[EXHIBIT 10.26]
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "AGREEMENT") is made as of
October __, 1998 by and among Color Spot Nurseries, Inc., a Delaware
corporation (the "ISSUER"), Heller Equity Capital Corporation, a Delaware
corporation, (the "INITIAL NOTEHOLDER" and, together with its successors and
assigns, the "NOTEHOLDERS") and Fleet Capital Corporation, as Agent under the
Senior Credit Agreement described below (the "AGENT").
RECITALS
WHEREAS, on or about December 31, 1996, Color Spot Nurseries, Inc.,
a Delaware corporation (later known as CSN, Inc.) ("Color Spot") and its
wholly owned subsidiary, the Issuer (previously known as Color Spot
Watsonville, Inc.), issued to the Initial Noteholder their 8% Convertible
Subordinated Pay-in-Kind Note due 2004 (the "SUBORDINATED NOTE" and, together
with any like notes issued upon the transfer or partial conversion of the
Subordinated Note, the "SUBORDINATED NOTES") in the form of Exhibit A hereto;
and
WHEREAS, Color Spot subsequently merged with and into the Issuer,
with the Issuer being the surviving entity; and
WHEREAS, the Issuer has entered into a Loan and Security Agreement
dated as of October __, 1998, among the Issuer, the Agent, and the other
lending institutions from time to time parties thereto (collectively, the
"BANKS"), pursuant to which the Banks have agreed to extend loans to the
Issuer, in order, among other things, to provide working capital for the
Issuer and its subsidiaries; and
WHEREAS, as a condition to the willingness of the Agent and the
Banks to enter into the Senior Credit Agreement (as hereinafter defined), and
of the Banks to make the extensions of credit to the Issuer referred to
above, they have required that the parties enter into this Agreement,
providing for the subordination of the Issuer's indebtedness under the
Subordinated Notes to its obligations under the Senior Credit Agreement and
related documents, all on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the above recitals and the
provisions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
ARTICLE 1. DEFINITIONS.
Section 1.1. CERTAIN DEFINED TERMS. The following terms used in
this Agreement shall have the following meanings:
"ACCELERATION EVENT" is defined in Section 2.4(a)(i).
"AGENT" is defined in the preamble to this Agreement, and shall
mean and include any successor Agent under the Senior Credit Agreement;
PROVIDED that, in the event that there is Senior Indebtedness for which there
is not an Agent, the "Agent" shall mean the holders of over 50% in principal
amount of such Senior Indebtedness, including any undrawn commitments to lend
under the Senior Credit Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as now
and hereafter in effect, or any successor statute.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which shall be in the State of Illinois or the State of California a legal
holiday or a day on which banking institutions are authorized by law or other
governmental actions to close.
"CASH" means U.S. dollars in money, currency or a credit balance in
a Deposit Account.
"CASH" means (a) cash, (b) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than one year from the date of acquisition; (c) marketable direct
obligations issued by any State of the United States of America or any local
government or other political subdivision thereof rated (at the time of
acquisition of such security) at least AA by S&P or the equivalent thereof by
Moody's having maturities of not more than one year from the date of
acquisition; (d) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (i) any Bank, (ii) any domestic
commercial bank of recognized standing having capital and surplus in excess
of $10,000,000,000 or (iii) any bank whose short-term commercial paper rating
(at the time of acquisition of such security) by S&P is at least A-1 or the
equivalent thereof or by Moody's is at least P-1 or the equivalent thereof
(any such bank, an "APPROVED BANK"), in each case with maturities of not more
than six months from the date of acquisition; (e) commercial paper and
variable or fixed rate notes issued by any Bank or Approved Bank or by the
parent company of any Bank or Approved Bank and commercial paper and variable
rate notes issued by, or guaranteed by, any industrial or financial company
with a short-term commercial paper rating (at the time of acquisition of such
security) of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company
with a long-term unsecured debt rating (at the time of acquisition of such
security) of at least AA or the equivalent thereof by S&P or the equivalent
thereof by Moody's and in each case maturing within one year after the date
of acquisition; (f) repurchase agreements with any Bank or any primary dealer
maturing within one year from the date of acquisition that are fully
collateralized by investment instruments that would otherwise be "Cash";
PROVIDED that the terms of such repurchase agreements comply with the
guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy - Repurchase Agreements of Depository Institutions
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With Securities Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985; and (g) investments in money market mutual
funds, all of the assets of which are invested in securities and instruments
of the types set forth in clauses (a) through (e) above.
