EXHIBIT 4.13
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated effective as of July 3, 1996, by and
between REPUBLIC ACCEPTANCE CORPORATION a Minnesota corporation with offices
at 2338 Central Avenue N.E. Minneapolis, Minnesota (the "Senior Lender"),
U.B.F.C., INC a Delaware corporation (the "Subordinated Lender"), and THE
O'BOISIE CORPORATION, an Illinois corporation with offices at 1111 West 22nd
Street, Suite 640, Oakbrook, Illinois (the "Company").
A. The Company and the Senior Lender have entered into a Credit
Agreement dated as of July 3, 1996 (as the same may hereafter be amended,
supplemented, extended, restated or otherwise modified from time to time, the
"Credit Agreement").
B. Pursuant to the terms of the Credit Agreement, the Lender has
agreed to extend credit accommodations to the Company (the principal and
interest due with regard to those credit accommodations as in effect on the
date of the Subordination Agreement, being the "Senior Debt").
C. The Senior Debt is secured by a Security Agreement dated July 3,
1996, pursuant to which the Company granted to the Senior Lender a security
interest in and to all personal property of the Company.
D. The Company is obligated and indebted to the Subordinated Lender,
INTER ALIA, for credit extended by the Subordinated Lender to the Company
pursuant to a Promissory Note in the principal amount of $8,000,000.00 dated
January 25, 1996 and as further evidenced by the Amended and Restated
Subordinated Promissory Note dated as of July 3, 1996 (the "Subordinated
Debt").
E. The Subordinated Debt is secured by a security interest in and to
certain personal property of the Company.
F. It is a condition precedent to the obligation of the Senior Lender
to extend credit accommodations to the Company pursuant to the Credit
Agreement that the Subordinated Lender and the Company execute and deliver
this Subordination Agreement to the Senior Lender.
G. The Subordinated Lender and the Company each find it advantageous,
desirable and in their respective best interests to comply with the
requirement that it execute and deliver this Subordination Agreement to the
Senior Lender.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the Senior Lender, Subordinated Lender and the Company
agree as follows:
1. SUBORDINATION OF DEBT.
(a) The Subordinated Lender and the Company covenant and agree
that the obligations of the Company with respect to any payment of principal,
interest or other amounts payable with respect to the Subordinated Debt are
and shall be subordinate, to the extent and in the manner hereinafter set
forth, for right of payment and subject to the prior payment or provision for
payment in full of all principal, interest or other amounts payable with
respect to the Senior Debt, and all amendments, renewals, extensions and
refundings of the Senior Debt; provided however that as long as none of the
events described in Section 1(b) or 1(c) have occurred, the Subordinated
Lender shall be entitled to receive and
retain all regularly scheduled payments of principal of an interest on the
Subordinated Debt (but the Subordinated Lender shall not accept, nor shall
the company make any prepayment on the Subordinated Debt, nor accelerate the
payment schedule under the Subordinated Debt, without the prior written
consent of the Senior Lender). It is a condition precedent to the
effectiveness of this Agreement that the Subordinated Lender receive the sum
of $4,000,000.00, from the Company in accordance with agreements between the
Company and Subordinated Lender of event dater hereof.
(b) Upon the maturity of the Senior Debt be demand for payment of
the Senior Debt, termination of the Credit Agreement or otherwise, all
principal thereof interest due thereon shall first be paid in full, or such
payment duly provided for in cash or a manner satisfactory to the holder of
the Senior Debt, before any payment is made on account of the principal of or
interest on the Subordinated Debt.
(c) Upon the happening of an event of default with respect to the
Senior Debt, as such event of default is defined in the Credit Agreement,
permitting the holder of the Senior Debt to accelerate maturity thereof,
then, until (1) such event of default shall have been cured or waived or
shall have ceased to exist, or (2) 180 days shall have passed since the date
of the event of default shall be made to the Subordinated Lender with respect
to the principal of or interest on the Subordinated Debt.
(d) In the event that, contrary to the provisions of Sections 1(b)
or 1(c) hereof, any payment or distribution of assets of the Company of any
character, whether in cash, securities or other property, is received by the
Subordinated Lender before the Senior Debt is paid in full, such payment or
distribution will be held in trust for the benefit of, and will be paid over
or delivered to, the holder of the Senior Debt (or its duly authorized
representative) until Senior Debt has been paid in full, after giving effect
to the concurrent payment or distribution (or provision therefor) to the
holder of the Senior Debt. Under no circumstances, however, shall the
Subordinated Lender be obligated to turn over any scheduled principal or
interest payment on the Subordinated Debt that is received by the
Subordinated Lender as permitted by Section 1(a) and prior to the occurrence
of the earliest event specified in Sections 1(b) or 1(c) to occur.
