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SUBORDINATION AND INTERCREDITOR AGREEMENT
Subordination and Intercreditor Agreement entered into as of October
23, 1999 by and among PEOPLE'S BANK ("New Lender"), CONNECTICUT INNOVATIONS,
INCORPORATED ("CII") and GUNTHER INTERNATIONAL, LTD. ("Gunther").
WHEREAS, pursuant to a certain Commercial Revolving Agreement dated the
date hereof between Gunther and the New Lender (the "Loan Agreement"), the New
Lender has or may make loans to Gunther from time to time in the aggregate
principal amount of up to Five Hundred Thousand Dollars ($500,000) at any one
time outstanding, which loans are evidenced by the Revolving Loan Agreement and
a certain $500,000 Promissory Note (Revolving Credit Facility) dated the date
hereof made by Gunther to the order of the New Lender (the "Revolving Note");
and
WHEREAS, payment and performance of Gunther's obligations under the
Revolving Loan Agreement and the Revolving Note are secured by a valid security
interest in, and lien on, all of Gunther's tangible and intangible personal
property, whether now owned or hereafter acquired, and all products and proceeds
thereof (collectively "the Collateral"), all as more fully set forth in a
certain Security Agreement dated the date hereof between Gunther and the New
Lender ("the Security Agreement"); and
WHEREAS, pursuant to a certain Commercial Loan Agreement dated the date
hereof between Gunther and the New Lender (the "Commercial Loan Agreement"), the
New Lender may make loans to Gunther from time to time in the aggregate
principal amount of up to Two Hundred Thousand Dollars ($200,000) at any one
time outstanding; and
WHEREAS, payment and performance of Gunther's obligations under the
Commercial Loan Agreement are to be secured by a valid pledge and security
interest in cash deposits (the "Cash Deposits") to be delivered to the New
Lender pursuant to a certain Pledge Agreement dated the date hereof between
Gunther and the New Lender (the "Pledge Agreement"); and
WHEREAS, Gunther is indebted to CII (the "CII Indebtedness") pursuant
to a certain Amendment and Restatement of Development
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Agreement made as of the 31st day of December, 1995 between Gunther and CII
("the CII Agreement"); and
WHEREAS, payment and performance of the CII Indebtedness is secured by
a valid security interest in and lien on all of the Collateral, as herein before
defined; and
WHEREAS, the Collateral, including the Cash Deposits, is also
encumbered by a valid security interest and lien granted by Gunther to Gunther
Partners, LLC ("GP") pursuant to a certain Loan and Security Agreement dated
October 2, 1998 between Gunther and GP as amended by that certain Amendment to
Loan and Security Agreement and Term Note dated as of September 15, 1999 between
Gunther and GP; and
WHEREAS, the Collateral, including the Cash Deposits, is also
encumbered by a valid security interest and lien granted by Gunther to June H.
Geneen, Phil E. Gilbert, Jr., Thomas W. Keesee and The United States Trust
Company of New York, as Co-Executors of the Estate of Harold S. Geneen, State of
New York, New York (collectively "the Estate") pursuant to a certain Security
Agreement dated October 2, 1998 between Gunther and the Estate; and
WHEREAS, pursuant to a certain Subordination and Intercreditor
Agreement dated the date hereof between GP (the "GP Subordination"), the New
Lender and Gunther, GP has agreed to subordinate its lien and security interest
in the Cash Deposits and all of the other Collateral constituting Accounts, as
defined in the GP Subordination, to the lien and security interest therein held
by the New Lender; and
WHEREAS, pursuant to a certain Subordination and Intercreditor
Agreement dated the date hereof between the Estate, the New Lender and Gunther,
the Estate has agreed to subordinate its lien and security interest in all of
the Collateral, including the Cash Deposits, to the lien and security interest
therein held by the New Lender; and
WHEREAS, the New Lender has conditioned its extension of credit to
Gunther under the Revolving Loan Agreement, the Revolving Note and the
Commercial Loan Agreement upon CII's subordinating its lien in the Cash Deposits
and other Collateral [other than Collateral which constitutes patents and
trademarks (such portion of the Collateral which constitutes patents and
trademarks herein called the "Patents and Trademarks")] to the
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lien of the New Lender in the Cash Deposits and the other Collateral other than
Patents and Trademarks; and
WHEREAS, it is in the best interests of CII if the New Lender provides
financing to Gunther pursuant to the Revolving Loan Agreement, the Revolving
Note and the Commercial Loan Agreement; and
NOW THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. CII hereby subordinates its security interest and lien in Cash
Deposits and the other Collateral other than the Patents and Trademarks (the
Cash Deposits and the other Collateral other than Patents and Trademarks herein
called the "Subordinated Collateral") to the security interest and lien of the
New Lender therein. Notwithstanding the date, time, manner or order of
attachment or perfection of the security interest and liens of CII or the New
Lender in any of the Subordinated Collateral, and notwithstanding any provisions
of the Uniform Commercial Code, any applicable law, any decision of any court or
tribunal of competent jurisdiction or whether CII or the New Lender holds
possession of all or any part of the Subordinated Collateral, the lien and
security interest of the New Lender in and to the Subordinated Collateral and
all proceeds thereof shall be prior in right to the lien and security interest
of CII in and to the Subordinated Collateral.
