SUBORDINATION AGREEMENT
This
Subordination Agreement is made as of February 9, 2010, by and between Agile
Opportunity Fund LLC, a Delaware limited liability company (“Senior Creditor”), and
Nascap Corp., a New York corporation (the “Junior Creditor”).
Recitals
A. Compliance
Systems Corporation, a Nevada corporation (the “Company”), has issued or shall
issue to Senior Creditor on or about the date hereof, a debenture which is
secured by assets and property of the Company.
B. Junior
Creditor has extended loans or other credit accommodations to the Company or one
or more of its subsidiaries (collectively, with the Company, the “Borrower”),
and/or may extend loans or other credit accommodations to Borrower from time to
time.
C. In
order to induce Senior Creditor to extend credit to the Borrower and, at any
time or from time to time, at Senior Creditor’s option, to make such further
loans, extensions of credit, or other accommodations to or for the account of
the Borrower, or to purchase or extend credit upon any instrument or writing in
respect of which the Borrower may be liable in any capacity, or to grant such
renewals or extension of any such loan, extension of credit, purchase, or other
accommodation as Senior Creditor may deem advisable, Junior Creditor is willing
to subordinate, on the terms hereof: (i) all of Borrower’s
indebtedness and obligations to Junior Creditor, whether presently existing or
arising in the future (the “Subordinated Debt”), to all of the Borrower’s
indebtedness and obligations to Senior Creditor; and (ii) all of Junior
Creditor’s security interests in the Borrower’s property to all of Senior
Creditor’s security interests in the Borrower’s property.
NOW,
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Junior
Creditor subordinates to Senior Creditor any security interest or lien that
Junior Creditor may have in any property or assets of Borrower (the
“Collateral”). Notwithstanding the respective dates of attachment
and/or perfection of the security interest of Junior Creditor and the security
interest of Senior Creditor, the security interest of Senior Creditor in the
Collateral shall at all times be senior in all respects to the security interest
of Junior Creditor.
2. All
Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to Senior Creditor now existing or hereafter arising, together with all
costs of collecting such obligations (including attorneys’ fees), including,
without limitation, all interest accruing after the commencement by or against
Borrower of any bankruptcy, reorganization or similar proceeding (the “Senior
Debt”).
3. For
so long as any Senior Debt remains outstanding and while an event of default has
been declared or is otherwise occurring under any debt instrument evidencing the
Senior Debt, Junior Creditor will not: (a) demand or receive
from Borrower (and Borrower will not pay to Junior Creditor) all or any part of
the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or
otherwise; (b) exercise any right or remedy, or take any enforcement action
regarding any property or assets of Borrower; or (c) commence, or cause to be
commenced, prosecute or participate in any administrative, legal or equitable
action against Borrower or the Collateral. Senior Creditor shall
notify Junior Creditor of the declaration and/or occurrence of any such event of
default.
4. For
so long as any Senior Debt remains outstanding and while an event of default has
been declared or is otherwise occurring under any debt instrument evidencing the
Senior Debt, Junior Creditor shall promptly deliver to Senior Creditor in the
form received (except for endorsement or assignment by Junior Creditor where
required by Senior Creditor) for application to the Senior Debt any payment,
distribution, security or proceeds received by Junior Creditor with respect to
the Subordinated Debt other than in accordance with this
Agreement. Senior Creditor shall notify Junior Creditor of the
declaration and/or occurrence of any such event of default.
5. In
the event of Borrower’s insolvency, reorganization or any case or proceeding
under any bankruptcy or insolvency law or laws relating to the relief of
debtors, these provisions shall remain in full force and effect, and Senior
Creditor’s claims against Borrower and the estate of Borrower shall be paid in
full before any payment is made to Junior Creditor.
6. Until
the Senior Debt is fully paid in cash and Senior Creditor’s arrangements to lend
any funds to Borrower has been terminated, Junior Creditor irrevocably appoints
Senior Creditor as Junior Creditor’s attorney-in-fact, and grants to Senior
Creditor a power of attorney with full power of substitution, in the name of
Junior Creditor or in the name of Senior Creditor, for the use and benefit of
Senior Creditor, without notice to Junior Creditor, to perform at Senior
Creditor’s option the following acts in any bankruptcy, insolvency or similar
proceeding involving Borrower:
(i) To
file the appropriate claim or claims in respect of the Subordinated Debt on
behalf of Junior Creditor if Junior Creditor does not do so prior to 30 days
before the expiration of the time to file claims in such proceeding and if
Senior Creditor elects, in its sole discretion, to file such claim or claims;
and
(ii) To
accept or reject any plan of reorganization or arrangement on behalf of Junior
Creditor and to otherwise vote Junior Creditor’s claims in respect of any
Subordinated Debt in any manner that Senior Creditor deems appropriate for the
enforcement of its rights hereunder.
7. Junior
Creditor shall immediately affix a legend to the instruments evidencing the
Subordinated Debt stating that the instruments are subject to the terms of this
Agreement. Junior Creditor hereby agrees that any financing statements filed by
Junior Creditor against Borrower after the date of this Agreement shall contain
the following: “In accordance with a certain Subordination Agreement by and
among the Secured Party, the Debtor and Agile Opportunity Fund, LLC, the Secured
Party has subordinated any security interest or lien that Secured Party may have
in any property of the Debtor to the security interest of Agile Opportunity Fund, LLC in
all assets of the Debtor, notwithstanding the respective dates of attachment or
perfection of the security interest of the Secured Party and Agile Opportunity
Fund, LLC.”
