Exhibit 10.31
SUBORDINATION AGREEMENT
This Subordination Agreement, dated as of August 8, 2005 (this
"Agreement") is by and among Draupnir, LLC, a Delaware limited
liability company ("Draupnir"), Aristide Investments, L.P., a
California limited partnership ("Aristide", and collectively with
Draupnir, the "Junior Lenders") and Trinity Springs, Inc.
("Borrower").
WITNESSETH:
WHEREAS, pursuant to the Amended and Restated Loan and Security
Agreement, dated as of September 30, 2004, as amended by Revised First
Amendment to Amended and Restated Loan and Security Agreement, dated
as of April 14, 2005, as further amended by the Revised Second
Amendment to Amended and Restated Loan and Security Agreement, dated
May 23, 2005 (collectively, the "Senior Loan Agreement"), between
AMCON Distributing Company ("AMCON") and its subsidiaries The Beverage
Group, Inc., Xxxxxxxxxx Natural Foods, Inc., Hawaiian Natural Water
Company, Inc., and Health Food Associates, Inc., and Borrower
(collectively, the "Bank Borrowers") and LaSalle Bank, N.A
("LaSalle"), Gold Bank and any other lenders from time to time party
thereto (collectively, the "Senior Lenders"), the Senior Lenders have
extended credit from time to time to the Bank Borrowers;
WHEREAS, Borrower has borrowed $500,000 from the Junior Lenders
pursuant to two promissory notes dated the date hereof to which this
Agreement is attached as Exhibit A and incorporated therein by
reference (individually, a "Subordinated Note" and collectively, the
"Subordinated Notes");
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Junior Lenders hereby agree as hereinafter
set forth, and as to which agreement the Senior Lenders are a third
party beneficiary:
1. Certain Defined Terms. In addition to the terms defined above and
elsewhere in this Agreement, the following terms used in this
Agreement shall have the following meanings, applicable both to the
singular and the plural forms of the terms defined:
"Additional Obligations" means, except for any principal payable by
Borrower to Senior Lender pursuant to the Senior Loan Agreement, all
costs, fees and expenses payable by Borrower under the Senior Loan
Agreement as in effect on the date hereof; indemnities; all interest
and all fees and expenses, including interest, fees and expenses
incurred after the commencement of an Insolvency Event or any other
federal or state bankruptcy, insolvency or reorganization act
regardless of whether Senior Lenders' claim therefore or the security
interests asserted are valid, binding, enforceable, void, voidable,
voided, subordinated, reduced, disallowed or allowable in such
Insolvency Event.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person. For
purposes of this definition, "control" means the possession, directly
or indirectly through one or more intermediaries, of the power to
direct the management and policies of a Person, whether through
ownership interests in such Person, by contract, or otherwise.
"Agreement" has the meaning set forth in the introduction hereto.
"Blockage Period" has the meaning assigned to that term in Section
3(b) hereof.
"Borrower" has the meaning set forth in the introduction hereto above.
"Business Days" means any day that is not a Saturday, Sunday, or other
day on which banks are authorized or required to close in the state of
Illinois.
"Collateral" shall mean all now existing and hereafter acquired
(including after an Insolvency Event) or arising personal property of
Borrower including, without limitation, all goods, accounts,
inventory, equipment, intangibles, investment property, deposit
accounts, fixtures, instruments, documents, chattel paper,
intellectual property, letters of credit and letters of credit rights,
all supporting obligations, all commercial tort claims and all
products and proceeds of the foregoing including insurance proceeds.
"Collection Action" shall mean (a) to demand, xxx for, take or receive
from the Borrower, by set-off or in any other manner, the whole or any
part of any moneys which may now or hereafter be owing by the Borrower
with respect to the Subordinated Notes, (b) to initiate or participate
with others in any suit, action or proceeding against Borrower to (i)
enforce payment of or to collect the whole or any part of the
Subordinated Notes or (ii) commence judicial enforcement of any of the
rights and remedies under the Subordinated Notes or applicable law
with respect to the Subordinated Notes, (c) to accelerate the maturity
of any Subordinated Notes.
"Insolvency Event" shall mean any proceeding (whether voluntary or
involuntary) for dissolution, winding up, liquidation, reorganization,
arrangement, protection, relief or composition of Borrower or its
debts, whether voluntary or involuntary, total or partial, in
bankruptcy, insolvency, receivership, arrangement, reorganization,
relief or other proceedings, or upon an assignment for the benefit of
creditors or any other marshaling of the assets and liabilities of
Borrower.
"Junior Lenders" has the meaning set forth in the introduction hereto.
"Payment Block Notice" means any notice from the Senior Agent to the
Borrower notifying the Borrower that a Senior Default has occurred,
with a copy to Junior Lenders.
"Permitted Payments" has the meaning assigned to that term in Section
2(b) hereof.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business
trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions
thereof.
"Senior Collateral" means all collateral described in the Senior Loan
Documents as to which the Senior Lenders have a security interest or
lien.
"Senior Debt" shall mean all indebtedness, fees, expenses, obligations
and liabilities of Borrower to the Senior Lender pursuant to the
Senior Loan Documents or any agreements or instruments that provide
for credit to replace or refinance in whole or in part the credit
accommodations under the Loan Documents, whether now existing or
hereafter arising (and whether such indebtedness arises or accrues
before or after an Insolvency Event) directly, including without
limitation the Senior Loans and any interest, fees or prepayment
penalties thereon accruing pre-petition or post-petition and costs,
expenses, and attorneys' and paralegals' fees, whenever incurred (and
whether or not such interest, costs, expenses or fees are allowed or
allowable as claims in bankruptcy).
"Senior Default" shall mean any "Event of Default" as defined in the
Senior Loan Agreement.
"Senior Default Notice" shall mean a written notice from the Senior
Lender to Junior Lender pursuant to which Junior Lender is notified of
the occurrence of a Senior Default, which notice incorporates a
reasonably detailed description of such Senior Default.
"Senior Lender" or "Senior Lenders" has the meaning set forth in the
recitals hereto.
"Senior Loan Agreement" has the meaning set forth in the recitals
hereto.
"Senior Loan Documents" means the Senior Loan Agreement and the "Other
Agreements", as such term is defined in the Senior Loan Agreement.
"Senior Payment Default" shall mean a default in the payment or
direction of proceeds from the foreclosure of, or realization upon,
any Senior Collateral of any principal, interest or fee or other
amount owing to the Senior Lenders with respect to Senior Debt,
including, without limitation, any default in payment of Senior Debt
after acceleration thereof.
"Subordinated Note" shall mean (a) all principal of, premium, if any,
and interest on, the obligations owed by the Borrower to the Junior
Lenders pursuant to either of the Subordinated Notes, and (b) all
other indebtedness, fees, expenses, obligations and liabilities of the
Borrower to the Junior Lenders, whether now existing or hereafter
incurred or created, under or pursuant to the terms of either of the
Subordinated Notes or separately under any other document, instrument
or agreement executed in connection therewith which relates to the
indebtedness evidenced by either of the Subordinated Notes or any
agreements or instruments that provide for credit to replace or
refinance in whole the credit accommodations under the Subordinated
Notes, in each case, whether such amounts are due or not due, direct
or indirect, absolute or contingent.
"Subordinated Notes" shall mean both of the Subordinated Notes.
2. Subordination.
(a) General. Notwithstanding anything in the terms of the
Subordinated Notes or this Agreement to the contrary, the Junior
Lenders agree and covenant that, to the extent set forth herein and on
the terms and conditions set forth herein, the payment and performance
of the Subordinated Notes is and shall be subordinated in right of
payment to the Senior Debt.
(b) Permitted Payments. Except as otherwise provided in this
Agreement, the Junior Lenders shall be entitled to receive payments of
principal and interest under the Subordinated Notes ("Permitted
Payments").
3. Priority, Blockage of Payments and Suspension of Remedies.
(a) Insolvency or Dissolution of the Borrower. Upon the occurrence of
any Insolvency Event, any payment or distribution of assets or
securities of Borrower of any kind or character, whether in cash,
property or securities, to which the Junior Lenders would be entitled,
except for the provisions of this Agreement, shall be made by Borrower
or by any receiver, trustee in bankruptcy, liquidating trustee, or
other person making such payment or distribution, directly to the
Senior Lenders for application (in the case of cash) to, or as
collateral (in the case of non-cash property or securities) for, the
Senior Debt until the payment in full in cash of all Senior Debt.
(b) Default under the Senior Loan Agreement. No direct or indirect
payment or distribution by or on behalf of Borrower in respect of the
Subordinated Notes (including, without limitation, Permitted
Payments), whether pursuant to the terms of the Subordinated Notes or
upon acceleration or otherwise, shall be made, and no other
consideration in respect of Subordinated Notes shall be given if, at
the time such payment or distribution is to be made the Senior Lender
has given the Junior Lenders a Senior Default Notice or has given
Borrower a Payment Block Notice; provided, that Borrower may resume
payments (and make any missed payments due to application of this
Section 3(b)) with respect to the Subordinated Notes upon the earlier
to occur of (i) the Senior Agent's written acknowledgement of the cure
or waiver in accordance with the terms of the Loan Documents of all
Senior Defaults referenced in the applicable Senior Default Notice or
applicable Payment Block Notice (which written acknowledgement, in
each case, the Senior Agent agrees to promptly give to the Junior
Lenders upon such cure or waiver, but in no event later than one
Business Day after such cure or waiver), or (ii) the expiration of a
period of one hundred eighty (180) days, in the case of such defaults
which are payment defaults (including upon acceleration), and ninety
(90) days, in the case of all such other defaults, in each case from
the date such Senior Default Notice or Payment Block Notice was
received by the Junior Lenders or Borrower (the "Blockage Period").
(c) Certain Payments Held in Trust. In the event that,
notwithstanding the foregoing provisions prohibiting such payment or
distribution or such giving of consideration, the Junior Lenders shall
have received any payment or distribution or consideration in respect
of the Subordinated Notes contrary to such provisions, then and in
such event such payment or distribution or consideration shall be
received and held in trust for the Senior Lenders and shall be paid
over or delivered to the Senior Lenders for application to or as
collateral for the payment or prepayment of all Senior Debt after
giving effect to any concurrent payment or distribution to the Senior
Lenders in respect of the Senior Debt.
(d) Notice of Default. If either of the Junior Lenders give Borrower
notice of any default under the Subordinated Notes, then such Junior
Lender agrees to provide concurrently a copy of such notice to the
Senior Agent and the other Junior Lender. Nothing in this Section 3(d)
shall create any third party beneficiary rights in Borrower or in any
way affect the right of the Senior Lenders to accelerate the maturity
of the Senior Debt under the Senior Loan Agreement.
(e) Suspension of Remedies.
(i) During any period commencing on the date on which a default under
the Subordinated Notes shall have occurred (and of which a Junior
Lender has provided notice of such default to Senior Lender and the
other Junior Lender, together with a stated intention to exercise a
Collection Action) and ending on the earliest of (A) one hundred
eighty (180) days after receipt by the Senior Agent of such notice of
such default, (B) acceleration of the Senior Debt, (C) the occurrence
of any Insolvency Event, or (D) the commencement by the Senior Agent
or any holder of the Senior Debt of any judicial or non judicial
action or proceeding against Borrower to (I) enforce payment of or to
collect the whole or any part of the Senior Debt, (II) enforce any of
the rights and remedies available to the Senior Agent or any holder of
the Senior Debt with respect to the Senior Debt or any collateral
securing the Senior Debt, or (III) realize upon any of the Senior
Collateral securing the Senior Debt or exercise any other right or
remedy with respect to such collateral, the Junior Lenders shall not
take any Collection Action, and, if taken, any such prohibited
Collection Action shall be ineffective, provided that until the Senior
Debt is paid in full, the Junior Lenders shall not take any Collection
Action to realize or foreclose upon any of the Senior Collateral or to
exercise any other right or remedy with respect to the Senior
Collateral to the extent that Senior Agent has accelerated the Senior
Debt and is diligently realizing or foreclosing on the Senior
Collateral or exercising any of its rights or remedies in respect
thereof. Notwithstanding the foregoing, the Junior Lenders may vote,
file proofs of claim and otherwise act with respect to the
Subordinated Notes in any Insolvency Event to the extent permitted by
Section 12(a).
(ii) During any period commencing on the date on which a default
under the Loan Documents shall have occurred (and of which Senior
Agent has provided notice of such default to the Junior Lenders
together with a stated intention to exercise a Senior Collection
Action) and ending on the earliest of (A) one hundred eighty (180)
days after receipt by the Junior Lenders of such notice of such
default, (B) acceleration of the Subordinated Note, (C) the occurrence
of any Insolvency Event or (D) the commencement by a Junior Lender of
any judicial or non judicial action or proceeding against Borrower to
(I) enforce payment of or to collect the whole or any part of the
Subordinated Notes, or (II) enforce any of the rights and remedies
available to the Junior Lenders with respect to the Subordinated
Notes, the Senior Lenders shall not take any Senior Collection Action,
and, if taken, any such prohibited Senior Collection Action shall be
ineffective.
(f) Rights of Senior Lenders and Junior Lenders Not to be Impaired.
No right of the Senior Agent, the Senior Lenders or the Junior Lenders
to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act taken in good faith, or
failure to act, which failure to act is in good faith, by the Senior
Agent, the Senior Lenders or the Junior Lenders, as applicable, or by
any noncompliance by Borrower, with the terms and provisions and
covenants herein or of the terms of the Loan Documents or the
Subordinated Note or this Agreement. The Junior Lenders and Borrower
agree not to take any action to avoid or to seek to avoid the
observance and performance of the terms and conditions hereof, and
shall at all times in good faith carry out all such terms and
conditions.
(g) Obligation of Borrower Unconditional; Subrogation; Nature of
Agreement.
(i) The Junior Lenders shall not be subrogated to the rights of the
holders of the Senior Debt to receive payments or distributions of
assets of the Borrower unless and until all of the Senior Debt shall
have been fully and indefeasibly paid and satisfied in cash (including
by way of payments to the holders of the Senior Debt pursuant to this
Agreement) and all financing arrangements to extend Senior Debt among
the Borrower, the Senior Agent and the Senior Lenders have been
terminated; and, for the purposes of such subrogation, no payments or
distributions made to the holders of the Senior Debt of any cash,
property or securities to which the Junior Lenders would be entitled
except for this Agreement and no payments pursuant to the provisions
of this Agreement to the holders of Senior Debt by the Junior Lenders
shall, as among any of the Borrower, its creditors and the Junior
Lenders, be deemed to be a payment by the Borrower to or on account of
the Senior Debt.
(ii) Subject to the full and indefeasible payment and satisfaction in
cash of the Senior Debt and the termination of all financing
arrangements to extend Senior Debt among the Borrower, the Senior
Agent and the Senior Lenders, the Junior Lenders shall be subrogated
to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Borrower
applicable to the Senior Debt until all amounts owing on the
Subordinated Notes shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of any Senior
Debt of cash, property, securities or other assets by virtue of the
subrogation herein provided which otherwise would have been made to
the Junior Lenders shall, as between the Borrower, its creditors and
the Junior Lenders, be deemed to be a payment to or on account of the
Senior Debt. Subject to the full and indefeasible payment and
satisfaction in cash of the Subordinated Notes and the termination of
all financing arrangements to extend Junior Debt among the Borrower
and the Junior Lenders, the Senior Lenders shall be subrogated to the
rights of the holders of Subordinated Notes to receive payments or
distributions of cash, property or securities of the Borrower
applicable to the Subordinated Notes until all amounts owing on the
Senior Debt shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of any Subordinated Notes
of cash, property, securities or other assets by virtue of the
subrogation herein provided which otherwise would have been made to
the Senior Lenders shall, as between the Borrower, its creditors and
the Senior Lenders, be deemed to be a payment to or on account of the
Subordinated Notes.
(iii) The provisions of this Agreement are and are intended solely
for the purposes of defining the relative rights of the Junior
Lenders, on the one hand, and the holders of the Senior Debt, on the
other hand, as among themselves. As between the Borrower and the
Junior Lenders, nothing contained herein shall impair the
unconditional and absolute obligation of the Borrower to the Junior
Lenders to pay the Subordinated Notes as such Subordinated Notes shall
become due and payable in accordance with the Subordinated Notes. As
between the Borrower and the Senior Lenders, nothing contained herein
shall impair the unconditional and absolute obligation of the Borrower
to the Senior Lenders to pay the Senior Debt as such Senior Debt shall
become due and payable in accordance with the Senior Loan Agreement
and the Senior Loan Documents. No person other than the Senior Agent,
the Senior Lenders and the Junior Lenders and their respective
successors and assigns shall have any rights hereunder; provided, that
the Junior Lenders and Senior Lenders and the other holders of any
Senior Debt are expressly entitled to the benefits of this Agreement.
(iv) This is a continuing agreement of subordination and the Senior
Lenders may continue, at any time and without notice to the Junior
Lenders, to extend credit or other financial accommodations and loan
monies to or for the benefit of the Borrower on the faith hereof,
provided, however, that the continuing agreement of subordination will
apply only to the Senior Debt as set forth in Section 2 hereof.
4. Actions to Effectuate Subordination.
(a) Authorization for the Senior Lenders. If the Junior Lenders do
not file proper claims or proof of debt in the form required in
connection with any dissolution, winding-up, liquidation or
reorganization of Borrower in any bankruptcy, insolvency, or
receivership proceedings prior to fifteen (15) calendar days before
the expiration of the time to file such claims or proofs, then after
giving five (5) Business Days notice to Junior Lenders, if the Junior
Lenders do not then file such claims, the Senior Agent, on behalf of
the Senior Lenders shall have the right to file and prove all claims
therefor and to take all such other action in the name of the Junior
Lenders or otherwise, as the Senior Lenders may determine to be
necessary or appropriate for the enforcement of the provisions of this
Agreement; provided, that no such prior notice shall be required if
the remaining time period for filing proper claims or proof of debt is
less than five (5) Business Days; provided, further, that the Junior
Lenders shall at all times (subject to the terms of this Agreement,
including, without limitation, Section 11) have the right to
participate in any such proceedings with respect to claims.
Notwithstanding anything to the contrary set forth herein, if,
following any such vote by the Senior Agent, the Junior Lenders timely
vote their claims, then such vote by the Junior Lenders shall be
deemed to control and supersede any such previous vote by Senior Agent
and, upon the written request of the Junior Lenders, Senior Agent will
withdraw such previous vote.
(b) Absence of Security Interests. The Subordinated Note is
unsecured.
(c) Specific Performance.
(i) The Senior Agent and the Senior Lenders are hereby authorized to
demand specific performance of the provisions of this Agreement, at
any time when the Junior Lenders shall have failed to comply with any
of the provisions of this Agreement. Junior Lenders hereby irrevocably
waive any defense based on the adequacy of a remedy at law that might
be asserted as a bar to such remedy of specific performance. Junior
Lenders hereby acknowledge that the provisions of this Agreement are
to be enforceable at all times, whether before or after the
commencement of an Insolvency Event, it being understood that this
Section 4(c)(i) does not limit and shall not be applied to limit the
rights of the Junior Lenders to enforce the provisions of the
Subordinated Notes in conformity with the provisions of this
Agreement.
(ii) The Junior Lenders are hereby authorized to demand specific
performance of the provisions of this Agreement, at any time when the
Senior Agent or the Senior Lenders shall have failed to comply with
any of the provisions of this Agreement. The Senior Agent and the
Senior Lenders shall have no defense based on the adequacy of a remedy
at law that might be asserted as a bar to such remedy of specific
performance. The provisions of this Agreement are to be enforceable at
all times, whether before or after the commencement of an Insolvency
Event, it being understood that this Section 4(c)(ii) does not limit
and shall not be applied to limit the rights of the Senior Agent or
the Senior Lenders to enforce the provisions of the Senior Loan
Documents in conformity with the provisions of this Agreement.
5. Amendments.
(a) Amendment to Subordinated Notes. The Junior Lenders agree that it
will not amend the terms of the Subordinated Notes or this Agreement
without the prior written consent of the Senior Agent and the Senior
Lenders if the effect of which is (i) to increase the maximum
principal amount of the Subordinated Notes (unless such increase does
not increase the amount of cash interest expense or other debt service
associated with the Subordinated Note payable prior to repayment in
full of the Senior Debt), (ii) to increase the rate of interest on any
of the Subordinated Notes (unless such increase is added to the
principal amount of the Subordinated Notes and is not due and payable
prior to the actual repayment in full of the Senior Debt), (iii) to
change any date upon which regularly scheduled payments of principal
or interest on the Subordinated Notes are due to an earlier date, (iv)
to add or make more restrictive any event of default or any covenant
with respect to the Subordinated Notes, provided that if the Senior
Loan Agreement or the Senior Loan Documents are amended to provide for
additional covenants or events of default or to make more restrictive
any existing covenants or events of default applicable to the
Borrower, then the Subordinated Notes and this Agreement may be
amended to provide for additional covenants or events of default or to
make more restrictive any existing covenants or events of default so
long as such covenants or events of default set forth in the
Subordinated Notes and this Agreement are not more restrictive than
those set forth in the Senior Loan Agreement or Senior Loan Documents,
as so amended, (v) to change the final maturity date of any
Subordinated Notes to a date that is earlier than the date which is
one hundred twenty (120) days after the maturity date of the Senior
Debt, or (vi) to take any liens or security interests in assets of the
Borrower or any other assets securing the Senior Debt, other than
liens and security interests in the Senior Collateral that exist as of
the date hereof; provided, however, that nothing contained in
Paragraph 5 or elsewhere in this Agreement shall be construed to limit
the rights set forth in the Subordinated Note as in effect on the date
hereof to charge and accrue the default interest rate and other fees,
charges and expenses permitted thereunder when an Event of Default
exists or to require the consent of the Senior Lenders to any waiver
by the Junior Lender of any Event of Default or Default under the
Subordinated Notes or of any of the rights and remedies of the Junior
Lenders thereunder.
(b) Amendment to Senior Debt, Other Agreements. The Senior Agent and
the Senior Lenders may from time to time amend, restate, modify,
extend, renew or supplement the Senior Loan Agreement, the Senior Loan
Documents and the Senior Debt without the consent of the Junior
Lender.
(c) Release of Senior Security Interests. The Junior Lenders agree
that the Senior Agent may, from time to time at its sole discretion
and without notice to the Junior Lenders, (i) retain or obtain a
security interest in any property to secure any of the Senior Debt,
(ii) retain or obtain the primary or secondary obligation of any other
obligor or obligors with respect to any of the Senior Debt, or (iii)
release its security interest in, or surrender, release or permit any
substitution or exchange for, all or any part of any Senior Collateral
securing any of the Senior Debt.
6. Subordinated Note Owed Only to the Junior Lenders. The Junior
Lenders warrant and represent that as at the date hereof (a) the
Junior Lenders have not previously assigned any interest in the
Subordinated Notes; (b) no other party owns an interest in the
Subordinated Notes other than the Junior Lenders and (c) the entire
Subordinated Notes are owing only to the Junior Lenders.
7. Instrument Legend. Any instrument evidencing any of the
Subordinated Notes will, on the date hereof or promptly hereafter, be
conspicuously inscribed with the following legend:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,
AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, WITHOUT (A) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED WITH RESPECT TO THE
PROPOSED DISPOSITION THEREOF AND THAT SUCH DISPOSITION WILL NOT CAUSE
THE LOSS OF THE EXEMPTION UPON WHICH THE COMPANY RELIED IN ISSUING
THIS NOTE TO THE ORIGINAL PURCHASER.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE SUBORDINATION
AGREEMENT, DATED AS OF AUGUST 8, 2005, BY AND AMONG TRINITY SPRINGS,
INC., DRAUPNIR, LLC, AND ARISTIDE INVESTMENTS, L.P., TO WHICH
REFERENCE IS MADE FOR THE TERMS THEREOF AND FOR LIMITATIONS ON
ENFORCEMENT OF THE PROVISIONS HEREOF AND OF RETENTION OF PAYMENTS
RECEIVED HEREUNDER.
8. Assignment of Claims. The Junior Lenders agree that until the
Senior Debt has been paid in full in cash and satisfied, the Junior
Lenders will not assign or transfer to others any claim the Junior
Lenders has or may have against Borrower, unless such assignment or
transfer is made expressly subject to this Agreement, provided,
however, that nothing contained herein shall be deemed to prohibit
Junior Lenders from securitizing or granting participation interests
in, or pledging or transferring to a commercial paper conduit or
transferring to any affiliate of the Junior Lenders, all or any
portion of the Subordinated Note, in each case without notice to or
consent of the Senior Agent and without any requirement of becoming a
signatory to this Agreement.
9. Invalidated Payments. To the extent that the Senior Lenders
receive payments on, or proceeds of Senior Collateral for, the Senior
Debt which are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal
law, common law, or equitable cause, then, to the extent of such
payment or proceeds received, the Senior Debt, or part thereof,
intended to be satisfied shall be revived and continue in full force
and effect as if such payments or proceeds had not been received by
the Senior Lenders. To the extent that the Junior Lenders receive
payments on the Subordinated Notes which are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required
to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause,
then, to the extent of such payment or proceeds received, the
Subordinated Notes, or part thereof, intended to be satisfied shall be
revived and continue in full force and effect as if such payments or
proceeds had not been received by the Junior Lenders.
10. Bankruptcy Issues.
(a) At any meeting of creditors or in the event of any Insolvency
Event, the Junior Lenders shall retain the right to vote, file a proof
of claim and otherwise act with respect to the Subordinated Note
(including the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition, or
extension), provided that the Junior Lenders shall not initiate, join
in or prosecute any claim or action in such Insolvency Event
challenging the enforceability of the Senior Debt, this Agreement, or
any liens and security interests securing the Senior Debt.
(b) The Junior Lenders acknowledge and agree that upon the occurrence
of any Insolvency Event, the Senior Lenders, or any one of them may
consent to the use of cash collateral or provide financing to the
Borrower on such terms and conditions and in such amounts as the
Senior Lenders, in their sole discretion, may decide and that, in
connection with such cash collateral usage or such financing, Borrower
(or a trustee appointed for the estates of Borrower) may grant to the
Senior Agent or the Senior Lenders liens and security interests upon
all assets of Borrower, which 1iens and security interests shall
secure payment of all Senior Debt (whether such Senior Debt arose
prior to the filing of the petition for relief thereafter). All
allocations of payments between the Senior Lenders and the Junior
Lender shall continue to be made after the occurrence of any
Insolvency Event on the same basis that the payments were to be
allocated prior to the date of such Insolvency Event. The Junior
Lenders waive any claim they may now or hereafter have against the
Senior Lenders arising out of the Senior Lenders' election, in any
proceeding instituted under Chapter 11 of the Bankruptcy Code, of the
application of Section 1111 (b)(2) of the Bankruptcy Code, and/or any
grant of a security interest or administrative claim to the Senior
Lenders under Sections 503, 507, 361 or 364 of the Bankruptcy Code by
the Borrower, as debtor in possession or by its trustee. The Junior
Lender agrees that it will not take, join in or otherwise support in
any manner any challenge to the validity, perfection, priority or
enforceability of the Senior Agent's liens and security interests in
the Senior Collateral or any post petition property of the Borrower.
11. Waivers. No waiver shall be deemed to be made by the Senior
Agent, any Senior Lender, or the Junior Lenders of any of their
respective rights hereunder, unless the same shall be in writing
signed by the waiving party, as applicable, 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 the Senior Agent, any Senior
Lender, or Junior Lenders or the obligations of the Junior Lenders to
the Senior Agent and the Senior Lenders or the obligations of the
Senior Agent and the Senior Lenders to the Junior Lenders in any other
respect at any other time.
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVERS. EACH OF THE JUNIOR
LENDERS, THE SENIOR AGENT AND THE SENIOR LENDERS HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT IN THE
STATE OF ILLINOIS AND OF ANY ILLINOIS STATE COURT FOR PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH
OF THE JUNIOR LENDERS, THE SENIOR AGENT AND THE SENIOR LENDERS, TO THE
FULLEST EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY OBJECTION BASED
UPON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH.
EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
13. Notices. Except as otherwise expressly provided below, any notice
required or desired to be served, given or delivered hereunder shall
be in writing, and shall be deemed to have been validly served, given
or delivered (a) three (3) days after deposit in the United States
Mails, by registered mail, with proper postage prepaid or provided
for, (b) when sent after receipt of confirmation if sent by telecopy
or other similar facsimile transmission, (c) one (1) Business Day
after deposited with a reputable overnight courier with all charges
prepaid or (d) when delivered, if hand-delivered by messenger.
14. Governing Law. This Agreement shall be interpreted and the rights
and obligations of the parties hereto determined, in accordance with
the laws and decisions of the State of Illinois, shall be immediately
binding upon and inure to the benefit of the parties hereto and each
of their respective successors and assigns.
15. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
16. Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this
Agreement.
17. Authority. The signatories to this Agreement on behalf of each of
the parties hereto hereby certify that they have all necessary
authority to grant the subordination evidenced hereby and execute this
Agreement on behalf of such party.
18. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of
this Agreement.
19. Full Agreement. This Agreement constitutes the complete agreement
between the parties with respect to the subject matter hereof. Any
document, instrument or agreement executed by the parties hereto with
respect to the financing which is the subject of this Agreement
predating this Agreement shall be merged with and into and superseded
by this Agreement.
20. Reliance. Upon any payment or distribution of assets of the
Borrower in connection with any Insolvency Event with respect thereto,
the Junior Lender shall be entitled to rely upon any order or decree
by any court of competent jurisdiction in which such Insolvency Event
is pending, delivered to the Junior Lender, purporting to enforce or
interpret this Agreement for the purpose of ascertaining the holders
of Senior Debt entitled to participate in such payment or distribution
in accordance with this Agreement, the amount thereof, and all other
matters related thereto. The Junior Lender shall not at any time be
charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or the receipt of any payment by
it, unless and until the Junior Lenders shall have received written
notice thereof from the Borrower or the Senior Agent, and prior to the
receipt of any such written notice the Junior Lenders shall be
entitled to assume conclusively that no such facts exist.
21. Attorneys' Fees. In the event of a dispute between the parties
arising from this Agreement, the prevailing party shall be entitled to
all attorneys' fees and costs and expenses related thereto.
22. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties and separate counterparts, each
of which when so executed and delivered, shall be deemed an original,
and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile shall be effective as delivery of
a manually executed counterpart of this Agreement.
[ signature pages follow ]
IN WITNESS WHEREOF, the parties has caused this Subordination
Agreement to be duly executed as of date set forth above.
JUNIOR LENDERS:
ARISTIDE INVESTMENTS, L.P.
/s/ Xxxxxxx X. Xxxxxx
By: Xxxxxxx X. Xxxxxx
Title: Partner
DRAUPNIR, LLC
/s/ Xxxxx Xxxxxxxx
By: Xxxxx Xxxxxxxx
Title: Member
BORROWER:
TRINITY SPRINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman of the Board
