EXHIBIT 4.2
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (hereafter this "Agreement") is made as of the
27th day of December, 1996, by and among SANWA BUSINESS CREDIT CORPORATION, a
Delaware corporation, as a Senior Lender and as Agent under the Sanwa Documents
for other Senior Lenders, and DILMUN FINANCIAL SERVICES, an unlimited Irish
company, and BIB HOLDINGS (BERMUDA) LTD., a Bermuda corporation.
RECITALS
WHEREAS, Brothers Gourmet Coffees, Inc. (the "Borrower") has entered into a
Loan and Security Agreement dated as of May 29, 1996 with Sanwa Business Credit
Corporation, as a Senior Lender and as Agent for the Senior Lenders (the "Sanwa
Loan Agreement"), pursuant to which the Senior Lenders have committed to make
loans and financial accommodations available to the Borrower to be secured by a
first lien and security interest against the Collateral.
WHEREAS, Subordinated Creditor is the holder of (a) a senior subordinated
promissory note of even date herewith issued by the Borrower in the principal
amount of Fifteen Million Dollars ($15,000,000) (the "Subordinated Note")
pursuant to the Subordinated Note Agreement and (b) the Warrant issued pursuant
to the Subordinated Note Agreement.
WHEREAS, the Borrower has requested that the Subordinated Creditor enter
into this Agreement with Sanwa as a condition of the Borrower's assumption of
the Subordinated Debt and as a condition to the Senior Lenders continuing to
advance Sanwa Debt under the Sanwa Documents on the date hereof or in the
future.
WHEREAS, Sanwa and Subordinated Creditor have entered into this Agreement
to set forth the relative rights of payment of the indebtedness and other
liabilities and obligations of the Borrower evidenced by the Sanwa Documents and
the Subordinated Debt Documents.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Subordinated Creditor, and
in order to induce the Senior Lenders, at their option, now or from time to time
hereafter, to make loans or extend credit or any other financial accommodations
to or for the benefit of the Borrower or to grant such renewals or extensions
thereof as the Senior Lenders may deem advisable and to better secure Sanwa and
the other Senior Lenders in respect of the foregoing, the Subordinated Creditor
hereby agrees with Sanwa and the other Senior Lenders as hereinafter set forth.
1
Section 1. CERTAIN DEFINITIONS. In addition to the terms defined in the
recitals hereto, the following terms shall have the following meanings for
purposes of this Agreement:
"Additional Subordinated Notes" shall mean the additional senior
subordinated promissory notes issued pursuant to Section 5(d)(vi) of the Warrant
in the form of Exhibit A to the Warrant.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 ET SEQ., as from time to
time hereinafter amended, and any successor thereto or replacement therefor
which may be hereinafter enacted.
"Blockage Period" shall have the meaning ascribed thereto in subsection
2(b) hereof.
"Code" shall mean the Uniform Commercial Code as in effect from time to
time in each jurisdiction in which any of the Collateral is located.
"Collateral" shall mean all assets, property and interests in property now
owned or hereafter acquired by the Borrower or its Subsidiaries or any guarantor
thereof in or upon which a security interest, lien or mortgage is granted to
Sanwa and the other Senior Lenders by the Borrower or its Subsidiaries under the
Sanwa Documents or under any other documents, instruments, agreements or
writings executed by the Borrower or its Subsidiaries and delivered to Sanwa
including, without limitation, the Accounts, General Intangibles, Fixtures,
Inventory, Intellectual Property, Equipment and Real Estate and all Proceeds (as
defined in the Code) of all of the foregoing.
"Collection Action" shall mean any of the following: (a) to take from or
on behalf of the Borrower or any guarantor, by set-off or in any similar manner,
the whole or any part of any monies which may now or hereafter be owing by the
Borrower or any guarantor with respect to the Subordinated Debt, (b) to take any
Enforcement Action with respect to the Subordinated Debt, or (c) to accelerate
the Subordinated Debt.
"Conversion Shares" shall have the meaning ascribed thereto in the Warrant.
"Covenant Default" shall mean any Event of Default (other than a Payment
Default) with respect to any Sanwa Debt which is described in the definition of
"Event of Default" in the Sanwa Loan Agreement (excluding clauses (f), (g),(h)
and (j) thereof).
"Enforcement Action" shall mean any of the following: (a) to xxx for
payment of, or to initiate or participate with others in any Event of Bankruptcy
or any suit, action or proceeding against the Borrower or any guarantor to
enforce payment of or to collect the whole or any part of the Sanwa Debt or the
Subordinated Debt or to enforce any other rights, powers, privileges or remedies
under the Sanwa Documents or the Subordinated Debt Documents or (b) to take any
action under Article 9 of the Code with respect to personal property (including
any action in the nature of a self-help remedy permitted under the Code) or
under the provisions of any state law with respect to foreclosure upon real
estate to enforce, foreclose upon, take possession of or sell any Collateral or
take any other judicial or non-judicial action with respect to the Collateral.
2
"Event of Bankruptcy" shall mean any Default or Event of Default arising
under clause (f), (g), (h) or (j) of the definition of "Event of Default" in the
Sanwa Loan Agreement.
"Event of Default" shall mean the existence of an Event of Bankruptcy or a
Default or Event of Default under any Sanwa Document.
"Payment Blockage Notice" shall have the meaning ascribed thereto in
subsection 2(b) hereof.
"Payment Default" shall mean a default in the payment (including, without
limitation, any mandatory prepayment) when due (whether such payment is due at
maturity, as a result of acceleration or otherwise) of all or any portion of the
Sanwa Debt.
"Person" shall mean any natural person, corporation, limited partnership,
general partnership, limited liability partnership, limited liability company,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and a government and agency and political subdivision thereof.
"Phantom Stock Payment" shall have the meaning ascribed thereto in the
Warrant.
"Post-Petition Interest" shall mean the aggregate amount of all
post-petition interest, fees, costs or expenses or adequate protection
payments accruing or allowed to be paid during the pendency of any Event of
Bankruptcy and any other interest, fees, costs or expenses that would have
accrued but for the commencement of such Event of Bankruptcy, to the date of
payment even if the claim for such interest, fees, costs or expenses is not
an allowed claim of the type described in Section 506(b) of the Bankruptcy
Code.
