EXHIBIT 4.12
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INTERCREDITOR AGREEMENT
between
[NAME OF SENIOR LENDER]
and
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
Dated as of July 22, 1997
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FORM OF
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT dated as of July 22, 1997 (this
"AGREEMENT") is made by and between State Street Bank and Trust Company (the
"SUBORDINATED CREDITOR"), solely in its capacity as trustee and collateral agent
under and pursuant to the Subordinated Creditor Indenture (as hereinafter
defined), and [Name of Lender], as senior secured lender (the "LENDER") under
and pursuant to the Lender Credit Agreement (as hereinafter defined).
RECITALS
A. Discovery Zone, Inc., a Delaware corporation (the "BORROWER"), certain
subsidiaries of the Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "SUBORDINATED CREDITOR INDENTURE"), pursuant
to which and upon the terms and conditions stated therein indebtedness was
incurred by the Borrower (the "SUBORDINATED INDENTURE INDEBTEDNESS") the
repayment of which is secured by priority security interests in and liens on the
assets and properties (the "COLLATERAL") described in the Security Agreement
(the "SECURITY AGREEMENT") and the Collateral Assignment of Trademarks (the
"TRADEMARK ASSIGNMENT" and together with the Security Agreement and the
Subordinated Creditor Indenture, the "SUBORDINATED INDENTURE AGREEMENTS"), each
dated the date of the Subordinated Creditor Indenture by and between the
Borrower and the Subordinated Creditor.
B. As of ___________________, the Borrower and the Lender entered into a
Credit Agreement (the "LENDER CREDIT AGREEMENT") pursuant to which the Lender
agreed, upon the terms and conditions stated therein, to make loans and advances
to or to issue letters of credit on account of the Borrower in an aggregate
principal amount and face amount, as the case may be, not to exceed in the
aggregate $10 million (such aggregate principal and face amount, together with
all interest and reasonable fees and expenses payable thereon or with respect
thereto being the "SENIOR LOAN INDEBTEDNESS"), secured by priority security
interests in and liens on the Collateral pursuant to the Lender Credit Agreement
and the collateral security documents executed and delivered in connection
therewith (the "SENIOR SECURITY AGREEMENTS" and together with the Lender Credit
Agreement, the "SENIOR LOAN AGREEMENTS").
C. One of the conditions of the Lender Credit Agreement is that the
priority of the security interests in and liens on the Collateral under the
Senior Loan Agreements be senior to the
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security interests in and liens on the Collateral under the Subordinated
Indenture Agreements, in the manner and to the extent provided in this
Agreement.
D. The Lender and the Subordinated Creditor desire to enter into this
Agreement concerning the respective rights of the Lender and the Subordinated
Creditor with respect to the priority of their respective security interests in
and liens on the Collateral.
E. The terms of Sections 10.02, 12.01 and 12.02 of the Subordinated
Creditor Indenture permit the Borrower to enter into the Lender Credit
Agreement, subject to compliance with certain conditions, and in connection
therewith authorize and direct the Subordinated Creditor to enter into a
subordination agreement substantially in the form of this Agreement.
F. In order to induce the Lender to extend credit to the Borrower and for
purposes of certain conditions precedent and covenants of the Senior Loan
Agreements, the Subordinated Creditor hereby agrees with the Lender, and in
order to induce the Subordinated Creditor to approve the Senior Loan
Indebtedness and the Lender's security interests in and liens on the Collateral
for purposes of certain conditions precedent and covenants of the Subordinated
Indenture Agreements, the Lender and the Subordinated Creditor hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. TERMS DEFINED ABOVE AND IN THE RECITALS. As used in this
Agreement, the following terms shall have the respective meanings indicated in
the opening paragraph hereof and in the above Recitals:
"Agreement"
"Borrower"
"Collateral"
"Lender"
"Lender Credit Agreement"
"Senior Loan Indebtedness"
"Senior Security Agreements"
"Senior Loan Agreements"
"Subordinated Creditor"
"Subordinated Creditor Indenture"
"Subordinated Indenture Indebtedness"
"Subordinated Indenture Agreements"
Section 1.02. LENDER CREDIT AGREEMENT DEFINITIONS. All capitalized terms
which are used but not defined herein shall have the same meaning as in the
Lender Credit Agreement.
