Exhibit 10.1
DEBT SUBORDINATION AGREEMENT
This Subordination Agreement, dated as of --------------, 1996, by and among
Financial Services Corporation of the Midwest, a Delaware corporation
("Borrower"), Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx, Xx.
(collectively and separately referred to as the "Subordinated Creditors"), and
M&I First National Bank, as trustee ("Trustee") for the holders (collectively,
"Senior Holders") of Borrower's -----% Notes due 2006 in the original principal
amount of $10,000,000 (collectively, "Notes").
WHEREAS, Subordinated Creditors are financially interested in Borrower;
WHEREAS, Borrower is about to become indebted to Senior Holders as a result of
their purchase and acquisition of the Notes in a public offering of the Notes to
be made pursuant to a Registration Statement on Form S-2 filed by Borrower with
the Securities and Exchange Commission on -------------------, 1996;
WHEREAS, as a condition to the offer and sale of such Notes, the Subordinated
Creditors are being required to subordinate payment of certain obligations owed
by Borrower to the Subordinated Creditors to the prior payment of the Notes; and
WHEREAS, the Subordinated Creditors acknowledge that the public offering and
sale of the Notes and purchase of the Notes by Senior Holders are of value to
the Subordinated Creditors.
NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions. As used herein, the following capitalized terms shall have
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the following meanings:
"Senior Claim" shall mean and be limited to all of Borrower's indebtedness
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and liabilities to the Senior Holders as represented by the Notes, together
with any renewals or extensions of the Notes.
"Subordinated Claim" shall mean and be limited to all of the Borrower's
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indebtedness and liabilities to Subordinated Creditors evidenced by the
Promissory Notes specifically described on attached Exhibit A and the
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Borrower's indebtedness and liabilities to Subordinated Creditors that may
arise upon the acquisition by the Subordinated Creditors of the Promissory
Notes specifically described on attached Exhibit B and any other Promissory
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Notes substantially similar to those on Exhibits A and B which are acquired
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in the future by any of the Subordinated Creditors (such Promissory Notes
on Exhibit B and such other Promissory Notes acquired by any of the
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Subordinated Creditors being herein called the "Acquired Promissory
Notes"); provided, however, that the indebtedness and liabilities evidenced
by the Acquired Promissory Notes shall not be a Subordinated Claim until
such Acquired Promissory Notes are acquired by any of the Subordinated
Creditors; and provided further, that nothing contained in this Agreement
shall be construed or interpreted to prohibit or in any way limit the
rights of any Subordinated Creditor to convert part or all of the
obligations underlying the Subordinated Claim into shares of the common
stock or Class D Preferred Stock of the Borrower as authorized by the
documentation executed and delivered in connection with the original
issuance and creation of the Subordinated Claim or to extend the term of
any or all of the Subordinated Claim after its maturity date.
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed to them in the Notes and the Indenture relating thereto.
2. Limitations on Payment. The Subordinated Creditors will not receive, or
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take action to collect or enforce payment from the Borrower, and the Borrower
will not make any payment to the Subordinated Creditors of the Subordinated
Claim or any part thereof, except that the Borrower may pay interest as it
accrues on the Subordinated Claim so long as no Event of Default has occurred
and is continuing on the Senior Claim. Upon the cure of any such Event of
Default, Subordinated Creditors shall be entitled to receive any past due
interest which may be paid without again creating an Event of Default.
3. Senior Holders' Priority. In the event of the bankruptcy of the Borrower,
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or the appointment of a trustee, receiver or other representative or liquidator
for any of the property of the Borrower, or if the Borrower shall become the
subject of any proceeding of any character under any federal or state bankruptcy
or insolvency act or law, all moneys and other property allocated or allocable
to the Subordinated Claim and which would be payable or deliverable to the
Subordinated Creditors in the absence of the provisions of this Agreement shall
be paid and delivered directly to the Trustee for the benefit of the Senior
Holders for application by the Senior Holders to the Senior Claim until full
payment of the Senior Claim with the excess, if any, to be paid to the
Subordinated Creditors.
4. Pay Over of Moneys. If the Subordinated Creditors receive any payment or
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property on the Subordinated Claim in violation of the terms of this Agreement,
such payments shall be held in trust by the Subordinated Creditors, and the
Subordinated Creditors will forthwith pay over or deliver the same to the
Trustee for the benefit of the Senior Holders to be held by the Trustee as cash
collateral securing the Senior Claim. Such cash collateral may be distributed
by the Trustee to the Senior Holders in accordance with the terms of the Notes
and the Indenture relating thereto.
5. Limitation on Transfer. Subordinated Creditors will not assign, pledge or
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otherwise transfer, or permit or suffer to be assigned, pledged or otherwise
transferred, or execute any power of attorney with respect to, the Subordinated
Claim or any part thereof unless such assignee, pledgee or transferee agrees in
writing to be bound by the terms and conditions of this Agreement. The
Subordinated Creditors agree to promptly place a notice regarding the
subordination provided by this Agreement on the face of each instrument
representing a Subordinated Claim.
6. Continuation of Agreement. This Agreement shall continue until the Senior
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Claim shall have been paid in full and shall then automatically terminate and be
of no further force or effect.
7. Successors and Assigns. This Agreement is binding not only upon the
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Subordinated Creditors and the Borrower, but also upon the heirs,
representatives, successors and assigns of each of them, and is enforceable not
only by the Trustee and the Senior Holders but also by each of their successors
and assigns, but shall not inure to the benefit of or be enforceable by any
other party or subordinate the Subordinated Claim to any claim other than the
Senior Claim.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND
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LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
9. Section Titles; Gender. The section titles contained in this Agreement are
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and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto. The masculine form
of any word used in this Agreement shall include the feminine form, and vice
versa.
10. Notices. Except as otherwise expressly provided herein, any notice
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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
three (3) business days after deposit in the United States mail, first class,
certified or registered mail, with proper postage prepaid, addressed to the
party to be notified as follows:
If to the Borrower:
Financial Services Corporation of the Midwest
000 - 00xx Xxxxxx
P. O. Xxx 0000
Xxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, President
If to the Subordinated Creditors:
Xxxxxxx X. Xxxxx
000 - 00xx Xxxxxx
P. O. Xxx 0000
Xxxx Xxxxxx, Xxxxxxxx 00000-0000
If to the Senior Holders:
M&I First National Bank
Trustee
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx
11. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement this ------ day of
------------------, 1996.
FINANCIAL SERVICES CORPORATION
OF THE MIDWEST
By ---------------------------
Its:--------------------------
/s/ Xxxxxxxx X. Xxxxxx, Xx.
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Xxxxxxxx X. Xxxxxx, Xx.
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
M&I FIRST NATIONAL BANK
Trustee
By-----------------------------
Its:---------------------------
EXHIBIT A
LIST OF EXISTING SUBORDINATED CLAIMS
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1. Promissory Note executed by Borrower in favor of Xxxxxxxx X. Xxxxxx, Xx. in
the original principal amount of $85,000, dated March 31, 1989.
2. Promissory Note executed by Borrower in favor of Xxxxx X. Xxxxxx in the
original principal amount of $85,000, dated March 31, 1989.
3. Promissory Note executed by Borrower in favor of Xxxxxx X. Xxxxx in the
original principal amount of $85,000, dated March 31, 1989, as transferred
and assigned by Xxxxxx X. Xxxxx to Xxxxxxx X. Xxxxx effective February 1,
1991.
4. Promissory Note executed by Borrower in favor of Xxxxxxxx X. Xxxxxx, Xx. in
the original principal amount of $165,000, dated April 17, 1989.
5. Promissory Note executed by Borrower in favor of Xxxxx X. Xxxxxx in the
original principal amount of $165,000, dated April 17, 1989.
6. Promissory Note executed by Borrower in favor of Xxxxxx X. Xxxxx in the
original principal amount of $165,000, dated April 17, 1989, as transferred
and assigned by Xxxxxx X. Xxxxx to Xxxxxxx X. Xxxxx effective February 1,
1991.
EXHIBIT B
LIST OF FUTURE SUBORDINATED CLAIMS
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1. Promissory Note executed by Borrower in favor of Xxxxxxx X. Xxxxxxxxx in
the original principal amount of $165,000, dated April 17, 1989, as
transferred and assigned by Xxxxxxx X. Xxxxxxxxx to Xxx X. Xxxxxxxxx.
2. Promissory Note executed by Borrower in favor of Xxx X. Xxxxxxxxx in the
original principal amount of $165,000, dated April 17, 1989, as transferred
and assigned by Xxx X. Xxxxxxxxx to Xxxxx X. Xxxxxxxxx.
