EXHIBIT 10.138
INTERCREDITOR AND SUBORDINATION AGREEMENT
     THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Agreement”), made as
of the 20th day of April, 2006, by and between THE CIT GROUP/BUSINESS CREDIT,
INC., a New York corporation (“CITBC”), individually and in its capacity as
agent (in such capacity, the “Agent”) for the Senior Lenders under the Senior
Lenders Loan Agreement, as hereinafter further defined; and LJH, LTD., a Texas
limited partnership (herein referred to as the “Subordinated Lender”, as
hereinafter further defined);
WITNESSETH:
     WHEREAS, Aircraft Interior Design, Inc., a Florida corporation, Brice
Manufacturing Company, Inc., a California corporation, TIMCO Aviation Services,
Inc., a Delaware corporation, TIMCO Engine Center, Inc., a Delaware corporation,
TIMCO Engineered Systems, Inc., a Delaware corporation, and Triad International
Maintenance Corporation, a Delaware corporation (collectively, the “Borrowers”
and, individually, a “Borrower”); and Aviation Sales Distribution Services
Company, Aviation Sales Leasing Company, Aviation Sales Property Management
Corp., AVS/M-1, Inc., AVS/M-2, Inc., AVS/M-3, Inc. and Whitehall Corporation,
each a Delaware corporation, AVS/CAI, Inc., a Florida corporation, AVSRE, L.P.,
a Delaware limited partnership, Hydroscience, Inc., a Texas corporation, and
TMAS/ASI, Inc., an Arkansas corporation, (collectively, the “Guarantors” and,
individually, a “Guarantor” and, together with the Borrowers, collectively, the
“Credit Parties” and, individually, a “Credit Party”), CITBC and other lenders
and financial institutions (the “Senior Lenders”, as hereinafter further
defined), and the Agent have each entered into a certain Financing Agreement,
dated April 4, 2005, as amended (such Financing Agreement, as amended, modified,
supplemented or restated from time to time, being herein called collectively the
“Senior Lenders Loan Agreement” as hereinafter further defined), pursuant to
which the Senior Lenders have agreed to make or extend to the Borrowers a
$30.0 million revolving credit loan evidenced by the Borrowers’ promissory note,
dated of even date herewith, in the aggregate original principal amount of up to
$30.0 million (the “Senior Lenders Revolving Note”), upon the term and subject
to the conditions set forth therein (the Senior Lenders Loan Agreement, the
Senior Lenders Revolving Note, and all related loan and collateral documentation
as in effect from time to time, being herein referred to as the “Senior Lenders
Documents”);
     WHEREAS, the Credit Parties and the Subordinated Lender (as successor by
assignment from Fortress Credit Opportunities I LP, Monroe Capital Advisors LLC
and Monroe Investments, Inc.) have each entered into a certain Amended and
Restated Financing Agreement, dated as of April 8, 2005, as amended by the First
Amendment thereto, dated September 28, 2005, and by the Second Amendment
thereto, dated as of April 10, 2006 (such Amended and Restated Financing
Agreement, as amended, modified, restated or supplemented from time to time in
accordance with the terms hereof, being herein called the “Subordinated Lender
Loan Agreement”), pursuant to which the Subordinated Lender has (a) made a
$8,190,294.32 term loan to the Borrowers (the “Subordinated Lender Term Loan
A-1”) evidenced by the Borrowers’ Amended and Restated Term Note A-1, dated
April 10, 2006 (the “Subordinated Lender Term Note A-1”), (b) made a
$7,166,489.67 term loan to the Borrowers (the “Subordinated Lender Term Loan
A-2”) evidenced by the Borrowers’ Amended and Restated Term Note A-1, dated

 

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April 10, 2006 (the “Subordinated Lender Term Note A-2”), (c) made $2,956,471.09
term loan to the Borrowers (the “Subordinated Lender Term Loan B”) evidenced by
the Borrowers’ Amended and Restated Term Note A-1, dated April 10, 2006 (the
“Subordinated Lender Term Note B”), and (d) agreed to make a $6.0 million term
loan to the Borrowers (the “Subordinated Lender Term Loan C”) evidenced by the
Borrowers’ Term Note C, dated April 10, 2006 (the “Subordinated Lender Term Note
C”), upon the terms and subject to the conditions set forth therein (the
Subordinated Lender Loan Agreement, the Subordinated Lender Term Note A-1, the
Subordinated Lender Term Note A-2, the Subordinated Lender Term Note B, the
Subordinated Lender Term Note C, and all related loan and collateral
documentation as in effect from time to time, being herein referred to as the
“Subordinated Lender Documents”);
     WHEREAS, to induce the Subordinated Lender and the Senior Lenders to enter
into the Subordinated Lender Documents and the Senior Lenders Documents,
respectively, and to make the loans and extend the credit contemplated thereby,
the Guarantors have executed guaranties as part of the Subordinated Lender
Documents and the Senior Lenders Documents thereby guaranteeing all of the
indebtedness and other obligations owing by the Borrowers to the Subordinated
Lender and the Agent and the Senior Lenders, respectively, thereunder;
     WHEREAS, pursuant to the Subordinated Lender Documents and the Senior
Lenders Documents, the Credit Parties have granted Liens in substantially all of
their property to the Subordinated Lender and the Agent for the benefit of the
Senior Lenders, respectively; and
     WHEREAS, the Subordinated Lender and the Agent wish to enter into this
Agreement for the purpose of establishing the priorities of their respective
Liens (as hereinafter defined) in the property of the Credit Parties, and for
the purpose of setting forth certain other agreements between them with respect
to their respective agreements with the Credit Parties;
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
     1. Certain Definitions. All capitalized terms used in this Agreement
without definition shall have the meanings ascribed to such terms in the Senior
Lenders Loan Agreement. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the following meanings for the
purposes of this Agreement:
     “Blockage Notice” shall mean a written notice from the Agent to the
Subordinated Lender that a Senior Lenders Event of Default has occurred and is
continuing and specifying such Senior Lenders Event of Default.
     “Credit Parties” shall mean the Borrowers and the Guarantors and “Credit
Party” shall mean any of them.
     “Collateral” shall mean all of the assets, properties and interests in
property of the Credit Parties, whether now owned or hereafter acquired or
arising, wherever located.

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     “Default” shall mean an event or condition the occurrence of which would,
with the giving of notice or the passage of time or both, become a Senior
Lenders Event of Default.
     “Deposit Account Collateral” shall mean that portion of the Collateral
consisting of “deposit accounts” (as such term is defined in the UCC) and the
proceeds thereof.
     “Documents” shall mean the Subordinated Lender Documents and the Senior
Lenders Documents or any or all of them as the context may require.
     “Enforcement Action” shall mean the commencement by the Agent of a
liquidation or foreclosure of the Collateral.
     “Exercise Notice” shall have the meaning ascribed to such term in
Section 10.1 of this Agreement.
     “Insolvency Proceeding” shall mean any insolvency or bankruptcy case or
proceeding or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith.
     “Insurance and Condemnation Proceeds” shall mean proceeds or payments
payable to the Credit Parties with respect to any loss, casualty or damage to,
or condemnation of, the Collateral or any part thereof.
     “Landlord Agreement” shall mean the Landlord’s Agreement executed by each
landlord of a facility or warehouse leased to a Credit Party constituting one of
the Documents pursuant to which such landlord grants certain assurances to each
Lender with respect to its respective Lien in such Credit Party’s leasehold
estate in such facility or warehouse and the Collateral located thereon.
     “Lenders” shall mean the Subordinated Lender, on the one hand, and the
Agent for the benefit of the Senior Lenders, on the other hand, and “Lender”
shall mean either of them.
     “Liens” shall mean the liens and security interests granted by the Credit
Parties or any of them to each Lender under the Documents and a “Lien” shall
refer to the liens and security interests granted by the Credit Parties or any
of them to one of the Lenders.
     “Obligations” shall mean the Senior Lenders Obligations and the
Subordinated Lender Obligations or any or all of them as the context may
require.
     “Option Period” shall have the meaning ascribed to such term in
Section 10.1 of this Agreement.
     “Option Triggering Event” shall have the meaning ascribed to such term in
Section 10.1 of this Agreement.