"Sanwa" shall mean and include Sanwa Business Credit Corporation as a
Senior Lender and as Agent under the Sanwa Documents for the Senior Lenders and
its successors and assigns.
"Sanwa Debt" shall mean all indebtedness, obligations and liabilities of
the Borrower to Sanwa and the other Senior Lenders of any kind and every kind
and nature now existing or hereafter arising, whether contingent or otherwise
direct or indirect, matured or unmatured including, without limitation, all
principal, fees, costs, expenses, indemnities, premium, if any, interest
(including, without limitation, Post-Petition Interest) and advancements arising
under, or incurred in connection with, or created under, the Sanwa Loan
Agreement, whether such indebtedness, obligations or liabilities arise or accrue
before or after the commencement of any Event of Bankruptcy; PROVIDED that,
notwithstanding anything set forth herein to the contrary, unless otherwise
consented to in writing by the Subordinated Creditor the aggregate principal
amount of Sanwa Debt to which the Subordinated Debt shall be subordinated
pursuant to this Agreement shall not exceed in the aggregate $28,000,000 at any
one time outstanding of which not more than $10,000,000 shall be term debt.
"Sanwa Documents" shall mean and include the Sanwa Loan Agreement and the
other Financing Agreements, and all other agreements, documents and instruments
now or hereafter
3
evidencing or securing Sanwa Debt, and any credit agreement, financing
agreement or other agreement, promissory note, guaranty, instrument or
document of any Person evidencing any replacement, substitution, conversion,
refunding or refinancing thereof, as the same may be amended, modified,
restated, renewed, extended or otherwise supplemented from time to time
hereafter.
"Senior Lenders" shall mean Sanwa Business Credit Corporation, in its
individual capacity as a Lender (as defined in the Sanwa Loan Agreement) under
the Sanwa Loan Agreement and any other Person hereafter becoming a party to the
Sanwa Loan Agreement as a Lender and any other Person hereafter holding any part
of the Sanwa Debt under any Sanwa Document.
"Significant Subordinated Debt Default" shall mean the occurrence of (a) a
matured Event of Default (as defined in the Subordinated Note Agreement) under
Section 7.1(i), 7.1(j) or 7.1(k) of the Subordinated Note Agreement, or (b) a
default in the payment when due under the Subordinated Note Agreement of
Subordinated Debt in excess of $100,000 or (c) a default in the payment when due
under the Subordinated Note Agreement of fees and other charges incurred by the
Borrower pursuant to the Subordinated Debt Documents in connection with the
closing of the Subordinated Debt transaction on December 27, 1996.
"Significant Subordinated Debt Default Notice" shall have the meaning
ascribed thereto in Section 5(d) hereof.
"Subordinated Creditor" shall mean and include, collectively, Dilmun
Financial Services and BIB Holdings (Bermuda) Ltd., their respective successors
and assigns and any other Person hereafter holding any part of the Subordinated
Debt under any Subordinated Debt Documents.
"Subordinated Debt" shall mean all indebtedness, obligations, and
liabilities of the Borrower to the Subordinated Creditor of any kind and every
kind and nature now existing or hereafter arising, whether contingent or
otherwise direct or indirect, matured or unmatured including, without
limitation, all principal, fees, costs, expenses, premium, if any, interest
(including, without limitation, Post-Petition Interest) and advancements arising
under, or incurred in connection with, or created under, the Subordinated Note
and the Additional Subordinated Notes, and all liabilities and obligations under
the Warrant including, without limitation, the Phantom Stock Payment, whether
such indebtedness, obligations or liabilities arise or accrue before or after
the commencement of any Event of Bankruptcy.
"Subordinated Debt Documents" shall mean and include the Subordinated Note,
the Warrant, the Subordinated Note Agreement, the Additional Subordinated Notes
and all other agreements, documents, instruments and guaranties now or hereafter
evidencing or securing the Subordinated Debt, and any credit agreement,
financing agreement or other agreement, promissory note, guaranty, instrument or
document of any Person evidencing any replacement, substitution, conversion,
refunding or refinancing thereof, as the same may be amended, modified,
restated, renewed, extended or otherwise supplemented from time to time
hereafter in accordance with the terms hereof.
4
"Subordinated Note Agreement" shall mean that certain Senior Subordinated
Note Agreement, dated December 27, 1996, by and between the Borrower and Dilmun
Financial Services.
"Warrant" shall mean that certain Warrant for the Purchase of Shares of
Common Stock, dated December 27, 1996, issued by the Borrower in favor of BIB
Holdings (Bermuda) Ltd.
"Warrant Shares" shall have the meaning ascribed thereto in the Warrant.
Section 1.2 OTHER DEFINED TERMS. Unless otherwise defined herein, all
defined terms herein shall have the respective meanings ascribed thereto in the
Sanwa Loan Agreement.
Section 2. SUBORDINATION.
(a) The Subordinated Creditor agrees that the Subordinated Debt shall
be subject to the provisions of this Agreement, and the Subordinated Creditor,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions. The Subordinated Creditor further agrees
that, notwithstanding any language to the contrary contained in any Subordinated
Debt Document, the Subordinated Debt shall be and is subordinated and subject in
right of payment to the prior payment in full in cash (or in another manner
agreed to in writing by the Senior Lenders in their sole discretion) of all
Sanwa Debt when and as due (whether by acceleration or otherwise); PROVIDED that
payments on the Subordinated Debt may be made from time to time in accordance
with the terms of the Subordinated Debt Documents as provided in Section 3
hereof. Notwithstanding the foregoing, the consent of the Senior Lenders shall
not be required for the issuance by the Borrower of the Warrant Shares or
Conversion Shares or Additional Subordinated Notes in accordance with the terms
of the Subordinated Debt Documents.
