SUBORDINATION AND INTERCREDITOR AGREEMENT
This
Subordination and Intercreditor Agreement (“Agreement”)
is
made as of the 31day of January, 2008, by and between Arngrove Group
Holdings Ltd., a company organized under the laws of England (“Arngrove”),
and
After All Limited, a company organized under the laws of England (“After
All”;
with
Arngrove, collectively, the “Lenders”),
on
the one hand, and ForgeHouse, Inc., a Nevada corporation (“Publico”),
and
ForgeHouse LLC, a Georgia limited liability company (“ForgeHouse”;
collectively with Publico, the “Borrowers”),
on
the other hand, with the record owners, and all persons or entities who acquire
any ownership, control, voting, economic, or other rights therein (collectively,
the “Preferred
Stock Holders”),
of
the two million shares of Series A Preferred Stock (the “Preferred
Stock”)
of
Publico currently issued and outstanding as specifically intended third-party
beneficiaries of each of the terms, conditions, and obligations of the parties
hereto.
WHEREAS,
the Lenders previously advanced certain funds to ForgeHouse and, in connection
with a transaction that resulted in ForgeHouse becoming a wholly-owned
subsidiary of Publico (the “Transaction”),
consented to the amendment, restatement, and supersession in whole of the
then-extant promissory notes of ForgeHouse in their favor and the replacement
thereof with a series of promissory notes in their favor of even date herewith
(individually, a “Promissory
Note”
and,
collectively, the “Promissory
Notes”),
wherein the Borrowers were the co-makers, which Promissory Notes evidenced
the
financial obligation of the Borrowers in favor of After All in the principal
amount of $200,000.00 (the “After
All Loan”)
and in
favor Arngrove in the principal amount of $1,200,000.00 (individually the
“Arngrove Loan”;
collectively, with the After All Loan, the “Loans”);
WHEREAS,
in connection with the Transaction, the Preferred Stock Holders advised the
Borrowers and the Lenders that, subject to, inter
alia,
the
parties’ execution and delivery of this Agreement and their adherence to the
terms hereof, the Preferred Stock Holders would accept Publico’s offer and
purchase the Preferred Stock from Publico (as an indirect result of which
purchase, the Lenders received an aggregate of US$240,000.00 from the Borrowers
at or about concurrently with the Lenders’ execution and delivery of this
Agreement); and
WHEREAS,
each of the Lenders desires to memorialize its or his respective agreement
concerning its or his respective interests in the Borrowers’ financial
obligations memorialized by the Promissory Notes, as modified by this
Subordination And Intercreditor Agreement.
NOW,
THEREFORE, in consideration of the premises and for such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged
by
the parties hereto, the parties hereto hereby agree as follows:
1. Subordination
Agreement.
Each of
the Lenders hereby acknowledges and agrees that all of its respective rights
against the Borrowers to which such Lender may be entitled pursuant to the
terms
of its respective Promissory Note, the statutes and case law of any relevant
jurisdiction, or otherwise shall be subordinate to the rights, privileges,
and
preferences of the Preferred Stock Holders, in their capacity as such, and
each
of the Borrowers hereby acknowledges such subordination by the Lenders and
agrees not to engage in any conduct and to refrain from engaging in any conduct
in derogation of such contractually superior rights of the Preferred Stock
Holders. Set forth hereinbelow, by way of example and not of limitation, are
certain of such subordination obligations of the Lenders.
(a) All
principal, interest, and other payments under the Promissory Notes to the
Lenders may be tendered when due, so long as, at each such date of payment,
Publico is not then in default of any of its obligations under the rights,
privileges, and preferences of the Preferred Stock, e.g.,
payment of accrued or declared and unpaid dividends or liquidation preference
payments.
(b) In
the
event that any proceedings under the Bankruptcy Code are instituted by or
against either of the Borrowers, or in the event of any assignment by either
of
them for the benefit of their respective creditors, Lenders shall assign to
the
Preferred Stock Holders any and all of their rights in, under, and related
to
the Promissory Notes.
(c) Each
of
the Lenders agrees not to xxx upon, or to collect, or to receive payment of
the
principal or interest or other amount under its respective Promissory Note,
and
not to sell, assign, transfer, pledge, hypothecate, or encumber any such claim
or claims except subject expressly to this Agreement, and not to enforce or
apply any security now or hereafter existing therefor, nor to take any lien
or
security on any of Borrowers’ respective property, real or personal, so long as
the rights, privileges and preferences of the Preferred Stock Holders remain
extant.
(d) In
the
event of the appointment of any receiver for either Borrower’s respective
business or assets, or any dissolution or winding up of the affairs of either
Borrower: (a) said Borrower and any assignee, receiver or other person or
persons in charge is hereby directed to pay to the Preferred Stock Holders
the
full amount of the Preferred Stock Holders’ liquidation preference and any
accrued and unpaid dividends thereon, before making any payment of principal
or
interest to Lenders, and insofar as may be necessary for that purpose, each
of
the Lenders hereby assigns and transfers to the Preferred Stock Holders all
security or the proceeds thereof, and all rights to any payments, dividends
or
other distributions, and (b) each of the Lenders hereby irrevocably constitutes
and appoints the Preferred Stock Holders as the true and lawful attorney to
act
in its name and stead: (i) to file the appropriate subordinated claim or claims
on behalf of each of the Lenders, if such Lenders do not do so prior to 30
days
before the expiration of the time to file claims in such proceeding and if
the
Preferred Stock Holders elect at their sole discretion to file such subordinated
claim or claims and (ii) to accept or reject any plan of reorganization or
arrangement on behalf of such Lenders, and to otherwise vote such Lender’s
subordinated claim in respect of any indebtedness now or hereafter owing from
Borrowers to the Lenders in any manner the Preferred Stock Holders deem
appropriate for their own benefit and protection.
(e) On
request of the holders of more than 50% of the then-outstanding Preferred Stock,
each Lender shall deliver to the then-designated representative of the Preferred
Stock Holders the original of any promissory note or other evidence of any
existing or future indebtedness of Borrowers to any of the Lenders, and xxxx
same with a conspicuous legend that reads substantially as follows:
“THIS
PROMISSORY NOTE IS SUBORDINATED TO THE RIGHTS, PRIVILEGES, AND PREFERENCES
OF
THE HOLDERS OF THE MAKERS’ SERIES A PREFERRED STOCK AND MAY BE ENFORCED ONLY IN
ACCORDANCE WITH THAT CERTAIN SUBORDINATION AND INTERCREDITOR
AGREEMENT
DATED JANUARY 31, 2008 AMONG THE HOLDER OF THIS PROMISSORY NOTE, AND OTHER
SIMILARLY SITUATED PERSONS OR ENTITIES AND THE MAKERS HEREOF.”
(f) In
the
event that any payment or any cash or noncash distribution is made to any of
the
Lenders in violation of the terms of this Agreement, such Lender shall receive
same in trust for the benefit of the Preferred Stock Holders, and shall
forthwith remit it to the Preferred Stock Holders in the form in which it was
received, together with such endorsements or documents as may be necessary
to
effectively negotiate or transfer same to the Preferred Stock
Holders.
2. Intercreditor
Agreement.
(a) Any
and
all interest and principal payments shall be paid by Borrower to After All
in
connection with the After All Loan and to Arngrove in connection with the
Arngrove Loan.
(b) Pursuant
to the terms of the Promissory Notes, After
All
shall have
the
right to collect any and all items (including, but not limited to, interest)
due
or collectible in connection with the After
All
Loan and Arngrove shall have the right to collect any and all items (including,
but not limited to, interest) due or collectible in connection with the Arngrove
Note.
(c) If
either
of the Lenders acquires any knowledge of any event of default under either
of
the Loans, then the party having such knowledge shall with reasonable promptness
notify the other parties in writing and, thereafter, shall advise as to its
proposed action, if any, to be taken in connection therewith.
