EXHIBIT 10.5
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THIS INSTRUMENT PREPARED BY/RECORD AND RETURN TO: Conrad J. Boyle, Esquire,
Mombach, Boyle & Hardin, P.A., 500 East Broward Boulevard, Suite 1950, Fort
Lauderdale, Florida 33394.
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT is made and entered into as of the 20th day
of December, 2004, by and among Charley Zeches, in her capacity as Trustee of
LAKES HOLDING TRUST under agreement dated July 27, 2001 (hereinafter referred to
as "Senior Lender"), Mitchell Entertainment Company, a Delaware limited
liability company (hereinafter referred to as "Junior Lender") and is agreed to,
accepted and acknowledged by AGU Entertainment Corp., a Delaware corporation
(hereinafter referred to as "Mortgagor").
W I T N E S S E T H:
WHEREAS, Senior Lender is the owner and holder of that certain Mortgage
Deed and Security Agreement securing indebtedness in the amount of Seven Million
and 00/100 Dollars ($7,000,000.00) executed by Mortgagor in favor of Senior
Lender, dated and recorded in the Public Records of Broward County, Florida, in
Official Records Book , Page (the "Senior Mortgage") encumbering certain real
property and improvements, the legal description of which is set forth on
Exhibit "A" hereto (the "Property" or "Mortgaged Property"), which secures that
certain Promissory Note dated December 20, 2004 in the principal amount of Seven
Million and 00/100 Dollars ($7,000,000.00) executed by Mortgagor in favor of
Senior Lender, and other obligations of Mortgagor to Senior Lender (collectively
the "Senior Obligations"); as affected by Notice Restricting Future Advances
("Restriction Notice") and
WHEREAS, Junior Lender is the owner and holder of that certain Mortgage
executed by Mortgagor in favor of Junior Lender dated December 20, 2004 and
recorded in Official Records Book__ , Page ___ of the Public Records of Broward
County, Florida (the "Junior Mortgage") encumbering the Property, which secures
that certain Promissory Note dated December 20, 2004 in the principal amount of
Three Million and 00/100 Dollars ($3,000,000.00) (the "Junior Note") executed by
Mortgagor in favor of Junior Lender and other obligations of Mortgagor to Junior
Lender (the "Junior Obligations"); and
WHEREAS, Senior Lender and Junior Lender desire to set forth their
Agreement with regard to the subordination of the Junior Mortgage and the Junior
Obligations as more specifically set forth herein.
NOW THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, from one to the other paid, the receipt
and sufficiency whereof is hereby acknowledged, the parties do hereby agree as
follows:
1. RECITALS: The Recitals set forth are true and correct and are made a
part hereof.
2. SUBORDINATION: The lien of the Junior Mortgage and the Junior
Obligations are now and shall forever hereafter be subordinate and inferior to
the lien of the Senior Mortgage and the Senior Obligations, including without
limitation, any and all sums at any time due and owing under any and all
promissory notes secured by the Senior Mortgage, any principal and any interest
thereon, any other amount or amounts that may be added to the mortgage
indebtedness under the terms of this instrument for protective advances, and any
interest thereon, and all costs, payments advanced, taxes and expenses hereafter
advanced to insure the Property, to prevent waste, to protect the collateral
thereunder or collect said debt, and all other expenses, costs and attorneys'
fees incurred by Senior Lender in connection with the Senior Mortgage and/or the
Senior Obligations, subject nevertheless to the Restriction Notice. Further, the
terms of the Junior Mortgage and the Junior Note, and all rights and remedies of
Junior Lender available thereunder, including but not limited to, the right to
claim or receive any insurance or condemnation awards or proceeds, are hereby
expressly subordinated to the terms of the Senior Mortgage, the Senior
Obligations and the rights and remedies of Senior Lender under the Senior
Mortgage. Junior Lender and Mortgagor acknowledge and agree that no payments of
interest or principal shall be made or accepted under the Junior Note following
the occurrence of a default under the Senior Mortgage until the Senior Mortgage
has been repaid in full.
