Exhibit 10.40
SUBORDINATION AND INTERCREDITOR
AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR
AGREEMENT (this “Agreement”) is made as of the 19th day
of December, 2006, by and among RADCLIFFE SPC, LTD. FOR AND ON
BEHALF OF THE CLASS A CONVERTIBLE CROSSOVER SEGREGATED PORTFOLIO
(“Junior Creditor”), VERTICALNET, INC., a Pennsylvania
corporation (“Borrower”), and the noteholders signatory
hereto (“Senior Creditors”).
BACKGROUND
A. Borrower has granted Senior
Creditors a first-priority security interest in and to all of the
assets of Borrower.
B. Borrower has granted Junior
Creditor a second-priority security interest in and to all of the
assets of Borrower and a security interest in and to all of the
assets of its domestic subsidiaries.
C. This Agreement sets forth the
relative rights and priorities of Senior Creditors and Junior
Creditor in and to the Collateral (as defined below).
NOW, THEREFORE, the parties hereto,
as an inducement for each Senior Creditor and for Junior Creditor
to maintain credit to Borrower, and with the understanding that
each Senior Creditor and Junior Creditor is relying upon the
provisions of this Agreement and intending to be legally bound
hereby, agree as follows:
1. Definitions . The following words and phrases as used in
capitalized form in this Agreement, whether in singular or plural,
shall have the meanings indicated:
(a) “Bankruptcy Code”
shall mean the United States Bankruptcy Code, as amended from time
to time.
(b) “Borrower” shall
mean Borrower as defined in the introductory paragraph hereof and
such Person’s successors and assigns.
(c) “Collateral” is
defined in Section 9(a).
(d) “Collateral Enforcement
Action” shall mean (i) as to Senior Creditors, the
exercise of any rights and remedies with respect to any of its
Collateral securing the Senior Debt or the commencement or
prosecution of enforcement of any of the rights and remedies under,
the Senior Debt Documents or applicable law, including without
limitation the exercise of any rights of set-off or recoupment, and
the exercise of any rights or remedies of a secured creditor under
the Uniform Commercial Code of any applicable jurisdiction or under
the Bankruptcy Code, and (ii) as to Junior Creditor, the
exercise of any rights and remedies with respect to any of its
Collateral securing the Subordinated Debt or the commencement or
prosecution of enforcement of any of the rights and remedies under,
the Subordinated Debt Documents or applicable law, including
without limitation the exercise of any rights of set-off or
recoupment, and the exercise of any rights or remedies of a secured
creditor under the Uniform Commercial Code of any applicable
jurisdiction or under the Bankruptcy Code.
(e) “Commence Legal
Action” shall mean (i) as to Senior Creditors,
asserting, participating in or bringing any sort of action, suit or
proceeding (including without limitation any insolvency proceeding)
either at law or in equity for the enforcement, collection or
realization of all, or any part of, the Senior Debt, and
(ii) as to Junior Creditor, asserting, participating in or
bringing any sort of action, suit or proceeding (including without
limitation any insolvency proceeding) either at law or in equity
for the enforcement, collection or realization of all, or any part
of, the Subordinated Debt. “Commencing Legal Action”
and “Commenced Legal Action” shall have the same
meaning as Commence Legal Action.
(f) “Proceeding” is
defined in Section 3(b).
(g) “Security Agreement”
shall mean that certain Security Agreement among Borrower, domestic
subsidiaries of Borrower and Junior Creditor dated as of the date
hereof, as the same may from time to time be amended.
(h) “Senior Debt” shall
mean all liabilities and obligations of any nature, whether
primary, secondary, absolute, contingent, sole, joint, several or
joint and several under the Senior Purchase Agreement and the
Senior Notes and all interest thereon (whether or not such interest
is enforceable or recoverable in any bankruptcy or similar
proceeding) and all fees, costs and expenses (including
attorney’s fees and legal expenses) related
thereto.
(i) “Senior Debt
Documents” shall mean the Senior Purchase Agreement, the
Senior Note and any other agreement, document or instrument
executed in connection with the Senior Debt, as any of the
foregoing may from time to time be amended, restated, refinanced,
or otherwise modified.
(j) “Senior Debt Event of
Default” is defined in Section 4(a).
(k) “Senior Notes” shall
mean the certain notes executed and delivered by Borrower to each
Senior Creditor dated as of August 16, 2005 pursuant to the
terms of the Senior Purchase Agreement, as the same may from time
to time be amended.
(l) “Senior Purchase
Agreement” shall mean that certain Note and Warrant Purchase
Agreement, dated as of August 16, 2005, as the same may from
time to time be amended.
(m) “Subordinated Debt Default
Notice” is defined in Section 5(a)(iv).
(n) “Standstill Period”
is defined in Section 5(c).
(o) “Subordinated Debt”
shall mean all liabilities and obligations of any nature, whether
primary, secondary, absolute, contingent, sole, joint, several or
joint and several, and all interest thereon and all fees, costs and
expenses (including attorney’s fees and legal expenses)
related thereto, now or at any time or times hereafter existing,
contracted or incurred, by Borrower to Junior Creditor, arising
under or in connection with the Subordinated Purchase Agreement
and/or Subordinated Note.
(p) “Subordinated Debt
Documents” shall mean the Subordinated Purchase Agreement,
the Subordinate Note, and any other agreement, document or
instrument executed in connection with the Subordinated Debt, as
any of the foregoing may from time to time be amended, restated,
refinanced, or otherwise modified.
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(q) “Subordinated Note”
shall mean that certain Senior Subordinated Discount Note executed
and delivered by Borrower to Junior Creditor dated as of
May 15, 2006, in the principal amount of $5,300,000, as the
same may from time to time be amended.
(r) “Subordinated Purchase
Agreement” shall mean that certain Note Purchase Agreement,
dated as of May 15, 2006, as the same may from time to time be
amended.
(s) “Suspension Notice”
is defined in Section 4(a).
(t) “Suspension Period”
is defined in Section 4(b).
2. Subordination .
(a) Junior Creditor subordinates all
Subordinated Debt and all claims and demands arising therefrom to
all the Senior Debt. Junior Creditor and Borrower agree that unless
expressly authorized under the terms of this Agreement:
(i) all of the Senior Debt shall be paid before Junior
Creditor shall be paid anything (of any kind or character) on
account of the principal of or interest on any Subordinated Debt or
any other sums payable in connection therewith and (ii) until
all of the Senior Debt is paid, performed and complied with in full
and this Agreement is terminated, Borrower will not make, and
Junior Creditor will not demand or accept, either directly or
indirectly, payment (of any kind or character) of all or any part
of the Subordinated Debt without the prior written consent of
Senior Creditors.
(b) The right of Senior Creditors to
enforce the subordination provisions and any other provisions
hereof shall not in any way be prejudiced or impaired by any act or
failure to act on the part of Senior Creditors, Junior Creditor or
Borrower, or by any noncompliance by Borrower or Junior Creditor
with the terms, provisions and covenants of this
Agreement.
3. In Furtherance of Subordination
.
(a) Upon any distribution of any of
the assets of Borrower or any collateral securing the Subordinated
Debt, upon or in connection with any dissolution, winding up,
liquidation, arrangement or reorganization of Borrower, or upon any
assignment for the benefit of creditors or any other marshalling of
the assets and/or liabilities of Borrower (each of the foregoing, a
“Proceeding”), any payment, dividend or distribution of
any kind (whether in cash, securities or other property) which
would otherwise be payable or deliverable with respect to the
Subordinated Debt, shall be paid or delivered directly to Senior
Creditor for application (in the case of cash) to, or as collateral
(in the case of securities or other property) for, the Senior
Debt.
(b) If any Proceeding is commenced,
Junior Creditor irrevocably authorizes Senior Creditors to file a
proof of claim on behalf of Junior Creditor with respect to the
Subordinated Debt if Junior Creditor fails to file proof of its
claims prior to 10 days before the expiration of the time period
during which such claims must be submitted, to accept and receive
all payments, dividends and distributions referred to in
subsection (a) in an amount not in excess of the
Senior Debt then outstanding and to take such other action as may
be reasonably necessary to effectuate
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the foregoing. Upon the commencement of a
Proceeding, each Senior Creditor is granted a power of attorney by
Junior Creditor with full power of substitution to execute and file
such documentation as authorized above and take any other action
such Senior Creditor may deem advisable to accomplish the
foregoing. Such power being coupled with an interest is
irrevocable. Junior Creditor shall retain the right to vote its
claims and otherwise act in any Proceeding relative to Borrower
(including, without limitation, the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition, or extension).
