EXHIBIT 10.7
SUBORDINATION AGREEMENT
This Agreement, dated as of July 31, 2002, is made by Concorde Gaming
Corporation, a Colorado corporation (the "Parent"), for the benefit of First
National Bank, Rapid City, South Dakota, and its endorsers, successors and
assigns (the "Lender").
RECITALS
In accordance with the terms and conditions of a Loan Agreement dated
July 31, 2002 (the "Loan Agreement"), by and between the Lender and Concorde
Cripple Creek, Inc., a Colorado corporation wholly owned by Parent (the
"Borrower"), the Lender agreed to lend to the Borrower $7,600,000.00 (the
"Loan") for the purposes set forth in the Loan Agreement.
As a condition to the Loan, the Lender requires that the Parent
subordinate the payment of all management, consulting, supervision or
development fees, and all compensation, distributions, dividends or benefits,
however described, and in any form whatsoever (collectively, the
"Distributions"), to the payment of any and all indebtedness of the Borrower to
the Lender for the benefit of the Lender.
AGREEMENT
ACCORDINGLY, in consideration of the making of the Loan by the Lender
and other financial accommodations that may hereafter be made for the benefit of
the Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent hereby agrees as
follows:
1. Definitions. As used herein, the following terms have the meanings
set forth below:
Borrower Default: means a "Default or "Event of Default" as defined in
the Loan Agreement or any other Loan Documents.
Collateral: means the "Collateral" as defined in the Loan Agreement.
Loan Agreement: means the Loan Agreement, dated as of July 31, 2002,
between the Borrower and the Lender.
Senior Indebtedness: means all Obligations of the Borrower under the
Loan Agreement and any other agreement or instrument evidencing, governing, or
issued in connection with the Loan.
Obligations: means the "Obligations" as defined in the Loan Agreement.
Subordinate Obligations: means the Borrower's obligation to pay
Distributions and any other debt or obligation owing from the Borrower to the
Parent, whether now existing or hereinafter arising.
2. Subordination. The payment of all Subordinate Obligations is hereby
expressly deferred and subordinated to the extent and in the manner hereinafter
set forth to the payment in full of the Senior Indebtedness. Regardless of any
priority otherwise available to the Parent by law or by agreement, the Parent
agrees that (i) the Lender holds a first priority security interest in the
Collateral, and (ii) no payments in respect of Subordinate Obligations are
secured by any interest in any Collateral.
3. Payments. Until all of the Senior Indebtedness has been paid in full
and the Loan Agreement has been terminated, the Parent may not, without the
Lenders' prior written consent, demand, receive or accept any payment from the
Borrower in respect of the Subordinate Obligations, or exercise any right of or
permit any setoff in respect of the Subordinate Obligations, except that the
Parent may accept payments of Distributions, provided that such payments may not
be made if a Borrower Default has occurred and is continuing with respect to any
Senior Indebtedness or if such payments would result in a Borrower Default.
4. Receipt of Prohibited Payments. Notwithstanding any other provision
hereof, the Parent is entitled to retain and apply for its own purposes, each
and every payment received by the Parent in accordance with the terms of this
Subordination Agreement (and under no other conditions); provided, however, that
such payment is received before actual receipt by the Parent of notice that a
Borrower Default has occurred and is continuing. If the Parent receives any
other payment on Subordinate Obligations, except as stated in the foregoing
sentence, the Parent will hold the amount so received in trust for the Lender
and will forthwith turn over such payment to the Lender in the form received
(except for the endorsement of the Parent where necessary) for application to
then-existing Senior Indebtedness (whether or not due), in such manner of
application as set forth in the Loan Agreement. If the Parent exercises any
right of setoff which the Parent is not permitted to exercise under the
provisions of this Agreement, the Parent will promptly pay over to the Lender,
in immediately available funds, an amount equal to the amount of the claims or
obligations offset. If the Parent fails to make any endorsement required under
this Agreement, the Lender, or any of its officers or employees or agents on
behalf of the Lender, is hereby irrevocably appointed by the Parent as the
attorney-in-fact (which appointment is coupled with an interest) for the Lender
to make such endorsement in the Parent's name.
5. Action on Subordinated Obligations. Until all of the Senior
Indebtedness has been paid in full and the Loan Agreement has been terminated,
the Parent will not commence any action or proceeding against the Borrower to
recover all or any part of Subordinate Obligations, or join with any creditor
(unless the Lender so joins) in bringing any proceeding against the Borrower
under any bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any
state government, or take possession of, sell, or dispose of any rights to
Collateral, or exercise or enforce any right or remedy available to the Parent
with respect to the Collateral.
6. Bankruptcy and Insolvency. In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, whether or not pursuant to bankruptcy law,
dissolution, liquidation or any other marshaling of the assets or liabilities of
the Borrower (a "Bankruptcy Event"), the Parent will file all claims, proofs of
claim or other instruments of similar character necessary to enforce the
obligations of the Borrower in respect of Subordinate Obligations and will hold
in trust for the Lender and
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promptly pay over to the Lender in the form received (except for the endorsement
of the Parent where necessary) for application to the then-existing Senior
Indebtedness, any and all moneys, dividends or other assets thereafter received
in any such proceedings on account of Subordinate Obligations, unless and until
the Senior Indebtedness has been paid in full. If the Parent fails to take any
such action, the Lender, as attorney-in-fact for the Parent, may take such
action on the Parent's behalf prior to ten business days before the deadline for
taking any such action. The Parent hereby irrevocably appoints the Lender, or
any of its officers or employees on behalf of the Lender, as attorney-in-fact
for the Parent (which appointment is coupled with an interest) in connection
with a Bankruptcy Event with the power but not the duty to demand, xxx for,
collect and receive any and all such moneys, dividends or other assets and give
acquittance therefor and to file any claim, proof of claim or other instrument
of similar character, to vote claims comprising Subordinate Obligations to
accept or reject any loan of partial or complete liquidation, reorganization,
arrangement, composition or extension and to take such other action in the
Lender's own name or in the name of the Parent as the Lender may deem necessary
or advisable for the enforcement of the agreements contained herein; and the
Parent will execute and deliver to the Lender such other and further
powers-of-attorney or instruments as the Lender may request in order to
accomplish the foregoing.
7. Restrictive Legend: Transfer of Subordinate Obligations. The Parent
will cause all agreements, notes, bonds, debentures or other instruments
evidencing Subordinate Obligations or any part thereof to contain a specific
statement thereon to the effect that the indebtedness thereby evidenced is
subject to the provisions of this Agreement, and the Parent will xxxx its books
conspicuously to evidence the subordination effected hereby.
8. Continuing Effect. This Agreement constitutes a continuing agreement
of subordination, and the Lender may, without notice to or consent by the
Parent, modify any term of the Senior Indebtedness in reliance upon this
Agreement. Without limiting the generality of the foregoing, the Lender may, at
any time and from time to time, either before or after receipt of any such
notice of revocation, without the consent of or notice to the Parent and without
incurring responsibility to the Parent or impairing or releasing any of the
Lender's rights or any of the Parent's obligations hereunder:
(a) alter the terms of the Senior Indebtedness in accordance
with the terms of the Loan Agreement;
(b) sell, exchange, release or otherwise deal with any
property at any time securing payment of the Senior Indebtedness or any
part thereof as provided in the Loan Documents; and
(c) exercise or refrain from exercising any right against the
Borrower or any other person (including the Parent).
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9. Notice. All notices and other communications hereunder must be in
writing and must be (i) personally delivered, (ii) transmitted by registered
mail, postage prepaid, or (iii) transmitted by telecopy, in each case addressed
to the party to whom notice is being given at its address as set forth below:
If to the Parent: Concorde Gaming Corporation
0000 Xxxx Xxxxxx
Xxxxx Xxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxx Xxxx, President
If to the Lender: First National Bank, Rapid City
000 Xx. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxx Xxxxxx 00000
Attn: Xxxx Xxxxxxxxxxx, Branch President
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications are deemed given on (i) the date
received if delivered personally, (ii) the two business days after posting if
delivered by mail, or (iii) the date of transmission if delivered by telecopy on
a business day between the hours of 9:00 a.m. and 5:00 p.m. (central time),
otherwise on the immediately following day.
10. Conflict in Agreements. If the subordination provisions of any
instrument evidencing Subordinate Obligations conflict with the terms of this
Agreement, the terms of this Agreement and the Guaranty of Parent in favor of
Lender dated of even date herewith shall govern the relationship between the
Lender and the Parent.
11. No Waiver. No waiver is deemed to be made by the Lender of any of
its rights hereunder or under the Guaranty of Parent in favor of Lender dated of
even date herewith, unless the same is in writing signed on behalf of the
Lender, and each such waiver, if any, is a waiver only with respect to the
specific matter or matters to which the waiver related and in no way impairs the
rights of the Lender or the obligations of the Parent to the Lender in any other
respect at any time.
12. Governing Law; Consent to Jurisdiction and Venue. This Agreement
must be governed by and construed in accordance with the substantive laws (other
than conflict laws) of the State of South Dakota.
13. Binding Effect: Acceptance. This Agreement is binding upon the
Parent and the Parent's successors and assigns and inures to the benefit of the
Lender and its successors and assigns irrespective of whether this or any
similar agreement is executed by any other creditor of the Borrower. Notice of
acceptance by the Lender of this Agreement or of reliance by the Lender upon
this Agreement is hereby waived by the Parent.
14. Miscellaneous. The paragraph headings herein are included for
convenience of reference only and do not constitute a part of this Agreement for
any other purpose.
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15. Term of Agreement. This Agreement expires when the Senior
Indebtedness has been paid in full and the Loan Agreement has been terminated;
provided that the Parent agrees that to the extent that the Borrower makes any
payment or payments with respect to the Senior Indebtedness, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to Borrower, a
receiver, or any other party under any bankruptcy, insolvency or other similar
state or federal statute, common law, or principles of equity, then, to the
extent of such payment of repayment, the Senior Indebtedness or part thereof
intended to be satisfied may be revived and continued in full force and effect
as if such payment had not been made, and this Agreement may be revived and
continued in full force and effect as if such payment had not been made.
IN WITNESS WHEREOF, the Parent has executed this Agreement as of the
date and year first above-written.
CONCORDE GAMING CORPORATION,
a Colorado corporation
By: /s/ Xxxxx Xxxx
-----------------------------------
Its: President
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The foregoing Subordination Agreement is hereby accepted by the Lender
as of the date first above written.
FIRST NATIONAL BANK
By: /s/ illegible
----------------------------------------
Its: Branch President
[SIGNATURE PAGE TO SUBORDINATION AGREEMENT FOR BORROWER FOLLOWS]
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ACKNOWLEDGEMENT BY BORROWER
WITH RESPECT TO THE ABOVE SUBORDINATION AGREEMENT, THE BORROWER HEREBY:
acknowledges receipt of a copy thereof, and consents to all of the terms and
provisions thereof.
CONCORDE CRIPPLE CREEK, INC.,
A COLORADO CORPORATION
By: /s/ Xxxxx Xxxx
----------------------------------------
Name: Xxxxx Xxxx
Its: President
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