EXHIBIT 10.53
EXECUTION COPY
SUBORDINATION AGREEMENT
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SUBORDINATION AGREEMENT, dated as of November 9, 2004, among Harbor
View Master Fund, LP ("HARBORVIEW"), Southridge Partners, LP ("SOUTHRIDGE" and,
collectively with Harborview, "JUNIOR CREDITORS"), Xxxxxxxx Technologies, Inc.
(the "COMPANY"), DKR Soundshore Oasis Holding Fund, LLC ("SOUNDSHORE") and DKR
Soundshore Strategic Holding Fund, LLC ("SOUNDSHORE STRATEGIC" and, collectively
with Soundshore, the "SENIOR CREDITORS").
I. Pursuant the Securities Purchase Agreement, dated as of September
21, 2004, among the Company and the Senior Creditors (as amended, supplemented
or otherwise modified from time to time, the "PURCHASE AGREEMENT"), the Senior
Creditors, severally, purchased from the Company 8% Secured Convertible Notes,
due September 21, 2005 in an aggregate principal amount of $5,200,000 (as
amended, supplemented or otherwise modified from time to time, the "SENIOR
NOTES"). In connection with the Senior Notes, the Senior Creditors were granted
a first priority lien on all of the assets of the Company and its Subsidiaries
(as defined in the Security Agreement).
II. The Junior Creditors purchased from the Company Secured 8%
Convertible Notes, dated November 9, 2004 in the aggregate principal amount of
$1,350,000.00 (as amended, supplemented or otherwise modified from time to time,
the "SUBORDINATED CONVERTIBLE NOTES").
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Senior Notes.
"AGENT" means the Agent appointed under the Security
Agreement, dated as of September 21, 2004, among the Company and the Senior
Creditors.
"JUNIOR OBLIGATIONS" means all of the obligations and
liabilities of the Company to the Junior Creditors under the Subordinated
Convertible Notes, including with out limitation, all obligations thereunder or
in respect thereof now existing or hereafter arising, created, assumed or
incurred, including all post-petition interest and make-whole premiums, whether
or not allowed as a secured claim or as an unsecured claim in any proceeding,
including any proceeding arising under Title 11 of the United States Code.
"PAYMENT" means any payment, whether in the form of cash,
property or otherwise, whether in respect of principal, interest, fees, expenses
or otherwise, whether in respect of a scheduled payment, a prepayment, a
repurchase, a redemption, a defeasance, an acceleration, the sale or redemption
of any collateral security or otherwise and whether voluntary or involuntary (by
way of setoff, offset or otherwise).
"PAYOFF TIME" means any time upon which (a) all of the
liabilities and obligations of the Senior Creditors under the Senior Notes shall
have been satisfied in full or otherwise released, and (b) the earlier of the
following two events: (i) each Senior Creditor shall have received the
indefeasible payment in full, in cash, of the then outstanding Senior
Obligations owing to it, or (ii) the aggregate amount of all cash Payments made
in respect of the Junior Obligations and indefeasibly turned over or paid
directly to the Senior Creditors under and in accordance with Section 2(d) shall
equal or exceed the full amount of the Senior Obligations.
"SENIOR DOCUMENTS" means (i) the Senior Notes, (ii) the
Security Agreement, dated as of September 21, 2004, among the Company and the
Senior Creditors, (iii) the Transaction Documents, (v) each agreement,
instrument or other document executed or delivered in connection with any Senior
Obligations, and (vi) each agreement, instrument or other document executed or
delivered in connection with any of the foregoing, as each may be amended,
supplemented or otherwise modified from time to time in accordance with their
respective terms.
"SENIOR OBLIGATIONS" means all of the obligations and
liabilities of the Company under the Senior Notes, whether fixed, contingent,
now existing or hereafter arising, created, assumed or incurred, and including
all post-petition interest and make-whole premiums, whether or not allowed as a
secured claim or as an unsecured claim in any proceeding, including any
proceeding arising under Title 11 of the United States Code.
2. SUBORDINATION.
(a) The Junior Creditors hereby subordinate, upon the terms
and conditions herein contained, the Junior Obligations to the Senior
Obligations.
