SUBORDINATION AND STANDSTILL AGREEMENT
Exhibit 10.4
THIS
SUBORDINATION AND STANDSTILL AGREEMENT (this “Agreement”) is made as of October
14, 2009, by and between PROFICIO BANK, a Utah corporation (“Lender”), and the
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trust under agreement dated March 27, 2006, ▇▇▇ ▇▇▇▇▇, an
individual, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual, and ▇▇▇▇ ▇▇▇▇▇▇▇▇ International,
LLC, a Delaware limited liability company (each, a “Junior Creditor” and
together the “Junior Creditors”).
RECITALS
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A.
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UTILIPOINT
INTERNATIONAL, INC., a New Mexico corporation (“Utilipoint”), has executed
senior subordinated debentures (the “Subordinate Notes”) to the Junior
Creditors in the aggregate original principal amount of FIVE HUNDRED
NINETY-ONE THOUSAND NINE HUNDRED EIGHTEEN DOLLARS AND NO/100 ($591,918.00)
(the “Subordinate Loans”).
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B.
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Utilipoint
has executed the Secured Revolving Promissory Note dated as of October 14,
2009 (the “First Note”) in the aggregate principal amount of $500,000.00
in favor of Lender, payable with interest and upon the terms and
conditions described therein and in that certain Revolving Loan Agreement
dated as of October 14, 2009 (the “Credit Agreement”), evidencing
that certain secured loan (collectively, the “First Loan”). The
First Note is secured by, among other things, the Security Agreement dated
October 14, 2009, and other documents and instruments securing the
repayment of the First Loan (as such Security Agreement and other
documents and instruments may be hereafter amended, extended, restated,
supplemented, consolidated, renewed or otherwise modified or replaced from
time to time, the “First Security Instruments”) covering the personal
property described therein (the “First Loan
Collateral”). Capitalized terms used herein but not defined
shall have the meanings given such terms in the Credit
Agreement.
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C.
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Lender
is unwilling to consent to the Subordinate Loans unless the rights of
Junior Creditors under the Subordinate Loan Documents (as hereinafter
defined) are, among other things, limited such that, except as may be
expressly otherwise provided in this Agreement, (i) Junior Creditors can
take no action against Utilipoint while any portion of the First Loan
remains unpaid, (ii) Junior Creditors can take no action to delay any
refinance, foreclosure or collection of the First Loan, and (iii) Lender
will control the disposition of Junior Creditor’s claims against
Utilipoint in the event of Utilipoint’s bankruptcy or debtor
reorganization proceedings.
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D.
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Lender
and Junior Creditors have agreed that the Subordinate Loan Documents are
to be subordinated such that, among other things, they will provide no
rights to Junior Creditors against Utilipoint or the Subordinate Loan
Collateral until such time as Utilipoint owns the First Loan Collateral
free and clear of the First Security Instruments and the First Loan has
been repaid in full.
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E.
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In
consideration of Lender’s consent to the Subordinate Loan and the
Subordinate Security Instruments, Junior Creditors are willing to execute
and deliver this Agreement.
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NOW, THEREFORE, in
consideration of the mutual benefits accruing to the parties hereto and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby declared, understood and agreed as
follows:
1. DEFINITIONS.
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(a)
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“Bankruptcy Code” means
▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, as amended from time to time, any successor
statute thereto, and any rules promulgated pursuant
thereto.
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(b)
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“Enforcement Action”
means the commencement of any enforcement action against, or the taking of
possession or control of, or the exercise of any remedies with respect to
Utilipoint.
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(c)
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“First Loan Collateral”
means all of the real, personal and other property (i) encumbered by the
First Loan Documents, or (ii) securing the First Loan, and all of
Utilipoint’s right, title and interest in and to such property, whether
existing or acquired in the future, and all security interests, liens,
claims, pledges, assignments, conveyances, endorsements and guaranties of
whatever nature securing the First Loan and all products and proceeds of
the foregoing.