(b) The Borrower will not, directly or indirectly, make or agree to
make, and the Subordinated Creditor will not ask for, demand, xxx for, take,
receive, accept or retain (subject to the applicable provisions of the
Bankruptcy Code), directly or indirectly, any payment or distribution (in cash,
property or securities, by set-off or otherwise) of or on account of any
Subordinated Debt or take any Collection Action, if, at the time of such action,
payment or distribution or immediately after giving effect thereto:
(i) (x) a Payment Default shall have occurred and such Payment
Default shall not have been cured or waived or (y) judicial proceedings
shall be pending in respect of such Payment Default; or
(ii) all of the following shall have occurred:
(A) the Subordinated Creditor shall have received written notice
(a "Payment Blockage Notice") from Sanwa of the occurrence of a
Covenant Default (which Payment Blockage Notice shall describe the
nature of such Covenant Default and shall specify that such notice is
a Payment Blockage Notice pursuant to this Agreement);
5
(B) such Covenant Default shall not have been cured or waived;
and
(C) less than one hundred eighty (180) days shall have elapsed
after the date of the receipt of the Payment Blockage Notice (the
period during which the restrictions imposed by this subsection
2(b)(ii) are in effect is hereinafter referred to as a "Blockage
Period");
PROVIDED, that (i) at least thirty (30) days must elapse between the
termination of one Blockage Period and the commencement of a
subsequent Blockage Period and the aggregate duration of all Blockage
Periods shall not exceed one hundred eighty (180) days during any
period of three hundred sixty (360) consecutive days, and (ii) no
Covenant Default which exists on the date of the commencement of a
Blockage Period and which was known to Sanwa on such date may be made
the basis of the commencement of a subsequent Blockage Period; and
PROVIDED FURTHER that successive breaches of financial or
other non-payment covenants by the Borrower shall be deemed to be
separate Covenant Defaults.
The foregoing restrictions in this subsection 2(b) shall cease to apply
and, unless otherwise prohibited under Section 2, 5 or 6 hereof, the Borrower
shall be permitted to resume payments with respect to the Subordinated Debt
(including, without limitation, all payments which shall not have been made on
account of the provisions contained in this subsection 2(b)):
(x) in the case of a Payment Default, upon the earlier to occur
of (1) a cure or waiver of such Payment Default or the dismissal of
any such judicial proceeding by the Senior Lenders or (2) payment in
full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all Sanwa Debt; or
(y) in the case of a Covenant Default, upon the earlier to occur
of (1) the cure or waiver thereof or (2) the expiration of the
Blockage Period or the earlier termination of such Blockage Period by
the Senior Lenders.
If any such Covenant Default shall have been cured or waived, Sanwa shall
so notify the Subordinated Creditor in writing of such occurrence; PROVIDED that
failure of Sanwa to give such notice shall not in any way affect the terms of
this Agreement or render Sanwa or any other Senior Lender liable to the
Subordinated Creditor in any respect or relieve the Subordinated Creditor of its
obligations and agreements set forth in this Agreement.
(c) Notwithstanding any language in Section 2.2(b) to the contrary,
following an acceleration of the maturity of any of the Sanwa Debt (whether as a
result of a Payment Default, a Covenant Default, an Event of Bankruptcy or
otherwise) and as long as such acceleration shall continue unrescinded, the
Sanwa Debt shall first be paid in full in cash (or in another manner agreed to
in writing by the Senior Lenders in their sole discretion) before any payment is
made on account of or applied on the Subordinated Debt.
6
(d) Each payment of the Subordinated Debt by the Borrower shall be
deemed to constitute a representation of the Borrower to Sanwa and the other
Senior Lenders and the Subordinated Creditor that such payment is permitted to
be paid by the Borrower under this Agreement. Notwithstanding anything to the
contrary set forth herein, the Subordinated Creditor shall be entitled to retain
(subject to the applicable provisions of the Bankruptcy Code) any such payment
unless the Subordinated Creditor received a notice of a Payment Default or a
Payment Blockage Notice from Sanwa hereunder, in which case the Subordinated
Creditor shall hold and deliver to Sanwa such payment or an amount of
immediately available funds equal to the amount thereof in accordance with the
terms of Section 7 hereof within ten (10) days of receipt of such notice. Any
notice given under this subsection 2(d) arising from a Covenant Default shall
constitute a Payment Blockage Notice for purposes of this Section 2, commencing
on such date of payment of the Subordinated Debt, and the duration of any
resulting Blockage Period shall be governed in all respects by the terms of
subsection 2(b) hereof.
(e) This Agreement shall apply with respect to all of the Sanwa Debt,
regardless of how or in what manner the Sanwa Debt is incurred, or whether the
Sanwa Debt has already been incurred or may be incurred in the future by future
advances or other financial accommodations made or extended by the Senior
Lenders as of the date hereof or hereafter or by Persons that become holders of
Sanwa Debt after the date hereof, or whether such future advances or other
financial accommodations are made at the discretion of the Senior Lenders or
such other Person under the Sanwa Documents or pursuant to commitments
thereunder.
(f) The Subordinated Creditor acknowledges and agrees that the
subordination provisions herein contained are, and are intended to be, an
inducement and a consideration to the Senior Lenders, whether the Sanwa Debt was
created or acquired before or after the issuance of the Subordinated Debt, to
continue to hold or to acquire and continue to hold such Sanwa Debt and the
Senior Lenders shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold such Sanwa Debt. If the
Subordinated Creditor shall attempt to take any action in violation of this
Agreement, Sanwa and the other Senior Lenders may interpose as a defense or plea
the making of this Agreement and Sanwa and the other Senior Lenders may
intervene and interpose such defense in their name, and may by virtue of this
Agreement restrain the violation thereof.
Section 3. PERMITTED PAYMENTS. Subject to the terms of Sections 2, 5, and
6 hereof and subsection 8.20 of the Sanwa Loan Agreement, the Borrower may pay
to the Subordinated Creditor and the Subordinated Creditor may receive, accept
and retain (subject to the applicable provisions of the Bankruptcy Code) from
the Borrower payments made by the Borrower on the Subordinated Debt in
accordance with the terms of the Subordinated Debt Documents; PROVIDED that no
Default or Event of Default would result after giving effect to any such
payment. The Borrower will not, directly or indirectly, make or agree to make,
and the Subordinated Creditor will not ask for, demand, take, receive, accept or
retain (subject to the applicable provisions of the Bankruptcy Code), directly
or indirectly, any prepayment of the Subordinated Debt except as permitted by
the terms of this Agreement and the Sanwa Loan Agreement as in effect on the
date hereof without the prior written consent of the Senior Lenders.
