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Exhibit 10-AE
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AFFILIATE SUBORDINATION AGREEMENT
THIS AFFILIATE SUBORDINATION AGREEMENT ("Agreement") is made as of the 28th day
of February, 2001, by and among the persons listed on Exhibit A (referred to
herein collectively as "Affiliates" and individually an "Affiliate"), certain of
the Affiliates listed on Exhibit B who are also "Guarantors" as defined below,
Bruegger's Corporation, a Delaware corporation (the "Corporation"), and Quality
Dining, Inc., an Indiana corporation (including its successors and assigns)
("QDI").
Recitals
A. Concurrently with the execution of this Agreement, the Corporation is
executing and delivering to QDI that certain Amended and Restated Junior
Subordinated Note Due October 1, 2004 (the "Note"), and certain of the
Affiliates (who are referred to herein as the "Guarantors") are executing and
delivering to QDI that certain Amended and Restated Junior Subordinated
Guarantee (the "Guarantee"). Capitalized terms used in this Agreement and not
otherwise defined in this Agreement shall have the same meanings in this
Agreement as are ascribed to them in the Note and/or Guarantee.
B. Each Affiliate (individually or with one or more of the other Affiliates) may
have in the past made one or more loans or otherwise extended credit to the
Corporation or one or more of the Guarantors (a "Past Credit Extension") and/or
may from time to time hereafter make one or more loans or otherwise extend
credit to the Corporation or to one or
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more of the Guarantors (a "Future Credit Extension").
C. As a material inducement to QDI to accept the Note and Guarantee in exchange
and as substitutes for the Junior Subordinated Note Due October 20, 2004
executed to QDI and dated October 20, 1997 and the Junior Subordinated Guarantee
dated October 20, 1997 executed to QDI by the Guarantors, Affiliates,
Guarantors, and the Corporation have agreed, jointly and severally, that the
"Subordinated Debt" (as such term is hereinafter defined) shall be subordinated
to the "Obligations" (as such term is hereinafter defined) all in accordance
with the terms of this Agreement. The debts and obligations of the Corporation
and Guarantors to QDI that now exist or that may later arise under the Note and
the Guarantee are referred to hereafter as the "Obligations". Obligations
include all interest accrued or hereafter accruing on any part of the
Obligations (whether or not included as part of an allowed claim of QDI) after
the commencement of a case (a "Bankruptcy Case") by or with respect to the
Corporation or any of the Guarantors under the United States Bankruptcy Code (11
U.S.C. 101 et. seq.) and all costs, expenses (including reasonable attorneys'
fees), fees, and charges that would be otherwise recoverable by QDI from
whichever of the Corporation or Guarantors is the subject of such Bankruptcy
Case.
D. This Agreement is executed and delivered to QDI by Affiliates and the
Corporation pursuant to Section 3.7 of the Note.
Agreement
NOW, THEREFORE, FOR VALUE RECEIVED, receipt of which is hereby acknowledged, and
in consideration of credit given, being given and to be given by QDI to the
Corporation and Guarantors, the Affiliates, Guarantors, and the Corporation
hereby covenant to and agree with QDI as follows:
1. Subordination. All of the Subordinated Debt (as such term is hereinafter
defined) is hereby MADE INFERIOR, JUNIOR AND SUBORDINATE in all respects to all
of the Obligations. As used in this Agreement, the term "Subordinated Debt"
shall mean all present and future indebtedness, obligations and liabilities, and
all renewals and extensions thereof, now or hereafter owed to the Affiliates or
any of them by the Corporation or any of the Guarantors as a result of any Past
Credit Extension, Future Credit Extension or otherwise, whether such
indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, joint and several, and
whether such indebtedness, liabilities and obligations now exist or hereafter
arise. Notwithstanding anything to the contrary contained in this Agreement, QDI
understands, acknowledges and agrees that any Subordinated Debt or Subordinated
Debt Payments that constitute, either now or hereafter, Senior Indebtedness, or
collateral of the Banks or a New Lender, shall be, as between QDI and the Banks
or a New Lender, Subordinated Indebtedness and shall be subject and subordinate
to the Senior Indebtedness in accordance with the terms of the Note and
Guarantee.
2. Payment of Subordinated Debt. The Corporation and the Guarantors shall be
permitted to pay or repay all or any part of the Subordinated Debt owed to the
Affiliates, and the Affiliates shall be permitted to receive or collect all or
any part of the Subordinated Debt owed by the Corporation and/or any of the
Guarantors (any payment of all or any part of the Subordinated Debt and any
recovery or collection of all or any part of the Subordinated Debt is referred
to herein as a "Subordinated
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Debt Payment") (a) at any time to the Banks or a New Lender to satisfy a demand
made by the Banks or a New Lender, (b) prior to an Event of Default and an
acceleration of the Obligations owed to QDI pursuant to Article IV of the Note
(a "Default and Acceleration"), (c) prior to a "Third Party" (as such term is
hereinafter defined) obtaining, whether directly or indirectly, absolutely or
conditionally, (i) an interest in any of the Subordinated Debt by assignment,
transfer or otherwise, (ii) a lien in or against any of the Subordinated Debt,
whether such lien attaches voluntarily or involuntarily, or (iii) an order of
garnishment with respect to any of the Subordinated Debt (with the foregoing (i)
through (iii) being defined hereafter as a "Debt Transfer"), or (d) in the case
of a Debt Transfer, after such Debt Transfer is released or otherwise
extinguished. Notwithstanding the foregoing, in no event shall the Corporation
or any of the Guarantors be permitted to make a Subordinated Debt Payment to
Nordahl L. Brue ("Brue") or Michael J. Dressell ("Dressell") until all of the
Obligations have been fully paid and indefeasibly satisfied unless the
Subordinated Debt Payment is contemporaneously (x) loaned by Brue or Dressell to
the Corporation or any one or more of the Guarantors, (y) contributed as capital
by Brue or Dressell to the Corporation or any one or more of the Guarantors, or
(z) paid by Brue or Dressell to the Banks and/or a New Lender. As used in this
Agreement, the term "Third Party" shall mean any Person other than the
Corporation, the Guarantors, the Affiliates, the Banks and a New Lender.
3. Restrictions on Subordinated Debt Payment. Except as otherwise expressly
permitted pursuant to the terms of this Agreement or unless QDI shall otherwise
consent in writing, until all of the Obligations have been fully paid and
indefeasibly satisfied, no Affiliate shall demand or request payment of, nor
institute or cause to be instituted any action or proceeding to collect or
otherwise take any action to collect, obtain, recover or receive from the
Corporation, any of the Guarantors or any other Person, all or any part of the
Subordinated Debt, and neither the Corporation nor any of the Guarantors shall
pay all or any part of the Subordinated Debt.
4. Receipt of Prohibited Payment/Affiliate's Obligation. In the event a
Subordinated Debt Payment not expressly permitted to be paid by the Corporation
or any Guarantor to any Affiliate pursuant to the terms of this Agreement is
paid to or received by such Affiliate, whether such Subordinated Debt Payment is
made by the Corporation, any Guarantor or any other Person (any such payment
being referred to herein as a "Prohibited Payment"), prior to the payment in
full of all of the Obligations, such Prohibited Payment shall be deemed to be
held by the recipient Affiliate(s) as the property of and in trust for the
benefit of QDI, and the recipient Affiliate(s) shall deliver such Prohibited
Payment to QDI as soon as is practicable, in precisely the form received, except
for the Affiliate's(s') endorsement when necessary, for application against the
Obligations. Prohibited Payment includes any payment or distribution received by
an Affiliate on account of any claim in a Bankruptcy Case if and so long as all
Obligations have not been indefeasibly paid. In the event of the failure by the
recipient Affiliate to endorse any instrument for the payment of money so
received by Affiliate, QDI is hereby irrevocably appointed attorney-in-fact for
the recipient Affiliate with full power to make endorsement and with full power
of substitution. In addition, so long as any portion of the Obligations is
outstanding and/or remains unsatisfied, any Subordinated Debt shall not,
directly or indirectly, be reduced in any manner by way of counterclaim,
recoupment, setoff or chargeback. Each Guarantor and the Corporation shall be
jointly and severally liable for the payment to
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QDI on demand of any Prohibited Payment paid by the Corporation and/or any
Guarantor.
5. Security Interests. In the event any Affiliate acquires any lien, security
interest, right or interest in any property or asset of the Corporation and/or
any Guarantor to secure payment in connection with any Subordinated Debt, such
Affiliate hereby affirms, acknowledges and agrees that he, she or it shall hold
any such lien, security interest, right or interest in such property or assets
in trust for the benefit of QDI to secure the repayment of the Obligations.
6. Covenants. Affiliates, Guarantors and the Corporation hereby jointly and
severally covenant and warrant to QDI that, except as expressly authorized
herein:
(a) Any promissory note, instrument or other evidence of indebtedness which may
be issued after the date of this Agreement by the Corporation or any Guarantor
to any Affiliate, directly or indirectly, in connection with or to evidence any
Subordinated Debt (any such note, instrument or other evidence of indebtedness
being hereinafter called a "Subordinated Debt Note") shall contain a statement
or notation indicating that such Subordinated Debt Note and the Subordinated
Debt evidenced by such Subordinated Debt Note is subject to this Agreement and
the subordination and other provisions hereof.
(b) No Affiliate shall negotiate, transfer or assign any Subordinated Debt Note
to any Third Party, excepting only QDI.
(c) No Affiliate shall demand or receive, directly or indirectly, any payment of
any part of the Subordinated Debt, or any collateral as security with respect
thereto, from any guarantor or surety, who is a Third Party, of or for any part
of the Subordinated Debt.
7. Modification of Obligations. Unless and until all of the Obligations have
been fully paid and indefeasibly satisfied or have been otherwise released or
compromised in their entirety, without notice to or further assent by the
Affiliates, the liabilities of the Corporation and the Guarantors to QDI with
respect to the Obligations may from time to time, in whole or in part, be
renewed, extended, modified, compromised or released by QDI, and any collateral
or liens for any of the Obligations may be exchanged, sold or surrendered by
QDI, all without affecting in any way the obligations of the Affiliates,
Guarantors or the Corporation under this Agreement.