"CREDIT PARTY" means each of the Issuer and each Subsidiary of the
Issuer.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"ENFORCEMENT ACTION" is defined in Section 2.4(a)(ii).
"INITIAL NOTEHOLDER" has the meaning set forth in the recitals
hereto.
"ISSUER" has the meaning set forth in the preamble hereto.
"MATURITY DATE" means December 31, 2004.
"NOTEHOLDERS" has the meaning set forth in the recitals hereto, and
shall mean and include (i) the Initial Noteholder and (ii) any assignees of
the Subordinated Notes, in whole or in part.
"OBLIGATIONS" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to
the Agent or any Bank pursuant to the terms of the Senior Credit Agreement or
any other Senior Credit Document or secured by any of the "Security
Documents" (as defined in the Senior Credit Agreement).
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"POST-PETITION INTEREST" shall mean interest at the contract rate
accruing subsequent to the filing of a petition initiating any proceeding in
bankruptcy, insolvency or like proceeding whether or not such interest is an
allowed claim enforceable against the debtor in a bankruptcy case under the
Bankruptcy Code.
"SENIOR CREDIT AGREEMENT" means the Loan and Security Agreement
dated as of October __, 1998, among the Issuer, the Agent, and the Banks
signatory thereto, as such agreement may be amended, restated, supplemented
or otherwise modified from time to time, including, without limitation, to
increase the principal amount and/or available commitments thereunder, and
any agreement changing the maturity of, refinancing, replacing, or otherwise
restructuring all or any portion of the "Obligations" under such agreements
or any successor thereto, whether with the same or different lenders.
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"SENIOR CREDIT DOCUMENTS" means, collectively, the Senior Credit
Agreement, and the other "Loan Documents" (as defined in the Senior Credit
Agreement), and each other document or instrument executed by the Issuer or
any other Credit Party in connection therewith, as such agreements may be
amended, restated, supplemented or otherwise modified from time to time, and
any agreement changing the maturity of, refinancing, replacing, or otherwise
restructuring all or any portion of the Obligations under any such agreements
or any successors thereto, whether with the same or different lenders.
"SENIOR INDEBTEDNESS" shall mean, collectively, all Obligations now
or hereafter incurred pursuant to or in connection with the Senior Credit
Documents, in each case, including, without limitation, principal, premium
(if any), interest (including Post-Petition Interest), expenses, fees and
indemnifications thereunder.
"SUBORDINATED NOTE" and "SUBORDINATED NOTES" have the respective
meanings set forth in the recitals hereto.
"SUBORDINATED OBLIGATIONS" shall mean all Obligations to the
Noteholders now or hereafter incurred pursuant to or in connection with the
Subordinated Notes, including, without limitation, any principal or interest
on the Subordinated Notes and any expenses payable thereunder.
"SUBSIDIARY" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity interest at the
time.
ARTICLE 2. SUBORDINATION
Section 2.1. OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS.