(b) Until the Payoff Time, the Junior Creditors shall not be
entitled to receive and the Company shall not make any Payment in respect of the
Junior Obligations except for periodic interest payments made in the ordinary
course and liquidated damages not to exceed $100,000.
(c) Unless and until the Payoff Time shall have occurred, the
Junior Creditors agrees that they shall not declare any part of the Junior
Obligations to be due and payable or exercise any of the rights or remedies that
it may have (including, without limitation, bringing, or joining with any other
creditor in instituting, any proceeding in contemplation of, or in connection
with, any Bankruptcy Event).
(d) Until the Payoff Time (i) the Company shall not grant, and
the Junior Creditors shall not receive or accept, any Lien of any kind or nature
on any property (whether now existing or hereafter acquired) of the Company or
any Subsidiary that secures the Junior Obligations, and (ii) the Junior
Creditors shall not accept any guaranty of any Junior Obligation, or any "put"
or other arrangement similar thereto.
(e) Nothing contained in this Subordination Agreement is
intended to or shall impair, as among the Company, its creditors (other than the
Senior Creditors) and the Junior Creditors, the obligation of the Company to pay
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the Junior Creditors any amount due in respect of the Junior Obligations as and
when the same shall become due and payable in accordance with the terms thereof,
or affect the relative rights of the Company and its creditors (other than the
Senior Creditors), in each case subject to the rights of each Senior Creditor
under this Subordination Agreement.
(f) The Junior Creditors agree that this Subordination
Agreement shall not be affected by any action or failure to act by a Senior
Creditor that results, or may result, in affecting, impairing or extinguishing
any right of reimbursement or subrogation or other right or remedy of the Junior
Creditors.
(g) The Junior Creditors agree that any statement of account
with respect to the Senior Obligations from the Senior Creditors to the Company
that binds the Company shall also be binding upon the Junior Creditors, and that
copies of any such statement of account maintained in the ordinary course of
business may be used in evidence against the Junior Creditors.
(h) The Junior Creditors agree that no Payment received by the
Junior Creditors and paid over to any Senior Creditor pursuant to the provisions
hereof shall entitle the Junior Creditors to exercise any rights of subrogation
in respect thereof until the Payoff Time, and for the purpose of such
subrogation no such Payment that otherwise would have been made to the Junior
Creditors shall, as among the Company, its creditors (other than the Senior
Creditors) and the Junior Creditors, be deemed to be a payment by the Company to
or on account of the Senior Obligations, it being understood that the provisions
hereof are intended solely for the purpose of defining the relative rights of
the Junior Creditors, on the one hand, and the Senior Creditors, on the other
hand. From and after the Payoff Time, the Junior Creditors shall be subrogated
to all rights of the Senior Creditors to receive any further payments or
distributions until the Junior Obligations shall have been indefeasibly paid in
full. The subordination provisions contained herein shall not be affected by any
action, or failure to act, by any Senior Creditor that results, or may result,
in affecting, impairing or extinguishing any right of reimbursement or
subrogation or other right or remedy of the Junior Creditors.
(i) Any document or instrument evidencing the Junior
Obligations, including, without limitation, the Subordinated Convertible Note,
shall bear the following legend:
THIS INSTRUMENT AND THE RIGHTS TO PAYMENT HEREUNDER ARE SUBORDINATED PURSUANT
THE SUBORDINATION AGREEMENT, DATED AS OF NOVEMBER 9, 2004, AMONG XXXXXXXX
TECHNOLOGIES, INC, THE JUNIOR CREDITORS AND THE SENIOR CREDITORS PARTY THERETO.
3. REPRESENTATIONS AND WARRANTIES. The Junior Creditors represent and
warrant to each Senior Creditor as follows:
(a) The Junior Creditor is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
has all requisite power and authority to carry on its business as now conducted.
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(b) The transactions contemplated hereby are within the
corporate or other analogous powers of the Junior Creditor and have been duly
authorized by all necessary corporate or other analogous and, if required,
equityholder action. This Subordination Agreement has been duly executed and
delivered by the Junior Creditor and constitutes a legal, valid and binding
obligation thereof, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally.
