SUBORDINATION AGREEMENT
Exhibit
10.6
This
Subordination Agreement (the “Agreement”)
is
entered into as of the 21st day
of
September 2006, by and between DRIVEITAWAY, INC., a Delaware corporation
(the
“Company”),
ZONE
MINING LIMITED, a Nevada corporation (the “Subordinate
Lender”)
and
TRIDENT GROWTH FUND, L.P., a Delaware limited partnership (the “Senior
Lender”).
RECITALS
WHEREAS,
in
connection with a contemplated loan transaction (the “Subordinate
Lender Loan”)
between Subordinate Lender and the Company, the Company will execute, among
other documents, a promissory note or notes (the “Notes”)
in the
amount of up to $1,000,000, as such Notes may be thereafter amended or modified
in writing or otherwise (the “Subordinate
Lender Note”).
It is
expressly understood and agreed that all amounts loaned to the Company by
the
Subordinate Lender at any time, whether described in the Subordinate Lender
Note
or the Subordinate Loan Documents (as defined below) shall be considered
part of
the Subordinate Lender Loan for purposes of this Agreement. The Subordinate
Lender Note, the Security Agreement, if any, and any other documents,
instruments or written or oral agreements evidencing or securing payment
of the
Subordinate Lender Loan are hereinafter collectively referred to as the
“Subordinate
Loan Documents”;
and
WHEREAS,
Subordinate
Lender will be the parent company of the Company as a result of a merger
between
the Company and ZM Acquisition, Inc., a Delaware corporation; and
WHEREAS,
in
connection with a certain loan transaction (the “Senior
Lender Loan”)
between Senior Lender and Subordinate Lender, Subordinate Lender executed,
among
other documents, a 12% Secured Convertible Debenture (the “Senior
Lender Note”)
in the
stated principal amount of $1,000,000.00, payable to Senior Lender. The payment
of the indebtedness evidenced by the Senior Lender Loan is secured by, among
other things, a Security Agreement from the Company creating a security interest
in certain property of the Company more particularly described therein (the
“Collateral”). The Senior Lender Note and any other documents, instruments or
written agreements evidencing or securing payment of the Senior Lender Loan
are
hereinafter collectively referred to as the “Senior
Lender Loan Documents”;
and
WHEREAS,
the
Company and Senior Lender propose for the indebtedness evidenced by the Senior
Lender Note to be secured by, among other things, a first lien on and priority
security interest in and to the Collateral. Accordingly, Senior Lender has
required, as a covenant in the Senior Loan Documents, that all obligations,
liens, or rights to the property or assets of the Company, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent
or now
or hereafter existing, or due or to become due, including but not limited
to
those created in connection with the Subordinate Lender Loan, to the Subordinate
Lender in connection with the Subordinate Lender Loan or otherwise (the
“Junior Liabilities”)
be
made subordinate to the liens, security interests, and rights of the Senior
Lender and the Senior Lender Loan, as well as all obligations of Company,
howsoever created, arising or evidenced, whether direct or indirect, absolute
or
contingent or now or hereafter existing, or due or to become due to the Senior
Lender (the “Senior
Liabilities”),
it
being expressly understood and agreed that the term Senior Liabilities, as
used
in this Agreement, shall include, without limitation, any and all interest,
fees
and penalties accruing on any of the Senior Liabilities, notwithstanding
any
provision or rule of law which might restrict the rights of the Senior Lender,
as against Company or anyone else, to collect such interest; and
1
WHEREAS,
Senior
Lender and Subordinate Lender desire to enter into this Agreement to evidence,
as more particularly described herein, Subordinate Lender’s subordination of the
Junior Liabilities to the Senior Liabilities;
NOW,
THEREFORE,
for and
in consideration of the mutual covenants and agreements contained herein,
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Subordinate
Lender hereby expressly subordinates the Junior Liabilities to the Senior
Liabilities and acknowledges and agrees that the Senior Liabilities shall
be
superior and prior to the Junior Liabilities. Accordingly, except as expressly
otherwise provided in this Agreement or as the Senior Lender may otherwise
expressly consent in writing, the payment of any Junior Liability shall be
postponed and subordinated to the payment in full of all Senior Liabilities,
and
no payments or other distributions whatsoever in respect of any Junior Liability
shall be made, nor shall any property or assets of the Company be applied
to the
purchase or other acquisition or retirement of the Junior
Liability.
