Exhibit (10)-5
SUBORDINATION AGREEMENT
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE
PROPERTY AND COLLATERAL BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN
THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS SUBORDINATION AGREEMENT ("AGREEMENT"), made this 30th day of November,
1998, by GRAND HAVANA ENTERPRISES, INC., a Delaware corporation ("GRA"), owner
of the collateral hereinafter defined and XXXXX XXXXXXX, an individual
("XXXXXXX") present owner and holder of that certain secured promissory note
(the "Xxxxxxx Note") dated as of August 15, 1998 entered into by and between GRA
as Maker and Xxxxxxx as Noteholder;
WITNESSETH
A. On or about February 12, 1997 GRA entered into a loan agreement with
United Leisure Corporation ("ULC") pursuant to which GRA executed an unsecured
promissory note (the "Unsecured ULC Note") having a due date of September 30,
1998.
B. On or about August 15, 1998 the GRA executed and delivered the Xxxxxxx
Note to Xxxxxxx. In connection with the delivery of the Xxxxxxx Note and as a
condition of lending the funds evidenced by the Xxxxxxx Note, Xxxxxxx required
that GRA execute a Security Agreement (the "Xxxxxxx Security Agreement") and a
UCC-1 Financing Statement (the "Xxxxxxx Financing Statement") creating a
security interest in the equipment, fixtures, furniture and other property
rights described therein (the "Collateral") in favor of Xxxxxxx.
X. Xxxxxxx caused the Xxxxxxx Financing Statement to be recorded with
California Secretary of State.
D. On or about September 30, 1998 GRA executed a new promissory note with
ULC which replaced the Unsecured ULC Note due on September 30, 1998. The new
note with ULC shall be referred to herein as the "Secured ULC Note". In
connection with the issuance and execution of the Secured ULC Note, GRA also
executed a security agreement (the "ULC Security Agreement") and UCC-1 Financing
Statement (the "ULC Financing Statement").
E. In order to induce ULC to accept the Secured ULC Note and as a
condition to accepting the Secured ULC Note, ULC required that its security
interest in the Collateral be prior, and superior to, Xxxxxxx'x security
interest in the Collateral.
X. Xxxxxxx is now willing to subordinate his security interest in the
Collateral to ULC.
1. GRA acknowledges and agrees that ULC agreed to accept the ULC Note
only upon the condition that the ULC Financing Statement securing the Secured
ULC Note would constitute on lien upon the Collateral prior, and superior to,
the lien or charge of the Xxxxxxx Financing Statement and provided that Xxxxxxx
specifically and unconditionally subordinate the lien or charge of the Xxxxxxx
Note to the charge of the ULC Financing Statement.
2. Xxxxxxx acknowledges and agrees that the ULC Financing Statement
securing the Secured ULC Note when recorded, constituted a lien or charge upon
said Collateral, and that upon execution of this Agreement, the Secured ULC Note
shall be deemed to be unconditionally prior and superior to the lien or charge
of the Xxxxxxx Financing Statement and the Xxxxxxx Note.
3. GRA and Xxxxxxx mutually agree and acknowledge that:
(a) the ULC Financing Statement securing the Secured ULC Note in favor of
ULC, and any renewals or extensions thereof, shall unconditionally be
and remain at all times a lien or charge on the Collateral therein
described, prior and superior to the lien or charge of the Xxxxxxx
Note and the Xxxxxxx Financing Statement above mentioned.
(b) That ULC would not have made the ULC loan and accepted the Secured ULC
Note without this Agreement.
(c) That this Agreement shall be the whole and only agreement with regard
to the subordination of the lien or charge of the Xxxxxxx Note and the
Xxxxxxx Financing Statement to the lien or charge of the ULC Financing
Statement and that the ULC Financing Statement shall supersede the
Xxxxxxx Financing Statement.
4. Xxxxxxx declares, agrees and acknowledges that:
(a) He consents to and approves all provisions of the ULC Financing
Statement;
(b) ULC, in accepting the Secured ULC Note, is under no obligation or
duty to, nor has ULC represented that it will see to the
application of any loan proceeds by GRA on that the use of
proceeds will be used for any particular purpose whatsoever and
that such failure to supervise the disbursement of loan proceeds
shall not defeat the subordination herein made in whole or in
part;
(c) He intentionally and unconditionally waives, relinquishes and
subordinates the lien or charge of the Xxxxxxx Financing
Statement in favor of the lien or charge upon the Collateral in
favor of ULC, and understands that in reliance upon, and in
consideration of, this waiver, relinquishment and subordination
ULC accepted the Secured ULC
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Note and that ULC would not have agreed to accept the Secured ULC
Note but for its reliance upon this waiver, relinquishment and
subordination.
"GRA" GRAND HAVANA ENTERPRISES, INC.
a Delaware Corporation
By:/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Its: President
"XXXXXXX"
/s/ Xxxxx Xxxxxxx
____________________________
Xxxxx Xxxxxxx
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