2
8. No
amendment or restatement of the documents evidencing or relating to the either
the Senior Debt or the Subordinated Debt shall directly or indirectly modify the
provisions of this Agreement in any manner which might terminate or impair the
subordination of the Subordinated Debt or the subordination of the security
interest or lien that Junior Creditor may have in any property of
Borrower.
9. If,
at any time after payment in full of the Senior Debt any payments of the Senior
Debt must be disgorged by Senior Creditor for any reason (including, without
limitation, the bankruptcy of Borrower), this Agreement and the relative rights
and priorities set forth herein shall be reinstated as to all such disgorged
payments as though such payments had not been made and Junior Creditor shall
immediately pay over to Senior Creditor all payments received with respect to
the Subordinated Debt to the extent that such payments would have been
prohibited hereunder. At any time and from time to time, without
notice to Junior Creditor, Senior Creditor may take such actions with respect to
the Senior Debt as Senior Creditor, in its sole discretion, may deem
appropriate, including, without limitation, terminating advances to Borrower,
increasing the principal amount, extending the time of payment, increasing
applicable interest rates, renewing, compromising or otherwise amending the
terms of any documents affecting the Senior Debt and any collateral securing the
Senior Debt, and enforcing or failing to enforce any rights against Borrower or
any other person. No such action or inaction shall impair or
otherwise affect Senior Creditor’s rights hereunder.
10. This
Agreement shall bind any successors or assignees of Junior Creditor and shall
benefit any successors or assigns of Senior Creditor. This Agreement
shall remain effective until (i) the Senior Debt is fully paid in cash or other
good funds acceptable to Senior Creditor and (ii) Senior Creditor has no
commitment or obligation to lend any further funds to Borrower. This Agreement
is solely for the benefit of Junior Creditor and Senior Creditor and not for the
benefit of Borrower or any other party.
11. Junior
Creditor hereby agrees to execute such documents and/or take such further action
as Senior Creditor may at any time or times reasonably request in order to carry
out the provisions and intent of this Agreement, including, without limitation,
ratifications and confirmations of this Agreement from time to time hereafter,
as and when requested by Senior Creditor.
12. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one
instrument.
13. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to conflicts of laws
principles. Junior Creditor and Senior Creditor submit to the
exclusive jurisdiction of the state and federal courts located in New York, New
York in any action, suit, or proceeding of any kind, against it which arises out
of or by reason of this Agreement. JUNIOR CREDITOR AND SENIOR
CREDITOR WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.
3
14. This
Agreement represents the entire agreement with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements and
commitments. Junior Creditor is not relying on any representations by
Senior Creditor or Borrower in entering into this Agreement and Junior Creditor
has kept and will continue to keep itself fully appraised of the financial and
other condition of Borrower. This Agreement may be amended only by
written instrument signed by Junior Creditor and Senior Creditor.
15. All
requests, demands, notices and other communications required or otherwise given
under this Agreement shall be deemed sufficiently given if (a) delivered by
hand, against written receipt therefor, (b) forwarded via a nationally
recognized overnight courier requiring delivery the next business day and
written acknowledgment of receipt or (c) mailed by postage prepaid, registered
or certified mail, return receipt requested, in the case of clauses (b) and (c),
addressed to the party to whom such request, demand, notice or other
communication is being given at such recipient’s address set forth on the
signature page to this Agreement, or, in the case of any of the parties to this
Agreement, at such other address as such party shall have furnished in writing,
in accordance with this section 15, to the other party to this
Agreement. Each such request, demand, notice or other communication
shall be deemed given (i) on the date of delivery by hand, (ii) on the first
business day following the date of delivery to an overnight courier or (iii)
three business days following mailing by registered or certified
mail.
4
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
|
NASCAP
CORP.
|
Address
for Notice:
|
||
|
0
Xxxx Xxxxx
|
|||
|
Xxxxxxxxxx,
XX 00000
|
|||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx
|
||
|
Name:
Xxxxxxxx Xxxxxxxx
|
|||
|
Title:
President
|
|||
|
AGILE
OPPORTUNITY FUND, LLC
|
Address
for Notice:
|
||
|
0000
Xxxx Xxxxxxx
|
|||
|
Xxxx,
Xxxxx 000X,
|
|||
|
Xxxxxxxx,
XX 00000
|
|||
|
By:
|
/s/ Xxxxx X. Xxxxxx
|
||
|
Name: Xxxxx
X. Xxxxxx
|
|||
|
Title: Managing
Member
|
|||
The
undersigned hereby acknowledges and approves of the terms of this
Agreement.
|
COMPLIANCE
SYSTEMS CORPORATION
|
Address
for Notice:
|
||
|
00
Xxxxx Xxxx
|
|||
|
Xxxx
Xxxx, XX 00000
|
|||
|
By:
|
/s/ Xxxx X. Xxxxxxxxx
|
||
|
Name: Xxxx
X. Xxxxxxxxx
|
|||
|
Title: President
|
|||
5
