Exhibit 10.3
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") made as of November 27,
2006, by and between, TNK, INC. (f/k/a GIRLS' LIFE, INC.), a Maryland
corporation (the "Creditor"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a
New York banking corporation (the "Bank").
R E C I T A L S
Subject to, and in accordance with, that certain Credit Agreement dated
November 27, 2006 (which Credit Agreement, as the same may from time to time
be amended, restated, supplemented or otherwise modified is herein called the
"Credit Agreement"), by and between the Bank and Girls' Life Acquisition Corp.,
a Delaware corporation (the "Borrower"), the Bank has agreed to make a demand
discretionary credit facility (the "Bank's Credit Facility") available to the
Borrower. The Borrower's obligation to repay amounts drawn on the Bank's Credit
Facility with interest is evidenced by the Borrower's Grid Note (which Grid
Note, as the same may from time to time be extended, replaced, substituted for,
amended, restated or otherwise modified, is herein called the "Bank's Grid
Note") dated as of the date hereof, and payable to order of the Bank in the
principal amount of the Bank's Credit Facility. Subject to, and in accordance
with, that certain Term Loan Agreement dated November 27, 2006 (which Term Loan
Agreement, as the same may from time to time be amended, restated, supplemented
or otherwise modified is herein called the "Loan Agreement"), by and between
the Bank and the Borrower, the Bank has agreed to make a term loan (the "Bank's
Term Loan") to the Borrower. The Borrower's obligation to pay the Bank's Term
Loan with interest is evidenced by the Borrower's Term Note (which Term Note,
as the same may from time to time be extended, replaced, substituted for,
amended, restated or otherwise modified, is herein called the "Bank's Term
Note") dated the date hereof, and payable to the Bank in the principal amount
of the Bank's Term Loan. The prompt and punctual repayment of the Bank's Credit
Facility and the Bank's Term Loan is secured by the security interest and
continuing lien in and to all of the assets of the Borrower (the "Collateral"),
more fully described in, and granted to the Bank by the Borrower pursuant to,
that certain Security Agreement dated November 27, 2006 (which Security
Agreement, as the same may be from time to time amended, restated, supplemented
or otherwise modified the "Bank's Security Agreement"), by and between the
Borrower and the Bank. Subject to and in accordance with that certain Guaranty
Agreement dated November 27, 2006 (which Guaranty Agreement, as the same may
from time to time be amended, restated, supplemented or otherwise modified is
herein called the "Bank's Guaranty"), by Xxxxx Xxxxxx (the "Guarantor") to the
Bank, the Guarantor, has guaranteed, among other things, the prompt and
punctual repayment of Bank's Credit Facility and the Bank's Term Loan. Subject
to and in accordance with that certain Security Agreement dated as of November
27, 2006 (which Security Agreement, as the same may from time to time be
amended, restated, supplemented or otherwise modified is herein called the
"Bank's Stock Pledge"), by and between the Guarantor and the Bank, the
Guarantor, has granted a continuing lien and security interest in and to the
capital stock of the Borrower (the "Stock"), in order to secure, among other
things, the Guarantor's obligations under the Bank's Guaranty, and the prompt
and punctual repayment of the Bank's Credit Facility and the Bank's Term Loan.
The Creditor has agreed to make a loan (the "Creditor's Loan") to the Borrower.
The Borrower's obligation to repay the Creditor's Loan with interest is
evidenced by the Borrower's Secured Promissory Note (which Non-Negotiable
Secured Promissory Note, as the same may from time to time be extended,
replaced, substituted for, amended, restated or otherwise modified, is herein
called the "Creditor's Note") dated as August 18, 2006, and payable to the
Creditor in the principal amount of the Creditor's Loan. The prompt and
punctual repayment of the Creditor's Loan in accordance with the Creditor's Note
is secured by the security interest and continuing lien in and to the Collateral
granted to the Creditor by the Borrower pursuant to, a certain Security
Agreement dated November 27, 2006 (which Security Agreement, as the same may be
from time to time amended, restated, supplemented or otherwise modified the
"Creditor's Security Agreement"), by and between the Borrower and the Creditor.