(c) The transactions contemplated hereby will not (i) violate
the organizational documents of the Junior Creditor and (ii) violate or result
in a default under any indenture, agreement or other instrument binding upon the
Junior Creditor or its assets, or give rise to a right thereunder to require any
payment to be made by the Junior Creditor.
(d) All of the Junior Obligations are represented by the
Subordinated Convertible Note.
4. SUBORDINATION ABSOLUTE.
(a) All rights and interests of each Senior Creditor
hereunder, and all agreements and obligations of the Junior Creditors and the
Company hereunder, shall remain in full force and effect irrespective of (i) the
invalidity or lack of enforceability of any Senior Notes, (ii) any amendment of,
supplement to or other modification of (including by any amendment, waiver or
consent) the Senior Debentures or all or any of the Senior Obligations,
including any renewal, extension, acceleration or replacement thereof, (iii) the
existence, enforceability, perfection or validity of any collateral security or
any guarantor, (iv) the liability of any other Person in respect of the Senior
Obligations, (v) any failure, delay, neglect or omission by the Agent or any
other Senior Creditor to obtain, realize upon or perfect any security interest
in any collateral, guaranty, indebtedness, liability or obligation, or by any
direct or indirect collateral security therefor, (vi) the bankruptcy,
reorganization or insolvency of, or by any other proceeding for the relief of
debtors commenced by or against, the Junior Creditors, the Company or any other
Person, (vii) the subordination of the Senior Obligations to any other
liabilities or obligations or (viii) any other reason or circumstance
whatsoever, whether similar or dissimilar to the foregoing, that might otherwise
constitute a defense available to, or a discharge of, the Junior Creditors in
respect of this Subordination Agreement or the Company in respect of the Senior
Obligations or this Subordination Agreement.
(b) The Junior Creditors hereby waive any right to require
that resort be had by the Agent or any other Senior Creditor against the Company
or any other Person, or to require that resort be had by the Agent or any other
Senior Creditor to any collateral security. Neither the Agent nor any other
Senior Creditor shall have any obligation to enforce any Senior Documents by any
action, including making or perfecting any claim against the Company prior to
being entitled to the benefits of this Subordination Agreement.
5. EXPENSES. The Junior Creditors agree to pay to each Senior Creditor,
upon demand, any and all reasonable sums, costs and expenses of each Senior
Creditor, as applicable, may pay or incur in enforcing this Subordination
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Agreement, including court costs, collection charges, and reasonable fees and
disbursements of counsel to the Senior Creditors.
6. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS; CONTINUING
AGREEMENT; TERMINATION. Whenever in this Subordination Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Company or the Junior Creditor that are contained in this
Subordination Agreement shall bind and inure to the benefit of each party hereto
and its respective successors and assigns. This Subordination Agreement shall
become effective when a counterpart hereof executed on behalf of each of the
Company and the Junior Creditors shall have been delivered to the Senior
Creditors and a counterpart hereof shall have been executed on behalf of the
Senior Creditors, and thereafter shall be binding upon the Company or the Junior
Creditors, as applicable, and the Secured Creditors and their respective
successors and assigns, and shall inure to the benefit of the Company or the
Junior Creditors, as applicable, the Agent and the other Senior Creditors, and
their respective successors and assigns, except that neither the Company or the
Junior Creditors shall have the right to assign its rights or obligations
hereunder or any interest herein (and any such attempted assignment shall be
void), except as expressly contemplated by this Subordination Agreement or the
other Senior Documents. This Subordination Agreement shall be a continuing
agreement and shall be irrevocable.
7. WAIVERS; AMENDMENT.
(a) No failure or delay of the Secured Creditors in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Senior Creditors hereunder and under the other Senior
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Subordination
Agreement or consent to any departure by the Company or the Junior Creditors
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Company or the Junior Creditors in any case shall
entitle the Company or the Junior Creditors, as applicable, to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Subordination Agreement nor any provision
hereof may be waived, amended or modified except pursuant to a written agreement
entered into by, between or among the Senior Creditors and the Company and/or
the Junior Creditors, as applicable.
