Senior Adequate Protection liens and any
“carve-out” agreed to by the First Lien Agent or the other First Lien Creditors)
and any Liens securing debtor-in-possession financing on the same basis as the
other liens securing the Subordinated Debt are so subordinated under this
Agreement; provided that, Subordinated Creditor hereby irrevocably agrees,
pursuant to Section 1129(a)(9) of the Bankruptcy Code, that any stipulation
and/or order granting such adequate protection may provide that any junior
superpriority claims held by it may be paid under any plan of reorganization in
any combination of cash, debt, equity or other property having a value on the
effective date of such plan equal to the allowed amount of such junior
superpriority claims. Except as expressly set forth above, Subordinated Creditor
may not seek and waive the right to request or receive post-petition interest
and/or adequate protection payments in any Proceeding, and the First Lien
Creditors may oppose any payments proposed to be made by any Obligor to
Subordinated Creditor.
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15.
Subordinated Creditor hereby consents to any sale, lease, exchange,
transfer or other disposition (each, a “Disposition”) of any
Collateral securing the First Lien Debt (or any portion thereof) and the
Subordinated Debt free and clear of Liens or other claims under Section 363 of
the Bankruptcy Code or any other provision of the Bankruptcy Code, if the First
Lien Creditors have consented to the Disposition of such assets, as long as all
proceeds of such Disposition received by the First Lien Creditors on account of
the First Lien Debt will be applied to the First Lien Debt to permanently reduce
the principal portion of the First Lien Debt in accordance with this Agreement;
provided that
Subordinated Creditor may raise any objections to any such Disposition of such
Collateral securing the Subordinated Debt that could be raised by any creditor
of the Obligors whose claims were not secured by any liens on such collateral,
provided such objections are not inconsistent with any other term or provision
of this Agreement and are not based on the status of Subordinated Creditor as a
secured creditors (without limiting the foregoing, Subordinated Creditor will
not be permitted to raise any objections based on rights afforded by Sections
363(e) and (f) of the Bankruptcy Code to secured creditors (or by any comparable
provision of any bankruptcy or insolvency law)) with respect to the Liens
granted to Subordinated Creditor; provided, further, that
Subordinated Creditor shall retain its rights to bid on the Collateral
(including by way of credit bidding under Section 363(k) of the Bankruptcy
Code or otherwise) so long as such bid contains a cash component sufficient to
Discharge the First Lien Debt in its entirety. Subordinated Creditor
hereby irrevocably waives any claim it may now or hereafter have arising out of
the First Lien Creditors’ election in any proceeding instituted under Chapter 11
of the Bankruptcy Code of the application of Section 1111(b)(2) of the
Bankruptcy Code. Subordinated Creditor hereby agrees not to initiate or
prosecute or join with any other Person to initiate or prosecute any claim,
action or other proceeding (i) challenging the enforceability of the First Lien
Creditors’ claims as fully secured claims with respect to all or part of the
First Lien Debt or for allowance of any First Lien Debt (including those
consisting of post-petition interest, fees or expenses) or opposing any action
by the First Lien Agent or the First Lien Creditors to enforce their rights or
remedies arising under the First Lien Documents in a manner which is not
prohibited by the terms of this Agreement, (ii) challenging the enforceability,
validity, priority or perfected status of any liens on assets securing the First
Lien Debt under the First Lien Documents, (iii) asserting any claims which any
of the Obligors may hold with respect to the First Lien Creditors, (iv) seeking
to lift the automatic stay to the extent that such action is opposed by the
First Lien Agent or (v) opposing a motion by the First Lien Agent to lift the
automatic stay. The First Lien Creditors agree not to initiate or
prosecute or join with any Person to initiate or prosecute any claim, action or
other Proceeding (i) challenging the enforceability, validity, priority or
perfected status of any liens on assets securing the Subordinated Debt under the
Subordinated Debt Documents, (ii) challenging the enforceability of the
Subordinated Creditor’s claims as fully secured claims with respect to all or
part of the Subordinated Debt or for allowance of any Subordinated Debt
(including those consisting of post-petition interest, fees or expenses) or
opposing any action by the Subordinated Creditor to enforce its rights or
remedies arising under the Subordinated Debt Documents in a manner which is not
prohibited by the terms of this Agreement or (iii) asserting any claims
which any of the Obligors may hold with respect to the Subordinated
Creditor. Furthermore, Subordinated Creditor agrees that it shall not at
any time, whether before, during or after the commencement of any Proceeding
(including any Insolvency Proceeding) and until the First Lien Termination Date,
(x) grant any waivers under, or fail to enforce the terms of or exercise any
rights available to it under or pursuant to, any subordination agreement,
priority deed, or similar document or instrument that applies to any
indebtedness, obligations, undertakings, guaranties or liens that are thereby or
otherwise subordinated to the Subordinated Debt and/or any liens on Collateral
(“Other Subordinated
Debt”), (y) cooperate with or otherwise permit or forbear from exercising
any rights and remedies with respect to any attempt by any beneficial or legal
holder of any Other Subordinated Debt, in violation of any applicable so called
“standstill” provisions of such agreement or priority deed, to accelerate, make
demand, attempt to collect, take legal or equitable action with respect to, or
seek a judgment against or any other legal or equitable relief with respect to
any Obligor and/or to foreclose or otherwise realize upon and/or take possession
or control of, or obtain any legal or equitable relief with respect to, any
portion of the Collateral.