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Section 1.03. OTHER DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
"FULLY PAID" shall mean the payment in cash in full of all obligations
under each Lender Loan Document at such time when there shall no longer be any
obligation of the Lender to make advances or issue letters of credit and there
shall no longer be any letter of credit outstanding thereunder or such letter of
credit shall have been cash collateralized in an amount not less than 105% of
the undrawn amount thereof.
"INSOLVENCY PROCEEDING" shall mean any proceeding for the purposes of
dissolution, winding up, liquidation, arrangement or reorganization of the
Borrower or its successors or assigns, whether in bankruptcy, insolvency,
arrangement, reorganization or receivership proceedings or upon an assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of the Borrower or its successors or assigns.
"LENDER LOAN DOCUMENTS" shall mean the Senior Loan Agreements, the
collateral documents and instruments executed and delivered in connection
therewith, the Lender Note, and such other agreements, instruments and
certificates as defined or referred to in the Lender Credit Agreement, as any or
all of the same may be amended or supplemented from time to time.
"LENDER NOTE" shall mean the promissory note (or notes) executed by the
Borrower in favor of the Lender pursuant to the Lender Credit Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction,
excluding true lease and consignment filings).
"LIEN PRIORITY" shall mean with respect to any Lien of the Lender or the
Subordinated Creditor in the Collateral, the order of priority of such Lien as
specified in Section 2.01.
"LOAN DOCUMENTS" shall mean the Lender Loan Documents and the Subordinated
Creditor Loan Documents.
"MCDONALD'S" shall mean the ▇▇▇▇▇▇▇▇'▇ Corporation, a Delaware corporation,
and its successors and assigns.
"MCDONALD'S COLLATERAL" shall mean those certain fourteen parcels of real
property and related fixtures, including, without limitation, any proceeds
thereof, which properties and proceeds are subject to McDonald's Senior Liens.
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"MCDONALD'S SECURED NOTE" shall mean a secured promissory note to be issued
on the Issue Date by the Borrower in favor of McDonald's pursuant to the Plan of
Reorganization, which note represents restructured secured claims against the
Borrower in an estimated aggregate principal amount of up to $4,600,000.
"MCDONALD'S SECURED RENT DEFERRAL NOTES" shall mean secured promissory
notes to be issued on the Issue Date by the Borrower in favor of McDonald's
pursuant to the Plan of Reorganization, which notes represent restructuring of
rent deferrals which McDonald's granted to the Borrower during bankruptcy
proceedings of the Borrower in an estimated aggregate principal amount of to
$300,000.
"MCDONALD'S SENIOR LIENS" shall mean the first priority liens of McDonald's
on the McDonald's Collateral, as set forth in the first mortgages, deeds of
trust and/or deeds to secure debt, which McDonald's Senior Liens secure, among
other things, the payment of the McDonald's Secured Note, the McDonald's Secured
Rent Deferral Notes and any obligations of the Debtors (as defined in the Plan
of Reorganization) or the Borrower or any of the other Reorganized Debtors (as
defined in the Plan of Reorganization) that may arise under (i) the agreement to
indemnify as set forth in Section 10.3(f) and Section 11.2(a)(iii) of the
Agreement and Plan of Merger, dated as of August 30, 1994, by and among
Discovery Zone, Inc., Discovery Zone International, Inc., Leaps & Bounds, Inc.
and McDonald's and (ii) the Stipulation and Order Between Debtors and McDonald's
Providing for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims, entered by the United States
Bankruptcy Court for the District of Delaware on November 18, 1996, which liens
are senior to the subordinate liens on the McDonald's Collateral granted by the
Borrower to Subordinated Creditor as set forth in the Subordination Agreement,
dated as of July ___, 1997, by and between McDonald's and the Subordinated
Creditor.
