Establish order of loan repayments to creditors: Subordinated Loan Agreement

Subordinated Loan Agreement

THIS SUBORDINATED LOAN AGREEMENT is entered into as of among , , , (hereinafter called "Senior Creditor"), and , , , (hereinafter called "Junior Creditor").

FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby acknowledged, Junior Creditor, to induce Senior Creditor, at its option at any time or from time to time to loan monies or extend financial accommodations, with or without security, to or for the account of , , , (hereinafter called "Borrower"), and at the special instance and request of Senior Creditor, hereby agrees with Senior Creditor as follows:

1.Definitions.

The following terms shall have the meanings set forth below:

a."Junior Debt" shall mean and include any and all indebtednesses, liabilities and obligations of Borrower to the Junior(Subordinated) Creditor, absolute or contingent, direct or indirect, joint, several or independent, now outstanding or owing or which may hereafter be existing or incurred, arising by operation of law or otherwise, due or to become due, or held or to be held by Junior Creditor, whether created directly or acquired by assignment, as a participation, conditionally, as collateral security from another or otherwise, including indebtednesses, obligations and liabilities of Borrower to Junior Creditor as a member of any partnership, syndicate, association or other group, and whether incurred by Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise, including, without limiting the generality of the foregoing, all indebtednesses, liabilities and obligations of Borrower or Subsidiary and to the Junior (Subordinated) Creditor arising out of the following described document: dated in the original principal amount of , executed by Borrower and payable to the order of Junior Creditor.

b."Senior Debt" shall mean and include any and all indebtednesses, liabilities and obligations of Borrower to Senior Creditor, absolute or contingent, direct or indirect, joint, several or independent, now outstanding or owing or which may hereafter be existing or incurred, arising by operation of law or otherwise, due or to become due, or held or to be held by Senior Creditor, whether created directly or acquired by assignment, as a participation, conditionally, as collateral security from another or otherwise, including indebtednesses, obligations and liabilities of Borrower to Senior Creditor as a member of any partnership, syndicate, association or other group, and whether incurred by Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise, including, without limitation, principal, interest before and after maturity and after the filing of a voluntary or involuntary petition pursuant to the U.S. Bankruptcy Code, costs, liquidated damages, amounts due pursuant to indemnities, expenses, legal, accounting and appraisal expenses, and late charges.

2.Subordination.

The payment of any and all Subordinated Debt is expressly subordinated to the extent and in the manner set forth herein to the Senior Debt.

3. Subordination of Payment.

a. After such time as a default has occurred and is continuing under any agreement or other document evidencing any Senior Debt and Senior Creditor has sent notice of such default to Junior Creditor, Junior Creditor will not ask for, demand, sue for, take, receive or accept from the Borrower, by setoff or in any other manner, any payment or distribution on account of the Junior Debt, nor present any instrument evidencing the Junior Debt for payment other than such presentment as may be necessary to prevent discharge of other liable parties on such instrument.

b. Notwithstanding any provision contained herein to the contrary, Junior Creditor may retain all payments of principal, interest or penalty respecting the Junior Debt received by Junior Creditor from Borrower prior to such time as Senior Creditor has sent notice of default to Junior Creditor.

c. Any restrictions on Junior Creditor contained herein relating to such default shall automatically terminate when the default of Borrower under any agreements evidencing the Senior Debt has been cured and Borrower is not in default under said agreements, but such termination shall not waive Senior Creditor's rights under any other or future event of default. After acceleration of the maturity of the Senior Debt, no cure or attempted cure of any event of default shall terminate the restrictions contained herein, unless the Senior Creditor shall so agree in writing.

4.Payments Held in Trust.

In the event the Junior Creditor shall receive any payment or distribution on account of the Junior Debt which Junior Creditor is not entitled to receive under the provisions of the foregoing paragraph (3), Junior Creditor will hold any amount so received in trust for Senior Creditor and will forthwith turn over such payment to Senior Creditor in the form received by Junior Creditor (together with any necessary endorsement) to be applied on the Senior Debt remaining unpaid until all Senior Debt has been paid in full, after giving effect to any concurrent payment or distribution to the Senior Creditor

5.Restrictions on Action Against Borrower.

The Junior Creditor will not commence any action or proceeding against Borrower to recover all or any part of the Junior Debt, nor join with any other creditor, unless Senior Creditor shall also join, in bringing any proceedings against Borrower under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law, or statute of the federal or any state government unless and until all Senior Debt shall have been paid in full.

