SUBORDINATION
AND INTERCREDITOR AGREEMENT
THIS
SUBORDINATION AND INTERCREDITOR AGREEMENT (the “
Agreement ”) is made and entered into as of the ___
day of
, 200_, by and among
, a Delaware corporation, as collateral agent for itself and the
lenders under the Junior Loan Agreement defined below (the “
Junior Agent ”), and
, a New York banking corporation, as collateral agent for itself
and the lenders under the Senior Loan Agreement defined below, and
as administrative agent under the Senior Loan Agreement (the
“ Senior Agent ”).
Pursuant
to a certain Fourth Amended and Restated Loan Agreement dated as of
July 11, 2006, as amended (as the same may from time to time
be amended, restated, supplemented, modified, substituted,
replaced, renewed or refinanced, the “IDB Loan
Agreement ”), among Israel Discount Bank of New York, a
New York banking corporation, as collateral agent for itself and
the lenders signatory hereto from time to time, as administrative
agent (the “ Senior Agent ”), and as co-lead
arranger, Middle Market Finance, a division of Merrill Lynch
Business Financial Services Inc., as co-lead arranger and as
co-administrative agent, and the lenders signatory thereto from
time to time (the “ Senior Lenders ”), Asta
Funding Acquisition I, LLC, a Delaware limited liability company,
Asta Funding Acquisition II, LLC, a Delaware limited liability
company, Palisades Collection L.L.C., a Delaware limited liability
company, Palisades Acquisition I, LLC, a Delaware limited liability
company, Palisades Acquisition II, LLC, a Delaware limited
liability company, Palisades Acquisition IV, LLC, a Delaware
limited liability company, Palisades Acquisition V, LLC, a Delaware
limited liability company, Palisades Acquisition VI, LLC, a
Delaware limited liability company, Palisades Acquisition VII, LLC,
a Delaware limited liability company, Palisades Acquisition VIII,
LLC, a Delaware limited liability company, Palisades Acquisition
IX, LLC, a Delaware limited liability company, Palisades
Acquisition X, LLC, a Delaware limited liability company, Cliffs
Portfolio Acquisition I, LLC, a Delaware limited liability company,
Sylvan Acquisition I, LLC, a Delaware limited liability company,
and Option Card, LLC, a Colorado limited liability company
(collectively and individually, “ Borrowers ”);
Asta Funding, Inc., a Delaware corporation, Computer Finance, LLC,
a Delaware limited liability company, AstaFunding.com, LLC, a
Delaware limited liability company, Asta Commercial, LLC, a
Delaware limited liability company, Vativ Recovery Solutions, LLC,
a Texas limited liability company, Asta Funding Acquisition IV,
LLC, a Delaware limited liability company, Palisades Acquisition
XI, LLC, a Delaware limited liability company, Palisades
Acquisition XII, LLC , a Delaware limited liability company,
Palisades Acquisition XIII, LLC, a Delaware limited liability
company, Palisades Acquisition XIV, LLC, a Delaware limited
liability company, Palisades Acquisition XV, LLC, a Delaware
limited liability company, Palisades Acquisition XVII, LLC, a
Delaware limited liability company, Palisades Acquisition XVIII,
LLC, a Delaware limited liability company, Citizens Lending Group
LLC, a Delaware limited liability company and Ventura Services,
LLC, a Delaware limited liability company (collectively and
individually, “ Guarantors ”) (the Borrowers and
the Guarantors are, together with any future borrowers or
guarantors, collectively and individually referred to as the
“ IDB Credit Parties ” and are sometimes
individually referred to as a “ IDB Credit Party
”), the Senior Lenders have agreed to make loans and
otherwise extend credit to or for the benefit of the Credit
Parties.
The
obligations of the Credit Parties under the Senior Loan Agreement
and the other Senior Loan Documents (as such term is defined below)
are secured on a first-priority basis by security interests and
liens on substantially all of its current and future acquired
assets and properties of any Credit Parties (the “ IDB
Collateral ”), including, without limitation, all
“Collateral” as defined in the IDB Loan
Agreement.
Pursuant
to a certain
Agreement
.
The
Junior Creditors have requested that the Credit Parties guarantee,
of the obligations of
pursuant to the Junior Guaranty Agreement.
To
secure that
indebtedness, the Junior Creditors have requested that the Credit
Parties grant junior security interests in and junior liens upon
certain Collateral, pursuant to the Junior Security
Agreement.
It
is a condition precedent to the Senior Lenders’ agreement to
permit the Credit Parties to grant the Junior Liens that the Credit
Parties and the Junior Creditors enter into this Agreement to
confirm their agreement, among other things, that the Junior
Indebtedness shall, at all times, be subordinated to the Senior
Indebtedness and that the Senior Liens (as such term is defined
below) shall at all times be senior to the Junior Liens (as such
term is defined below).
To
induce the Senior Lenders to permit the Credit Parties to grant the
Junior Liens, the Junior Creditors and the Credit Parties have
agreed to enter into this Agreement.
NOW,
THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1.
Definitions . The following terms as used in this Agreement
shall have the meanings hereinafter provided:
“
Agreement ” means this Subordination and Intercreditor
Agreement, as the same may be modified, amended, supplemented or
restated from time to time.
“
Collateral ” means any existing and future assets of
any Credit Parties including, without limitation, the IDB
Collateral.
“
Credit Parties ” means, collectively and individually,
any borrower, guarantor, credit party or other obligor under any
existing or future Senior Indebtedness, including, without
limitation, any IDB Credit Parties. It is agreed and understood
that Palisades Acquisition XVI is not a Credit Party.
“
Enforcement Action ” means,
.
“
Junior Creditors ” means
.
“
Junior Guaranty Agreement ”: means that certain
Subordinated Limited Recourse Guaranty Agreement of even date
herewith by and among the Credit Parties in favor of the
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Junior
Agent on behalf of the Junior Creditors, in each case as the same
may from time to time be amended, restated, supplemented, modified,
substituted, replaced, renewed or refinanced to the extent
expressly permitted herein.
“
Junior Indebtedness ”: means all loans, advances,
debts, liabilities and obligations for the performance of
covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or
such amounts are liquidated or determinable) owing by any Credit
Party to Junior Creditors, and any lender under the Junior Loan
Documents, and all covenants and duties regarding such amounts, of
any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, whether arising under the
Junior Loan Documents or otherwise. This term includes all
principal, interest (including all interest that accrues after the
commencement of any case or proceeding by or against any Credit
Party in bankruptcy, whether or not allowed in such case or
proceeding), fees, charges, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under any of the Junior
Loan Documents.
“
Junior Liens ”: means any and all security interests,
liens, claims, rights and/or interests of the Junior Creditors in
or on any or all of the property or assets of the Credit Parties
(including, without limitation, the Collateral), including, without
limitation, the liens and security interests on the Collateral
created under the Junior Loan Documents, whether now or hereafter
arising and howsoever existing, and all replacements, renewals and
other modifications of such security interests, liens, claims
and/or rights.
“
Junior Loan Documents ”: means any and all documents,
instruments, writings or agreements by and among the Junior
Creditors and the Credit Parties, including, without limitation,
the Junior Guaranty Agreement and the Junior Security Agreement
(but excluding the Securitization Documents), in each case as the
same may from time to time be amended, restated, supplemented,
modified, substituted, replaced, renewed or refinanced to the
extent expressly permitted herein.
“
Junior Security Agreement ”: means that certain
Subordinated Guarantor Security Agreement of even date herewith by
and among the Credit Parties and the Junior Creditors, in each case
as the same may from time to time be amended, restated,
supplemented, modified, substituted, replaced, renewed or
refinanced to the extent expressly permitted herein.
“
Paid in Full ” or “ Payment in Full
”: means with respect to any Senior Indebtedness, that
(a) such Senior Indebtedness has been paid in full in cash and
(b) any commitment or agreement of the Senior Lenders to
extend any financial accommodations to or for the benefit of any
Credit Party has been terminated.
“
Securitization Documents ”: means the “
.
“
Senior Agent ” means any administrative agent with
respect to any Senior Indebtedness.
“
Senior Creditors ”: means collectively and
individually, the Senior Agent, the other agents under the Senior
Loan Documents, and the Senior Lenders, together with any and all
agents and/or lenders as successors, assigns, transferees,
replacements, or substitutions of, or in addition to, the foregoing
(including one or more other lenders and one or more agents or
similar contractual representatives for one or more lenders that at
any time succeeds to or refinances,
3
replaces
or substitutes for any or all of the Senior Indebtedness at any
time and from time to time).
“
Senior Indebtedness ”: means all loans, advances,
debts, liabilities and obligations for the performance of
covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or
such amounts are liquidated or determinable) owing by any Credit
Party to Senior Creditors, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument, whether
arising under the Senior Loan Agreement or any of the other Senior
Loan Documents or otherwise (including without limitation, under
all interest rate caps, swaps or collar agreements, or similar
agreements or arrangements to provide protection against
fluctuations in interest rates). This term includes all principal,
interest (including all interest that accrues after the
commencement of any case or proceeding by or against any Credit
Party in bankruptcy, whether or not allowed in such case or
proceeding), fees, charges, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under the Senior Loan
Agreement or any of the other Senior Loan Documents, and all
replacements, renewals, substitutions, refinancing and other
modifications of the foregoing. Without limiting the foregoing,
Senior Indebtedness shall include any loans, advances, debts,
liabilities and obligations of any kind in connection with any
refinancing, replacement financing, successor financing or
substitute financing involving any Credit Parties, whether or not
provided by any of the current Senior Creditors or the amounts,
conditions, collateral or other terms of such financing are
comparable to those set forth in the IDB Loan Agreement.
“
Senior Liens ”: means any and all security interests,
liens, claims, rights and/or interests of the Senior Creditors in
or on any or all of the property or assets of the Credit Parties
(including, without limitation, the Collateral), including, without
limitation, the liens and security interests on the Collateral
created under the Senior Loan Documents, whether now or hereafter
arising and howsoever existing, and all replacements, renewals and
other modifications of such security interests, liens, claims
and/or rights.
“
Senior Lenders ” means any lenders with respect to any
Senior Indebtedness.
“
Senior Loan Agreement ” means the IDB Loan Agreement
and any other loan or credit agreement reflecting the terms of
existing or future Senior Indebtedness (as the same may from time
to time be amended, restated, supplemented, modified, substituted,
replaced, renewed or refinanced.
“
Senior Loan Documents ”: means any and all documents,
instruments, writings and agreements by and among any of the Senior
Agent, the Senior Creditors and any Credit Parties, including,
without limitation, the Senior Loan Agreement, in each case as the
same may from time to time be amended, restated, supplemented,
modified, substituted, replaced, renewed or refinanced.
2.
No Third Party Beneficiaries . All undertakings, agreements,
representations and warranties contained herein are solely for the
benefit of the Junior Creditors, the Senior Creditors, and any
agents and/or lenders as successors or assigns of, or substitutions
or replacements for, any one or more of the Junior Creditors and
the Senior Creditors, and the Credit Parties (to the extent set
forth in Section 5 hereof) and there are no other parties who
are intended to be benefited in any way by this
Agreement.
4
3.
Reservation of Security Interests as Against Third Parties .
Nothing contained herein is intended to affect or limit in any way
the Senior Liens or the Junior Liens insofar as the Credit Parties
and third parties are concerned. The parties hereto specifically
reserve the Senior Liens and the Junior Liens, as applicable, and
rights to assert the same as against the Credit Parties and third
parties.
4.
Junior Creditors’ Subordination . The Junior Creditors
covenant and agree with the Senior Agent and the Senior Lenders
that:
No
payments due or to become due on the Junior Indebtedness shall be
paid, and no payment on account thereof shall be received, accepted
or retained unless and until the Senior Indebtedness has been Paid
in Full; provided , however , Junior Creditor may
accept payments under the Junior Guaranty Agreement (but not
realized from any Collateral) so long as no Event of Default has
occurred and is continuing or would result from any such payments
under the Senior Loan Agreement.
5.
Consent to Junior Guaranty Agreement and Junior Liens .
Senior Creditors hereby consent to the Junior Indebtedness and
Junior Liens, provided, however, that the aggregate principal
amount of the Junior Indebtedness secured by the Junior Liens on
the Collateral shall not exceed an aggregate amount of $
and the Junior Liens shall secure no indebtedness other than the
Junior Indebtedness.
6.
