SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, made and entered into this 13th day of
December, 1995 by and between Bridgewater Resources Corp. ("Subordinating
Creditor") and THE CIT GROUP/BUSINESS CREDIT, INC. ("CIT").
WITNESSETH:
WHEREAS, Peerless Chain Company ("PCC") (together with its subsidiary
Peerless Chain of Iowa, Inc. collectively the "Company") has executed and
delivered to Subordinating Creditor its promissory note, dated, December 13,
1995 in the principal amount of $2,500,000 (the "Subordinated Note");
WHEREAS, Discus Acquisition Corporation (the "Guarantor") has executed
and delivered to Subordinating Creditor a guaranty (the "Subordinated Debt
Guaranty") of the Company's obligations under the Subordinated Note and secured
its obligation under the Subordinated Debt Guaranty by a pledge of, and junior
and subordinated lien upon, and security interest in, all of the present and
future outstanding common stock of PCC (the "Pledged Stock");
WHEREAS, Guarantor has also executed and delivered to Subordinating
Creditor its promissory note dated December 13, 1995 in the original amount of
$1,200,000 (the "Guarantor Note"), which note is secured by a pledge of, and
junior and subordinated lien upon, and security interest in, the Pledged Stock;
WHEREAS, the Company desires to borrow certain sums from CIT pursuant
to a certain Financing Agreement ("Financing Agreement"), including, without
limitation, the Revolving Loans, Letters of Credit, Term Loans and CAPEX Term
Loans (as defined in said Financing Agreement);
WHEREAS, the Guarantor has executed and delivered to CIT a guaranty
(the "Senior Debt Guaranty") of the Senior Debt (as defined below) and secured
its obligations under the Senior Debt Guaranty by a pledge of, and a first
priority lien upon and security interest in, the Pledged Stock;
WHEREAS, the extension of credit by CIT to the Company will benefit the
Subordinating Creditor;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinating Creditor hereby agrees with CIT as follows:
1. SUBORDINATION. The Subordinating Creditor hereby subordinates and defers the
payment (including without limitation in any Insolvency Proceeding) of any and
all amounts which may be now or hereafter owing by (a) the Company to the
Subordinating Creditor pursuant to the Subordinated Note and (b) the Guarantor
to the Subordinating Creditor pursuant to the Guarantor Note, and/or any
promissory notes now or hereafter executed and delivered by (i) the Company to
the Subordinating Creditor in payment of or as evidence of amounts now or
hereafter owing by the Company to the Subordinating Creditor arising pursuant to
or in connection with said Subordinated Note and (ii) the Guarantor to the
Subordinating Creditor in payment of or as evidence of amounts now or hereafter
owing by the Guarantor to the Subordinating Creditor arising pursuant to or in
connection with said Guarantor Note (collectively the "Subordinated Debt") to
the prior payment and satisfaction in full of any and all Senior Debt which may
be now or hereafter owing to CIT by the Company. "Senior Debt", as used herein,
shall mean all Obligations (as defined in the Financing Agreement), including,
without limitation, any and all now existing and future indebtedness,
obligations or liabilities of the Company to CIT, whether direct or indirect,
absolute or contingent, secured or unsecured, arising under the Financing
Agreement (including, without limitation, all Revolving Loans, Term Loans, CAPEX
Term Loans and Letters of Credit thereunder) or any guaranty executed by the
Company in favor of CIT, as now written or as amended or supplemented hereafter,
or by operation of law or otherwise, including any and all expenses (including
reasonable attorneys' fees) incurred in connection therewith and any interest
thereon, including, without limitation, any post petition interest accruing on
such Senior Debt after the Company becomes subject to an Insolvency Proceeding
(whether or not such interest is enforceable against the Company or recoverable
against the Company or its bankruptcy estate). Senior Debt shall also include
all indebtedness, obligations and liabilities of the Company (i) arising in
connection with any advances made to the Company as a debtor-in-possession, or a
trustee for the Company under any Insolvency Proceeding and (ii) to repay any
amount previously paid by the Company pursuant to the Financing Agreement which
amounts have been returned to the Company or to a trustee pursuant to sections
547 or 548 of the Bankruptcy Code.