"PARTY" shall mean any signatory to this Agreement.
"SENIOR LIABILITIES" shall mean the "Obligations", contingent or otherwise,
of the Borrower to the Lender as defined in the Lender Credit Agreement,
including interest, fees and expenses after the initiation of any Insolvency
Proceeding, and including the secured claims of the Lender in respect of the
Collateral in any Insolvency Proceeding.
"SUBORDINATED CREDITOR ENFORCEMENT EVENT" shall mean the occurrence and
continuance of an "Event of Default" under Section 6.01 of the Subordinated
Creditor Indenture.
"SUBORDINATED CREDITOR LOAN DOCUMENTS" shall mean the Subordinated
Indenture Agreements, the Collateral Agreements (as defined in the Subordinated
Creditor Indenture), the Subordinated Creditor Notes, the real property
mortgages referred to in the
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Subordinated Creditor Indenture (now existing or hereafter negotiated, executed,
delivered and recorded), and such other agreements, instruments and certificates
as defined or referred to in the Subordinated Creditor Indenture, as any or all
of the same may be amended or supplemented from time to time.
"SUBORDINATED CREDITOR NOTES" shall mean the Notes issued to the holders
thereof pursuant to the Subordinated Creditor Indenture.
"SUBORDINATED LIABILITIES" shall mean the "Obligations", contingent or
otherwise, of the Borrower and the Subsidiary Guarantors (as defined in the
Subordinated Creditor Indenture) to the Subordinated Creditor and the holders of
the Subordinated Creditor Notes defined in Section 1.01 of the Subordinated
Creditor Indenture, including interest, fees and expenses after the initiation
of any Insolvency Proceeding, and including the secured claim of the
Subordinated Creditor in respect of the Collateral in any Insolvency Proceeding.
"TRIGGER EVENT" shall mean any of (a) the occurrence of an Event of Default
under the applicable section of the Lender Credit Agreement, (b) the
acceleration of or demand for payment on the Lender Note by the Lender pursuant
to the applicable section of the Lender Credit Agreement, or (c) the
commencement of any action by the Lender, whether judicial or otherwise, for the
enforcement of the Lender's rights and remedies under any of the Loan Documents,
including (i) commencement of any receivership or foreclosure proceedings
against or any other sale of, collection on or disposition of any Collateral,
including any notification to third parties to make payment directly to the
Lender, (ii) exercise of any right of set-off, (iii) commencement of any
Insolvency Proceeding, and (iv) commencement of any action or proceeding against
the Borrower to recover all or any part of the Senior Liabilities.
Section 1.04. SINGULAR AND PLURAL. All definitions herein (whether set
forth herein directly or by reference to definitions in other documents) shall
be equally applicable to both the singular and the plural forms of the terms
defined.
Section 1.05. MISCELLANEOUS. The words "hereof", "herein" or "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Article and section references are to articles and sections of this Agreement
unless otherwise specified. The term "including" shall mean "including, without
limitation".
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ARTICLE II
LIEN PRIORITY
Section 2.01. AGREEMENT TO SUBORDINATE. The Subordinated Creditor hereby
agrees that the Liens of the Subordinated Creditor in the Collateral are and
shall be subordinate in priority of Lien to the Lender's Liens in the Collateral
up to and not exceeding the maximum amount of $10 million (inclusive of
principal, interest, premium and expenses thereof) of the Senior Liabilities;
PROVIDED, HOWEVER, that the terms, provisions and restrictions of this Agreement
shall be void and of no further force and effect in the event that the Lender's
Liens in the Collateral are avoided, disallowed, set aside or otherwise
invalidated in any judicial proceeding by a court, tribunal or administrative
agency of competent jurisdiction, to the extent of such Collateral which is the
subject of any such proceeding. The subordination of Liens in favor of the
Lender herein shall not be deemed to subordinate the Subordinated Creditor's
Liens to the Liens of any other Person.
