SUBORDINATION AGREEMENT
THIS
SUBORDINATION AGREEMENT (this “Subordination
Agreement”)
dated
as of September 24, 2007, is by and among TD Banknorth, N.A. (the “Senior
Creditor”)
and
UFood Franchise Company, a Nevada corporation ( the “Subordinated
Creditor”).
Reference
is made to that certain Credit Agreement, dated as of May 27, 2005, between
KFLG
Watertown, Inc., a Massachusetts corporation (the “Borrower”)
and
the Senior Creditor, as amended from time to time (as amended, the “Credit
Agreement”),
and
that certain Guarantee and Security Agreement, dated as of May 27, 2005, made
by
Knowfat Franchise Company, Inc., a Delaware corporation (the “Guarantor,
and
together with the Borrower, the “Credit
Parties”)
in
favor of the Senior Creditor, as amended from time to time. Any capitalized
term
not defined in this Subordination Agreement shall have the meaning provided
in
the Credit Agreement.
NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereby agree as follows:
1. Representations
by Subordinated Creditor.
The
Subordinated Creditor represents to the Senior Creditor that the maximum amount
of Indebtedness which may be incurred by the Credit Parties to the Subordinated
Creditor is set forth in Schedule
I
hereto.
The Subordinated Creditor further represents that said Indebtedness, has not
heretofore been, not will it be, assigned to or subordinated in favor of any
other Person and that Subordinated Creditor holds no security
therefor.
2. Subordination.
Subordinated Creditor hereby subordinates all present and future Indebtedness
and other obligations of the Credit Parties (including without limitation,
(i)
any indebtedness and obligations of the Guarantor under the Unsecured
Subordinated Bridge Loan Promissory Note, dated as of the date hereof (the
“Note”),
(ii)
any put, call, redemption or repurchase obligations or any other obligation
of
the Credit Parties to repurchase or redeem any equity interests in the Credit
Parties or any warrants or other securities from any Credit Party or (iii)
any
obligation of the Credit Parties to pay any cash dividends or distributions
owed
to the Subordinated Creditor (all such Indebtedness and other obligations are
hereinafter collectively referred to as the “Subordinated
Indebtedness”),
to
any and all Indebtedness now or hereafter owing by the Credit Parties (including
any interest accruing after the commencement of any proceeding by or against
the
Credit Parties under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal, state or foreign bankruptcy,
insolvency or other similar law, and any other interest that would have accrued
but for the commencement of such proceeding, whether or not any such interest
is
allowed as a claim enforceable against the Credit Parties in such proceeding)
to
the Senior Creditor (the “Senior
Indebtedness”)
to the
extent and in the manner hereinafter set forth, and the Subordinated Creditor
agrees not to demand, accept or receive any payment in respect of the
Subordinated Indebtedness, including, without limitation, any payment received
through the exercise of any right of setoff, counterclaim or cross claim, or
any
collateral therefor, in contravention hereof; provided,
however,
so long
as no default or event of default under or within the meaning of any of the
loan
documents evidencing the Senior Indebtedness shall have occurred and be
continuing at the time of such payment, and so long as no default or event
of
default under or within the meaning of any of the loan documents evidencing
the
Senior Indebtedness would occur as a result of, and after giving effect to,
any
such payment the Guarantor may pay to the Subordinated Creditor, and the
Subordinated Creditor may accept from the Guarantor, regularly scheduled
payments of interest at a rate no greater than 9% per annum on the monthly
interest payment dates set forth in the Note.
(a) In
the
event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings in connection
therewith, relative to the Credit Parties or to their creditors, as such, or
to
their properties, or in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Credit Parties, whether or not involving
insolvency or bankruptcy, then the Senior Creditor shall be entitled to receive
payment in full in cash of all of the Senior Indebtedness before the
Subordinated Creditor is entitled to receive any payment in respect of the
Subordinated Indebtedness, and to that end the holders of the Senior
Indebtedness shall be entitled to receive for application in payment thereof
any
payment or distribution of any kind or character, whether in cash or property
or
securities, which may be payable or deliverable in any such proceedings in
respect of the Subordinated Indebtedness;
(b) Upon
the
occurrence of any Event of Default as defined or provided in the Credit
Agreement or in any other agreement of the Credit Parties with the Senior
Creditor, and during the continuance thereof, no amount shall be paid, whether
in cash, property, or securities or otherwise, in respect of the principal
of or
premium, if any, or interest on the Subordinated Indebtedness; and
(c) No
amount
shall be paid by any Credit Party or accepted or retained by the Subordinated
Creditor, whether in cash, property, securities or otherwise, in respect of
the
Subordinated Indebtedness, except as specifically permitted under this
Agreement.
3. Collateral
Assignment of Claims. etc.
As
security for the Senior Indebtedness and in order to effectuate the foregoing
subordination, the Subordinated Creditor hereby transfers and assigns to the
Senior Creditor all claims or demands of the Subordinated Creditor against
the
Credit Parties, with full right on the part of the Senior Creditor, in its
own
name or in their names as attorney in fact for the Subordinated Creditor, to
collect and enforce said claims by suit, proof of debt in bankruptcy or other
liquidation, reorganization or insolvency proceedings or otherwise and to vote
said claims in any such proceedings. If requested by the Senior Creditor, the
Credit Parties and the Subordinated Creditor will: (a) promptly deliver or
cause
to be delivered to the Senior Creditor all promissory notes or other negotiable
instruments evidencing the Subordinated Indebtedness, which promissory notes
or
negotiable instruments shall be endorsed to the Senior Creditor; and (b)
promptly execute and deliver to the Senior Creditor all such further
instruments, and proofs of claim, assignments of claim and other instruments,
as
may reasonably be requested by the Senior Creditor to enforce all claims upon
or
in respect of the Subordinated Indebtedness; and (c) take all such other action,
as may be requested by the Senior Creditor to enforce all claims upon or in
respect of the Subordinated Indebtedness. All such promissory notes and other
negotiable instruments evidencing any Subordinated Indebtedness shall bear
an
appropriate legend referring to this Subordination Agreement and reciting that
the payment of the Subordinated Indebtedness evidenced thereby is subject to
the
provisions hereof.
