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Elgar Holdings - Intercompany Subordination Agreement
Exhibit 10.6
INTERCOMPANY SUBORDINATION AGREEMENT
THIS INTERCOMPANY SUBORDINATION AGREEMENT (this " Agreement"), dated as of June 26, 2002, is made by and among ELGAR HOLDINGS, INC., a Delaware corporation (" Parent"), and ELGAR ELECTRONICS CORPORATION , a California corporation (" Borrower" Parent and Borrower are referred to hereinafter each individually as an " Obligor", and collectively, as the " Obligors"), in favor of ABLECO FINANCE LLC , a Delaware limited liability company, as the collateral agent for the below-defined Lender Group (in such capacity, together with its successors, if any, in such capacity, " Collateral Agent").
WHEREAS, the Obligors and the Lender Group have entered into that certain Financing Agreement, of even date herewith (as amended, restated, modified, renewed or extended from time to time, the " Financing Agreement"), pursuant to which (i) the Lender Group has agreed to make certain financial accommodations to Borrower, and (ii) Parent has agreed to guarantee the obligations of Borrower to the Lender Group.
WHEREAS, each Obligor has made or may make certain loans or advances from time to time to one or more other Obligors; and
WHEREAS, each Obligor has agreed to the subordination of such indebtedness of each other Obligor to such Obligor, upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations, and warranties set forth herein and for other good and valuable consideration, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation . (a) Terms Defined in Financing Agreement . All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Financing Agreement. (b) Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings:
" Administrative Agent" means Ableco Finance LLC, a Delaware limited liability company, solely in its capacity as administrative agent for the Lender Group, and shall include any successor administrative agent.
" Agreement" has the meaning set forth in the preamble hereto.
" Collateral Agent" has the meaning set forth in the preamble hereto.
" Financing Agreement" has the meaning set forth in the recitals hereto.
" Insolvency Event" has the meaning set forth in Section 3.
" Lender Group" means, individually and collectively, Collateral Agent, Administrative Agent and each of the Lenders.
" Lenders" means, individually and collectively, each of the financial institutions listed on the signature pages of the Financing Agreement and any other Person made a party thereto in accordance with the provisions of Section 12.07 thereof (together with their respective successors and assigns).
" Obligors" has the meaning set forth in the preamble hereto.
" Parent" has the meaning set forth in the preamble hereto.
" Senior Debt" means the Obligations and other indebtedness and liabilities of the Obligors to the Lender Group under or in connection with the Financing Agreement, the Security Agreement and the other Loan Documents, including all unpaid principal of the Loans, all interest accrued thereon, all fees due under the Financing Agreement and the other Loan Documents, and all other amounts payable by the Obligors to the Lender Group thereunder or in connection therewith, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and including without limitation interest, fees, and other such amounts, which would accrue and become due but for the commencement of an Insolvency Event, whether or not such interest, fees, and other amounts are allowed or allowable in whole or in part in any such Insolvency Event.
" Subordinated Debt" means, with respect to each Obligor, all indebtedness, liabilities, and other obligations of any other Obligor owing to such Obligor in respect of any and all loans or advances made by such Obligor to such other Obligor whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including all fees and all other amounts payable by any other Obligor to such Obligor under or in connection with any documents or instruments related thereto.
" Subordinated Debt Payment" means any payment or distribution by or on behalf of the Obligors, directly or indirectly, of assets of the Obligors of any kind or character, whether in cash, property, or securities, including on account of the purchase, redemption, or other acquisition of Subordinated Debt, as a result of any collection, sale, or other disposition of collateral, or by setoff, exchange, or in any other manner, for or on account of the Subordinated Debt.
(c) Interpretation . Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a 2
whole and not to any particular provision of this Agreement. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. References to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto. References to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending, or replacing the statute or regulation referred to. The captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 2 Subordination to Payment of Senior Debt . As to each Obligor, all payments on account of the Subordinated Debt shall be subject, subordinate, and junior, in right of payment and exercise of remedies, to the extent and in the manner set forth herein, to the prior payment, in full, in cash or cash equivalents of the Senior Debt (or the collateralization thereof in a manner reasonably satisfactory to Collateral Agent). SECTION 3 Subordination Upon Any Distribution of Assets of the Obligors . As to each Obligor, in the event of any payment or distribution of assets of any other Obligor of any kind or character, whether in cash, property, or securities, upon the dissolution, winding up, or total or partial liquidation or reorganization, readjustment, arrangement, or similar proceeding relating to such other Obligor or its property, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership, arrangement, or similar proceedings or upon an assignment for the benefit of creditors, or upon any other marshaling or composition of the assets and liabilities of such other Obligor, or otherwise (such events, collectively, the " Insolvency Events"): (i) all amounts owing on account of the Senior Debt shall first be paid, in full, in cash, or payment provided for in cash or in cash equivalents, before any Subordinated Debt Payment is made; and (ii) to the extent permitted by applicable law, any Subordinated Debt Payment to which such Obligor would be entitled except for the provisions hereof, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other liquidating agent making such payment or distribution directly to Collateral Agent for the benefit of the Lender Group for application to the payment of the Senior Debt in accordance with clause (i), after giving effect to any concurrent payment or distribution or provision therefor to the Lender Group, or Collateral Agent for the benefit thereof, in respect of such Senior Debt. SECTION 4 Payments on Subordinated Debt . (a) Permitted Payments . So long as no Event of Default has occurred and is continuing, each Obligor may make, and each other Obligor shall be entitled to accept and receive, payments on account of the Subordinated Debt in the ordinary course of business. (b) No Payment Upon Senior Debt Defaults . Upon the occurrence of any Event of Default, and until such Event of Default is cured or waived, each Obligor shall not make, and each other Obligor shall not accept or receive, any Subordinated Debt Payment. SECTION 5 Subordination of Remedies . As long as any Senior Debt shall remain outstanding and unpaid, following the occurrence of any Event of Default and until such Event of Default is cured or waived, each Obligor shall not, without the prior written consent of Collateral Agent:
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(a) accelerate, make demand, or otherwise make due and payable prior to the original due date thereof any Subordinated Debt or bring suit or institute any other actions or proceedings to enforce its rights or interests in respect of the obligations of any other Obligor owing to such Obligor; (b) exercise any rights under or with respect to guaranties of the Subordinated Debt, if any; (c) exercise any rights to set-offs and counterclaims in respect of any indebtedness, liabilities, or obligations of such Obligor to any other Obligor against any of the Subordinated Debt; or (d) commence, or cause to be commenced, or join with any creditor other than the Lender Group, or Collateral Agent on behalf thereof, in commencing, any bankruptcy, insolvency, or receivership proceeding against the other Obligor. SECTION 6 Payment Over to Collateral Agent . In the event that, notwithstanding the provisions of Sections 3, 4, and 5, any Subordinated Debt Payments shall be received in contravention of such Sections 3, 4, and 5 by any Obligor before all Senior Debt is paid, in full, in cash or cash equivalents, such Subordinated Debt Payments shall be held in trust for the benefit of the Lender Group and shall be paid over or delivered to Collateral Agent for the benefit of the Lender Group for application to the payment, in full, in cash or cash equivalents of all Senior Debt remaining unpaid to the extent necessary to give effect to such Sections 3, 4, and 5, after giving effect to any concurrent payments or distributions to the Lender Group in respect of the Senior Debt. SECTION 7 Authorization to Collateral Agent . If, while any Subordinated Debt is outstanding, any Insolvency Event shall occur and be continuing with respect to the other Obligor or its property: (i) Collateral Agent, on behalf of the Lender Group, hereby is irrevocably authorized and empowered (in the name of each Obligor or otherwise), but shall have no obligation, to demand, sue for, collect, and receive every payment or distribution in respect of the Subordinated Debt and give acquittance therefor and to file claims and proofs of claim and take such other action (including voting the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Lender Group; and (ii) each Obligor shall promptly take such action as Collateral Agent reasonably may request (A) to collect the Subordinated Debt for the account of the Lender Group and to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to Collateral Agent such powers of attorney, assignments, and other instruments as it may request to enable it to enforce any and all claims with respect to the Subordinated Debt, and (C) to collect and receive any and all Subordinated Debt Payments. SECTION 8 Certain Agreements of Each Obligor . (a) No Benefits . Each Obligor understands that there may be various agreements between the Lender Group and any other Obligor evidencing and governing the Senior Debt, and each Obligor acknowledges and agrees that such agreements are not intended to confer any benefits on such Obligor and that the Lender Group and Collateral Agent on behalf 4
thereof shall have no obligation to such Obligor or any other Person to exercise any rights, enforce any remedies, or take any actions which may be available to them under such agreements. (b) No Interference . Each Obligor acknowledges that each other Obligor has granted to Collateral Agent for the benefit of the Lender Group security interests in all of such other Obligor's assets, and agrees not to interfere with or in any manner oppose a disposition of any Collateral by the Lender Group, or Collateral Agent on behalf thereof, in accordance with applicable law. (c) Reliance by the Lender Group . Each Obligor acknowledges and agrees that the Lender Group will have relied upon and will continue to rely upon the subordination provisions provided for herein and the other provisions hereof in entering into the Loan Documents and making or issuing the Loans, or other financial accommodations thereunder. (d) Waivers . Except as provided under the Financing Agreement, each Obligor hereby waives any and all notice of the incurrence of the Senior Debt or any part thereof and any right to require marshaling of assets. (e) Obligations of Each Obligor Not Affected . Each Obligor hereby agrees that at any time and from time to time, without notice to or the consent of such Obligor, without incurring responsibility to such Obligor, and without impairing or releasing the subordination provided for herein or otherwise impairing the rights of the Lender Group hereunder: (i) the time for any other Obligor's performance of or compliance with any of its agreements contained in the Loan Documents may be extended or such performance or compliance may be waived by the Lender Group or Collateral Agent on behalf thereof; (ii) the agreements of any other Obligor with respect to the Loan Documents may from time to time be modified by such other Obligor and the Lender Group or Collateral Agent on behalf thereof for the purpose of adding any requirements thereto or changing in any manner the rights and obligations of such other Obligor or the Lender Group thereunder; (iii) the manner, place, or terms for payment of Senior Debt or any portion thereof may be altered or the terms for payment extended, or the Senior Debt may be renewed in whole or in part; (iv) the maturity of the Senior Debt may be accelerated in accordance with the terms of any present or future agreement by any other Obligor and the Lender Group or Collateral Agent on behalf thereof; (v) any Collateral may be sold, exchanged, released, or substituted and any Lien in favor of Collateral Agent for the benefit of the Lender Group may be terminated, subordinated, or fail to be perfected or become unperfected; (vi) any Person liable in any manner for Senior Debt may be discharged, released, or substituted; and (vii) all other rights against the other Obligor, any other Person, or with respect to any Collateral may be exercised (or the Lender Group or Collateral Agent on behalf thereof may waive or refrain from exercising such rights). (f) Rights of the Lender Group Not to Be Impaired . No right of the Lender Group or Collateral Agent on behalf thereof to enforce the subordination provided for herein or to exercise its other rights hereunder shall at any time in any way be prejudiced or impaired by any act or failure to act by any other Obligor, the Lender Group, or Collateral Age...
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