Exhibit 10.3

 

 

InterCreditor and Debt Subordination Agreement

 

THIS INTERCREDITOR AND DEBT SUBORDINATION AGREEMENT (this “Subordination
Agreement”), dated September 6, 2018, between HG HOLDINGS, INC., a Delaware
corporation (“Junior Creditor”), having an address of 2115 E. 7th Street, Suite
101, Charlotte, North Carolina 28204, and HALE PARTNERSHIP FUND, L.P., a
Delaware limited partnership, in its capacity as agent (in such capacity,
“Fund”) having an office at 6100 Fairview Road, Charlotte, North Carolina 28210.

 

RECITALS

 

WHEREAS, pursuant to an Asset Purchase Agreement, dated as of September 6, 2018
(as amended from time to time, the “Purchase Agreement”), between Stanley
Furniture Company LLC, as seller (the “Seller”), and Stone & Leigh, LLC, a
Tennessee limited liability company (the “Borrower” or “Debtor”), as buyer,
Seller has sold to the Borrower certain of Seller’s assets and properties,
including the Stone & Leigh tradename and inventory;

 

WHEREAS, as a portion of the consideration paid by the Borrower for Seller’s
assets and properties sold pursuant to the Purchase Agreement, the Borrower has
executed and delivered to Junior Creditor a Subordinated Secured Promissory
Note, dated of even date herewith (as amended, restated or otherwise modified
from time to time, the “Junior Note”), in the original principal amount of
$4,400,000;

 

WHEREAS, payment of the Junior Note and the other Junior Indebtedness (as
defined below) is secured by liens and security interests granted by the Debtor
in substantially all of its assets and properties, including, without
limitation, all of Debtor’s accounts, inventory, documents, instruments, chattel
paper, general intangibles, equipment and all proceeds thereof;

 

WHEREAS, the Borrower has executed and delivered to Fund and other Noteholders
(as defined in the Senior Note) (the “Senior Lenders”) party thereto a Senior
Secured Promissory Note, dated as of even date herewith (as amended, restated or
otherwise modified from time to time, the “Senior Note”), in the original
principal amount of $1,702,000, which is secured by first priority senior and
superior liens and security interests granted by the Debtor in favor of Fund as
agent for itself and the Senior Lenders, in substantially all of its assets and
properties, including, without limitation, all of Debtor’s accounts, inventory,
documents, instruments, chattel paper, general intangibles, equipment and all
proceeds thereof; and

 

WHEREAS, the Senior Lenders and Fund are unwilling to enter into the Senior Note
with the Borrower and to make available the term loan credit facility thereunder
to the Borrower unless (a) Junior Creditor agrees that (i) any interest of any
kind Junior Creditor has in any of Debtor’s assets and properties shall be
junior and subordinate to the security interests and liens to be granted to Fund
for the benefit of itself and the Senior Lenders and (ii) the indebtedness of
Debtor to Junior Creditor under or with respect to the Junior Note and the other
Junior Indebtedness is subordinate to the indebtedness of Debtor to Senior
Lenders, and (b) Junior Creditor and Fund have entered into this Subordination
Agreement so as to set forth said priorities of their respective liens on assets
and properties of Debtor and the indebtedness of Debtor to each of Junior
Creditor and Senior Lender.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

-1-

--------------------------------------------------------------------------------

 

 

NOW THEREFORE, Junior Creditor and Fund agree as follows:

 

1.           Definitions. All capitalized terms used in this Subordination
Agreement without definition shall have the meanings ascribed to such terms in
the Senior Note. In addition to the defined terms set forth above or in the
Senior Note or as otherwise provided for herein: (A) each of Junior Creditor and
the Senior Lenders is sometimes referred to as a "Lender" and collectively the
"Lenders"; (B) each of Junior Creditor and the Fund is sometimes referred to as
a "Party" and collectively the "Parties"; (C) "Obligations" means the present
and future liabilities of Debtor to each Lender, including, without limitation,
all principal, interest, fees and expenses, whether incurred or accruing prior
to or after a bankruptcy or similar insolvency proceeding of Debtor; (D)
"Security Agreement" means and collectively refers to the Junior Note, Senior
Note, Related Document (as defined in each of the Junior Note and Senior Note)
or any loan and security agreement, security agreement, notes, instruments and
all other documents executed or delivered by Debtor granting a security interest
or lien in favor of Junior Creditor and Fund and any amendments, restatements,
modifications or supplements thereto; (E) "Enforcement Action" means taking any
action, judicial or otherwise, to collect payment on any Obligations or pursuing
any other remedy with respect to the Obligations, including commencing or
joining with any other junior creditor in commencing any proceeding under any
bankruptcy or similar insolvency proceeding, further including, without
limitation, enforcement of or foreclosure of any lien on any Collateral; (F)
"Senior Indebtedness" means and include all present and future principal of and
interest (including, without limitation, any post-petition interest) on all
Obligations owing to the Senior Lenders evidenced by or arising under or related
to the Senior Note, accruing whether or not granted or permitted in any
bankruptcy or similar insolvency proceeding, and all fees, costs and expenses,
including attorneys' fees, on all Obligations of Debtor to the Senior Lenders
evidenced by or arising under or related to the Senior Note, whether direct or
indirect, absolute or contingent, joint, several or independent, now or
hereafter existing, due or to become due to, or held or to be held by the Senior
Lenders, whether created directly or acquired by assignment or otherwise; (G)
"Junior Indebtedness" means and includes the principal of and interest on the
Junior Note and all other present and future principal of and interest and all
fees, costs and expenses, including attorneys' fees, on all Obligations of
Debtor to Junior Creditor evidenced by or arising under or related to the Junior
Note or any of the other Purchase Documents, whether direct or indirect,
absolute or contingent, joint, several or independent, now or hereafter
existing, due or to become due, or held or to be held by Junior Creditor whether
created directly or acquired by assignment or otherwise; and (H) “Collateral”
means all of the assets and properties of Debtor in which Junior Creditor or
Fund has or claims a security interest or lien pursuant to any Security
Agreement with Debtor.

 

2.           Representations. Junior Creditor represents that:

 

(A)     As of the date hereof the total principal amount of the Junior
Indebtedness is $4,600,000 which is evidenced by the Junior Note.

 

(B)     Junior Creditor is the unconditional owner of the Junior Indebtedness,
free and clear of all liens, claims and encumbrances, and the Junior
Indebtedness has not been subordinated in favor of any other party.

 

(C)     Junior Creditor holds no security for the Junior Indebtedness, or any
guarantees of any third parties of such Junior Indebtedness, except as disclosed
on Exhibit A annexed hereto.

 

(D)     This Subordination Agreement constitutes the valid and binding
obligation of Junior Creditor and is enforceable against Junior Creditor in
accordance with its terms.

 

3.           Subordination.

 

(A)     Upon the terms and subject to the provisions of this Subordination
Agreement, Junior Creditor hereby subordinates the payment of the Junior
Indebtedness to payment in full in cash of the Senior Indebtedness.

 

(B)     Upon any distribution of the assets or readjustment of indebtedness of
Debtor, whether by reason of liquidation, dissolution, bankruptcy,
reorganization, receivership or any other action or proceeding involving the
readjustment of all or any of the Junior Indebtedness, or the application of
assets of Debtor to the payment or liquidation thereof, the Senior Lenders shall
be entitled to receive payment in full in cash of the Senior Indebtedness prior
to the payment of all or any part of the Junior Indebtedness hereby
subordinated.

 

(C)     In order to enable Fund to enforce its rights hereunder for the benefit
of the Senior Lenders in any action or proceeding referred to in (B) above, Fund
is hereby irrevocably authorized and empowered in Fund's discretion to make and
present for, and on behalf of Junior Creditor, such proofs or claims against
Debtor on account of the Junior Indebtedness as Fund may deem expedient or
proper, and to vote such proofs or claims in any such proceedings, and to
receive and collect any and all dividends or other payments or disbursements
made thereon in whatever form the same may be paid or issued, and to apply same
on account of the Senior Indebtedness. Further, in order to enable Fund to
enforce its rights hereunder in any action or proceeding referred to in (B)
above, Junior Creditor hereby appoints Fund, or its designee, attorney to take
the above mentioned with full power of substitution in the premises. Junior
Creditor further agrees to execute and deliver any further documents or other
instruments which may be necessary or expedient to enable Fund to collect any
and all dividends or other payments or disbursements which may be made at any
time on account of all or any of the Junior Indebtedness or otherwise enforce
its rights under this Subordination Agreement.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

 
-2-

--------------------------------------------------------------------------------

 

 

(D)     Junior Creditor agrees that Junior Creditor will make proper notations
on the Junior Note and in Junior Creditor's books and records indicating that
the Junior Indebtedness is subject to this Subordination Agreement. The Junior
Note and all other evidences of indebtedness accepted by the Junior Creditor
from Debtor shall contain a specific statement that the indebtedness thereby
evidenced is subject to the provisions of this Subordination Agreement.

 

(E)     Junior Creditor hereby waives any and all notice of the creation,
renewal, modification or extension of the Senior Indebtedness and acknowledges
that Fund, for the benefit of itself and the Senior Lenders, shall be deemed to
have relied on this Subordination Agreement when extending any credit, loaning
any monies or providing any financial accommodation to Debtor or otherwise
acting with respect to the occurrence of the Senior Indebtedness, now or at any
time in the future, and Junior Creditor expressly waives proof of reliance by
Fund upon this Subordination Agreement and waives all notice of any actions that
Fund or any Senior Lender may take with respect to the Senior Indebtedness, or
the acceptance by Fund of this Subordination Agreement or the extension of
credit by Fund and the Senior Lenders to Debtor.

 

4.           Payments and Other Acts With Regard to Junior Indebtedness. Until
satisfaction in full in cash of the Senior Indebtedness and termination of this
Subordination Agreement in accordance with its terms, Junior Creditor agrees
that:

 

(A)     Junior Creditor will not ask, demand, sue for, take or receive from
Debtor any payment or distribution on account of the Junior Indebtedness
(whether in cash, property or securities), including, but not limited to, by
setoff or any other manner or accelerate the maturity thereof; provided,
however, if and only to the extent that, immediately before and after giving pro
forma effect to any payment on the Junior Indebtedness, no Event of Default
shall exist or would result from the making of such payment, Debtor may pay and
Junior Creditor may receive payments on the Junior Indebtedness on the due dates
thereof.

 

(B)     Junior Creditor will not obtain, ask for or require any additional
security for or any additional guaranty of the Junior Indebtedness (other than
as set forth on Exhibit A annexed hereto); and

 

(C)     If, notwithstanding any terms of this Subordination Agreement to the
contrary, Junior Creditor receives any payment or distribution on account of the
Junior Indebtedness not permitted to be received under (A) above, and/or Junior
Creditor receives any payment or proceeds on any accounts of Debtor or other
Collateral, Junior Creditor will hold same in trust for Fund and immediately
deliver same in the form received, except for the addition of any endorsement or
assignment necessary to effect a transfer, to Fund for the benefit of itself and
the Senior Lenders for application on account of the Senior Indebtedness. If
Junior Creditor fails to endorse any instrument for the payment of money payable
to it or its order, which has been turned over to Fund, Fund is hereby
irrevocably constituted and appointed attorney-in-fact for the Junior Creditor
with full power to make any such endorsement, and with full power of
substitution. All actions taken by such attorney-in-fact as permitted by the
terms of this Subordination Agreement or applicable law are hereby ratified and
approved.

 

(D)     After all of the Senior Indebtedness has been paid in full in cash and
until all of the Junior Indebtedness has been paid in full in cash, Junior
Creditor shall be subrogated to the rights of Fund and the Senior Lenders to
receive payments and distributions of assets with respect to the Senior
Indebtedness, to the extent that distributions otherwise payable to Junior
Creditor have been applied to the payment of Senior Indebtedness in accordance
with the provisions of this Subordination Agreement.  As between Debtor and
Junior Creditor, a distribution applied to the payment of Senior Indebtedness in
accordance with the provisions of this Subordination Agreement which would
otherwise have been made to Junior Creditor shall not be deemed a payment by
Debtor on the Junior Indebtedness, it being understood that the subordination
and other intercreditor provisions of this Subordination Agreement are intended
solely for the purpose of defining the relative rights of Junior Creditor, on
the one hand, and Fund, on the other hand, and nothing contained in this
Subordination Agreement shall impair the obligations of Debtor, which are
absolute and unconditional, to pay to Junior Creditor the Junior Indebtedness as
and when the same shall become due and payable in accordance with its terms,
except as such obligation is modified by the rights confirmed hereunder in favor
of Fund, or affect the relative rights of Junior Creditor and the creditors of
Debtor other than Fund.

 

-3-

--------------------------------------------------------------------------------

 

 

5.           Priorities. Notwithstanding the terms of any Security Agreement
heretofore or hereafter entered into between either Party and Debtor, or the
date of the filing of any financing statements heretofore or hereafter filed by
Junior Creditor or Fund against Debtor, or any other action by either Party with
regard to perfection of a security interest or lien, Junior Creditor agrees that
any security interest, lien, claim or right now or hereafter asserted by Junior
Creditor with respect to the Collateral, shall be subject, junior and
subordinate to any security interest, lien, claim or right now or hereafter
asserted by Fund with respect thereto.

 

6.           Exercise of Rights Under Security Agreements, Notes and Other
Agreements.

 

(A)     Junior Creditor will not take any action which interferes with the
exercise of Fund's or any Senior Lender’s rights and remedies with respect to
the Senior Indebtedness, or interfere with Fund's exercise of Fund's superior
security interest in, or lien on, the Collateral, and specifically and without
limitation, Junior Creditor will not, without the prior written consent of Fund,
notify any account debtors of Debtor of Junior Creditor's security interest in
the accounts of Debtor and will not notify any such account debtor to remit any
payments on accounts to Junior Creditor.

 

(B)     If an event of default exists under the Obligations of Debtor to Junior
Creditor that permits Junior Creditor to exercise any of its rights or remedies
to collect the Junior Indebtedness, Junior Creditor will not take any
Enforcement Action until the date the Obligations of Debtor to Fund and the
Senior Lenders are indefeasibly paid and satisfied in full in cash; provided
that following the acceleration of the Senior Indebtedness, Junior Creditor may
accelerate the Junior Indebtedness. Any Enforcement Action by Junior Creditor
shall be subject to the terms of this Subordination Agreement.

 

(C)     ()Each of the Lenders waives the right to require a marshalling of
assets.

 

(D)     Each Party hereto agrees to endeavor to promptly notify the other Party
if such Party declares an event of default under the Obligations of Debtor to
such Party or other applicable Lenders, however the failure of any Party to so
notify the other Party shall not impose any liability on the Party failing to
give such notice or in any manner restrict or limit the rights and remedies of
such Party.

 

(E)     Junior Creditor hereby agrees that, until the Obligations of Debtor to
Fund and the Senior Lenders are indefeasibly paid and satisfied in full in cash,
Fund may dispose of, and exercise any other rights with respect to, any or all
of the Collateral, free of the lien of Junior Creditor (except to the extent of
Junior Creditor’s right to any surplus over the amount necessary to pay the
Obligations owing to Fund and the Senior Lenders as provided in the following
proviso clause), provided that the proceeds thereof, net of disposition costs
and expenses, are applied to the payment of the Senior Indebtedness and Junior
Creditor retains any rights Junior Creditor may have as a junior secured
creditor with respect to the surplus (if any) over the amount necessary to pay
the Obligations owing to Fund and the Senior Lenders in full in cash arising
from any such disposition or enforcement. Upon any disposition of any of the
Collateral by Fund, or by Debtor with the consent of Fund, any and all liens of
Junior Creditor in such Collateral (except to the extent of Junior Creditor’s
right to any surplus over the amount necessary to pay the Obligations owing to
Fund and the Senior Lenders as provided in the following proviso clause), shall
be deemed to be released without further action on the part of Junior Creditor
provided the proceeds of such disposition, net of disposition costs and
expenses, are applied to the payment of the Senior Indebtedness, and Junior
Creditor retains any rights Junior Creditor may have as a junior secured
creditor with respect to the surplus (if any) over the amount necessary to pay
the Obligations owing to Fund and the Senior Lenders in full in cash arising
from any such disposition or enforcement. Junior Creditor agrees, if requested,
to execute and/or immediately deliver any and all financing statement amendments
and other documents with respect to such releases which Fund deems necessary in
its discretion.

 

(F)      Each Party hereto agrees to give to the other Party 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 its respective Security
Agreement with Debtor, or by law, in each case concurrently with the giving of
such notice to Debtor; provided, however, that no failure of Junior Creditor or
Fund to give such notice to the other Party shall affect the validity or
enforcement of the subordination and other provisions of this Subordination
Agreement or the relative priorities of the respective liens and security
interests of Junior Creditor and Fund in the Collateral established in Section 5
hereof.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

 
-4-

--------------------------------------------------------------------------------

 

 

(G)     Intercreditor Arrangements in Bankruptcy.

 

(i)     This Subordination Agreement shall remain in full force and effect and
enforceable pursuant to its terms in accordance with Section 510(a) of the
Bankruptcy Code, and all references herein to Debtor shall be deemed to apply to
Debtor as debtor in possession and to any trustee in bankruptcy for the estate
of Debtor.

 

(ii)     Except as otherwise specifically permitted in Section 6(F) or this
Section 6(G), until the Obligations of Debtor to Fund and the Senior Lenders are
indefeasibly paid and satisfied in full in cash, Junior Creditor shall not
assert, without the written consent of Fund, any claim, motion objection, or
argument in respect of any of the Collateral in connection with any insolvency
or liquidation proceeding which could otherwise be asserted or raised in
connection with such insolvency or liquidation proceeding by Junior Creditor as
a secured creditor of Debtor, including, without limitation, any claim, motion,
objection or argument seeking adequate protection or relief from the automatic
stay in respect of the Collateral.

 

(iii)     Without limiting the generality of the foregoing, Junior Creditor
agrees that, if an insolvency or liquidation proceeding occurs, (1) Fund may
consent to the use of cash collateral on such terms and conditions and in such
amounts as Fund and Senior Lenders, in their sole discretion, may decide without
seeking or obtaining the consent of Junior Creditor as holder of a subordinate
interest in the Collateral; (2) the Senior Lenders may, upon notice to Junior
Creditor, (A) provide financing to Debtor, or (B) consent to the granting of a
priming lien to secure postpetition financing, in each case pursuant to Section
364 of the Bankruptcy Code or other applicable law and on such terms and
conditions and in such amounts as Fund and the Senior Lenders, in their sole
discretion, may decide without seeking or obtaining the consent of Junior
Creditor as holder of an interest in the Collateral; (3) Junior Creditor shall
not oppose Debtor's use of cash collateral on the basis that Junior Creditor's
interest in the Collateral is impaired by such use or inadequately protected by
such use to the extent such use has been approved by Fund; (4) Junior Creditor
shall not oppose any sale or other disposition of any assets comprising part of
the Collateral free and clear of liens or other claims of any party, including
Junior Creditor, under Section 363 of the Bankruptcy Code on the basis that
Junior Creditor's interest in the Collateral is impaired by such sale or
inadequately protected as a result of such sale if Fund has consented to such
sale or disposition of such assets; and (5) Junior Creditor shall not vote in
favor of, nor sponsor or support any plan of reorganization of Debtor, that does
not propose to pay the Senior Indebtedness in full on the effective date of such
plan or that is not consistent with this Subordination Agreement, absent Fund's
consent to a plan that does not pay in full the Senior Indebtedness on the
effective date of such plan.

 

(iv)     Junior Creditor agrees that it will not initiate, prosecute, encourage,
or assist with any other person or entity to initiate or prosecute any claim,
action or other proceeding (1) challenging the validity or enforceability of
this Subordination Agreement, (2) challenging the validity or enforceability of
Fund's or any Senior Lender’s claim, (3) challenging the perfection or
enforceability of any liens of Fund, or (4) asserting any claims, if any, which
Debtor may hold with respect to Fund or the Senior Lenders or any of the
Obligations of Debtor to Fund or the Senior Lenders.

 

(v)     To the extent that Fund or any Senior Lender receives payments or
transfers on the Obligations of Debtor to Fund or the Senior Lenders or Fund
receives proceeds of the Collateral which are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver of any other party under any bankruptcy law, state or federal
law, common law, or equitable cause, then, to the extent of such payment or
proceeds received, the Obligations of Debtor to Fund and the Senior Lenders, or
part thereof, intended to be satisfied shall be revived and continued in full
force and effect as if such payments or proceeds had not been received by Fund
and/or Senior Lenders.

 

(vi)     Subject to the provisions of this Section 6(G) above, (1) Junior
Creditor 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 Junior Creditor, including, without limitation, any claims
secured by the Collateral, if any, and (2) Junior Creditor shall be entitled to
file any pleadings, objections, motions or subordination agreements which assert
rights or interests available to unsecured creditors of Debtor arising under
either the Bankruptcy Code or applicable non-bankruptcy law.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

 
-5-

--------------------------------------------------------------------------------

 

 

(vii)     Fund agrees that Fund and/or Senior Lenders will not initiate,
prosecute, encourage, or assist with any other person or entity to initiate or
prosecute any claim, action or other proceeding (1) challenging the validity of
enforceability of this Subordination Agreement, (2) challenging the validity or
enforceability of Junior Creditor's claims, (3) challenging the perfection of
enforceability of any liens of Junior Creditor, or (4) asserting any claims, if
any, which Debtor may hold with respect to Junior Creditor or any of the
Obligations of Debtor to Junior Creditor.

 

7.           No Warranties. Junior Creditor and Fund have not made to each other
nor do they hereby or otherwise make to each other any warranties, express or
implied, nor do they assume any liability to the other Lenders with respect to:
(a) Debtor or any other obligors under any instruments of guaranty; (b) the
enforceability, validity, value or collectability of the Collateral held by
Junior Creditor or Fund, as applicable, or any of the notes, guaranties,
security agreements or subordination agreements evidencing or entered into with
respect to any of the Obligations; or (c) Debtor's title or right to transfer
the Collateral (or any portion thereof). Neither Junior Creditor nor Fund shall
be liable to any other Lenders for any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of such
Party or such Party’s agents, officers, employees or attorneys with respect to
any transaction relating to any of the notes or subordination agreements
evidencing or entered into with respect to any of the Obligations or any
security or guaranties therefor, provided such Party has acted in good faith and
has not been guilty of gross negligence or willful misconduct.

 

8.           Actions by Fund. Without impairing or releasing this Subordination
Agreement, Fund and/or the Senior Lenders may at any time and from time to time,
without the consent of, or notice to Junior Creditor, upon any terms or
conditions and in whole or in part:

 

(A)     Change the manner, place or terms of payment, and/or change or extend
from time to time the time of payment or renew or alter, the Senior Indebtedness
or any security therefor, and this Subordination Agreement shall apply to the
Senior Indebtedness as so changed, extended, renewed or altered;

 

(B)     Sell, exchange, release, surrender, realize upon or otherwise deal with
in any manner and in any order any property by whomsoever at any time pledged,
mortgaged or in which a security interest is given to secure, or howsoever
securing, the Senior Indebtedness;

 

(C)     Exercise or refrain from exercising any rights against Debtor or any
surety, endorser or guarantor or subordinator (including Junior Creditor) (each
an "Obligor") or against security, or otherwise act or refrain from acting;

 

(D)     Settle or compromise the Senior Indebtedness, or any liability of any
Obligor, or dispose of any security therefor, with or without consideration, or
any liability incurred directly or indirectly in respect thereof;

 

(E)     Apply any sum by whomsoever paid or howsoever realized to the Senior
Indebtedness; and

 

(F)     Take or refrain from taking any or all actions against Debtor, any
Obligor, or any of the Collateral, whether similar or dissimilar to the
foregoing.

 

9.          Assignment and Transfer. Each Party hereto may, from time to time,
without affecting any of such Party's rights hereunder, assign or transfer any
or all of the Obligations owing to such Party or any interest therein, provided
that prompt written notice thereof is given to the other Party hereto, and the
assignment or transfer is made expressly subject to the terms of this
Subordination Agreement and the assignee or transferee of such Party agrees in
writing to be bound by the provisions of this Subordination Agreement.

 

10.         Amendment; Waiver. No amendment, modification or waiver of any
provision of this Subordination Agreement, or of Junior Creditor’s or Fund’s
rights hereunder, shall be effective or deemed to be made by either Junior
Creditor or Fund unless the same shall be in writing and signed by such Party
(and Debtor shall be bound by this Subordination Agreement as so amended), and
any such waiver shall be effective only in the specific instance and for the
specific purpose for which given, and shall in no way impair the rights of such
Party or the obligations of the other Party hereto in any other respect at any
other time. No delay on the part of Junior Creditor or Fund in the exercise of
any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by such Party of any right, power or remedy preclude
any other for further exercise thereof, or the exercise of any other right,
power or remedy.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

 
-6-

--------------------------------------------------------------------------------

 

 

11.         Notices. Notices and communications under this Subordination
Agreement shall be in writing and shall be given by (i) hand-delivery, (ii)
first class mail (postage prepaid), (iii) reliable overnight commercial courier
(charges prepaid); or (iv) facsimile or other electronic transmission, to the
addresses and facsimile numbers listed below the signature of Junior Creditor
and Fund below. Notice given by facsimile or other electronic transmission shall
be deemed to have been given and received when sent. Notice by overnight courier
shall be deemed to have been given and received on the date scheduled for
delivery. Notice by mail shall be deemed to have been given and received three
(3) calendar days after the date first deposited in the United States mail.
Notice by hand-delivery shall be deemed to have been given and received upon
delivery. Junior Creditor and Fund may change its address and/or facsimile
number by giving written notice to the other Lender as specified herein.

 

12.         Entire Agreement. This Subordination Agreement embodies the entire
agreement and understanding of the parties hereto and supersedes all prior
understandings of the parties hereto relating to the subject matter herein
contained.

 

13.         Captions. Section captions used in this Subordination Agreement are
for convenience only and shall not affect the interpretation of the provisions
of this Subordination Agreement.

 

14.         Counterparts; Effectiveness. This Subordination Agreement may be
executed by the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. This Subordination Agreement shall become effective as of the date
hereof when one or more counterparts has been executed and delivered by each of
the parties hereto.

 

15.         Termination. This Subordination Agreement shall remain in full force
and effect until such time as all of the Obligations owing to Fund and the
Senior Lenders are indefeasibly paid and satisfied in full in cash.

 

16.         Governing Law. This Subordination Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in such state. All terms used herein which
are not defined herein and are defined in the New York Uniform Commercial Code
in effect from time to time (the "UCC") shall have the meanings therein stated,
unless the context otherwise requires. Except as otherwise provided in this
Subordination Agreement, the rights and priorities of Junior Creditor and Fund
shall be determined in accordance with applicable law.

 

17.         Successors and Assigns; Benefit of Subordination Agreement. This
Subordination Agreement is solely for the benefit of Junior Creditor and Fund,
for the benefit of itself and the Senior Lenders, and their respective
successors, designees or assigns, as the case may be, and no other persons,
including, without limitation, Debtor, shall have any right, benefit, priority
or interest under, or because of the existence of, this Subordination Agreement.

 

18.         Miscellaneous.

 

(A)     All rights, powers and remedies of Junior Creditor and Fund hereunder
and under any agreement between Debtor or any other Obligor and Junior Creditor
or Fund (as applicable), now, or at any time hereafter in force, shall be
cumulative and not alternative, and shall be in addition to all rights, powers
and remedies given to the parties hereto by law.

 

(B)     Whenever used herein, the singular shall include the plural, the plural
the singular, and the use of the masculine, feminine or neuter gender shall
include all genders.

 

(C)     The terms "Debtor", "Junior Creditor" and "Fund" as used in this
Subordination Agreement shall include the individuals, firms, corporations or
limited liability companies named herein as Debtor, or Junior Creditor or Fund
as applicable, and (i) any successor, individual or individuals, firms or
corporations to which all or substantially all of the business or assets of any
of them shall have been transferred; (ii) in the case of a partnership, any new
partnership which shall have been created by reason of the admission of any new
partner or partners therein or the dissolution of the then existing partnership
or the death, resignation or withdrawal of a partner; and (ii) in the case of a
corporation or limited liability company, any other corporation or limited
liability company into or with which such corporate or limited liability company
party shall have been merged, consolidated, reorganized or absorbed.

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

 
-7-

--------------------------------------------------------------------------------

 

 

19.         Controlling Contract. In the case of any conflict between this
Subordination Agreement and any Security Agreement with either Fund or Junior
Creditor, this Subordination Agreement shall control.

 

20.         Further Action. Each Party shall take such further actions as the
other Party shall reasonably request to effectuate the priorities and other
matters set forth in this Subordination Agreement, including without limitation,
in the case of UCC financing statements filed by Junior Creditor, the filing of
UCC amendment statements giving record notice that the liens and security
interests of Junior Creditor in the Collateral are junior and subordinate to the
senior liens and security interests of Fund. Junior Creditor further agrees the
Junior Indebtedness shall also be subordinate to the indebtedness owing by
Debtor to a third party lender whose loans to Debtor are used to refinance the
Senior Indebtedness, and that Junior Creditor's lien on assets of Debtor shall
also be subordinate to the lien in favor of such future lender, and that Junior
Creditor shall execute and deliver to any such future lender a Subordination
Agreement in the same form as this Subordination Agreement or such other form as
the future working capital lender and Junior Creditor shall reasonably agree to.

 

21.         WAIVER OF TRIAL BY JURY. EACH PARTY HERETO WAIVES TRIAL BY JURY IN
ANY ACTION UNDER OR RELATING TO THIS SUBORDINATION AGREEMENT.

 

 

 

 

 

[Signatures Begin on the Next Page]

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

-8-

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, each party hereto has caused this Subordination Agreement to
be duly executed by its authorized officer(s), as applicable, as of the day and
year first above written

 

  HG HOLDINGS, INC.                 By: /s/ Steven A. Hale II      Name: Steven
A. Hale II          Title: CEO  

 

  Address:  2115 E. 7th Street, Suite 101        Charlotte, North Carolina 28204
    Attn:  Brad Gardner      

 Phone:     (252) 355-4610, Ext. 2 (work)

Facsimile No.: (252) 321-1527

 

 

  HALE PARTNERSHIP FUND, L.P.                     By: /s/ Steven A. Hale II    
  Name: Steven A. Hale II      Title: Founder, Portfolio Manager  

 

  Address:  3600 North Drive       Greenville, North Carolina 27834     Attn:
Bradley G. Garner     Phone:  (252) 355-4610, Ext. 2 (work)     Facsimile No.:
(252) 321-1527  

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

-9-

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGEMENT AND AGREEMENT OF DEBTOR

 

The undersigned, the Debtor referred to in the foregoing Subordination
Agreement, hereby accepts notice of, and consents to the execution and delivery
thereof, and of the terms and provisions thereof, and, in consideration of the
granting or continuing of the Senior Indebtedness, as therein described, agrees
to do and perform any and all acts and things which may be required on the
Debtor’s part to enable Junior Creditor under the Subordination Agreement to
perform the obligations of Junior Creditor as therein expressed, and to refrain
from doing any act or thing which would cause or contribute to a violation by
Junior Creditor of the Subordination Agreement or of any of Junior Creditor’s
obligations thereunder.

 

Dated: September 6, 2018

 

  STONE & LEIGH, LLC                     By: /s/ Matthew W. Smith     Name:
Matthew W. Smith     Title: Manager/President  

      

 

 

Stone & Leigh, LLC - Intercreditor and Debt Subordination Agreement

-10-