Exhibit 10.7
INTERCREDITOR AND SUBORDINATION AGREEMENT

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Subordination Agreement”)
is made as of the 27th day of June, 2012 by and between PNC BANK, NATIONAL
ASSOCIATION, as Agent for Lenders (the "Bank”) and CD Financial, LLC, a Florida
limited liability company having its principal place of business at 3299 NW
Second Avenue, Boca Raton, Florida 33431 (the “Junior Creditor”), and is
acknowledged by Integrated BioPharma, Inc., a Delaware corporation,
InB:Manhattan Drug Company, Inc., a New York corporation, AgroLabs, Inc., a New
Jersey corporation, IHT Health Products, Inc., a Delaware corporation, Vitamin
Factory, Inc., a Delaware corporation, and IHT Properties Corp., a Delaware
corporation (collectively, the “Borrower”).

WHEREAS, Junior Creditor has extended credit to Integrated BioPharma, Inc. under
the Subordinated Loan Documentation, as such term is defined in the Loan
Agreement (as hereinafter defined), and in conjunction therewith have obtained a
security interest in and lien on all of the assets of the Borrower; and

WHEREAS, the Bank and the Lenders are entering into that certain Revolving
Credit, Term Loan and Security Agreement dated June 26, 2012 with the Borrower,
under which Bank and other lenders have made, and may make revolving loans and
advances, a term loan, or other financial accommodations to Borrower and in
conjunction therewith the Bank as Agent for Lenders will obtain a security
interest in and lien upon all of the assets of Borrower; and

WHEREAS, it is a condition precedent to the Bank and other lenders extending
financial accommodations to Borrower that the Junior Creditor enter into this
Intercreditor and Subordination Agreement so as to set forth the priorities of
their respective liens on the assets of Borrower and the indebtedness of
Borrower to the Junior Creditor and the Bank.

NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the loans, advances, discounts, renewals
or extensions of credit now or hereafter made by the Bank to or for the account
of the Borrower, the Junior Creditor and the Bank agree as follows:

1. The term “Subordinated Indebtedness” shall mean all indebtedness, obligations
and liabilities of every nature of the Borrower and of Borrower’s subsidiaries
to the Junior Creditor arising under the Subordinated Loan Documentation
(including, but not limited to, the Subordinated Liquidity Note, the
Subordinated Securities Note and the Subordinated Subsidiary Guarantee, as such
terms are defined in the Loan Agreement), whether now existing or hereafter
arising or incurred, absolute or contingent, direct or indirect, secured or
unsecured, liquidated or unliquidated, due or not due, joint or several, and
however arising, whether created directly or acquired by assignment or incurred
by the Borrower as principal, maker, surety, endorser, guarantor or otherwise,
together with all extensions, renewals or modifications thereof and any
attorneys’ fees incurred in connection therewith.  The Junior Creditor
represents and warrants that the Subordinated Indebtedness is the sum of
$7,064,000 evidenced by the Subordinated Liquidity Note and the Subordinated
Securities Note.  The Junior Creditor shall not amend or modify the Subordinated
Liquidity Note and/or the Subordinated Securities Note without the prior written
consent of the Bank.  The Junior Creditor covenants that it shall not enter
into, or be the beneficiary of, any other arrangements or agreements regarding
any additional Subordinated Indebtedness.  The term “Collateral” shall mean all
real and personal property and other tangible and intangible and other assets of
Borrower in which either the Junior Creditor or the Bank has a security interest
or lien.  “Security Agreement” means the security agreement or other security
instrument by the Borrower in favor of the Junior Creditor and the Bank.

2. The term "Senior Indebtedness" shall mean all Obligations (as such term is
defined in the Loan Agreement) of every kind, nature and description of the
Borrower to or with the Bank and/or the Lenders (as such term is defined in the
Loan Agreement), or with an affiliate of the Bank or Lenders, whether or not
arising out of or under that certain Revolving Credit, Term Loan and Security
Agreement dated June 26, 2012 (as it has been, is being and may further be
amended, modified, extended, supplemented, replaced or restated from time to
time, the "Loan Agreement") by and among the Borrower, the Bank, the other
Lenders, and the Bank as Agent for the Lenders, including, without limitation,
principal, interest, charges, expenses, attorneys' fees, and whether secured or
unsecured, direct or indirect, absolute or contingent, joint and/or several, due
or to become due, liquidated or unliquidated, now existing or hereafter
contracted (including, without limitation any participation or interest of the
Bank, or any affiliate of the Bank in any obligation of the Borrower to others)
acquired outright, conditionally or as collateral security from another, and
whether incurred by the Borrower as principal, surety, endorser, guarantor,
accommodation party or otherwise, together with any extensions, renewals or
modifications thereof.
 