Subject to and in accordance with that certain Guaranty Agreement dated
November 27, 2006 (which Guaranty Agreement, as the same may from time to time
be amended, restated, supplemented or otherwise modified is herein called the
"Creditor's Guaranty"), by the Guarantor to the Creditor, the Guarantor, has
guaranteed, among other things, the prompt and punctual repayment of Creditor's
Loan. Subject to and in accordance with that certain Stock Pledge Agreement
dated as of August 18, 2006 (which Stock Pledge Agreement, as the same may from
time to time be amended, restated, supplemented or otherwise modified is herein
called the "Creditor's Stock Pledge"), by and between the Guarantor and the
Creditor, the Guarantor has granted a continuing lien and security interest in
and to the Stock, in order to secure the prompt and punctual repayment of the
Creditor's Loan.
The Bank and the Creditor desire to set forth their agreement regarding
the Bank's Obligations (hereinafter defined), the Creditor's Obligations
(hereinafter defined), the Bank's Lien (hereinafter defined) and the Creditor's
Lien (hereinafter defined).
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Creditor and the Bank agree as follows:
1. Recitals. The Creditor and the Bank acknowledge that the above Recitals
are true and correct, and hereby incorporate the same by this reference into
the body of this Agreement.
2. Certain Definitions.
"Bank's Documents" as used herein means collectively and includes the Credit
Agreement, the Bank's Grid Note, the Loan Agreement, Bank's Term Note, the
Bank's Guaranty, the Bank's Security Agreement, the Bank's Stock Pledge and any
other instrument, document or agreement both now and hereafter executed,
delivered or furnished by the Borrower, the Guarantor or any other person
evidencing, guaranteeing, securing or in connection with Bank's Credit Facility
and the Bank's Term Loan.
"Bank's Lien" means collectively (a) the continuing lien and security interest
granted by the Borrower to the Bank under the Bank's Security Agreement, (b)
the continuing lien and security interest granted by the Guarantor to the Bank
under the Bank's Stock Pledge, and (c) any and all liens and security interests
of the Bank now existing or hereafter arising in the property of the Borrower.
"Bank's Obligations" means collectively and includes (a) all present and future
indebtedness, liabilities and obligations of any kind and nature whatsoever of
the Borrower to the Bank both now existing and hereafter arising under, as a
result of, on account of, or in connection with, the Bank's Credit Facility and
the Bank's Term Loan, including, without limitation, obligations for the
repayment of the Bank's Term Loan, for the repayment of all amounts drawn on
the Bank's Credit Facility, future advances, principal, interest, indemnities,
fees, late charges, enforcement costs and other costs and expenses whether
direct, contingent, joint, several, matured or unmatured; and (b) all present
and future indebtedness, liabilities and obligations of any kind and nature
whatsoever of the Guarantor to the Bank both now existing and hereafter arising
under, as a result of, on account of, or in connection with, the Bank's
Guaranty, including, without limitation, obligations for the guaranty of
payment of the Bank's Term Loan, and the guaranty of payment of all amounts
drawn on the Bank's Credit Facility.
"Creditor's Documents" means collectively and includes the Creditor's Note, the
Creditor's Security Agreement, the Creditor's Guaranty, the Creditor's Stock
Pledge and any other instrument, document or agreement both now and hereafter
executed, delivered or furnished by the Borrower or any other person
evidencing, guaranteeing, securing or in connection with the Creditor's
Loan.
"Creditor's Lien" means collectively (a) the continuing lien and security
interest granted by the Borrower to the Creditor under the Creditor's Security
Agreement, (b) the continuing lien and security interest granted by the
Guarantor to the Creditor under the Creditor's Stock Pledge, and (c) any and
all liens and security interests of the Creditor now existing or hereafter
arising in the property of the Borrower.
"Creditor's Obligations" means collectively and includes (a) all present and
future indebtedness, liabilities and obligations of any kind and nature
whatsoever of the Borrower to the Creditor both now existing and hereafter
arising under, as a result of, on account of, or in connection with, the
Creditor's Loan, including, without limitation, obligations for the repayment
of the Creditor's Loan, principal, interest, indemnities, fees, late charges,
enforcement costs and other costs and expenses whether direct, contingent,
joint, several, matured or unmatured; and (b) all present and future
indebtedness, liabilities and obligations of any kind and nature whatsoever
of the Guarantor to the Creditor both now existing and hereafter arising under,
as a result of, on account of, or in connection with, the Creditor's Guaranty,
including, without limitation, obligations for the guaranty of payment of the
Creditor's Loan.
3. Debt Subordination. From the date hereof though and including August 16,
2007 (the "Subordination Period"), the Creditor hereby subordinates and
postpones the payment of the Creditor's Obligations to the payment of the
Bank's Obligations to the Bank. The Creditor agrees that during the
Subordination Period the Bank's Obligations shall have priority in payment,
right and remedy over the Creditor's Obligations, and except as otherwise
herein provided, and without the prior written consent of the Bank, the
Creditor shall not ask, demand, receive, accept, xxx for, set off, collect
or enforce the Creditor's Obligations (against either the Borrower or the
Guarantor) or any part thereof or any collateral and security therefore, or
permit the amendment of the Creditor's Documents, except amendments made under
the terms of the Modification Agreement (hereinafter defined), without the
prior written consent of the Bank. The Creditor agrees, that from the date
hereof until the expiry of the Termination Period, that the Creditor will
deliver to the Bank any and all monies received from the Borrower or the
Guarantor in payment of the Creditor's Obligations, for the Bank's application
to the Bank's Obligations in accordance with the Bank's Documents, other than
amounts received pursuant to that certain Modification Agreement dated as of
November 27, 2006, by and between the Borrower, the Creditor and Monarch
Services, Inc. (which Modification Agreement, as the same may be from time to
time amended, restated, supplemented or otherwise modified the "Modification
Agreement") The Creditor agrees that any and all monies received from the
Borrower or the Guarantor in payment of the Creditor's Obligations that is not
yet delivered to the Bank in compliance with the previous sentence shall be
deemed to be held in trust for thebenefit of the Bank.
4. Lien Subordination. The provisions of this Agreement shall apply
notwithstanding the date, manner or order of perfection of the Bank's Lien
and the Creditor's Lien, and notwithstanding any provisions of the Uniform
Commercial Code, or any applicable law. Nothing herein shall modify or affect
the relative priority of any interests of the Bank and the Creditor, now
existing or hereafter arising, in and to any property of the Borrower other
than the Collateral, or any property of the Guarantor other than the Stock.
The Bank and the Creditor hereby irrevocably and unconditionally agree that
the Creditor's Lien and any security interest, lien or claim that the Creditor
may now or hereafter have or obtain in the Collateral and the Stock, is
subordinate in all respects to the Bank's Lien and any security interest,
lien or claim that the Bank may now or hereafter have or obtain in the
Collateral and the Stock.
5. Standstill. The Creditor agrees that, at any time until the Bank's
Obligations are indefeasibly paid in full, upon the delivery by the Bank of
a notice to the Creditor that an Event of Default (as defined in the Loan
Agreement) has occurred and remains continuing, the Creditor shall not, for
a period ending one hundred eighty (180) days following the delivery of such
notice: (a) demand payment of any of the Creditor's Obligations, (b) accelerate
the maturity of any of the Creditor's Obligations, (c) exercise any rights or
remedies or take any action or proceeding to collect or enforce any of the
Creditor's Obligations, including without limitation, taking any action to
foreclose on or dispose of the Collateral or the Stock, (d) join with any
other creditor of the Borrower in filing any petition commencing any Bankruptcy
petition against or in respect of the Borrower, (e) sell, assign, transfer or
otherwise dispose of all or any part of the Creditor's Obligations, (f) receive
or accept any collateral and security of any nature whatsoever for the
Creditor's Obligations, or (g) amend or modify the Creditor's Documents.
6. Reorganization, Bankruptcy.
(a) The Creditor hereby acknowledges and agrees that this Agreement shall
survive any Reorganization (hereinafter defined) and shall continue unimpaired
and in full force and effect and shall apply with full force and effect. As
used herein the term "Reorganization" means with respect to the Borrower during
the Subordination Period, any filing, whether voluntary or involuntary, of any
petition under the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute, and all rules and regulations promulgated thereunder
(the "Bankruptcy Code"), the bringing of any proceeding for the relief of
Borrower, distribution of the assets of the Borrower upon any voluntary or
involuntary dissolution, winding-up, total or partial liquidation or
reorganization, or bankruptcy, insolvency, receivership or other statutory or
common law proceedings or arrangements involving the Borrower or the
readjustment of the liabilities of the Borrower or any assignment for the
benefit of creditors or any marshaling of the assets or liabilities of the
Borrower.
(b) During the pendency of any Reorganization, the Creditor further agrees
as follows:
(i) If the Bank shall desire to permit the use by the Borrower of any
of the Collateral that constitutes "cash collateral", under 11 U.S.C. S363 or
any successor statute or similar statute, or to provide or permit post-petition
financing to the Borrower, under 11 U.S.C. S364 or any successor statute or
similar statute, the Creditor agrees that: (1) adequate notice to the Creditor
shall he deemed to have been provided for such use of cash collateral or such
postpetition financing if the Creditor receives notice thereof at least five
(5) business days prior to the earlier of any hearing on a request to approve
such use of cash collateral or such post-petition financing, or (y) the date
of entry of an order approving the same; and (2) no objection, directly or
indirectly, will be raised by the Creditor to any such use of cash collateral
or such postpetition financing on the grounds.
(ii) No objection, directly or indirectly, will be raised by the
Creditor to any motion by the Bank for relief from the automatic stay in any
Reorganization (including the automatic stay under 11 U.S.C. S362 or any
successor statute) to foreclose on, sell or otherwise realize upon the
Collateral or to prohibit use of cash collateral.
(iii) No objection, directly or indirectly, will be raised by the
creditor to any sale or other disposition of the Collateral under 11 U.S.C.
S363, or any successor statute, to which Bank has consented provided that any
such sale is conducted in a commercially reasonable manner.
(iv) The Creditor will proceed, if and only if directed by the Bank,
to elect a trustee satisfactory to the Bank in any Reorganization.
(v) The Creditor generally will not take any action in connection
with any such Reorganization that the Creditor would not be permitted to take
under this Agreement.
(c) Any assets of the Borrower distributed, divided or applied by way of
dividend or payment on account of the Creditor's Obligations or any securities
issued on account of the Creditor's Obligations or the proceeds of any
realization upon the same received by the Creditor during any Reorganization
shall be received and held by the Creditor in trust, as trustee, for the
benefit of the Bank and shall be delivered to the Bank for application to the
Bank's Obligations until all of the Bank's Obligations (including, without
limitation, all interest accruing thereon after the commencement of the
Reorganization) have been paid in full, rendering any surplus to the Creditor.
Until so delivered, the same shall be held in trust by the Creditor as the
property of the Bank. The Creditor hereby assigns to the Bank all rights to any
such payments or distributions, which the Bank may exercise in its name or in
the name of the Creditor, and the Creditor agrees to execute and deliver such
documents as reasonably may be required by the Bank to enable the Bank to
enforce such claims.
(d) In the event of any Reorganization, all of the Bank's Obligations
shall first be paid in full in immediately available funds before any payment
on account of or in respect of the Creditor's Obligations is made, and in any
such proceeding any payment or distribution of any kind or character, whether
in cash or property or securities which may be payable or deliverable in
respect of the Creditor's Obligations shall be paid or delivered directly to
the Bank for application in payment of the Bank's Obligations, unless and until
all of the Bank's Obligations shall have been paid and satisfied in full. To
that end, in the event that upon any such Reorganization, any payment or
distribution of assets of the Borrower of any kind or character, whether in
cash, or other property, shall be received by the Creditor before all of the
Bank's Obligations are paid in full, such payment or distribution shall be
immediately paid over to the Bank, for application to the payment of all of
the Bank's Obligations remaining unpaid, until all of the Bank's Obligations
shall have been paid in full, after giving effect to any concurrent payment
or distribution to the Bank.
(e) The Creditor shall, in any Reorganization, file claims, proofs of
claims and other instruments of similar character necessary to enforce the
obligations of the Borrower in respect of the Creditor's Obligations. In the
event that the Creditor fails to take such action within ten (10) days prior
to the date upon which the filing of such claim would be barred, the Creditor
does hereby irrevocably assign all claims of the Creditor to the Bank and
irrevocably authorizes the Bank to file, prove and vote any and all claims in
such proceedings on the Creditor's Obligations, and to accept and receive any
payment or distribution, and to do any and all things and to execute all
instruments necessary to effectuate the foregoing. To that end, the Creditor
does hereby irrevocably appoint the Bank its attorney, with full power and
authority in the name of the Creditor, or otherwise, upon the happening of
any events hereinbefore in this paragraph stated, to file or present said
claims and to receive and collect any and all dividends thereon and other
benefits therefrom for the purpose aforesaid.
(f) The Creditor hereby acknowledges and agrees that this Agreement shall
survive any the commencement or filing of any proceedings by or against the
Guarantor or any of the Guarantor's assets or properties under the provisions
of any bankruptcy, debt reorganization or similar law for the relief of debtors
(a "Bankruptcy Proceeding") and shall continue unimpaired and in full force and
effect and shall apply with full force and effect.
(g) During the pendency of any Bankruptcy Proceeding, the Creditor further
agrees as follows:
(i) No objection, directly or indirectly, will be raised by the
Creditor to any motion by the Bank for relief from the automatic stay in any
Bankruptcy Proceeding (including the automatic stay under 11 U.S.C. S362 or
any successor statute) to foreclose on, sell or otherwise realize upon the
Stock or to prohibit use of cash collateral.
(ii) No objection, directly or indirectly, will be raised by the
Creditor to any sale or other disposition of the Stock under 11 U.S.C. S363,
or any successor statute, to which Bank has consented provided that any such
sale is conducted in a commercially reasonable manner.
(iii) The Creditor generally will not take any action in connection
with any such Bankruptcy that the Creditor would not be permitted to take under
this Agreement.
(h) Any assets of the Guarantor distributed, divided or applied by way of
dividend or payment on account of the Creditor's Obligations or any securities
issued on account of the Creditor's Obligations or the proceeds of any
realization upon the same received by the Creditor during any Bankruptcy
Proceeding shall be received and held by the Creditor in trust, as trustee, for
the benefit of the Bank and shall be delivered to the Bank for application to
the Bank's Obligations until all of the Bank's Obligations (including, without
limitation, all interest accruing thereon after the commencement of the
Bankruptcy Proceeding) have been paid in full, rendering any surplus to the
Creditor. Until so delivered, the same shall be held in trust by the Creditor
as the property of the Bank. The Creditor hereby assigns to the Bank all rights
to any such payments or distributions, which the Bank may exercise in its name
or in the name of the Creditor, and the Creditor agrees to execute and deliver
such documents as reasonably may be required by the Bank to enable the Bank to
enforce such claims.
(i) In the event of any Bankruptcy Proceeding, all of the Bank's
Obligations shall first be paid in full in immediately available funds before
any payment on account of or in respect of the Creditor's Obligations is made,
and in any such proceeding any payment or distribution of any kind or
character, whether in cash or property or securities which may be payable or
deliverable in respect of the Creditor's Obligations shall be paid or delivered
directly to the Bank for application in payment of the Bank's Obligations,
unless and until all of the Bank's Obligations shall have been paid and
satisfied in full. To that end, in the event that upon any such Bankruptcy
Proceeding, any payment or distribution of assets of the Guarantor of any
kind or character, whether in cash, or other property, shall be received by
the Creditor before all of the Bank's Obligations are paid in full, such
payment or distribution shall be immediately paid over to the Bank, for
application to the payment of all of the Bank's Obligations remaining unpaid,
until all of the Bank's Obligations shall have been paid in full, after giving
effect to any concurrent payment or distribution to the Bank.
(j) The Creditor shall, in any Bankruptcy Proceeding, file claims, proofs
of claims and other instruments of similar character necessary to enforce the
obligations of the Guarantor in respect of the Creditor's Obligations. In the
event that the Creditor fails to take such action within ten (10) days prior to
the date upon which the filing of such claim would be barred, the Creditor does
hereby irrevocably assign all claims of the Creditor to the Bank and
irrevocably authorizes the Bank to file, prove and vote any and all claims in
such proceedings on the Creditor's Obligations, and to accept and receive any
payment or distribution, and to do any and all things and to execute all the
instruments necessary to effectuate the foregoing. To that end, the Creditor
does hereby irrevocably appoint the Bank its attorney, with full power and
authority in the name of the Creditor, or otherwise, upon the happening of any
events hereinbefore in this paragraph stated, to file or present said claims
and to receive and collect any and all dividends thereon and other benefits
therefrom for the purpose aforesaid.
7. Notice. All notices, requests and demands to or upon the parties to this
Agreement shall be deemed to have been given or made when delivered by hand, or
when deposited in the mail, postage prepaid by registered or certified mail,
return receipt requested, at the respective addresses indicated on Schedule A
attached hereto, or to such other address as any party hereto may hereinafter
designate in writing to the other parties.
8. Governing Law, etc. This Agreement and the rights and obligations of
the parties hereunder shall be construed and interpreted in accordance with the
laws of the State of Maryland, both in interpretation and performance. The
invalidity, illegality or unenforceability of any provision of this Agreement
shall not affect the validity, legality or enforceability of any of the other
provisions of this Agreement which shall remain effective. This Agreement
constitutes the complete and exclusive expression of the terms of the agreement
between the parties, and supersedes all prior or contemporaneous communications
between the parties relating to the subject matter of this Agreement. The
parties further agree that this Agreement may not in any way be explained or
supplemented by a prior or existing course of dealings between the parties or
by any other prior performance between the parties pursuant to this Agreement
or otherwise, and no course of dealing between the Bank and the Creditor shall
be effective to amend, modify or change any provision of this Agreement. No
amendment to this Agreement shall be effective unless it is in writing and
signed by duly authorized representatives of each of the parties hereto. The
Creditor represents and warrants that it has full power and authority to
execute, deliver and perform its obligations under this Agreement, and that
this Agreement has been duly authorized, executed and delivered and is a
legal, valid and binding obligation of the Creditor enforceable in accordance
with its terms. The Creditor (a) consents and submits to the jurisdiction and
venue of any state or federal court sitting in the State of Maryland over any
suit, action or proceeding arising out of or relating to, or in connection
with, this Agreement, (b) waives, to the fullest extent permitted by law, any
objection, that it, now or hereafter may have to the laying of the venue of
any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum, and (c) consents to the service of process
in any such suit, action or proceeding in any such court by the mailing of
copies of such process to the Creditor, respectively, by certified or
registered mail at the respective addresses indicated on Schedule A attached
hereto. THE CREDITOR AND THE BANK SPECIFICALLY WAIVE THE RIGHT TO TRIAL BY
JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS AGREEMENT.
SIGNATURE PAGE TO SUBORDINATION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under their respective seals by their duly authorized officers of the
day and year first above written.
WITNESS/ATTEST: TNK, INC.
BY: /s/ A. Xxxx Xxxx (Seal)
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President
-------------------- ---------------------
(Name) (Name) (Title)
MANUFACTURERS AND TRADERS TRUST COMPANY
BY: /s/ Xxxx Xxxxxx (Seal)
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--------------------- Xxxx Xxxxxx, Vice President
(Name)
STATE OF MARYLAND, Co, of Balto, TO WIT:
I HEREBY CERTIFY that on this 28th day of November, 2006, before me, a
Notary Public of said State, personally appeared A. Xxxx Xxxx, who acknowled-
ged himself/herself to be the President of TNK, Inc., a Maryland corporation,
known to me (or satisfactorily proven) to be the person whose name is sub-
scribed to the foregoing instrument and acknowledged that he/she executed to
same for the purposes therein contained as the duly authorized officer of said
corporation by signing the name of the corporation by himself/herself as
President.
WITNESS my hand and Notarial Seal.
Notary Public/s/ Xxxxx X. Xxxxxxx
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My Commission Expires: Mar 1, 2010
