Exhibit 10.7
SUBORDINATION AND INTERCREDITOR
AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT
(as hereafter amended, restated or otherwise modified from time to
time, the “ Agreement ”) is entered into
effective as of December 12, 2003 (the “ Effective
Date ”), by and among LAURUS MASTER FUND, LTD., a Cayman
Islands company (together with its successors and assigns to the
extent permitted hereby, the “ Junior Creditor
”), WELLS FARGO FOOTHILL, INC. (f/k/a Foothill Capital
Corporation), as Lender under the hereinafter defined Senior Credit
Agreement (together with its successors and assigns, the “
Lender ”) EQUINOX BUSINESS CREDIT CORP., a New Jersey
corporation (together with its successors and assigns, “
Debtor ”) and EQUIFIN, INC., a Delaware corporation
(together with its successors and assigns, “ Guarantor
”). Terms defined in Section 1 , where used
in the Recitals below and elsewhere in this Agreement, shall have
the same meanings, where so used, as are prescribed
therein.
RECITALS
Debtor is obligated for payment and performance
of the Senior Debt and has granted the Senior Creditor Liens to
secure the Senior Debt. Guarantor has guaranteed the Senior
Debt. Debtor and Guarantor are obligated or may become
obligated for payment and performance of Junior Debt and may grant
the Junior Creditor Liens to secure the Junior Debt. As one
of the conditions precedent to the agreement of Lender to extend
credit under the Senior Credit Agreement, Lender has required the
execution and delivery of this Agreement by the parties
hereto. In order to induce Lender to extend credit under the
Senior Credit Agreement, Junior Creditor wishes to enter into this
Agreement on the terms provided herein.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to
extend credit under the Senior Credit Agreement, and for value
received, the receipt and sufficiency of which are hereby
acknowledged by each of the undersigned, the parties hereto hereby
agree as follows:
1.
Definitions . The following terms shall have the
following meanings in this Agreement:
“ Bankruptcy Code ” means
the Bankruptcy Reform Act of 1978, as amended and from time to time
in effect (11 U.S.C. §§ 101, et seq ).
“ Business Day ” means any
day that is not Saturday, Sunday, or a day on which banks in
Dallas, Texas, are required or permitted under applicable law to be
closed.
“ Commitment ” means the
commitment of Lender to extend credit under the Senior Credit
Agreement.
“ Debtor ” has the meaning
prescribed for such term in the introductory paragraph of this
Agreement, and includes Debtor as debtor-in-possession in any
Proceeding.
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“ Equally Senior Securities
” means securities of Debtor, Guarantor or any other Person
provided for by a plan of reorganization or readjustment the
payment of which are senior with respect to the payment of all
Junior Debt at least to the extent provided in the subordination
provisions of this Agreement, in form and substance satisfactory to
Lender.
“ Equally Subordinate Securities
” means securities of Debtor, Guarantor or any other Person
provided for by a plan of reorganization or readjustment the
payment of which are subordinate with respect to the payment of all
Senior Debt at least to the extent provided in the subordination
provisions of this Agreement, in form and substance satisfactory to
Lender, and are not subordinate to any other claim or interest of
any Person (other than claims or interests, if any, in respect of
which the Junior Debt was so subordinate prior to the effectiveness
of such reorganization or readjustment).
“ Guarantor ” has the
meaning prescribed for such term in the introductory paragraph of
this Agreement and includes Guarantor as debtor-in-possession in
any Proceeding.
“ Indefeasibly Paid ” means,
with respect to the making of any payment on or in respect of any
Senior Debt, a payment of such Senior Debt in full which is not
subject to avoidance under section 547 of the Bankruptcy
Code.
“ Junior Creditor ” has the
meaning prescribed for such term in the introductory paragraph of
this Agreement, and also includes any other Person at any time who
is a holder of any Junior Debt.
“ Junior Creditor Collateral
” means all property of Debtor or Guarantor, now owned or
hereafter acquired, in which any Junior Creditor Liens are granted
pursuant to any Junior Debt Documents, and all proceeds
thereof.
“ Junior Creditor Liens ”
means any and all liens, security interests, mortgages or other
interests held by Junior Creditor in the Junior Creditor
Collateral, now or hereafter existing, and any and all other liens,
security interests, mortgages or other interests, if any, at any
time held by Junior Creditor in any property of Debtor or
Guarantor.
“ Junior Debt ” means the
indebtedness, obligations and liabilities now or hereafter owing to
Junior Creditor by Debtor or Guarantor, whether now existing or
hereafter incurred or created (including, without limitation,
interest accruing on any such indebtedness after the commencement
of any Proceeding and any additional interest that would have
accrued thereon but for the commencement of such Proceeding), and
any and all renewals, extensions or rearrangements thereof. Without
limiting the foregoing, such Junior Debt includes the indebtedness
arising under the Junior Note, the Purchase Agreement, the Security
Agreement of even date therewith from Debtor and Guarantor in favor
of Junior Creditor, the letter agreement referred to in the last
sentence of Section 12, and any other security agreement or
other document related thereto.
