FORM OF SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT
This Subordination Agreement (the "Agreement") is entered into as of
September ___, 1997, by and between _________________, and BANK ONE, NATIONAL
ASSOCIATION.
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, and in consideration of the loans or other extensions of
credit and all renewals or extensions now or hereafter made by Bank One,
National Association, its successors and assigns ("Senior Creditor"), directly
or indirectly, to Drew Shoe Corporation ("Borrower") which loans or other
extensions of credit have been or will be guaranteed by BCAM International, Inc.
(the "Guarantor"), such Guarantor being the 100% shareholder of the Borrower,
the undersigned, _____________., on behalf of the undersigned and the
undersigned's successors and assigns ("Subordinated Creditor") and Senior
Creditor make the following representations and agreements:
1. Description of Subordinated Debt. Subordinated Creditor represents and
warrants to Senior Creditor that (a) Guarantor is indebted to Subordinated
Creditor in the principal sum of $___________, evidenced by (i) that certain
Note Purchase Agreement dated as of September 19, 1997 (the "Note Purchase
Agreement") between _____________ from Guarantor dated September 19, 1997, which
is attached to this Agreement as Exhibit A (the "Subordinated Note"); (b)
Subordinated Creditor holds no collateral, or other assurances, or security for
the Subordinated Debt; (c) the Subordinated Debt has not been subordinated in
favor of or sold, assigned, pledged or otherwise transferred or encumbered, in
whole or in part, to any other person, entity or corporation; and (d)
Subordinated Creditor has the full right, power and authority to enter into this
Agreement.
2. Subordination. Subordinated Creditor hereby subordinates all
indebtedness, obligations, and liabilities now or hereafter owing by Guarantor
to Subordinated Creditor in respect of the Subordinated Note, including without
limitation, all principal, premium interest, fees, expenses, and other charges
accruing thereon (the "Subordinated Debt") to the payment of any and all
indebtedness, obligations and liabilities now or hereafter owing by Guarantor to
Senior Creditor under a certain Continuing Guaranty executed and delivered by
Guarantor to Senior Creditor dated September ___, 1997, and all amendments,
modifications, renewals and substitutes therefor (the "Guaranty") by which
Guarantor guarantees payment of certain liabilities of Borrower, including all
principal up to the sum of $5,500,000, together with all interest, fees,
expenses, and other charges accruing on such principal sum (the "Senior Debt"),
to the extent and in the manner set forth below, and Subordinated Creditor
agrees not to demand, accept or receive, directly or indirectly, any payment or
repayment of principal, interest or other amount in respect of the Subordinated
Debt, or from any property of Borrower or Guarantor or any third party, in
violation of the terms hereof. Subordinated Creditor shall take no steps to
obtain payment, directly or indirectly, of any type from Borrower or from any
property of Borrower.
(a) Permitted Payments. Subject to the provisions of paragraphs 2(b)
and 2(c) below, the Guarantor may pay to Subordinated Creditor the following
payments in connection
with the Subordinated Debt (the "Permitted Payments" or a "Permitted Payment"):
(1) accrued interest in connection with the Subordinated Note, on a
semi-annual basis, on each March 19 and September 19, commencing
March 19, 1998; and
(2) payments of principal in connection with the Subordinated Note, at
its stated maturity of September 19, 2002, in the amount of up to
$_____________ as set forth in the Subordinated Note.
(b) No Payments Upon Default. No amount, including, without
limitation, the Permitted Payments, shall be paid by Guarantor or accepted by
Subordinated Creditor, whether in cash, property, securities or otherwise, in
respect of the Subordinated Debt (a "Blockage"), if (i) there exists, or would
exist after giving effect to such proposed payment, any "Event of Default", as
defined in a certain Loan and Security Agreement between Senior Creditor and
Borrower dated as of September ___, 1997, as the same may be renewed,
supplemented or otherwise modified or amended from time to time which relates to
the tangible net worth of the Borrower or a bankruptcy or other insolvency
proceeding of the Borrower or the Guarantor, or a default in payment by
Guarantor under the Guaranty (separately a "Default" and collectively the
"Defaults"), and (ii) Subordinated Creditor shall have received written notice
from Senior Creditor of such Default; provided, however, that notwithstanding
the foregoing restrictions, Subordinated Creditor may receive any payment which
was suspended hereunder upon the earlier of (i) a cure of such default,
acknowledged by the Senior Creditor in writing, or the written waiver by Senior
Creditor, of the then existing Defaults, or (ii) the payment in full in cash of
Senior Debt and the irrevocable termination of the loan documents relating
thereto. Notwithstanding the foregoing, during any 360-day period, the aggregate
of all periods of Blockage shall not exceed 180 days, and there shall be a
period of at least 180 consecutive days in each consecutive 360-day period when
no period of Blockage is in effect.
(c) No Payments Upon Certain Proceedings. In the event of any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization, or any sale or transfer of any material asset or interest in
Guarantor or Borrower (each, a "Sale Transaction") if such transaction has not
been agreed to or consented to by the Senior Creditor, or if such Sale
Transaction gives rise to an Event of Default under the Senior Debt or the
Guaranty; , or other similar proceedings or transactions in connection
therewith, relative to Guarantor or Borrower, and their respective creditors, or
their respective properties, or in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of Guarantor or Borrower, whether
or not involving insolvency or bankruptcy, Senior Creditor shall be entitled to
receive payment in full of the Senior Debt, including, without limitation,
interest, default interest, fees, or expenses accruing subsequent to the filing
of a petition in any such insolvency or bankruptcy proceeding, notwithstanding
any law, rule or regulation that would otherwise limit Senior Creditor's right
to receive such "post-petition" interest, default interest, fees, or expenses
before Subordinated Creditor is entitled to receive any payment of the
Subordinated Debt, and Senior Creditor shall be entitled to receive for
application in payment thereof any payment, distribution, or dividend of any
kind or character, whether in cash or property or securities, which may be
payable or deliverable
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in any such proceedings in respect of the Subordinated Debt, except securities
which are subordinate and junior in right of payment to the payment of all the
Senior Debt then outstanding.
3. Legend. Subordinated Creditor shall cause the Subordinated Note and
other instruments and agreements evidencing any Subordinated Debt to bear an
appropriate legend referring to this Agreement and reciting that the payment of
the Subordinated Debt evidenced thereby is subject to the provisions hereof, and
agrees to cause any extension of any such instrument to bear such legend.
4. Turnover of Payments. If, prior to the satisfaction of the Senior Debt,
Subordinated Creditor receives from any source whatsoever including, but not
limited to, receipt resulting from the exercise by any court of its legal or
equitable powers, any payment (except for a Permitted Payment) with respect to
any of the Subordinated Debt, Subordinated Creditor shall forthwith deliver such
payment to Senior Creditor, in precisely the form received, except for
Subordinated Creditor's indorsement when necessary, for application on account
of the Senior Debt, and until so delivered, such payment or security shall be
held in trust by Subordinated Creditor as the property of Senior Creditor. In
the event of the failure of any Subordinated Creditor to indorse any instrument
for the payment of money so received by such Subordinated Creditor, Senior
Creditor is irrevocably appointed attorney for such Subordinated Creditor with
full power to make such indorsement and with full power of substitution.
5. Standstill. Subordinated Creditor agrees for the benefit of the holder
of the Senior Debt that, so long as any part of the Senior Debt remains
outstanding, Subordinated Creditor will not (a) take any action to accelerate,
demand the payment of, or recover any amount due under the Subordinated Debt
(except for Permitted Payments) or to exercise any remedies with respect
thereto; or (b) take any action or exercise any remedies against the Guarantor
or against any property of the Guarantor prior to the earliest of (i) 120 days
after Subordinated Creditor provides notice to Senior Creditor of an "Event of
Default" (as such term is defined in the Note Purchase Agreement) under the
terms of the Subordinated Note which is not thereafter cured or waived in
writing by Subordinated Creditor, (ii) 30 days after the acceleration of the
Senior Debt, or (iii) the infeasible payment in full of the Senior Debt.
6. No Waiver. No action which Senior Creditor, or Guarantor or Borrower,
with the consent of Senior Creditor, may take or refrain from taking with
respect to any Senior Debt, or collateral therefor, including a waiver or
release thereof, or any agreement or agreements (including guaranties) in
connection therewith, shall affect this Agreement or the obligations of
Subordinated Creditor hereunder. Without limitation, the subordination of
Subordinated Creditor shall in no way be affected or impaired by, and
Subordinated Creditor hereby irrevocably consents to: (a) any amendment,
restatement, alteration, extension, renewal, waiver, indulgence or other
modification of the documents evidencing the Senior Debt; (b) any settlement or
compromise in connection with the Senior Debt; (c) any substitution, exchange,
release or other disposition of all or any part of the Senior Debt or the
collateral held therefor; (d) any failure, delay, neglect, act or omission by
the Senior Creditor to act in connection with the Senior Debt or the collateral
held
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therefor; or (e) any advances for the purpose of performing or curing any term
or covenant contained in the documents or agreements evidencing the Senior Debt
to which Borrower shall be or would otherwise be in default. The obligations and
agreements of Subordinated Creditor hereunder shall be unconditional and
continuing.
7. No Modification. No modification or waiver shall be deemed to be made
by Senior Creditor of any of its rights hereunder unless the same shall be in
writing and then only with respect to the specific instance involved, and shall
in no way impair or offset the rights of Senior Creditor or the obligations of
Subordinated Creditor in any other respect or at any other time. No amendment,
waiver or modification of any subordination provision adverse to Senior Creditor
or the holders of the Senior Debt will be effective against any holder of the
Senior Debt, unless expressly consented to in writing by or on behalf of such
holder.
8. Obligation of Guarantor Not Impaired. The provisions of this
Subordination Agreement define the relative rights of the Senior Creditor and of
Subordinated Creditor against the Guarantor and its property. Nothing herein
shall impair, as between the Guarantor and Subordinated Creditor, the obligation
of Guarantor, which is unconditional and absolute, to pay to Subordinated
Creditor the principal thereof and premium, if any, and interest on the
Subordinated Debt in accordance with the terms and the provisions thereof.
Except as otherwise expressly provided in this Subordination Agreement, nothing
shall prevent the Subordinated Creditor from exercising all remedies under the
Note Purchase Agreement, the Subordinated Note or otherwise permitted by
applicable law.
9. Event of Default Under Subordinated Note. The failure by Guarantor to
make a payment on account of principal of or interest on the Subordinated Note
by reason of any provisions of this Subordination Agreement shall not be
construed as preventing the occurrence of an Event of Default under the
Subordinated Note.
10. Successors; Governing Law. This Agreement shall be binding upon
Subordinated Creditor and Senior Creditor and their respective legal
representatives, heirs, successors and assigns. This Agreement shall be
construed and enforced in accordance with and governed by the law of the State
of Ohio.
11. Notice. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) one day after the same is
sent to the address set forth below such party's signature line below if sent by
recognized overnight delivery service, (b) upon confirmation of electronic
communication if sent by telecopier, or (c) upon delivery to such address if
personally delivered.
12. Subrogation. Conditional upon the prior payment in full of the Senior
Debt, to the extent that Senior Creditor has received any payment or
distribution which, but for this Agreement, would have been applied to the
Subordinated Debt, Subordinated Creditor shall be subrogated to the rights of
Senior Creditor until the Subordinated Debt shall be paid in full, and,
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for the purposes of such subrogation, no such payment or distribution shall, as
between the Guarantor or its other creditors, be deemed to be a payment or
distribution on account of the Senior Debt, it being understood and agreed that
the provisions of this Subordination Agreement are intended solely for the
purpose of defining the relative rights of the holders of the Senior Debt and
the Subordinated Debt.
13. Counterparts. This Agreement may be executed in three or more
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same document.
14. Headings. The headings contained in this Agreement are for ease of
reference only, and shall not be construed to modify, alter or affect this
Agreement in any way.
Each of the parties has executed this Agreement as of the date set forth
above.
SUBORDINATED CREDITOR:
________________
By:_________________________________
Its:________________________________
Notice address: ____________
Agreed and Accepted:
SENIOR CREDITOR:
BANK ONE, NATIONAL ASSOCIATION
By:_________________________________
Its:________________________________
Notice Address:
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
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Attn: Xxxx X. Xxxxxxx
Facsimile No. (000) 000-0000
BCAM International, Inc. and Drew Shoe Corporation each hereby
acknowledges notice of the foregoing Subordination Agreement and agrees to be
bound by all the terms, provisions and conditions thereof.
GUARANTOR:
BCAM INTERNATIONAL, INC.
By:_________________________________
Its:________________________________
Notice address: 0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Facsimile No. (000) 000-0000
BORROWER:
DREW SHOE CORPORATION
By:_________________________________
Its:________________________________
Notice address: 000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
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