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     “Permitted Junior Securities” shall have the meaning ascribed to such term
in Section 19.3 of this Agreement.
     “Person” shall mean an individual, partnership, corporation, joint stock
company, land trust, business or unincorporated organization, or a government or
agency or political subdivision thereof.
     “Possessory Collateral” shall mean any Collateral in which the Agent’s Lien
is perfected by the Agent’s taking of possession of such Collateral pursuant to
the provisions of the UCC and other applicable law.
     “Second Amendment to LJH Financing Agreement” shall mean that certain
Second Amendment to Amended and Restated Financing Agreement, dated as of
April 10, 2006, among the Credit Parties and Subordinated Lender.
     “Senior Lenders” shall mean CITBC and the other lenders and financial
institutions that are parties to the Senior Lenders Loan Agreement from time to
time, and any other lender or lenders refinancing or refunding all or any
portion of the Senior Lenders Obligations.
     “Senior Lenders Early Termination Fee” shall mean the “Early Termination
Fee” as defined in the Fee Agreement.
     “Senior Lenders Event of Default” shall mean an “Event of Default” as
defined in the Senior Lenders Loan Agreement as in effect on the date of this
Agreement.
     “Senior Lenders Loan Agreement” shall mean the Financing Agreement, dated
April 4, 2005, among the Credit Parties, the Agent and the Senior Lenders that
are parties thereto, as in effect on the date hereof, and as the same may be
amended, restated, supplemented or otherwise modified from time to time, and
including any agreement with the same or other lenders extending the maturity
of, or restructuring, refinancing or replacing all or any portion of the
indebtedness and obligations owing to the Agent and the Senior Lenders
thereunder.
     “Senior Lenders Obligations” shall mean all indebtedness, liabilities and
obligations of any and every kind now or hereafter owing by the Credit Parties
to the Agent and the Senior Lenders under the Senior Lenders Documents.
     “Subordinated Lender” shall mean LJH, Ltd., a Texas limited partnership,
and its successors and assigns, and any subsequent holder or holders of any of
the Subordinated Lender Obligations.
     “Subordinated Lender Obligations” shall mean all indebtedness, liabilities
and obligations of any and every kind now or hereafter owing by the Credit
Parties to the Subordinated Lender under the Subordinated Lender Documents.
     “Term Loan B Collateral” shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.

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     “Term Loan C Exchange” means the exchange of the portion of the
Subordinated Lender Obligations consisting of the Subordinated Lender Term Loan
C for common stock issued by Parent, whether accomplished by exchange,
conversion, exercise of rights or otherwise.
     “Term Loan C Obligations” means the portion of the Subordinated Lender
Obligations evidenced by the Subordinated Lender Term Note C.
     “Term Loan Exchange” means the exchange of the portion of the Subordinated
Lender Obligations for any common stock, partnership interests, limited
liability company membership interests, or other equity securities or equity
interests of any Credit Party, whether accomplished by exchange, conversion,
exercise of rights or otherwise.
     “UCC” shall mean the Uniform Commercial Code as in effect from time to time
in the State of North Carolina.
     2. Lien Subordination.
          2.1 Collateral. The Lenders agree that at all times, whether before,
after or during the pendency of any Insolvency Proceeding, and notwithstanding
the priorities which would ordinarily result from the order of execution or
granting of any Lien in the Collateral or the order of filing of any financing
statements or recording of any deeds of trust, mortgages or any other security
documents now or hereafter constituting part of the Subordinated Lender
Documents or the Senior Lenders Documents with respect to the Collateral, or any
provision of the UCC or any other applicable law to the contrary, the Liens of
the Agent in the Collateral arising pursuant to the Senior Lenders Documents as
security for all of the Senior Lenders Obligations shall be at all times first
priority Liens in the Collateral, superior to the Liens of the Subordinated
Lender in the Collateral arising pursuant to the Subordinated Lender Documents,
and the Liens of the Subordinated Lender in the Collateral shall be junior and
subordinate to the Liens of the Agent therein as security for all of the Senior
Lenders Obligations. All proceeds of the Collateral shall be applied to the
Obligations in accordance with the provisions of Section 5 hereof.
Notwithstanding the foregoing provisions of this Section 2.1, it is hereby
agreed that (a) any Collateral (herein, “Term Loan B Collateral”) purchased by
any Borrower prior to the date of the Second Amendment to LJH Financing
Agreement with the proceeds of the Term Loan B (as defined in the Subordinated
Lender Loan Agreement), shall be at all times subject to a first priority Lien
in favor of Subordinated Lender, superior to the Liens of the Senior Lenders in
such Term Loan B Collateral arising pursuant to the Senior Lenders Documents,
and (b) the Liens of the Senior Lenders in the Term Loan B Collateral shall be
junior and subordinate to the Liens of the Subordinated Lender therein as
security for all of the Subordinated Lender Obligations.
          2.2 No Waiver of Subordination Provisions.
          (a) No right of the Agent to enforce the provisions of this Agreement
shall at any time or in any way be prejudiced or impaired by any act or failure
to act on the part of the Credit Parties or by any act or failure to act by the
Agent or the Senior Lenders, or by any non-

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compliance by the Credit Parties with the terms, provisions and covenants of any
of the Subordinated Lender Documents, regardless of any knowledge thereof the
Agent or any Senior Lender may have or be otherwise charged with.
          (b) No right of the Subordinated Lender to enforce the provisions of
this Agreement as to the Term Loan B Collateral shall at any time or in any way
be prejudiced or impaired by any act or failure to act on the part of the Credit
Parties or by any act or failure to act by the Subordinated Lender, or by any
non-compliance by the Credit Parties with the terms, provisions and covenants of
any of the Senior Lenders Documents, regardless of any knowledge thereof the
Subordinated Lender may have or be otherwise charged with.
          (c) Without in any way limiting the generality of subsection (a) of
this Section 2.2, the Lenders may, at any time and from time to time, without
the consent of or notice to the other Lender, without incurring responsibility
to the other Lender and without impairing or releasing the lien subordination
provided hereunder, do any one or more of the following:
     (i) Amend, modify, waive or consent to any term or provision set forth in
any of the Documents;
     (ii) Change the manner, place or terms of payment or extend the time of
payment of, or refund or refinance, or renew or alter, any of the Obligations;
     (iii) Sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing all or any portion of the Obligations in which
such Lender has a first priority;
     (iv) Release any Person liable in any manner for the payment or collection
of any of the Obligations owed to such Lender;
     (v) Exercise or refrain from exercising any rights against the Credit
Parties or any other Person; and
     (vi) Take any other action which might otherwise constitute a defense
available to, or a discharge of, such Lender in respect of its lien
subordination as provided pursuant to the terms of this Agreement.
          (c) The provisions of this Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time payment of any Obligations is
rescinded or must otherwise be returned by a Lender upon the insolvency,
bankruptcy or reorganization of a Credit Party, or otherwise, all as though such
payment had not been made.
     3. Appointment of the Agent as Collateral Agent. The Subordinated Lender
hereby appoints and designates the Agent, and the Agent agrees to act, as the
Subordinated Lender’s collateral agent within the meaning of the term “secured
party” under Section 9-102(75) of the UCC for the sole and limited purpose of
perfecting the Liens granted to the Subordinated Lender in any Deposit Account
Collateral to the extent that the Agent is a party to, and the Subordinated