3. COSTS AND ENFORCEMENT: Should suit be brought to enforce the provisions
of this Agreement, the prevailing party shall be entitled to recover its
attorneys fees incurred both at trial and on appeal.
4. NOTICES/RIGHT TO CURE: Junior Lender will send to Senior Lender a copy
of any notice of default under the Junior Mortgage. Whenever a default notice
has been provided pursuant to this provision and referenced in this Agreement,
the same shall be referred to as the "Default Notice". Senor Lender will give
Junior Lender notice of any default, and shall accept cure by Junior Lender. If
Junior Lender pays Senior Lender in full, Senior Lender will assign the Senior
Obligations to Junior Lender.
5. FORECLOSURE: In the event of a foreclosure action instituted by Senior
Lender, Junior Lender shall not impose any cross claims against Mortgagor in
such action and any such claims shall be brought in a separate action by Junior
Lender, and Junior Lender shall further agree to waive any and all defenses to
foreclosure instituted by Senior Lender under the Senior Mortgage, but this
shall not be construed to waive any provision of this Agreement or the right to
receive any overage in net proceeds in the event of a foreclosure sale.
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6. INSURANCE, CONDEMNATION: In the event of partial or total destruction
of the Mortgaged Property which results in the payment of insurance proceeds, or
in the event of a condemnation or similar proceeding which results in the
payment of an award, the proceeds or award shall be applied in accordance with
the relevant provisions of the Senior Mortgage. Junior Lender shall share in the
excess proceeds, if any, in accordance with the terms of the Junior Mortgage.
7. SUPERIOR LIENS: Junior Lender agrees that it shall not acquire, by
subordination, subrogation or otherwise, any lien, estate, right or other
interest in the Mortgaged Property that is, or may be, prior in right to the
lien of the Senior Mortgage. In the event that Junior Lender cures any default
of Mortgagor under the Senior Mortgage or under the Junior Mortgage by the
payment of money, including, for example, but not limited to, the payment of
taxes or insurance premiums, Junior Lender agrees that such payment shall be
deemed to be additional indebtedness of the Mortgagor to be secured by the lien
of the Junior Mortgage, which shall be subordinate to the lien of the Senior
Mortgage and such amounts shall not create a lien on parity with or superior to
the Senior Mortgage and shall not give Junior Lender the right of subrogation
with respect to such amounts.
8. BANKRUPTCY OF MORTGAGOR: Junior Lender hereby agrees that so long as
any sum evidenced or secured by the Senior Mortgage remains outstanding:
(a) Junior Lender shall not, without the prior written consent of
Senior Lender, in Senior Lender's sole discretion, commence, cause the
Mortgagor to commence, consent to Mortgagor commencing, or join with any
other creditor in commencing, any proceeding under the United States
Bankruptcy Code or any similar federal or state law (a "Bankruptcy
Proceeding") or any proceeding under any federal or state fraudulent
conveyance law, whether statutory or any common law, with respect to the
Mortgagor or any portion of the real and personal property which,
together, comprises the collateral for the Senior Obligations (the "Senior
Obligations Collateral"), or any other property of Mortgagor, including
any property which is collateral for the Junior Obligations.
(b) In addition to any other rights given to Junior Lender under
applicable laws (but subject to the limitations set forth in this
paragraph 8, it is agreed that Junior Lender shall have the right (i) to
file a proof of claim with respect to the Junior Obligations, (ii) to
deliver to Senior Lender a copy thereof, together with evidence of the
filing with the appropriate court or other authority, and (iii) to defend
any objection filed to said proof of claim.
(c) Junior Lender agrees that it will not oppose: (i) any motion by
the Senior Lender for relief from the automatic stay in order for Senior
Lender to exercise its rights under the Senior Mortgage, (ii) any motion
by the Senior Lender for adequate protection, (iii) any motion by the
Senior Lender to dismiss the Bankruptcy Proceeding, (iv) any motion by the
Senior Lender to appoint a bankruptcy trustee or examiner or (v) any
motion by the Senior Lender to convert the Bankruptcy Proceeding to any
other Chapter of the Bankruptcy Code.
