Exhibit 10.13
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is entered into as of the
27th day of April, 2004, 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 Laurus Master
Fund, Ltd. (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 April 27, 2004 (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
$627,813 in respect of accrued and unpaid salaries earned by him and (y) Xxxx
XxxxxxXxxxxx an aggregate amount of $676,979 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
$50,000 as of the date hereof, plus accrued and unpaid interest of $5,250 as of
the date hereof and (y) the Company has incurred a loan from Xxxx XxxxxxXxxxxx,
which loan has an aggregate principal amount of $570,450 as of the date hereof,
plus accrued and unpaid interest of $15,316 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
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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; provided that,
notwithstanding the foregoing, so long as no Event of Default (as defined in the
Securities Purchase Agreement or any Related Agreement) shall have occurred and
is continuing, the Company may pay to Xxxx XxxxxxXxxxxx an aggregate amount of
up to $300,000 in respect of the Outstanding Indebtedness owed to him.
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.
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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.
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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.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been made and delivered this 27th
day of April, 2004.
By:______________________
Name: Xxxx Xxxxxxxxxxx
Title:
By:____________________________
Name: Xxxx XxxxxxXxxxxx
Title:
LAURUS MASTER FUND, LTD.
By:________________________
Name:
Title:
Acknowledged and Agreed to by:
SEQUIAM CORPORATION
By:________________________
Name:
Title:
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