SUBORDINATION AGREEMENT
Exhibit
10.12
This
Subordination Agreement (this "Subordination Agreement") is entered into as
of
the 30th day of March, 2007, by and among Xxxx Xxxxxxxxxxx and Xxxx XxxxxxXxxxxx
(Xxxx Xxxxxxxxxxx and Xxxx XxxxxxXxxxxx are collectively referred to herein
as
the “Subordinated Lenders” and each, a "Subordinated Lender"), and Biometrics
Investors, L.L.C., a Delaware limited liability company (the "Senior Lender").
Unless otherwise defined herein, capitalized terms used herein shall have the
meaning provided such terms in the Agreement referred to below.
BACKGROUND
WHEREAS the
Senior Lender is
the
holder of a note which was made by Sequiam Corporation (the "Company") and
which
has an outstanding balance as of the date of this Pledge Agreement, including
principal and accrued interest, of $ 3,965,119 (the "Prior Note"). Subject
to
the terms and conditions of that certain Agreement dated as of the date hereof
among the Senior Lender, as lender, and the Company, as borrower (the
"Agreement"), the Senior Lender has agreed to extend a term loan to the Company
in the amount of $2,500,000 ("Term Loan A") which loan would be consolidated
with the indebtedness evidenced by the Prior Note and evidenced by a new note
in
the face amount of $6,500,000 ("Term Note A").
WHEREAS,
subject to the terms and conditions of the Agreement, the Senior Lender has
agreed to extend a separate term loan to the Company in the amount of $5,000,000
("Term Loan B" and collectively with Term Loan A, the “Loans”) evidenced by a
note in such amount ("Term Note B").
WHEREAS,
each of the subsidiaries of the Company (the "Subsidiaries"), pursuant to the
terms of that certain Subsidiary Guaranty dated as of the date hereof in favor
of the Senior Lender, have unconditionally guaranteed the prompt payment in
full
of the Loans and all other liabilities due and owing from the Company to the
Senior Lender.
WHEREAS,
in connection with the Prior Note, the Subordinated Lender had executed that
certain Subordination Agreement in favor of Xxx Xxxxxxxx Xxxxxx, Attorney
in-Fact for the Trust Under the Will of Xxxx Xxxxxxxxxxx (the "Trust”) dated as
of May 18, 2005 (the “Prior Subordination Agreement”)
WHEREAS,
the Trust has assigned all of its rights under the Prior Subordination Agreement
to the Lender such that the Lender now stands in place of the Trust thereunder.
WHEREAS,
the Subordinated Lenders are senior officers of the Company and (x) the Company
has incurred a loan from Xxxx Xxxxxxxxxxx, which loan has an aggregate principal
amount outstanding of $50,000.00 as of the date hereof, plus accrued and unpaid
interest of $8,750.00 as of the date hereof and (y) the Company has incurred
a
loan from Xxxx XxxxxxXxxxxx, which loan has an aggregate principal amount of
$361,000.00 as of the date hereof, plus accrued and unpaid interest of
$35,577.00 as of the date hereof (such amounts set forth in this clause,
together with the principal, interest and other fees attributable to any other
indebtedness owed by the Company to either Xxxx Xxxxxxxxxxx or Xxxx
XxxxxxXxxxxx, whether incurred prior to, on or after the date hereof, shall
be
referred to as the “Outstanding Indebtedness”).
NOW,
THEREFORE, each Subordinated Lender and the Senior Lender agree as
follows:
TERMS
1. All
obligations of the Company and the Subsidiaries to the Senior Lender, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereafter existing, or due or to become due are referred
to
as "Senior Liabilities". The Accrued Salary Amount and the Outstanding
Indebtedness, together with all obligations of the Company or any of its
Subsidiaries to any Subordinated Lender to pay the Accrued Salary Amount or
any
Outstanding Indebtedness (in each case, including any interest, fees or
penalties related thereto), howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent or now or hereafter existing, or
due
or to become due are referred to as "Junior Liabilities". It is expressly
understood and agreed that the term "Senior Liabilities", as used in This
Subordination Agreement, shall include, without limitation, any and all
interest, fees and penalties accruing on any of the Senior Liabilities after
the
commencement of any proceedings referred to in paragraph 4 of This Subordination
Agreement, notwithstanding any provision or rule of law which might restrict
the
rights of the Senior Lender, as against any Subordinated Lender or anyone else,
to collect such interest, fees or penalties, as the case may be.
2. Except
as
expressly otherwise provided in This Subordination Agreement or as the Senior
Lender may otherwise expressly consent in writing, the payment of the Junior
Liabilities shall be postponed and subordinated to the payment in full of all
Senior Liabilities. Furthermore, no payments or other distributions whatsoever
in respect of any Junior Liabilities shall be made, nor shall any property
or
assets of any Subordinated Lender be applied to the purchase or other
acquisition or retirement of any Junior Liability.
3. Each
Subordinated Lender hereby subordinates all security interests that have been,
or may be, created by any Subordinated Lender in respect of the Junior
Liabilities, to the security interests granted by each Subordinated Lender
to
the Senior Lender in respect of the Senior Liabilities.
4. In
the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to the Company or its Subsidiaries or
to
their creditors, as such, or to their property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon an assignment for the benefit of creditors, or any other
marshalling of the assets and liabilities of any Subordinated Lender, or any
sale of all or substantially all of the assets of any Subordinated Lender,
or
otherwise), the Senior Liabilities shall first be paid in full before any
Subordinate Lender shall be entitled to receive and to retain any payment or
distribution in respect of any Junior Liability.
5. Each
Subordinated Lender will xxxx his books and records so as to clearly indicate
that their respective Junior Liabilities are subordinated in accordance with
the
terms of this Subordination Agreement. Each Subordinated Lender will execute
such further documents or instruments and take such further action as the Senior
Lender may reasonably request from time to time request to carry out the intent
of this Subordination Agreement.
6. Each
Subordinated Lender hereby waives all diligence in collection or protection
of
or realization upon the Senior Liabilities or any security for the Senior
Liabilities.
7. No
Subordinated Lender will without the prior written consent of the Senior Lender:
(a) attempt to enforce or collect any Junior Liability or any rights in respect
of any Junior Liability; or (b) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to the Company or any Subsidiary.
8. The
Senior Lender may, from time to time, at its sole discretion and without notice
to any Subordinated Lender, take any or all of the following actions: (a) retain
or obtain a security interest in any property to secure any of the Senior
Liabilities; (b) retain or obtain the primary or secondary obligation of any
other obligor or obligors with respect to any of the Senior Liabilities; (c)
extend or renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Liabilities, or release or
compromise any obligation of any nature of any obligor with respect to any
of
the Senior Liabilities; and (d) release their security interest in, or
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Senior Liabilities, or extend or renew
for
one or more periods (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any obligor
with
respect to any such property.
9. The
Senior Lender may, from time to time, whether before or after any discontinuance
of this Subordination Agreement, without notice to any Subordinated Lender,
assign or transfer any or all of the Senior Liabilities or any interest in
the
Senior Liabilities; and, notwithstanding any such assignment or transfer or
any
subsequent assignment or transfer of the Senior Liabilities, such Senior
Liabilities shall be and remain Senior Liabilities for the purposes of this
Subordination Agreement, and every immediate and successive assignee or
transferee of any of the Senior Liabilities or of any interest in the Senior
Liabilities shall, to the extent of the interest of such assignee or transferee
in the Senior Liabilities, be entitled to the benefits of this Subordination
Agreement to the same extent as if such assignee or transferee were the Senior
Lender, as applicable; provided, however, that, unless the Senior Lender shall
otherwise consent in writing, the Senior Lender shall have an unimpaired right,
prior and superior to that of any such assignee or transferee, to enforce This
Subordination Agreement, for the benefit of the Senior Lender, as to those
of
the Senior Liabilities which the Senior Lender has not assigned or
transferred.
10. The
Senior Lender shall not be prejudiced in its rights under this Subordination
Agreement by any act or failure to act of any Subordinated Lender, or any
noncompliance of any Subordinated Lender with any agreement or obligation,
regardless of any knowledge thereof which the Senior Lender may have or with
which the Senior Lender may be charged; and no action of the Senior Lender
permitted under this Subordination Agreement shall in any way affect or impair
the rights of the Senior Lender and the obligations of any Subordinated Lender
under this Subordination Agreement.
11. No
delay
on the part of the Senior Lender in the exercise of any right or remedy shall
operate as a waiver of such right or remedy, and no single or partial exercise
by the Senior Lender of any right or remedy shall preclude other or further
exercise of such right or remedy or the exercise of any other right or remedy;
nor shall any modification or waiver of any of the provisions of this
Subordination Agreement be binding upon the Senior Lender except as expressly
set forth in a writing duly signed and delivered on behalf of the Senior Lender.
For the purposes of this Subordination Agreement, Senior Liabilities shall
have
the meaning set forth in Section 1 above, notwithstanding any right or power
of
any Subordinated Lender or anyone else to assert any claim or defense as to
the
invalidity or unenforceability of any such obligation, and no such claim or
defense shall affect or impair the agreements and obligations of any
Subordinated Lender under this Subordination Agreement.
12. The
Subordinated Lender represents and warrants that the the Prior Subordination
Agreement is in full force and effect and, as of the date hereof, the
enforcement of the Prior Subordination Agreement against the Subordinated Lender
is subject to no defenses of any kind.
13. This
Subordination Agreement shall be binding upon each Subordinated Lender and
upon
the heirs, legal representatives, successors and assigns of each Subordinated
Lender and the successors and assigns of any Subordinated Lender.
14. This
Subordination Agreement shall be construed in accordance with and governed
by
the laws of Illinois without regard to conflict of laws provisions. Wherever
possible each provision of this Subordination Agreement shall be interpreted
in
such manner as to be effective and valid under applicable law, but if any
provision of this Subordination Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Subordination Agreement.
15. This
Subordination Agreement may be executed in any number of counterparts, each
of
which when so executed shall be deemed to be an original and, all of which
taken
together shall constitute one and the same Subordination Agreement. In the
event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
[signature
page follows]
IN
WITNESS WHEREOF, this Subordination Agreement has been made and delivered this
30th day of March, 2007.
By:_______________________________
Name: Xxxx
Xxxxxxxxxxx
Title: CFO
By:________________________________
Name: Xxxx
XxxxxxXxxxxx
Title: CEO
BIOMETRICS
INVESTORS L.L.C.
By:
Name: Xxxxx
Xxxxx
Title: Manager
Acknowledged
and Agreed to by:
SEQUIAM
CORPORATION
By:
Name:
Xxxxxxxx XxxxxxXxxxxx
Title: CEO