 
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3. The Junior Creditor hereby subordinates, to the extent and in the manner set
forth herein, all Subordinated Indebtedness howsoever evidenced and whether now
existing or hereafter incurred to all Senior Indebtedness until all the Senior
Indebtedness (other than the Remaining Obligations) shall be fully paid and
satisfied.  The Junior Creditor and the Borrower covenant and agree that the
Subordinated Indebtedness shall be junior in right of repayment or payment to
the prior repayment in full of all Senior Indebtedness to the extent and in the
manner set forth herein.  The Junior Creditor and the Borrower further covenant
and agree that until all of the Senior Indebtedness (other than the Remaining
Obligations) have been fully paid and satisfied, no payment of principal and/or
interest on account of the Subordinated Indebtedness, or guaranty of any nature,
shall be made or given, by or on behalf of the Borrower, nor be demanded,
accepted, received or applied by the Junior Creditors for or on account of the
Subordinated Indebtedness except (A) when (i) no Default and/or Event of Default
has occurred and is continuing prior to and after making such payment, (ii) the
Borrower provides to the Bank evidence that the Borrower is and will be in pro
forma compliance with the Fixed Charge Coverage Ratio (as of the then most
recently completed fiscal quarter) set forth in Section 6.5 of the Loan
Agreement prior to and immediately after making such payment, and (iii) the
Borrower provides to the Bank evidence that the Borrower has and will have
Undrawn Availability of not less than $1,000,000 prior to and after making such
payment, then the Borrower may pay and the Junior Creditor shall have the right
to receive cash interest and any and all accrued and unpaid interest, except to
the extent that Borrower is otherwise limited or restricted from making such
payments under the Loan Agreement and (B) the Borrower may pay and the Junior
Creditor shall have the right to receive payments of principal solely with
regard to the Subordinated Liquidity Note upon (i) the repayment or prepayment
of the principal amount of the Term Loan in an amount of not less than
$1,000,000, (ii) receipt and satisfactory review by the Bank of the Borrower’s
annual financial statements deliverable pursuant to Section 9.7 of the Loan
Agreement for the fiscal year ending June 30, 2013 which shall reflect, among
other things, a calculation of EBITDA of the Borrower of not less than
$1,500,000 for such fiscal period, (iii) receipt by the Bank of evidence that no
Default and/or Event of Default shall have occurred and be continuing at such
time, (iv) receipt by the Bank of evidence that the Borrower has an Undrawn
Availability of not less than $1,750,000 prior to and immediately after giving
effect to any such payment of principal with regard to the Subordinated
Liquidity Note, and (v) receipt by the Bank of evidence that the aggregate
amount of any such payment of principal with regard to the Subordinated
Liquidity Note, in full or in part, does not exceed an amount equal to fifty
percent (50%) of Excess Cash Flow of the Borrower for such fiscal year.

4. Notwithstanding the terms of any Security Agreement heretofore or hereafter
entered into between the Junior Creditor or the Bank, and the Borrower, or the
date of the filing of any financing statements heretofore or hereafter filed by
the Junior Creditor or the Bank against Borrower, or any other action by the
Junior Creditor or the Bank with regard to perfection of a security interest or
lien, any security interest, lien, claim or right now or hereafter asserted by
the Junior Creditor with respect to the Collateral shall be subject, junior and
subordinate in all respects to the security interest, lien, claim or right now
or hereafter asserted by the Bank with respect thereto.  As between the Bank and
the Junior Creditor, the first priority of the Bank’s security interest in the
Collateral shall not be affected by any failure to perfect any security interest
or any lapse in perfection thereof.

5. The Junior Creditor covenants to the Bank that the Subordinated Indebtedness
now existing or hereafter arising shall not be assigned to any other person,
firm or corporation unless said person, firm or corporation executes a
subordination agreement substantially in the form of this Subordination
Agreement.