"Insolvency Proceeding" shall mean (i) any insolvency or bankruptcy
case or proceeding or any receivership, liquidation, reorganization,
readjustment, composition or other similar case or proceeding relating to the
Company and/or the Guarantor or their assets, (ii) any liquidation, dissolution,
reorganization or winding up of the Company and/or the Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
proceedings or (iii) any assignment for the benefit of creditors or any other
marshalling of the Company's and/or Guarantor's assets.
2. REPRESENTATIONS AND WARRANTIES. The Subordinating Creditor hereby
warrants and represents:
2.1 That the Company and/or the Guarantor (as the case may be) owes to
the Subordinating Creditor, as of the date hereof, the Subordinated Debt; that
the Subordinated Debt is not subject to any defense, offset or counterclaim
arising in connection with any purchase price adjustment under Section 1.2 of
the Stock Purchase Agreement between Guarantor and Subordinating Creditor dated
as of November 22, 1995 (herein the "Prohibited Offset") and the Subordinating
Creditor will not assert or assent to any Prohibited Offset; that the
Subordinating Creditor is the exclusive owner of the Subordinated Debt; that
there are, and will be, no guarantees or collateral or security for said
Subordinated Debt except the Subordinated Debt Guaranty and the Pledged Stock;
and that neither the Subordinated Debt nor any collateral or guarantees therefor
is now, nor will be subject to any lien, security interest, guarantees,
subordination or assignment except (a) the subordination in favor of CIT
hereunder, (b) the junior subordination in favor of the lessor under the
Company's lease of its Winona, Minnesota facility, all as more fully set forth
in the Subordinated Note (herein the "Winona Lease Subordination) and (c)
Permitted Transfers. The Subordinating Creditor further represents, warrants and
agrees that the Company is not, and shall not be obligated to Subordinating
Creditor with respect to the Guarantor Note and Subordinating Creditor will not
assert, and hereby waives and relinquishes any and all claims that it may now or
hereafter have against the Company with respect to the Guarantor Note.
"Permitted Transfers" as used herein shall mean: (i) any assignment or transfer
to an affiliate of the Subordinating Creditor who agrees in writing to be bound
by and comply with the terms and provisions of this Subordination Agreement, and
(ii) any assignment, transfer or pledge of, or grant of a lien upon, or security
interest in, the Subordinated Debt, provided that with respect to this clause
(ii) (x) the Subordinating Creditor obtains CIT's prior consent thereto (which
consent shall not be unreasonably withheld by CIT) and (y) the transferee agrees
in writing to be bound by and comply with the terms and provisions of this
Subordination Agreement.
2.2 That until such time as this Subordination Agreement is terminated
as herein below provided, except as otherwise specifically permitted in this
Subordination Agreement, the Subordinating Creditor will not, directly or
indirectly, demand or receive payment of; exchange, or modify (except for
modifications permitted under paragraph 12 hereof); request or obtain any
additional collateral or security or guarantees for; effect a subordination
(other than the Winona Lease Subordination) or transfer to others of (except for
Permitted Transfers); grant any security interest in or lien on (except for
Permitted Transfers); or assert, or participate in, or bring any sort of action,
suit or proceeding (including without limitation bankruptcy or insolvency
proceedings) either at law or in equity for the enforcement, collection or
realization on: the whole or any part of, the Subordinated Debt.
2.3 That:
(a) Subordinating Creditor is a corporation validly existing and in
good standing under the laws of Texas;
(b) Subordinating Creditor has the power, authority and legal right to
make, deliver and perform this Subordination Agreement;
(c) Subordinating Creditor has taken all necessary corporate action to
authorize its execution of this Subordination Agreement and no consent of any
other party (including, but not limited to, any shareholder or creditor) and no
authorization of, notice to, or other act by or in respect of any governmental
authority, is required; and
(d) This Subordination Agreement has been duly authorized, executed and
delivered on behalf of the Subordinating Creditor and constitutes a legal, valid
and binding obligation of Subordinating Creditor.
3. INDUCEMENT. This Subordination Agreement is executed as an
inducement to CIT to make loans or advances to the Company or otherwise to
extend credit or financial accommodations to the Company, and to enter into and
continue a financing arrangement with the Company and is executed in
consideration of CIT's doing or having done any of the foregoing. The
Subordinating Creditor agrees that any of the foregoing shall be done or
extended by CIT in its sole discretion and shall be deemed to have been done or
extended by CIT in consideration of and in reliance upon the execution of this
Subordination Agreement, but that nothing herein shall obligate CIT to do any of
the foregoing.