2. Subject
to the terms of this Agreement, Subordinate Lender hereby consents, without
the
necessity of any other documentation, to the Senior Lender Loan and acknowledges
and agrees that the neither the Senior Lender Loan nor the Senior Liabilities
created thereby constitute a default under the Subordinate Lender Loan and/or
Loan Documents, and if either the Senior Lender Loan or the creation of the
Senior Liabilities does in fact constitute a default thereunder, Subordinate
Lender agrees to amend such Subordinate Loan Documents, as soon as reasonably
practicable, to permit the Senior Lender Loan and Senior Liabilities.
Subordinate Lender further, without the necessity of any other documentation,
acknowledges and agrees to forebear from exercising its rights and remedies
under the Subordinate Loan Documents on account of any existing or future
default under the Subordinate Lender Loan until the termination of this
Agreement.
3. The
Subordinate Lender hereby subordinates all security interests created pursuant
to any security agreement entered into with the Company and any other security
interest created in connection with the Subordinate Lender Loan in any manner,
to the security interests of the Senior Lender in all of the Collateral and
all
other property of the Company, now owned or hereafter acquired by same.
2
4. In
the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to the Company or to its creditors,
as
such, or to its property (whether voluntary or involuntary, partial or complete,
and whether in bankruptcy, insolvency or receivership, or upon an assignment
for
the benefit of creditors, or any other marshalling of the assets and liabilities
of the Company, or any sale of all or substantially all of the assets of
the
Company, or otherwise), the Senior Liabilities shall first be paid in full
before the Subordinate Lender shall be entitled to receive and to retain
any
payment or distribution in respect of the Junior Liabilities.
5. The
Subordinate Lender will xxxx the Subordinate Loan Documents, its books and
records so as to clearly indicate that the Junior Liability is subordinated
in
accordance with the terms of this Agreement. Upon request by Senior Lender,
Subordinate Lender agrees to execute and deliver such additional documents
and
instruments and to take such actions as may be reasonably necessary in order
to
further evidence and carry out the purposes, goals, and intents of this
Agreement or to correct any error in this Agreement or any documents executed
in
connection herewith that was caused by any clerical mistake, computer
malfunction, printing error or similar error.
6. The
Subordinate Lender hereby waives all diligence in collection or protection
of or
realization upon the Senior Liabilities or any security for the Senior
Liabilities. In exercising rights and remedies with respect to the Collateral,
the Senior Lender may enforce the provisions of the Senior Loan Documents
and
exercise remedies thereunder and under any other Senior Loan Documents, all
in
such order and in such manner as it may determine in its sole and absolute
discretion. Such exercise and enforcement shall include, without limitation,
the
rights to sell or otherwise dispose of Collateral, to incur expenses in
connection with such sale or disposition and to exercise all the rights and
remedies of a secured lender under the Uniform Commercial Code of any applicable
jurisdiction and of a secured creditor under bankruptcy or similar laws of
any
applicable jurisdiction.
7. During
the term hereof, the Subordinate Lender will not without the prior written
consent of the Senior Lender: (a) attempt to enforce or collect the Junior
Liability or any rights in respect of the Junior Liability; (b) take any
Collateral or enforce any rights in respect of any Security Agreement;
(c) sell, assign, transfer, pledge, or give a security interest in the
Junior Liabilities; (d) commence, prosecute or participate in any
administrative, legal or equitable action against the Company or in any
administrative, legal, or in any administrative, legal or equitable action
that
might adversely affect the Company or its interest; (e) take any lien or
security on any of the Company’s property, real or personal; (f) incur any
obligation to or receive any loan advances, or gifts from the Company; or
(g)
commence, or join with any other creditor in commencing, any bankruptcy,
reorganization or insolvency proceedings with respect to the
Company.
