SUBORDINATION AGREEMENT 

[RCI II, LTD]

 

This Subordination Agreement (this "Agreement") is entered into as of October
31, 2011 (the "Effective Date"), by HERALD NATIONAL BANK, a national banking
association, whose address is 623 Fifth Avenue, 11th Floor, New York, New York
10022 (the "Bank"), RCI II, LTD., whose address is 411 West 14thStreet, 4th
Floor, New York, New York 10128 (the "Creditor"), and THE ONE GROUP, LLC, a
Delaware limited liability company, ONE 29 PARK MANAGEMENT, LLC, a New York
limited liability company, STK-LAS VEGAS, LLC, a Nevada limited liability
company, and STK ATLANTA, LLC, a Georgia limited liability company, (hereinafter
referred to individually as a "Borrower", and collectively, as the "Borrowers"),
whose address is c/o The One Group, LLC, 411 West 14th Street, 3rdFloor, New
York, New York 10014.

 

The Bank has agreed to extend or renew credit to the Borrowers on the condition
that the Creditor enter into this Agreement. In order to induce the Bank to
extend such credit to the Borrowers, the Creditor has agreed to enter into this
Agreement and to subordinate all indebtedness owed to it by the Borrowers as
provided herein.

 

In consideration of the Bank's extension or renewal of credit to the Borrowers,
the Bank, the Creditor and the Borrowers agree as follows:

 

1.          Subordinated Debt. All of the indebtedness, liabilities and
obligations of the Borrowers or any of them to the Creditor, whether now
existing or hereafter arising, including, without limitation, the indebtedness,
liabilities and obligations of the Borrowers to the Creditor described in the
attached Schedule "A", and all instruments and documents executed and delivered
in connection therewith (any promissory note evidencing such indebtedness,
liabilities and obligations of Creditor is hereinafter referred to as, a
"Subordinated Note"), whether for principal, interest, fees, costs or expenses,
and whether or not currently contemplated (regardless of the extent to which
such documents are enforceable against the Borrowers or any of them and
regardless of the extent to which such amounts are allowed as claims against the
Borrowers or any of them, in each case, in any bankruptcy or other similar
proceeding relative to any Borrower, and including any interest accruing thereon
after the date of filing any petition by or against any Borrower in connection
with any bankruptcy or other similar proceeding and any other interest that
would have accrued thereon but for the commencement of such proceeding) are
hereinafter referred to collectively as "Subordinated Debt".

 

2.          Bank Debt. All indebtedness, liabilities and obligations of the
Borrowers to the Bank, whether now existing or hereafter arising, including,
without limitation, the indebtedness, liabilities and obligations of the
Borrowers to the Bank under the Credit Agreement, dated as of the date hereof,
among the Bank and the Borrowers (such agreement, as it may from time to time be
amended, modified and/or supplemented, is hereinafter referred to as the "Credit
Agreement"), the Note and the Security Documents (as such terms are defined in
the Credit Agreement and hereinafter referred to as the "Bank Security
Documents") and all other instruments and documents executed and delivered in
connection therewith, whether for principal, interest, fees, costs or expenses
and whether or not currently contemplated (regardless of the extent to which
such documents are enforceable against the Borrowers or any of them and
regardless of the extent to which such amounts are allowed as claims against the
Borrowers or any of them in any bankruptcy or other proceeding relative to any
Borrower, and including any interest accruing thereon after the date of filing
any petition by or against any Borrower in connection with any bankruptcy or
other proceeding and any other interest that would have accrued thereon but for
the commencement of such proceeding) are hereinafter referred to collectively as
"Bank Debt".

 

 

 

             

 3.         Consent; No Default. The Creditor hereby consents to and approves of
the execution, delivery and performance by the Borrowers of the Credit Agreement
and the Bank Security Documents, and all other instruments and documents
executed and delivered in connection therewith (the "Bank Loan Documents") and
the consummation of the transactions contemplated thereby notwithstanding
anything to the contrary contained in any of the agreements, instruments and
documents executed in connection with the Subordinated Debt. The Borrowers and
the Creditor represent and warrant to the Bank that as of the Effective Date,
there does not exist any default under the Subordinated Debt.

 

4.          Agreement to Subordinate. The Creditor and the Borrowers agree that
the payment of any and all Subordinated Debt is hereby expressly subordinated to
the prior payment of all Bank Debt to the extent and in the manner set forth
herein.