4. TERMINATION. This Subordination Agreement may be terminated only
upon (i) payment and satisfaction in full of all Senior Debt and termination of
the Financing Agreement and CIT's obligation to make loans, advances and/or
extensions of credit thereunder, or (ii) as of an Anniversary Date, as defined
in the Financing Agreement, and then only upon actual receipt by an officer of
CIT of at least one hundred and twenty (120) days prior written notice of
termination sent by registered or certified mail; provided, however, that in the
event of termination of this Subordination Agreement, the Subordinating
Creditor, shall remain bound hereunder, and this Subordination Agreement shall
continue in full force and effect with respect to any and all Senior Debt
created or arising prior to the effective date of such termination and with
respect to any and all extensions, renewals or modifications of said
pre-existing Senior Debt. This is a continuing agreement and written notice as
above provided shall be the only means of termination, notwithstanding the fact
that for certain periods of time there may be no Senior Debt owing to CIT by the
Company.
5. RIGHTS IN INSOLVENCY PROCEEDINGS. The Subordinating Creditor
irrevocably authorizes and empowers CIT in any Insolvency Proceeding involving
or relating to the Subordinated Debt to file a proof of claim in behalf of the
Subordinating Creditor with respect to the Subordinated Debt if the
Subordinating Creditor fails to file proof of its claims prior to 30 days before
the expiration of the time period during which such claims must be submitted, to
accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt in an amount
not in excess of the Senior Debt then outstanding and to take such other action
as may be reasonably necessary to effectuate the foregoing. The Subordinating
Creditor shall provide to CIT all information and documents necessary to present
claims or seek enforcement as aforesaid. The Subordinating Creditor agrees that
while it shall retain the right to vote its claims and otherwise act in any such
Insolvency Proceeding relative to the Company and/or the Guarantor (as the case
may be) (including, without limitation, the right to vote to accept or reject
any plan of partial or complete liquidation, reorganization, arrangement,
composition, or extension), the Subordinating Creditor shall not take any action
or vote in any way so as to contest (i) the validity or the enforceability of
the Financing Agreement, or the liens and security interests to the extent
granted to CIT with respect to the Senior Debt, (ii) the rights and duties of
CIT established in the Financing Agreement or any security documents with
respect to such liens and security interests, or (iii) the validity or
enforceability of this Subordination Agreement or any agreement or instrument to
the extent evidencing or relating to the Senior Debt. CIT agrees that while it
shall retain the right to vote its Senior Debt and otherwise act in any such
reorganization proceeding relative to the Company and/or the Guarantor (as the
case may be) (including, without limitation, the right to vote or accept or
reject any plan of partial or complete liquidation, reorganization arrangement,
composition or extension), CIT shall not take any action or vote in any way so
as to contest the enforceability of this Subordination Agreement, the
Subordinated Note or any other agreement or instrument to the extent evidencing
or relating to Subordinated Debt.
6. NO LIABILITY; OVERPAYMENT. CIT shall in no event be liable for any
failure to prove the Subordinated Debt; for failure to exercise any rights with
respect thereto; or for failure to collect any sums payable thereon or for
failure to take any affirmative action in connection therewith. If any dividends
or payments received by CIT on the Subordinated Debt, when added to the
dividends received directly by CIT on the Senior Debt, shall exceed the total
Senior Debt, CIT agrees to pay the excess to the Subordinating Creditor.
7. ARRANGEMENTS WITH THE COMPANY. It is agreed that CIT may enter into
any agreement or arrangements with respect to the Financing Agreement and any
amendments thereto, with the Company and/or the Guarantor as CIT may deem
proper; extend the time for payment of and/or renew any or all Senior Debt;
surrender any security, collateral or guarantees underlying all or any of such
Senior Debt, and make any settlements and compromises thereof; all without
notice to or consent from the Subordinating Creditor and without in any way
impairing or affecting this Subordination Agreement thereby.