Priority of Security Interests . Irrespective of:
(a) the
time, order, manner or method of creation, attachment or perfection
of Senior Liens or the Junior Liens;
(b) the
time or manner of the filing of their respective financing
statements;
(c) whether
the Junior Creditors or the Senior Creditors or any bailee or agent
thereof holds possession of any or all of the property or assets of
the Credit Parties, including, without limitation, the
Collateral;
(d) the
dating, execution or delivery of any document, instrument, writing
or agreement granting the Senior Liens or the Junior
Liens;
(e) the
giving or failure to give notice of the acquisition or expected
acquisition of any purchase money or other security interests;
and
(f) any
provision of the Uniform Commercial Code of the applicable state(s)
or any law to the contrary;
the
Junior Liens shall be and hereby are subordinated to the Senior
Liens on the terms hereinafter set forth. The subordination
hereunder applies regardless of the legality, validity or
enforceability of the Senior Indebtedness or the Senior Loan
Documents, or the legality, validity, enforceability or perfection
of the Senior Liens.
7.
No Action . (a) The Junior Creditors will not assert a
claim or make a demand against any Credit Party with respect to
Junior Indebtedness, will not commence any action or proceeding
against any Credit Party to recover all or any part of the Junior
Indebtedness, will not
5
commence
any action or proceeding with respect to the Collateral (whether by
judicial or non-judicial foreclosure, notification to any Credit
Party’s account debtors, the seeking of the appointment of a
receiver for any portion of any Credit Party’s property or
assets, including, without limitation, the Collateral, or
otherwise), will not (whether directly or indirectly) join with any
creditor in bringing, solicit any person to bring, or cause
(directly or indirectly) the commencement of, any proceeding
against any Credit Party under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt receivership, liquidation
or insolvency law or statute of the federal or any state
government, will not take possession of, sell or dispose of, or
otherwise deal with, the Collateral, and will not exercise or
enforce any other right or remedy which may be available to Junior
Creditors against any Credit Party or with respect to the
Collateral until the Senior Indebtedness shall have been Paid in
Full. Notwithstanding the prior sentence, after February___, 2014
Junior Agent may with at least 180 days written prior notice
to the Senior Agent and the IDB Credit Parties (which may be
delivered at any time), exercise its rights and remedies under the
Junior Loan Documents, provided, however, that neither Junior Agent
nor any Junior Creditor may exercise such rights and remedies
during an Enforcement Action. For purposes of the foregoing
allocation of priorities, any claim of a right of setoff shall be
treated in all respects as a security interest and no claimed right
of setoff shall be asserted to defeat or diminish the rights or
priorities provided for herein. If the Junior Creditors, in
contravention of the terms of this Agreement, shall commence,
prosecute or participate in any suit, action or proceeding against
any Credit Party, then such Credit Party may interpose as a defense
or plea the making of this Agreement, and the Senior Creditors may
intervene and interpose such defense or plea in its name or in the
name of such Credit Party. If the Junior Creditors, in
contravention of this Agreement, shall attempt to collect any of
the Junior Indebtedness, execute on any Collateral, or enforce any
of the Junior Loan Documents or otherwise violate this Agreement,
then the Senior Creditors or any Credit Party may, by virtue of
this Agreement, restrain the enforcement thereof or such other
action and Senior Creditors may seek such restraint in its name or
in the name of the Credit Party.
(b) Notwithstanding
clause (a) of this Section 7, the Junior Creditors
may:
(i) take
the actions permitted by Section 8(c);
(ii) file
a claim or statement of interest with respect to the Junior
Indebtedness; provided that an insolvency proceeding has been
commenced by or against any Credit Party;
(iii) take
any action in order to create, perfect or preserve any Lien held by
or on behalf of the Junior Creditors on the Collateral;
(iv) file
any necessary responsive or defensive pleadings in opposition to
any motion, claim, adversary proceeding or other pleading made by
any person objecting to or otherwise seeking the disallowance of
the claims of the Junior Creditors, including any claims secured by
the Collateral;
(v) vote
on any plan of reorganization, file any proof of claim, make other
filings and make any arguments and motions that are, in each case,
not prohibited by the terms of this Agreement, with respect to the
Junior Indebtedness and the Collateral; and
6
(vi) receive
any remaining proceeds of Collateral after the Senior Indebtedness
has been Paid in Full.
8.
Waiver and Consent; Bankruptcy .
(a) Except
as set forth herein or as required by law, the Senior Creditors
shall have no obligation to the Junior Creditors with respect to
the Collateral or the Senior Indebtedness. The Senior Creditors may
(i) exercise collection rights, (ii) take
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