 

5.          Payment of Subordinated Debt Prohibited. Subject to subparagraph (c)
below, until all Bank Debt shall have been paid in full, no Borrower shall make
and the Creditor shall not receive, accept or retain any direct or indirect
payment or reduction (whether by way of loan, set-off or otherwise) in respect
of:

 

(a)         the principal of the Subordinated Debt, whether such principal of
the Subordinated Debt shall have become payable on the maturity of the
installment or installments thereof provided for in the Subordinated Notes, by
acceleration or otherwise; or (ii) the interest on the Subordinated Debt accrued
through the date hereof; and

 

(b)         Except as provided in clause (ii) of Section 5(a) of this Agreement,
the interest on the Subordinated Debt, whether such interest on the Subordinated
Debt shall have become payable on the date such payment of interest would (but
for the terms hereof) be payable to and received by the Creditor pursuant to the
Subordinated Note (hereinafter referred to as a "Subordinated Debt Payment
Date"), by acceleration or otherwise if, on any such Subordinated Debt Payment
Date:

 

(i)          an Event of Default, as defined or specified in the Credit
Agreement (hereinafter referred to as an "Event of Default"), shall have
occurred, shall be continuing and shall not have been specifically waived in
writing by the Bank; or

 

(ii)         whether or not an Event of Default shall be continuing on any
Subordinated Debt Payment Date, the Bank, pursuant to the Credit Agreement or
the Note, shall have declared the Bank Debt or any portion thereof due and
payable in full in accordance with the terms of the Credit Agreement and on the
basis of any Event of Default and such acceleration shall not have been
specifically rescinded in writing by the Bank.

 

Scheduled payments of the interest on the Subordinated Debt that are not
prohibited under this Agreement from being made may be made (it being understood
and agreed that payment of all interest on the Subordinated Debt accrued through
the date hereof shall be prohibited from being made), but only upon, subject and
pursuant to the terms and provisions, including the dates, amounts and rate of
principal and interest payments, as are set forth in the Subordinated Note as in
effect on the date of this Agreement; provided, however, that until the Bank
Debt shall have been paid in full, no Borrower shall make, and the Creditor
shall not receive, accept or retain, any prepayment on account of principal or
interest on any of the Subordinated Debt without the prior written consent of
the Bank.

 

(c)         In the event of (x) any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, readjustment of debt, arrangement,
composition, assignment for the benefit of creditors, or other similar
proceeding relative to any Borrower or its creditors, as such, or its property,
or (y) any proceeding for voluntary liquidation, dissolution or other winding up
or bankruptcy proceedings, then and in any such event:

 

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(i)         All of the Bank Debt shall first be paid in full before any payment
or distribution of any character, whether in cash, securities, obligations or
other property, shall be made in respect of the Subordinated Debt;

 

(ii)         Any payment or distribution of any character, whether in cash,
securities, obligations or other property, that would otherwise (but for the
terms hereof) be payable or deliverable in respect of the Subordinated Debt,
shall be paid or delivered directly to the Bank until all of the Bank Debt shall
have been paid in full, and the Creditor, irrevocably authorizes, empowers and
directs all receivers, custodians, trustees, liquidators, conservators and
others having authority in the premises to effect all such payments and
deliveries; and

 

(iii)         The Creditor will, upon the written request of the Bank, prove,
enforce and endeavor to obtain payment of the aggregate outstanding amount of
all unpaid Subordinated Debt payments due and payable, or thereafter becoming
due and payable from the Borrowers to the Creditor, and will turn over to the
Bank in precisely the form received, any payment of any kind or character on
account of such Subordinated Debt for application to the payment of any
indebtedness, liabilities or obligations of the Borrowers to the Bank then
existing.

 

(d)         Except to the extent provided in this Agreement that the
Subordinated Debt may not become due and payable or be paid, nothing contained
herein shall impair, as among the Borrowers and the Creditor, the obligation of
the Borrowers, which is absolute and unconditional, to pay to the Creditor the
principal of the Subordinated Notes, and interest thereon, as and when the same
shall become due and payable in accordance with the terms thereof, or prevent
the Creditor upon default with respect to the Subordinated Debt, from exercising
all rights, powers and remedies otherwise provided therein or by applicable law,
all subject to the rights of the holders of Bank Debt hereunder.