8. PAYMENTS TO THE SUBORDINATING CREDITOR. (a) Subject to the
provisions of subparagraph (b) hereof, should any payment with respect to the
Subordinated Debt be received by the Subordinating Creditor in any form and from
any source whatsoever (including, without limitation, any payment or
distribution of collateral security (if any ) or the proceeds of any such
collateral security) prior to the satisfaction in full of all of the Senior
Debt, the Subordinating Creditor shall immediately deliver to CIT any monies,
securities or other property received by it, or its equivalent in cash, with
proper endorsements or assignments, if necessary; and pending such delivery the
Subordinating Creditor shall hold such monies, securities or other property as
trustee for the account of CIT; and
(b) Notwithstanding anything to the contrary stated herein, (x) the
Company may make payments of (i) interest when due, strictly in accordance with
the terms and provisions of the Subordinated Note as in effect on the date
hereof, and (ii) principal in full commencing on December 13, 1998 to the
Subordinating Creditor under and strictly in accordance with the Subordinated
Note as in effect on the date hereof, and (y) the Guarantor may make payments of
(i) interest when due, strictly in accordance with the terms and provisions of
the Guarantor Note as in effect on the date hereof, and (ii) principal in full
commencing on December 13, 1998 to the Subordinating Creditor under and strictly
in accordance with the Guarantor Note as in effect on the date hereof, all
without prepayment or acceleration of the Subordinated Debt, and the
Subordinating Creditor may demand, receive and retain said payments unless CIT
has notified the Subordinating Creditor in writing that an Event of Default has
occurred under the Financing Agreement (a "Suspension Notice"). Upon receipt of
a Suspension Notice, and at all times thereafter during the applicable
Suspension Period (as defined herein), (i) the Subordinating Creditor may not
take, demand, receive or accelerate any payment of the Subordinated Debt and the
Company and/or the Guarantor shall not give, make or permit any such payment and
(ii) the Subordinating Creditor shall not assert, participate in or bring any
sort of action, suit or proceeding (including without limitation any Insolvency
Proceeding) either at law or in equity for the enforcement, collection or
realization of all, or any part of, the Subordinated Debt (herein "Commence
Legal Action"). In the event CIT determines that the Event of Default has been
cured to its satisfaction, CIT shall so notify the Subordinating Creditor and
the Company and the Guarantor in writing and the suspended payments may resume.
Such resumed payments shall be subject to all of the terms and provisions of
this Subordination Agreement. Upon the expiration of an applicable Suspension
Period, unless (A) CIT has prior to such expiration given a notice of
acceleration to the Company and/or the Guarantor with respect to the Senior Debt
and is pursuing remedies against the Company and/or the Guarantor or the
Collateral (as defined in the Financing Agreement), or (B) the Company and/or
the Guarantor has paid to the Subordinating Creditor all installments of
principal and interest that would have been due (without acceleration) during
such Suspension Period, the Subordinating Creditor may accelerate the
Subordinated Debt and Commence Legal Action. However, notwithstanding the
foregoing, should any Insolvency Proceeding occur at any time, the Subordinated
Debt shall be subordinated to the prior payment of all Senior Debt in accordance
with paragraph 1 hereof, and the aforesaid provisions of subparagraph (a) of
this paragraph. Notwithstanding any provision to the contrary contained herein
the principal amount of the Guarantor Note may be paid from the proceeds of
additional common stock issued by the Guarantor hereafter.
(c) "Suspension Period" shall mean a period equal to 180 consecutive
days. With respect to Suspension Notice(s), it is hereby understood and agreed
that:
(i) there shall be no limit of the number of Suspension Notices which
CIT may give;
(ii) CIT shall not be entitled to give successive Suspension Notices
based on a continuing Event of Default under the Financing Agreement,
which Event of Default was the basis for a prior Suspension Notice; and
(iii) nothing contained herein shall prohibit CIT from giving
successive Suspension Notices based upon an Event of Default under the
Financing Agreement other than the Event of Default which was the basis
for any prior Suspension Notice or any other Event of Default of which
CIT had actual knowledge at the time it gave such prior Suspension
Notice.
(d) In the event that as a result of an avoidance action under the
Bankruptcy Code (including, but not necessarily limited to, any action under
Sections 544, 545, 547, 548, 549 and/or 550), the Subordinating Creditor is
required to return to the Company and/or the Guarantor or their bankruptcy
estate any payment received by the Subordinating Creditor and paid over to CIT
pursuant to Section 8(a), thereupon CIT shall pay back to the Subordinating
Creditor such amount paid over to CIT, provided that such amount is returned to
the Company and/or the Guarantor and/or its bankruptcy estate as aforesaid.
9. ACCELERATION RIGHTS AND REMEDIES
(a) The Subordinating Creditor shall have no right to accelerate the
Subordinated Debt or Commence Legal Action to enforce collection of all, or any
part of, the Subordinated Debt, except as otherwise provided in paragraph (b)
below and except that the Subordinating Creditor may accelerate and Commence
Legal Action in the event that:
(i) the Company and/or the Guarantor (as the case may be) commences or
has commenced against it (other than by the Subordinating Creditor) an
Insolvency Proceeding, provided that any such involuntary Insolvency
Proceeding which is commenced against the Company and/or the Guarantor
(as the case may be) is not dismissed or discharged within 60 days
after commencement thereof and provided further that the Subordinating
Creditor may accelerate only against the entity which is the subject of
any such Insolvency Proceeding; or
(ii) the applicable Suspension Period expires and neither of the
conditions specified in clauses (A) or (B) of subparagraph (b) of
paragraph 8 hereof have occurred;
provided, however that any amount received by the Subordinating
Creditor as a result of any acceleration permitted above, prior to payment in
full of the Senior Debt, shall be held in trust and paid to CIT in accordance
with the provisions of this Subordination Agreement.
(b) The Subordinating Creditor shall have no right to Commence Legal
Action for enforcement or collection of all, or any part of, the Subordinated
Debt, except that, in the event (i) the Company or the Guarantor defaults in
payment of any installment of interest or principal due the Subordinating
Creditor under the Subordinated Note or the Guaranty Note, respectively and
permitted by the terms of this Subordination Agreement, (ii) the Subordinating
Creditor notifies CIT of such default in payment and (iii) CIT does not send a
Suspension Notice to the Subordinating Creditor within 30 days after CIT's
receipt of such notice from the Subordinating Creditor, the Subordinating
Creditor may Commence Legal Action to enforce collection of the defaulted
installment from the Company or the Guarantor (as the case may be) (without any
acceleration of the Subordinated Debt), provided, however, that the
Subordinating Creditor may not participate in the commencement of any
involuntary Insolvency Proceeding against the Company and/or the Guarantor.
10. ACTION AGAINST. If the Subordinating Creditor in violation of this
Subordination Agreement shall assert or bring any action, suit or proceeding
against the Company or the Guarantor, the Company and/or the Guarantor may
interpose as a defense or dilatory plea the making of this Subordination
Agreement, and CIT is hereby irrevocably authorized to intervene and to
interpose such defense or plea in its name or in Company's or the Guarantor's
name. If the Subordinating Creditor shall attempt to enforce, collect or realize
upon any Subordinated Debt or, any collateral, security or guarantees (if any),
securing the Subordinated Debt in violation of this Subordination Agreement, the
Company and/or the Guarantor may, by virtue of this Subordination Agreement,
restrain any such enforcement, collection or realization, or upon failure to do
so, CIT may restrain any such enforcement, collection or realization, either in
its own name or in the name of the Company and/or the Guarantor.
11. ENDORSEMENT OF NOTE; OTHER DOCUMENTS. The Subordinating Creditor
agrees to xxxx the Subordinated Note evidencing the Subordinated Debt with a
notation in substantially the following form:
"This Note is subject to the terms and provisions of Subordination
Agreement executed by the Payee in favor of The CIT Group/Business Credit,
Inc.",
and to deliver proof of such notation to CIT. In the event CIT requires the
possession of the Subordinated Note in order to present claims or seek
enforcement against the Company and/or the Guarantor for payment of the
Subordinated Note in accordance with the provisions of this Subordination
Agreement, the Subordinating Creditor agrees to endorse and deliver the
Subordinated Note to CIT.
12. MODIFICATIONS TO THE SUBORDINATED NOTE. Without obtaining the prior
written consent of CIT, the Subordinated Note or the Guarantor Note shall not be
amended for (i) any increase in the rate of interest charged thereunder, (ii)
any increase in the principal amount thereof or any installment due thereunder,
(iii) any change of the maturity date of any payment for principal or interest
which would have the effect of accelerating payment thereof, (iv) amendment of
the form or method of payment, (v) the granting or obtaining of any collateral
security or obtaining any lien in any collateral, (vi) providing for any
additional financial covenants or events of default or making more restrictive
any existing covenants or events of default applicable to the Company and/or the
Guarantor, or (vii) any other amendment which would have a material adverse
effect on the operations of the Company or the Guarantor, CIT's security
interest in the Collateral or CIT's Senior Debt.
13. NO IMPAIRMENT OF OBLIGATION. Subject to all of CIT's rights as
expressly provided in this Subordination Agreement, nothing contained in this
Subordination Agreement shall impair, as between the Company and/or the
Guarantor (as the case may be) and the Subordinating Creditor, the obligation of
the Company and/or the Guarantor (as the case may be), which is unconditional
and absolute, to pay the Subordinated Debt to the Subordinating Creditor as and
when all or any portion thereof shall become due and payable in accordance with
its terms or prevent the Subordinating Creditor, upon any default under the
Subordinated Debt, from exercising all rights, powers and remedies otherwise
provided therein or by applicable law.
14. SUBROGATION. Until such time as all Senior Debt is paid in full and
this Subordination Agreement is terminated as herein provided the Subordinating
Creditor shall not assert or be entitled to any subrogation rights. Subject to
the prior sentence, if any payment or distribution to which the Subordinating
Creditor would otherwise have been entitled (but for the provisions of this
Subordination Agreement) shall have been turned over to CIT or otherwise applied
to the payment of the Senior Debt pursuant to the provisions of this
Subordination Agreement, then the Subordinating Creditor shall be entitled to
receive from CIT any payments or distributions received by CIT in excess of the
amount sufficient to pay all Senior Debt in full, and upon such payment in full
of the Senior Debt shall be subrogated (without any representation by, or any
recourse whatsoever to CIT) to all rights of CIT to receive all further payments
or distributions applicable to the Senior Debt until the Subordinated Debt shall
have been paid in full. For purposes of the Subordinating Creditor's subrogation
rights hereunder, payments to CIT with respect to the Senior Debt which the
Subordinating Creditor would have been entitled to receive with respect to the
Subordinated Debt but for the provisions of this Subordination Agreement shall
not, as between the Company and/or the Guarantor (as the case may be), its
creditors (other than CIT) and the Subordinating Creditor, be deemed payments
with respect to the Senior Debt except, at the Subordinating Creditor's option,
to the extent Subordinating Creditor has lost its subrogation rights with
respect to any such payment as a result of any action by CIT. CIT makes
absolutely no representation or warranty whatsoever in connection with such
rights or Senior Debt, including without limitation any representation or
warranty as to the enforceability of the Financing Agreement, the Senior Debt,
or any lien upon Collateral therefor, or the collectibility of said Senior Debt.
15. GUARANTIES AND PLEDGED STOCK. (a) The Subordinating Creditor
hereby:
(i) subordinates and defers the payment of any and all amounts which
may be now or hereafter owing by the Guarantor to Subordinating
Creditor pursuant to the Subordinated Debt Guaranty to the prior
payment and satisfaction in full of the obligations of the Guarantor to
CIT arising under or pursuant to the Senior Debt Guaranty to the same
extent and in the same manner as the Subordinated Debt is subordinated
to the Senior Debt herein;
(ii) subordinates its lien upon, and security interest in, the Pledged
Stock (whether such Pledged Stock secures the Subordinated Debt
Guaranty or the Guarantor Note) to CIT's first and prior lien upon, and
security interest in, such Pledged Stock;
(iii) agrees and confirms that until all Senior Debt has been paid in
full, it shall not:
(x) foreclose its junior and subordinate lien upon and security
interest in, the Pledged Stock; or
(y) take any other action or institute any other proceedings with
respect to the Pledged Stock; or
(z) exercise any other right or assert any other claim with respect to
the Pledged Stock.
(b) CIT hereby acknowledges and agrees that, subject to its first and prior
lien upon, and security interest in, the Pledged Stock, it is holding,
and will continue to hold, the Pledged Stock as bailee for the benefit
of Subordinating Creditor for the sole purpose of enabling the
Subordinating Creditor to perfect its lien on such Pledged Stock.
Subordinating Creditor further agrees that:
(i) CIT shall have no duty to Subordinating Creditor in connection with
such bailment arrangement except to exercise reasonable care with
respect to the safekeeping of such Pledge Stock, all subject to, and in
accordance with, CIT's normal business practices; and
(ii) CIT shall not incur any liability whatsoever to Subordinating
Creditor for any loss or damage now or hereafter arising under or in
connection with this bailment arrangement except to the extent such
loss or damage arises solely from CIT's willful misconduct, and
Subordinating Creditor hereby indemnifies CIT (and its officers and
directors) from and against any and all claims, actions, suits, losses,
damages, costs, liabilities and expenses (including reasonable
attorney's fees) arising out of or in any way relating to this bailment
arrangement, provided that CIT shall not be so indemnified for its
willful misconduct.
CIT agrees that upon termination of the Financing Agreement and full, final and
indefeasible payment of all Senior Debt, it will deliver the Pledged Stock to
the Subordinating Creditor.
16. ENTIRE AGREEMENT. This Subordination Agreement embodies the whole
agreement of the parties and may not be modified except in writing. CIT's
failure to exercise any right hereunder shall not be construed as a waiver of
the right to exercise the same or any other rights at any other time and from
time to time thereafter, and such rights shall be considered as cumulative
rather than alternative. No knowledge of any breach or other non-observance by
the Subordinating Creditor of the terms and provisions of this Subordination
Agreement shall constitute a waiver thereof, nor a waiver of any obligations to
be performed by the Subordinating Creditor hereunder.
17. WAIVER OF NOTICE. The Subordinating Creditor hereby waives any and
all demands, presentments or notices (other than notices specifically provided
for in this Subordination Agreement) to which it might otherwise be entitled
(including, without limitation, any and all notice of the creation or accrual of
any Senior Debt; of any extension, modification, or renewal of any of said
Senior Debt, and of CIT's reliance on this Subordination Agreement).
18. NOTICES All notices and other communications hereunder shall be in
writing or by telex, telegram or telecopy, and shall be deemed to have been duly
made when delivered in person or sent by telex, telegram, telecopy, same day or
overnight carrier, or when deposited in the United States first class or
registered or certified mail return receipt requested, postage prepaid. Notices
shall be sent:
If to the Subordinating Creditor:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax#: (000) 000-0000
If to the Company and/or Guarantor:
Peerless Chain company
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx X. xxx Xxxxxxxxxx
Fax# (000) 000-0000
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 X. Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Fax# (000) 000-0000
If to CIT:
The CIT Group/Business Credit, Inc.
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx, Vice President and Regional Manager
Fax# (000) 000-0000
19. GENERAL PROVISIONS. When used in this Subordination Agreement all
pronouns shall, wherever applicable, be deemed to include the plural as well as
the masculine and feminine gender. This Subordination Agreement: shall inure to
the benefit of CIT, its successors and assigns and any parent, subsidiary or
affiliate of CIT; shall be binding upon the respective successors and assigns of
the Subordinating Creditor; and shall pertain to the Company, the Guarantor and
their respective successors and assigns. This Subordination Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed an original, and such counterparts shall together constitute but one and
the same document.
20. CHOICE OF LAW. THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Subordination Agreement effective as of the date above set forth.
BRIDGEWATER RESOURCES CORP.
By Xxxx X. Xxxxxx
Title: CEO
THE CIT GROUP/BUSINESS CREDIT, INC.
By Xxxxxxx Xxxx
Title: Vice President
The undersigned, the Company and the Guarantor referred to in the
foregoing Subordination Agreement, hereby agree to comply with all of the terms
and provisions of said Subordination Agreement in all respects. In the event of
a breach by either the Company, the Guarantor or Subordinating Creditor in the
performance of any of the terms of the said Subordination Agreement, all of said
Senior Debt shall, without notice or demand, become immediately due and payable.
The Company and the Guarantor hereby covenant that they will not (except as
otherwise provided in the Subordination Agreement) make any payment on account
of, recognize any assignment or transfer of, nor give any additional security
for, the Subordinated Debt while said Subordination Agreement is in effect or
until CIT's Senior Debt has been satisfied in full and said Subordination
Agreement is terminated as herein provided.
PEERLESS CHAIN COMPANY
By Xxxxxxx X. Xxxxx
Title: Chairman
PEERLESS CHAIN OF IOWA, INC.
By Xxxxxxx X. Xxxxx
Title: Chairman
DISCUS ACQUISITION CORPORATION
By Xxxxxxx X. Xxxxx
Title: CEO
