Exhibit 10.13
INTERCREDITOR AND SUBORDINATION AGREEMENT
This Intercreditor and Subordination Agreement (this
"Agreement"), dated as of December 19, 2002 is entered into by and between U.S.
Plastic Lumber Corp., U.S. Plastic Lumber Finance Corporation, U.S. Plastic
Lumber IP Corporation (collectively, and together with their respective
permitted successors and assigns, "Subordinated Lender") and Guaranty Business
Credit Corporation (together with all of its successors and assigns, "Senior
Lender"), to determine the parties' respective rights, remedies and interests
with respect to U.S. Plastic Lumber Ltd. ("Borrower"). This Agreement is made
with respect to the following facts:
A. Subordinated Lender is a creditor of
Borrower as a result of Subordinated Lender extending or committing in
the future to extend credit to Borrower which may be evidenced by
promissory notes or book entries.
B. Senior Lender is extending various secured
financial accommodations to Borrower for the purposes of, among others,
providing working capital. However, Senior Lender is unwilling to
provide such financial accommodations unless Subordinated Lender
subordinates its claims in the manner set forth below. Subordinated
Lender hereby acknowledges and affirms that Senior Lender's financial
accommodations to Borrower constitute valuable consideration to
Subordinated Lender.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged by the parties hereto, and to induce Senior
Lender to extend such financial accommodations to Borrower as it may determine,
and to better secure Senior Lender with respect to the foregoing, the parties
hereby agree as follows:
1. Subordination and Standby.
a. Indebtedness. Except as set forth in
Section 2 of this Agreement, unless and until all Senior Indebtedness (as herein
defined) has been fully paid and satisfied in cash, Subordinated Lender shall
not accept or receive, by setoff or in any other manner, from Borrower the whole
or any part of any sums which may now or hereafter be owing to Subordinated
Lender by Borrower, or any of its predecessors, successors or assigns,
including, without limitation, a receiver, trustee or debtor in possession (the
term "Borrower" shall hereinafter include any such predecessors, successors or
assigns) under or in connection with the Subordinated Indebtedness (as herein
defined);
b. Liens and Security Interests. Subordinated
Lender hereby represents and warrants that it does not have and will not accept
any liens or security interests against any assets of Borrower or any other
assets securing the Subordinated Indebtedness, if any, whether now existing or
hereafter granted or arising and, to the extent that Subordinated Lender obtains
any lien or security interest against such assets in violation hereof, such lien
or security interest shall in each case be subordinate to the rights, liens and
interests held by Senior Lender with respect to the Senior Indebtedness.
Accordingly, except as set forth in Section 2 of
this Agreement, unless and until all of the Senior Indebtedness has been fully
paid and satisfied in cash:
(1) Subordinated Lender shall not
commence, prosecute or participate in any other action, whether
private, judicial, equitable, administrative or otherwise, including,
without limitation, any bankruptcy case against Borrower or any of its
assets, provided that, as more fully set forth in Section 7 hereof,
Subordinated Lender may file a proof of claim in a bankruptcy or
insolvency proceeding involving Borrower, which proof of claim shall
indicate Subordinated Lender's subordination hereunder; and
(2) Subordinated Lender shall have no
right either to enforce any security interests in, foreclose, levy or
execute upon, or collect or attach any such assets, whether by private
or judicial action or otherwise.
c. "Senior Indebtedness". The term "Senior
Indebtedness" shall mean, collectively, (i) all indebtedness and other
obligations of Borrower now or hereafter existing under that certain Loan and
Security Agreement dated December 19, 2002 between Borrower and Senior Lender
(the "Loan Agreement"), and all other documents, instruments and agreements
executed by Borrower with or in favor of Senior Lender in connection therewith,
as they may be amended, supplemented, extended, renewed, modified or restated
from time to time, whether for principal, premium, interest (including all
interest accruing after the initiation of any bankruptcy case, whether or not
allowed), fees, expenses, indemnities or otherwise; and (ii) all other
indebtedness for credit extended by Senior Lender to Borrower from time to time,
whether for principal, premium, interest (including all interest accruing after
the initiation of any bankruptcy case, whether or not allowed), fees, expenses,
indemnities or otherwise.