 

6.          Post-Petition Interest. Notwithstanding any statute, including,
without limitation, the Federal Bankruptcy Code, any rule of law or bankruptcy
procedures to the contrary, the right of the Bank hereunder to have all of the
Bank Debt paid and satisfied in full prior to the payment of any of the
Subordinated Debt shall include, without limitation, the right of the Bank to be
paid in full all interest accruing on the Bank Debt due to it after the filing
of any petition by or against any Borrower in connection with any bankruptcy or
similar proceeding, whether or not a claim by the Bank for such post- petition
interest is enforceable in such proceeding, prior to the payment of any amounts
in respect of the Subordinated Debt, including, without limitation, any interest
due to the Creditor accruing after such date.

 

7.          Reserved.

 

8.          Assignment of Subordinated Debt and Collateral. To secure payment
and performance of Bank Debt by the Borrowers, the Creditor hereby grants the
Bank a security interest in and assigns to the Bank all Subordinated Debt and
all collateral of any kind and guarantees therefor including all instruments
evidencing Subordinated Debt. The Bank may file financing statements upon such
collateral (if any) concerning the security interest hereby created.

 

9.          Bank Appointed Attorney-in-Fact. The Bank is hereby irrevocably
appointed attorney- in-fact for the Creditor with full power to act in stead of
the Creditor to sign financing statements reflecting the assignment of
Subordinated Debt and collateral and guarantees therefor and to act in all
matters concerning the Subordinated Debt including the right to make, present,
file and vote proofs of claim against any Borrower on account of all or part of
the Subordinated Debt and receive and collect any dividends thereon, foreclose
under any mortgage or security agreements or otherwise take possession of and
sell collateral and collect against any guarantees and apply proceeds of such
dividends, sale or collection to reduction of Subordinated Debt and to
compromise or settle any claim related thereto.

 

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10.        Subordinated Legend. So long as this Agreement is in effect, the
parties hereto will cause any note and any other instrument which may evidence
Subordinated Debt from time to time to be endorsed with the following legend:

 

"The indebtedness evidenced by this instrument is subordinated to the prior
payment of the Bank Debt, as defined in, pursuant to, and to the extent provided
in, the Subordination Agreement dated October 31, 2011, in favor of Herald
National Bank"

 

The parties hereto each will further mark the appropriate books of account to
reflect the effect of this Agreement. The Creditor agrees to deliver to the
Bank, upon written request, all instruments evidencing Subordinated Debt or
collateral or guarantees therefor endorsed in blank.

 

11.        Subordinated Instrument to the Bank. The Creditor shall deliver any
note and any other instrument which may evidence Subordinated Debt or collateral
or guarantees therefor to the Bank to hold in its possession under the
assignment granted herein. Such instruments shall be returned to the Creditor
when the subordination granted herein terminates.

 

12.        Restrictions on Creditor. Prior to the payment in full of the Bank
Debt and notwithstanding anything to the contrary contained in the Subordinated
Notes or any other agreement, instrument or document executed and delivered in
connection with the Subordinated Debt (hereinafter referred to collectively as
the "Subordinated Debt Documents"), the Creditor shall not, without the prior
written consent of the Bank, accelerate the maturity of all or any portion of
the Subordinated Debt, or take any action towards collection of all or any
portion of the Subordinated Debt or enforcement of any rights, powers or
remedies under the Subordinated Debt Documents or other agreements entered into
pursuant thereto, or applicable law, upon the occurrence of any event of default
under and as defined in any of the Subordinated Debt Documents or any event
which, with the passage of time, or giving of notice, or both, would constitute
such a default (including, without limitation, the occurrence of an Event of
Default under any of the Bank Loan Documents).

 

13.        Limitation on Modification of Subordinated Debt. The Borrowers and
the Creditor shall not, without the prior written consent of the Bank, modify,
extend, supplement or increase Subordinated Debt.

 

14.        No Limitation on Modification of Bank Debt. The Bank may, without
notice to the Creditor, extend, renew, modify or increase Bank Debt and may
substitute, exchange or release collateral or letters of credit securing payment
of Bank Debt and may add or release any guarantor or surety on Bank Debt.