2. After the occurrence of a default in Gunther's obligations to the
New Lender or CII which continues beyond any applicable grace period, (i) the
proceeds from the disposition, sale or liquidation of the Subordinated
Collateral other than the Cash Deposits shall be applied, regardless of when the
indebtedness of Gunther to the New Lender or CII may be due, first to pay the
debts, obligations and liabilities of Gunther to the New Lender under the
Revolving Loan Agreement and the Revolving Note (including accrued interest,
expenses and other costs) and then, to pay all other creditors of Gunther in
accordance with their rights and (ii) the Cash Deposits shall be applied,
regardless of when the indebtedness of Gunther to the New Lender or CII may be
due, first to pay the debts, obligations and liabilities of Gunther to the New
Lender under the Commercial Loan Agreement (including accrued interest, expenses
and other costs) and then to pay all other creditors of Gunther in accordance
with their rights. At all times, the New Lender may exercise all of its rights
and remedies under the Revolving Loan
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Agreement, the Revolving Note and the Commercial Loan Agreement and, without
limiting the foregoing, may take all actions that it deems desirable to collect
the debts, obligations and liabilities of Gunther to the New Lender under the
Revolving Loan Agreement, the Note and/or Commercial Revolving Loan Agreement
("collectively the New Lender Indebtedness") as the case may be, including
without limitation, the repossessing, foreclosing, selling, releasing or
disposing of any of the Subordinated Collateral and the commencement of, or
joining with other creditors in the commencement of, bankruptcy or insolvency
actions against Gunther.
3. CII agrees to execute any assignment, UCC-1 financing statement,
UCC-3 subordination agreement, or any other instrument or document requested by
the New Lender and to take such further action as the New Lender may at any
time, and from time to time, reasonably request in order to effectuate this
Agreement.
4. CII has, to the extent deemed necessary by CII, reviewed the
existing agreements among the New Lender and Gunther and has had its counsel
fully explain to it such agreements and this Agreement, and understands that
there is no commitment or obligation on the New Lender's part to make any loans
or advances or to extend credit to Gunther except as may be contained in current
and presently effective written agreements between the New Lender and Gunther.
5. In its discretion, the New Lender may at any time and from time to
time: extend the time for payment of all or any of the New Lender Indebtedness;
waive any event of default provided for in the documentation evidencing the New
Lender Indebtedness; amend the interest rate applicable to the New Lender
Indebtedness provided that at such time the CII Indebtedness is not in default
and such amended rate is commercially reasonable (but in no event shall it
exceed the Default Rate provided for in said documentation); waive or release
any collateral which is pledged to, or held by New Lender as security for the
New Lender Indebtedness; release any guarantor or accommodation party with
respect to the New Lender Indebtedness; or modify or amend the terms of the
documentation evidencing the New Lender Indebtedness with respect to and only
with respect to the exercise of the rights of New Lender to accelerate such
Indebtedness provided such modification or amendment is commercially reasonable;
all as the New Lender may deem desirable without notice to or further assent
from CII and without in any way affecting the New Lender's rights hereunder. New
Lender may otherwise amend, modify or
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restate the obligations of Gunther to the New Lender upon receipt of a written
reaffirmation of this Subordination from CII, which reaffirmation CII shall not
commercially unreasonably withhold (and provided that CII may withhold its
consent in its sole discretion to any increase in the amount of the New Lender
Indebtedness if the CII Indebtedness is then in default).
6. This Agreement shall be governed by and construed under the laws of
the State of Connecticut.
7. The provisions of this Agreement are independent of and severable
from each other. If any provision hereof shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of any other provision hereof, and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
8. Neither the failure nor any delay on the part of the New Lender to
exercise any right, remedy, power or privilege hereunder shall operate as a
waiver thereof or give rise to an estoppel, nor be construed as an agreement to
modify the terms of this Agreement, nor shall any single or partial exercise of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver by the New Lender hereunder shall be effective
unless it is in writing and signed by the New Lender, and then only to the
extent specifically stated in such writing.
9. In order to induce the New Lender to provide financing to Gunther
pursuant to the Revolving Loan Agreement, the Revolving Note and the Commercial
Loan Agreement, Gunther hereby acknowledges this Agreement and agrees to be
bound by all the terms, provisions and conditions hereof.
10. This Agreement shall be binding upon CII and its successors and
assigns and all of the New Lender's rights hereunder shall inure to the benefit
of the New Lender and its successors and assigns.
11. All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed given when received at the addresses
provided below:
If to CII, to:
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Connecticut Innovations, Incorporated
999 West Street
Rocky Hill, Connecticut 06067
Attn: Executive Director
If to the New Lender, to:
People's Bank
4 Broadway
Norwich, Connecticut 06360
Attn: Arthur C. Barton
If to Gunther, to:
Gunther International, Ltd.
One Winnenden Road
Norwich, Connecticut 06360
Attention: President
Each party shall have the right to change its address by sending a
written notice thereof to the other parties by registered or certified mail
addressed as provided herein.
12. CII, the New Lender and Gunther hereby agree that any state court
or local court of the State of Connecticut and the United States District Court
for the District of Connecticut shall have exclusive jurisdiction to hear and
determine any claims or disputes between CII, the New Lender and Gunther
pertaining directly or indirectly to this Agreement, or to any matter arising
herefrom. CII, the New Lender and Gunther expressly submit and consent in
advance to such jurisdiction in any action or proceeding commenced in such
courts, hereby waiving personal service of the summons and complaint, or other
process or papers issued therein, and agreeing that service of such summons and
complaint, or other process or papers may be made by registered or certified
mail addressed to CII, the New Lender and Gunther, as the case may be, at the
address of the New Lender, CII or Gunther, as the case may be, set forth above.
The exclusive choice of forum set forth in this paragraph shall not be deemed to
preclude the enforcement of any judgment obtained in such forum, in any
appropriate jurisdiction.
13. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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14. Telefacsimile transmissions of any executed original document
and/or retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of any
party hereto, the other parties shall confirm telefacsimile transmissions by
executing duplicate original documents and delivering the same to the requesting
party or parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year first above written.
Signed, Sealed and Delivered
in the Presence of: PEOPLE'S BANK
/s/ Karl-Erik Sternlof By: /s/ Arthur C. Barton
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Name: Name:
Title: Vice President
/s/ Frank J. Saccomandi, III
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Name:
CONNECTICUT INNOVATIONS,
INCORPORATED
/s/ K. D. Coombs By: /s/ Victor R. Butnick
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Name: Name:
Title: President & Executive
Director
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Name:
GUNTHER INTERNATIONAL, LTD.
/s/ Frank J. Saccomandi, III By: /s/ Michael M. Vehlies
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Name: Name:
Title: Chief Financial
Officer
/s/ Karl-Erik Sternlof
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Name:
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STATE OF CONNECTICUT )
) ss. at Norwich November 8, 1999
COUNTY OF New London )
Personally appeared Arthur C. Barton, signer and sealer of the foregoing
instrument personally known to me (or satisfactorily proven) who acknowledged
that he is the Vice President of PEOPLE'S BANK, is duly authorized to execute
said instrument and further acknowledged the same to be his free act and deed as
such Officer of PEOPLE'S BANK, and the free act and deed of said bank, before
me, the undersigned officer.
/s/ Karl-Erik Sternlof
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Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss. Rocky Hill October 29, 1999
COUNTY OF HARTFORD )
Personally appeared Victor R. Butnick, signer and sealer of the
foregoing instrument personally known to me (or satisfactorily proven) who
acknowledged that he/she as President and Executive Director of CONNECTICUT
INNOVATIONS, INCORPORATED, is duly authorized to execute said instrument and
further acknowledged the same to be his/her free act and deed as such Officer of
CONNECTICUT INNOVATIONS, INCORPORATED, and the free act and deed of said
corporation, before me, the undersigned officer.
/s/ Julana F. Rader
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Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires Nov. 30, 2003
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STATE OF CONNECTICUT )
) ss. Norwich October __, 1999
COUNTY OF New London )
Personally appeared Michael Vehlies, signer and sealer of the foregoing
instrument personally known to me (or satisfactorily proven) who acknowledged
that he as Chief Financial Officer of GUNTHER INTERNATIONAL, LTD., is duly
authorized to execute said instrument and further acknowledged the same to be
his free act and deed as such Officer of GUNTHER INTERNATIONAL, LTD., and the
free act and deed of said corporation, before me, the undersigned officer.
/s/ Frank J. Saccomandi, III
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Name:
Commissioner of the Superior Court
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