8. GOVERNING LAW. THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
9. NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile to each party hereto
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at the address set forth with respect to such party on the signature pages
hereof. Any party hereto may change its address or facsimile number for notices
and other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Subordination Agreement shall be deemed to have been
given on the date of receipt.
10. SURVIVAL OF AGREEMENT; SEVERABILITY.
(a) All covenants, agreements, representations and warranties
made by each of the Company and the Junior Creditors herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Subordination Agreement shall be considered to have been relied
upon by the Senior Creditors and shall survive the execution and delivery of
this Agreement, regardless of any investigation made by the Senior Creditors or
on their behalf, and shall continue in full force and effect until this
Subordination Agreement shall terminate. The agreements made herein shall
continue to be effective or be reinstated, as applicable, if at any time
payment, or any part thereof, of any Senior Obligation is rescinded or must
otherwise be restored by any Senior Creditor or the Junior Creditors upon the
bankruptcy or reorganization of the Company, the Junior Creditors or otherwise.
(b) In the event any one or more of the provisions contained
in this Subordination Agreement should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
11. COUNTERPARTS. This Subordination Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one contract. Delivery of an
executed counterpart of this Subordination Agreement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Subordination Agreement.
12. HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Subordination Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Subordination Agreement.
13. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) Each of the Company and the Junior Creditors hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Subordination Agreement, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that,
to the extent permitted by applicable law, all claims in respect of any such
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action or proceeding may be heard and determined in such New York State court
or, to the extent permitted by applicable law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Subordination
Agreement shall affect any right that the Senior Creditors may otherwise have to
bring any action or proceeding relating to this Subordination Agreement against
the Company or the Junior Creditors, or any of its property, in the courts of
any jurisdiction.
(b) Each of the Company and the Junior Creditors hereby
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this
Subordination Agreement in any court referred to in paragraph (a) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Subordination Agreement irrevocably
consents to service of process in the manner provided for notices in Section 10.
Nothing in this Subordination Agreement will affect the right of any party to
this Subordination Agreement to serve process in any other manner permitted by
law.
(d) If any party shall commence a proceeding to enforce any
provisions of this Subordination Agreement, then the prevailing party in such
proceeding shall be reimbursed by the other party for its reasonable attorney's
fees and other actual costs and expenses incurred with the investigation,
preparation and prosecution of such proceeding.
14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS SUBORDINATION AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
SUBORDINATION AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
15. MISCELLANEOUS.
(a) Except as otherwise specifically provided in this
Subordination Agreement, the Junior Creditors hereby waives presentment, demand
for payment, notice of default, nonperformance and dishonor, protest and notice
of protest under this Subordination Agreement, notice of acceptance of this
Subordination Agreement and reliance hereupon by the Senior Creditors, and the
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incurrence or accrual of any other obligations and notice of any sale of
collateral or any default of any sort.
(b) Nothing herein shall limit or affect in any manner any
right any Senior Creditor may have by virtue of any other instrument or
agreement.
(c) The Company, for the consideration hereinabove stated,
authorizes and approves any act or thing which may be done in accordance
herewith and agrees to act in accordance herewith.
(d) This Agreement constitutes the entire contract among the
parties relating to the subject matter hereof and supersedes any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Subordination Agreement as of the day and year first above written.
HARBORVIEW MASTER FUND, LP
By: _________________________
Name:
Title:
Address for Notice:
With a copy to:
SOUTHRIDGE PARTNERS, LP
By: _________________________
Name:
Title:
Address for Notice:
With a copy to:
XXXXXXXX TECHNOLOGIES, INC.
By: _________________________
Name:
Title:
Address for Notice:
Xxxxxxxx Technologies, Inc.
00 Xxxxxxx Xxxx, #000
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Subordination Agreement as of the day and year first above written.
DKR SOUNDSHORE OASIS HOLDING FUND, LTD.
By:_______________________________
Name:
Title:
Address for Notice:
DKR Oasis Management Company, LP
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxx
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Subordination Agreement as of the day and year first above written.
DKR SOUNDSHORE STRATEGIC HOLDING FUND, LTD.
By:_______________________________
Name:
Title:
Address for Notice:
DKR Capital Partners L.P.
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxx
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