7
Section 4. SUBORDINATED DEBT OWED TO THE SUBORDINATED CREDITOR. The
Subordinated Creditor represents and warrants to Sanwa and the other Senior
Lenders that, as of the date hereof (i) the only outstanding Subordinated Debt
is that incurred under the Subordinated Note, (ii) the aggregate outstanding
Subordinated Debt is $15,000,000, plus fees and other charges incurred by the
Borrower pursuant to the Subordinated Debt Documents in connection with the
closing of the Subordinated Debt transaction, (iii) it holds no Lien in or upon
any property of the Borrower or any of its Subsidiaries to secure payment of the
Subordinated Debt, (iv) no other Person owns any interest in the Subordinated
Debt (whether as joint holder, participant or otherwise) and (v) to the best of
the Subordinated Creditor's knowledge, no default or event of default or other
breach exists under the Subordinated Debt Documents.
The Subordinated Creditor may not negotiate, sell, assign, transfer or
otherwise dispose of (collectively a "transfer") all or any portion of the
Subordinated Debt or any interest therein unless (a) the Subordinated Creditor
shall have given Sanwa at least ten (10) days' prior written notice of such
proposed transfer and (b) the transferee shall have unconditionally agreed in
writing, in each instance, in advance of or contemporaneously with such transfer
and in form and substance satisfactory to Sanwa to be bound by the terms of this
Agreement.
Section 5. STAND-STILL PROVISIONS. Subject to the terms of SECTIONS 2
and 6 hereof and subsection 8.20 of the Sanwa Loan Agreement, upon the
occurrence and during the continuance of a default with respect to the
Subordinated Debt (other than by reason of a Payment Default or a Blockage
Period) the Subordinated Creditor may ask or make demand for payment of any
payment of any Subordinated Debt then due in accordance with the terms of the
Subordinated Debt Documents, but shall not take any other action to enforce
payment of such amount or take any other Collection Action with respect to the
Subordinated Debt or the Borrower or any guarantor until the earliest to occur
of:
(a) payment in full in cash (or in another manner agreed to in
writing by the Senior Lenders in their sole discretion) of all Sanwa Debt;
(b) the acceleration of all Sanwa Debt;
(c) an Event of Bankruptcy; or
(d) with respect to a Significant Subordinated Debt Default only, one
hundred eighty (180) days shall have elapsed from the date on which the
Subordinated Creditor shall have given notice (a "Significant Subordinated Debt
Default Notice") to the Borrower and Sanwa of the occurrence of any Significant
Subordinated Debt Default which Significant Subordinated Debt Default Notice
shall describe the nature of such Significant Subordinated Debt Default and
shall specify that such notice is a Significant Subordinated Debt Default Notice
pursuant to this Agreement;
PROVIDED that any payments or proceeds of such exercise of any Collection Action
received by the Subordinated Creditor shall be subject to the terms of Sections
2 and 6 hereof and shall be paid over to Sanwa in accordance with Section 7
hereof.
8
Notwithstanding anything contained herein to the contrary, if (i) following
the acceleration of the Sanwa Debt as described in clause (b) above, such
acceleration is rescinded by the Senior Lenders, whether or not any existing
Event of Default shall have been waived or cured, and the Borrower is restored
to the STATUS QUO ANTE existing prior to such acceleration, and (ii) the
Subordinated Creditor has taken any Collection Actions, then all such Collection
Actions shall likewise be rescinded or terminated. Upon the occurrence of any
such rescission, the terms of this Agreement shall continue to control any
subsequent Collection Actions by the Subordinated Creditor. In taking any
Collection Action, the Subordinated Creditor shall not take any action which is
intended to hinder or delay any Enforcement Action taken by the Senior Lenders
or which is inconsistent with the provisions of this Agreement.
As between the Subordinated Creditor and the Borrower, the existence of any
payment bar or standstill restriction hereunder shall not constitute a waiver of
the Subordinated Creditor's rights to receive payments of the Subordinated Debt
when due or prevent or suspend the occurrence of an "Event of Default" under the
Subordinated Debt Documents.
Section 6. INSOLVENCY PROCEEDINGS. Upon the occurrence of an Event of
Bankruptcy:
(a) This Agreement shall be applicable both before and after the
commencement, whether voluntary or involuntary, of any Event of Bankruptcy, and
all references herein to the Borrower shall be deemed to apply to the Borrower
as debtor and/or debtor in possession and to any trustee in bankruptcy for the
estate of the Borrower. Each of the parties hereto acknowledges and agrees that
this Agreement shall be enforceable under Section 510(a) of the Bankruptcy Code.
Without limiting the generality of the foregoing, this Agreement, the priorities
set forth herein and the rights and obligations of the parties hereto with
regard to Collateral shall be applicable to all post-petition Liens on
Collateral (whether such Liens are additional or replacement Liens)granted
pursuant to any bankruptcy court order, stipulation or agreement to the same
extent as if granted under the Sanwa Documents.