8. As
an
additional security for the Senior Liabilities, and to secure the performance
of
all of the Subordinate Lender’s obligations hereunder, Subordinate Lender hereby
transfers, grants a security interest in, and assigns to the Senior Lender
all
of Subordinate Lenders’ rights to any payments or distributions which might
otherwise be due to the Subordinate Lender from the Company. Senior Lender
is
hereby irrevocably constituted and appointed the attorney-in-fact of Subordinate
Lender to file any and all proofs of claim (if Subordinate Lender has not
demonstrated to the satisfaction of the Senior Lender, no later than 20 days
prior to the applicable bar date, that such Subordinate Lender has filed
an
appropriate claim or proof of claim), financing statements, and any other
documents and to take all other action, either in Senior Lender’s name, or in
the Subordinate Lender’s name, whichever is necessary to enable Senior Lender to
obtain all such payments. The Company hereby agrees to make such payments,
if
any, to the Senior Lender.
3
9. This
Agreement and the obligations, rights and benefits of the parties hereto
shall
terminate upon the payment in full of the indebtedness evidenced by the Senior
Lender Loan Documents and the Senior Liabilities as a whole.
10. The
Senior Lender may, from time to time, during the term of this Agreement,
at its
sole discretion and without notice to the Subordinate Lender, take any or
all of
the following actions: (a) retain or obtain a security interest in any property
to secure any of the Senior Liabilities; (b) retain or obtain the primary
or
secondary obligation of any other obligor or obligors with respect to any
of the
Senior Liabilities; (c) extend or renew for one or more periods (whether
or not
longer than the original period), alter or exchange any of the Senior
Liabilities, or release or compromise any obligation of any nature of any
obligor with respect to any of the Senior Liabilities; and (d) release their
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Senior
Liabilities, or extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such
property.
11. The
Senior Lender may, from time to time, during the term of this Agreement,
without
notice to the Subordinate Lender, assign or transfer any or all of the Senior
Liabilities or any interest in the Senior Liabilities as well as this Agreement;
and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer of the Senior Liabilities, such Senior Liabilities
shall
be and remain Senior Liabilities for the purposes of this Agreement, and
every
immediate and successive assignee or transferee of any of the Senior Liabilities
or of any interest in the Senior Liabilities shall, to the extent of the
interest of such assignee or transferee in the Senior Liabilities, be entitled
to the benefits of this Agreement to the same extent as if such assignee
or
transferee were the Senior Lender, as applicable; provided,
however,
that,
unless the Senior Lender shall otherwise consent in writing, the Senior Lender
shall have an unimpaired right, prior, and superior to that of any such assignee
or transferee, to enforce this Agreement, for the benefit of the Senior Lender,
as to those of the Senior Liabilities which the Senior Lender has not assigned
or transferred.
12. The
Senior Lender shall not be prejudiced in its rights under this Agreement
by any
act or failure to act of the Company or the Subordinate Lender, or any
noncompliance by the Company or the Subordinate Lender with any agreement
or
obligation, regardless of any knowledge thereof which the Senior Lender may
have
or with which the Senior Lender may be charged; and no action of the Senior
Lender permitted under this Agreement shall in any way affect or impair the
rights of the Senior Lender and the obligations of the Subordinate Lender
under
this Agreement.
4
13. No
delay
on the part of the Senior Lender in the exercise of any right or remedy shall
operate as a waiver of such right or remedy, and no single or partial exercise
by the Senior Lender of any right or remedy shall preclude other or further
exercise of such right or remedy or the exercise of any other right or remedy;
nor shall any modification or waiver of any of the provisions of this Agreement
be binding upon the Senior Lender except as expressly set forth in a writing
duly signed and delivered on behalf of the Senior Lender. For the purposes
of
this Agreement, Senior Liabilities shall include all obligations of the Company
to the Senior Lender, notwithstanding any right or power of the Company or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
affect or impair the agreements and obligations of the Subordinate Lender
under
this Agreement.
14. Subordinate
Lender further agrees that in case Subordinate Lender should take or receive
any
security interest in, or lien by way of attachment, execution, or otherwise
on
any of the property, real or personal, of the Company, or should take or
join in
any other measure or advantage contrary to this Agreement, at any time prior
to
the payment in full of all of the Senior Liabilities, Senior Lender shall
be
entitled to have the same vacated, dissolved and set aside by such proceedings
or law, or otherwise, as the Senior Lender may deem appropriate, and this
Agreement shall be and constitute full and sufficient grounds therefore and
shall entitle the Senior Lender to become a party to any proceedings at law,
or
otherwise, initiated by the Senior Lender or by any other party, in or by
which
the Senior Lender deems it appropriate to protect its interests hereunder.