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Lender is not a party to, a control agreement contemplated by
Section 9-105(a)(2) of the UCC perfecting the Liens of the Agent in such Deposit
Account Collateral, and in any Possessory Collateral. In connection with the
Agent’s acting as such collateral agent for the Subordinated Lender hereunder,
the parties further agree as follows:
          3.1 No Liability of the Agent. All Liens held by the Agent in the
Possessory Collateral and the Deposit Account Collateral in its capacity as
collateral agent for the Subordinated Lender shall be subject to, and any
proceeds of the Possessory Collateral and the Deposit Account Collateral shall
be distributed to the Lenders in accordance with, the provisions of this
Agreement. In its capacity as collateral agent, the Agent shall have no duties
or responsibilities of any kind or nature and it shall not be liable to the
Subordinated Lender for any action taken or omitted to be taken under or in
connection with this Agreement or any of the Documents.
          3.2 No Warranties or Representations. Except as otherwise specifically
set forth in this Agreement, the Agent does not make to the Subordinated Lender
any express or implied warranty, representation or guarantee with respect to the
Obligations, the Collateral, the Documents or any Credit Party. The Agent shall
not be responsible to the Subordinated Lender for (i) the execution, validity,
genuineness, effectiveness or enforceability of, any of the Documents; (ii) the
validity, genuineness, enforceability, collectibility, value, sufficiency or
existence of any Collateral, or the perfection or priority of any Lien therein;
or (iii) the assets, liabilities, financial condition, results of operations,
business, creditworthiness or legal status of any Credit Party.
          3.3 Indemnity. The Subordinated Lender agrees to indemnify and defend
the Agent (to the extent not reimbursed by the Credit Parties, but without
limiting the indemnification obligations of the Credit Parties under the
Documents), and to hold the Agent harmless from and against, any and all claims,
demands, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses or disbursements of any kind or
nature whatsoever (including reasonable attorneys’ fees and expenses) which may
be imposed on, incurred by or asserted or initiated against the Agent in any way
arising out of its acting as collateral agent for the Subordinated Lender with
respect to any of the Possessory Collateral and the Deposit Account Collateral
(and not arising out of the Agent’s acting in any other capacity), provided that
the Subordinated Lender shall not be liable to the Agent for any of the
foregoing to the extent that they result solely from the willful misconduct or
gross negligence of the Agent.
          3.4 Exclusive Control Agreement Instructions of Subordinated Lender.
After all of the Senior Lenders Obligations have been paid and satisfied in full
and the Agent’s and the Senior Lenders’ commitments for the incurring of
additional Senior Lenders Obligations have expired or been irrevocably
terminated in writing, the Agent shall (a) send to each bank that is a party to
any control agreement among the Agent, the Subordinated Lender and such bank, a
notice or other instruction as permitted by such control agreement that the bank
is authorized to honor instructions originated by the Subordinated Lender
directing disposition of the funds in such deposit account, and (b) execute an
amendment to such control agreement, in form and substance satisfactory to the
Agent, the Subordinated Lender and such bank, as may be reasonably requested by
the Subordinated Lender to give effect to such notice or instruction.

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     4. Notices of Default. The Agent shall give the Subordinated Lender notice
of default, termination, demand, acceleration, exercise of remedies and any
other notice which is of a like nature or required to be given under the Senior
Lenders Documents or by law, and the Subordinated Lender shall give the Agent
notice of any default, termination, demand, acceleration, exercise of remedies
and any other notice which is of a like nature or required to be given under the
Subordinated Lender Documents or by law, in each case concurrently with the
giving of such notice to the Borrowers or any of the other Credit Parties;
provided, however, that no failure of either party to give such notice shall
(a) affect the validity of such notice as to the Credit Parties or affect the
relative priorities of the Liens established in Section 2 hereof or (b) create
the basis for any liability of one Lender to the other Lender or the Agent to
the Subordinated Lender.
     5. Application of Proceeds of Collateral. All proceeds of the Collateral
received by or for the account of the Lenders (whether by sale, casualty,
condemnation or other disposition of the Collateral), shall be distributed to
the Lenders and applied as follows:
     First, with respect to all Collateral other than Term Loan B Collateral, to
the Agent for application to all of the Senior Lenders Obligations;
     Second, with respect to all Term Loan B Collateral, to the Subordinated
Lender for application to the Subordinated Lender Obligations;
     Third, with respect to all Collateral other than Term Loan B Collateral,
after all of the Senior Lenders Obligations have been paid and satisfied in full
and the commitments of the Agent and the Senior Lenders under the Senior Lenders
Documents have expired or been irrevocably terminated in writing, to the
Subordinated Lender for application to the Subordinated Lender Obligations; and
     Fourth, with respect to all Term Loan B Collateral after all of the
Subordinated Lender Obligations have been paid and satisfied in full, to the
Agent for application to the Senior Lenders Obligations.
     6. Enforcement of Liens; Release of Liens.
          6.1 Enforcement of Liens in Favor of Senior Lenders. The Subordinated
Lender agrees that, except as expressly provided in this Agreement, unless and
until all of the Senior Lenders Obligations have been paid and satisfied in full
and the and the commitments of the Agent and the Senior Lenders under the Senior
Lenders Documents have expired or been irrevocably terminated in writing,
without the prior written consent of the Agent, the Subordinated Lender will not
take any action with respect to the Collateral other than the Term Loan B
Collateral, whether by judicial or non-judicial foreclosure, notification to
account debtors or other obligors on the Collateral other than the Term Loan B
Collateral, taking or obtaining possession of any of the Collateral other than
the Term Loan B Collateral, or otherwise realizing upon the whole or any part of
the Collateral other than the Term Loan B Collateral.

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          6.2 Enforcement of Liens in Favor of Subordinated Lender. The Senior
Lenders agree that, unless and until all of the Subordinated Lender Obligations
have been paid and satisfied in full, without the prior written consent of the
Subordinated Lender, neither the Agent nor the Senior Lenders will take any
action with respect to the Term Loan B Collateral, whether by judicial or
non-judicial foreclosure, taking or obtaining possession of any of the Term Loan
B Collateral, or otherwise realizing upon the whole or any part of the Term Loan
B Collateral.
          6.3 Release of Liens by Subordinated Lender. If the Agent or the
Senior Lenders shall determine, in connection with any sale of Collateral other
than the Term Loan B Collateral, that the release of the lien of any
Subordinated Lender Document on such Collateral in connection with such sale is
necessary or advisable, the Subordinated Lender shall execute such release
documents and instruments and shall take such further actions as the Agent or
the Senior Lenders shall request. If the Subordinated Lender fails or refuses to
take the action requested by the Agent or the Senior Lenders within ten
(10) days of the receipt of a written request given in accordance with
Section 11 below, the Subordinated Lender hereby irrevocably constitutes and
appoints the Agent and any officer of Agent, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Subordinated Lender and in the name of the
Subordinated Lender or in the Agent’s own name, from time to time in the Agent’s
discretion, for the purpose of carrying out the terms of this section, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this section, including, without limitation, any financing statements,
endorsements, assignments or other instruments of transfer or release. The
Subordinated Lender hereby ratifies all that said attorneys shall lawfully do or
cause to be done pursuant to the power of attorney granted in this paragraph.
          6.4 Release of Liens by Agent on behalf of Senior Lenders. If the
Subordinated Lender shall determine, in connection with any sale of the Term
Loan B Collateral, that the release of the lien of any Senior Lenders Document
on such Term Loan B Collateral in connection with such sale is necessary or
advisable, the Agent on behalf of the Senior Lenders shall execute such release
documents and instruments and shall take such further actions as the
Subordinated Lender shall request. If the Agent fails or refuses to take the
action requested by the Subordinated Lender within ten (10) days of the receipt
of a written request given in accordance with Section 11 below, the Senior
Lenders each hereby irrevocably constitutes and appoints the Subordinated Lender
and any officer of Subordinated Lender, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Senior Lender and in the name of the Agent or such
Senior Lender or in the Subordinated Lender’s own name, from time to time in the
Subordinated Lender’s discretion, for the purpose of carrying out the terms of
this section, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this section, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer or
release. The Agent and each Senior Lender hereby ratifies all that said
attorneys shall lawfully do or cause to be done pursuant to the power of
attorney granted in this paragraph.

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     7. Debt Subordination and Permitted Payments.
          7.1 Subordination of Subordinated Lender Obligations. The Subordinated
Lender hereby agrees that the Subordinated Lender Obligations are subordinate,
and the payment thereof, directly or indirectly, by any means whatsoever, is
deferred, to the prior payment in full of all of the Senior Lenders Obligations,
to the extent and in the manner set forth in this Agreement.
          7.2 Prohibited Collection Actions. Except as set forth in Section 7.5
below, unless and until the Senior Lenders Obligations shall have been fully
paid and the Senior Lenders Documents and all outstanding commitments of each
Senior Lender for the incurring of additional Senior Lenders Obligations shall
have expired or been irrevocably terminated in writing, the Subordinated Lender
will not, without the prior written consent of the Senior Lenders, which consent
may be granted or withheld in the Senior Lenders’ sole discretion:
          (a) Accelerate (except in the event of an Insolvency Proceeding), ask,
demand, sue for, take or receive from or on behalf of any Credit Party, by
setoff or in any other manner, the whole or any part of any monies which may now
or hereafter be owing to the Subordinated Lender on the Subordinated Lender
Obligations; or
          (b) Except as expressly provided in this Agreement, initiate or
participate with others in any suit, action or proceeding against any Credit
Party, or otherwise take action against any Credit Party or any of its assets,
to enforce payment of or to collect the whole or any part of the Subordinated
Lender Obligations; or
          (c) Commence any bankruptcy, arrangement, reorganization or any other
Insolvency Proceeding against any Credit Party; or
          (d) Ask, demand, take or receive any additional security for any of
the Subordinated Lender Obligations other than that granted pursuant to the
Subordinated Lender Documents other than additional security provided to the
Agent and the Senior Lenders;
provided, however, nothing herein shall be deemed to prohibit the Subordinated
Lender from (1) filing a proof of claim in any Insolvency Proceeding of a Credit
Party or (2) voting any claim or otherwise participating in any Insolvency
Proceeding involving a Credit Party, in each case subject to the other
provisions of this Agreement.
          7.3 Incurring of Additional Senior Lender Obligations. The provisions
of this Agreement shall apply with respect to all of the Senior Lenders
Obligations, regardless of whether the Senior Lenders Obligations have already
been incurred or may be incurred in the future by future advances or other
financial accommodations made or extended by one or more Senior Lenders to a
Credit Party pursuant to the Senior Lenders Documents.
          7.4 Actions in Violation of Agreement. If the Subordinated Lender in
violation of this Agreement shall commence, prosecute or participate in any
suit, action or proceeding against any Credit Party or shall attempt to enforce,
foreclose or realize upon any

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security for the Subordinated Lender Obligations, including, without limitation,
the Collateral, such Credit Party, Agent or any Senior Lender may interpose as a
defense or plea the making of this Agreement and Agent or any Senior Lender may
intervene and interpose such defense in its name or in the name of such Credit
Party, and such Credit Party, Agent or such Senior Lender may by virtue of this
Agreement restrain the enforcement thereof in the name of such Credit Party,
Agent or such Senior Lender.
          7.5 Permitted Payments. Notwithstanding the provisions of Section 7.2
hereof, until the giving by the Agent of a Blockage Notice to the Subordinated
Lender, the Borrowers may pay to the Subordinated Lender, and the Subordinated
Lender may demand, accept and retain from the Borrowers, the following permitted
payments on the Subordinated Lender Obligations and no other payments:
          (a) periodic payments of non-cash interest accruing on the
Subordinated Lender Obligations at the interest rates applicable thereto (which
rate may include the “Default Rate of Interest” as such term is defined in the
Subordinated Lender Loan Agreement), as and when the same become due under the
terms of the Subordinated Lender Documents, which shall be paid in kind and
added to the outstanding principal amount of the notes evidencing the
Subordinated Lender Obligations but which shall not be payable in cash (which,
for the avoidance of doubt, may be made irrespective of whether a Senior Lenders
Event of Default shall exist or whether a Blockage Notice shall have been given
by the Agent);
          (b) periodic payments of cash interest on the Subordinated Lender
Obligations other than the Term Loan C Obligations at the interest rates
applicable thereto (which rate may include the “Default Rate of Interest” as
such term is defined in the Subordinated Lender Loan Agreement) made at any time
after the Agent shall have received the Credit Parties’ audited Consolidated
Balance Sheet, statements of profit and loss, cash flow and reconciliation of
surplus for the Fiscal Year ending December 31, 2006, together with the
officer’s certificate with respect thereto, each as required to be delivered to
the Agent pursuant to Section 7.8 of the Senior Lenders Loan Agreement; provided
that each of the following conditions shall have first been satisfied with
respect to each such payment of cash interest: (1) both immediately before, and
immediately after giving effect to such cash interest payment, no Default and no
Senior Lenders Event of Default has occurred and is then continuing or will
immediately result therefrom; and (2) the Subordinated Lender shall not have
received a Blockage Notice from the Agent. Upon the delivery by the Subordinated
Lender of a Blockage Notice to the Subordinated Lender, the subordination
provisions of Section 7.2 shall govern and control, and no payments of cash
interest on the Subordinated Lender Documents (other than as permitted by
Section 7.5(a) hereof by a non-cash payment in kind) and no payments in cash of
fees, costs, expenses, indemnification amounts and other amounts (other than
interest) (other than as permitted by Section 7.5(c) hereof by a non-cash
payment in kind) shall be made by the Borrowers, or demanded, accepted or
retained by the Subordinated Lender, until the earlier to occur of the
following:
          (i) The Senior Lenders Event of Default giving rise to such Blockage
Notice shall have been cured to the reasonable satisfaction of the Agent and the
Senior Lenders, or waived in writing or shall have ceased to exist, and

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the Agent on behalf of the Senior Lenders shall have delivered to the
Subordinated Lender a rescission of the Blockage Notice; or
     (ii) All of the Senior Lenders Obligations shall have been paid and
satisfied in full and the Agent and the Senior Lenders have no further
obligation for the incurring of additional Senior Lenders Obligations;
          (c) non-cash payment of fees, costs, expenses, indemnification amounts
and other amounts (other than interest and principal) payable by a Credit Party
pursuant to the Subordinated Lender Documents, payments of non-cash interest
accruing on the Subordinated Lender Obligations, which shall be paid in kind and
added to the outstanding principal amount of the Subordinated Lender Term Note B
and which shall not be payable in cash (which, for the avoidance of doubt, may
be made irrespective of whether a Senior Lenders Event of Default shall exist or
whether a Blockage Notice shall have been given by the Agent); provided,
however, the foregoing prohibition of the payment of fees, costs and expenses
shall not apply to the payment in cash of the reasonable fees, costs and
expenses (including reasonable attorneys’ fees and expenses) incurred by the
Subordinated Lender in connection with the Second Amendment to LJH Financing
Agreement and the assignment and assumption of the Subordinated Loan Documents
by Subordinated Lender.
     8. Exercise of Remedies. In the event of commencement of foreclosure under
the Senior Lenders Documents, the following provisions shall apply:
          8.1 Collateral. The Agent shall have the exclusive right to sell,
transfer or otherwise dispose of the Collateral (other than the Term Loan B
Collateral) or exercise any other right or remedy with respect to such
Collateral as provided in the Senior Lenders Documents or by applicable law in
the manner deemed appropriate by the Agent without regard to the Subordinated
Lender’s Liens therein, and the Subordinated Lender will not hinder the Agent’s
actions in enforcing its remedies with respect to such Collateral.
          8.2 No Liability of the Agent, Senior Lenders or Subordinated Lender.
          (a) The Agent and the Senior Lenders shall have no liability to the
Subordinated Lender for, and the Subordinated Lender waives any claim which it
may have at any time against the Agent and the Senior Lenders, arising out of or
related to any actions which the Agent or the Senior Lenders take or omit to
take with respect to the Collateral (other than the Term Loan B Collateral) or
the Senior Lenders Obligations secured thereby, except for such actions taken or
omitted to be taken by the Agent or the Senior Lenders in violation of this
Agreement or through willful misconduct or gross negligence of the Agent, any
Senior Lender or their respective agents or employees. Without limiting the
generality of the foregoing, the Agent and the Senior Lenders may, without
regard to the existence of any rights the Subordinated Lender may now or
hereafter have in and to any of the Collateral (other than the Term Loan B
Collateral and other than the rights of the Subordinated Lender to notices under
this Agreement or as may be required by applicable law): (a) compromise, settle,
adjust and in general deal in any manner with the Collateral, other than the
Term Loan B Collateral, including, without limitation, the account debtors and
other obligors indebted thereon, as the Agent may deem

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appropriate, upon such terms and conditions (including the length of time
incidental thereto) as the Agent may deem appropriate, (b) engage third parties
to assist the Agent and the Senior Lenders in the effectuation of the
liquidation, collection or foreclosure of the Collateral, other than the Term
Loan B Collateral, and (c) incur such reasonable out-of-pocket costs and
expenses incidental thereto as the Agent and/or the Senior Lenders may deem
appropriate, including, without limitation, reasonable fees and disbursements of
counsel to the Agent and the Senior Lenders and any other third party
professionals engaged by any of them. The Subordinated Lender irrevocably waives
any right it may have, whether at law or in equity, to assert any claim or bring
any action, suit or proceeding against the Agent or the Senior Lenders or to
raise any affirmative defense, claim or counterclaim in any action brought
against it by the Agent or the Senior Lenders, the effect of which is to contest
the commercial reasonableness of the decisions or actions of the Agent or the
Senior Lenders (whether made or taken alone or through any of its agents or
representatives) with respect to the Collateral.
          (b) The Subordinated Lender shall have no liability to the Agent and
the Senior Lenders for, and the Agent and the Senior Lenders waive any claim
which they may have at any time against the Subordinated Lender, arising out of
or related to any actions which the Subordinated Lender take or omit to take
with respect to the Term Loan B Collateral or the Subordinated Lender
Obligations secured thereby, except for such actions taken or omitted to be
taken by the Subordinated Lender in violation of this Agreement or arising from
through willful misconduct or gross negligence of the Subordinated Lender or any
of its agents or employees. Without limiting the generality of the foregoing,
the Subordinated Lender may, without regard to the existence of any rights the
Agent and the Senior Lenders may now or hereafter have in and to any of the Term
Loan B Collateral (other than the rights of the Agent and the Senior Lenders to
notices under this Agreement or as may be required by applicable law):
(a) compromise, settle, adjust and in general deal in any manner with the Term
Loan B Collateral, including, without limitation, the account debtors and other
obligors indebted thereon, as the Agent may deem appropriate, upon such terms
and conditions (including the length of time incidental thereto) as the Agent
may deem appropriate, (b) engage third parties to assist the Subordinated Lender
in the effectuation of the liquidation, collection or foreclosure of the Term
Loan B Collateral, and (c) incur such reasonable out-of-pocket costs and
expenses incidental thereto as the Subordinated Lender may deem appropriate,
including, without limitation, reasonable fees and disbursements of counsel to
the Subordinated Lender and any other third party professionals engaged by any
of them. The Agent and the Senior Lenders irrevocably waive any right any of
them may have, whether at law or in equity, to assert any claim or bring any
action, suit or proceeding against the Subordinated Lender or to raise any
affirmative defense, claim or counterclaim in any action brought against it by
the Subordinated Lender, the effect of which is to contest the commercial
reasonableness of the decisions or actions of the Subordinated Lender (whether
made or taken alone or through any of its agents or representatives) with
respect to the Term Loan B Collateral.
          8.3 Preservation of Liens. Nothing contained in this Agreement shall
be deemed to prohibit the Subordinated Lender from intervening or participating
in any judicial proceeding to the extent necessary to establish, protect or
preserve its Liens in the Collateral, so long as such intervention or
participation does not interfere with the foregoing rights of the Agent and the
Senior Lenders, or from bidding or being the buyer of any Collateral at any
private or public foreclosure sale conducted by the Agent under the Senior
Lenders Documents.