8. Enforcement and Benefit. QDI may require the Corporation, Guarantors, and/or
Affiliates or any Affiliate to furnish QDI with other or further evidence of
their respective obligations and the subordination as provided herein when
reasonably necessary or appropriate as determined by QDI. In addition, the
Corporation, Guarantors and Affiliates shall permit QDI to have access from time
to time, upon reasonable advance notice, during normal business hours to inspect
their respective books of account with respect to any Subordinated Debt.
9. Modification. No modification, amendment, extension or alleged waiver of this
Agreement or any provision hereof will be binding upon the party sought to be
bound unless in writing and signed by such a party or a duly authorized officer
or agent thereof.
10. Governing Law. This Agreement and the performance by the parties under this
Agreement shall be construed in accordance with the laws of
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the State of Indiana, and any action or proceeding that may be brought, arising
out of, in connection with or related to this Agreement shall be governed by the
laws of the State of Indiana.
11. Successors and Assigns. The rights and remedies of QDI hereunder shall be
exercisable by the successors and assigns of the Obligations (including any
holder of the Note and/or Guarantee) and the subordination provisions and the
obligations and undertakings of Affiliates, Guarantors and the Corporation
hereunder shall be applicable to such successors and assigns and to the
Obligations as held by such other holder(s) of the Note and/or Guarantee.
12. Captions. The captions used in this Agreement are for convenience and
identification purposes only, are not integral parts of this Agreement and are
not to be considered in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
BRUEGGER'S CORPORATION
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Chief Financial Officer
(the "Corporation")
BF HOLDING, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Chief Financial Officer
BRUEGGERS FRANCHISE CORPORATION
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Chief financial Officer
LETHE LLC
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Chief Financial Officer
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ODYSSEY BAGELS, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Chief Financial Officer
CHAMPLAIN MANAGEMENT SERVICES, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: President and Treasurer
CHAMPLAIN LEASING, L.L.C.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: President and Treasurer
FLOUR CITY BAGELS, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
BAYSTATE BAGELS, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
UPTOWN BAGELS, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
IRON CITY BAGELS, INC.
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By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
NORSTAR BAGEL BAKERIES, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
HAWKEYE BAGEL BAKERIES, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
TARHEEL BAGELS, INC.
By: /s/ Steven P. Schonberg
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Name: Steven P. Schonberg
Title: Vice President Finance and Treasurer
/s/ Nordahl L. Brue
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Nordahl L. Brue
/s/ Michael J. Dressell
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Michael J. Dressell
ACKNOWLEDGMENT
STATE OF VERMONT )
) SS:
COUNTY OF CHITTENDEN )
Before me, a Notary Public in and for the State of Vermont, personally appeared
Nordahl L. Brue, who, being first duly sworn, acknowledged the
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execution of the foregoing Affiliate Subordination Agreement as his free and
voluntary act.
Witness my hand and Notarial Seal this 27th day of February, 2001.
/s/ Kelly J. Reagan
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Notary Public
Printed: Kelly J. Reagan
(seal)
I am a resident of Chittenden County, Vermont
My commission expires: 02/10/03
ACKNOWLEDGMENT
STATE OF VERMONT )
) SS:
COUNTY OF CHITTENDEN )
Before me, a Notary Public in and for the State of Vermont, personally appeared
Michael J. Dressell, who, being first duly sworn, acknowledged the execution of
the foregoing Affiliate Subordination Agreement as his free and voluntary act.
Witness my hand and Notarial Seal this 27th day of February, 2001.
/s/ Kelly J. Reagan
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Notary Public
Printed: Kelly J. Reagan
(seal)
I am a resident of Chittenden County, Vermont
My commission expires: 02/10/03
ACCEPTED:
QUALITY DINING, INC.
By: /s/ John C. Firth
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Name: John C. Firth
Title: Executive Vice President
("QDI")
Attest:
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By: /s/ James R. Meyer, Jr.
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Name: James R. Meyer, Jr.
Title: Assistant Secretary
Exhibit A
Affiliates
Bruegger's Corporation
BF Holding, Inc.
Brueggers Franchise Corporation
Lethe LLC
Odyssey Bagels, Inc.
Champlain Management Services, Inc.
Champlain Leasing, L.L.C.
Flour City Bagels, Inc.
Baystate Bagels, Inc.
Uptown Bagels, Inc.
Iron City Bagels, Inc.
Norstar Bagel Bakeries, Inc.
Hawkeye Bagel Bakeries, Inc.
Tarheel Bagels, Inc.
Nordahl L. Brue
Michael J. Dressell
Exhibit B
Guarantors
BF Holding, Inc.
Brueggers Franchise Corporation
Lethe LLC
Odyssey Bagels, Inc.
Champlain Management Services, Inc.
Champlain Leasing, L.L.C.
Flour City Bagels, Inc.
Baystate Bagels, Inc.
Uptown Bagels, Inc.
Iron City Bagels, Inc.
Norstar Bagel Bakeries, Inc.
Hawkeye Bagel Bakeries, Inc.
Tarheel Bagels, Inc.