SUBORDINATION AGREEMENT
EXHIBIT
10.9
This
Subordination Agreement (this “Agreement”) is entered into as of the 18th day of
May, 2005, 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 Xxx Xxxxxxxx Xxxxxx,
Attorney-in-Fact for the Trust Under the Will of Xxxx Xxxxxxxxxxx (the “Senior
Lender”). Unless otherwise defined herein, capitalized terms used herein shall
have the meaning provided such terms in the Securities Purchase Agreement
referred to below.
BACKGROUND
WHEREAS,
the Senior Lender has to make a loan to Sequiam Corporation, a California
corporation (the “Company”) pursuant to, and in accordance with (i) that certain
Securities Purchase Agreement, dated as of May 18, 2005 (as amended, modified or
supplemented from time to time, the “Securities Purchase Agreement”), by and
between the Company and the Senior Lender and (ii) the Related Agreements
referred to in the Securities Purchase Agreement.
WHEREAS,
the Subordinated Lenders are senior officers of the Company and (I) the Company
currently owes (x) Xxxx Xxxxxxxxxxx an aggregate amount of $708,021 in respect
of accrued and unpaid salaries earned by him and (y) Xxxx XxxxxxXxxxxx an
aggregate amount of $761,771 in respect of accrued and unpaid salaries owed by
him (the
amounts set forth in the preceding clauses (x) and (y) of this clause (I),
together with any accrued and unpaid interest owed thereon, the “Accrued Salary
Amount”) and (II) (x) the Company has incurred a loan from Xxxx Xxxxxxxxxxx,
which loan has an aggregate principal amount outstanding of $100,000 as of the
date hereof, plus accrued and unpaid interest of $4,000 as of the date hereof
and (y) the Company has incurred a loan from Xxxx XxxxxxXxxxxx, which loan has
an aggregate principal amount of $372,450 as of the date hereof, plus accrued
and unpaid interest of $25,462 as of the date hereof (such amounts set forth in
this clause (II), 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, (the “Outstanding Indebtedness”).
NOW,
THEREFORE, each Subordinated Lender and the Senior Lender agree as
follows:
TERMS
1. All
obligations of each Subordinated Lender 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 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 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 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 any Subordinated Lender or to its
creditors, as such, or to its 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 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
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 any Subordinated Lender.
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 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 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 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 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 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
Agreement shall in any way affect or impair the rights of the Senior Lender and
the obligations of any Subordinated Lender under this 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 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 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
Agreement.
12. This
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.
13. This
Agreement shall be construed in accordance with and governed by the laws of New
York without regard to conflict of laws provisions. Wherever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this 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
Agreement.
14. This
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 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 Agreement has been made and delivered this 18th day of
May, 2005.
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By: |
/s/ Xxxx Xxxxxxxxxxx | ||
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Name: |
Xxxx
Xxxxxxxxxxx | ||
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Title: |
CFO | ||
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By: |
/s/ Xxxx XxxxxxXxxxxx | |
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Name: |
Xxxx
XxxxxxXxxxxx | ||
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Title: |
CEO | ||
| Xxx Xxxxxxxx Xxxxxx, Attorney-in-Fact for the Trust Under the Will of Xxxx Xxxxxxxxxxx | |||
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By: |
/s/ Xxx Xxxxxxxx Xxxxxx | ||
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Name: |
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Title: |
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| Acknowledged and Agreed to by: | |||
| SEQUIAM CORPORATION | |||
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By: |
/s/ Xxxxxxxx XxxxxxXxxxxx |
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Name: |
Xxxxxxxx
XxxxxxXxxxxx |
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|
Title: |
CEO |
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