16.
Subordinated Creditor shall promptly affix a legend to the
instruments evidencing the Subordinated Debt stating that the instruments are
subject to the terms of this Agreement. By the execution of this
Agreement, Subordinated Creditor hereby agrees to promptly (but not more than
five (5) Business Days following the date first written above) amend any
financing statements and functionally-similar lien perfection and/or creation
documents filed or recorded by Subordinated Creditor against any Obligor as
follows: “In accordance with a certain Subordination Agreement by and among the
[Subordinated Creditor], the Debtor and the [First Lien Agent], the
[Subordinated Creditor] has subordinated any security interest or lien that
[Subordinated Creditor] may have in any property of the Debtor to the security
interest of [the First Lien Agent] on behalf of itself and other creditors in
all assets of the Debtor, notwithstanding the respective dates of attachment or
perfection of the security interest of the Secured Creditor and [the First Lien
Agent]”.
14
17.
No amendment of the Subordinated Debt Documents shall directly or
indirectly modify the provisions of this Agreement in any manner which might
terminate or impair the subordination of the Subordinated Debt or the
subordination of the Liens that Subordinated Creditor may have in any property
of any Obligor.
18.
In the event of any Insolvency Proceeding involving one or more of
the Obligors, these provisions shall apply: (a) the Subordinated Creditor shall
not seek in any Proceeding to be treated as part of the same class of creditors
as the First Lien Agent or the First Lien Creditors and shall not oppose any
pleading or motion by the First Lien Agent and/or the First Lien Creditors for
the First Lien Creditors and the Subordinated Creditor to be treated as separate
classes of creditors; (b) the First Lien Creditors shall first be entitled to
receive payment in full in cash of the First Lien Debt (including post-petition
interest, including any applicable default rate interest, whether or not
permitted in such Proceeding) from the proceeds of the Collateral before
Subordinated Creditor is entitled to receive from the proceeds of the Collateral
any payment on account of the principal of or interest on or any other amount
owing in respect of the Subordinated Debt; (c) any payment, dividend or
distribution of assets of the Obligor of any kind or character, whether in cash,
property or securities to which Subordinated Creditor would be entitled except
for the provisions of this Agreement, shall be paid by the Person making the
payment or distribution, whether a trustee in bankruptcy, a
debtor-in-possession, a receiver or liquidating trustee or other trustee or
agent, directly to the First Lien Agent, to the extent necessary to make
indefeasible payment in full in cash of the remaining unpaid First Lien Debt and
Subordinated Creditor shall then be entitled to receive from the proceeds of the
Collateral payment in full in cash of the Subordinated Debt (including
post-petition interest, including any applicable default rate interest, whether
or not permitted in such Proceeding); (d) in any Proceeding, the First Lien
Agent is irrevocably authorized and empowered (in the name of Subordinated
Creditor or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment, dividend or distribution referred to in
clauses (a) through (c) above and give acquittance therefor and to file claims
and proofs of claim and take other action (including, without limitation, voting
the Subordinated Debt or enforcing any lien securing Subordinate Debt) as the
First Lien Agent may deem necessary or advisable for the exercise or enforcement
of any of the rights, remedies or interests of the First Lien Agent under this
Agreement to the extent that Subordinated Creditor, after written notice from
First Lien Agent, has not theretofore done so and any applicable claims bar date
or statute of limitations is due to occur in less than thirty (30) days; (e) in
any Insolvency Proceeding, Subordinated Creditor shall promptly take any action
as the First Lien Agent may reasonably request: (i) to collect the Subordinated
Debt for the account of the First Lien Agent and to file appropriate claims or
proofs of claim in respect of the Subordinated Debt; (ii) to execute or
authenticate and deliver to the First Lien Agent powers of attorney,
assignments, instruments, or other documentation as the First Lien Agent may
request in order to enable the First Lien Agent to enforce any and all claims
with respect to the Subordinated Debt and any lien securing Subordinate Debt;
and (iii) to collect and receive any and all payments, dividends or
distributions which may be payable or deliverable upon or with respect to the
Subordinated Debt; and (f) in any Insolvency Proceeding, Subordinated Creditor
shall not have any right to setoff against the Subordinated Debt any
indebtedness, claim or other obligation of any nature owed by Subordinated
Creditor to the Obligor (including, without limitation, any right of setoff
under Section 553 of the Bankruptcy Code), and Subordinated Creditor irrevocably
agrees, to the extent not prohibited by applicable law, that Subordinated
Creditor waives and will not exercise any right of setoff. If the foregoing
waivers are adjudicated unenforceable by a court of competent jurisdiction, then
Subordinated Creditor agrees that, in the event that Subordinated Creditor
exercises any right of setoff in any Proceeding or at any other time,
Subordinated Creditor will pay directly to the First Lien Agent, an amount equal
to the amount of Subordinated Debt that was so set off, for application to First
Lien Debt until all First Lien Debt has been Discharged.
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19. To
the extent that the First Lien Creditors receive payments on the First Lien Debt
or proceeds of Collateral for application to the First Lien Debt which are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
Bankruptcy Law, common law, equitable cause or otherwise (and whether as a
result of any demand, settlement, litigation or otherwise) (each a “First Lien
Avoidance”), then to the extent of such payment or proceeds received,
such Obligations, or part thereof, intended to be satisfied by such payment or
proceeds shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by the First Lien Creditors, and this
Agreement, if theretofore terminated, shall be reinstated in full force and
effect as of the date of such First Lien Avoidance, and such prior termination
shall not diminish, release, discharge, impair or otherwise affect the Lien
priorities and the relative rights and obligations of the First Lien Creditors
and the Subordinated Creditor provided for herein with respect to any event
occurring on or after the date of such First Lien Avoidance. The
Subordinated Creditor agrees that it shall not be entitled to benefit from any
First Lien Avoidance, whether by preference or otherwise, it being understood
and agreed that the benefit of such First Lien Avoidance otherwise allocable to
them shall instead be allocated and turned over for application in accordance
with the priorities set forth in this Agreement.
20.
Subject to Section 19 hereof, this Agreement shall terminate upon
the First Lien Termination Date.
21. All
rights and interests of the First Lien Agent and the First Lien Creditors under
this Agreement, and all agreements and obligations of Subordinated Creditor and
Obligor under this Agreement, shall remain in full force and effect irrespective
of: (a) any lack of collectability, validity or enforceability of all or any
portion of this Agreement, the First Lien Debt or any of First Lien Documents
due to incapacity, lack of power or authority, discharge or for any reason
whatsoever; (b) subject to Section 8, any change in the amount of interest
accruing on, time, manner or place of payment of, or in any other terms or
conditions of, all or any of First Lien Debt, or any other amendment or waiver
of, any consent to departure from any of First Lien Documents, including,
without limitation, changes in the terms of disbursement or repayment of any
loan proceeds, any modifications, increases, extensions, renewals,
rearrangements, restatements, acceleration, settlement or compromise of First
Lien Debt or the advancement of additional funds by the First Lien Agent in its
discretion; (c) the timing, manner and order of application of any payments and
credits made by the First Lien Agent on First Lien Debt; (d) the First Lien
Agent’s or the First Lien Creditors’ forbearance or agreement to forbear from
enforcing any right or remedy related to First Lien Debt, including rights and
remedies against any Obligor; (e) any exchange of Collateral, release or
non-perfection of any lien, subordination of any lien, or any release of any
Obligor on the First Lien Debt or any release, amendment or waiver of, or
consent to departure from or indulgence with respect to, any the First Lien
Document, for all or any of First Lien Debt; (f) any future law, regulation, or
order of any governmental authority (whether of right or in fact) purporting to
affect any term of First Lien Debt or First Lien Documents; (g) any setoff,
defense or counterclaim whatsoever (in any case, whether based on contract, tort
or any other theory) or any other circumstance in respect of this Agreement,
First Lien Debt or any the First Lien Document that might otherwise constitute a
defense available to, or a discharge of, First Lien Debt, the First Lien
Borrower, any other Obligor on any First Lien Debt or Subordinated Creditor; or
(h) any action taken or refrained from being taken by the First Lien Agent
regarding First Lien Debt that the First Lien Agent deems
appropriate.
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22.
Each party hereto hereby agrees to execute such documents and/or take such
further action as the First Lien Agent or Subordinated Creditor may at any time
or times reasonably request in order to carry out the provisions and intent of
this Agreement, including, without limitation, ratifications and confirmations
of this Agreement from time to time hereafter, as and when requested by the
First Lien Agent or Subordinated Creditor.
23. Subordinated
Creditor represents and warrants to the First Lien Agent as follows: (a) the
execution, delivery and performance of this Agreement and each of the
Subordinated Debt Documents now outstanding (true and complete copies of which
have been furnished to the First Lien Agent) have been duly authorized by all
necessary action; are within the power and authority of Subordinated Creditor
and do not and will not (i) contravene the partnership agreement or other
organic documents, if any, establishing or governing Subordinated Creditor, any
applicable law or governmental regulation or any contractual restriction binding
on or affecting Subordinated Creditor or any of its properties or (ii) result in
or require the creation of any Lien upon or with respect to any of Subordinated
Creditor’s properties; (b) this Agreement and each of the Subordinated Debt
Documents are legal, valid and binding obligations of Subordinated Creditor,
enforceable against the Second Lien Borrower and the other Obligors party
thereto, to the best of Subordinated Creditor’s knowledge, and Subordinated
Creditor in accordance with their respective terms except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights and by general equitable principles; (c)
Subordinated Creditor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, organization or
formation and in good standing in the jurisdictions in which it is doing
business, except, in each instance, with respect to such failures that would not
reasonably be expected to adversely impact Subordinated Creditor’s rights under
the Subordinated Debt Documents and Subordinated Creditor’s ability to perform
its obligations under this Agreement; (d) Subordinated Creditor is the sole
holder of the Subordinated Debt, free and clear of any Liens, with full power to
make the subordinations set forth in this Agreement; and (e) Subordinated
Creditor has not made or permitted any assignment or transfer, as security or
otherwise, of the Subordinated Debt, any Subordinated Debt Documents or of any
of the Collateral securing the Subordinated Debt prior to the date hereof.
The First Lien Agent represents and warrants to Subordinated Creditor as
follows: (a) the execution, delivery and performance of this Agreement and the
First Lien Documents have been duly authorized by all necessary action; are
within the power and authority of the First Lien Agent and do not and will not
(i) contravene the partnership agreement or other organic documents, if any,
establishing or governing the First Lien Agent, any applicable law or
governmental regulation or any contractual restriction binding on or affecting
the First Lien Agent or any of its properties, or (ii) result in or require the
creation of any lien upon or with respect to any of the First Lien Agent’s
properties; (b) this Agreement constitutes a legal, valid and binding obligation
of the First Lien Agent, enforceable against the First Lien Agent in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditors' rights and by
general equitable principles, (c) First Lien Agent is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation and in good standing in the
jurisdictions in which it is doing business, except, in each instance, with
respect to such failures that would not reasonably be expected to adversely
impact First Lien Agent’s rights under the First Lien Documents and First Lien
Agent’s ability to perform its obligations under this Agreement; (d) First Lien
Creditors’ are the sole holders of the First Lien Debt, free and clear of any
Liens, with full power to make the agreements set forth in this
Agreement.
17
24.
This Agreement binds Subordinated Creditor, the First Lien Agent,
the First Lien Creditors, the First Lien Borrower, the Second Lien Borrower, and
all other Obligors and their respective successors or assigns, and benefits the
First Lien Agent, the First Lien Creditors and Subordinated Creditor, and their
respective successors, assigns and participants in any portion of the First Lien
Debt and the Subordinated Debt, as applicable. This Agreement is for
Subordinated Creditor’s and the First Lien Agent’s and the First Lien Creditors’
benefit and not for the benefit of any Obligor, any guarantor of any Obligor’s
obligations under the First Lien Debt and/or the Subordinated Debt or any other
person. Each Secured Creditor reserves the right to grant participations in, or
otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, their respective Obligations; provided that no
Secured Creditor shall be obligated to give any notices to or otherwise in any
manner deal directly with any participant in the Obligations and no participant
shall be entitled to any rights or benefits under this Agreement, except through
the Secured Creditor with which it is a participant. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original and
all of which together shall constitute one instrument. Any facsimile, “pdf”,
“tiff” or other copy hereof (in any format) shall be deemed to be an original
for purposes of enforcement hereof. Any rule of construction to the effect that
a contract is to be construed against a drafting party is expressly
disclaimed. The term “including” is construed to mean “without
limitation.”
25.
This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to conflicts of
laws principles. Subordinated Creditor, the First Lien Agent, First Lien
Creditors and each Obligor submit to the non-exclusive jurisdiction of the state
and federal courts located in Los Angeles, California, any action, suit, or
Proceeding of any kind, against it which arises out of or by reason of this
Agreement. Each Secured Creditor expressly submits and consents in advance to
such jurisdiction in any action or suit commenced in any such court, and each
Secured Creditor hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Each Secured Creditor hereby waives personal
service of the summons, complaints, and other process issued in such action or
suit and agrees that service of such summons, complaints, and other process may
be made by registered or certified mail addressed to such Secured Creditor at
the address set forth on the signature page hereof, and that service so made
shall be deemed completed upon the earlier to occur of such Secured Creditor’s
actual receipt thereof or two (2) business days after deposit by the First Lien
Agent or the Subordinated Creditor, as the case may be, in the U.S. mails,
proper postage prepaid.
18
TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, SUBORDINATED CREDITOR AND THE FIRST LIEN AGENT EACH WAIVE THEIR RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT,
TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT
FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED
THIS WAIVER WITH ITS COUNSEL.
WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is
not enforceable, the parties hereto agree that the foregoing jury trial waiver
shall be severed from this Agreement and that any and all disputes or
controversies of any nature between them arising at any time shall be decided by
a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Los Angeles County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Los Angeles County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have
the power, among others, to grant provisional relief, including without
limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall
be closed to the public and confidential and all records relating thereto shall
be permanently sealed. If during the course of any dispute, a party
desires to seek provisional relief, but a judge has not been appointed at that
point pursuant to the judicial reference procedures, then such party may apply
to the Los Angeles County, California Superior Court for such relief. The
proceeding before the private judge shall be conducted in the same manner as it
would be before a court under the rules of evidence applicable to judicial
proceedings. The parties shall be entitled to discovery which shall be
conducted in the same manner as it would be before a court under the rules of
discovery applicable to judicial proceedings. The private judge shall
oversee discovery and may enforce all discovery rules and order applicable to
judicial proceedings in the same manner as a trial court judge. The
parties agree that the selected or appointed private judge shall have the power
to decide all issues in the action or proceeding, whether of fact or of law, and
shall report a statement of decision thereon pursuant to the California Code of
Civil Procedure § 644(a). Nothing in this paragraph shall limit the right
of any party at any time to exercise self-help remedies, foreclose against
collateral, or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and
enforceability of this paragraph.
26.
The Subordinated Creditor hereby agrees that until the First Lien Termination
Date has occurred it will not assert any rights of subrogation it may acquire as
a result of any payment hereunder; provided that as
between the Obligors, on the one hand, and the Subordinated Creditor, on the
other hand, any such payment that is paid over to the First Lien Agent and/or
the First Lien Creditors pursuant to this Agreement shall be deemed not to
reduce any of the Subordinated Debt.
19
27.
Each of First Lien Agent and Subordinated Creditor may demand specific
performance of this Agreement and, on behalf of itself and the respective other
Secured Creditors, hereby irrevocably waives any defense based on the adequacy
of a remedy at law and any other defense that might be asserted to bar the
remedy of specific performance in any action which may be brought by the
respective Secured Creditors.
28.
This Agreement represents the entire agreement with respect to the subject
matter hereof, and supersedes all prior negotiations, agreements and
commitments. Except as provided in Section 23, Subordinated Creditor is
not relying on any representations by the First Lien Agent in entering into this
Agreement, and Subordinated Creditor has kept and will continue to keep itself
fully apprised of the financial and other condition of each Obligor. This
Agreement may be amended only by written instrument signed by Subordinated
Creditor and the First Lien Agent.
29.
Each Obligor party hereto hereby, jointly and severally, agrees to pay, upon
demand, to the First Lien Agent and/or Subordinated Creditor, as the case may
be, the amount of any and all fees, charges, costs and expenses, including
reasonable attorneys' fees and costs, both before and after judgment, that the
First Lien Agent or Subordinated Creditor may incur under or in enforcement of
this Agreement.
[Remainder
of Page Intentionally Left Blank]
20
IN WITNESS WHEREOF, the undersigned
have executed this Subordination Agreement as of the date first above
written.
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“First
Lien Agent”
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“Subordinated
Creditor”
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TRINAD
CAPITAL MASTER FUND, LTD.
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VALUEACT
SMALLCAP MASTER FUND, L.P.
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By:
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By:
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||
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Name:
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Name:
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|||
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Title:
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Title:
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“First
Lien Borrower”
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“Second
Lien Borrower”
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Name:
NeuMedia, Inc.
|
Name:
Twistbox Entertainment, Inc.
|
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By:
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By:
|
|
||
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Title:
|
Title:
|
|
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Signature Page to
Subordination Agreement