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     9. Receipt of Monies.
          9.1 By the Subordinated Lender. The Subordinated Lender agrees that
should it receive contrary to the provisions of this Agreement any monies from
the sale, liquidation, casualty or other disposition of or as a result of its
Lien in the Collateral (other than the Term Loan B Collateral), it will (unless
otherwise restricted by law) hold the same for the Senior Lenders and promptly
pay over the same to the Agent for application to the Senior Lenders Obligations
in accordance with the provisions of Section 5 of this Agreement.
          9.2 By the Agent. The Agent agrees that should it receive contrary to
the provisions of this Agreement any monies from the sale, liquidation, casualty
or other disposition of or as a result of its Lien in the Collateral, it will
(unless otherwise restricted by law) hold the same for the Subordinated Lender
and promptly pay over the same to the Subordinated Lender for application to the
Subordinated Lender Obligations in accordance with the provisions of Section 5
of this Agreement.
     10. Option to Purchase Senor Lenders Obligations.
          10.1 Purchase of Senior Lenders Obligations. If (a) there shall occur
a Senior Lenders Event of Default and, in consequence thereof, the Agent shall
accelerate and declare immediately due and owing the Senior Lender Obligations
and commence an Enforcement Action, or (b) there shall occur a Senior Lenders
Event of Default arising from an Insolvency Proceeding, or (c) the Agent shall
deliver a Blockage Notice to the Subordinated Lender pursuant to the provisions
of Section 7.5(b) hereof (each of the foregoing, an “Option Triggering Event”),
then the Subordinated Lender shall have the option, exercisable by a written
notice (an “Exercise Notice”) given by the Subordinate Lender to the Agent no
later than thirty (30) days after the occurrence of such Option Triggering Event
(such thirty (30) day period, the “Option Period”), to purchase all (but not
less than all) of the Senior Lenders Obligations which are owing by the Credit
Parties to the Agent and the Senior Lenders and the Senior Lenders Documents.
Once given, an Exercise Notice shall be irrevocable. The option granted hereby
to the Subordinated Lender shall lapse and be of no further force and effect
unless exercised by the Subordinated Lender before the expiration of the Option
Period.
          10.2 Sale of Senior Lenders Obligations. On a closing date (the
“Closing Date”) specified in the Exercise Notice (which shall be no earlier than
five (5) Business Days nor more than thirty (30) days after the giving by the
Subordinated Lender of the Exercise Notice, the Agent and the Senior Lenders
shall sell, and the Subordinated Lender shall purchase, for a purchase price and
otherwise on terms and conditions as set forth in this Section 10, all (but not
less than all) of the Senior Lenders Obligations then owing to the Agent and the
Senior Lenders and the Senior Lenders Documents.
          10.3 Closing of Purchase of Senior Lenders Obligations. On the Closing
Date, the Subordinated Lender shall (i) pay to the Agent and the Senior Lenders
as the purchase price the full amount of all the Senior Lenders Obligations
owing to the Agent and the Senior Lenders which are then outstanding and unpaid
(including principal, reimbursement obligations, interest,

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any applicable Senior Lenders Early Termination Fee, fees, and expenses,
including reasonable attorneys’ fees and legal expenses, (ii) either (1) furnish
cash collateral to the Agent and the Senior Lenders in such amounts as the Agent
determines is reasonably necessary to secure the Agent and the Senior Lenders in
connection with any issued and outstanding letter of credit accommodations
provided by the Agent and the Senior Lenders to or for the account of the Credit
Parties (but not in any event in an amount greater than 105% of the aggregate
undrawn face amount of such letters of credit), or (2) cause all issued and
outstanding letters of credit and letters of credit guaranties to be cancelled
and terminated, and (iii) agree to reimburse the Agent and the Senior Lenders
for any loss, cost, damage, or expense (including reasonable attorneys’ fees and
legal expenses) in connection with any commissions, fees, costs, or expenses
related to any issued and outstanding letters of credit as described above and
any checks or other payments provisionally credited to the Senior Lenders
Obligations owing to the Agent and the Senior Lenders, and/or as to which the
Agent and the Senior Lenders have not yet received final payment. Such purchase
price and cash collateral shall be remitted by wire transfer in federal funds to
such bank account of the Agent, as the Agent may designate in writing to the
Subordinated Lender for such purpose. Interest shall be calculated to, but
excluding, the Business Day on which such purchase and sale shall occur if the
amounts so paid by the Subordinated Lender to the bank account designated by the
Agent are received in such bank account prior to 1:00 p.m., Eastern time, and
interest shall be calculated to, and including, such Business Day if the amounts
so paid by the Subordinated Lender to the account designated by the Agent are
received in such bank account later than 1:00 p.m., Eastern time. On the Closing
Date, the Agent and the Senior Lenders shall also execute and deliver such
assignments, documents or other instruments, each in form reasonably
satisfactory to the Agent and the Subordinated Lender, that are necessary or
reasonably requested by the Subordinated Lender to evidence or confirm the sale,
assignment and transfer to the Subordinated Lender of the Senior Lenders
Obligations owing to the Agent and the Senior Lenders and the Senior Lenders
Documents.
          10.4 Limited Representations and Warranties. Such purchase shall be
expressly made without representation or warranty of any kind by the Agent and
the Senior Lenders as to the Senior Lenders Obligations owing to the Agent and
the Senior Lender, the Senior Lenders Documents, or otherwise, and without
recourse to the Agent and the Senior Lenders, except for representations and
warranties as to the following: (i) the amount of the Senior Lenders Obligations
being purchased (including, without limitation, as to the principal of and
accrued and unpaid interest on such Senior Lenders Obligations, fees and
expenses thereof), (ii) that the transfer of the Senior Lenders Obligations and
the Senior Lenders Documents is free and clear of any Liens, and (iii) the Agent
and the Senior Lenders have the full right and power to assign the Senior
Lenders Obligations, such assignment has been duly authorized, and no approval
of any governmental authority, other regulatory body, or other Person is
required in connection with such assignment.
          10.5 No Approval Required. The Agent hereby represents and warrants to
the Subordinated Lender that, as of the date hereof, no approval of any
governmental authority, other regulatory body, or other person is required for
sale made by it pursuant to the provisions of this Section 10.

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     11. Notices. All notices, requests and demands to or upon a Lender, to be
effective, shall be in writing and shall be sent by certified or registered
mail, return receipt requested, by overnight air courier or by facsimile, and
shall be deemed to have been received by the other Lender when sent during
customary business hours by facsimile, transmission confirmed (or, if sent after
5:00 p.m., eastern standard time or eastern daylight savings time, as the case
may be, on the following Business Day), when delivered against a receipt, if
sent by overnight air courier, and three (3) Business Days after mailing, if
sent by certified or registered mail. Notices shall be addressed as follows:

     
If to Subordinated Lender:
  LJH, Ltd.
377 Neva Lane
Dennison, Texas 75020
Attention: Lacy Harber
Facsimile No. 903-465-6514
 
   
With a copy to:
  Bracewell & Giuliani, LLP
500 North Akard, Suite 4000
Dallas, Texas 75201
Attention: Christopher D. Olive, Esq.
Facsimile No. 214-758-8392
 
   
If to the Agent:
  The CIT Group/Business Credit, Inc.
900 Ashwood Parkway, Suite 610r
Atlanta, Georgia 30338
Attention: TIMCO Account Manager
Facsimile No. 770-522-7673
 
   
With a copy to:
  Carruthers & Roth, P.A.
235 North Edgeworth Street
Greensboro, North Carolina 27401
Attention: June L. Basden, Esq.
Facsimile No. 336-273-7885

or to such other address as either Lender may designate for itself by notice
given in accordance with this Section 11.
     12. Relationship of Parties. This Agreement is entered into solely for the
purposes set forth above, and neither Lender assumes any responsibility to the
other Lender to advise the other Lender of information known to such Lender
regarding the financial condition of the Credit Parties, or regarding the
Collateral, or of any other circumstances bearing upon the risk of nonpayment of
the Obligations of the Credit Parties under the Senior Lenders Documents and the
Subordinated Lender Documents, respectively. Each Lender shall be responsible
for managing its relationship with the Credit Parties, and, except as otherwise
specifically set forth herein, neither Lender shall be deemed the agent of the
other for any purpose.

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     13. Waiver of Marshalling. Each Lender hereby waives any right to require
the other Lender to marshall any security or collateral or otherwise to compel
the other Lender to seek recourse against or satisfaction of the indebtedness
and obligations owed to it from one source before seeking recourse or
satisfaction from another source.
     14. Provisions Concerning Insurance, Condemnation and Landlord’s
Agreements. Notwithstanding any contrary provision of any of the Documents, the
Lenders agree as follows with respect to any Insurance or Condemnation Proceeds
and the Landlord’s Agreements:
          14.1 Insurance Insuring the Collateral Generally. Each Lender agrees
that the other Lender shall be entitled to obtain loss payee endorsements and
additional insured status with respect to all policies of insurance now or
hereafter obtained by the Credit Parties insuring casualty or other loss to any
Collateral. The Agent shall have the sole and exclusive right, as against the
Subordinated Lender, to file claims, make adjustments and settlements of
insurance claims and take any and all other actions in regard thereto in the
event of any covered loss, theft or destruction of any Collateral (other than
Term Loan B Collateral), and the Subordinated Lender shall have the sole and
exclusive right, as against the Agent, to file claims, make adjustments and
settlements of insurance claims and take any and all other actions in regard
thereto in the event of any covered loss, theft or destruction of any Term Loan
B Collateral. The rights and priorities of the Lenders to any Insurance or
Condemnation Proceeds shall be as provided in this Agreement.
          14.2 Insurance or Condemnation Proceeds.
          (a) Any Insurance or Condemnation Proceeds with respect to the
Collateral shall be deemed part of the Collateral, and the rights and priorities
of the Lenders to any Insurance or Condemnation Proceeds with respect to the
Collateral shall be the same as with respect to the Collateral.
          (b) All Insurance or Condemnation Proceeds with respect to Collateral
(other than Term Loan B Collateral) shall be paid to the Agent and the
Subordinated Lender shall cooperate (if necessary) in a reasonable manner in
effecting the payment of Insurance or Condemnation Proceeds to the Agent. In the
event the Agent, in its sole discretion or pursuant to agreement with the Credit
Parties, permits the Credit Parties to utilize all or any Insurance or
Condemnation Proceeds to replace Collateral (other than Term Loan B Collateral),
the consent of the Agent thereto shall be deemed to include the consent of the
Subordinated Lender. The Subordinated Lender agrees to execute such consents,
releases, endorsements and other documents as may be reasonably necessary to
accomplish the application of such Insurance or Condemnation Proceeds, all
without any additional consideration or payment to the Subordinated Lender.
          (c) All Insurance or Condemnation Proceeds with respect to Term Loan B
Collateral shall be paid to the Subordinated Lender and the Agent shall
cooperate (if necessary) in a reasonable manner in effecting the payment of
Insurance or Condemnation Proceeds to the Subordinated Lender. In the event the
Subordinated Lender, in its sole discretion or pursuant to agreement with the
Credit Parties, permits the Credit Parties to utilize all or any Insurance or

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Condemnation Proceeds to replace Term Loan B Collateral, the consent of the
Subordinated Lender thereto shall be deemed to include the consent of the Agent
and the Senior Lenders. The Agent on behalf of the Senior Lenders agrees to
execute such consents, releases, endorsements and other documents as may be
reasonably necessary to accomplish the application of such Insurance or
Condemnation Proceeds, all without any additional consideration or payment to
the Agent.
          14.3 Landlord Agreements. All consents granted and decisions made by
the Agent under each Landlord Agreement shall be conclusive and binding upon the
Subordinated Lender. The Subordinated Lender agrees to execute such consents,
releases, and other documents as may be reasonably necessary to accomplish or
implement any decisions made by the Agent under a Landlord Agreement, all
without any additional consideration or payment to the Subordinated Lender.
     15. Further Assurances. The Credit Parties and the Lenders shall each
execute and deliver such additional documents and take such additional actions
as may be reasonably necessary to effectuate the provisions and purposes of this
Agreement. Without limiting the generality of the foregoing, if the Subordinated
Lender purchases the Senior Lenders Obligations pursuant to Section 10 hereof,
then the Agent shall take such action as may be reasonably requested by the
Subordinated Lender to aid and assist, or join with the Subordinated Lender, in
the enforcement or collection of the transferred Senior Lenders Obligations or
the Liens securing the same. All out of pocket expenses of the Agent incurred in
connection therewith shall be additional Senior Lenders Obligations owing by the
Credit Parties to the Agent and the Senior Lenders and secured by the
Collateral. If requested by a Lender, the Lenders shall execute filings to be
recorded in accordance with the Uniform Commercial Code provisions in the
appropriate locations reflecting the provisions of this Agreement.
     16. Parties; Successors and Assigns. No Lender shall transfer or assign any
of the Obligations owing to such Lender except upon receipt of a written
acknowledgment and agreement from such transferee or assignee which
acknowledgment and agreement shall be reasonably acceptable in form and
substance to the other Lender and bind such assignee and transferee and all
successive assignees and transferees to the terms and conditions of this
Agreement. This Agreement shall be binding upon, and shall inure to the benefit
of, the Lenders and their respective successors and assigns.
     17. No Third Party Beneficiaries. This Agreement is for the sole and
exclusive benefit of the Lenders and no other Person (including each Credit
Party), and their respective successors and assigns, shall have standing to
require satisfaction of the provisions hereof or be entitled to assume
compliance herewith, and no other Person (including each Credit Party) shall
under any circumstances be deemed to be a beneficiary of any of the terms hereof
or be entitled to assume that the Lenders will insist upon strict compliance
with any of such terms, any or all of which may be freely waived or amended in
whole or in part by the Lenders at any time if they in their sole discretion
deem it advisable to do so.
     18. Injunctive Relief. Each Lender agrees that in the event it is in breach
of any of its obligations hereunder, the other Lender may obtain an injunction
in a court of competent