Section 2.02. STANDSTILL PERIOD. If a Subordinated Creditor Enforcement
Event has occurred and is continuing, the Subordinated Creditor may give the
Lender written notice thereof, specifying the nature of the Subordinated
Creditor Enforcement Event in reasonable detail. If such Subordinated Creditor
Enforcement Event is continuing for more than 120 days after the delivery of
such notice, and if the Lender has not by the expiration of such 120-day period
notified the Subordinated Creditor that the Lender has commenced one or more
types of enforcement actions described in Section 3.01 or an Insolvency
Proceeding, then the Subordinated Creditor may, subject to the Lien Priority and
prior application of proceeds of the Collateral to the Senior Liabilities, as
provided herein, take one or more types of enforcement actions described in
Section 3.01 or otherwise available to the Subordinated Creditor under the
Subordinated Creditor Indenture and the other Subordinated Creditor Loan
Documents. If Lender has taken or commenced such action within such period and
thereafter discontinues such enforcement action or actions, and no Insolvency
Proceeding or other action described in Section 3.01 is then being taken by the
Lender, and such Subordinated Creditor Enforcement Event is then continuing,
then the Subordinated Creditor may, subject to the Lien Priority and prior
application of proceeds of the Collateral to the Senior Liabilities, as provided
herein, take one or more types of enforcement actions described in Section 3.01
or otherwise available to the Subordinated Creditor under the Subordinated
Creditor Indenture and the other Subordinated Creditor Loan Documents.
Section 2.03. EXERCISE OF RIGHTS.
(a) The Subordinated Creditor may exercise, and nothing herein shall
constitute a waiver of, any right it may
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have at law or equity to receive notice of, or to commence or join with any
creditor in commencing any Insolvency Proceeding or, subject to Section 2.02, to
join or participate in, any action or proceeding or other activity described in
Section 3.01; PROVIDED, HOWEVER, that exercise of any such right by the
Subordinated Creditor shall be subject to the Lien Priority and prior
application of proceeds of Collateral to the Senior Liabilities as provided
herein.
(b) The Subordinated Creditor may make such demands or file such
claims in respect of the Subordinated Liabilities as may be necessary to prevent
the waiver or bar of such claims under applicable statutes of limitations or
other statutes, court orders or rules of procedure, but except as provided in
this Section 2.03, the Subordinated Creditor shall not take any actions
restricted by Article 3 in respect of such claims until the Senior Liabilities
are Fully Paid.
Section 2.04. PRIORITY OF LIENS. Irrespective of the order of recording
of mortgages, financing statements, security agreements or other instruments,
and irrespective of the descriptions of Collateral contained in the Loan
Documents, including any financing statements, the Parties agree among
themselves that their respective liens and security interests in the Collateral
shall be governed by the Lien Priority, which shall be controlling in the event
of any conflict between this Agreement and any of the Loan Documents.
Notwithstanding any other term or provision herein contained, Collateral, as
such term is used herein, shall only include the assets and properties subject
to the security interest and lien of the Security Agreement and the Collateral
Assignment of Trademarks (Security Agreement), each dated July 22, 1997, by and
between the Subordinated Creditor and the Borrower, and shall not include the
properties, assets and securities or other collateral described in (i) the
Pledge Agreement or the Escrow and Security Agreement, each dated July 22, 1997,
by and between the Subordinated Creditor and the Borrower, (ii) the real
property mortgage instruments granting, now or hereafter, to the Subordinated
Creditor certain leasehold mortgages with respect to certain real property
leases and related assets and properties of the Borrower, and (iii) the
McDonald's Collateral regarding the McDonald's Senior Liens.