(c) In the event that the total
amount of all cash payments actually received by Senior Creditors
related to the Subordinated Debt or from any other source exceeds
all of the Senior Debt, then Senior Creditors shall reassign to
Junior Creditor, without recourse or representation, the remaining
balance due under the Subordinated Debt and all Collateral and
guaranties securing the Subordinated Debt, or make such other
disposition thereof as may be required by applicable law or court
order.
4. Payments to Junior Creditor
.
(a) Notwithstanding anything to the
contrary stated herein, Borrower may make payments of interest to
Junior Creditor when due (including any regularly scheduled
payments not made during a Suspension Period (as defined herein))
and Junior Creditor may demand, receive and retain said payments
unless a Senior Creditor has given written notice to Junior
Creditor (a “Suspension Notice”) that an event of
default has occurred and is continuing in connection with the
Senior Debt (a “Senior Debt Event of Default”). Subject
to Section 5(c) hereof, upon receipt of a Suspension Notice,
and at all times thereafter during the applicable Suspension
Period: (i) Junior Creditor may not take, demand, receive or
accelerate any payment of the Subordinated Debt and Borrower shall
not give, make or permit any such payment, and (ii) Junior
Creditor shall not assert, participate in or bring any sort of
action, suit or proceeding (including without limitation any
insolvency proceeding) either at law or in equity for the
enforcement, collection or realization of all, or any part of, the
Subordinated Debt (herein “Commence Legal Action”) or
commence any Collateral Enforcement Action. In the event the Senior
Debt Event of Default has been waived by Senior Creditors or cured
to Senior Creditors’ satisfaction, Senior Creditors shall so
notify Junior Creditor and Borrower in writing and the suspended
payments of interest may resume. Such resumed payments shall be
subject to all of the terms and provisions of this
Agreement.
(b) “Suspension Period”
shall mean a period not to exceed 180 consecutive days during which
Junior Creditor is prohibited from demanding, receiving or
accelerating any payment of the Subordinated Debt, Commencing Legal
Action or commencing any Collateral Enforcement Action following
receipt of a Suspension Notice pursuant to Section 4(a)
.
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5. Limitations on Junior Creditor’s
Rights .
(a) Except as expressly set forth in
Section 5(c) below, Junior Creditor agrees that it will
not, without the prior written consent of Senior Creditors:
(i) demand or accelerate any of the Subordinated Debt,
(ii) Commence Legal Action, take any Collateral Enforcement
Action or institute any court proceedings against Borrower to
collect any of the Subordinated Debt, or (iii) exercise any
right or remedy against the assets of Borrower or domestic
subsidiaries of Borrower.
(b) Upon the occurrence and during
the continuance of a Senior Debt Event of Default or a Junior Debt
Event of Default, a Senior Creditor may Commence Legal Actions and
take and continue any Collateral Enforcement Action with respect to
the Senior Debt and the Collateral in such order and manner as it
may determine in its reasonable discretion.
(c) Junior Creditor may accelerate
the Subordinated Debt, Commence Legal Action and take any
Collateral Enforcement Action against Borrower or its subsidiaries
to collect the Subordinated Debt only upon the occurrence of any of
the following:
(i) Borrower or a domestic
subsidiary of Borrower commences or has commenced against it (other
than by the Junior Creditor) any bankruptcy or other insolvency
proceeding, or any receivership, liquidation, reorganization or
other similar proceeding (provided that any such involuntary
bankruptcy or other insolvency proceeding which is commenced
against Borrower or such domestic subsidiary of Borrower is not
dismissed or discharged within 60 days after commencement thereof);
provided, however, that any amount received by Junior Creditor in
such proceeding, prior to payment in full of the Senior Debt, shall
be held in trust and paid to Senior Creditors in accordance with
the provisions of this Agreement.
(ii) A Senior Creditor accelerates
the Senior Debt and Commences Legal Action to collect the Senior
Debt; provided, however, that any amount received by Junior
Creditor as a result of any acceleration permitted under this
Agreement or otherwise, prior to payment in full of the Senior
Debt, shall be held in trust and paid to Senior Creditors in
accordance with the provisions of this Agreement.
(iii) The Suspension Period expires
and Borrower has not paid Junior Credi
