EXHIBIT 4.11
SUBORDINATION AGREEMENT
This Subordination Agreement (the "Agreement") is entered into as
of the 15th day of January, 2004, by and among Digital Fusion, Inc., a
Delaware corporation (the "Company"), Xxx X. Xxxxxxx, III (the
"Subordinate Lender") and Laurus Master Fund (the "Senior Lender").
BACKGROUND
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The Company is currently indebted to PowerCerv Corporation
("PowerCerv") in the amount of $136,580.32 pursuant to a promissory
note in the original amount of $827,500 as a result of the Borrower's
acquisition of digital fusion, inc., a Florida corporation, in March
2000. The Company is also currently indebted to the Senior Lender
pursuant to (a) a convertible note issued on July 26, 2002, as
restructured on April 29, 2003 for a principal amount of $533,333 and
(b) an additional convertible note issued on April 29, 2003 in the
amount of $266,667.
The Subordinate Lender has agreed to make a loan to the Company to
be applied by the Company in retirement of the PowerCerv note
described above. The parties intend for such loan to be subordinate to
the Company's indebtedness to the Senior Lender.
NOW, THEREFORE, the parties agree as follows:
TERMS
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1. All obligations of Company, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent or now
or hereafter existing, or due or to become due, other than obligations
to the Subordinate Lender as an employee of Company, are referred to
as "Liabilities". All Liabilities to the Senior Lender are referred to
as "Senior Liabilities" and the Note dated January 15, 2004 in the
amount of $136,580.32 (a copy of which is attached as Exhibit A to
this Agreement) to the Subordinate Lender is referred to as the
"Junior Liability". It is expressly understood and agreed that the
term "Senior Liabilities", as used in this Agreement, shall include,
without limitation, any and all interest 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 Company or anyone else, to collect such interest.
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 Liability shall be postponed and subordinated to
the payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever in respect of the Junior Liability
shall be made, nor shall any property or assets of the Company be
applied to the purchase or other acquisition or retirement of the
Junior Liability; provided, however, that, until such time as the
Senior Lender shall have notified the Subordinate Lender that the
Company shall have defaulted in the payment when due, whether by
acceleration or otherwise, of any amount payable in respect of the
Senior Liabilities (and after the default in payment is cured), there
are excepted from the terms of the foregoing provisions of this
paragraph 2 those payments to the Subordinate Lender by the Company in
respect of the Junior Liability.
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3. The Subordinate Lender hereby subordinates all security
interests created pursuant to the Security Agreement by and between
the Subordinate Lender and the Company dated as of January 15, 2004
(the "Security Agreement"), to the security interests of the Senior
Lender (to the extent perfected and enforceable) in all of the
property of the Company, now owned or hereafter acquired. Except as
provided in the previous sentence, priority of such security interests
shall be in accordance with the provisions of the Uniform Commercial
Code.
4. In the event of any dissolution, winding up, liquidation,
readjustment, reorganization or other similar proceedings relating to
the Company 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 the Company, or any sale of all or substantially all of
the assets of the Company, or otherwise), the Senior Liabilities shall
first be paid in full before the Subordinate Lender shall be entitled
to receive and to retain any payment or distribution in respect of the
Junior Liability.
5. The Subordinate Lender will xxxx his books and records so as to
clearly indicate that the Junior Liability is subordinated in
accordance with the terms of this Agreement. The Subordinate Lender
will execute such further documents or instruments and take such
further action as the Company or the Senior Lender may reasonably
request from time to time request to carry out the intent of this
Agreement.
6. The Subordinate Lender hereby waives all diligence in
collection or protection of or realization upon the Senior Liabilities
or any security for the Senior Liabilities.
7. The Subordinate Lender will not without the prior written
consent of the Senior Lender: (a) attempt to enforce or collect the
Junior Liability or any rights in respect of the Junior Liability; (b)
take any collateral security for the Junior Liability other than
pursuant to the Security Agreement; or (c) commence, or join with any
other creditor in commencing, any bankruptcy, reorganization or
insolvency proceedings with respect to the Company.
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8. This Agreement shall in all respects be a continuing agreement
and shall remain in full force and effect (notwithstanding, without
limitation, the death or incompetence of the Subordinate Lender or
that at any time or from time to time all Senior Liabilities may have
been paid in full), subject to discontinuance only upon receipt by the
Senior Lender of written notice from the Subordinate Lender, or any
person duly authorized and acting on behalf of the Subordinate Lender,
of the discontinuance of this Subordinate Agreement; provided,
however, that no such notice of discontinuance shall affect or impair
any of the agreements and obligations of the Subordinate Lender under
this Agreement with respect to any and all Senior Liabilities existing
prior to the time of receipt of such notice by the Senior Lender, any
and all Senior Liabilities created or acquired thereafter pursuant to
any previous commitments made by the Senior Lender, any and all
extensions or renewals of any of the foregoing, any and all interest
accruing on any of the foregoing, and any and all expenses paid or
incurred by the Senior Lender in endeavoring to collect or realize
upon any of the foregoing or any security for the Senior Liabilities;
and all of the agreements and obligations of the Subordinate Lender
under this Agreement shall, notwithstanding any such notice of
discontinuance, remain fully in effect until all such Senior
Liabilities (including any extensions or renewals of any thereof and
all such interest and expenses) shall have been indefeasibly paid in
full.
9. The Senior Lender may, from time to time, whether before or
after any discontinuance of this Agreement, at its sole discretion and
without notice to the Subordinate 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.
10. The Senior Lender may, from time to time, whether before or
after any discontinuance of this Agreement, without notice to the
Subordinate 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.
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11. The Senior Lender shall not be prejudiced in its rights under
this Agreement by any act or failure to act of the Company or the
Subordinate Lender, or any noncompliance of the Company or the
Subordinate 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 the Subordinate
Lender under this Agreement.
12. 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 include all
obligations of the Company to the Senior Lender, notwithstanding any
right or power of the Company 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 the Subordinate Lender under this
Agreement.
13. This Agreement shall be binding upon the Subordinate Lender
and upon the heirs, legal representatives, successors and assigns of
the Subordinate Lender and the successors and assigns of the Company.
14. 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 Subordination Agreement has been made and
delivered this 15th day of January, 2004.
/s/ Xxx X. Xxxxxxx, III
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Xxx X. Xxxxxxx, III
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
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Name: Xxxxx Grin
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Title: Managing Partner
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The Company hereby acknowledges receipt of a copy of the foregoing
Subordination Agreement, waives notice of acceptance of the
Subordination Agreement by the Senior Lenders, and agrees to be bound
by the terms and provisions of the Subordination Agreement, to make no
payments or distributions contrary to the terms and provisions of the
Subordination Agreement, and to do every other act and thing necessary
or appropriate to carry out such terms and provisions.
Dated: January 15th , 2004
DIGITAL FUSION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: Vice President
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EXHIBIT A
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[Attach copy of note]
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