6. The Junior Creditor covenants to the Bank to not take any action which
interferes with the Bank’s exercise of its superior security interest in, or
lien on, the Collateral.   The Junior Creditor hereby waives any right to
challenge the actions of the Bank in liquidating the Collateral whether such
challenge is in the form of attacking manner of liquidation, timing of
liquidation or otherwise.  The Junior Creditor and the Bank waive their right to
require a marshalling of assets.

7. So long as any Senior Indebtedness shall remain unpaid, the Junior Creditor
shall forthwith deliver to the Bank any payment or collateral security or the
proceeds thereof received by the Junior Creditor in violation of the terms of
this Subordination Agreement, in precisely the form received (except for
endorsement by the appropriate Junior Creditor) for application on account of
the Senior Indebtedness and, until so delivered, the same shall be held in trust
by the Junior Creditor as the property of the Bank.
 
 
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8. In order to carry out the terms and the intent of this Subordination
Agreement more effectively, the Junior Creditor and Bank agree to do all
reasonable acts and execute all further instruments reasonably necessary or
convenient to preserve for the Bank and the Junior Creditor the benefit of this
Subordination Agreement.

9. The Junior Creditor agrees that this Subordination Agreement shall constitute
a continuing agreement of subordination and no action which the Bank, any other
Lender or the Borrower may take or refrain from taking with respect to the
Senior Indebtedness, or any note or notes representing the same, or any
collateral therefor, including a waiver or release thereof, or any agreement or
agreements in connection therewith, shall affect this Subordination Agreement or
the obligations of the Junior Creditor hereunder until the complete repayment
and satisfaction of the Senior Indebtedness (other than the Remaining
Obligations).

10. No waiver shall be deemed to be made by the Bank of any of its rights
hereunder unless the same shall be in writing and any waiver granted by the Bank
shall be a waiver only with respect to the specific instance involved and it
shall in no way impair the Bank’s rights or the Junior Creditor's obligations to
the Bank in any other respect or at any other time.

11. The Junior Creditor agrees that the Junior Creditor shall take no steps,
directly or indirectly, to enforce or seek to enforce any of its rights with
respect to the Subordinated Indebtedness or any collateral security therefor,
nor shall the Junior Creditor directly or indirectly take any action that shall
interfere in any nature whatsoever with the rights of the Bank with respect to
the Bank’s senior interests, whether by virtue of this Subordination Agreement
or otherwise, except that the Junior Creditor shall have the right to take
action or institute proceedings with respect to the Subordinated Indebtedness or
any collateral security at any time after one hundred fifty (150) days (the
“Standstill Period”) after the receipt by Bank of a notice from the Junior
Creditor setting forth an event of default under the Subordinated Loan
Documentation, provided that as of the expiration of the Standstill Period (such
date being referred to as the “Collateral Enforcement Date”), such event of
default remains uncured and is continuing; and so long as the Senior
Indebtedness remains outstanding, the Junior Creditor agrees that any proceeds
which it receives with respect to any collateral security shall be held by the
Junior Creditor in trust for the Bank, and shall be promptly remitted to the
Bank for application to the Senior Indebtedness, and in the event that the Bank
institutes any action or proceedings with respect to any collateral security
after the commencement by the Junior Creditor of any action or proceeding
against the collateral security, the Junior Creditor shall desist from such
enforcement efforts against such collateral security promptly upon being advised
in writing by the Bank of the commencement of foreclosure or other enforcement
efforts by the Bank against such collateral security..

12. The Junior Creditor and the Borrower agree to make proper notations in their
respective books, records or other statements which evidence or record any
Subordinated Indebtedness, specifically indicating that the Subordinated
Indebtedness is subject to this Agreement.

13. The Bank and the Junior Creditor (each a “Secured Creditor”) shall (a) give
the other written notice of: (i) sending any written notice to the Borrower of
an event of default of the Subordinated Indebtedness or Senior Indebtedness, as
applicable, which has not been waived or cured; (ii) any demand of payment of
any of the Subordinated Indebtedness or the Senior Indebtedness, as applicable,
(iii) any commencement of a foreclosure or other lien enforcement proceeding by
the Junior Creditor or the Bank against the Borrower or any collateral security,
in each case concurrently with the sending of such notice to the Borrower, and
(iv) provide to the other Secured Creditor a copy of any written notice received
by such Secured Creditor from a landlord or other third party of a default by
Borrower under any lease or other agreement of the Borrower with such third
party promptly after the receipt thereof by such Secured Creditor; provided
that the failure of either Secured Creditor to send any such notices or provide
such copy, as the case may be, shall not create a cause of action against such
Secured Creditor or create any claim against it or effect the relative rights,
duties or priorities established by this Subordination Agreement.  The failure
by either Secured Creditor to send a copy of any such notice to the other shall
not affect the validity of such notice as against Borrower. Borrower hereby
authorizes and consents to each Secured Creditor sending to the other such
notices or any other information with respect thereto.