“ Junior Debt Documents ”
means any and all agreements, instruments or documents now existing
or hereafter executed and/or delivered by Debtor or Guarantor
pursuant to which Debtor or Guarantor agrees to pay or assures
payment and/or performance of any Junior Debt or grants or purports
to grant any liens, security interests or other interests in any
property for the benefit of Junior Creditor to secure the Junior
Debt, or any part thereof ( provided , that the foregoing
reference
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to liens,
security interests or other interests in property shall not be
construed to allow the granting of any liens, security interests or
other interests in property which otherwise are prohibited by the
terms of this Agreement), in each case as the same may be modified,
amended, renewed, extended, restated, supplemented or otherwise
modified from time to time.
“ Junior Default ” means any
default or event of default (however defined) under any of the
Junior Debt Documents or any other occurrence, event or condition
which, in and of itself or with notice or the passage of time, or
both, would permit Junior Creditor to take action to accelerate the
payment of all or any portion of the Junior Debt.
“ Junior Default Notice ”
means a written notice on behalf of Junior Creditor, Debtor or
Guarantor to Lender pursuant to which Lender is notified of the
occurrence of a Junior Default and provides a reasonably detailed
description of such Junior Default.
“ Junior Note ” means the
$1,100,000 Convertible Term Note dated December 12, 2003 from
Debtor and Guarantor payable to Junior Creditor.
“ Lender ” has the meaning
prescribed for such term in the introductory paragraph of this
Agreement and shall also refer to, in the future, any other Person
that is designated as a lender in a Senior Credit Agreement and
also includes any Person that refinances the Senior Debt in any
replacement or refinancing facility or otherwise.
“ Person ” means any
individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization,
association, corporation, governmental authority, or any other
entity.
“ Plan ” means any plan of
partial or complete liquidation, reorganization, readjustment,
arrangement, composition or extension, whether in a Proceeding or
otherwise.
“ Proceeding ” means any (a)
insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding related to a
Person or its property as such, (b) proceeding for any
liquidation, dissolution or other winding-up of a Person, voluntary
or involuntary, whether or not involving insolvency or bankruptcy
proceedings, or (c) assignment for the benefit of creditors of a
Person.
“ Purchase Agreement ” has
the meaning specified therefor in the Junior Note.
“ Senior Credit Agreement ”
means the certain Loan and Security Agreement dated as of December
19, 2001 among Debtor, Lender and any successor or replacement
credit agreement, including, without limitation, any replacement
credit agreement effected by Debtor with any other Person in any
refinancing of and/or increases to the Senior Debt, as any of the
foregoing may be modified, amended, renewed, extended, restated,
supplemented or otherwise modified from time to time.
References to “the Senior Credit Agreement” shall refer
to each and every Senior Credit Agreement, as any of the forgoing
may be modified, amended, renewed, extended, restated, supplemented
or otherwise modified from time to time.
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“ Senior Creditor Collateral
” means all property of Debtor or Guarantor, now owned or
hereafter acquired, in which any Senior Creditor Liens are granted
pursuant to the Senior Debt Documents, and all proceeds
thereof.
“ Senior Creditor Liens ”
means any and all liens, security interests, mortgages or other
interests held by Lender, now or hereafter existing, in the Senior
Creditor Collateral, pursuant to a Senior Credit Agreement, and any
and all other liens, security interests, mortgages or other
interests, if any, at any time held or claimed by Lender in any
property of Debtor.
“ Senior Debt ” means any
and all of the following, now or hereafter existing or
arising: (a) all principal of, and premium, if any, and
interest on, the Senior Loans (including, without limitation, any
interest accruing thereon at the legal rate after the commencement
of any Proceeding and any additional interest that would have
accrued thereon but for the commencement of such Proceeding), (b)
all reimbursement and other obligations under or in connection with
any letter of credit issued by Lender or any affiliate of Lender
for the benefit of Debtor or Guarantor, (c) all obligations of
Debtor or Guarantor under or in respect of any Hedging Agreement
(as defined by the Senior Credit Agreement), (d) all other
indebtedness, obligations and liabilities of Debtor or Guarantor to
Lender, whether now existing or hereafter incurred or created,
under or with respect to any Senior Debt Document, (including,
without limitation, claims for indemnity or damages arising under
or with respect to the Senior Debt Documents), (e) all indebtedness
and obligations arising in connection with any refinancings,
replacements or increases of any of the foregoing, whether with
Lender or another Person and whether in the same, lesser or greater
amount, and (f) any amendments, modifications or refinancings of
any of the foregoing. Without limiting the extent and
generality of the forgoing, “Senior Debt” includes all
indebtedness and obligations from time to time included within the
“Obligations” as defined by the Senior Credit Agreement
(which definition is incorporated herein by reference), as may be
amended, modified or refinanced.