d. "Subordinated Indebtedness". The term
"Subordinated Indebtedness" shall mean, collectively, all indebtedness and other
obligations of Borrower to Subordinated Lender, whether or not such indebtedness
is evidenced by a note or any other document, instrument, or agreement, whether
the sums represent principal, interest, dividends, costs, attorneys' fees,
charges, or other obligations due or not due, whether incurred directly or
indirectly and whether absolute or contingent.
2. Permitted Payments. Subject to the conditions set
forth herein, Borrower may pay to Subordinated Lender, and Subordinated Lender
may accept or receive and shall not be required to hold in trust, those payments
from Borrower to Subordinated Lender which are expressly permitted under the
Loan Agreement and subject to the conditions thereof (collectively, the
"Permitted Payments"). Subordinated Lender agrees that prepayments of the
Subordinated Indebtedness or payments resulting from either the breach of any
covenant or warranty with respect to the Subordinated Indebtedness or the
acceleration of any amounts due thereunder shall not be Permitted Payments for
the purpose of this Agreement.
3. Modifications of Indebtedness. Senior Lender shall
have the right, without notice to Subordinated Lender, to amend, supplement or
modify the Senior Indebtedness, in any manner whatsoever, including, without
limitation, any extensions or shortening of time of
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payments (even if such shortening causes any Senior Indebtedness to be due on
demand or otherwise), any revision of any amortization schedule with respect
thereto, and any increase in the amount of the Senior Indebtedness, and
Subordinated Lender consents and agrees to any such amendment, supplement or
modification.
4. Subordinated Indebtedness Owed Only to Subordinated
Lender. Subordinated Lender warrants and represents that it has not previously
assigned any interest in the Subordinated Indebtedness, that no other party owns
an interest in any of the Subordinated Indebtedness (whether as joint holders,
participants or otherwise) (other than Permitted Encumbrances), and that the
entire Subordinated Indebtedness is owing only to Subordinated Lender.
Subordinated Lender covenants and agrees that the entire
Subordinated Indebtedness shall continue to be owing only to it; provided that
Subordinated Lender may assign some or all of its interest in the Subordinated
Indebtedness after the assignee has executed and delivered to Senior Lender an
agreement subordinating, in the manner set forth herein, all rights, remedies
and interests with respect to the assigned Subordinated Indebtedness.
Subordinated Lender further warrants and represents that the
only indebtedness owing by Borrower to it is the Subordinated Indebtedness; that
to the best of its knowledge as of the date hereof, there is no default or
breach with respect to any of such indebtedness; and, specifically, that nothing
herein contained and nothing contained in any other document, instrument or
agreement with or in favor of Senior Lender constitutes a default or breach with
respect to any of such indebtedness.
5. Payments Received by Subordinated Lender. Except as
provided in Section 2 hereof, if any payment, distribution or any collateral
proceeds thereof is received by Subordinated Lender from Borrower with respect
to the Subordinated Indebtedness prior to the satisfaction in full of all the
Senior Indebtedness in cash, Subordinated Lender shall receive and hold the same
in trust as trustee for the benefit of Senior Lender and shall forthwith deliver
such assets to Senior Lender in precisely the form received (except for the
endorsement or assignment by Subordinated Lender where necessary), for
application on any of the Senior Indebtedness, due or not due. In the event of
the failure of Subordinated Lender to make any such endorsement or assignment to
Senior Lender, Senior Lender and any of its officers or agents are hereby
irrevocably authorized to make such endorsement or assignment.
6. Claims in Bankruptcy. In the event of any bankruptcy,
assignment for the benefit of creditors or similar proceedings against Borrower,
Subordinated Lender shall file all claims it may have against Borrower, and
shall direct the debtor in possession or trustee in bankruptcy, as appropriate,
to pay over to Senior Lender all amounts due to Subordinated Lender on account
of the Subordinated Indebtedness until the Senior Indebtedness has been paid in
full in cash. If Subordinated Lender fails to file such claims as requested by
Senior Lender, Senior Lender may file such claims on Subordinated Lender's own
behalf.
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7. Postpetition Financing; Liens. In the event of any
bankruptcy case against Borrower or any of the assets of Borrower, Subordinated
Lender hereby expressly consents to the granting by Borrower to Senior Lender of
senior liens and priorities in connection with any post-petition financing of
Borrower by Senior Lender.
8. Sale of Assets. In the event of a sale of some or
all of the assets of Borrower, Subordinated Lender agrees to release its
security interest, if any, in such assets, or any of them, upon the request of
Lender; provided that such assets are sold for fair value with the net proceeds
being applied to the Senior Indebtedness, whether or not Subordinated Lender
will receive any proceeds from such sale.
9. Additional Remedies. If Subordinated Lender violates
any of the terms of this Agreement, in addition to any remedies in law, equity
or otherwise, Senior Lender may restrain such violation in any court of law and
may interpose this Agreement as a defense in any action by Subordinated Lender.
10. Subordinated Lender's Waivers. All of the Senior
Indebtedness shall be deemed to have been made or incurred in reliance upon this
Agreement. Subordinated Lender expressly waives all notice of the acceptance by
Senior Lender of the subordination and other provisions of this Agreement and
agrees that Senior Lender has made no warranties or representations with respect
to the legality, validity, enforceability, collectability or perfection of the
Senior Indebtedness or any liens or security interests held in connection
therewith.
Subordinated Lender agrees that Senior Lender shall be
entitled to manage and supervise its loans in accordance with applicable law and
its usual practices, modified from time to time as it deems appropriate under
the circumstances, without regard to the existence of any rights that
Subordinated Lender may now or hereafter have in or to any assets. Senior Lender
shall have no liability to Subordinated Lender as a result of any and all lawful
actions which Senior Lender takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
its liens or security interest, actions with respect to the occurrence of a
Default, actions with respect to the foreclosure upon, sale, release or failure
to realize upon, any of its collateral, and actions with respect to the
collection of any claim for all or any part of the Senior Indebtedness from any
account debtor or any other party), regardless of whether any such actions or
omissions may affect Senior Lender's rights to deficiency or Subordinated
Lender's rights of subrogation or reimbursement.
Senior Lender may, from time to time, enter into agreements
and settlements with Borrower as it may determine, including, without
limitation, any substitution of collateral, any release of any lien or security
interest and any release of Borrower. Subordinated Lender waives any and all
rights it may have to require Senior Lender to ▇▇▇▇▇▇▇▇ assets.
11. Waivers. No waiver shall be deemed to be made by
Senior Lender or Subordinated Lender of any of their respective rights hereunder
unless it is in writing signed by the waiving party. Each such waiver shall be a
waiver only with respect to the specific instance
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involved and shall in no way impair the rights of the waiving party or the
obligations of the other party to the waiving party in any other respect at any
other time.
12. Information Concerning Financial Condition.
Subordinated Lender hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower and of all other circumstances bearing upon
the risk of nonpayment of the Senior Indebtedness, and agrees that Senior Lender
shall have no duty to advise it of information known to Senior Lender regarding
such condition or any such circumstances. In the event Senior Lender, in its
sole discretion, undertakes, at any time or from time to time, to provide any
such information to Subordinated Lender, Senior Lender shall be under no
obligation (i) to provide any such information to Subordinated Lender on any
subsequent occasion, (ii) to undertake any investigation not a part of its
regular business routine, or (iii) to disclose any information which, pursuant
to its commercial finance practices, Senior Lender wishes to maintain
confidential.
13. Third Party Beneficiaries. This Agreement is solely
for the benefit of Senior Lender, Subordinated Lender and their respective
successors and assigns, and neither Borrower nor any other persons or entities
are intended to be third party beneficiaries hereunder or to have any right,
benefit, priority or interest under, or because of the existence of, or to have
any right to enforce, this Agreement. Senior Lender and Subordinated Lender
shall have the right to modify or terminate this Agreement at any time without
notice to or approval of Borrower or any other person or persons.
Nothing in this Agreement is intended to or shall impair, as
between Borrower and its creditors other than Senior Lender and Subordinated
Lender, the obligation of Borrower, which is absolute and unconditional, to pay
to Subordinated Lender the principal of and interest constituting the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with their terms, or affect the relative rights of Subordinated
Lender and creditors of Borrower other than Senior Lender.
Notwithstanding any of the foregoing, if any third party
satisfies the Senior Indebtedness owing to Senior Lender, Senior Lender may
assign its rights and remedies hereunder to such third party, and such third
party shall be deemed to be Senior Lender for all purposes of this Agreement. If
a determination is made in favor of any third party, including, without
limitation, a trustee in bankruptcy, that Senior Lender's liens or security
interests are invalid, avoidable or unperfected, the subordination set forth in
Section 1 hereinabove shall be deemed null and void, but only to the extent of
such invalidity, avoidability and imperfection.
14. Notices. For the purposes of this Agreement, written
notices shall be sent by U.S. first class mail, postage prepaid; or by U.S.
certified mail, return receipt requested, postage prepaid; or by personal
delivery; or by facsimile confirmed by the recipient; and addressed to the
notified party at its address set forth below its signature line, or such other
address specified by the party with like notice. Notices shall be deemed
received three (3) business days after deposit in the U.S. mail, if sent by
first class mail; upon the date set forth in the return receipt, if by certified
mail; on the day of confirmation of delivery by the recipient, if by facsimile;
or on the day of transmittal by personal delivery.
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15. Costs and Attorneys' Fees. If there is any claim or
controversy litigated in any lawsuit between any of the parties hereto in
connection with this Agreement, the prevailing parties in the lawsuit shall be
entitled to recover from the other parties their reasonable costs and attorneys'
fees.
16. Consent to Jurisdiction; Additional Waivers.
Subordinated Lender and Senior Lender each consents to the jurisdiction of any
state or federal court located within Los Angeles County, California.
Subordinated Lender waives personal service of any and all process upon it, and
consents that all service of process be made in the manner set forth in Section
16 of this Agreement. Subordinated Lender and Senior Lender each waives, to the
fullest extent each may effectively do so, any defense or objection based upon
forum non conveniens and any defense or objection to venue of any action
instituted within Los Angeles County, California. EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.
17. Governing Law. This Agreement has been delivered and
accepted at and shall be deemed to have been made in the State of California,
and shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with the internal laws (as opposed to conflicts of
laws provisions) of the State of California.
18. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties' respective
successors and assigns, subject to the provisions hereof.
19. Integrated Agreement. This Agreement sets forth the
entire understanding of the parties with respect to the within matters and may
not be modified or amended except upon a writing signed by all parties.
20. Authority. Each of the signatories hereto certifies
that such party has all necessary authority to execute this Agreement.
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23. Counterparts. This Agreement may be executed in one
or more counterparts, each one of which when so executed shall be deemed to be
an original, and all of which taken together shall constitute one and the same
agreement.
"Subordinated Lender"
U.S. PLASTIC LUMBER CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Counsel and Secretary
Address for notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ 33431
U.S. PLASTIC LUMBER FINANCE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President and Secretary
Address for notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
U. S. PLASTIC LUMBER IP CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Secretary
Address for notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
"Senior Lender"
GUARANTY BUSINESS CREDIT CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
Address for notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All of the foregoing is consented and agreed
to as of the date first set forth above:
"Borrower"
U.S. PLASTIC LUMBER LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary