Exhibit 10.2
SUBORDINATION AND INTERCREDITOR
AGREEMENT
This Subordination and Intercreditor
Agreement (this “Agreement”) dated as of March 2,
2009 among PNC BANK, NATIONAL ASSOCIATION (“PNC”), as
agent for Revolving Lenders (as defined below) (PNC, in such
capacity, “Agent”), STEEL CITY CAPITAL FUNDING, LLC, as
agent for Term B Lenders (as defined below) (in such capacity,
“Term B Agent”), ARES CORPORATE OPPORTUNITIES FUND II,
L.P., a Delaware limited partnership (“Ares II LP” or
“Subordinated Lender”), and each of STREAM HOLDINGS
CORPORATION, a Delaware corporation (“SHC”), STREAM
FLORIDA INC., a Delaware corporation and a wholly-owned Subsidiary
of SHC (“SFI”), STREAM INTERNATIONAL INC., a Delaware
corporation and a wholly-owned Subsidiary of SHC
(“Stream”), STREAM NEW YORK INC. a Delaware corporation
and a wholly-owned Subsidiary of SHC (“SNY”) and STREAM
INTERNATIONAL EUROPE B.V., a company organized under the laws of
the Netherlands and a wholly-owned Subsidiary of Stream
(“Stream BV”), STREAM INTERNATIONAL CANADA INC., a
company organized under the laws of Ontario and a Subsidiary of
Stream (“Stream Canada”), STREAM INTERNATIONAL SERVICE
EUROPE B.V., a company organized under the laws of the Netherlands
and a wholly-owned Subsidiary of Stream International (Bermuda)
Ltd. (“Stream Service BV”), STREAM INTERNATIONAL (N.I.)
LIMITED, a company organized under the laws of Northern Ireland and
a Subsidiary of Stream (“Stream UK”) and STREAM
INTERNATIONAL GMBH, a company organized under the laws of Germany
and a Subsidiary of Stream (“Stream Germany”) and
STREAM GLOBAL SERVICES, INC, a Delaware corporation and the owner
of all of the issued and outstanding shares of the capital stock of
SHC (“SGS”) (SHC, SFI, Stream, SNY, Stream BV, Stream
Canada, Stream Service BV, Stream UK, Stream Germany and SGS, each
a “Loan Party” and collectively the “Loan
Parties”).
BACKGROUND
As an inducement for Agent, Term B
Agent and Lenders to enter into a certain Amendment No. 1 and
Waiver to Fifth Amended and Restated Revolving Credit, Term Loan
and Security Agreement dated as of the date hereof
(“Amendment No. 1 and Waiver”) and to continue to
provide a credit facility in favor of Loan Parties, Subordinated
Lender has agreed to enter into this Agreement to provide for the
subordination of (i) the “Subordinated
Indebtedness” to the “Senior Indebtedness” (as
each term is defined below) and (ii) the “Liens”
in the assets of any Loan Party granted to Subordinated Lender to
the “Liens” in such assets of Loan Parties granted to
Agent for its benefit and for the ratable benefit of
Lenders.
AGREEMENTS
NOW, THEREFORE, for good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. Definitions .
1.1. General Terms . For
purposes of this Agreement, the following terms shall have the
following meanings:
“ Agent ” shall
have the meaning set forth in the introductory paragraph of this
Agreement and shall include its successors and assigns.
“ Amendment No. 1 and
Waiver ” shall have the meaning set forth in the
Background paragraph of this Agreement.
“ Collateral ”
shall mean all of the property and interests in property, tangible
or intangible, real or personal, now owned or hereafter acquired by
any Loan Party in or upon which Agent for its benefit and for the
ratable benefit of Lenders at any time has or has been granted a
Lien under and pursuant to the terms of the Loan Agreement and the
other Documents, and including, without limitation, all proceeds
and products of such property and interests in property.
“ Creditor Agreements
” shall mean, collectively, the Senior Lending Agreements and
the Subordinated Agreements.
“ Creditors ”
shall mean, collectively, Agent (for its benefit and for the
ratable benefit of Lenders) and Subordinated Lender and their
respective successors and assigns.
“ Default ” shall
have the meaning set forth in the Loan Agreement.
“ Distribution ”
shall mean any payment, whether in cash, in kind, securities or any
other property, or security for any such Distribution other than
the grant of security pursuant to Section 3(a) of the
Reimbursement Agreement, the payment of the LC Fee (as defined in
the Reimbursement Agreement) pursuant to Section 2(a) of the
Reimbursement Agreement and the payment of expenses under
Section 9(h) of the Reimbursement Agreement.
“ Documents ”
shall have the meaning given to the term “Other
Documents” in the Loan Agreement.
“ Event ” shall
have the meaning set forth in Section 2.2(c)
hereof.
“ Holder of Subordinated
Indebtedness ” or “ Subordinated Lender
” shall mean Ares II LP, and any other Person(s) at any time
or in any manner acquiring any right or interest in any of the
Subordinated Indebtedness, and any heirs, administrators,
executors, successor and assigns of such Person.
“ Lenders ” shall
mean, jointly and severally, the Revolving Lenders and the Term B
Lenders.
“ Loan Agreement
” shall mean the Fifth Amended and Restated Revolving Credit,
Term Loan and Security Agreement dated as of January 8, 2009
among Agent, Term B Agent, Revolving Lenders, Term B Lenders, PNC
as Swingline Lender (as therein defined), PNC Capital Markets LLC.,
as sole lead arranger and Siemens Financial Services, Inc., as
documentation agent, as amended as of the date hereof by Amendment
No. 1 and Waiver, and as the same may hereafter be further
amended, supplemented, modified or restated from time to
time.
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“ Loan Party ”
and “ Loan Parties ” shall have the meaning set
forth in the introductory paragraph of this Agreement and shall
include their respective successors and assigns.
“ Person ” shall
mean an individual, a partnership, a corporation (including a
business trust), a joint stock company, a trust, an unincorporated
association, a joint venture, a limited liability company, a
limited liability partnership or other entity, or a government or
any agency, instrumentality or political subdivision
thereof.
“ Reimbursement
Agreement ” shall mean the Guarantee and Reimbursement
Agreement dated as of March 2, 2009 by and among Subordinated
Lender and each of SHC, SFI, Stream, SNY and SGS, as the same may
hereafter be amended, supplemented, modified or restated from time
to time.
“ Revolving Lenders
” shall mean each of the financial institutions named as a
Revolving Lender in or which hereafter become a Revolving Lender
party to the Loan Agreement.
“ Secured Lender
Remedies ” shall mean any action which results in the
sale, foreclosure, realization upon, or a liquidation of any of the
Collateral including, without limitation, the exercise of any of
the rights or remedies of a “secured party” under
Article 9 of the Uniform Commercial Code, such as, without
limitation, the notification of account debtors; provided that
“Secured Lender Remedies” shall not include the
delivery of reservation of rights letters and the like, the
imposition of default interest in accordance with the Subordinated
Agreements and the taking of steps to preserve and protect the
security interests in the Collateral granted in favor, or for the
benefit, of the Subordinated Lender (or any agent, representative
or trustee on behalf thereof).
“ Senior Indebtedness
” shall mean all obligations of any kind owed by Loan Parties
to Agent, Term B Agent and/or Lenders from time to time under or
pursuant to any of the Senior Lending Agreements including, without
limitation, all principal, interest accruing thereon, charges,
expenses, fees and other sums (including all interest, charges,
expenses, fees and other sums accruing after commencement of any
case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any Loan Party) chargeable to any
Loan Party by Lenders, Agent and/or Term B Agent, and
reimbursement, indemnity or other obligations due and payable to
Lenders, Agent and/or Term B Agent. Senior Indebtedness shall
continue to constitute Senior Indebtedness, notwithstanding the
fact that such Senior Indebtedness or any claim for such Senior
Indebtedness is subordinated, avoided or disallowed under the
federal Bankruptcy Code or other applicable law. Senior
Indebtedness shall also include any indebtedness of Loan Parties
incurred in connection with a refinancing of all or a portion of
the Senior Indebtedness under the Senior Lending
Agreements.
“ Senior Lending
Agreements ” shall mean the Loan Agreement and the other
Documents.
“ Subordinated
Indebtedness ” shall mean all Reimbursement Obligations
(as defined in the Reimbursement Agreement) and all other
principal, interest and other amounts
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payable or chargeable in connection with the
standby letters of credit, guarantees and/or other forms of credit
support provided under the Subordinated Agreements. Subordinated
Indebtedness shall continue to constitute Subordinated
Indebtedness, notwithstanding the fact that such Subordinated
Indebtedness or any claim for such Subordinated Indebtedness is
subordinated, avoided or disallowed under the federal Bankruptcy
Code or other applicable law. Subordinated Indebtedness shall also
include any indebtedness of the Subordinated Lender incurred in
connection with a refinancing of all or a portion of the
Subordinated Indebtedness under the Subordinated
Agreements.
“ Subordinated
Agreements ” shall mean, collectively, the Reimbursement
Agreement and all promissory notes, agreements, documents and
instruments now or at any time hereafter executed and/or delivered
by any Loan Party or any other Person to, with or in favor of
Subordinated Lender in connection therewith or related thereto, as
all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or
replaced.
“ Term B Agent ”
shall have the meaning set forth in the introductory paragraph of
this Agreement and shall include its successors and
assigns.
“ Term B Lenders
” shall mean each of the financial institutions named as a
Term B Lender in or which hereafter become a Term B Lender party to
the Loan Agreement.
1.2. Other Terms .
Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Loan Agreement.
1.3. Certain Matters of
Construction . The terms “herein”,
“hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural
and vice versa. All references to statutes and related regulations
shall include any amendments of same and any successor statutes and
regulations. Except as expressly set forth herein, all references
to any instruments or agreements, including, without limitation,
references to any Creditor Agreements shall include any and all
modifications or amendments thereto and any and all extensions or
renewals thereof.
2. Covenants . Each Loan
Party and each Holder of Subordinated Indebtedness hereby covenants
that until the Senior Indebtedness (other than contingent
reimbursement and indemnification obligations in respect of which
no claim for payment has been asserted) shall have been paid in
full and satisfied in cash and the commitments to advance funds
under the Loan Agreement shall have been terminated, all in
accordance with the terms thereof, each will comply with such of
the following provisions as are applicable to it:
2.1. Transfers . Each Holder
of Subordinated Indebtedness covenants that any transferee from it
(other than another existing Holder of Subordinated Indebtedness)
of any Subordinated Indebtedness shall, prior to acquiring such
interest, execute and deliver a counterpart of this Agreement to
each other party hereto.
2.2. Subordination Provisions
. To induce Agent, Term B Agent and Lenders to enter into Amendment
No. 1 and Waiver, and to continue to make loans and advances
under
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the Loan Agreement, notwithstanding any other
provision of the Subordinated Indebtedness to the contrary, any
Distribution with respect to the Subordinated Indebtedness is and
shall be expressly junior and subordinated in right of payment to
all amounts due and owing upon all Senior Indebtedness outstanding
from time to time in the manner and to the extent provided in this
Agreement.
(a) Payments . No Loan Party
shall make any Distribution on the Subordinated Indebtedness until
such time as the Senior Indebtedness (other than contingent
reimbursement and indemnification obligations in respect of which
no claim for payment has been asserted) shall have been paid in
full in cash and the commitments to advance funds under the Loan
Agreement shall have been terminated.
(b) Limitation on
Acceleration . Until payment in full in cash of all Senior
Indebtedness (other than contingent reimbursement and
indemnification obligations in respect of which no claim for
payment has been asserted) and the termination of the commitments
to advance funds under the Loan Agreement, no Holder of
Subordinated Indebtedness shall exercise any Secured Lender
Remedies or commence any other action or proceeding to recover any
amounts due or to become due with respect to Subordinated
Indebtedness. Notwithstanding the foregoing, any amounts received
by any Holder of Subordinated Indebtedness upon and after the
occurrence of an Event shall be subject to the provisions of
Section 2.2(c) hereof.
(c) Prior Payment of Senior
Indebtedness in Bankruptcy, etc . In the event of any
insolvency or bankruptcy proceedings relative to any Loan Party or
its property, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, or, in the event
of any proceedings for voluntary liquidation, dissolution or other
winding up of any Loan Party or distribution or marshalling of its
assets or any composition with creditors of any Loan Party, whether
or not involving insolvency or bankruptcy, or if any Loan Party
shall cease its operations, call a meeting of its creditors or no
longer do business as a going concern (each individually or
collectively, an “Event”), then all Senior Indebtedness
(other than contingent reimbursement and indemnification
obligations in respect of which no claim for payment has been
asserted) shall be paid in full and satisfied in cash and the
commitments to advance funds under the Loan Agreement terminated
before any Distribution shall be made on account of any
Subordinated Indebtedness. Any such Distribution which would, but
for the provisions hereof, be payable or deliverable in respect of
the Subordinated Indebtedness, shall be paid or delivered directly
to Agent for application to the Senior Indebtedness, until amounts
owing upon Senior Indebtedness (other than contingent reimbursement
and indemnification obligations in respect of which no claim for
payment has been asserted) shall have been paid in full in cash and
the commitments to advance funds under the Loan Agreement shall
have been terminated.
(d) [Reserved ]
(e) Power of Attorney . To
enable Agent to assert and enforce its rights hereunder in any
proceeding referred to in Section 2.2(c) or upon the happening
of any Event, Agent or any person whom it may designate is hereby
irrevocably appointed attorney in fact for Subordinated Lender with
full power to act in the place and stead of Subordinated
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Lender (i) to make, present and file such
claims, and/or proofs of claim, against any Loan Party on account
of all or any part of the Subordinated Indebtedness as Agent may
deem advisable upon the failure of Subordinated Lender to do so
fifteen (15) days prior to the expiration of the time to file
any such claim and/or proof of claim and (ii) to receive and
collect any and all dividends or other payments made thereon and to
apply the same on account of the Senior Indebtedness. Subordinated
Lender will execute and deliver to Agent such instruments as may be
required by Agent to enforce any and all Subordinated Indebtedness,
to effectuate the aforesaid power of attorney and to effect
collection of any and all dividends or other payments which may be
made at any time on account thereof. Subordinated Lender hereby
irrevocably appoints Agent as the lawful attorney and agent of
Subordinated Lender to execute financing statements on behalf of
Subordinated Lender, and Subordinated Lender hereby further
authorizes Agent, to file such financing statements in any
appropriate public office.
(f) Payments Held in Trust .
Should any Distribution or the proceeds thereof, in respect of the
Subordinated Indebtedness, be collected or received by Subordinated
Lender or any Affiliate (as such term is defined in Rule 405 of
Regulation C adopted by the Securities and Exchange Commission
pursuant to the Securities Act of 1933) of Subordinated Lender at a
time when Subordinated Lender is not permitted under this Agreement
to receive any such Distribution or proceeds thereof including if
same is collected or received when there is or would be after
giving effect to such payment a Default or an Event of Default
under any Senior Lending Agreement, then Subordinated Lender will
forthwith deliver, or cause to be delivered, the same to Agent, in
precisely the form held by Subordinated Lender (except for any
necessary endorsement), and until so delivered, the same shall be
held in trust by Subordinated Lender, or any such Affiliate, as the
property of Agent.
(g) Subrogation . Subject to
the prior payment in full in cash of the Senior Indebtedness (other
than contingent reimbursement and indemnification obligations in
respect of which no claim for payment has been asserted) and the
termination of the commitments to advance funds under the Loan
Agreement, to the extent that Agent has received any Distribution
on the Senior Indebtedness which, but for this Agreement, would
have been applied to the Subordinated Indebtedness, Subordinated
Lender shall be subrogated to the then or thereafter rights of
Agent including, without limitation, the right to receive any
Distribution made on the Senior Indebtedness until the Subordinated
Indebtedness shall be paid in full; and, for the purposes of such
subrogation, no Distribution to Agent to which Subordinated Lender
would be entitled except for the provisions of this Agreement
shall, as between each Loan Party, its creditors (other than Agent,
Term B Agent and Lenders) and Subordinated Lender, be deemed to be
a Distribution by Loan Parties to or on account of Senior
Indebtedness, it being understood that the provisions hereof are
and are intended solely for the purpose of defining the relative
rights of Subordinated Lender on the one hand, and Agent on the
other hand.
(h) Scope of Subordination .
The provisions of this Agreement are solely to define the relative
rights of any Holder of Subordinated Indebtedness and Agent.
Nothing in this Agreement shall impair, as between each Loan Party
and Subordinated Lender the unconditional and absolute obligation
of such Loan Party to punctually pay the principal, interest and
any other amounts and obligations owing under Subordinated
Agreements in accordance with the terms thereof, subject to the
rights of Agent under this Agreement.
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3. Security .
3.1. Acknowledgment of Lien .
Each Creditor hereby agrees and acknowledges that the other
Creditors have been granted a Lien upon the Collateral.
3.2. Priority .
Notwithstanding the order or time of attachment, or the order, time
or manner of perfection, or the order or time of filing or
recordation of any document or instrument, or other method of
perfecting a Lien in favor of each Creditor in any Collateral and
notwithstanding any conflicting terms or conditions which may be
contained in any of the Creditor Agreements, the Liens upon the
Collateral of Agent have and shall have priority over the Liens
upon the Collateral of Subordinated Lender and such Liens of
Subordinated Lender are and shall be, in all respects, subject and
subordinate to the Liens of Agent therein to the full extent of the
Senior Indebtedness outstanding from time to time. Subordinated
Lender shall not take any action to foreclose or realize upon the
Collateral until such time as the Senior Indebtedness (other than
contingent reimbursement and indemnification obligations in respect
of which no claim for payment has been asserted) shall have been
paid in full in cash and the commitments to advance funds under the
Loan Agreement shall have been terminated, other than any actions
expressly permitted by the proviso to the definition of
“Secured Lender Remedies”.
3.3. No Alteration of
Priority . The Lien priorities provided in Section 3.2
hereof shall not be altered or otherwise affected by any amendment,
modification, supplement, extension, renewal, restatement or
refinancing of any Senior Indebtedness or the Subordinated
Indebtedness.
3.4. Perfection . Each of
Agent and Subordinated Lender shall be solely responsible for
perfecting and maintaining the perfection of its Lien in and to
each item constituting the Collateral in which Agent and
Subordinated Lender have been granted a Lien. The foregoing
provisions of this Agreement are intended solely to govern the
respective lien priorities as between Subordinated Lender on the
one hand, and Agent on the other hand, and shall not impose on
Agent any obligations in respect of the disposition of proceeds of
foreclosure on any Collateral which would conflict with prior
perfected claims therein in favor of any other Person. Agent agrees
that it will not contest the validity, perfection, priority or
enforceability of the Liens of Subordinated Lender in the
Collateral. Subordinated Lender agrees that it will not contest the
validity, perfection, priority or enforceability of the Liens of
Agent in the Collateral, and that as between Agent and Subordinated
Lender, the terms of this Agreement shall govern even if part or
all of the Senior Indebtedness or the Liens of Agent securing
payment and performance thereof are avoided, disallowed, set aside
or otherwise invalidated in any judicial proceeding or
otherwise.
3.5. Management of Collateral
. Agent shall have the exclusive right to manage, perform and
enforce the terms of the Senior Lending Agreements to which it is a
party with respect to the Collateral and to exercise and enforce
all privileges and rights thereunder according to its discretion
and its business judgment, in each case exercised in good faith,
and in compliance with the terms of this Agreement and applicable
law, including, without limitation, the exclusive right
to