(e) Subject to the payment in full of the Senior Debt, the
Subordinated Lender shall be subrogated to the rights of the holder of the
Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until all amounts
owing on the Subordinated Debt shall be paid in full. For the purposes of
that subrogation, no payments or distributions to the holder of the Senior
Debt which, except for the provisions of the this subordination agreement
would be payable or distributable to the Subordinated Lender, shall, as
between the Company, its creditors other than the holder of the Senior Debt,
and the Subordinated Lender be deemed payments to the holder of, or on
account of the Senior Debt, is being understood that the provisions of this
Section 1 are and are intended solely for the purpose of defining the
relative rights of the Subordinated Lender, on the one hand, and the holder
of the Senior Debt, on the other hand.
(f) No right of any present or future holder of the Senior Debt to
enforce subordination as provided in this Section 1 will at any time in any
way be prejudiced or impaired by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Subordination Agreement, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
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2. SUBORDINATION OF SECURITY INTEREST.
(a) The Company and the Subordinated Lender hereby agree that,
regardless of any priority otherwise available to the Subordinated Lender by
law or by agreement, any security interest which the Subordinated lender may
now hold or may now or at any time hereafter acquire in any or all of the
assets of the Company (the "Collateral"), together with all proceeds thereof,
is, shall be and shall remain fully subordinate for all purposes to the
security interest of the Senior Lender in the Collateral, which relates to
the Senior Debt, until all of the Senior Debt has been paid in full and the
Credit Agreement has been terminated.
(b) The Subordinated Lender will not exercise any collection
rights with respect to the Collateral, will not take possession of, sell or
dispose of, or otherwise deal with, the Collateral, and will not exercise or
enforce any right or remedy which be available to the Subordinated Lender
with respect to the Collateral upon default, without the prior written
consent of the Senior Lender.
(c) The Senior Lender may exercise collection rights, may take
possession of, sell or dispose of, and otherwise deal with, the Collateral,
and may exercise and enforce any right or remedy available prior to or after
the occurrence of an event described in Sections 1(b) or 1(c), all without
notice to or consent by anyone. The Senior Lender may apply the proceeds of
the Collateral to any indebtedness secured by the Senior Lender's
above-described security interest, in any order of application until all of
the Senior Debt has been paid in full and the Credit Agreement has been
terminated.
(d) In the event that the Company determines to sell Collateral
and the Senior Lender consents thereto, the Subordinated Lender shall execute
and deliver unconditional releases of its security interests in the
Collateral to be sold if requested by the Company in return for confirmation
that the Subordinated Lender will retain its security interest of equal
priority to any security interest in any of the Collateral which it consents
to be released and the Company and Senior Lender will hold such proceeds for
the benefit of the Subordinated Lender.
(e) Neither the Subordinated Lender nor the Senior Lender (i)
makes any representation or warranty concerning the Collateral or the
validity, perfection or (except as to the subordination accomplished hereby)
priority of any security interest therein, or (ii) shall have any duty to
preserve, protect, care for, insure, take possession of, collect, dispose of
or otherwise realize upon any of the Collateral.
3. BANKRUPTCY ISSUES.
(a) In the event of any insolvency, bankruptcy or similar
proceeding relating to the Company or its property, any voluntary
liquidation, dissolution or other winding up of the Company, or any
assignment for the benefit of its creditors or any other marshalling of its
assets, the Senior Debt shall first be paid in full before any payment or
distribution is made on account of the Subordinated Debt, and to that end the
holder of the Senior Debt shall be entitled to receive for application and
payment thereof any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable in any
such proceeding in respect of the Subordinated Debt, including any such
payment or distribution which may be payable or deliverable by virtue of the
provisions of any indebtedness which is subordinate and junior in right of
payment to the Subordinated Debt, except securities which are subordinate in
right of payment to the payment of the Senior Debt. In order to enable
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the Senior Lender to enforce the foregoing rights in any bankruptcy,
insolvency or similar action or proceedings, the Senior Lender is hereby
irrevocably authorized an empowered in its discretion to make and present for
or on behalf of the Subordinated Lender such proof of claims or claims
against the Company on account of the Subordinated Debt as the Senior Lender
may deem expedient and proper, and to vote such claims in any such
proceedings and to receive and collect any and all dividends or other
payments or disbursements made thereon in whatever form the same may be paid
or issued and to apply the same on account of the Senior Debt. The
Subordinated Lender further agrees to execute such instruments as may be
required by the Senior Lender to enable the Senior Lender to enforce any and
all such claims and collect any and all dividends or other payments or
disbursements which may be made on account of the Subordinated Debt including
any documents of assignment which are necessary to allow the Senior Lender to
enforce its claims with respect to the Senior Debt.