Section 2.05. NOTICE OF TRIGGER EVENT. The Lender and the Subordinated
Creditor each agree that it will notify the other if it receives actual notice
of the occurrence of a Trigger Event or Subordinated Creditor Enforcement Event,
respectively, not later than 30 days after the date of any such occurrence, in
accordance with Section 5.06.
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ARTICLE III
ACTIONS OF THE PARTIES
Section 3.01. LIMITATION ON CERTAIN ACTIONS. Subject to Section 2.02, so
long as any of the Senior Liabilities are not Fully Paid, the Subordinated
Creditor will not, without the consent of the Lender, take any of the following
actions:
(a) commence receivership or foreclosure proceedings against or
otherwise sell, collect or dispose of any Collateral; or
(b) notify third party account debtors to make payment directly to it
or any of its agents or other Persons acting on its behalf.
Section 3.02. NOTICES. The Lender shall provide the Subordinated Creditor
with written notice at least 15 days prior to the Lender exercising any remedies
with respect to the Collateral.
Section 3.03. FORECLOSURE. The Lender shall take commercially reasonable
steps as permitted by applicable law to foreclose upon only such portion of the
Collateral as shall be reasonably necessary so that the Senior Liabilities are
Fully Paid.
ARTICLE IV
ENFORCEMENT OF PRIORITIES
Section 4.01. IN FURTHERANCE OF LIEN PRIORITIES. The Lender and the
Subordinated Creditor agree as follows:
(a) Upon any distribution of all or any of the assets of the Borrower
to creditors of the Borrower (whether in cash, securities or other property) in
connection with any Insolvency Proceeding, which otherwise would be payable or
deliverable upon or with respect to the Collateral securing the Subordinated
Liabilities, such assets shall be paid or delivered by the Subordinated Creditor
directly to the Lender for application (in the case of cash) to or as collateral
(in the case of securities or other non-cash property) for the payment or
prepayment of the Senior Liabilities until the amount of $10 million (inclusive
of principal, interest, premium and expenses thereof) of Senior Liabilities
shall have been Fully Paid.
(b) If any Insolvency Proceeding is commenced by or against the
Borrower, the Subordinated Creditor, to the extent party to any such Insolvency
Proceeding, and to the extent it has commenced any action described in
Section 3.01, shall use its commercially reasonable efforts to duly and promptly
take such
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action as the Lender may reasonably request (i) to collect the proceeds of
Collateral securing the Subordinated Liabilities for account of the Lender at
Lender's reasonable cost and expense and to file appropriate claims or proofs of
claim in respect of the Subordinated Liabilities and (ii) to collect and receive
any and all payments or distributions which may be payable or deliverable upon
or with respect to the Collateral securing the Subordinated Liabilities and to
hold such payments or distributions in trust for the Lender, at Lender's
reasonable cost and expense, to the extent set forth herein; PROVIDED, HOWEVER,
that Subordinated Creditor shall have no liability to the Lender regarding the
adequacy of any such proceeds or for any such action subject to wilful
misconduct, bad faith or gross negligence.
(c) All payments or distributions upon or with respect to the
Subordinated Liabilities which are received by the Subordinated Creditor
contrary to the provisions of this Agreement shall be segregated from other
funds and property held by the Subordinated Creditor and shall be held in trust
for the Lender and shall forthwith pay over such remaining proceeds to the
Lender in the same form as so received (with any necessary endorsement) to be
applied (in the case of cash) to or held as Collateral (in the case of non-cash
property or securities) for the payment or prepayment of the Senior Liabilities
in accordance with the terms of the Lender Credit Agreement; PROVIDED, HOWEVER,
after such application of proceeds so that the Senior Liabilities are Fully Paid
to the extent set forth herein, the Lender shall segregate any remaining
payments and distributions from the Lender's other funds and properties and
shall hold such payments and distributions in trust for the Subordinated
Creditor and shall be forthwith paid over to the Subordinated Creditor in the
same form as so received (with any necessary endorsement) to be applied (in the
case of cash) to or held as Collateral (in the case of non-cash property or
securities) for the payment or prepayment of the Subordinated Liabilities in
accordance with the terms of the Subordinated Creditor Indenture, as further
provided in Section 5.14.
