Exhibit 10.5
Subordination Agreement
This Subordination Agreement (the "Agreement") is entered into on the 1st
day of November , 2002 by and among Trimedia Entertainment Group, Inc. (the
"Company"), Xxxxx Xxxxxxxx, SPH Investments, Inc., Capital Growth Trust, HMA
Investments Profit Sharing Plan and Continental Southern Resources, Inc.
(collectively referred to as the "Subordinated Creditor"), and Gemini Growth
Fund, LP, a Delaware limited partnership ("Senior Creditor")
Recitals
Whereas, pursuant to the Convertible Promissory Notes (the "Senior Creditor
Notes") each entered into on November 1, 2002 by and between the Company and
Senior Creditor, the Senior Creditor has agreed to loan an aggregate of $250,000
to the Company as more fully described in the Senior Creditor Notes;
Whereas, the Company and the Subordinated Creditor previously entered into
a note or credit agreements (collectively the "Subordinated Creditor Loan
Agreements"); and
Whereas, the Subordinated Creditor has agreed with the Company and the
Senior Creditor to execute and deliver this Agreement and become bound by the
terms of subordination and other provisions as set forth herein.
Now, therefore, in consideration of these promises, the Subordinated
Creditor and the Company hereby agree with the Senior Creditor as follows:
1. The term "Obligation" is used in this Agreement in its broadest and most
comprehensive sense and shall mean all present and future indebtedness of
the Company which may be, from time to time, directly or indirectly,
incurred by the Company, including but not limited to, any negotiable
instruments, evidencing the same, and all guarantees, debts, demands,
monies, indebtness, liabilities and obligations owed or to become owing,
including interest, principal, costs and other charges, and all claims,
rights, causes of actions, judgments, decrees, remedies security interests,
or other obligations of any kind whatsoever and however arising, whether
voluntary or involuntary, absolute, contingent or by operation of law.
2. Any and all Obligations owed by the Company to the Subordinated Creditor
pursuant to the Subordinated Creditor Loan Agreements (the "Subordinated
Creditor Obligations") are hereby subordinated and subject to any and all
Obligations owed to the Company by the Senior Creditor, including but not
limited to the those Obligations arising pursuant to the Senior Creditor
Notes or any other agreement or agreements between the Senior Creditor and
the Company, now or hereafter existing, whether matured or not (hereinafter
referred to as the "Senior Creditor Obligations"), so long as any Senior
Creditor Obligations shall remain unpaid, in whole or in part.
3. So long as any of the Senior Creditor Obligations remain unpaid, in whole
or in part, Subordinated Creditor agrees not to:
a. collect, or to receive payment upon, by setoff or in any other manner,
all or any portion of the Creditor Obligations against the Company now
or hereafter existing;
b. sell, assign, transfer, pledge, or give a security interest in the
Subordinated Creditor Obligations (except subject expressly to this
Agreement);
c. enforce or apply any security, now or hereafter existing for the
Subordinated Creditor Obligations;
d. commence, prosecute or participate in any administrative, legal or
equitable action against the Company or in any administrative, legal,
or in any administrative, legal or equitable action that might
adversely affect the Company or its interest;
e. join in any petition for bankruptcy, assignment for the benefit of
creditors, or creditors` agreement;
f. take any lien or security on any of the Company`s property, real or
personal; and
g. incur any obligation to or receive any loan advances, or gifts from
the Company.
Notwithstanding the foregoing, so long as the Company is not in default in
any of the Senior Creditor Obligations, then the Subordinated Creditor
shall be entitled to receive regularly scheduled payments of interest due
under the Subordinated Creditor Loan Agreements. Nothwithstanding anything
herein to the contrary, nothing herein shall effect the security interest
of the Screen Actors Guild.
4. Except as otherwise expressly agreed to herein, all of the Senior Creditor
Obligations now or hereafter existing shall first be paid by the Company
before any payment shall be made by the Company on the Subordinated
Creditor Obligations. This priority of payment shall apply at all times
until all of the Senior Creditor Obligations have been repaid in full, and
in the event of any assignment by the Company for the benefit of the
Company`s creditors, of any bankruptcy proceedings instituted by or against
the Company, of the appointment of any receiver for the Company or the
Company`s business or assets, or of any dissolution or other winding up of
the Company, and in all such cases respectively, the officers of the
Company and any assignee, trustee in bankruptcy, receiver, and other person
or persons in charge, are hereby obligated to pay the Senior Creditor the
full amount of the Senior Creditor Obligations before making any payments
to the Subordinated Creditor.
5. As an additional security for the Senior Creditor Obligations, and to
secure the performance of all of the Subordinated Creditor`s obligations
arising to the Senior Creditor under this Agreement, Subordinated Creditor
hereby transfers, grants a security interest in, and assigns to the Senior
Creditor all of Subordinated Creditor`s rights to any payments or
distributions which might otherwise be due to the Subordinated Creditor
from the Company. Senior Creditor is hereby irrevocably constituted and
appointed the attorney-in-fact of Subordinated Creditor to file any and all
proofs of claim, financing statements, and any other documents and to take
all other action, either in Senior Creditor`s names, or in the name of the
Subordinated Creditor`s name, whichever is necessary to enable Senior
Creditor to obtain all such payments.
6. Subordinated Creditor agrees that if part or all of the Subordinated
Creditor Obligations shall be evidenced by a promissory note or other
instrument, Subordinated Creditor shall place or cause to be placed on its
face a legend stating that the payment thereof is subject to the terms of
this Agreement and is subordinate to the payment of all of the Senior
Creditor Obligations. Subordinated Creditor agrees to xxxx all books of
account in such manner as to indicate that payment thereof is subordinated
pursuant to the terms of this Agreement.
7. Subordinated Creditor agrees that Senior Creditor shall have absolute power
and discretion, without notice to Subordinated Creditor, to deal in any
manner with the Senior Creditor Obligations, including interest, costs and
expenses payable by the Company to the Senior Creditor, and any security
and guarantees therefore including, but not limited to release, surrender,
extension, renewal, acceleration, compromise or substitution. Subordinated
Creditor hereby waives and agrees not to assert against the Senior Creditor
any rights which a guarantor or surety could exercise; however, nothing in
this Agreement shall constitute Subordinated Creditor a guarantor or
surety. Subordinated Creditor hereby waives the right, if any, to require
that Senior Creditor marshal or otherwise require the Senior Creditor to
proceed to dispose of or foreclose upon collateral in any manner or order.
8. This Agreement, the obligations of Subordinated Creditor to Senior
Creditor, and Senior Creditor`s rights and privileges hereunder shall
continue until payment in full of all of Senior Creditor Obligations owing
to Senior Creditor by the Company notwithstanding any action or non-action
by the Senior Creditor with respect thereto or with respect ot any
collateral therefore or any guarantees thereof. All rights, power and
remedies hereunder shall apply to all past, present and future Senior
Creditor Obligations, including under successive transactions which may
continue, renew, increase, decrease or from time to time create new Senior
Creditor Obligations.
9. Subordinated Creditor further agrees that in case Subordinated Creditor
should take or receive any security interest in, or lien by way of
attachment, execution, or otherwise on any of the property, real or
personal, of the Company, or should take or join in any other measure or
advantage contrary to this Agreement, at any time prior to the payment in
full of all of the Senior Creditor Obligations, Senior Creditor shall be
entitled to have the same vacated, dissolved and set aside by such
proceedings or law, or otherwise, as the Senior Creditor may deem
appropriate, and this Agreement shall be and constitute full and sufficient
grounds therefore and shall entitle the Senior Creditor to become a party
to any proceedings at law, or otherwise, initiated by the Senior Creditor
or by any other party, in or by which the Senior Creditor deems it
appropriate to protect its interests hereunder. Subordinated Creditor
agrees that if it violates this Agreement, it shall be liable to the Senior
Creditor for all losses and damages sustained by the Senior Creditor by
reason of such breach, including Senior Creditor`s attorney`s fees in any
such legal action.
10. Except as otherwise expressly agreed to herein, if Subordinated Creditor
shall receive any payments, security interests, or other rights in any
property of the Company in violation of this Agreement, such payment or
property shall be received by Subordinated Creditor in trust for the Senior
Creditor and shall subsequently be delivered and transferred to the Senior
Creditor.
11. No subordination of the Subordinated Creditor Obligations have previously
been executed by the Subordinated Creditor for the benefit of anyone else,
and any such subordinations hereafter executed will be, and shall be
expressed to be, subject and subordinate to the terms of this Agreement.
This Agreement shall continue in full force and effect, and it shall not be
cancelled or otherwise rendered ineffective, until the Senior Creditor has
received payment in full of all of the Senior Creditor Obligations of the
Company.
12. This Agreement shall be binding upon the successors and assigns of
Subordinated Creditor, and shall inure to the benefit of the Senior
Creditor`s successors and assigns.
13. This Agreement and all rights and liabilities of the parties hereto shall
be governed as to the validity, interpretations, enforcement and effect by
the laws of the State of Texas in the courts located in Dallas, Texas.
In Witness Whereof, the parties hereto have caused this Subordination Agreement
to be executed by their authorized officers on and as of the date and in the
year first written above.
SUBORDINATED CREDITORS
------------------------------
Xxxxx Xxxxxxxx, individually
------------------------------
SPH Investments, Inc.
Name:
Title:
------------------------------
Capital Growth Trust
Name:
Title:
------------------------------
HMA Investments Profit Sharing Plan, Inc.
Name:
Title:
------------------------------
Continental Southern Resources, Inc.
Name:
Title:
SENIOR CREDITOR
By: ______________________________
Its: ______________________________
THE COMPANY
__________________________________
Xxxxx Xxxxxxxx, President
