EXHIBIT 10.25
SUBORDINATION AGREEMENT
1. Xxxxxxxxxxx X. Xxxxx (the "Creditor") a creditor of Stronghold Technologies,
Inc., a New Jersey Corporation (the "Borrower") , knowing that UNITEDTRUST BANK
(the "Bank") relying on this agreement will extend credit to the Borrower,
agrees to and hereby does subordinate the payment of the Junior Claims (as
defined herein) to the payment of all obligations of the Borrower to the Bank
now outstanding or arising hereafter (together called the "Obligations").
"Junior Claims" shall mean the claims which the Creditor has against the
Borrower as of the date hereof, including but not limited to those listed in
Schedule A, and all claims arising hereafter. The Obligations and the Junior
Claims shall be deemed to include all interest thereon and all charges,
including attorney's fees, arising therefrom.
2. The Creditor agrees:
(a) not to demand or accept any payment of or collateral or other security with
respect to any of the Junior Claims;
(b) that any payment of or collateral or other security with respect to the
Junior Claims coming into its possession shall be held by it as trustee for the
Bank and immediately turned over to the Bank; and
(c) not to sell, assign, pledge or otherwise dispose of any of the evidence of
the Junior Claims, and, if requested to do so by the Bank, to deliver and assign
any such evidence of any of the Junior Claims to the Bank.
3. The Creditor hereby grants a security interest in, and transfers and assigns
the Junior Claims (together with any collateral or other security at any time
held or received therefor) to the Bank as collateral security for the
Obligations. The Creditor authorizes and empowers the Bank, in its own name or
the Creditor's name, to demand, xxx for and collect the Junior Claims, and take
any and all actions available to the Creditor whether in any insolvency,
bankruptcy, receivership, liquidation, reorganization or similar proceeding
affecting the Borrower, or otherwise, provided, however, that if the Bank,
acting hereunder, recovers any amount greater than the then sum of the
Obligations, it will apply said excess to the payment of the Junior Claims.
The Borrower and the Creditor hereby authorize the Bank to sign and file a
financing statement with respect to the Junior Claims without the signature of
either the Borrower or the Creditor, or sign their names thereto, provided,
however, the Borrower and the Creditor will, upon the written request of the
Bank, sign such a financing statement and execute such other documents and take
such other actions as may be required by them by
the Bank to carry out this Subordination Agreement.
4. Except as provided for herein, the Borrower agrees not to make any payment of
or give any collateral or other security with respect to any of the Junior
Claims until this agreement is no longer in effect.
5. Anything herein to the contrary notwithstanding, the Bank agrees and
acknowledges that provided no event of default has occurred under the terms of
the documentation evidencing the Obligations, the Borrower may make the
following payments to the Creditor:
(a) Payments of interest only accruing on the May 16, 2002 Note (or any
successor notes thereto) referenced on Schedule A; and
(b) Principal and interest due under any Bridge Loans referenced on Schedule A
provided that the Borrower pays same solely from funds raised through the sale
of the stock of its parent corporation and no debt is incurred by the Borrower
or its parent corporation in connection with such funds.
6. The Creditor hereby consents to and waives all notice of any renewal,
extension or modification of the terms of any of the Obligations and agrees that
any such renewal, extension or modification will not impair the subordination
granted hereby.
7. The Creditor and the Borrower agree that the failure by the Bank to exercise
any of its rights hereunder shall not be deemed to constitute a waiver of any of
its rights under this agreement. This agreement shall bind the Creditor and the
Borrower and the legal representatives, successors and assigns of the Creditor
and the Borrower.
8. In the event of a breach by either the Creditor or the Borrower of any term
of this agreement, all of the Obligations shall, without notice or demand,
become immediately due and payable.
9. This agreement shall be effective so long as there are any Obligations or
there is an agreement, in writing, pursuant to which the Bank is required to
extend credit to the Borrower.
10. This agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey. This agreement may be executed in counterparts.
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11. This Agreement is dated and is effective as of September 30,
2002.
THE CREDITOR:
/s/ Xxxxxxxxxxx X. Xxxxx
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Xxxxxxxxxxx X. Xxxxx, President
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THE BORROWER:
Stronghold Technologies, Inc., a
New Jersey corporation
By: /s/ Xxxxxxxxxxx X. Xxxxx
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Xxxxxxxxxxx X. Xxxxx, President
THE BANK:
UNITEDTRUST BANK
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx X Xxxxxxxx, Vice President
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SCHEDULE A
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All claims of the Creditor against the Borrower as of the date hereof and
subsequently arising including, but not limited to, the following:
Nature of Claim Date Amount
--------------- ---- ------
Promissory Note May 16, 2002 $1,200,000.00
Bridge Loan(s) Various Not to exceed
anticipated to $750,000.00 in
to be repaid from aggregate
proceeds of a stock
offering
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