(d) Each of the Lender and the Subordinated Creditor is hereby
authorized to demand specific performance of this Agreement, whether or not the
Borrower shall have complied with any of the provisions hereof applicable to it,
at any time when the other shall have failed to comply with any of the
provisions of this Agreement applicable to it, PROVIDED, HOWEVER, the remedy of
specific performance shall not be available, and the asserting party shall be
free to assert any and all legal defenses it may possess, if such remedy would
result in, or otherwise constitute, a violation of the Employee Retirement
Income Security Act of 1974, as amended. Each of the Lender and the
Subordinated Creditor hereby irrevocably waives any defense based on the
adequacy of a remedy at law, which might be asserted as a bar to such remedy of
specific performance.
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(e) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Senior Liabilities
is, other than as a result of any malfeasance, intentional fraud or negligence
of the Lender, rescinded or must otherwise be returned by the Lender upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as
though such payment had not been made.
Section 4.02 MCDONALD'S SENIOR LIENS. Nothing herein shall in any
way reduce, release, compromise, or limit the validity, perfection, priority or
enforceability of the McDonald's Senior Liens.
ARTICLE V
MISCELLANEOUS
Section 5.01. RIGHTS OF SUBROGATION. The Subordinated Creditor
agrees that no payment or distribution to the Lender pursuant to the provisions
of this Agreement shall entitle the Subordinated Creditor to exercise any rights
of subrogation in respect thereof until the Senior Liabilities shall have been
Fully Paid.
Section 5.02. FURTHER ASSURANCES. The Parties will, at their own
expense and at any time and from time to time, promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that either Party may reasonably request, in order to
protect any right or interest granted or purported to be granted hereby or to
enable the Lender or the Subordinated Creditor to exercise and enforce its
rights and remedies hereunder; PROVIDED, HOWEVER, that neither Party shall be
required to pay over any payment or distribution, execute any instruments or
documents, or take any other action referred to in this Section 5.02 to the
extent that such action would contravene any law, order or other legal
requirement, and in the event of a controversy or dispute, either Party may
interplead any payment or distribution in any court of competent jurisdiction,
without further responsibility in respect of such payment or distribution under
this Section 5.02.
Section 5.03. DEFENSES SIMILAR TO SURETYSHIP DEFENSES. All rights and
interests of the Lender hereunder, and all agreements and obligations of the
Subordinated Creditor under this Agreement, shall remain in full force and
effect irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Liabilities, or any other amendment or
waiver of or any consent to departure from the Lender Note or the Lender Credit
Agreement, PROVIDED, HOWEVER, that this clause (a) shall not apply to, and the
Subordinated Creditor's liens and security interests in the
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Collateral shall not be subordinated in priority by virtue of this Agreement to
the Lender's liens and security interests therein to the extent that the Senior
Loan Indebtedness is increased by virtue of any amendment, without the express
written consent of the Subordinated Creditor, which alters the amount of the
Senior Liabilities or the rate of interest or commission payable with respect
thereto or alters the schedule of payments of principal or interest thereon, or
which has the effect stated in the proviso to clause (b) below; or
(b) any exchange, release or non-perfection of any Collateral, or any
release, amendment or waiver of or consent to departure from any guaranty, for
all or any of the Senior Liabilities, PROVIDED, HOWEVER, that this clause (b)
shall not apply to, and the Subordinated Creditor's Liens in the Collateral
shall not be subordinated in priority by virtue of this Agreement to the
Lender's Liens therein, if there is any such release, amendment, waiver or
consent, without the express written consent of the Subordinated Creditor, which
releases any material items or amount of Collateral.
Section 5.04. WAIVER. Except as otherwise provided herein, and
subject to commercially reasonable standards, the Subordinated Creditor hereby
waives, with respect to the Collateral to which the Lien Priority hereunder
relates (i) any failure, omission, delay or lack on the part of the Lender to
enforce, assert or exercise any right, power or remedy conferred on the Lender
in any of the Lender Loan Documents or this Agreement or the inability of the
Lender to enforce any provision of the Lender Loan Documents or this Agreement,
and (ii) without limiting the generality of the foregoing, any requirement that
the Lender protect, secure, perfect or insure any Liens or other lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any Collateral; PROVIDED, HOWEVER, that this
Section 5.04 shall not be applicable to, and the Subordinated Creditor's Liens
in the Collateral shall not be subordinated in priority by virtue of this
Agreement to the Lenders' Liens therein, if, due to the Lender's malfeasance,
intentional fraud or gross negligence, or in the event there is any lack of
validity or enforceability, in any material respect, of the Lender Loan
Documents.
Section 5.05. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by any Party shall in
any event be effective unless the same shall be in writing and signed by the
each Party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 5.06. ADDRESSES FOR NOTICES. All demands, notices and other
communications provided for hereunder shall be in writing and, if to the
Subordinated Creditor, mailed or sent by telecopy or delivered to it, addressed
to it as follows:
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▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ and Trust
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and if to the Lender, mailed, sent or delivered thereto, addressed to it at the
address of the Lender specified in the Lender Credit Agreement, or as to any
party at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this
Section. All such demands, notices and other communications shall be effective,
when mailed, two business days after deposit in the mails, postage prepaid, when
sent by telecopy, when receipt is acknowledged by the receiving telecopy
equipment (or at the opening of the next business day if receipt is after normal
business hours), or when delivered, as the case may be, addressed as aforesaid.
Section 5.07. NO WAIVER, REMEDIES. No failure on the part of any
Party to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
Section 5.08. CONTINUING AGREEMENT, TRANSFER OF LENDER NOTE. This
Agreement is a continuing agreement and shall (i) remain in full force and
effect until the Senior Liabilities and, solely for the purposes of Section
5.14, the Subordinated Liabilities shall have been paid in full, (ii) be binding
upon the Parties and their successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Parties and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (iii), the Lender or the Subordinated Creditor may assign or otherwise
transfer its Lender Note or the Subordinated Liabilities to any other Person
(other than Borrower or an Affiliate of Borrower), and such other Person shall
thereupon become vested with all the rights in respect thereof granted to the
Lender or Subordinated Creditor, as the case may be, herein or otherwise.
Section 5.09. GOVERNING LAW: ENTIRE AGREEMENT. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York except as otherwise preempted by applicable federal law. This Agreement
constitutes the entire agreement and understanding among the Parties with
respect to the subject matter hereof and supersedes any prior agreements,
written or oral, with respect thereto.
Section 5.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and it is not necessary
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that the signatures of all Parties be contained on any one counterpart hereof,
each counterpart will be deemed to be an original, and all together shall
constitute one and the same document.
Section 5.11. NO THIRD PARTY BENEFICIARY. This Agreement is solely
for the benefit of the Parties (and their permitted assignees). No other Person
(including Borrower or any Affiliate of Borrower) shall be deemed to be a third
party beneficiary of this Agreement.
Section 5.12. HEADINGS. The headings of the articles and sections of
this Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof
Section 5.13. SEVERABILITY. If any of the provisions in this
Agreement shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement and shall not invalidate the Lien Priority
or any other priority set forth in this Agreement.
