SUBORDINATED
LIMITED RECOURSE GUARANTY AGREEMENT
This
Subordinated Limited Recourse Guaranty Agreement (this “
Guaranty ”) is made and entered into this 20th day of
February, 2009, by and between each signatory hereto identified as
a Guarantor (each a “ Guarantor ” and
collectively, the “ Guarantors ”), in favor of
Asta Group, Incorporated (“ Asta Group ”). Terms
used herein and not defined herein have the meaning set forth in
the Guarantor Security Agreement (as defined below).
Whereas,
pursuant to two subordinated promissory notes, dated the date
hereof, one in the principal amount of $7,526,278 (the
“$7.5 Million Note ”) and one in the principal
amount of $700,000 (the “$700,000 Note ,” and
with the $7.5 Million Note, the “ Notes ”), Asta
Funding, Inc. (“ Asta Funding ”) has agreed to
pay Asta Group the respective principal amounts of $7,526,278 and
$700,000, plus interest thereon;
Whereas,
in connection with the fourth amendment to that certain receivables
financing agreement, dated as of March 2, 2007 (as amended,
supplemented or otherwise modified from time to time, the “
Receivables Financing Agreement ”), among Palisades
Acquisition XVI, LLC (the “ Borrower ”),
Palisades Collection, L.L.C., as servicer, Fairway Finance Company,
LLC, BMO Capital Markets Corp., as administrator and collateral
agent (the “ Collateral Agent ”), and Bank of
Montreal, Asta Group collaterally assigned the $700,000 Note to the
Collateral Agent, as additional security for the obligations of the
Borrower under the Receivables Financing Agreement (the “
Collateral Assignment ”);
Whereas,
in order to induce Asta Group to enter into such Collateral
Assignment, the Guarantors have agreed to enter into this Guaranty
in favor of Asta Group, with recourse under this Guaranty being
limited as set forth in this Guaranty and a subordinated Guarantor
Security Agreement dated as of the date hereof among Guarantors and
Asta Group (as amended, modified, supplemented and restated from
time to time, the “ Guarantor Security Agreement
”); and
Whereas,
to obtain the consent of Guarantors’ existing senior secured
creditors to enter into the Guaranty and the Guarantor Security
Agreement, Asta Group has agreed to enter into the Subordination
and Intercreditor Agreement of this date between Asta Group and
Israel Discount Bank of New York, as collateral agent for itself
and the senior secured creditors (as amended, modified,
supplemented and restated from time to time, the “
Intercreditor Agreement ”; and, together with this
Guaranty and the Guarantor Security Agreement, the “
Guarantor Security Documents ”).
1. The
Guarantors, jointly and severally, hereby unconditionally and
irrevocably guarantee payment of the principal and interest on the
Notes, including, without limitation, all reasonable costs and
expenses of enforcement and collection, including attorneys’
fees of Asta Group (the “ Guaranteed Obligations
”); provided however notwithstanding anything to
the
contrary
in this Guaranty or in any other Guarantor Security Document, so
long as the Intercreditor Agreement is in effect or any Senior
Indebtedness has not been Paid in Full, Asta Group shall not take
any action to enforce any of the obligations of any Guarantor (or
otherwise seek any remedy or recourse) under any Guarantor Security
Document except in accordance with Section 7(a) of the
Intercreditor Agreement as in effect on the date hereof (or such
revised Section 7(a) after the date hereof that has been consented
to by the Guarantors in writing) (the
“Standstill”).
For
purposes of this Agreement, “Senior Indebtedness” means
Senior Indebtedness as defined in the Intercreditor Agreement as in
effect on the date hereof or such revised definition after the date
hereof that has been consented to by the Guarantors in writing. For
purposes of this Agreement, “Paid in Full” means Paid
in Full as defined in the Intercreditor Agreement as in effect on
the date hereof or such revised definition after the date hereof
that has been consented to by the Guarantors in writing.
2. Subject
to the Intercreditor Agreement and other restrictions set forth
herein, Guarantors, jointly and severally, agree that the
Guaranteed Obligations shall be due and payable from the Collateral
(as defined in the Guarantor Security Agreement) in accordance with
the Guarantor Security Agreement when the Guaranteed Obligations or
any portion thereof is due to be paid by Asta Funding to Asta
Group, whether at stated maturity, by declaration, acceleration or
otherwise.