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9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SENIOR LENDER: Senior
Lender represents and warrants to Junior Lender that:
a. Senior Lender is the sole owner and holder of the Senior Note and
the Senior Mortgage.
b. To the best of it s knowledge, as of the date hereof, there is no
default or event which by notice or the passage of time would
constitute an event of default under the Senior Note and/or the
Senior Mortgage.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF JUNIOR LENDER: Junior
Lender represents and warrants to Senior Lender that:
a. Junior Lender is the sole owner and holder of the Junior Note and
the Junior Mortgage.
b. To the best of its knowledge, as of the date hereof, there is no
default or event which by notice or the passage of time would
constitute an event of default under the Junior Note and/or the
Junior Mortgage.
11. AMOUNT SECURED: Without the prior written consent of Senior Lender,
which consent may be withheld in Senior Lender's sole discretion, Junior Lender
shall not permit any increases in the principal amount secured by the Junior
Mortgage (as may have been reduced by the repayment of any principal by
Mortgagor), except for protective advances, and any interest thereon, and all
costs, payments advanced, taxes and expenses hereafter advanced to insure the
Property, to prevent waste, to protect the collateral thereunder or collect said
debt, and all other expenses, costs and attorneys' fees incurred by Junior
Lender in connection with the Junior Mortgage and/or the Junior Obligations. In
the absence of consent by Senior Lender, any such increases shall constitute a
default under the Senior Mortgage.
12. CONTINUING AGREEMENT: The obligations of Senior Lender and Junior
Lender hereunder shall be absolute and unconditional and this Agreement shall be
a continuing agreement and shall continue notwithstanding the dissolution or
reorganization of Senior Lender or of Junior Lender. Senior Lender, without
affecting the subordination herein provided and without notice to Junior Lender,
(i) may release any security for its respective notes, including part of the
property encumbered by its mortgage or retain or obtain a security interest in
other property to secure the obligations of the Mortgagor to Senior Lender, or
(ii) may extend, alter, exchange, substitute or modify its note(s) or its
mortgage or release, compromise, alter or exchange any obligation held by it as
security for its note(s), so long as there is no increase in principal or in the
other financial obligations of Mortgagor. None of such actions shall affect the
subordination herein provided, and Junior Lender expressly waives any rights,
including any defense in the nature of a suretyship defense, otherwise arising
out of such action. Senior Lender's senior security position hereunder shall not
be prejudiced by any action omitted or undertaken by it with respect to the
Senior Obligations or any indebtedness secured by the Senior Mortgage.
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13. NOTICES: All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes when presented
personally or three (3) days after mailing when sent by actual hand-delivery
commercial overnight courier (i.e., Federal Express) or registered or certified
mail, return receipt requested, postage prepaid, to the addresses set forth
below:
to Senior Lender: Charley Zeches as Trustee of
Lakes Holding Trust under agreement
Dated July 27, 2001
521 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
with a copy to: Mombach, Boyle & Hardin, P.A.
500 East Broward Boulevard, Suite 1950
Ft. Lauderdale, Florida 33394
Attn: Conrad J. Boyle, Esq.
to Junior Lender: Mitchell Entertainment Company
7220 N.W. 36th Street, Suite 100
Miami, Florida 33166
with copy to: Howard L. Friedberg, Esq.
Katz, Barron, Squitero Law Firm
2699 South Bayshore Drive, 7th Floor
Miami, Florida 33133
to Mortgagor: AGU Entertainment Corp.
11077 Biscayne Boulevard, Suite 100
Miami, Florida 33161
with copy to: Bruce C. Rosetto, Esq.
Blank Rome LLP
1200 N. Federal Highway, Suite 417
Boca Raton, Florida 33432
or any such other address of which a party shall have notified the party giving
such notice in writing.