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(d)
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“First Loan Documents”
means the Credit Agreement, First Note and First Loan Security Instruments
and any other document, agreement or instrument now or hereafter executed
and delivered by or on behalf of Lender or Utilipoint in connection with
the First Loan, including, without limitation, any document, agreement or
instrument hereafter executed and delivered by or on behalf of Lender or
Utilipoint in connection with any refinancing or replacement of the First
Loan, as any of the same may be from time to time amended, extended,
restated, replaced, supplemented, increased, consolidated, decreased,
renewed or otherwise modified.
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(e)
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“Subordinate Loan
Collateral” means all of the real, personal and other property (i)
encumbered by the Subordinate Notes or (ii) securing the Subordinate
Notes, and all of Utilipoint’s right, title and interest in and to such
property, whether existing or acquired in the future, and all security
interests, liens, claims, pledges, assignments, conveyances, endorsements
and guaranties of whatever nature securing the Subordinate Notes and all
products and proceeds of the
foregoing.
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(f)
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“Subordinate Loan
Documents” means the Subordinate Notes and any other document,
agreement or instrument now or hereafter executed and delivered by or on
behalf of Utilipoint in connection with the Subordinate Loans, as any of
the same may (subject to the terms and conditions of this Agreement) be
from time to time amended, extended, restated, replaced, supplemented,
consolidated, renewed or otherwise modified (but in no event
increased).
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2. EFFECTIVENESS OF AGREEMENT.This
Agreement shall be effective immediately upon the execution hereof by the
parties hereto and shall remain in effect for only so long as both the First
Loan and the Subordinate Notes remain outstanding.
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3. SUBORDINATION.
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(a)
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Notwithstanding
anything to the contrary whatsoever contained in any of the Subordinate
Loan Documents or any other document or agreement related or pertaining to
the Subordinate Loans, the Subordinate Loan Documents, as well as any or
all of Junior Creditors’ rights and remedies under the Subordinate Loans
Documents and in and to the Subordinate Loan Collateral, are hereby
expressly made subject and subordinate in all respects to the First Loan,
any future advances by Lender pursuant to modifications of the First Loan
or to protect the First Loan Collateral or Lender’s lien thereon or rights
thereto, and to all of Lender’s rights and remedies under the First Loan
Documents and in and to the First Loan Collateral and to all of the terms
and conditions of the First Loan Documents. Junior Creditors
hereby agree that they will not, without Lender’s express prior written
consent, which consent shall be granted or withheld at the sole discretion
of Lender, except as otherwise permitted pursuant to this Agreement,
accept any payments on account of the Subordinate Notes, until such time
as the First Loan and the First Loan Documents have been satisfied in
full, as reasonably determined by
Lender.
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(b)
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Notwithstanding
the foregoing subsection (a), provided there has been no Event of Default
under the First Loan Documents or no event has occurred which with notice
or the passage of time, or both, would become an Event of Default under
the First Loan Documents, Junior Creditors shall be permitted to accept
scheduled payments of interest under the Subordinate Loan Documents to the
extent provided in the Subordinate Loan Documents, and, after the public
offering of the capital stock of Midas Medici Group Holdings, Inc., a
Delaware corporation, shall be permitted to accept payments of
principal.
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Junior
Creditors agree that their right to accept interest and principal payments under
the Subordinate Notes shall immediately terminate upon Junior Creditors’ receipt
of written notice from Lender of the occurrence of an Event of Default or the
happening of an event which with notice or the passage of time, or both, would
become an Event of Default under the First Loan Documents.
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(c)
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In
addition, in furtherance of and without limiting the foregoing, Junior
Creditors agree that:
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(i) Junior
Creditors have no interest in the First Loan Collateral other than their
security interests granted in the Subordinate Security Instruments;
(ii) Junior
Creditors do hereby expressly consent to and authorize, at the option of Lender,
the release of all or any portion of the First Loan Collateral from the lien of
the First Security Instruments, and hereby waive any equitable rights Junior
Creditors might have, as a result of any refinancing of the First Loan or any
release of all or any portion of the First Loan Collateral by Lender under the
First Security Instruments, to require that Lender marshal the First Loan
Collateral in favor of Junior Creditors and further, in the event of any
foreclosure or collection action, Junior Creditors hereby expressly consent to
and authorize, at the option of Lender, the sale, whether separately or
together, of all or any portion of the First Loan Collateral;
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(iii) All
rights of Junior Creditors under the Subordinate Loan Documents and in and to
the Subordinate Loan Collateral shall be expressly subject and subordinate to
the rights of Lender in and to the First Loan Collateral and the proceeds
thereof (including, without limitation, all obligations in the Credit Agreement,
insurance proceeds and condemnation awards), and to any expenses incurred under
the First Security Instruments or any of the other First Loan
Documents;
(iv) Junior
Creditors hereby expressly consent to and authorize, at the option of Lender,
the amendment, extension, restatement, refinancing, supplementing, renewal,
consolidation or other modification or replacement, in whole or in part, of all
or any part of the First Loan Documents, including, without limitation,
amendments or modifications increasing or decreasing the stated principal amount
of the First Notes, making protective advances, increasing or decreasing the
interest rate payable under the First Notes or altering any other payment terms
under the First Notes.
(v) If Junior
Creditors shall acquire by indemnification, subrogation or otherwise, any lien,
estate, right or other interest in any of the First Loan Collateral, that lien,
estate, right or other interest shall be subordinate to the First Security
Instruments and other First Loan Documents as provided herein;
(vi) Junior
Creditors hereby agree that Junior Creditors shall not agree to (i) any
increases in the principal amount of the Subordinate Notes or (ii) any further
advances of money to or for the benefit of Utilipoint or evidenced by the
Subordinate Loan Documents, unless expressly permitted by Lender;
(vii) In no
event shall any of the Subordinate Loan Documents be modified, amended,
supplemented, replaced, restated, substituted for or otherwise altered in any
respect without the prior written consent of Lender in each instance, which
consent shall not be unreasonably withheld, and any such action taken without
such consent of Lender shall be of no force or effect.
(viii) If any
payment or distribution or security of any character (whether in cash,
securities, or other property) shall be received by a Junior Creditor out of or
in connection with the First Loan Collateral in contravention of the terms of
this Agreement before all of the First Loan shall have been paid in full, unless
otherwise approved by Lender, such payment, distribution or security shall not
be commingled with any asset of such Junior Creditor, shall be held in trust for
the benefit of, and shall promptly be paid over or delivered and transferred to,
Lender, for application to the payment of the First Loan remaining unpaid, until
all of the First Loan shall have been paid in full, and Lender shall be entitled
to specifically enforce the obligations of Junior Creditors set forth in this
section and Junior Creditors hereby grant Lender a security interest in the
Subordinate Loan Documents to secure the obligations of Junior Creditors in this
section; and
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(ix) Junior
Creditors shall be bound by any written consents or waivers made by Lender under
the First Loan Documents, and Junior Creditors hereby waive any and all rights
of consent or approval with regard to any matters covered by or under the terms
of the First Loan Documents.
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4.
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CERTAIN ACTIONS REGARDING SUBORDINATE
LOANS.Until
such time as the First Loan shall have been paid in full, together with
any and all other amounts which shall be due and payable under the terms
of the First Loan Documents, the First Loan Collateral shall be owned by
Utilipoint free and clear of the First Security Instruments, and Junior
Creditors shall not take any of the following actions with respect to the
Subordinate Notes without the prior written consent of Lender and subject
to Lender’s rights of priority:
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(a)
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Declare
a default under the Subordinate Loan Documents, accelerate all or any
portion of the Subordinate Notes or exercise any of their remedies
(including, without limitation, any Enforcement Action)
thereunder;
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(b)
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Commence
any legal proceedings against Utilipoint or commence any Enforcement
Action;
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(c)
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Consent
to any amendment, extension, restatement, replacement, supplement,
increase, consolidation or renewal of the Subordinate Loan Documents;
or
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(d)
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Commence
or consent to any bankruptcy, insolvency, reorganization or similar
proceeding by or against
Utilipoint.
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Except as
otherwise expressly provided in this Agreement, any consent required of Lender
in this Agreement may be given or withheld in the sole and unfettered discretion
of Lender. Junior Creditors shall have no rights to any proceeds of a
refinancing, including without limitation, any securitized or related financing
or refinancing, in which rights under the First Loan Documents are sold or
transferred or the First Loan is replaced until such time as the entire
indebtedness evidenced or secured by the First Loan Documents and all other
amounts evidenced or secured by the First Loan Documents have been paid in
full.
5. BANKRUPTCY
ISSUES.
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(a)
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This
Agreement shall be applicable and enforceable both before and after the
commencement, whether voluntary or involuntary, of any case by or against
Utilipoint under the Bankruptcy Code and all references herein to
Utilipoint shall be deemed to apply to Utilipoint as a
debtor-in-possession and to any trustee in bankruptcy for the estate of
Utilipoint.
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(b)
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In
the event Lender is required under any bankruptcy or other law to return
to Utilipoint, the estate in bankruptcy thereof, any third party or any
trustee, receiver or other similar representative of Utilipoint any
payment or distribution of assets, whether in cash, property or
securities, including, without limitation, any First Loan Collateral or
any proceeds of the First Loan Collateral previously received by Lender on
account of the First Security Instruments (a “Reinstatement
Distribution”), then to the maximum extent permitted by applicable
law, this Agreement shall be reinstated with respect to any such
Reinstatement Distribution. Lender shall not be required to
contest its obligation to return such Reinstatement
Distribution.
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(c)
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Except
for (i) the exercise of rights and remedies for specific performance or
equitable relief to compel Utilipoint to comply with any non-payment
obligations under the Subordinate Loan Documents, or (ii) any suit or
action initiated or maintained by Junior Creditors within thirty (30) days
of the expiration of, and solely to the extent such suit or action is
necessary to prevent the running of, any applicable statute of limitations
or other similar permanent restriction on claims, Junior Creditors hereby
agree that Junior Creditors shall not make any election, give any consent,
file any motion or take any other action in any case by or against
Utilipoint under the Bankruptcy Code (each, a “Bankruptcy Action”)
without the prior written consent of Lender. Without limiting
the immediately preceding sentence, and solely as a means of clarifying
the foregoing, except as otherwise provided above in this Section 5(c), in
no event shall Junior Creditors be permitted to take any Bankruptcy Action
in connection with the Subordinate Loans and/or the Subordinate Loan
Documents until the First Loan has been repaid in
full.
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6.
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FURTHER ASSURANCES. Junior
Creditors hereby agree that, within three (3) business days after written
request by Lender, Junior Creditors shall do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances and
instruments as Lender may reasonably request in connection with the rights
granted to Lender hereunder and in order to evidence the foregoing
agreements, including, but not limited to, the execution and delivery of
documents to confirm the foregoing agreements upon and with respect to any
refinancing or replacement of the First Loan or the First Loan
Documents. Without limiting the foregoing, Junior Creditors
agree to execute and record a short form subordination agreement with
respect to any of the Junior Loan Collateral to evidence this
Agreement.
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7.
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GOVERNING LAW. This
Agreement shall be construed in accordance with and governed by the laws
of the State of Utah, and any disputes now or hereafter arising in
connection with the execution or operation of this Agreement, regardless
of whether such disputes shall arise in contract, tort or otherwise, shall
be governed and determined by the laws of the State of Utah, without
regard to the conflicts of laws provisions
thereof. Jurisdiction and venue for purposes of this Agreement
shall be solely with the state and federal courts sitting in Salt Lake
City, Salt Lake County, Utah.
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8.
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ENTIRE AGREEMENT. This
Agreement and the Revolving Note reflects the entire
understanding and agreement of the parties with respect to the subject
matter hereof.
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9.
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NOTICES. All notices and communications
required or provided for hereunder for any party shall be in
writing and shall be (a) delivered personally, (b) sent by certified or
registered mail, postage prepaid, (c) sent by private courier or other
overnight delivery service, or (d) sent by telecopy (with evidence of
transmittal) to the party or parties to whom such notice is required to be
given, to the address set forth below (or to such other address as any
party may designate from time to time in accordance with the terms of this
section:
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If to Bank:
Proficio
Bank
▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇▇▇▇▇, Chief Credit & Lending Officer
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy
to:
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq.
Holme,
▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
Junior
Creditors:
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ Trust
▇▇ ▇▇▇▇▇
▇▇.
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇ International, LLC
Attention:
▇▇▇▇▇▇▇ Kachidza
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: (for
KLI)
▇▇▇▇▇▇ ▇.
▇▇▇▇, Esq.
360
Venture Law (Shmalo Lang) LLP
▇.▇. ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
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A notice
delivered personally shall be effective upon receipt. A notice
delivered by private courier or other overnight delivery service shall be
effective on the day delivered (or the day on which delivery is refused in the
event delivery is refused). A notice delivered by certified or
registered mail shall be effective on the third business day after the day of
mailing. A notice sent by telecopy shall be effective twenty-four
(24) hours after the dispatch thereof.
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10.
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CHANGES
TO THIS AGREEMENT; CAPTIONS. This Agreement may not be
changed, terminated or modified except by an agreement in writing, signed
by each of the parties hereto. The various captions and
headings contained herein are for convenience only and shall not be deemed
or construed to limit, modify, alter or impair the meaning of any section
or provision contained in this
Agreement.
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11.
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NO THIRD PARTY BENEFICIARY. No
person or entity (including, without limitation, Utilipoint) is intended
to be a third party beneficiary of, and no one other than Lender and
Junior Creditors and their respective successors and assigns (including,
without limitation, any holder of a replacement of the First Loan) shall
have any rights under, this
Agreement.
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12.
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ASSIGNMENT; SUCCESSORS
AND ASSIGNS Lender
may assign the First Notes and the other First Loan Documents without
restriction. Lender may assign its rights and obligations under
this Agreement to any subsequent holder of the First
Notes. Junior Creditors may not assign the Subordinate Loans or
any of the Subordinate Loan Documents. This Agreement shall be
binding upon and shall inure to the benefit of Lender and Junior Creditors
and their respective successors and
assigns.
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13.
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NO
PARTNERSHIP. This
Agreement shall not in any respect be interpreted, deemed or construed as
making any Junior Creditor a partner or joint venturer with any other
person or entity, including, without limitation, Lender or Utilipoint, nor
shall it be construed as making any Junior Creditor the agent or
representative of Lender or Utilipoint nor Lender or Utilipoint the agent
or representative of any Junior
Creditor.
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14.
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COUNTERPARTS. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original.
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15.
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CONSTRUCTION. The parties to
this Agreement have participated jointly in the negotiation and drafting
of this Agreement. In the event of an ambiguity or if a
question of intent or interpretation arises, this Agreement shall be
constructed as if drafted jointly by the parties to this Agreement and no
presumption or burden of proof shall arise favoring or disfavoring either
party to this Agreement by virtue of the authorship of any of the
provisions of this Agreement.
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16.
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ATTORNEYS
FEES. If any lawsuit is brought to enforce this
Agreement or in connection with any breach or violation hereof, the
prevailing party shall be entitled to recover from the non-prevailing
party all of its costs and expenses, including, without limitation, all
reasonable attorneys’ fee and
expenses.
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[Signatures
on following pages]
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IN
WITNESS WHEREOF, Lender and Junior Creditors have executed this Agreement as of
the date appearing on the first page of this Agreement.
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“LENDER”
PROFICIO
BANK,
a
Utah corporation
By:/s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇
Name: ▇▇▇▇▇ ▇.
▇▇▇▇▇
Title: Chief
Credit and Lending Officer
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“JUNIOR
CREDITORS”
▇▇▇▇
▇▇▇▇▇▇▇▇ INTERNATIONAL, LLC,
a
Delaware limited liability company
By:/s/ ▇▇▇▇▇▇▇ Kachidza
Name: ▇▇▇▇▇▇▇
Kachidza
Title: Managing
Principal
The
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trust, under agreement dated March 27, 2006
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ |
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IN
WITNESS WHEREOF, Utilipoint has executed this Agreement as of the date set forth
in the introductory paragraph of this Agreement, solely for the purpose of
acknowledging the same and its obligations hereunder.
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“UTILIPOINT”
UTILIPOINT
INTERNATIONAL, INC,
a
New Mexico corporation
By/s/ ▇▇▇▇
▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Title:
Chief Executive Officer
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