Subordinate Lender agrees that if it violates this Agreement, it shall be
liable
to the Senior Lender for all losses and damages sustained by the Senior Lender
by reason of such breach, including Senior Lender’s attorney’s fees and costs in
any such legal action.
15. Except
as
otherwise expressly agreed to herein, if Subordinate Lender shall receive
any
payments, security interests, or other rights in any property of the Company
in
violation of this Agreement, such payment or property shall be received by
Subordinate Lender in trust for the Senior Lender and shall subsequently
be
delivered and transferred to the Senior Lender immediately upon receipt
thereof.
16. This
Agreement shall be binding upon the Subordinate Lender and the Company as
well
as their respective successors and assigns, and shall inure to the benefit
of
Senior Lender and its successors and assigns.
17. Any
notice or other communication required or permitted to be given hereunder
shall
be in writing and shall be sent by first class U.S. mail, or by cable, telex,
telegram, facsimile transmission, or by other electronic means or delivered
by
hand or by overnight or similar delivery service, fees prepaid, to the party
to
whom it is to be given at the address of such party set forth below or to
such
other address for notice as such party shall provide in accordance with the
terms of this section. Except as otherwise specifically provided in this
Agreement, notice so given shall, in the case of notice given by certified
mail
(or by such comparable method) be deemed to be given and received on the
date of
certification (or comparable act) thereof, in the case of notice so given
by
overnight delivery service, on the date of actual delivery, and, in the case
of
notice so given by cable, telegram, facsimile transmission, telex or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery. If any
communication is sent by e-mail or such other electronic means, such
communication shall be effective upon confirmation (whether by return e-mail
or
otherwise) of receipt of such e-mail or electronic transmission.
5
|
If
to the Company:
|
000
X. Xxxxxxxxx Xxxxx
|
Xxxxx
000
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attn:
________________
|
If
to Subordinate Lender:
|
000
Xxxxxxxxxxxx Xxxxxxxxx
|
Xxxxx
000
Xxxx
Xxxxxx, XX 00000
Telephone:
(000) 000-0000
Facsimile:
Attn:
Xxxxxxx X. Xxxxxxxxxx
|
If
to Senior Lender:Trident
Growth Fund, LP
|
000
Xxxxxx
|
Xxxxxxx,
Xxxxx 00000
Phone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx St. Xxxxxx
18.
This
Agreement shall be construed in accordance with and governed by the laws
of the
State of Texas without regard to conflict of laws provisions. Venue for any
action hereunder shall be brought in and shall be proper exclusively in Dallas
County, Texas.
19. If
any
provision or provisions of this Agreement should be held to be invalid or
ineffective, then all other provisions shall continue in full force and effect
to the same extent and in the same manner as though such invalid or
unenforceable provision had never been contained herein to the extent the
remaining provisions further accomplish the goals and intents of this
Agreement.
[signature
page follows]
6
IN
WITNESS WHEREOF,
this
Subordination Agreement has been made and delivered as of the first date
written
above.
| SUBORDINATE LENDER: | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxxxxxx | |
|
Xxxxxxx X. Xxxxxxxxxx
President
|
||
|
SENIOR
LENDER:
|
||
| Trident Growth Fund, LP | ||
| By: Trident Management, LLC, its General Partner | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxx | |
|
Its: Authorized Member |
||
The
Company hereby acknowledges receipt of a copy of the foregoing Subordination
Agreement, waives notice of acceptance of the Subordination Agreement by
the
Senior Lender, and agrees to be bound by the terms and provisions of the
Subordination Agreement, to make no payments or distributions contrary to
the
terms and provisions of the Subordination Agreement, and to do every other
act
and thing necessary or appropriate to carry out such terms and
provisions.
| Dated: As of the First Date Written Above | |||
| COMPANY | |||
|
DRIVEITAWAY,
INC.
|
|||
| By: /s/ Xxxxx X. Xxxx | |||
|
|
7
