PFSweb Inc. Contracts
Sample Business Contracts
Notes Payable Subordination Agreement - Congress Financial Corp. (Southwest) and Supplies Distributors Inc.
Promissory Notes
NOTES PAYABLE SUBORDINATION AGREEMENT
March 29, 2002
Congress Financial Corporation (Southwest)
901 Main Street, Suite 1625
Dallas, Texas 75202
Ladies and/or Gentlemen:
Supplies Distributors, Inc., a Delaware corporation with its principal
place of business at 500 North Central Expressway, Plano, TX 75074 ("Supplies"),
may become indebted to Priority Fulfillment Services, Inc., a Delaware
corporation ("PFS")(howsoever evidenced and whether now existing or hereafter
incurred, the "PFS Indebtedness"). PFS represents that no part of the PFS
Indebtedness has been assigned to or subordinated in favor of any other Person,
other than pursuant to that certain Amended and Restated Notes Payable
Subordination Agreement, dated as of March 29, 2002, by and between PFS and IBM
Credit Corporation, a Delaware corporation ("IBM Credit"), and that PFS does not
hold any security therefor. Capitalized terms used herein without definition
shall have the meaning ascribed thereto in the Loan Agreement referred to below.
To induce Congress Financial Corporation (Southwest), a Texas
corporation ("Congress"), to enter into a loan agreement with Supplies (as
amended, modified, and supplemented from time to time, the "Loan Agreement") and
in consideration of any loans, advances, payments, extensions or credit
(including the extension or renewal, in whole or in part, of any antecedent or
other debt), benefits or financial accommodations heretofore or hereafter made,
granted or extended by Congress or which Congress has or will become obligated
to make, grant or extend to or for the account of Supplies whether under the
Loan Agreement, any of the other Financing Agreements or otherwise, and in
consideration of any obligations heretofore or hereafter incurred by Supplies to
Congress, whether under the Loan Agreement, any of the other Financing
Agreements or otherwise, PFS agrees to make the payment of the PFS Indebtedness
and any and all other present or future indebtedness of Supplies to PFS together
with any and all interest accrued thereon (collectively the "Secondary
Obligations") subject and subordinate to the prior indefeasible payment in full
of any and all debts, obligations and liabilities of Supplies to Congress,
whether absolute or contingent, due or to become due, now existing or hereafter
arising (including interest accrued subsequent to the filing of any petition
under any bankruptcy, insolvency or similar law, whether or not such interest is
allowed pursuant to claim under such law) and whether direct or acquired by
Congress by transfer, assignment or otherwise (collectively the "Primary
Obligations") and that Supplies shall make no payments to PFS or to any
permitted assignee or holder of the PFS Indebtedness in respect of the Secondary
Obligations until the Primary Obligations have been indefeasibly paid in full as
acknowledged in writing by Congress. Notwithstanding the foregoing, Supplies may
make payments in respect of the Secondary Obligations provided, that, (i) no
Event of Default, or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred and be continuing,
or would occur as a result of any such payment; (ii) any such payment shall not
cause the total principal amount of the Secondary Obligations to be less than
$6,500,000; and (iii) the
Notes Payable Subordination Agreement
<PAGE>
aggregate amount of the Revolving Loans at the time of such payment shall not
exceed the amounts available to Supplies in accordance with Section 2.1 of the
Loan Agreement. Except as provided above, PFS agrees not to ask, demand, sue
for, take or receive payment or security for all or any part of the Secondary
Obligations until and unless all of the Primary Obligations shall have been
fully paid and discharged.
Upon any distribution of any assets of Supplies whether by reason of
sale, reorganization, liquidation, dissolution, arrangement, bankruptcy,
receivership, assignment for the benefit of creditors, foreclosure or otherwise,
Congress shall be entitled to receive payment in full of the Primary Obligations
prior to the payment of any part of the Secondary Obligations. To enable
Congress to enforce its rights hereunder in any such proceeding or upon the
happening of any such event, Congress or any person whom Congress may from time
to time designate is hereby irrevocably appointed attorney-in-fact for PFS with
full power to act in the place and stead of PFS including the right to make,
present, file and vote proofs of claim against Supplies on account of all or any
part of said Secondary Obligations as Congress may deem advisable and to receive
and collect any and all payments made thereon and to apply the same on account
of the Primary Obligations. PFS will execute and deliver to Congress such
instruments as Congress may require to enforce each of the Secondary
Obligations, to effectuate said power of attorney and to effect collection of
any and all dividends or other payments which may be made at any time on account
thereof.
While this instrument remains in effect, PFS will not assign to or
subordinate in favor of any other person, firm or corporation, except IBM
Credit, any right, claim or interest in or to the Secondary Obligations or
commence or join with any other creditor in commencing any bankruptcy,
reorganization or insolvency proceeding against Supplies. Congress may at any
time, in its discretion, renew or extend the time of payment of all or any
portion of the Primary Obligations or waive or release any collateral which may
be held therefor and Congress may enter into such agreements with Supplies as
Congress may deem desirable without notice to or further assent from PFS and
without adversely affecting Congress's rights hereunder in any manner
whatsoever.
In furtherance of the foregoing and as collateral security for the
payment and discharge in full of any and all of the Primary Obligations, PFS
hereby transfers and assigns to Congress the Secondary Obligations and all
collateral security therefor to which PFS now is or may at any time be entitled
and all rights under all guarantees thereof and agrees to deliver to Congress,
after the obligations owed by Supplies to IBM Credit pursuant to that certain
Agreement for Inventory Financing dated as of March 29, 2002 between Supplies,
IBM Credit and the other parties signatory thereto have been satisfied in full,
endorsed in blank all notes or other instruments now or hereafter evidencing
said Secondary Obligations which have not otherwise been delivered to IBM
Credit. Congress may file one or more financing statements concerning any
security interest hereby created without the signature of PFS appearing thereon.
The within instrument is and shall be deemed to be a continuing
subordination and shall be and remain in full force and effect until all Primary
Obligations have been performed and paid in full and Congress's commitment, if
any, under the Loan Agreement has been terminated.
Notes Payable Subordination Agreement
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have executed this letter
agreement as of the day and year first written above.
PRIORITY FULFILLMENT SERVICES, INC.
By:
--------------------------------------------
Thomas J. Madden
Chief Financial Officer and
Executive Vice President
500 North Central Expressway, 5th Floor
Plano, Texas 75074
Supplies hereby acknowledges notice of the within and foregoing subordination
and agrees to be bound by all the terms, provisions and conditions thereof.
Except as expressly permitted hereby, Supplies further agrees not to repay all
or any part of the Secondary Obligations, or to issue any note or other
instrument evidencing the same or to grant any collateral security therefor
without Congress's prior written consent.
SUPPLIES DISTRIBUTORS, INC.
By:
--------------------------------------------
Joe Farrell
President and
Chief Executive Officer
500 North Central Expressway, 5th Floor
Plano, Texas 75074
ACCEPTED:
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
By:
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Mike Sheff
Senior Vice President
Notes Payable Subordination Agreement
<PAGE>
ACKNOWLEDGMENT OF SUBORDINATION
STATE OF TEXAS )
) SS
COUNTY OF DALLAS )
On the 29th day of March, 2002, appeared before me Thomas J. Madden to
me known to be the individual described in and who executed the foregoing
instrument, and who acknowledged to me that the same was executed as his or her
free and voluntary act for the uses and purposes therein set forth.
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(Notary Public)
My Commission Expires:
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Notes Payable Subordination Agreement