(b) Sanwa and the other Senior Lenders shall be entitled to receive
indefeasible payment in full in cash (or in another manner agreed to in writing
by the Senior Lenders in their sole discretion) of all Sanwa Debt before any
payment or distribution, whether in cash, property or securities, is made on
account of or applied to the Subordinated Debt;
(c) The Subordinated Debt shall forthwith become due and payable, and
any payment or distribution of assets of the Borrower of any kind or character
that occurs after an Event of Bankruptcy, whether in cash, property or
securities, to which the Subordinated Creditor would be entitled except for the
provisions of this Agreement (including any payment that may be payable by
reason of any other indebtedness of the Borrower being subordinated to payment
of any of the Subordinated Debt), shall be paid or delivered by any debtor,
debtor in possession, receiver, liquidator, custodian, conservator, trustee or
other Person making such payment or distribution, directly to Sanwa for
application to the payment of the Sanwa Debt remaining unpaid, to the extent
necessary to indefeasibly pay in full in cash (or in another manner agreed to in
writing by the Senior Lenders in their sole discretion) of all Sanwa Debt after
giving effect to any concurrent payment or distribution to Sanwa and the other
Senior Lenders. To facilitate the foregoing, at the request of Sanwa, the
Subordinated Creditor shall authorize, empower and
9
direct any such debtor, debtor in possession, receiver, liquidator,
custodian, conservator, trustee or other Person having authority in the
premises to effect all such payments and deliveries. The Subordinated
Creditor also irrevocably authorizes and empowers the Senior Lenders to
demand, xxx for, collect and receive every such payment or distribution
described herein, such Person to make all such payments and distributions
directly to the Senior Lenders;
(d) The Subordinated Creditor hereby irrevocably authorizes and
empowers the Senior Lenders, if the Subordinated Creditor fails to file a claim
or proof of claim in any case or proceeding related to an Event of Bankruptcy at
least forty-five (45) calendar days prior to the date established by rule of law
or order of court for such filing, to file and prove such claims on behalf of
the Subordinated Creditor;
(e) The Subordinated Creditor shall execute and deliver to the Senior
Lenders all such further instruments and other documentation confirming the
above authorization, and all such powers of attorney, proofs of claim and
assignment of claims, and shall take all such other action, as may be reasonably
requested by the Senior Lenders to enforce such claims and carry out the
purposes of this SECTION 6;
(f) In the event Sanwa or any other Senior Lender is required in any
case or proceeding related to an Event of Bankruptcy or otherwise to turn over
or otherwise return to the Borrower, the estate of the Borrower or any
guarantor, any third party or any trustee, receiver or other representative of
the Borrower or any guarantor any payment or other amount received with respect
to the Sanwa Debt (a "Recovery"), the obligations of the Subordinated Creditor
under this Agreement shall continue to be effective, or be reinstated, as the
case may be, and the Sanwa Debt shall be reinstated to the extent of such
Recovery and Sanwa and the other Senior Lenders shall be entitled to receive
payment in full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all such amounts, all as though such
payment had not been made;
(g) The Subordinated Creditor shall not contest (or support any other
Person contesting) (i) any request by the Senior Lenders for adequate protection
in any case or proceeding related to an Event of Bankruptcy or (ii) any
objection by the Senior Lenders to any motion, relief, action or proceeding in
any such case or proceeding based on the Senior Lenders claiming a lack of
adequate protection; and
(h) Although, subject to paragraph (c) above, the Subordinated
Creditor has retained its rights to vote its claims and otherwise act on its own
behalf in any case or proceeding related to an Event of Bankruptcy, the
Subordinated Creditor agrees that it will not (i) directly or indirectly, amend
the Subordinated Documents or take any other action with respect to the
Subordinated Documents or vote in any way in connection with an Event of
Bankruptcy that would be in violation of, or inconsistent with, or result in a
breach of, this Agreement or so as to challenge or contest in a case or
proceeding related to an Event of Bankruptcy or otherwise (x) the validity,
perfection, priority or enforceability of the Sanwa Debt or the liens, security
interests, mortgages and guaranties granted to secure payment of any of the
Sanwa Debt, (y) the rights of Sanwa and the other Senior Lenders set forth in
any Sanwa Document with respect to such liens, security interests, mortgages or
guaranties or (z) the
10
validity or enforceability of any term, condition or provision of this
Agreement, (ii) induce any other Person to take any such action or (iii)
cooperate with any Person in taking any such action. Nothing herein shall be
construed to prohibit the Senior Lenders from seeking, in any case or
proceeding related to an Event of Bankruptcy, a determination of the value of
its secured claims, including, without limitation, a determination under 11
U.S.C. Section 506(a) and Bankruptcy Rule 3012.
Nothing contained herein shall prohibit or in any way limit Sanwa or any
other Senior Lender from objecting in any such case or proceeding related to an
Event of Bankruptcy or otherwise to any action taken by the Subordinated
Creditor.
Upon any payment or distribution of assets of the Borrower referred to in
this Section 6, the Subordinated Creditor shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any case or
proceeding related to an Event of Bankruptcy is pending, and upon a certificate
of the debtor, debtor in possession, receiver, liquidator, custodian,
conservator, trustee or other Person making any payment or distribution to such
holders for the purpose of ascertaining the Persons entitled to participate
therein, the then outstanding principal amount of the Sanwa Debt and any and all
amounts payable thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this SECTION 6.
Section 7. PAYMENTS OR DISTRIBUTIONS RECEIVED BY THE SUBORDINATED
CREDITOR. Except as to payments or distributions which the Subordinated
Creditor is permitted to receive, accept and retain (subject to the applicable
provisions of the Bankruptcy Code) pursuant to this Agreement, should any
payment or distribution of any kind or character be paid to or received by,
whether in cash, property or securities, upon or with respect to the
Subordinated Debt prior to the payment in full in cash (or in another manner
agreed to in writing by the Senior Lenders in their sole discretion) of all
Sanwa Debt, the Subordinated Creditor shall receive and hold the same in trust,
as trustee, for the benefit of Sanwa and the other Senior Lenders and shall
forthwith deliver the same to Sanwa in precisely the same form received (except
for the endorsement or assignment of the Subordinated Creditor where necessary)
for application to the Sanwa Debt and until so delivered, the same shall not be
commingled with any assets of the Subordinated Creditor and shall be held in
trust by the Subordinated Creditor as the property of Sanwa and the other Senior
Lenders.
Section 8. LIENS. The Subordinated Creditor represents that it holds no
guaranty of the Subordinated Debt or lien, security interest or mortgage in or
upon any assets of the Borrower or any of its Subsidiaries to secure payment of
the Subordinated Debt. After the date hereof, the Subordinated Creditor agrees
not to accept any guaranty of the Subordinated Debt or any lien, security
interest or mortgage in or upon the assets of the Borrower or any Subsidiary of
the Borrower to secure the Subordinated Debt.
