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Subordination Agreement Between Wells Fargo Bank And John A. Martell

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Sectors: Services
Governing Law: Wisconsin, View Wisconsin State Laws
Effective Date: January 14, 2008
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Exhibit 10.9





SUBORDINATION AGREEMENT



This Subordination Agreement, dated as of January 14, 2008, is made by JOHN A. MARTELL (the "Subordinated Creditor"), for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Wells Fargo Business Credit operating division (the "Lender").



MISCOR GROUP, LTD., an Indiana corporation ("MISCOR"), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation ("MIS"), MARTELL ELECTRIC, LLC, an Indiana limited liability company ("Martell"), HK ENGINE COMPONENTS, LLC, an Indiana limited liability company ("HK"), MAGNETECH POWER SERVICES, LLC, an Indiana limited liability company ("MPS"), IDEAL CONSOLIDATED, INC., an Indiana corporation ("Ideal"), 3-D SERVICE, LTD., an Ohio limited liability company ("3D"), and AMERICAN MOTIVE POWER, INC., a Nevada corporation ("AMP" and together with MISCOR, MIS, Martell, HK, MPS, Ideal and 3D, the "Borrowers" and each a " Borrower") are now or hereafter may be indebted to the Lender on account of loans or the other extensions of credit or financial accommodations from the Lender to the Borrowers, or to any other person under the guaranty or endorsement of the Borrowers.



The Subordinated Creditor has made or may make loans or grant other financial accommodations to one or more of the Borrowers.



As a condition to making any loan or extension of credit to the Borrowers, the Lender has required that the Subordinated Creditor subordinate the payment of the Subordinated Creditor's loans and other financial accommodations to the payment of any and all indebtedness of the Borrowers to the Lender. Assisting the Borrowers in obtaining credit accommodations from the Lender and subordinating his interests pursuant to the terms of this Agreement are in the Subordinated Creditor's best interest.



ACCORDINGLY, in consideration of the loans and other financial accommodations that have been made and may hereafter be made by the Lender for the benefit of the Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Subordinated Creditor hereby agrees as follows:



1. Definitions . As used herein, the following terms have the meanings set forth below:



"Borrower Default" means a Default or Event of Default as defined in any agreement or instrument evidencing, governing, or issued in connection with Lender Indebtedness, including, but not limited to, the Credit Agreement, or any default under or breach of any such agreement or instrument.



"Collateral" means all collateral now or hereafter securing payment of the Lender Indebtedness, including all proceeds thereof.


















"Credit Agreement" means that certain Credit and Security Agreement dated as of January 14, 2008, by and among the Borrowers and the Lender as the same may hereafter be amended, supplemented or restated from time to time.



"Lender Indebtedness" means each and every debt, liability and obligation of every type and description which the Borrowers may now or at any time hereafter owe to the Lender, whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several, all interest thereon and all fees, costs and other charges related thereto (including all interest, fees, costs and other charges accruing after the commencement of any case, proceeding or other action relating to the bankruptcy insolvency or reorganization of any Borrower, whether or not allowed in such proceeding or other action), all renewals, extensions and modifications thereof and any notes issued in whole or partial substitution therefor.



"Lien" means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.



"Subordinated Indebtedness" means all obligations arising under the Subordinated Note and each and every other debt, liability and obligation of every type and description which any Borrower may now or at any time hereafter owe to the Subordinated Creditor, whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several.



"Subordinated Note" means the Borrower's Promissory Note, dated as of January 1, 2004, payable to the order of the Subordinated Creditor in the original principal amount of Three Million Dollars ($3,000,000), together with all renewals, extensions and modifications thereof and any note or notes issued in substitution therefor.



2. Subordination . The payment of all of the Subordinated Indebtedness is hereby expressly subordinated to the extent and in the manner hereinafter set forth to the payment in full of the Lender Indebtedness; and regardless of any priority otherwise available to the Subordinated Creditor by law or by agreement, the Lender shall hold a first priority Lien in the Collateral, and any Lien claimed therein (including any proceeds thereof) by the Subordinated Creditor shall be and remain fully subordinate for all purposes to the Lien of the Lender therein for all purposes whatsoever. The Subordinated Indebtedness shall continue to be subordinated to the Lender Indebtedness even if the Lender Indebtedness is







2










subordinated, avoided or disallowed under the United States Bankruptcy Code or other applicable law.



3. Payments . Until all of the Lender Indebtedness has been paid in full and the Lender has released its Lien in the Collateral, the Subordinated Creditor shall not, without the Lender's prior written consent, demand, receive or accept any payment (whether of principal, interest or otherwise) from any Borrower in respect of the Subordinated Indebtedness, or exercise any right of or permit any setoff in respect of the Subordinated Indebtedness, except that the Subordinated Creditor may accept (a) scheduled payments (but not prepayments) of interest required to be paid under the Subordinated Note, so long as no Borrower Default has occurred and is continuing or will occur as a result of or immediately following any such payment and (b) payments of salaries and bonuses to the extent that the payment thereof does not cause a Borrower Default to occur.



4. Receipt of Prohibited Payments . If the Subordinated Creditor receives any payment on the Subordinated Indebtedness that the Subordinated Creditor is not entitled to receive under the provisions of this Agreement, the Subordinated Creditor will hold the amount so received in trust for the Lender and will forthwith turn over such payment to the Lender in the form received (except for the endorsement of the Subordinated Creditor where necessary) for application to then-existing Lender Indebtedness (whether or not due), in such manner of application as the Lender may deem appropriate. If the Subordinated Creditor exercises any right of setoff which the Subordinated Creditor is not permitted to exercise under the provisions of this Agreement, the Subordinated Creditor will promptly pay over to the Lender, in immediately av
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