14. All notices, requests and other communications pursuant to this
Subordination Agreement shall be in writing, either by letter (delivered by hand
or sent certified mail, return receipt requested) or facsimile (sending
confirmed) or by overnight delivery addressed to the Bank at PNC Business
Credit, 340 Madison Avenue, 11th Floor, New York, New York  10173, Attention:
Brian Conway, Vice President, or to Borrower at its principal place of business
as described in the Loan Agreement, Attention: Chief Executive Officer and Chief
Financial Officer, or to the Junior Creditor, Attention: William H. Milmoe at
its address stated above, or such other address as any party may give notice to
the others as herein provided.  Any notice, request or communication hereunder
shall be deemed to have been given two days after being deposited in the mails,
postage prepaid, or in the case of hand delivery, when delivered, or in the case
of overnight delivery, the next Business Day, or in the case of telegraphic
notice, upon delivery to the telegraph company, addressed as aforesaid except
where otherwise provided in Subordination Agreement, provided, however, that
notice of a change of address, as hereinabove provided, shall be deemed to have
been given only when actually received by the party to which it is addressed.
 
 
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15. This Subordination Agreement is solely for the benefit of the Bank, the
Lenders and the Junior Creditor and their respective successors, designees or
assigns.

16. All capitalized terms not specifically defined herein shall have the meaning
ascribed to them in the Loan Agreement.

17. THE BANK, JUNIOR CREDITOR AND THE BORROWER EXPRESSLY WAIVE TO THE EXTENT
PERMITTED BY APPLICABLE LAW THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SUBORDINATION AGREEMENT OR
THE ACTIONS OF THE BANK OR THE JUNIOR CREDITOR IN THE ENFORCEMENT HEREOF.  THIS
WAIVER IS MADE KNOWINGLY AND IN CONSIDERATION OF THE LOANS BEING MADE BY THE
BANK TO THE BORROWER.

18. THIS SUBORDINATION AGREEMENT HAS BEEN EXECUTED AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES
HERETO CONSENT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN
NEW YORK IN CONNECTION WITH THE MATTER ARISING HEREUNDER.

(Next Page is the Signature Page)
 
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          IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be executed this 27th  day of June, 2012.
 
 
 
 
CD FINANCIAL, LLC
   As holder of the Subordinated Liquidity Note and the    Subordinated
Securities Note          
By:
/s/ William H. Milmoe    
Name: William H. Milmoe
 
Title:  Manager

 
 

 
PNC BANK, NATIONAL ASSOCIATION
   
 
   
By:
/s Brian Conway    
Name:  BRIAN CONWAY
 
Title:  Vice President

 
The Borrower acknowledges and agrees to the terms of this Subordination
Agreement on this 27th  day of June, 2012.
 
 
INTEGRATED BIOPHARMA.INC.
         
By:
/s/ E. Gerald Kay    
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer

 
 

 
InB:MANHATTAN DRUG COMPANY, INC.
   
 
   
By:
/s/ Riva Sheppard    
Name:  RIVA SHEPPARD
 
Title:  President and Chief Executive Officer

 
 

 
AGROLABS, INC.
         
By:
/s/ Christina Kay    
Name:  CHRISTINA KAY
 
Title:  President and Chief Executive Officer

 
 

 
IHT HEALTH PRODUCTS, INC.
         
By:
/s/ Christina Kay    
Name:  CHRISTINA KAY
 
Title:  President and Chief Executive Officer

 
 
 
VITAMIN FACTORY, INC.
         
By:
/s/ E. Gerald Kay    
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer

 
 

  IHT PROPERTIES CORP.    
 
   
By:
/s/ Riva Sheppard    
Name:  RIVA SHEPPARD
 
Title:  President and Chief Executive Officer

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