Section 9. SUBROGATION. After all of the Sanwa Debt has been paid in full
in cash (or in another manner agreed to in writing by the Senior Lenders in
their sole discretion) and until the Subordinated Debt has been paid in full,
the Subordinated Creditor shall be subrogated to the rights of Sanwa and the
other Senior Lenders with respect to the Collateral and to receive,
11
accept and retain (subject to the applicable provisions of the Bankruptcy
Code) payments or distributions with respect to the Sanwa Debt, to the extent
that distributions otherwise payable to the Subordinated Creditor have been
applied to the payment of the Sanwa Debt in accordance with the provisions of
this Agreement. As among the Borrower, its creditors other than the Senior
Lenders and the Subordinated Creditor, any payment or distribution applied to
the payment of the Sanwa Debt in accordance with the provisions of this
Agreement which otherwise would have been made to the Subordinated Creditor
shall not be deemed a payment by the Borrower on the Sanwa Debt. The
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of Sanwa, the other Senior Lenders and the
Subordinated Creditor. Nothing contained in this Agreement is intended to or
shall alter or impair the obligations of the Borrower, which are absolute and
unconditional, to pay to the Subordinated Creditor the Subordinated Debt as
and when the same shall become due and payable in accordance with its terms.
Section 10. TERM. This Agreement shall constitute a continuing agreement
between Sanwa, the other Senior Lenders and the Subordinated Creditor, and the
successors and assigns of each of them, regardless of whether such successors
and assigns are signatories hereto, and the Senior Lenders or their respective
successors and assigns may continue, without notice to the Subordinated Creditor
or to the successors and assigns thereof, to lend monies, extend credit and make
other accommodations to or for the account of the Borrower in reliance upon the
provisions of this Agreement. This Agreement shall be irrevocable by the
Subordinated Creditor until all of the Sanwa Debt shall have been paid in full
in cash (or in another manner agreed to in writing by the Senior Lenders in
their sole discretion) and all commitments under the Sanwa Documents have
expired or been terminated in writing, or the Subordinated Debt shall have been
paid in full in cash.
Section 11. WAIVERS OF THE SUBORDINATED CREDITOR. All of the Sanwa Debt
shall be deemed to have been made or incurred in reliance upon this Agreement,
and the Subordinated Creditor expressly waives notice of the creation, renewal,
extension, increase, release, accrual or other incurrence of Sanwa Debt from
time to time under the Sanwa Documents or the exchange, sale or surrender of any
Collateral as the Senior Lenders may deem advisable or of the reliance of Sanwa
and the other Senior Lenders on these provisions and all other notices not
specifically required pursuant to the terms of this Agreement or by law. The
Subordinated Creditor agrees that (a) the provisions of this Agreement shall be
specifically enforceable against it by Sanwa and the other Senior Lenders and
irrevocably waives any defense based upon the adequacy of a remedy at law which
might be asserted as a bar to such remedy of specific performance, and (b)
without notice to or further assent by it, the Sanwa Debt may from time to time,
in whole or in part, be renewed, extended, increased or released by the Senior
Lenders, as the Senior Lenders may deem advisable, that any Collateral for the
Sanwa Debt may from time to time, in whole or in part, be exchanged, sold, or
surrendered by the Senior Lenders, as the Senior Lenders may deem advisable, and
that the Senior Lenders may take any other action it may deem necessary or
appropriate in connection with the Sanwa Debt, all without in any manner or to
any extent impairing or affecting the obligations of the Borrower or the
Subordinated Creditor. The Subordinated Creditor agrees that Sanwa has not made
any warranties or representations with respect to the due execution, legality,
validity, completeness or enforceability of any Sanwa Documents or the
collectibility of the Sanwa Debt, or the
12
perfection of liens, security interests or mortgages in the Collateral, and
that Sanwa and the other Senior Lenders shall be entitled to manage and
supervise the Sanwa Debt owed to them in accordance with applicable law and
its usual practices, modified from time to time as Sanwa and the other Senior
Lenders may deem appropriate under the circumstances.
Section 12. AGREEMENT UNAFFECTED BY CERTAIN EVENTS. The rights under this
Agreement of Sanwa and the other Senior Lenders as against the Subordinated
Creditor shall remain in full force and effect without regard to, and shall not
be impaired or affected by: (a) any act or failure to act on the part of the
Borrower; (b) the validity or enforceability of any Lien on any of the
Collateral or of any of the Sanwa Documents or the Subordinated Debt Documents;
(c) any extension or indulgence in respect of any payment or prepayment of the
Sanwa Debt or any part thereof or in respect of any other amount payable to
Sanwa or the other Senior Lenders; (d) any amendment, modification or waiver of,
or addition or supplement to, or deletion of, or compromise, release, consent,
termination or other action in respect of, any of the terms of any of the Sanwa
Documents, the Subordinated Debt Documents or any other agreement which may be
made relating to the Sanwa Debt or the Subordinated Debt; PROVIDED that the
Senior Lenders hereby agree that the Sanwa Documents shall not be amended to
expressly prohibit the payment of the Subordinated Debt without regard to the
terms of the Subordination Agreement; (e) any exercise or non-exercise by the
Senior Lenders of any right, power, privilege or remedy under or in respect of
any portion of the Sanwa Debt or this Agreement, or any waiver of any such
right, power, privilege or remedy or any default in respect of such Sanwa Debt
or this Agreement, or any receipt by Sanwa or the other Senior Lenders of any
security, or any failure by Sanwa or the other Senior Lenders to perfect a Lien
on, or any release by such holder of, any Collateral for the payment of the
Sanwa Debt; (f) any merger or consolidation of the Borrower into or with any of
its Subsidiaries or any such Subsidiary with any other Subsidiary of the
Borrower or of the Borrower or any of its Subsidiaries into or with any other
Person, or any sale, lease, exchange, transfer or other disposition of any or
all of the assets or property of the Borrower or any of its Subsidiaries to any
other Person; (g) any impairment, modification, change, exchange, release or
subordination of or limitation on, any liability of, or stay of actions or other
Lien enforcement proceedings against, any of the Borrower, its property or its
estate in bankruptcy resulting from any Event of Bankruptcy; (h) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, the Borrower or a subordinated creditor; or (i) the absence of any
notice to, or knowledge by, the Subordinated Creditor of the existence or
occurrence of any of the matters or events set forth in the foregoing clauses
(a) through (h).
Section 13. AMENDMENTS TO SUBORDINATED DEBT DOCUMENTS. Prior to the
payment in full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all Sanwa Debt in accordance with the terms
thereof and hereof and notwithstanding anything contained in the Subordinated
Debt Documents to the contrary, without the prior written consent of the Senior
Lenders (which consent shall not be unreasonably withheld), the Subordinated
Creditor shall not agree to any amendment, modification, restatement or other
supplement to any of the Subordinated Debt Documents.
13
Section 14. NOTICE FROM OTHER PARTIES. (a) Each of Sanwa and the
Subordinated Creditor agrees to give to each other party hereto copies of any
written notices of default, termination, demand for payment, acceleration,
Enforcement Action and any other material written notice of a like nature
including, without limitation, any such notice which may be given under or
pursuant to the terms of any of the applicable Sanwa Documents or the
Subordinated Debt Documents, which such party may give hereafter to the Borrower
or any guarantor, in each case concurrently with, or as soon as practicable
after, the giving of such notice to the Borrower or any guarantor; PROVIDED that
failure of any party to give a copy of any such notice as provided herein shall
not in any way affect the validity or effectiveness of the notice or render the
party liable to any other party in any respect or relieve any such party of its
obligations and agreements contained herein.
(b) The Subordinated Creditor shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to it, unless and until the Subordinated Creditor shall have received a
notice of a Payment Default or a Payment Blockage Notice from Sanwa hereunder.
Prior to the receipt of any such notice, the Subordinated Creditor shall be
entitled to assume conclusively that no such facts exist, without, however,
limiting any right of Sanwa and the other Senior Lenders under the terms of this
Agreement to recover from the Subordinated Creditor any payment made in
contravention of this Agreement.
(c) The Subordinated Creditor shall be entitled to rely on the
delivery to it of a notice by a Person representing itself to be the
representative of Sanwa to establish that such notice has been given by Sanwa.
In the event that the Subordinated Creditor determines in good faith that
further evidence is required with respect to the right of any such Person to
participate in any payment or distribution pursuant to this Agreement, the
Subordinated Creditor may request evidence to the reasonable satisfaction of the
Subordinated Creditor as to any fact pertinent to the rights of the Subordinated
Creditor under this Agreement, and if such evidence is not furnished, then the
Subordinated Creditor may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 15. NOTICES. Any notice, demand or other communication required or
permitted under the terms of this Agreement shall be in writing and shall be
made by overnight courier service, telecopier, telegram, telex or certified or
registered mail, return receipt requested, and shall be deemed to be received by
the addressee one (1) Business Day after sending, if sent by courier,
telecopier, telegram or telex, and three (3) Business Days after mailing, if
sent by certified or registered mail. Notices shall be addressed as provided
below:
If to the Subordinated Creditor:
Dilmun Financial Services
Harbormaster Place 4
International Financial Services Centre
Dublin, Ireland
Attention: Xxxx Xxxxx
Phone: 000-000-000-00000
14
Telecopy: 011-353-167-00181
With a copy to:
Bahrain International Bank E.C.
Bahrain Commercial Xxxxxxx
00xx Xxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxx
Attention: Xxxxxx Xx Xxxxx
Phone: 000-000-000-000
Telecopy: 011-973-535-141
and
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Telecopy: (000) 000-0000
If to Sanwa or any other Senior Lender:
SANWA BUSINESS CREDIT CORPORATION
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Phone: (000) 000-0000
Telecopy No.: (000) 000-0000
or at such other address as any party may designate by notice to the other
parties in accordance with the provisions hereof.
Section 16. INSTRUMENT LEGEND. The Subordinated Creditor Note, and any
renewals or replacements thereof, and all promissory notes or other securities
for which it is exchanged or into which it is converted will, on the date hereof
or prior to the issuance thereof, be inscribed with a legend conspicuously
stating that payment thereof is subordinate and junior in right of payment to
the Sanwa Debt pursuant to the terms of this Agreement. The Subordinated
Creditor shall deliver to Sanwa a photocopy of the original Subordinated Note
marked with such legend.
Section 17. EXERCISE OF RIGHTS; CUMULATIVE REMEDIES. No failure by the
Senior Lenders to exercise, and no delay by the Senior Lenders in exercising
from time to time, any right, power, privilege or remedy under the Sanwa Debt or
the Sanwa Documents or any right, power, privilege or remedy under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, privilege or remedy under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, power,
privilege or remedy.
15
The rights, powers, privileges and remedies provided in this Agreement and in
any agreement relating to any of the Sanwa Debt, the Sanwa Documents and all
other agreements, instruments and documents referred to in any of the
foregoing are cumulative and shall not be exclusive of any rights, powers,
privileges or remedies provided by law.
Section 18. GOVERNING LAW. This Agreement shall be governed by, and the
rights and liabilities of the parties hereto construed, in accordance with the
internal laws and decisions of the State of Illinois without regard to choice of
law or conflicts of law principles.
Section 19. PARTIES. This Agreement shall be binding upon, and inure to
the benefit of, Sanwa, the other Senior Lenders and the Subordinated Creditor
and their respective successors, transferees and assigns; PROVIDED that any
assignment, sale, disposition or other transfer by the Subordinated Creditor of
any of the Subordinated Debt or the Subordinated Debt Documents shall be made in
accordance with the terms of SECTION 4 hereof. Notwithstanding the failure to
execute any such agreement, the agreements effected hereby shall survive any
such assignment, sale, disposition or other transfer, and the terms of this
Agreement shall be binding upon the successors and assigns of the Subordinated
Creditor. In addition, any successor or assignee of Sanwa or any other Senior
Lender shall be entitled to rely upon and be the third party beneficiary of the
agreements provided for herein and shall be entitled to enforce the terms and
provisions hereof as if initially a party hereto. The term "Borrower" as used
herein shall also refer to the successors and assigns of the Borrower,
including, without limitation, a receiver, trustee, custodian or debtor in
possession. This Agreement is solely for the purpose of defining the rights and
priorities of the parties hereto, and their respective successors and assigns,
and no other Person (including, without limitation, the Borrower) shall have any
right, benefit, priority or interest under, or because of the existence of, this
Agreement or shall be a direct or indirect beneficiary of or have any direct or
indirect cause of action or claim in connection with this Agreement, nor shall
this Agreement affect the obligations of the Borrower to Sanwa or the other
Senior Lenders or to the Subordinated Creditor, which obligations shall remain
absolute and unconditional in all circumstances.
Section 20. SECTION TITLES. The section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the Agreement between the parties hereto.
Section 21. COUNTERPARTS. This Agreement may be executed by the parties
hereto in any number of separate counterparts (or telecopied counterparts with
original execution copy to follow) and by the different parties on separate
counterparts, all of which counterparts taken together shall constitute one and
the same instrument.
Section 22. WAIVERS; AMENDMENTS. No waiver shall be deemed to be made by
Sanwa or the other Senior Lenders of any of its rights hereunder unless the same
shall be in writing signed on behalf of Sanwa and each waiver, if any, shall be
a waiver only with respect to the specific instance involved and shall in no way
impair the rights of Sanwa or the other Senior Lenders in any other respect at
any other time. Unless otherwise expressly provided for herein, no provision of
this Agreement may be amended, modified or supplemented without the express
prior written consent thereto of Sanwa and the Subordinated Creditor.
16
Section 23. ENTIRE AGREEMENT. This Agreement contains all of the terms
and conditions agreed upon by the parties relating to its subject matter and
supersedes any and all prior and contemporaneous agreements, negotiations,
correspondence, understandings and communications of the parties, whether oral
or written, respecting that subject matter.
Section 24. SUBMISSION TO JURISDICTION; MUTUAL WAIVER OF JURY AND BOND.
EACH OF SANWA, THE OTHER SENIOR LENDERS AND THE SUBORDINATED CREDITOR HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF XXXX, STATE OF ILLINOIS, AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH
COURTS, AND EACH OF SANWA, THE OTHER SENIOR LENDERS AND THE SUBORDINATED
CREDITOR WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM
NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS
SET FORTH IN SECTION 15 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE SUBORDINATED CREDITOR'S ADDRESS BY THE
SUBORDINATED CREDITOR'S AGENT AS SET FORTH BELOW. SANWA, THE OTHER SENIOR
LENDERS AND THE SUBORDINATED CREDITOR ACKNOWLEDGE THAT THE TIME AND EXPENSE
REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVE
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF SANWA OR THE OTHER SENIOR LENDERS. NOTHING CONTAINED IN THIS
SECTION 24 SHALL AFFECT THE RIGHT OF SANWA TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF SANWA OR THE OTHER SENIOR LENDERS
TO BRING ANY ACTION OR PROCEEDING OR TAKE OTHER LEGAL ACTION IN THE COURTS OF
ANY OTHER JURISDICTION TO THE EXTENT NECESSARY TO ENFORCE ITS LIEN AND SECURITY
INTERESTS AGAINST COLLATERAL LOCATED IN SUCH JURISDICTION. THE SUBORDINATED
CREDITOR WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO ABOVE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
Section 25. INVALIDITY OR CONFLICT. As between Sanwa and the other Senior
Lenders, on the one hand, and the Subordinated Creditor, on the other hand, in
the event of any conflict between any term, covenant or condition of this
Agreement and any term, covenant or condition of the Subordinated Debt
Documents, the provisions of this Agreement shall govern and be controlling.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or
17
unenforceability, without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
The parties hereto shall endeavor in good faith negotiations to replace any
such invalid or unenforceable provision with a valid provision, the economic
effect of which comes as close as possible to that of the invalid or
unenforceable provision.
Section 26. MARSHALING. So long as this Agreement shall be in effect, the
Subordinated Creditor to the fullest extent permitted by applicable law, waives,
with respect to the Collateral, any requirement regarding, and agrees not to
demand, request, plead or otherwise claim the benefit of, any marshaling by
Sanwa or the other Senior Lenders that may otherwise be available under
applicable law.
Section 27. ADDITIONAL PROVISIONS
(a) Sanwa and the Subordinated Creditor each undertake to perform
only such obligations on its part as are specifically set forth in this
Agreement, and no implied covenants or obligations with respect to any party
shall be read into this Agreement against the other party. Except to the extent
specifically provided for by Section 7 hereof, neither party hereto shall be
deemed to owe any fiduciary duty to the other party by virtue of the provisions
of this Agreement.
(b) The Borrower acknowledges that the Subordinated Debt shall not be
subordinated (i) to claims of any trade creditors of the Borrower or (ii) in
right of payment to the prior payment of any existing or future unsecured
indebtedness of the Borrower, but rather shall rank equally with all existing
and future unsecured indebtedness of the Borrower, (except as otherwise may be
required by bankruptcy or other laws affecting the rights of creditors
generally).
18
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
SANWA BUSINESS CREDIT CORPORATION,
as a Senior Lender and as agent for
the other Senior Lenders
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
DILMUN FINANCIAL SERVICES
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
BIB HOLDINGS (BERMUDA) LTD.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
19
ACKNOWLEDGMENT AND AGREEMENT OF THE BORROWER
The undersigned, Brothers Gourmet Coffees, Inc., the Borrower named in the
foregoing Agreement, does hereby accept, and acknowledge receipt of a copy of,
the foregoing Agreement, and agrees that (a) it will not pay any of the
Subordinated Debt except as the foregoing Agreement permits, and (b) it will be
bound by all provisions of the foregoing Agreement. In the event of a breach by
the Borrower of any of the provisions of the Agreement, all of the Sanwa Debt
shall, without presentment, demand, protest or notice of any kind become
immediately due and payable unless the Senior Lenders shall otherwise elect in
writing.
All capitalized terms used in this Acknowledgement and Agreement without
definition shall have the same meanings as set forth in the foregoing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement and
Agreement to be duly executed as of the day and year first above written.
BROTHERS GOURMET COFFEES, INC.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
20