“ Senior Debt Documents ”
means, collectively, the Senior Credit Agreement, the
“Guaranty” of Guarantor referred to therein, and any
and all agreements, instruments or documents now existing or
hereafter executed in connection with the Senior Debt, pursuant to
which the person executing same agrees to pay, guarantees or
assures payment and/or performance of any Senior Debt or grants or
purports to grant any Senior Creditor Liens, and all other
documents and instruments evidencing or pertaining to all or any
portion of the Senior Debt, in each case as the same may be
modified, amended, renewed, extended, restated, supplemented,
refinanced or otherwise modified from time to time.
“Senior Debt Documents” includes any of the foregoing
agreements, instruments or documents executed or entered into by
Debtor or Guarantor after the commencement of a Proceeding.
Without limiting the extent and generality of the forgoing,
“Senior Debt Documents” includes all “Loan
Documents” as defined by the Senior Credit Agreement (which
definition is incorporated herein by reference).
“ Senior Default ” means any
“Default” as defined by the Senior Credit Agreement
(which definition is incorporated herein by reference) or any
default (howsoever defined) under any replacement or refinancing
facility.
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“ Senior Event of Default ”
means any “Event of Default” as defined by the Senior
Credit Agreement (which definition is incorporated herein by
reference) or any event of default (howsoever defined) under any
replacement or refinancing facility.
“ Senior Loans ” means all
“Advances” as defined by the Senior Credit Agreement
(which definition is incorporated herein by reference), outstanding
from time to time, and any loans constituting Senior Debt made in
any replacement or refinancing facility, whether with Lender or
with any other Person, and whether in the same, lesser or greater
amount as the Advances.
“ Senior Payment Event of Default
” means any Senior Event of Default arising from default in
the payment of any Senior Debt, whether of principal, accrued
interest or fees, costs or expenses, as the same becomes due and
payable, or at final maturity or by acceleration.
“ Subordinated Guaranty ”
means any guaranty of the Junior Debt made by a guarantor who is
also a guarantor of the Senior Debt.
“ Subsidiary ” has the
meaning prescribed for such term as defined by the Senior Credit
Agreement (which definition is incorporated herein by
reference).
2.
Junior Debt Subordination . Until all Senior Debt
shall first be Indefeasibly Paid and the Commitment terminated,
Junior Creditor agrees, for itself and each holder of the Junior
Debt transferred by Junior Creditor, and its successors and
assigns, that the Junior Debt hereby is expressly subordinated and
junior in right of payment and claim to the prior payment of all
Senior Debt in the manner and to the extent set forth in this
Agreement provided , however , that: (i) subject to
Sections 2(a) , 2(b) and 2(c) below, Debtor
and Guarantor may pay, and the holders of the Junior Debt may take,
receive and retain (x) accrued interest under the Junior Note as
scheduled by the Junior Note on the Effective Date and (y)
regularly scheduled payments (not prepayments) of principal under
the Junior Note as scheduled by the Junior Note on the Effective
Date; and (ii) the indebtedness represented by the Junior Note may
be converted into common stock of the Guarantor, as provided by the
Junior Note on the Effective Date; provided , however
, that if a Change of Control (as defined in the Senior Credit
Agreement) results therefrom or from the exercise of the
“Warrant” referred to in the Purchase Agreement the
consequences thereof shall be as provided in the Senior Credit
Agreement.
(a)
Upon the occurrence of a Senior Payment Event of Default then,
unless and until such Senior Payment Event of Default shall have
been remedied or waived in writing by Lender, no direct or indirect
payment, whether in cash, property or securities or by set-off or
otherwise (but excluding Equally Subordinate Securities to the
extent provided by the proviso to
Section 2(c)(ii) ) shall be paid by Debtor or Guarantor
or taken, received or retained by Junior Creditor, on account of
any Junior Debt, or as a sinking fund for any Junior Debt, or by
reason of any Subordinated Guaranty or the subordination of any
other indebtedness to any Junior Debt, or in respect of any
redemption, retirement, purchase or other acquisition of any of the
Junior Debt.
(b)
Upon the happening of a Senior Default or a Senior Event of Default
(other than under circumstances when the terms of Sections
2(a) or 2(c) are applicable), then, unless
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and
until such Senior Default or Senior Event of Default shall have
been remedied or waived in writing by Lender, no direct or indirect
payment, whether in cash, property or securities or by set-off or
otherwise), including any payment to the holder of any Junior Debt
by reason of any Subordinated Guaranty or the subordination of any
indebtedness to any Junior Debt, shall be paid by Debtor or
Guarantor or taken, received or retained by Junior Creditor, on
account of any Junior Debt, or as a sinking fund for any Junior
Debt, or in respect of any redemption, retirement, purchase or
other acquisition of any Junior Debt, during the period of 365 days
after written notice (a “ Block Notice ”) of
such Senior Default or Senior Event of Default shall have been
given by Lender to Debtor and to Junior Creditor, provided,
that upon expiration of such 365 day period and provided
that neither Sections 2(a) or 2(c) are then
applicable, the holders of Junior Debt shall be entitled to receive
such payments in respect of the Junior Debt Documents that as of
such time would otherwise have been allowed to be paid under this
Agreement had no such Block Notice been given.
(c)
In the event of any Proceeding of Debtor or Guarantor:
(i)
All Senior Debt shall first be Indefe