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4. Delivery
of Payments.
If,
prior to the satisfaction of the Senior Indebtedness and the termination of
the
obligation of the Senior Creditor to make loans to the Borrower under the Credit
Agreement and the documents related thereto, the Subordinated Creditor receives
any payment with respect to any of the Subordinated Indebtedness (except for
payments, if any, permitted under Section 2 hereof) or any security for or
on
account of the Subordinated Indebtedness, the Subordinated Creditor shall
forthwith deliver such payment or security to the Senior Creditor, in precisely
the form received, except for the Subordinated Creditor’s endorsement when
necessary, for application on account of or as security for the Senior
Indebtedness and until so delivered, such payment or security shall be held
in
trust by the Subordinated Creditor as the property of the Senior Creditor.
In
the event of the failure of the Subordinated Creditor to endorse any instrument
for the payment of money so received by the Subordinated Creditor, the Senior
Creditor is irrevocably appointed an attorney for the Subordinated Creditor
with
full power to make such endorsement and with full power of
substitution.
5. Further
Assurances.
In
order to carry out the terms and intent of this Subordination Agreement more
effectively, the Subordinated Creditor will do all acts and execute all further
documents and instruments necessary or convenient to preserve for the Senior
Creditor the benefits of this Subordination Agreement.
6. Waivers.
etc.
No
action which the Senior Creditor, or the Credit Parties with the consent of
the
Senior Creditor, may take or refrain from taking with respect to any Senior
Indebtedness, or any note or notes representing the same, or any collateral
therefor, including any waiver or release thereof or of any agreement or
agreements (including guaranties) in connection therewith, shall affect this
Subordination Agreement or the obligations of the Subordinated Creditor
hereunder. No waiver shall be deemed to be made by the Senior Creditor of any
of
their rights hereunder unless the same shall be in writing and then only with
respect to the specific instance involved, and shall in no way impair or offset
the rights of the Senior Creditor or the obligations of the Subordinated
Creditor in any other respect or at any other time.
7. Transfer.
The
Subordinated Creditor will not transfer, sell or otherwise dispose of any of
the
Subordinated Indebtedness except to a transferee who agrees to become a party
hereto and with the prior written consent of the Senior Creditor.
8. Miscellaneous
Notices.
This
Subordination Agreement shall be binding upon the Subordinated Creditor and
the
Credit Parties and their respective heirs, legal representatives, successors
and
assigns and shall inure to the benefit of the Senior Creditor and their
respective legal representatives, successors and assigns (including without
limitation any transferee of any Senior Indebtedness). This Subordination
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of the counterparts shall together
constitute one and the same instrument. Notices hereunder shall be given in
accordance with the terms of Section 8.2 of the Credit Agreement. The
Subordinated Creditor’s address for notices is set forth on the signature page
hereto.
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9. Governing
Law; Jurisdiction; Waiver of Jury Trial.
This
Subordination Agreement, including the validity hereof and the rights and
obligations of the parties hereunder, shall be construed in accordance with
and
governed by the laws of the Commonwealth of Massachusetts. The Subordinated
Creditor, to the extent that the Subordinated Creditor may lawfully do so,
hereby consents to service of process, and to be sued, in the Commonwealth
of
Massachusetts and consents to the non-exclusive jurisdiction of any state or
federal courts located in the Commonwealth of Massachusetts, as well as to
the
jurisdiction of all courts to which an appeal may be taken from such courts,
for
the purpose of any suit, action, or other proceeding arising out of any of
the
Subordinated Creditor’s obligations hereunder or with respect to the
transactions contemplated hereby, and expressly waives any and all objections
as
to venue in any such courts. The Subordinated Creditor further agrees that
a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and confer personal jurisdiction if served personally
or by certified mail at the address set forth below under the signature of
the
Subordinated Creditor or as otherwise provided under the laws of the
Commonwealth of Massachusetts. Nothing in this Subordination Agreement shall
affect any right the Senior Creditor may otherwise have to bring an action
or
proceeding relating to this Subordination Agreement against the Subordinated
Creditor or its properties in the courts of any jurisdiction. EACH PARTY HERETO
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER
PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST SUCH PERSON IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Remainder
of this page intentionally left blank.]
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This
Subordination Agreement is executed as a sealed instrument as of the day and
year first above written.
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SUBORDINATED
CREDITOR:
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UFOOD
FRANCHISE COMPANY
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By:
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Name:
Xxxxx Xxxx
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Title:
President
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00000-00X
Xxxxxx
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Xxxxxx,
XX X0X 0X0
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Facsimile
#: 000-000-0000
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The
foregoing Subordination Agreement is hereby accepted:
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SENIOR
CREDITOR:
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TD
BANKNORTH, N.A.
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By:
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Name:
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Title:
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Address:
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CREDIT
PARTIES:
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KNOWFAT
FRANCHISE COMPANY, INC.
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By:
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Name:
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Title:
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KFLG
WATERTOWN, INC.
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By:
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Name:
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Title:
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[Signature
Page Subordination Agreement]
Schedule
I
Indebtedness
of Subordinated Creditor
Up
to
$2,000,000 principal amount of Unsecured Subordinated Bridge Loan Promissory
Notes of KnowFat Franchise Company, Inc. payable to the Subordinated Creditor