14. NO WAIVER: The giving of consent by Senior Lender to the Junior
Mortgage is not and shall not be deemed a waiver of the Senior Lender's rights
to prohibit any other junior mortgage of the Mortgaged Property. No delay on the
part of Senior Lender or Junior Lender in the exercise of any right or remedy
hereunder or under the Senior Mortgage or Junior Mortgage, respectively, shall
operate as a waiver of any right hereunder.
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15. COUNTERPARTS: The parties hereto agree that this Subordination
Agreement may be executed in two (2) or more counterparts, each of which shall
be an original, but all of which shall constitute one and the same instrument.
16. ESTOPPEL CERTIFICATES: At the written request of Senior Lender, Junior
Lender shall deliver to Senior Lender a certificate stating that no default has
occurred under the Junior Note or the Junior Mortgage which default is
continuing, and that Junior Lender is not aware of any event which after notice
or lapse of time or both would constitute a default or, if any such event or
default had occurred and is continuing, Junior Lender shall specify the nature
and period of existence thereof. At the written request of Junior Lender, Senior
Lender shall deliver to Junior Lender a certificate stating that no default has
occurred under the Senior Note or the Senior Mortgage which default is
continuing, and that Senior Lender is not aware of any event which after notice
or lapse of time or both would constitute a default or, if any such event or
default had occurred and is continuing, Senior Lender shall specify the nature
and period of existence thereof.
17. PARAGRAPH HEADINGS: The headings of the various paragraphs of this
Subordination Agreement have been inserted only for the purpose of convenience,
and are not part of this Subordination Agreement and shall not be deemed in any
manner to modify, explain or restrict any of the provisions of this
Subordination Agreement.
18. CHOICE OF LAW: This Agreement shall be construed, interpreted,
enforced and governed by and in accordance with the laws of the State of
Florida, excluding the principles thereof governing conflicts of law. If any
provision shall be held prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating any other provision of this Agreement.
19 VENUE: The parties agree that Broward County, Florida, at the sole
option of Senior Lender, is the proper venue for any and all legal proceedings
arising out of this Subordination Agreement and any associated loan documents.
20. BINDING EFFECT: This Agreement shall be binding upon and inure to the
benefit of the Mortgagor, Senior Lender and Junior Lender and their respective
heirs, successors and assigns.
21. NEITHER SENIOR LENDER, JUNIOR LENDER, MORTGAGOR NOR ANY OTHER PERSON
LIABLE FOR THE OBLIGATIONS, COVENANTS, WARRANTIES AND REPRESENTATIONS HEREIN,
NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF SENIOR LENDER,
JUNIOR LENDER, MORTGAGOR OR ANY SUCH OTHER PERSON OR ENTITY SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE
BASED UPON OR ARISING OUT OF THIS AGREEMENT. NEITHER SENIOR LENDER, JUNIOR
LENDER, MORTGAGOR NOR ANY SUCH PERSON OR ENTITY WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE PARTIES, HERETO AND THE PROVISIONS
HEREOF SHALL BE SUBJECT TO NO EXCEPTIONS.
[THE BALANCE OF THE PAGE INTENTIONALLY HAS BEEN LEFT BLANK]
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IN WITNESS WHEREOF, we have hereunto set our hands and seals on the day
and year first above written.
Signed, sealed and SENIOR LENDER
delivered in the presence of:
/s/ Robert J. Zeches By:/s/ Charley Zeches
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Print Name: Robert J. Zeches Name:Charley Zeches
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Title: Trustee
/s/ John N. Minjiras -------------------------------------
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Print Name: John N. Minjiras
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MITCHELL ENTERTAINMENT COMPANY, a Delaware limited
liability company
By: /s/ Johnathan E. Mitchell
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Print Name: Jonathan E. Mitchell
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Title: CEO
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Print Name:
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AGREED TO, ACCEPTED AND ACKNOWLEDGED by the undersigned Mortgagor this
20th day of December, 2004.
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AGU ENTERTAINMENT CORP.
/s/ Bruce C. Rosetto
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Print Name: Bruce C. Rosetto By: /s/ David Levy
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Name: David Levy
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/s/ Innocencia Ramos Title: President
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Print Name: Innocencia Ramos
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