(b) If Company becomes the subject of proceedings under the
Bankruptcy Code and if the Senior Lender desires to permit the use of cash
collateral or to provide financing to Company under either Section 363 or
Section 364 of Title 11 of the United States Code (the "Bankruptcy Code") the
Subordinated Lender agrees that adequate notice of such financing to the
Subordinated Lender shall have been provided if the undersigned receives
notice two (2) Business Days prior to the entry of any order approving such
cash collateral usage or financing. Notice of proposed financing or use of
cash collateral shall be deemed given upon the sending of such notice by
telegraph, telecopy or hand delivery to the undersigned at the address
indicated on the signature page hereof. All allocations of payments between
the Senior Lender and the Subordinated Lender shall continue to be made after
the filing of petition under the Bankruptcy Code on the same basis that the
payments were to be allocated prior to the date of such filing. To the
extent that the Senior Lender receives payments on, or proceeds of any
collateral for, the Senior Debt which are subsequently avoided, invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
prepaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds received, the Senior Debt, or part thereof, intended
to be satisfied shall be revived and continue in full force and effect as if
such payments or proceeds had not been received by the Senior Lender.
4. INSTRUMENT LEGEND. Any agreement or instrument evidencing the
Subordinated Debt and/or the security interest held by the Subordinated
Lender, or any portion thereof, which has been or is hereafter executed by
the Company will, on the date hereof or the date of execution, be inscribed
with a legend conspicuously indicating that payment thereof or the security
interest held by the Subordinated Lender, as the case may be, is subordinated
to the claims or the security interests of the Senior Lender pursuant to the
terms of this Agreement. A copy of any such agreement or instrument will be
delivered to the Senior Lender within five (5) Business Days after the date
hereof or the date of its execution.
5. TRANSFER OF THE SUBORDINATED DEBT. The Subordinated Lender
warrants and represents that it has not previously assigned any interest in
the Subordinated Debt, and that no other party owns an interest in the
Subordinated Debt. The Subordinated Lender further covenants and agrees that
it will not assign or transfer the Subordinated Debt or its security interest
in the Collateral to any other person without the prior written consent of
the Senior Lender. Such consent will be conditioned solely upon satisfactory
proof that any purchase or transferee, or successor to, the Subordinated Debt
or any security interest of the Subordinated Lender in any or all of the
Collateral has been given detailed written notice of the subordination
accomplished hereby, prior to the time of purchase, transfer or succession,
and agrees to be bound by the same on terms satisfactory to the Senior Lender.
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6. RIGHTS UNIMPAIRED. Nothing contained in this Agreement is intended
to or shall impair, as between the Company, its creditors other than the
holder of the Senior Debt, and the Subordinated Lender, the obligation of the
Company, which is absolute and unconditional, to pay to the Subordinated
Lender the principal of and interest on the Subordinated Debt as and when the
same shall become due and payable in accordance with its terms, or affect the
relative rights of the Subordinated Lender and creditors of the Company other
than the holder of the Senior debt, nor shall anything herein prevent the
Subordinated Lender from exercising all remedies otherwise permitted by
applicable law upon default under the Subordinated Debt (other than the right
to foreclose on the Collateral which right will be limited only in so far as
is provided by the provisions of Section 2 of this Agreement), subject to the
rights, if any, under this Agreement of the holder of the Senior debt in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
7. TERMINATION OF AGREEMENT AND RETENTION OF COLLATERAL. Upon
irrevocable payment in full of the Senior Debt, this Agreement shall
terminate, provided that if any payment received by the Senior Lender and
applied to the Senior Debt is subsequently set aside, recovered, rescinded or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Company or any other
obligor), the Senior Debt to which such payment was applied shall for the
purposes of this Agreement be deemed to have continued in existence,
notwithstanding such application, and this Agreement shall be enforceable as
to such Senior Debt as fully as if such application had never been made.
References in this Agreement to amount "irrevocably paid" or to "irrevocable
payment" refer to payments that cannot be set aside, recovered, rescinded or
required to be returned for any reason. Subject to the foregoing, upon
payment in full of the Senior Debt and termination of all obligations under
the Credit Agreement the Senior Lender as promptly as possible, deliver to
the Subordinated Lender all Collateral, any certificates or instruments
representing or evidencing the Collateral and any proceeds thereto then held
or thereafter received by it, unless such actions are prohibited by law, and
shall terminate or assign all outstanding financing statement with respect to
the Senior Debt. Senior Lender will hold all proceeds of collateral for the
Subordinated Lender after payment in full of the Senior Debt and termination
of the Credit Agreement and will promptly notify the Subordinated Lender of
such payment.
8. INFORMATION CONCERNING FINANCIAL CONDITION OF COMPANY. The
Subordinated Lender warrants and agrees that it is the responsibility of the
Subordinated Lender to keep informed of the financial condition of the
Company, any and all endorsers and any and all guarantors of the Subordinated
Debt and of all other circumstances bearing upon the risk of nonpayment of
the Senior Debt and/or the Subordinated Debt that diligent inquiry would
reveal. The Subordinated Lender hereby agrees that the Senior Lender shall
have no duty to advise the Subordinated Lender of information know to the
Senior Lender regarding such condition or any such circumstances. In the
event the Senior Lender, in its sole discretion, undertakes, at any time or
from time to time, to provide any such information to the Subordinated
Lender, the Senior Lender shall be under no obligation to (i) provide any
such information to the undersigned on any subsequent occasion, (ii)
undertake any investigation not a part of its regular business routine, or
(iii) disclosure any information which, pursuant to its usual practices, the
Senior Lender wishes to maintain confidential. The undersigned hereby agrees
that all payments received by the Senior Lender may be applied, reversed, and
reapplied, in whole or in part, to any of the Senior Debt, as the Senior
Lender, in its sole discretion, deems appropriate and assents to any
extension or postponement of the time of payment of the Senior Debt or to any
other indulgence with respect thereto, to any substitution, exchange or
release of collateral which may at any time secure the Senior Debt and to the
addition or release of any Person primarily or secondarily liable therefor.
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9. WAIVER OF JURY TRIAL; JURISDICTION. (a) THE SUBORDINATED LENDER BY
THE EXECUTION AND DELIVERY HEREOF, AND THE SENIOR LENDER BY ITS ACCEPTANCE
HEREOF, HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY CREDIT RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
(b) THE SUBORDINATED LENDER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY MINNESOTA STATE OR FEDERAL COURT SITTING IN HENNEPIN OR
RAMSEY COUNTY, MINNESOTA OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. THE SUBORDINATED DEBTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT THE SUBORDINATED LENDER MAY EFFECTIVELY DO SO,
THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
10. MISCELLANEOUS. This Agreement is made under the laws of the State
of Minnesota. It cannot be waived or changed, except by a writing signed by
the party to be bound thereby. The headings of the sections of this
Agreement have been inserted for convenience of reference only and do not
constitute part of this Agreement. All notice and other communications
required or permitted under this Agreement shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified
mail, to the parties at the addresses appearing under their signatures, or
such other address as any party may specify by written notice to the other
parties. All such notices and other communications shall for all purposes of
this Agreement be treated as being effective or having been given if
delivered upon receipt or, if sent by mail as provided above, upon the
earlier of receipt or the fifth (5th) day following the date of deposit in
the United States Mail. This Agreement may be executed in counterparts all
of which shall be deemed one agreement.
IN WITNESS WHEREOF, the Company, the Subordinated Lender and the Senior
Lender have caused this Agreement to be signed on the date first dated above.
THE O'BOISIE CORPORATION
By: /s/ Donald F. Schumacher
-------------------------------
Its: Chairman and CEO
Address: 1111 West 22nd Street
Oak Brook, Illinois
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U.B.F.C., INC.
By: /s/
-----------------------------
Its: President
Address: c/o Rogers & Wells
200 Park Avenue
New York, NY 10166
REPUBLIC ACCEPTANCE CORPORATION
By: /s/
-------------------------------
Its: Account Executive
Address: 2338 Central Avenue N.E.
Minneapolis, Minnesota 55418
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