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jurisdiction against any act or acts constituting such breach, and both Lenders
consent to be bound thereby. Such injunction shall be without prejudice to the
enjoining Lender’s rights to seek additional remedies at law or at equity.
     19. Post Bankruptcy Issues.
          19.1 This Agreement shall continue in full force and effect during the
term set forth herein, notwithstanding the commencement by or against a Credit
Party of an Insolvency Proceeding during the pendency of which, so long as the
Subordinated Lender Obligations and the Senior Lenders Obligations have not been
fully and indefeasibly paid and satisfied, all of the terms and provisions
hereof shall remain and continue in full force and effect.
          19.2 In an Insolvency Proceeding, the Subordinated Lender shall not,
until the Senior Lenders Obligations have been paid and satisfied in full and
the commitments of the Senior Lenders for the incurring of additional Senior
Lenders Obligations, any DIP financing or any use of the Senior Lenders’ cash
collateral, have expired or been irrevocably terminated in writing, contest (or
support any other party contesting) any request of any Credit Party made with
the consent of the Agent for use of cash collateral or for approval of any DIP
financing to be provided in good faith by the Senior Lenders to such Credit
Party, on the grounds of a failure to provide “adequate protection” for the
Liens of the Subordinated Lender (i) if the Subordinated Lender, in its
discretion, chooses not to contest any such use or approval, or (ii) so long as
(a) the Subordinated Lender is provided with replacement Liens on the same types
and items of property included in the Collateral that existed before the
commencement of the Insolvency Proceeding, (b) the Liens granted to the Agent
and the Subordinated Lender in the Insolvency Proceeding have the same priority,
and are otherwise subject to, and have the benefit of, the same terms,
limitations, and restrictions, that are set forth in this Agreement, and (c) in
the case of any DIP financing to be provided by the Agent and the Senior Lenders
in such Insolvency Proceeding, the DIP financing to be provided thereunder shall
not be provided on terms and conditions not inconsistent with the financing
provided pursuant to the Senior Lenders Loan Agreement, as limited by the terms
of this Agreement. Notwithstanding the foregoing, the Subordinated Lender shall
be entitled to file any necessary responsive or defensive pleadings in
opposition to any motion, claim, adversary proceeding or other pleading made by
any Person objecting to or otherwise seeking the disallowance of the claims of
the Subordinated Lender, including, without limitation, any claims secured by
the Collateral. Consistent with the terms of this Agreement, the Subordinated
Lender shall be entitled to file any other pleadings, objections, motions or
agreements which assert the rights or interests available to unsecured creditors
of any Credit Party arising under either the Bankruptcy Code or applicable
non-bankruptcy law.
          19.3 In the event of (i) any Insolvency Proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to any Credit Party or its assets, or (ii) any
liquidation, dissolution or other winding up of any Credit Party, whether
voluntary or involuntary, and whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the benefit of creditors or any other marshalling of
assets or liabilities of any Credit Party, then (a) in any such event, the
provisions of Section 2 of this Agreement shall continue to apply, and (b) in
the case of the foregoing clauses (ii) and (iii) all of the provisions of this
Agreement shall continue to apply (excluding the payment to Subordinated

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Lender in securities of any Credit Party provided for by a plan of
reorganization or readjustment that are equity securities or are subordinated in
right of payment to all indebtedness of each Credit Party issued to Senior
Lenders in such plan of reorganization or readjustment to substantially the same
extent as, or to a greater extent than, the Subordinated Lender Obligations are
subordinated to the Senior Lenders Obligations as provided in this Agreement)
(such equity securities or subordinated securities being herein called the
“Permitted Junior Securities”).
     20. Liens Following Term Loan C Exchange or Other Term Loan Exchange. Upon
the consummation of the Term Loan C Exchange or any other Term Loan Exchange as
contemplated by the Subordinated Lender Loan Agreement, the Agent and the Senior
Lenders shall have no Lien in any of the common stock, preferred stock,
partnership interests, limited liability company membership interests, warrants
or other equity securities or equity interests collected or received by or
distributed to Subordinated Lender as a result of any Term Loan C Exchange or
any such other Term Loan Exchange.
     21. Term of Agreement. This Agreement shall continue in full force and
effect and shall be irrevocable by either Lender until the earliest to occur of
the following: (i) the Lenders in writing mutually agree to terminate this
Agreement; (ii) the Senior Lenders Obligations have been fully paid and
discharged and the Agent and the Senior Lenders shall have no further obligation
for the incurring of additional Senior Lenders Obligations, and the Agent shall
have fully paid and performed its obligations under this Agreement; or (iii) the
Subordinated Lender Obligations have been fully paid and discharged and the
Subordinated Lender shall have no further obligation for the incurring of
additional Subordinated Lender Obligations, and the Subordinated Lender shall
have fully paid and performed its obligations under this Agreement.
     22. Section Titles. The section titles contained in this Agreement are
without substantive meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.
     23. Governing Law. This Agreement shall be interpreted, and the rights and
liabilities of the parties hereto determined, in accordance with the laws and
decisions of the State of North Carolina.
     24. Counterparts; Facsimile Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the signatures on
such counterparts appeared on one document, and each such counterpart shall be
deemed to be an original. Delivery of an executed counterpart of this Agreement
by facsimile or electronic transmission shall be as effective as delivery of a
manually executed counterpart hereof.
     25. Authority. Each Lender represents to the other Lender that it has all
necessary right, power and authority to enter into this Agreement and perform
and observe all of its covenants and agreements herein contained and that this
Agreement is valid and binding upon it and enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency and similar laws affecting
enforcement rights generally.

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     26. Miscellaneous. This Agreement constitutes the entire understanding of
the Lenders with respect to the subject matter hereof and any prior agreements,
whether oral or written, with respect thereto are superseded hereby. In the
event of any inconsistency between the terms of this Agreement and the terms of
any of the Documents, the terms of this Agreement shall govern and control. The
invalidity, illegality or unenforceability of any provision in or obligation
under this Agreement shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement.
     27. CONSENT TO FORUM. EACH LENDER HEREBY CONSENTS AND AGREES THAT THE
SUPERIOR COURT OF GUILFORD COUNTY, NORTH CAROLINA, OR THE UNITED STATES DISTRICT
COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA, GREENSBORO DIVISION, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
LENDERS PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. EACH PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION, AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS .
     28. WAIVERS OF TRIAL BY JURY. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
TO TRIAL BY JURY THE LENDERS MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN
EQUITY, IN CONNECTION WITH THIS AGREEMENT.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement UNDER
SEAL on the day and year first above written.

         
 
  Subordinated Lender:
 
       
 
  LJH, LTD.  

 
  By: DLH Management, L.L.C.,
        its general partner
 
       
 
  By:   /s/ Lacy Harber 
 
       
 
      Lacy Harber, President
 
       
 
  CITBC:
 
       
 
  THE CIT GROUP/BUSINESS CREDIT, INC.,
individually and as agent
 
       
 
  By:   /s/ Kenneth B. Butler 
 
       
 
      Title: Vice President

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ACKNOWLEDGMENT AND AGREEMENT
OF THE CREDIT PARTIES
     The undersigned Credit Parties each does hereby accept, and acknowledge
receipt of a copy of, the foregoing Intercreditor and Subordination Agreement
and each consents to and agrees to be bound by all of the provisions thereof, as
the same may be amended, modified, restated or supplemented from time to time in
accordance with the terms thereof.
     IN WITNESS WHEREOF, each Credit Party has caused this Acknowledgement and
Agreement to be duly executed under seal on the day and year first above
written.

         
 
  Credit Parties:
 
       
 
  AIRCRAFT INTERIOR DESIGN, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  BRICE MANUFACTURING COMPANY, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  TIMCO ENGINE CENTER, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  TIMCO ENGINEERED SYSTEMS, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance

 

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  TRIAD INTERNATIONAL MAINTENANCE CORPORATION
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  TIMCO AVIATION SERVICES, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVIATION SALES DISTRIBUTION SERVICES COMPANY
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVIATION SALES LEASING COMPANY
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVIATION SALES PROPERTY MANAGEMENT CORP.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVS/CAI, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance

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  AVS/M-1, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVS/M-2, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVS/M-3, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  AVSRE, L.P.
 
       
 
  By: Aviation Sales Property Management Corp.,
        its general partner
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  HYDROSCIENCE, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance

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  TMAS/ASI, INC.
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance
 
       
 
  WHITEHALL CORPORATION
 
       
 
  By:   /s/ Kevin Carter 
 
       
 
      Name: Kevin Carter
Title: Senior Vice President — Finance

4