6.Bankruptcy, Receivership and Similar Proceedings.

a. In the event of any receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement with creditors, adjustment of debt, whether or not pursuant to bankruptcy laws, the sale of all or substantially all of the assets, dissolution, liquidation, or any other marshalling of the assets and liabilities of Borrower, the Junior Creditor will at Senior Creditor's request file any claim, proof of claim, proof of interest or other instrument of similar character necessary to enforce the obligations of Borrower in respect to the Junior Debt and any collateral held therefore and will hold all payments on and proceeds from such Junior Debt or collateral in trust for Senior Creditor and pay the same over to Senior Creditor, in the form received (together with any necessary endorsement), to be applied on the Senior Debt remaining unpaid until all Senior Debt shall be paid in full.

b. In the event that the Junior Creditor shall fail to take any such action requested by Senior Creditor, Senior Creditor may, as attorney-in-fact for the Junior Creditor, take such action on behalf of the Junior Creditor, and the Junior Creditor hereby appoints Senior Creditor as attorney-in-fact for the Junior Creditor to demand, sue for, collect and receive any and all such monies, dividends or other assets and give acquittance therefore and to file any claim, proof of claim, proof of interest or other instrument of similar character and to take such other proceedings in Senior Creditor's own name or in the name of the Junior Creditor as Senior Creditor may deem necessary or advisable for the enforcement of this Subordinated Loan Agreement; this appointment is irrevocable and is coupled with an interest in such monies, dividends and assets.

c. The Junior Creditor will execute and deliver to Senior Creditor such other and further powers of attorney or other instruments as Senior Creditor may request in order to accomplish the foregoing.

7.Subordination of Liens.

All liens and security interests securing the Junior Debt are hereby subordinated and made junior to all liens and security interests securing the Senior Debt, but this subordination shall not be deemed to subordinate the liens and security interests in favor of Junior Creditor to the liens and security interests in favor of any other person. Without the prior written consent of Senior Creditor, the Junior Creditor shall not: (a) exercise or enforce any creditor's right it may have against Borrower with respect to any property of the Borrower, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings, judicial or otherwise, to enforce any liens, security interests, judgments or other encumbrances upon any property of the Borrower.

8.Senior Creditor's Actions.

This Subordination Agreement shall be irrevocable, absolute and unconditional, shall remain in full force and effect until payment in full of the Senior Debt, and shall in no way be affected or impaired by reason of the happening from time to time of any other event, including, without limitation, the following, whether or not any such event shall have occurred without notice to or the consent of the Junior Creditor:

(i) the waiver, compromise, settlement, termination or other release of the performance or observance by the Borrower, or any other person liable or to become liable for repayment of the Senior Debt or any or all of such Borrower's or other party's agreements, covenants, terms or conditions contained in any agreement relating to the Senior Debt provided, however, that no such changes shall have the effect of further restricting payments respecting the Junior Debt without the prior written consent of the Junior Creditor;

(ii) the extension of the time for payment of any of the Senior Debt or of the time for performance of any obligations, covenants or agreements under or arising out of any agreement relating to the Senior Debt;

(iii) any failure, omission, delay or lack on the part of Senior Creditor to enforce, assert or exercise any right, power or remedy conferred on Senior Creditor in any agreement relating to the Senior Debt or this Subordination Agreement, or the inability of Senior Creditor to enforce any provision of this Subordination Agreement or any agreement relating to the Senior Debt, or any other act or omission on the part of Senior Creditor or any of the holders from time to time of the Senior Debt;

(iv) the transfer, assignment or mortgaging, or the purported transfer, assignment or mortgaging, of all or any part of the interest of the Borrower or any Junior Creditor in any property or any failure of title with respect to the interest of the Borrower or any Junior Creditor in any property or the invalidity, unenforceability or termination of any agreement relating to the Senior Debt;

(v) the modification or amendment of any obligation, covenant or agreement set forth in this Subordination Agreement, or any agreement relating to the Senior Debt;

(vi) the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the assets, marshalling of assets and liabilities, receivership, conservatorship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting the Borrower or any Junior Creditor or any of their respective assets or any allegation or contest of the validity of this Subordination Agreement or any agreement relating to the Senior Debt;

(vii) the release of the Borrower or any Junior Creditor from the performance or observance of any of the agreements, covenants, terms or conditions contained in any agreement relating to the Senior Debt or this Subordination Agreement;

(viii) the surrender or impairment of any security for the performance or observance of any of the agreements, covenants, terms and conditions contained in any agreement relating to the Senior Debt or this Subordination Agreement;

(ix) any failure of Borrower or any Junior Creditor to perform or observe any agreement or covenant, or to discharge any duty or obligation, arising out of or connected with any agreement relating to the Senior Debt, this Subordination Agreement or the occurrence or pendency of any default or event of default thereunder or any proceedings or actions as a result of, or attendant upon, such default;

(x) the inability of the Senior Creditor to enforce any provision of any agreement relating to the Senior Debt or this Subordination Agreement for any reason;

(xi) the taking or the omission of any of the actions referred to in any agreement relating to the Senior Debt in or of any actions under this Subordination Agreement; or

(xii) the failure to give notice to the Junior Creditor of the occurrence of a default under this Subordination Agreement or of the occurrence of an event of default under the terms and provisions of any agreement relating to the Senior Debt except as required by Paragraph (3) above.

9. Subrogation

a. Upon payment in full of the Senior Debt, the Junior Creditor shall be fully subrogated to the rights of the Senior Creditor to receive payments or distributions of assets of the Borrower made on the Senior Debt until the Junior Debt has been paid in full. As to such subrogation, no payment or distribution upon the Senior Debt to which the Junior Creditor would be entitled but for this Paragraph (9), nor any payment by the Junior Creditor to the Senior Creditor pursuant to this Subordinated Loan Agreement shall, as among the Borrower and all Creditors of the Borrower except the Senior Creditor and the Junior Creditor, be deemed to be a payment by the Borrower upon or in respect of the Senior Debt;

b. However, the provisions of this paragraph are solely for the purpose of determining the rights and obligations of the Senior Creditor and Junior Creditor. As to any amount which the Junior Creditor would have received from the Borrower but for the provisions of this SubordinationAgreement, which amounts have been paid upon the Senior Debt, upon payment in full of the Senior Debt, the Junior Creditor shall be entitled to receive any amounts paid by the Borrower to the Senior Creditor in excess of the Senior Debt so paid.

10. Affirmative Covenants.

The Junior Creditor agrees to execute any and all other instruments necessary as required by the Senior Creditor to subordinate the Junior Debt to the Senior Debt as herein provided. The Junior Creditor will:

(i) cause all Junior Debt to be evidenced by a note, debenture or other instrument evidencing the Junior Debt;

(ii) at Senior Creditor's request promptly surrender or cause to be surrendered any such note, debenture, or instrument evidencing the Junior Debt so that a statement or legend may be entered thereon to the effect that such note, debenture, or other instrument is subordinated to the Senior Debt in favor of Senior Creditor in the manner and to the extent set forth in this Subordination Agreement;

(iii) mark the books of Junior Creditor to show that the Junior Debt is subordinated to the Senior Debt pursuant to this Subordination Agreement; and

(iv) cause all financial statements of the Junior Creditor hereafter prepared for delivery to any person to make specific reference to the provisions of this Subordination Agreement.

11.Negative Covenants.

Until payment in full of the Senior Debt, the Junior Creditor will not:

(i) waive, relinquish, release, or modify in any material way the Junior Debt or any security thereof;

(ii) compromise, settle or admit or permit any setoff or counterclaim to the Junior Debt; or

(iii) exchange the Junior Debt, or any portion thereof, for stock or any other equity or debt instrument of the Borrower.

12.Assignment by Junior Creditor.

Junior Creditor will not assign or transfer to others any claim the Junior Creditor has or may have against the Borrower so long as any of the Senior Debt remains outstanding, unless such assignment or transfer is expressly made subject to this Subordinated Loan Agreement. This Subordinated Loan Agreement is binding upon Junior Creditor's successors and assigns.

13. Assignment by Senior Creditor.

This Subordinated Loan Agreement may be assigned by Senior Creditor in connection with any assignment or transfer of the Senior Debt. This Subordination Agreement shall inure to the benefit of Senior Creditor, its successors and assigns.

14. Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of the State of .

15. Interpretation.

Headings are for the convenience of the parties only, and shall not be used to interpret the meaning of this Subordinated Loan Agreement.

15. Signatures.

This Agreement shall be signed by on behalf of and by on behalf of .