Each of the Issuer and the Initial Noteholder covenant and agree, for the
benefit of the Banks, and any subsequent Noteholders by their acceptance of
Subordinated Notes likewise covenant and agree, that all Subordinated Notes
shall be issued and all Subordinated Obligations shall be incurred hereunder
subject to the provisions of this Agreement; and each Noteholder, whether
upon original issue of the Subordinated Note or upon transfer, assignment or
exchange thereof, accepts and agrees that the payment of all Subordinated
Obligations, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in Cash in
full of all Senior Indebtedness from time to time outstanding; that the
subordination provided herein is for the benefit of, and shall be enforceable
directly by (subject to the powers and duties of the Agent provided herein),
each holder of Senior Indebtedness, and that each holder of Senior
Indebtedness shall be deemed to have acquired
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its Senior Indebtedness in reliance upon the covenants and provisions
contained in this Agreement. The Senior Indebtedness shall not be deemed to
have been paid in full for all purposes of the Senior Credit Documents and
the Subordinated Obligations until all Senior Indebtedness has been paid in
full in Cash (including, without limitation, Post-Petition Interest) and all
commitments to lend under the Senior Credit Documents have been terminated.
Section 2.2. PAYMENT OVER TO HOLDERS OF SENIOR INDEBTEDNESS.
(a) In the event of any payment by or distribution of assets of
the Issuer or any other Credit Party of any kind or character, in part or in
whole, whether in cash, property or securities, to creditors of the Issuer,
including in connection with (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization, adjustment,
composition or other similar case or proceeding in connection therewith,
relative to the Issuer or any other Credit Party or to any of its creditors
or to their assets, or (ii) any liquidation, dissolution or other winding up
of the Issuer or any other Credit Party, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (iii) any assignment
for the benefit of creditors or any other marshaling of assets and
liabilities of the Issuer or any other Credit Party, then and in any and all
such events:
(i) all Obligations due or to become due under or with
respect to all Senior Indebtedness in such proceeding shall be paid in
full in Cash before the Noteholders are entitled to receive any
payment or distribution of the assets of the Issuer or such Credit
Party, whether in cash, securities or other property, on account of
the Subordinated Obligations;
(ii) any payment or distribution of assets of the Issuer
or any other Credit Party of any kind or character, whether in Cash,
property or securities, by set-off or otherwise, to which the
Noteholders would be entitled but for the provisions of this
Agreement, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other
obligation of the Issuer being subordinated to the payment of the
Subordinated Obligations, shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the Agent, until all Obligations shall have been paid in
Cash, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, and interest on, such Senior Indebtedness
to the extent necessary to make payment in Cash in full of all such
Senior Indebtedness remaining unpaid after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness, and
(iii) in the event that, notwithstanding the foregoing
provisions, the holders of the Subordinated Notes shall have received
any such
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payment or distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities, before all such
Senior Indebtedness is paid in full in Cash, then and in such event such
payment or distribution shall be received by such holders in trust and
paid over or delivered promptly, in the form received, to the Agent,
until all Obligations shall have been paid in full, in Cash, to the
extent necessary to pay all such other Senior Indebtedness in full in
Cash, after giving effect to any concurrent payment or distribution to
or for the holders of such other Senior Indebtedness.
(iv) The Agent shall have the right to request any
Noteholder to file and, in the event that the Noteholder fails to do
so within 30 days prior to the date such claims or proofs of claim
would be barred for failure to make a timely filing, is hereby
authorized to file a proof of claim for and on behalf of that
Noteholder or any other holder of the Subordinated Notes in such form
as the Agent may determine to be necessary or appropriate for the
enforcement of the provisions of this Section 2.2, to accept and
receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Subordinated
Obligations in an amount not in excess of the Senior Indebtedness then
outstanding and to take such other action as may be reasonably
necessary to effectuate the foregoing. Each holder of a Subordinated
Note shall provide to the Agent all such powers of attorney, proofs of
claim, assignments of claim and other instruments, documents and
information, reasonably necessary to present any such claims or seek
enforcement as aforesaid.
(v) If there shall occur any consolidation of the Issuer
with, or any merger of the Issuer into, another corporation or the
liquidation or dissolution of the Issuer following any conveyance,
transfer or lease of its properties and assets substantially as an
entirety to another corporation, such consolidation, merger or
liquidation shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors
or marshaling of assets and liabilities of the Issuer for the purposes
of this Section 2.2.
Section 2.3. NO PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that the Issuer or any other Credit Party shall
fail to pay when due, upon acceleration or otherwise, any principal, interest
or fees with respect to Senior Indebtedness, which payment default shall not
have been cured or waived, or any other "Event of Default" (as defined in the
Senior Credit Agreement) shall not have been cured or waived, then no payment
shall be made by the Issuer, or accepted by any Noteholder, on account of the
Subordinated Obligations unless and until all Senior Indebtedness shall have
been paid in Cash, in full, or provision shall have been made for such
payment or until such "Event of Default" shall have been cured or waived;
PROVIDED that the
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foregoing shall not prevent the capitalization of accrued interest payable on
the Subordinated Notes, pursuant to section 1 thereof, or the conversion of
said Subordinated Notes in accordance with section 3 thereof.
(b) Without limiting the foregoing clause (a), prior to the
payment in full of all Senior Indebtedness and the termination of all
commitments to lend under the Senior Credit Agreement, absent the prior
written consent of the Agent, Issuer shall not make, and no Noteholder shall
accept, any payment on or with respect to any Subordinated Note, including,
without limitation, any payment with respect to interest on the Subordinated
Notes or any optional or mandatory prepayment or redemption payment, except
that the Issuer may make, and the Noteholders may accept, (i) payments
pursuant to section 3.1(f) of the Subordinated Notes which (x) do not exceed
$1,000 in the aggregate for all such payments, and (y) are not made during
the pendency of any "Event of Default" under the Senior Credit Agreement and
(ii) payments of cash interest in respect of the Subordinated Notes on each
June 30 and December 31, pursuant to the terms of the Subordinated Notes as
they exist on the date hereof, so long as (A) no "Event of Default" under the
Senior Credit Agreement is in existence at the time of each payment or would
be caused by the making of such payment and (B) after making such payment,
"Availability" under the Senior Credit Agreement is equal to or greater than
$3,000,000; PROVIDED that the foregoing shall not prevent the capitalization
of accrued interest payable on the Subordinated Notes pursuant to section 1
thereof, or the conversion of said Subordinated Notes in accordance with
section 3 thereof.
(c) In the event that any payment shall be received by any
Noteholder which is prohibited by the foregoing provisions of this Section
2.3, then and in such event such payment shall be held in trust by such
Noteholder for the benefit of the holders of Senior Indebtedness, and shall
be paid over and delivered to the Agent, promptly, in the form received, for
application to the Senior Indebtedness.
(d) The provisions of this Section 2.3 shall not apply to any
payment with respect to which Section 2.2 would be applicable.
Section 2.4. FORBEARANCE SO LONG AS SENIOR INDEBTEDNESS
OUTSTANDING.
(a) Until all Senior Indebtedness has been paid in full in Cash
and all commitments to lend under the Senior Credit Agreement shall have been
terminated, no Noteholder may, without the prior written consent of the Agent,
(i) accelerate the maturity of the Subordinated Notes
other than by reason of the occurrence and continuation of an event
described in section 8.1(d) or (g) of the Subordinated Notes or of an
event described in section 8.1(f) of the Subordinated Notes with
respect to acceleration of the Senior Indebtedness (any such event, an
"ACCELERATION EVENT"), or
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(ii) commence any action, suit or proceeding to accelerate
or to enforce any claims, rights, demands, causes of action,
liabilities, or suits, of any kind whatsoever, whether known or
unknown, that have been, could have been, or in the future might be
asserted by the holders of the Subordinated Notes based upon, arising
out of, or in any way relating to, the Subordinated Notes (each, an
"ENFORCEMENT ACTION") other than upon the occurrence and continuation
of an Acceleration Event; PROVIDED that the foregoing shall not
preclude the Noteholders from seeking specific performance of the
covenants set forth in sections 5.1 through 5.6 of the Subordinated
Notes; and PROVIDED further that the foregoing shall not preclude the
Noteholders from asserting any defense in an affirmative suit or claim
against them, or from raising their entitlement to payment on the
Subordinated Notes in offset or as a defense in any such affirmative
action.
(b) So long as any Senior Indebtedness remains outstanding, and
there remain any outstanding commitments to make advances or issue letters of
credit under the Senior Credit Agreement, each Noteholder agrees that it
shall not commence an Enforcement Action (which it may, in any event, only
commence upon the occurrence of an Acceleration Event), until the first to
occur of the following: (i) the expiration of 60 days following the delivery
by such Noteholder of a written notice to the Agent informing it of the
existence of the Acceleration Event and of its intention to commence an
Enforcement Action and (ii) the occurrence of any event described in section
8.1(d) of the Subordinated Notes; PROVIDED that the Noteholders may
accelerate the Subordinated Notes upon the occurrence of an Acceleration
Event, but may not take any other Enforcement Action until the expiry of the
above-described period.
Section 2.5. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS. Upon the payment in full in Cash of all Senior Indebtedness,
the Noteholders shall become subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to such Senior Indebtedness until the principal of
and interest on the Subordinated Notes shall be paid in full in cash. For
purposes of such subrogation, no payments or distributions to the holders of
such Senior Indebtedness of any cash, property or securities to which the
Noteholders would be entitled except for the provisions of this Agreement,
and no payments over pursuant to the provisions of this Agreement to the
holders of such Senior Indebtedness by the Noteholders shall, as among the
Issuer, its creditors (other than holders of such Senior Indebtedness) and
the Noteholders be deemed to be a payment or distribution by the Issuer to or
on account of such Senior Indebtedness.
Section 2.6. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of the holders of the Subordinated Notes on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Agreement or in the Subordinated
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Notes (including, without limitation, the failure of any Noteholder to bring
an Enforcement Action which is barred under the provisions of this Agreement)
is intended to or shall (i) impair, as among the Issuer, its creditors (other
than holders of Senior Indebtedness) and the Noteholders, the obligation of
the Issuer, which is absolute and unconditional, to pay to the Noteholders
the principal of, and premium and interest on, and any other amount payable
by the Issuer under, the Subordinated Notes as and when the same shall become
due and payable in accordance with its terms; or (ii) affect the relative
rights against the Issuer of the Noteholders and its creditors (other than
the holders of Senior Indebtedness); or (iii) prevent the Noteholders from
accelerating the Subordinated Obligations and exercising all other remedies
otherwise permitted by applicable law upon a default under the Subordinated
Notes after the payment in full in Cash of the Senior Indebtedness and
termination of commitments to make advances or issue letters of credit under
the Senior Credit Agreement or otherwise in accordance with the provisions of
this Agreement; or (iv) constitute or effect a waiver of any claims, defenses
or rights of such Noteholders which may be available to them in an action by
or against the Issuer or any other creditor (other than the holders of Senior
Indebtedness).
Section 2.7. NO WAIVER OF SUBORDINATION PROVISIONS. No right of
any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Issuer, any other
Credit Party, the Agent or any holder of Senior Indebtedness or by any act or
failure to act by the Agent or any such holder, or by any noncompliance by
the Issuer, the Agent or any holder of Senior Indebtedness with the terms,
provisions and covenants of this Agreement, regardless of any knowledge of
such act or failure to act any holder thereof may have or be otherwise
charged with. Without in any way limiting the generality of the foregoing,
the holders of Senior Indebtedness may at any time and from time to time,
without the consent of or notice to the Noteholders, without incurring
responsibility to the Noteholders and without impairing or releasing the
subordination provided in this Agreement or the obligations hereunder of the
Noteholders to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, or increase or reduce the available
commitments under or principal amount of, or otherwise amend, supplement,
modify, refinance or restructure in any manner any Senior Indebtedness or any
instrument evidencing the same or any agreement under which the Senior
Indebtedness is outstanding or is related thereto; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in any manner
for the collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising or waiving any rights, powers or remedies against the Issuer or
any other Person.
Section 2.8. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT. Upon any payment or distribution of assets of the Issuer
referred to in this Agreement, the Noteholders shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
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certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Noteholders for the
purpose of ascertaining the Persons entitled to participate in such payment
or distribution, the holders of Senior Indebtedness and other debt of any
Credit Party, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto.