3. Each
Guarantor warrants to Asta Group that: (i) no other agreement,
representation or special condition exists between such Guarantor
and Asta Group regarding the liability of such Guarantor hereunder,
nor does any understanding exist between such Guarantor and Asta
Group that the obligations of such Guarantor hereunder are or will
be other than as set forth herein; and (ii) as of the date hereof,
such Guarantor has no defense whatsoever to any action or
proceeding that may be brought to enforce this Guaranty.
4. So
long as any Guaranteed Obligations are outstanding (which, for
purposes of clarification, means until the Guaranteed Obligations
are indefeasibly paid in full in cash), each Guarantor
subordinates, in favor of Asta Group, any of the following rights
of such Guarantor against Asta Funding: (i) any right of such
Guarantor to be subrogated in whole or in part to any right or
claim with respect to any Guaranteed Obligations or any portion
thereof to Asta Group which might otherwise arise from payment by
such Guarantor to Asta Group on the account of the Guaranteed
Obligations or any portion thereof; and (ii) any right of such
Guarantor to require the marshalling of assets of Asta Funding or
any other Person which might otherwise arise from payment by such
Guarantor to Asta Group on account of the Guaranteed Obligations or
any portion thereof. If any amount shall be paid to such Guarantor
in violation of the preceding sentence, such amount shall be deemed
to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, Asta Group and shall forthwith be paid to
Asta Group to be credited and applied upon the Guaranteed
Obligations, whether matured or unmatured, in accordance with the
terms of the Notes. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing
arrangements contemplated by the Notes, the Receivables Financing
Agreement and the Guarantor Security Documents and that the waivers
set forth in this Section 4 are knowingly made in
contemplation of such benefits.
-2-
5. Except
as set forth in the last sentence of Section 2 above, each
Guarantor waives promptness and diligence by Asta Group with
respect to its rights under any of the Guarantor Security
Documents, including, but not limited to, this Guaranty.
6. Each
Guarantor waives any and all notice with respect to:
(i) acceptance by Asta Group of this Guaranty; (ii) the
provisions of any note, instrument or agreement relating to the
Guaranteed Obligations; and (iii) any default in connection
with the Guaranteed Obligations.
7. Each
Guarantor waives any presentment, demand, notice of dishonor or
nonpayment, protest, and notice of protest in connection with the
Guaranteed Obligations.
8. Each
Guarantor agrees that Asta Group may from time to time and as many
times as Asta Group, in its sole discretion, deems appropriate, do
any of the following without notice to such Guarantor and without
adversely affecting the validity or enforceability of this
Guaranty: (i) release, surrender, exchange, compromise, or settle
the Guaranteed Obligations or any portion thereof;
(ii) change, renew, or waive the terms of the Guaranteed
Obligations or any portion thereof; (iii) change, renew, or
waive the terms, including without limitation, the rate of interest
charged to Asta Funding or Guarantors, of any note, instrument, or
agreement relating to the Guaranteed Obligations or any portion
thereof; (iv) grant any extension or indulgence with respect
to the payment to Asta Group of the Guaranteed Obligations or any
portion thereof; (v) enter into any agreement of forbearance with
respect to the Guaranteed Obligations or any portion thereof;
(vi) release, surrender, exchange or compromise any security
held by Asta Group for the Guaranteed Obligations;
(vii) release any Person who is a guarantor or surety or who
has agreed to purchase the Guaranteed Obligations or any portion
thereof; and (viii) release, surrender, exchange or compromise
any security or Lien held by Asta Group for the liabilities of any
Person who is a guarantor or surety for the Guaranteed Obligations
or any portion thereof. Each Guarantor agrees that Asta Group may
do any of the above as it deems necessary or advisable, in its sole
discretion, without giving any notice to Guarantors, and that
Guarantors will remain, jointly and severally, liable for full
payment to Asta Group of the Guaranteed Obligations.
9. Each
Guarantor agrees to be jointly and severally bound by the terms of
this Guaranty and jointly and severally liable under this Guaranty
subject to the limitations of liability herein. As a result of such
liability, each Guarantor acknowledges that Asta Group may, in
its
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