 

15.        Further Assurance. The Creditor and the Borrowers shall execute and
deliver to the Bank such further instruments and shall take such further action
as the Bank may from time to time reasonably request in order to carry out the
provisions and intent of this Agreement and to confirm that Bank Debt is
entitled to the benefits of this Agreement and shall not act or permit any
action prejudicial to or inconsistent with the priority position of the Bank
Debt over Subordinated Debt created by this Agreement.

 

16.        Rights of Subrogation. The Creditor agrees that no payment or
distribution to Bank pursuant to the provisions of this Agreement shall entitle
the Creditor to exercise any rights of subrogation in respect thereof until Bank
Debt is finally and unavoidably paid in full.

 

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17.        Representations, Warranties and Covenants. The Creditor represents,
warrants and covenants that now and until all Bank Debt is fully paid, the
Subordinated Debt shall not be subject to any set off, security interests,
liens, charges, subordinations other than this Agreement, assignments or
encumbrances; is payable solely to the Creditor; is not and shall not be subject
to any guaranty or surety; and is not in default. The Creditor covenants and
agrees that (i) it is the sole owner of the Subordinated Debt as of the
Effective Date and (ii)the Creditor shall not sell, assign or otherwise transfer
Subordinated Debt unless the transferee of such Subordinated Debt shall agree in
writing to be bound by the terms of this Agreement. Each Borrower represents and
warrants that the Subordinated Debt is due and payable according to its terms.

 

18.        Termination of Subordination. This Agreement and the subordination
granted herein shall terminate when Bank Debt is finally and unavoidably paid.
Bank Debt shall be deemed not to be paid in full, for purposes of this
Agreement, so long as the Bank has any obligation with respect to the Bank Debt,
to make further advances to the Borrowers. However, this Agreement and the
subordination granted herein shall continue to be effective or be reinstated if
any payment of Bank Debt is rescinded, avoided, or for any reason returned by
Bank because of any adverse claim or threatened action as though such payment
had not been made.

 

19.        Remedies. If, notwithstanding the provisions of this Agreement, any
payment or distribution of any character (whether in cash, securities, or other
property) or any security shall be received by the Creditor in contravention of
the terms of this Agreement and before all Bank Debt shall have been paid in
full, such payment, distribution or security (i) shall not be commingled with
any asset of the Creditor, shall be held in trust for the benefit of, and (ii)
shall be paid over or delivered or transferred to, the Bank, or its
representative, for application to the payment of all Bank Debt remaining
unpaid, until all of the Bank Debt shall have been paid in full. Upon violation
of this Agreement by the Creditor or any Borrower, the Bank may accelerate the
maturity of Bank Debt and Subordinated Debt so that all Bank Debt and
Subordinated Debt is immediately due and payable. The Creditor shall pay to Bank
all sums received by the Creditor paid in violation of this Agreement, up to the
amount of the Bank Debt and Bank shall have all remedies of the Creditor against
collateral for Subordinated Debt. The Bank is entitled to specific performance
of this Agreement and each Borrower and the Creditor waive any defense based
upon adequacy of remedy at law which may be asserted as a bar to the remedy of
specific performance. No failure on the part of the Bank to exercise or delay in
exercising any right or remedy hereunder shall operate as a waiver thereof nor
shall any partial exercise of any rights or remedies hereunder preclude any
other or further exercise of such or additional rights or remedies. The remedies
provided herein are cumulative of any other remedies provided by law or
otherwise held against any Borrower.

 

19.        Miscellaneous.

 

(a)        Waiver of Notice: The Creditor waives notice of the acceptance of
this Agreement by Bank.

 

(b)        Severability: If any provision of this Agreement is found to be
invalid or unenforceable, the remainder of such provision and all other
provisions of this Agreement shall be valid and enforceable as if such
unenforceable provision were not written.

 

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  (c)       Notices: Any notices, demands or requests shall be sufficiently
given the Creditor whose address is listed on the first page hereof or the Bank
if in writing and mailed or delivered to the Bank whose address is listed on the
first page hereof or to another address as provided herein and in the event
either party hereto changes its address at prior to the date all Bank Debt paid
in full, that party shall promptly give written notice to the other party of
such change of address by registered or certified mail, return receipt
requested, all charges prepaid.

 

(d)        Continuing Agreement: This Agreement shall be binding upon the
parties and their respective successors and assigns.

 

(e)        Assignment: The Bank may assign or transfer its rights with respect
to any Bank Debt to any person or entity, and such transferee shall thereupon
become vested with all the rights in respect thereof granted to Bank herein. In
the event of any proposed sale, assignment, disposition or other transfer of the
Subordinated Debt, the Creditor shall, prior to the consummation of any such
transfer, cause the transferee thereof to execute and deliver to the Bank an
agreement (substantially identical to this Agreement or otherwise in form and
substance satisfactory to the Bank) providing for the continued subordination of
the Subordinated Debt to the Bank Debt as provided herein and for the continued
effectiveness of all of the rights of the Bank arising under this Agreement.

 

(f)        Modification: This Agreement is irrevocable and no waiver or
modification of any provision of this Agreement shall be valid unless in writing
and signed by all parties hereto.

 

(g)        Governing Law: THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES
PERTAINING TO CONFLICTS OF LAWS.

 

(h)        Jurisdiction: THE CREDITOR IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF, OR IN ANY MANNER RELATING TO
THIS AGREEMENT MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE
CREDITOR, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND
IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH
COURTS IN ANY SUCH ACTION OR PROCEEDING. THE CREDITOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS
RELATING TO ANY SUCH ACTION OR PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR
BY MAIL IN THE MANNER PROVIDED FOR IN SUBPARAGRAPH (c) ABOVE. THE CREDITOR
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION
OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. THE CREDITOR SHALL NOT BE ENTITLED
IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER
THE LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS
GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW YORK. NOTHING IN THIS
SUBPARAGRAPH (h) SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT
OF THE BANK TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
CREDITOR IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

 

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(i)        LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE
PARTIES HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL
PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT
OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED
HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE
LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2)
PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY
RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE
IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY,
WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE.

 

(j)        FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. In the event of any
conflict between any term, covenant or condition of this Agreement and any term,
covenant or condition of the Subordinated Debt Documents, the provisions of this
Agreement shall control and govern.

 

[Signature Page to Follow]

 

__

 

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IN WITNESS WHEREOF, Bank, the Creditor and the Borrowers have signed and sealed
this Agreement as of the day and year first above written.

  

  Bank:   HERALD NATIONAL BANK         By: /s/ Michael Laurie   Name: Michael
Laurie   Title: Senior Vice President and   Managing Director         Borrowers:
  THE ONE GROUP, LLC         By:  /s/ Jonathan Segal   Name: Jonathan Segal  
Title: Chief Executive Officer         ONE 29 PARK MANAGEMENT, LLC         By:
/s/ Jonathan Segal   Name: Jonathan Segal   Title: Chief Executive Officer      
  STK-LAS VEGAS, LLC         By: /s/ Jonathan Segal   Name: Jonathan Segal  
Title: Chief Executive Officer         STK ATLANTA, LLC         By: /s/ Jonathan
Segal   Name: Jonathan Segal   Title: Chief Executive Officer

 

  CREDITOR:         RCI II, LTD         By: /s/ Jonathan Segal   Name: Jonathan
Segal   Title: Managing Person

 

[Signature Page to The One Group Subordination Agreement]

 

 

 

 

  Agreed to and Accepted:   GUARANTOR:       /s/ Jonathan Segal   Jonathan Segal

   

[Signature Page to Subordination Agreement]

 

 

 

 

SCHEDULE A

SUBORDINATED DEBT

 

1.Demand Note made by The One Group, LLC to RCI II, LTD, dated August 24, 2007,
in the original principal amount of $868,000.00

 

oOutstanding principal as of September 30, 2011 - $450,000.00

oAccrued interest as of September 30, 2011 - $216,632.55

 

2.Demand Note made by The One Group, LLC to RCI II, LTD, dated October 17, 2007,
in the original principal amount of $500,000.00

 

oOutstanding principal as of September 30, 2011 - $500,000.00

oAccrued interest as of September 30, 2011 - $114,904.11

 

3.Demand Note made by The One Group, LLC to RCI II, LTD, dated December 31,
2008, in the original principal amount of $770,971.25

 

oOutstanding principal as of September 30, 2011 - $270,971.00

oAccrued interest as of September 30, 2011 - $60,827.53

 

4.Demand Note made by The One Group, LLC to RCI II, LTD, dated June 24, 2007, in
the original principal amount of $1,600,000.00

 

oOutstanding principal as of September 30, 2011 - $1,150,000.00

oAccrued interest as of September 30, 2011 - $435,528.77