ARTICLE 3. MISCELLANEOUS
Section 3.1. REINSTATEMENT. The holders of Senior Indebtedness
shall continue to benefit from the subordination created hereunder and the
provisions of this Agreement shall continue to govern the relative rights and
priorities of such holders, on the one hand, and the Noteholders, on the
other, notwithstanding the fact that part or all of the Senior Indebtedness
or the liens securing payment thereof are subordinated, set aside, avoided or
disallowed under Section 548 of the Bankruptcy Code or any successor statute
or other applicable insolvency law or equitable principles.
Section 3.2. REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto hereby represents and warrants that (a) it has full power, authority
and legal right to make and perform this Agreement, and (b) this Agreement is
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors' rights generally
and by general principles of equity (whether enforcement is sought in a
proceeding in equity or at law).
Section 3.3. AMENDMENT. This Agreement may only be amended by a
writing executed by the "Required Holders" (as defined in the Subordinated
Notes), the Issuer and the Agent. No modification, amendment or waiver to the
Subordinated Notes (other than to the conversion mechanisms in section 3
thereof) prior to the payment in full, in Cash, of all Senior Indebtedness
and the termination of all commitments under the Senior Credit Agreement,
shall be effected without the prior written consent of the Agent, other than
a waiver granted by the Noteholders of a default by the Issuer.
Section 3.4. LEGEND. The Subordinated Notes shall bear a legend
substantially in the form of the following:
THIS 8.0% SUBORDINATED CONVERTIBLE NOTE (THIS "NOTE") IS
SUBORDINATED TO THE PRIOR PAYMENT AND SATISFACTION OF ALL
SENIOR INDEBTEDNESS, PURSUANT TO, AND AS DEFINED IN, THE
SUBORDINATION AGREEMENT DATED AS OF OCTOBER ___, 1998, AS
AMENDED FROM TIME TO TIME (THE "SUBORDINATION AGREEMENT")
AMONG THE ISSUER, HELLER EQUITY CAPITAL CORPORATION
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AND THE AGENT (AS DEFINED IN THE SUBORDINATION AGREEMENT)
TO THE EXTENT, AND IN THE MANNER PROVIDED IN, THE
SUBORDINATION AGREEMENT. A COPY OF THE SUBORDINATION
AGREEMENT WILL BE PROVIDED TO ANY HOLDER OF THIS NOTE
UPON WRITTEN REQUEST TO THE ISSUER.
Section 3.5. REMEDIES. The holders of Senior Indebtedness shall
be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights existing in their favor. The Noteholders and
the Issuer acknowledge and agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that the Agent
on behalf of the holders of Senior Indebtedness may apply to any court of law
or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
Section 3.6. NOTICES. So long as any Senior Indebtedness or any
commitments to make loans or issue letters of credit under the Senior Credit
Agreement remain outstanding, all notices, demands or other communications to
be given or delivered under or by reason of the provisions of the
Subordinated Notes shall be simultaneously transmitted to the Agent by the
Issuer or Noteholder delivering such communication, and any notice of
acceleration of Senior Indebtedness provided to the Issuer by the Agent shall
also be provided to the Noteholders; PROVIDED that the failure of a
Noteholder or the Agent to so provide a copy of any such notice to the Agent
or the Noteholders, respectively, shall not prevent such notice from being
effective as to the Issuer. Notwithstanding the foregoing, so long as any
Senior Indebtedness or any commitments to lend under the Senior Credit
Agreement remain outstanding, no acceleration of, redemption of, or action
for specific performance of any covenant under, any Subordinated Note or any
Enforcement Action shall be effective without notice of the same being
provided to the Agent. All notices, demand or other communications to be
given or delivered under or by reason of the provisions of the Subordinated
Notes or this Agreement shall be in writing and delivered personally, mailed
by certified or registered mail, return receipt requested and postage
prepaid, sent via a nationally recognized overnight courier or sent via
facsimile. Such notices, demands and other communications will be sent to the
address indicated below:
If to the Issuer, to it at:
3478 Burkirk Avenue, Suite 260
Pleasant Hill, CA 94523
Attention: President
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with a copy to each of the following:
Brownstein Hyatt Farber & Strickland, PC
410 Seventeenth Street
22nd Floor
Denver, CO 80202-4437
Attention: Steven Siegel, Esq.
Telecopy: (303) 623-1956
and
Kohlberg & Company
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Samuel Frieder
Telecopy: (914) 241-7476
If to the Initial Noteholder:
Heller Equity Capital Corporation
500 West Monroe Street
Chicago, IL 60661
Attention: Charles P. Brisman, Esq.
Telecopy: (312) 441-7208
with a copy to:
Katten Muchin & Zavis
1999 Avenue of the Stars
Suite 1400
Los Angeles, CA 90067
Attention: James K. Baer, Esq.
Telecopy: (310) 788-4471
If to the Agent, to it at:
Fleet Capital Corporation
20800 Swenson Drive
Suite 350
Waukesha, Wisconsin 53186
Attention: Loan Administration Manager
Telecopy: (414) 798-4882
with a copy to:
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz
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55 East Monroe Street
Suite 3700
Chicago, IL 60603
Attention: Karen R. Bieber, Esq.
Telecopy: (312) 332-2196
or such other address or to the attention of such other Person as the
recipient party shall have specified by prior written notice to the sending
party; PROVIDED that the failure to deliver copies of notices as indicated
above shall not affect the validity of any notice. Any such communication
shall be deemed to have been received (i) when delivered, if personally
delivered, or sent by nationally recognized overnight courier or via
facsimile or (ii) on the third Business Day following the date on which the
piece of mail containing such communication is posted if sent by certified or
registered mail.
Section 3.7. SEVERABILITY. In case any provision in this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
Section 3.8. HEADING. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
Section 3.9. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 3.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and their successors and
assigns, and each holder of Senior Indebtedness shall be deemed to have
acquired its Senior Indebtedness in reliance on the terms hereof. Without
limitation, any and all holders of Subordinated Indebtedness shall be bound
by the provisions hereof.
Section 3.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against the Issuer or any Noteholder with
respect to this Agreement or any Subordinated Note may be brought in any
State or Federal court of competent jurisdiction in the State of Illinois
located in Cook County and by execution and delivery of this Agreement (or
the acceptance of any Subordinated Note) each such Person accepts for itself
and in connection with its properties, generally and unconditionally, the
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement subject,
however, to rights of appeal. The Issuer and each
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such Noteholder hereby designates and appoints CT Corporation System, with an
address at 1633 Broadway, New York, New York 10019 and such other Persons as
may hereafter be selected by such Person irrevocably agreeing in writing to
serve as its agent to receive on its behalf, service of all process in any
such proceedings in any such court, such service being hereby acknowledged by
each such person to be effective and binding service in every respect. A copy
of such process so served shall be sent by air courier to the applicable
party at its address provided in section 3.6, except that unless otherwise
provided by applicable law, any failure to mail such copy shall not affect
the validity of service of process. If any agent appointed by the Issuer or
any Noteholder refuses to accept service, such Person hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law.
Section 3.12. WAIVER OF JURY TRIAL. Each of the parties to this
Agreement and each holder of any Subordinated Note hereby irrevocably waives
all rights to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement or the Subordinated Notes or the
transactions contemplated hereby or thereby.
Section 3.13. COUNTERPARTS: EFFECTIVENESS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by the respective duly authorized officers of the undersigned
as of the date first written above.
THE ISSUER:
COLOR SPOT NURSERIES, INC.
By:
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Name:
Title:
THE INITIAL NOTEHOLDER:
HELLER EQUITY CAPITAL CORPORATION
By:
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Name:
Title:
THE AGENT:
FLEET CAPITAL CORPORATION
By:
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Name:
Title:
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