Section 5.14. PAYMENT IN FULL OF SENIOR LIABILITIES. From and after
the Senior Liabilities being Fully Paid up to $10 million (inclusive of
principal, interest, premium and expenses thereof):
(a) All payments or distributions from the Borrower or with respect
to the Collateral received by the Lender shall be segregated from other funds
and property held by the Lender and held in trust by the Lender for the
Subordinated Creditor and shall be promptly paid over to the Subordinated
Creditor in the same form as received (with any necessary endorsement without
recourse or warranty) to be applied to or held for the payment or prepayment of
the Subordinated Liabilities in accordance with the terms of the Subordinated
Creditor Indenture; and
(b) The Lender will promptly execute and deliver all further
instruments and documents, and take all further acts that may be necessary or
desirable, or that the Subordinated Creditor may reasonably request, to permit
the Subordinated Creditor to enforce the Subordinated Liabilities or recover any
proceeds of the Collateral;
PROVIDED, HOWEVER, that the Lender shall not be required to pay over any payment
or distribution, execute any instruments or documents, or take any other action
referred to in this Section 5.14 to the extent that such action would contravene
any law, order or other legal requirement, and in the event of a controversy or
dispute, the Lender may interplead any payment or distribution in any court of
competent jurisdiction, without further responsibility in respect of such
payment or distribution under this Section 5.14.
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Section 5.15. OTHER NON-SUBORDINATED ENCUMBERED ASSETS. Notwithstanding
any term herein to the contrary, it is hereby acknowledged and agreed that the
subordination set forth in this Agreement (and the term "Collateral" as defined
in this Agreement) does not include or apply to (i) certain Capital Stock
pledged by the Borrower to the Subordinated Creditor under and pursuant to a
Pledge Agreement between the Borrower and the Subordinated Creditor dated July
___, 1997, (ii) certain cash, securities, instruments and/or certificates in an
escrow account established with and pledged to the Subordinated Creditor under
and pursuant to a certain Escrow and Security Agreement between the Borrower and
the Subordinated Creditor dated July ___, 1997, (iii) certain leasehold
interests and related assets and properties of the Borrower and any of its
subsidiaries, encumbered by certain leasehold mortgages in favor of the
Subordinated Creditor, (iv) the McDonald's Collateral encumbered by the
McDonald's Senior Liens, as well as the Subordinated Creditor's subordinated
security interest and liens thereon, and (v) any assets or properties held by
any Subsidiary or any other subsidiary of the Borrower.
Section 5.16. SUBORDINATED CREDITOR TRUSTEE STATUS. Notwithstanding any
term herein to the contrary, it is hereby expressly agreed and acknowledged that
the terms of this Agreement applicable to or governing the Subordinated Creditor
shall at all times and in all respects, whether or not expressly referenced
therein, be subject to the terms, protections and benefits set forth in Article
Seven of the Subordinated Creditor Indenture. It is further expressly
acknowledged that the subordination and related agreements set forth herein by
the Subordinated Creditor are made solely in its capacity as Trustee under the
Subordinated Creditor Indenture and with respect to the Notes issued thereunder
(and not in its individual commercial capacity).
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IN WITNESS WHEREOF, the Lender and the Subordinated Creditor each has
caused this Agreement to be duty executed and delivered as of the date first
above written.
LENDER: [NAME OF LENDER]
By: ____________________________
SUBORDINATED STATE STREET BANK AND TRUST COMPANY,
CREDITOR: solely in its capacity as Trustee (and not
individually)
By:______________________________
Name:
Title:
ACKNOWLEDGMENT
The undersigned ("Borrower"), hereby acknowledges that it has received
a copy of the foregoing Intercreditor Agreement and consents thereto, and agrees
to recognize all rights granted thereby to the parties thereto, and will not do
any act or perform any obligation which is not in accordance with the agreements
set forth in such Intercreditor Agreement. Borrower further acknowledges that
it is not an intended beneficiary or third party beneficiary under the
Intercreditor Agreement.
Dated as of _____________, 1997.
DISCOVERY ZONE, INC.
a Delaware corporation
By:
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Name:
Title: