EXHIBIT 4.4
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SUBORDINATION AGREEMENT
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THIS SUBORDINATION AGREEMENT (this "Agreement") dated as of January 27,
2005, by and among:
VELOCITY ASSET MANAGEMENT, INC., a Delaware Corporation, and TLOP
ACQUISITION COMPANY, LLC, a New Jersey limited liability company (collectively,
the "Subordinated Creditor"), VELOCITY INVESTMENTS, L.L.C., a New Jersey limited
liability company, as borrower (the "Borrower"), and XXXXX FARGO FOOTHILL, INC.,
a California corporation ("Lender"), which is the Lender under that certain Loan
and Security Agreement of even date herewith, by and between Lender and Borrower
(as the same may be amended, restated, renewed, replaced, supplemented, extended
or otherwise modified from time to time, the "Loan Agreement").
W I T N E S S E T H T H A T:
In order to induce Lender to make or continue to make financial
accommodations to Borrower provided for in the Loan Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower and Subordinated Creditor hereby agree with Lender that,
so long as any Senior Indebtedness (as hereinafter defined) is outstanding or
Lender's commitment to make Advances under the Loan Agreement remains, each such
party will comply with such of the following provisions as are applicable to it.
1. Certain Definitions.
1.1 Insolvency Proceeding. The term "Insolvency Proceeding" shall
mean any voluntary or involuntary dissolution, winding-up, total or partial
liquidation, reorganization or bankruptcy, insolvency, receivership or other
statutory or common law proceedings or arrangements involving Borrower or
Subordinated Creditor, or the readjustment of the liabilities of Borrower or
Subordinated Creditor or any assignment for the benefit of creditors or any
marshalling of the assets or liabilities of Borrower or Subordinated Creditor .
1.2 Senior Indebtedness. The term "Senior Indebtedness" shall mean
any and all loans, advances, extensions of credit to, and all other
indebtedness, obligations and liabilities, now existing or hereafter arising,
direct or contingent, of Subordinated Creditor or Borrower now or hereafter
owing to Lender, outstanding from time to time, whether pursuant to the Loan
Agreement, the Guaranty executed by either Subordinated Creditor or otherwise
and any and all indebtedness to Lender in respect of any and all future loans or
advances or extensions of credit made to Subordinated Creditor or Borrower by
Lender, prior to, during or following any proceeding in respect of any
Insolvency Proceeding, together with interest thereon and all fees, expenses and
other amounts (including costs of collection and reasonable attorneys' fees) at
any time owing to Lender, whether arising in connection with the Loan Agreement,
the Guaranty or such other indebtedness (regardless of the extent to which the
Loan Agreement, the Guaranty or such other indebtedness is enforceable against
Subordinated Creditor or Borrower and regardless of the extent to which such
amounts are allowed as claims against Subordinated Creditor or Borrower in any
SUBORDINATION AGREEMENT - Page 1
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Insolvency Proceeding, and including any interest thereon accruing after the
commencement of any Insolvency Proceeding and any other interest that would have
accrued thereon but for the commencement of such Insolvency Proceeding),
provided, however, post-petition interest shall be included in Senior
Indebtedness only to the extent allowed by the Bankruptcy Court. All Senior
Indebtedness shall be entitled to the benefits of this Agreement without notice
thereof being given to the Subordinated Creditor.
1.3 Subordinated Indebtedness. The term "Subordinated
Indebtedness" shall mean all sums owing to Subordinated Creditor by Borrower for
advances or loans made or property transferred to Borrower, now owed or
hereafter arising, and all claims, rights, causes of action, judgments and
decrees in respect of the foregoing, but only to the extent that such sums, when
added to Borrower's member's equity do not exceed $3,250,000.
1.4 Other Capitalized Terms. Except as otherwise specified herein,
capitalized terms used in this Agreement which are defined in the Loan Agreement
have the same meanings herein as therein.
2. Representations and Warranties. The Subordinated Creditor
hereby represents and warrants to the Lender that:
(a) As of the date hereof, the aggregate outstanding and
unpaid Subordinated Indebtedness owing by Borrower to Subordinated
Creditor is described on Exhibit A attached hereto.
(b) There is no default in respect of the Subordinated
Indebtedness.
3. Terms of Subordination.
3.1 No Transfer. The Subordinated Creditor shall not sell or
otherwise dispose of any of the Subordinated Indebtedness except with the prior
written consent of Lender and except to a person who agrees in advance in
writing, pursuant to an agreement in form acceptable to Lender, to become a
party hereto. Subordinated Creditor shall give Lender at least thirty (30) days'
prior written notice of any such proposed transfer stating the identity of the
transferee and providing such other information as Lender shall require.
3.2 Payment Subordinated. Anything in the instruments or
agreements evidencing Subordinated Indebtedness to the contrary notwithstanding,
the payment of the Subordinated Indebtedness is and shall be expressly
subordinate and junior in right of payment and exercise of remedies to the prior
indefeasible payment in full in cash of the Senior Indebtedness to the extent
and in the manner provided herein, and the Subordinated Indebtedness is hereby
subordinated as a claim against Borrower or any of the assets of, or ownership
interests in, Borrower whether such claim be (a) in the event of any
distribution of the assets of Borrower upon any Insolvency Proceeding, or (b)
other than in connection with an Insolvency Proceeding, to the prior
indefeasible payment in full in cash of the Senior Indebtedness. In furtherance
of the foregoing, except as expressly permitted by the Loan Agreement or this
Subordination Agreement or unless Lender shall otherwise consent in writing,
Borrower will not make, and Subordinated Creditor will not accept or receive,
any payment of Subordinated Indebtedness until all the Senior Indebtedness has
SUBORDINATION AGREEMENT - Page 2
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been indefeasibly paid in full in cash and Lender's commitment to make Advances
under the Loan Agreement has terminated.
3.3 Distributions in Insolvency Proceeding. In the event of any
Insolvency Proceeding relative to Borrower or Subordinated Creditor or such
party's property, all of the Senior Indebtedness owed by Borrower or
Subordinated Creditor shall first be indefeasibly paid in full in cash before
any payment on account of principal, premium or interest or otherwise is made
upon or in respect of the Subordinated Indebtedness, and in any such proceedings
any payment or distribution of any kind or character, whether in cash or
property or securities which may be payable or deliverable in respect of the
Subordinated Indebtedness shall be paid or delivered directly to the Lender for
application in payment of the Senior Indebtedness, unless and until all such
Senior Indebtedness shall have been indefeasibly paid and satisfied in full in
cash. In the event that, notwithstanding the foregoing, upon any such Insolvency
Proceeding, any payment or distribution of assets of Borrower of any kind or
character, whether in cash, property or securities, shall be received by a
holder of any of the Subordinated Indebtedness before all Senior Indebtedness is
indefeasibly paid in full in cash, such payment or distribution shall be
immediately paid over to the holder of the Senior Indebtedness, for application
to the payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been indefeasibly paid in full in cash, after giving
effect to any concurrent payment or distribution to the holder of such Senior
Indebtedness.
3.4 Attorneys-in-Fact, Proof and Voting of Claims.
(a) Attorneys-in-Fact. Subordinated Creditor, for itself and its
heirs, representatives, successors and assigns, hereby irrevocably authorizes
and directs Lender, and any trustee in bankruptcy, receiver, custodian or
assignee for the benefit of creditors of Borrower in any Insolvency Proceeding,
on its behalf, to take such action as may be necessary or appropriate to
effectuate the subordination provided for in this Agreement and irrevocably
appoints, which appointment is coupled with an interest, upon any default under
the Loan Agreement and during the continuance thereof or any failure to comply
with the terms of this Agreement, Lender, or any such trustee, receiver,
custodian or assignee, its attorneys-in-fact for such purpose with full powers
of substitution and revocation.
(b) Proof and Vote of Claims. Subordinated Creditor hereby
irrevocably appoints, which appointment is irrevocable and coupled with an
interest, Lender as Subordinated Creditor's true and lawful attorney, with full
power of substitution, in the name of Subordinated Creditor, Lender or
otherwise, for the sole use and benefit of Lender, to the extent permitted by
law, to prove and vote all claims relating to the Subordinated Indebtedness,
either in the name of Lender or in the name of Subordinated Creditor by proof of
debt, proof of claim, suit or otherwise, to collect any assets of Borrower and
to receive and collect all distributions, securities, property and payments to
which Subordinated Creditor would be otherwise entitled on any liquidation of
Borrower or any of its property or in any proceeding affecting Borrower or its
property under any bankruptcy or insolvency laws or any laws or proceedings
relating to the relief of Borrower readjustment, composition or extension of
indebtedness or reorganization. In no event shall Lender be liable to
Subordinated Creditor for any failure to prove the Subordinated Indebtedness, to
exercise any right with respect thereto or to collect any sums payable thereon.
SUBORDINATION AGREEMENT - Page 3
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(c) No Interference. In addition, Subordinated Creditor agrees
that to the extent Subordinated Creditor holds any Subordinated Indebtedness at
the relevant time, it will not take any action as the holder of any such
Subordinated Indebtedness that will impede, interfere with or restrict or
restrain the exercise by Lender of rights and remedies under the Loan Documents
and, upon the commencement of any Insolvency Proceeding, will take such
commercially reasonable actions as the holder of any such Subordinated
Indebtedness as may be reasonably necessary or appropriate to effectuate the
subordination provided hereby. In furtherance thereof, Subordinated Creditor, in
its capacity as a holder of Subordinated Indebtedness, hereby agrees not to
oppose any motion filed or supported by Lender for relief from stay or for
adequate protection in respect of the Senior Indebtedness and not to oppose any
motions supported by Lender for Borrower's use of cash collateral or
post-petition borrowing from Lender.
3.5 Effect of Provisions. The provisions hereof as to
subordination are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holders of the
Subordinated Indebtedness on the other hand, and none of such provisions shall
impair, as between Borrower and the holders of its Subordinated Indebtedness,
the obligations of Borrower, which are unconditional and absolute, to pay to
such holders all of the Subordinated Indebtedness in accordance with the terms
thereof, nor, except as provided in Section 7 below, shall any such provisions
prevent the holders of Subordinated Indebtedness from exercising all remedies
otherwise permitted by applicable law or under the terms of such Subordinated
Indebtedness upon a default thereunder, subject to the rights, if any, of the
holders of Senior Indebtedness under the foregoing provisions of this Agreement.
3.6 Subrogation, Etc. Subordinated Creditor hereby subordinates to
the Senior Indebtedness all rights to be subrogated to the rights of the holders
of the Senior Indebtedness in respect of payments or distributions of assets of,
or ownership interests in, Borrower made on the Senior Indebtedness.
3.7 No Payments of Subordinated Debt. Borrower may not, without
the prior written consent of Lender, pay or cause to be paid to the Subordinated
Creditor, and the Subordinated Creditor may not accept nor retain, payments of
principal and interest or other sums owing to Subordinated Creditor on account
of any Subordinated Debt.
4. Agreement to Hold in Trust. If Subordinated Creditor shall
receive any payment on account of the Subordinated Indebtedness in violation of
this Agreement, it shall hold such payment in trust for the benefit of the
holders of the Senior Indebtedness and, promptly upon discovery or notice of
such violation, pay it over to Lender on behalf of such holder for application
in payment of the Senior Indebtedness.
5. Amendments to Subordinated Agreements/Additional Liens on
Collateral. Subordinated Creditor covenants and agrees that, unless Lender
otherwise consents thereto in writing, it will not obtain liens on or security
interests in any assets of Borrower as security for the Subordinated
Indebtedness, and that to the extent any such liens or security interests are
created on or in any assets of Borrower (by operation of law or otherwise), all
SUBORDINATION AGREEMENT - Page 4
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such liens and security interests shall be fully subordinated and junior to the
liens on and security interests in the assets of Borrower in favor of Lender.
6. Evidences of Subordinated Indebtedness/Legend. Subordinated
Creditor, for itself and its heirs, representatives, successors and assigns as
holders of Subordinated Indebtedness, covenants to cause each agreement and
instrument representing or evidencing any of the Subordinated Indebtedness
issued or executed by Borrower and held by Subordinated Creditor to have affixed
upon it a legend which reads substantially as follows:
"THIS INSTRUMENT IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS OF
JANUARY 27, 2005, AMONG VELOCITY INVESTMENTS, L.L.C., VELOCITY ASSET
MANAGEMENT, INC., and XXXXX FARGO FOOTHILL, INC. BY ITS ACCEPTANCE OF
THIS INSTRUMENT, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS
OF SUCH SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT EACH
SUBORDINATED CREDITOR (AS DEFINED THEREIN) IS BOUND."
Subordinated Creditor hereby further covenants and agrees to pledge and deliver
to Lender any and all promissory notes or other negotiable instruments
evidencing Subordinated Indebtedness and to assign and deliver to Lender any and
all collateral therefor as security for such Subordinated Creditor's obligations
under this Agreement.
7. Limit on Right of Action. Subordinated Creditor, for itself
and its heirs, representatives, successors and assigns, agrees for the benefit
of the holders of the Senior Indebtedness that, except as otherwise provided in
the Loan Agreement, so long as the Senior Indebtedness remains outstanding or
Lender's commitment to make Advances under the Loan Agreement remains,
Subordinated Creditor will not, directly or indirectly, take any action to
accelerate or demand payment by Borrower of Subordinated Indebtedness, to
exercise any of its remedies in respect of Subordinated Indebtedness, to
initiate any Insolvency Proceeding of, or litigation against, Borrower, or to
foreclose or otherwise realize on any security given by Borrower or any other
person to secure Subordinated Indebtedness prior to the payment in full in cash
of the Senior Indebtedness. The foregoing provisions of this Section 7 are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the holders of the Subordinated Indebtedness on
the other and shall not otherwise limit or affect any rights which the holders
of Subordinated Indebtedness may have against Borrower under the terms of the
agreements evidencing Subordinated Indebtedness.
8. Marshaling. Subordinated Creditor, for itself and its heirs,
representatives, successors and assigns, hereby expressly waives any right that
it otherwise might have to require the holders of Senior Indebtedness to marshal
any of the property of Borrower, to resort to any collateral in any particular
order or manner, whether provided for by common law or statute, or to enforce
any guaranty or any Lien given by Borrower as a condition precedent or
concurrent to the exercise of any of their remedies.
9. Additional Rights of Lender. If Subordinated Creditor, in
violation of this Agreement, shall commence, prosecute or participate in any
suit, action or proceeding against Borrower, Borrower may interpose as a defense
SUBORDINATION AGREEMENT - Page 5
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or plea the making of this Agreement and Lender may intervene and interpose such
defense or plea in Lender's name or in the name of Borrower. If Subordinated
Creditor obtains any assets of Borrower as a result of any administrative, legal
or equitable action, or otherwise, Subordinated Creditor agrees forthwith to
pay, deliver and assign to Lender any such assets for application to the Senior
Indebtedness.
10. Borrower's and Subordinated Creditor's Additional Agreement.
Borrower agrees with Lender that it will not, without Lender's prior written
consent, execute or deliver any negotiable or non-negotiable instrument as
evidence of the Subordinated Indebtedness or any part thereof, except as
otherwise permitted by this Agreement and the Loan Agreement.
11. Subsequent Changes. Subordinated Creditor expressly agrees
that Lender may, in its sole and absolute discretion, without notice to or
further assent of Subordinated Creditor and without in any way releasing,
affecting or impairing the obligations and liabilities of such Subordinated
Creditor hereunder: (i) waive compliance with, or any default under, or grant
any other indulgences with respect to, the Loan Documents (including, without
limitation, any waiver of a condition to an Advance); (ii) modify, amend or
change any provisions of the Loan Documents (including, without limitation, any
changes to the interest rates, payment schedules or maximum amount of the Senior
Indebtedness); (iii) grant extensions or renewals of or with respect to the Loan
Documents, and/or effect any release, compromise or settlement in connection
therewith; (iv) agree to the substitution, exchange, release or other
disposition of Borrower, any guarantor or other obligor of the Senior
Indebtedness or of all or any part of the collateral securing the Senior
Indebtedness (whether or not anything or any amount is received in return
therefor); (v) make advances for the purpose of performing any term or covenant
contained in the Loan Documents, with respect to which Borrower shall be in
default; (vi) assign or otherwise transfer the Loan Documents, including,
without limitation, this Agreement, or any interest therein; and (vii) deal in
all respects with Borrower, the Senior Indebtedness or any Collateral or
guaranty securing the Senior Indebtedness as if this Agreement were not in
effect. The obligations of Subordinated Creditor under this Agreement shall be
absolute and unconditional, irrespective of the genuineness, validity,
regularity, enforceability or priority of the Loan Documents or any other
circumstances which might otherwise constitute a legal or equitable discharge of
a surety or Subordinated Creditor. No exercise or nonexercise by Lender of any
right given to it hereunder or under the Loan Documents, and no change,
impairment or suspension of any right or remedy of Lender, shall in any way
affect any of the Subordinated Creditor's obligations hereunder or give
Subordinated Creditor any recourse against Lender. No right of any current or
future holder of any Senior Indebtedness to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Borrower; by any act or failure to act by any such
holder, by any act or failure to act by any other holder of the Senior
Indebtedness, or by any noncompliance by Borrower with the terms hereof,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
12. Waivers. Subordinated Creditor hereby expressly waives, in its
capacity as Subordinated Creditor herein,: (i) notice of acceptance of this
Agreement; (ii) notice of any default hereunder or under the Loan Documents and
of all indulgences; (iii) demand for observance or performance of, or
enforcement of, any terms or provisions of this Agreement or the Loan Documents;
SUBORDINATION AGREEMENT - Page 6
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(iv) notice of extensions of credit by Lender to Borrower and of any change in
the rate at which interest accrues under the Loan Documents; (v) all other
notices and demands otherwise required by law which such Subordinated Creditor
may lawfully waive; (vi) the right to assert in any action or proceeding
hereupon any setoff, counterclaim or other claim which it may have against
Lender; (vii) all rights of subrogation, reimbursement or contribution against
Borrower which might otherwise arise by reason of Subordinated Creditor's
execution or performance of this Agreement; (viii) all rights (statutory or
otherwise) that require Lender to make an election of remedies where Lender
holds security interests and liens on both the real and personal property of
Borrower, any guarantor of or any other obligor on the Senior Indebtedness or to
take recourse first or solely against any particular collateral securing the
Loan Agreement or the other Loan Documents; (ix) all rights (statutory or
otherwise) that restrict, affect or impair the rights or remedies of Lender to
collect any deficiency after the application to the Obligations of any proceeds
arising from the foreclosure of the Loan Documents; (x) any defense based on the
adequacy of a remedy at law which might be asserted as a bar to the remedy of
specific performance of this Agreement in any action brought therefor by any
party hereto, and (x) so long as this Agreement remains in effect, the benefit
of all other principles or provisions of law, statutory or otherwise, which are
or might be in conflict with the terms hereof.
13. Indulgences Not Waivers. Neither the failure nor any delay on
the part of Lender to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver thereof or give rise to an estoppel, nor be construed
as an agreement to modify the terms of this Agreement, nor shall any single or
partial exercise of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
14. Successors; Continuing Effect, Etc. This Agreement is being
entered into for the benefit of the Lender and the holders of the Senior
Indebtedness and the Subordinated Indebtedness, and their respective heirs,
representatives, successors and assigns. This Agreement shall be a continuing
agreement and shall be irrevocable and shall remain in full force and effect so
long as there are both Senior Indebtedness and Subordinated Indebtedness
outstanding or Lender's commitment to make Advances under the Loan Agreement
remains. The liability of each of the Subordinated Creditors hereunder shall be
reinstated and revived, and the rights of the holders of the Senior Indebtedness
shall continue, with respect to any amount at any time paid on account of the
Senior Indebtedness which shall thereafter be required to be restored or
returned by the holders of the Senior Indebtedness in any Insolvency Proceeding
(including, without limitation, any repayment made pursuant to any provision of
Chapter 5 of Title 11, United States Code) or otherwise, all as though such
amount had not been paid.
15. Entire Agreement; Amendment. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
no modification or waiver of any provision of this Agreement shall in any event
be effective unless the same shall be in writing signed by Lender, Borrower, and
the Subordinated Creditor.
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16. Miscellaneous. This Agreement, which may be executed in any
number of counterparts, shall take effect as a sealed instrument and shall be
governed by and construed in accordance with the laws of the State of California
applicable to contracts made and performed in said State. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) EACH OF THE BORROWER, SUBORDINATED CREDITOR, AND THE LENDER,
TO THE EXTENT THAT EACH MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND THE UNITED STATES
DISTRICT COURT LOCATED IN LOS ANGELES COUNTY, CALIFORNIA, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS
OBLIGATIONS ARISING HEREUNDER OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY, KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY, WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO
VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF
SUCH COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, SUBORDINATED
CREDITOR CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S.
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE PARTIES
AT THE ADDRESSES PROVIDED HEREIN. TO THE EXTENT THAT SUBORDINATED CREDITOR HAS
OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, SUBORDINATED CREDITOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO THE MAXIMUM EXTENT PERMITTED BY LAW.
(b) WAIVER OF JURY TRIAL. EACH OF THE BORROWER, SUBORDINATED
CREDITOR, AND THE LENDER HEREBY VOLUNTARILY, KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN RESPECT OF ANY ACTION BROUGHT ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY LOAN DOCUMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF LENDER RELATING TO THE
ADMINISTRATION OF THE FINANCING UNDER THE LOAN DOCUMENTS OR THE ENFORCEMENT OF
THE LOAN DOCUMENTS, AND AGREES THAT NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE
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ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, SUBORDINATED CREDITOR HEREBY
KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. SUBORDINATED CREDITOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE ADVANCES.
18. Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telecopied
communication) and mailed or telecopied or delivered to the applicable party at
the addresses indicated below.
If to Lender:
Xxxxx Fargo Foothill, Inc.
0000 X. Xxxxxxxx Xxx.
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Lender Finance Division Manager
Telecopy No.: (000) 000-0000
and
Xxxxx Fargo Foothill, Inc.
00000 Xxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Loan Portfolio Manager - Velocity Investments
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxx, LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Null
Telecopy No.: (000) 000-0000
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If to Borrower or to Subordinated Creditor, to:
3100 Route 000 Xxxx
Xxxxxxx Xxxxx, Xxxxxxxx 0
Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Xxxxx & Xxxxx PC
3100 Route 000 Xxxx
Xxxxxxx Xxxxx, Xxxxxxxx 0
Xxxx, XX 00000
Attention: W. Xxxxx Xxxxx, Xx.
Telecopy No.: 000-000-0000
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this Section. All such notices, requests, demands and other communication
shall be deemed given upon receipt by the party to whom such notice is directed.
19. Covenant Not to Challenge. This Agreement has been negotiated
by the parties with the expectation and in reliance upon the assumption that the
instruments and documents evidencing the Senior Indebtedness and the
Subordinated Indebtedness are valid and enforceable. In determining whether to
enter into this Agreement, the Subordinated Creditor, on the one hand, and the
Lender, on the other hand, have assumed such validity and enforceability, and
have agreed to the provisions contained herein, without relying upon any
reservation of a right to challenge or call into question such validity or
enforceability. As between the Subordinated Creditor, on the one hand, and the
Lender, on the other hand, such parties hereby covenant and agree, to the
fullest extent permitted by law, that neither the Lender nor the Subordinated
Creditor shall initiate in any proceeding a challenge to the validity or
enforceability of the documents and instruments evidencing the Senior
Indebtedness or the Subordinated Indebtedness, as applicable.
20. Independent Credit Investigations. Subordinated Creditor, the
Lender, and their respective directors, officers, agents, or employees, shall
not be responsible to the other for Borrower's solvency, creditworthiness,
financial condition, or ability to repay any of its claims or for the accuracy
of any recitals, statements, representations, or warranties of Borrower, oral or
written, or for the validity, sufficiency, enforceability, or perfection of its
claims or its respective loan documents, or any security interests or liens
granted by Borrower to any claimant in connection therewith. Each claimant has
entered into its respective financing agreements with Borrower based upon his or
its own independent investigation, and makes no warranty or representation to
the other claimant, nor does he or it rely upon any representation of the other
claimant with respect to matters identified or referred to in this paragraph.
SUBORDINATION AGREEMENT - Page 10
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21. Reinstatement. The obligations of Subordinated Creditor under
this Agreement shall continue to be effective, or be reinstated, as the case may
be, if at any time all or any part of any payment in respect of any Senior
Indebtedness is rescinded or must otherwise be restored or returned directly or
indirectly by Lender as a preference, fraudulent transfer or otherwise (whether
by demand, settlement, litigation or otherwise), by reason of any bankruptcy,
reorganization, arrangement, composition or similar proceeding or as a result of
the appointment of a receiver, intervener or conservator of, or trustee or
similar officer for, the Borrower or Guarantor or any substantial part of any of
their property, or otherwise, all as though such payment had not been made and
such rescinded or returned payments shall constitute Senior Indebtedness for all
purposes hereunder.
22. Effect of Bankruptcy/Additional Financing. This Agreement is
intended to be enforceable as a subordination agreement under Bankruptcy Code
section 510 notwithstanding the commencement of any bankruptcy or other
insolvency proceeding by or against Borrower and, to the full extent permitted
by law, shall apply with full force and effect to any indebtedness arising
pursuant to debtor-in-possession financing arrangements or pursuant to financing
arrangements entered into in connection with the confirmation of a plan of
reorganization under Chapter 11 of the Bankruptcy Code. Subordinated Creditor
acknowledges and consents that, to the extent that the Lender elects at its
option to provide to Borrower additional financing upon terms and conditions
satisfactory to the Lender and Borrower, whether prior to, during, or after an
Insolvency Proceeding, or at any other time prior to the Senior Indebtedness
having been indefeasibly paid in full in cash to the Lender, such additional
indebtedness (represented by such additional financing), together with any and
all interest or fees thereon (collectively, the "Additional Financing"), shall
become a part of the Senior Indebtedness, and shall be treated as provided under
this Agreement. Further, Subordinated Creditor acknowledges and agrees that such
Subordinated Creditor shall not object to any terms or conditions of the
Additional Financing, whether in the form of debtor-in-possession financing or
cash collateral use, as may be agreed to by the Lender and Borrower, and
Subordinated Creditor acknowledges and agrees that Subordinated Creditor shall
not be entitled to any adequate protection under the Bankruptcy Code (whether in
the form of replacement liens or adequate protection payments) until the Senior
Indebtedness is indefeasibly paid in full in cash to the Lender.
23. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Lender and the other holders of Senior Indebtedness, Subordinated
Creditor, and its respective successors and assigns, and neither Borrower nor
any other Person is intended to be a third party beneficiary hereunder or to
have any right, benefit, priority or interest under, or because of the existence
of, or to have any right to enforce, this Agreement. The Lender and the
Subordinated Creditor shall have the right to modify or terminate this Agreement
at any time without notice to or approval of Borrower or any other Person.
Nothing in this Agreement is intended to or shall impair, as between Borrower
and Subordinated Creditor, the obligations of Borrower, which are absolute and
unconditional, to pay the Subordinated Indebtedness as and when the same shall
become due and payable in accordance with its terms, or affect the relative
rights of the Subordinated Creditor and creditors of Borrower other than the
Lender and the other holders of Senior Indebtedness.
SUBORDINATION AGREEMENT - Page 11
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24. Inconsistent or Conflicting Provisions. In the event a
provision of the documents evidencing or governing the Senior Indebtedness or
the Subordinated Indebtedness is inconsistent or conflicts with the provisions
of this Agreement, the provisions of this Agreement shall govern and prevail.
25. Counterparts. This Agreement may be executed and delivered in
counterparts, including facsimile counterpart signatures (to be followed in due
course by delivery of original signature counterparts), shall be effective when
each party has delivered its counterpart signature, and all counterparts taken
together shall be deemed a single original agreement.
*The next page is a signature page*
SUBORDINATION AGREEMENT - Page 12
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the day and year first above written.
BORROWER:
VELOCITY INVESTMENTS, LLC,
a New Jersey Limited Liability Company
By: /s/ W. XXXXX XXXXX, XX.
-----------------------------------------
Name: W. Xxxxx Xxxxx, Xx.
---------------------------------------
Title: President
--------------------------------------
SUBORDINATED CREDITOR:
VELOCITY ASSET MANAGEMENT, INC.,
a Delaware corporation
By: /s/ XXXX X. XXXXXXXX
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: President and CEO
--------------------------------------
TLOP ACQUISITION COMPANY, LLC,
a New Jersey limited liability company
By: /s/ VELOCITY ASSET MANAGEMENT, INC. as
its sole managing member
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: President and CEO
--------------------------------------
LENDER:
XXXXX FARGO FOOTHILL, INC.,
a California corporation, as Lender
By: /s/ XXXX XXXXXX
-----------------------------------------
Name: Xxxx Xxxxxx
---------------------------------------
Title: Assistant Vice President
--------------------------------------
Signature Page to
-----------------
Subordination Agreement - Page 13
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EXHIBIT A
---------
Subordinated Indebtedness
-------------------------
Sums owing to Velocity Asset Management, Inc., by Borrower as an intercompany
payable for advances or loans made or property transferred to Borrower, but only
to the extent that such sums, when added to Borrower's member's equity do not
exceed $3,250,000.
Subordination Agreement - Page 14
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