DEBT SUBORDINATION AGREEMENT November 21, 2008
Exhibit
10.3
November
21, 2008
TO: Textron
Financial Corporation, as Agent
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Facsimile: (▇▇▇)
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Attention: ▇▇▇▇▇
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The
undersigned, ANCHOR
FUNDING SERVICES, INC. ("Creditor"), is a
creditor of ANCHOR
FUNDING SERVICES LLC ("Debtor"). In
order to induce TEXTRON
FINANCIAL CORPORATION (the "Agent"), as Agent for itself and other
financial institutions (the "Lenders"), party from time to time to a Loan and
Security Agreement (as amended, modified or restated, the "Loan Agreement"),
dated on or about the date hereof, between Agent and Debtor, to extend or
continue extending financial accommodations to Debtor, Creditor hereby warrants,
represents and agrees as follows:
1. As
used herein, the term "Creditor Claims" shall mean indebtedness in the amount of
$5,664,000, owed by Debtor to Creditor, whether direct or indirect, absolute or
contingent, due or to become due, secured or unsecured, legal or equitable; the
term "Insolvency Proceeding" shall mean any action, suit, proceeding or case
commenced by or against Debtor under any chapter or provision of the Bankruptcy
Code or for the appointment of a receiver or other custodian for Debtor or any
of its property, or an assignment for the benefit of creditors of Debtor; and
the term "Obligations" shall mean all existing and future indebtedness,
liabilities and obligations which are or may from time to time be owed by Debtor
to Agent and Lenders under the Loan Agreement, including, without limitation,
all interest, fees and other charges payable in connection therewith, in each
case whether direct or indirect, absolute or contingent, due or to become due,
secured or unsecured or legal or equitable. Whenever in this
Agreement reference herein is made to "payment in full" of the Obligations or
the Obligations being "paid in full," such reference shall be understood to mean
(i) the full and final payment of all of the Obligations, in cash, including,
without limitation, all interest, fees and other charges, whether or not any of
the same are recoverable or allowed as a claim in any Insolvency Proceeding, and
(ii) termination of any commitments that Agent and Lenders may have to Debtor
under the Loan Agreement to make any loans or otherwise extend credit to or for
the benefit of Debtor.
2. Each
instrument, if any, evidencing the Creditor Claims shall be permanently marked
with the following legend:
The
within promissory note is subject to that certain Debt Subordination Agreement
executed by Anchor Funding Services, Inc. and Anchor Funding Services, LLC on or
about the 21st day of November, 2008, addressed to Textron Financial
Corporation, as Agent.
3. Creditor
hereby subordinates payment of all of the Creditor Claims to the payment in full
of all of the Obligations, as and to the extent set forth in this
Agreement. Creditor shall not collect or receive any payments from
Debtor on account of the Creditor Claims (other than payments-in-kind) until
Debtor has paid in full all of the Obligations, unless otherwise expressly
permitted under the Loan Agreement.
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4. Creditor
shall hold in trust and immediately pay to Agent, in the same form of payment
received, any amount which Creditor receives in contravention of paragraphs 3 or
6 of this Agreement. If in violation of this Agreement
Creditor commences, prosecutes, or participates in any suit, action, or
proceeding against Debtor, or attempts to enforce any security agreements, trust
deeds, lien instruments or other encumbrances, Debtor may interpose this
Agreement as a complete defense, and Agent at its option may intervene and
interpose this Agreement as an absolute defense in Creditor's name or in the
name of Debtor.
5. Without
Agent's prior written consent, Creditor shall not take any action against Debtor
or any of its property, including, without limitation, filing any lawsuit or
executing on any judgment, whether such action is by legal, administrative or
other proceedings, or by any other means; commence, prosecute or participate in
any action, suit or proceeding against Debtor or any of its property, including,
without limitation, any involuntary bankruptcy proceeding against Debtor; or
take any action to foreclose or realize upon any collateral securing the
Creditor Claims or to enforce any security agreements, trust deeds, lien
instruments or other encumbrances securing the Creditor
Claims. Creditor subordinates any security interest, trust deed, deed
to secure debt, lien instruments and other encumbrances that Creditor may now or
hereafter have with respect to any existing or future property of Debtor to
Agent's interests in the same property.
6. By
its acceptance below, Debtor agrees that, until all of the Obligations are paid
in full, it shall not pay to Creditor any sum on account of any of the Creditor
Claims except as expressly permitted in paragraph 3 of this Agreement or under
the Loan Agreement. Creditor and Debtor each warrants and represents
that there is no default in connection with any of the Creditor Claims and that
Creditor has not assigned any of the Creditor Claims to any third
party.
7. With
respect to the loans or other extensions of credit between Agent, Lenders and
Debtor, Agent or Lenders may grant extensions of the time for payment or
performance of any of the Obligations; otherwise modify any of the terms and
conditions of the Obligations or any agreement relating thereto; make
compromises and settlements with the Debtor and all other persons liable for the
Obligations; subordinate or release any lien on any property securing any of the
Obligations; and release any person liable for the payment of any of the
Obligations, in each case without notice to or the consent of
Creditor.
8. Agent
and Lenders may at any time discontinue the extension of credit to Debtor or may
extend additional credit to Debtor, in each case without notice to or the
consent of Creditor. This Agreement shall continue in full force and
effect until Debtor has paid in full all Obligations owing to Agent and
Lenders.
9. If
any payment or other distribution of property shall be made in any Insolvency
Proceeding involving Debtor, whether pursuant to liquidation of assets or a plan
of reorganization or composition, and such payment or property shall be made to
or received by Creditor, then Creditor shall promptly turn such payment or
property over to Agent for application to the Obligations until all of such
Obligations are paid in full. If Creditor has any claim against
Debtor in any Insolvency Proceeding, Agent may file such claim on behalf of
Creditor and Creditor shall assign any such claim to Agent. Any sums
received by Agent in connection with such claim shall be applied to the
Obligations until all of the Obligations are paid in full.
10. This
Agreement shall be binding upon the successors and assigns of Creditor and
Debtor and shall inure to the benefit of Agent's successors and assigns; shall
be governed as to validity, interpretation, enforcement and effect by the
internal laws of the State of Rhode Island; sets forth the entire understanding
of the parties with respect to the subject matter hereof; and cannot be modified
except by a writing signed by Agent.
11. Creditor
and Debtor each waives notice of acceptance of this Agreement by
Agent.
12. If
any party files an action to enforce or construe the provisions of this
Agreement, the prevailing party in the action shall be entitled to recover from
the other party all of its costs and reasonable attorneys' fees in the
action.
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IN
WITNESS WHEREOF, Creditor and Debtor have executed this Agreement, this 21st day
of November, 2008.
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("Creditor")
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By:
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| ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| President | |||
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ANCHOR
FUNDING SERVICES LLC
("Debtor")
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By:
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/s/ | |
| ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| President | |||
| Accepted this ___ day of November, 2008: | ||||
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TEXTRON
FINANCIAL CORPORATION
("Agent")
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By:
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Title
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