(d) Any
person, firm, or corporation (other than Borrowers or any other person obligated
under the Loans) shall deal with After All as the sole owner of the After All
Loan and shall deal with Arngrove as the sole owner of the Arngrove Loan.
(e)Lenders
shall not, without the prior written consent of the Borrower, modify the
interest rate under the Promissory Notes, or change any material terms thereof.
(f) Pursuant
to the terms of the Promissory Notes, as limited by the terms hereof, Lenders
may take such action upon any default under the Loans as Lenders deem necessary
or advisable, including but not limited to, the selection of attorneys to be
used in connection with any required action to protect their respective
interests.
(g)Lenders
may perform any duties hereunder by or through their respective agents,
employees, or attorneys. Lenders shall have no duties or responsibilities except
those expressly set forth in this Agreement. Neither Arngrove nor After All
shall have a fiduciary relationship in respect of each other.
(h) Lenders
shall not transfer or assign this Agreement or any rights hereunder, or any
of
the Promissory Notes, without: (1) the prior written consent of each of the
others, and (2) the transferee or assignee becoming a party to this Agreement,
thereby subordinating any and all interest in the applicable Promissory Note(s)
to the rights, privileges, and preferences of the Preferred Stock
Holders.
3. Term.
This
Agreement shall automatically terminate upon the earlier of the conversion
of
all of the Preferred Stock into shares of Borrowers’ common stock or the payment
in full of both of the Promissory Notes.
4. Governing
Law and Jurisdiction.
This
Agreement is intended to be performed in, shall be construed and interpreted
in
accordance with, and be governed by the internal laws of, the State of New
York,
without regard to principles of conflict of laws. Any judicial proceeding
brought by or against any party to this Agreement with respect to this Agreement
shall be brought in any state court of New York or any federal court sitting
in
the State of New York, in either case sitting in the Borough of Manhattan,
and,
by execution and delivery of this Agreement, and by acceptance hereof, each
of
the parties hereto accept for themselves and in connection with its properties,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with this Agreement. Each of the parties hereto hereby
waive any claim or defense that any such forum is not convenient or proper.
5. Action
by Written Consent.
Any
permitted or required action of the Preferred Stock Holders under this Agreement
requires the written consent of the holders of more than fifty percent (50%)
of
the then-outstanding Preferred Stock.
6. Transfer.
Neither
this Agreement nor any of the Promissory Notes shall be transferred or assigned
by any Borrower or Lender without: (1) the express written consent of the
Preferred Stock Holders, and (2) the transferee or assignee of said Borrower
or
Lender becoming a party to this Agreement, thereby subordinating any and all
interest in the respective Promissory Note(s) to the rights, privileges, and
preferences of the Preferred Stock Holders. If the Preferred Stock Holders
consent to any such transfer or, if notwithstanding the foregoing, such a
transfer occurs, then the provisions of this Agreement shall be binding upon
any
and shall inure to the benefit of and be extended to any holder hereof. Except
as expressly set forth herein, this Agreement shall be binding upon the heirs,
successors, and assigns of the parties hereto.
[Signatures
continued on following page.]
Dated:
January 31, 2008
LENDERS:
ARNGROVE
GROUP HOLDINGS LTD.,
a
company
organized under the laws of England
By:
/s/ XX Xxxxxxx
XX
Xxxxxxx, its Director
AFTER
ALL
LIMITED, a company organized under the laws of England
By:
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, its Director
BORROWERS:
FORGEHOUSE
LLC, a Georgia limited liability company
| By: | ForgeHouse,
Inc.,
a Nevada corporation,
its
manager
|
|||
| By: | /s/ Alexander Man-Kit Xxxx | |||
|
Xxxxxxxxx
Man-Kit Ngan,
its
Assistant Secretary
|
ForgeHouse,
Inc., a Nevada corporation
| By: | /s/ Alexander Man-Kit Xxxx | |||
|
Xxxxxxxxx
Man-Kit Ngan,
its
Assistant Secretary
|
