Exhibit 10.25
SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of
January 25, 2002, by and between vFinance, Inc., a Delaware
corporation (the "COMPANY"), SBI INVESTMENTS (USA) INC., f/k/a
Best Finance Investments Limited, a British Virgin Islands
corporation ("SBI INVESTMENTS"), and UBS Americas Inc., a
DELAWARE CORPORATION ("UBS AMERICAS")
WHEREAS, UBS Americas proposes to lend the Company up to $3,000,000
pursuant to a Credit Agreement, dated as of January 25, 2002, by and between UBS
Americas and the Company (the "CREDIT AGREEMENT");
WHEREAS, SBI INVESTMENTS and the Company have entered into a Note
Purchase Agreement, dated November 28, 2001, by and between SBI INVESTMENTS and
the Company, as amended by letter agreements, dated November 30, 2001, December
14, 2001 and December 28, 2001 executed by SBI INVESTMENTS and the Company (the
"NOTE PURCHASE AGREEMENT"), providing for SBI INVESTMENTS' purchase of
non-interest bearing convertible notes in the form annexed as Exhibit D to the
Note Purchase Agreement in an aggregate principal amount of up to $1,500,000
(the "NOTES");
WHEREAS, UBS Americas is willing to lend up to $1,500,000 to the
Company in accordance with the terms of the Credit Agreement, and willing to
lend an additional $1,500,000 to the Company in accordance with the terms of the
Credit Agreement and subject to the conditions set forth in the Credit
Agreement, provided the Notes and all indebtedness represented thereby is
subordinated to the Senior Debt (as defined in the Credit Agreement);
WHEREAS, SBI INVESTMENTS has agreed for itself, its successor and
assigns and all future holders of the Notes, to the subordination of the Notes
and all indebtedness represented thereby to the Senior Debt, upon the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, UBS Americas, SBI INVESTMENTS and the Company wish to enter
into this Agreement to effect the subordination of the indebtedness represented
by the Notes to the Senior Debt and to clarify their respective rights.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged by the parties hereto, and to induce UBS Americas to
enter into the Credit Agreement and to make the Loans contemplated thereby, the
parties hereto agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
"AGREEMENT" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"CREDIT AGREEMENT" shall have the meaning set forth in the
first introductory paragraph to this Agreement, as revised, modified, amended,
supplemented, waived or otherwise changed from time to time.
"NOTE PURCHASE AGREEMENT" shall have the meaning set forth in
the second introductory paragraph to this Agreement, as revised, modified,
amended, supplemented, waived or otherwise changed from time to time.
"NOTES" shall have the meaning set forth in the second
introductory paragraph to this Agreement, as revised, modified, amended,
supplemented, waived or otherwise changed from time to time.
"SENIOR LENDER" shall mean UBS Americas Inc. and any other
holder of Senior Debt.
"SUBORDINATED DEBT" means the indebtedness evidenced by the
Notes to be issued by the Company to SBI INVESTMENTS in the original principal
amount of $975,000 pursuant to the Note Purchase Agreement and any notes issued
upon transfer or partial conversion of the Notes or otherwise evidencing the
same indebtedness as the Notes, as such indebtedness is subordinated or
otherwise modified in accordance with the terms of this Agreement, and
additional indebtedness which may be issued by the Company as all or a portion
of the Second Tranche (as defined in the Credit Agreement).
"SUBORDINATED DEBT DOCUMENTS" means the Notes, the Note
Purchase Agreement, and each other document or agreement entered into or
delivered in connection therewith, other than the Option Agreement, the
Registration Rights Agreement and the Investor Rights Agreement, each as defined
in the Note Purchase Agreement, as the same may be changed, modified or amended
with the prior written consent of the Senior Lenders.
"SUBORDINATED LENDER" shall mean SBI INVESTMENTS (USA) INC.
and any future holder of Subordinated Debt.
b. TERMS DEFINED IN THE CREDIT AGREEMENT. Unless otherwise defined in
this Agreement, any and all initially capitalized terms set forth in this
Agreement shall have the meaning ascribed thereto in the Credit Agreement. In
the event of a direct conflict between the terms and provisions of this
Subordination Agreement and the Credit Agreement on the one hand (the "SENIOR
DEBT DOCUMENTS"), and the Subordinated Debt Documents on the other hand, it is
the intention of the parties hereto that such documents shall be read together
and construed, to the fullest extent possible, to be in concert with each other.
In the event of any actual, irreconcilable conflict between the Senior Debt
Documents and the Subordinated Debt Documents that cannot be resolved as
aforesaid, the terms and provisions of the Senior Debt Documents shall control
and govern.
2. REPRESENTATIONS AND WARRANTIES OF SBI INVESTMENTS. SBI INVESTMENTS
represents and warrants to the Senior Lender that:
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a. ORGANIZATION; POWERS. SBI INVESTMENTS is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has all requisite corporate power and authority to carry on
its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a material adverse effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
b. AUTHORIZATION; ENFORCEABILITY. SBI INVESTMENTS has full power to
enter into this Agreement. The transactions entered into or to be entered into
by SBI INVESTMENTS and this Agreement has been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by SBI
INVESTMENTS and constitutes a legal, valid and binding obligation of SBI
INVESTMENTS, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
c. GOVERNMENTAL AND THIRD PARTY APPROVALS; NO CONFLICTS. The
transactions entered into, or to be entered into by SBI INVESTMENTS as
contemplated by the Subordinated Debt Documents and this Agreement (a) do not
require any consent or approval of registration or filing with, or any other
action by, any Governmental Authority or any other Person, (b) will not violate
any applicable law or regulation or the charter, by-laws or other organizational
documents of SBI INVESTMENTS or any order of any Governmental Authority, (c)
will not violate or result in a default under any agreement or other instrument
binding upon SBI INVESTMENTS, or its respective assets, or give rise to a right
thereunder to require any payment to be made by SBI INVESTMENTS and (d) will not
result in the creation or imposition of any Lien on any asset of SBI
INVESTMENTS.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY REGARDING
AUTHORIZATION AND ENFORCEABILITY. The Company represents and warrants to the
Senior Lender that its obligations contemplated by this Agreement are within its
powers and have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
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4. AGREEMENT REGARDING CERTAIN SUBORDINATION PROVISIONS.
a. SUBORDINATION. SBI INVESTMENTS, on behalf of itself and all future
holders of Subordinated Debt, hereby agrees for the benefit of each Senior
Lender to the subordination of the indebtedness evidenced by the Notes to the
Senior Debt, upon the terms and subject to the provisions set forth in Exhibit A
attached hereto, and agrees to observe each of the obligations imposed upon it
by the provisions set forth in Exhibit A attached hereto.
b. THE COMPANY. The Company hereby agrees, for the benefit of the
Senior Lender, to the subordination of the indebtedness evidenced by the Notes
to the Senior Debt, upon the terms and subject to the provisions set forth in
Exhibit A attached hereto, and agrees to observe each of the obligations imposed
upon it by the provisions set forth in Exhibit A attached hereto.
5. MODIFICATION OF SUBORDINATED DEBT. SBI INVESTMENTS and each other
holder of Subordinated Debt agrees that none of the Subordinated Debt Documents
may be changed, modified, amended or supplemented without the prior written
consent of the Senior Lenders and that, without the prior written consent of the
Senior Lenders, such consent not to be unreasonably withheld, none of the Option
Agreement, the Registration Rights Agreement and the Investor Rights Agreement
may be changed, modified, amended or supplemented in any manner which adversely
affects any Senior Lenders rights with respect to the Subordinated Debt.
6. SUBORDINATED INDEBTEDNESS OWED ONLY TO SBI INVESTMENTS. SBI
INVESTMENTS warrants and represents that SBI INVESTMENTS has not previously
assigned any interest in the Subordinated Debt, that no other party owns an
interest in any of the Subordinated Debt (whether as joint holders,
participants, or otherwise), and that the entire Subordinated Debt is, or upon
issuance will be, owing only to SBI INVESTMENTS.
7. POSTPETITION FINANCING, LIENS. In the event of any bankruptcy
proceeding against the Company or any of its assets, each Subordinated Lender
hereby expressly consents to the granting by the Company to any Senior Lender of
senior liens and priorities in connection with any post-petition financing of
the Company by any Senior Lender.
8. INSTRUMENT LEGENDS. The face of each of the Subordinated Debt
Documents and any other instrument evidencing Subordinated Debt, or any portion
thereof, shall be inscribed with a legend in the following form:
THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (THE "SUBORDINATION
AGREEMENT") DATED AS OF JANUARY 25, 2002, AS AMENDED, AMONG VFINANCE, INC. (THE
"COMPANY"), UBS AMERICAS, INC. AND SBI INVESTMENTS (USA) INC., TO THE
OBLIGATIONS (INCLUDING INTEREST) OWED BY THE COMPANY TO THE HOLDERS OF ALL OF
THE NOTES ISSUED PURSUANT TO THAT CERTAIN CREDIT AGREEMENT DATED AS OF JANUARY
25, 2002 BETWEEN THE COMPANY AND UBS AMERICAS, INC., AS SUCH CREDIT AGREEMENT
HAS BEEN AND HEREAFTER MAY BE SUPPLEMENTED, AMENDED, REPLACED OR REFINANCED FROM
TIME TO TIME; AND EACH HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND
BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
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THIS NOTE MAY NOT BE ASSIGNED OR TRANSFERRED WITHOUT WRITTEN ACKNOWLEDGEMENT BY
THE ASSIGNEE OR TRANSFEREE OF SUBORDINATION OF THE OBLIGATIONS EVIDENCED HEREBY
AS REQUIRED BY SECTION 16 OF THE SUBORDINATION AGREEMENT. The Notes and any
other instrument evidencing Subordinated Debt, and any instrument evidencing any
of such indebtedness or any portion thereof, will, when issued, be inscribed
with the aforesaid legend.
9. ADDITIONAL REMEDIES. If SBI INVESTMENTS, or any subsequent holder of
Subordinated Debt, violates any of the terms of this Agreement, in addition to
any remedies in law, equity, or otherwise, any Senior Lender may restrain such
violation in any court of law and may interpose this Agreement as a defense in
any action by SBI INVESTMENTS or any subsequent holder of Subordinated Debt.
10. INFORMATION CONCERNING FINANCIAL CONDITION. Each Subordinated
Lender assumes responsibility for keeping itself informed of the financial
condition of the Company and of all other circumstances bearing upon the risk of
nonpayment of the Subordinated Debt, and agrees that no Senior Lender shall have
any duty to advise any Subordinated Lender of information known to any Senior
Lender regarding such condition or any such circumstances. In the event any
Senior Lender, in its sole discretion, undertakes, at any time or from time to
time, to provide any such information to a Subordinated Lender, such Senior
Lender shall be under no obligation (i) to provide any such information to each
Subordinated Lender on any subsequent occasion, (ii) to undertake any
investigation, or (iii) to disclose any information which, pursuant to its
commercial finance practices, such Senior Lender wishes to maintain
confidential.
11. REDEMPTION OF SUBORDINATED DEBT. Notwithstanding Article III of the
Notes or any other provision in the Subordinated Debt Documents, the Company
will not redeem any of the Subordinated Debt, and the Company will not make any
other payments with respect to the Subordinated Debt, prior to the first
anniversary of the Maturity Date, as defined in the Credit Agreement.
12. NOTICES. Except in the case of notices and other communications
expressly permitted to be given by telephone, 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 telecopy, as follows:
a. if to the Company, to it at: vFinance, Inc.
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.A.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
b. if to the Senior Lender, UBS Americas Inc.
to it at: c/o Correspondent Services
Corporation
1285 Avenue of the ▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: 212 373-6468
with copies to: UBS Americas Inc.
c/o UBS PaineWebber Inc.
1285 Avenue of the ▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
and
Reitler ▇▇▇▇▇ LLC
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
c. if to the Subordinated c/o ▇▇▇▇▇ ▇▇▇▇▇▇
Lender, to it at: ▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇'▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
with copies to: Loeb & Loeb LLP
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other
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communications given to any party hereto in accordance with the provisions of
this Agreement shall, be deemed to have been given on the date of receipt.
13. COSTS AND ATTORNEYS FEES. In the event it becomes necessary for any
Senior Lender holder to commence or become a party to any proceeding or action
to enforce the provisions of this Agreement, the Company shall reimburse such
Senior Lender for all out-of-pocket costs and expenses incurred by such Senior
Lender, including the reasonable fees, charges and disbursements of any counsel
for the Senior Lender incurred in connection with the enforcement or protection
of its rights or remedies under this Agreement, the usual and customary and
lawfully recoverable court costs, and all other expenses in connection
therewith.
14. GOVERNING LAWS; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
a. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS
PRINCIPLES.
b. Each of the Company, SBI INVESTMENTS and each holder of Subordinated
Debt hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any of the state or federal courts
sitting in New York County or in the State of Delaware and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Subordinated Debt Documents, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such state courts or, to the extent
permitted by law, in such federal courts. No party hereto will raise as a
defense to any such action or proceeding that, or move for dismissal of any such
action or proceeding on the grounds that, the claims are required to be
arbitrated. 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 Agreement or any Subordinated Debt Document shall affect any
right that any holder of Senior Debt may otherwise have to bring any action or
proceeding relating to this Agreement or any Subordinated Debt Document against
the Company or its properties in the courts of any jurisdiction, at law or in
equity.
c. Each of the Company, SBI INVESTMENTS and each holder of Subordinated
Debt hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement and Subordinated Debt Documents in any court referred
to in paragraph (b) of this Section. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
d. Each of the Company, SBI INVESTMENTS and each holder of Subordinated
Debt agrees that each Senior Lender's remedy at law for any breach of any of the
Company's, SBI INVESTMENTS' or other holder of Subordinated Debt's obligations,
warranties, representations or covenants under this Agreement, as the case may
be, will be inadequate, and that such Senior Lender will be entitled to apply
for and obtain injunctive relief to restrain the breach of, or otherwise
specifically enforce, its rights under this Agreement.
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e. Each of the Company, SBI INVESTMENTS and each holder of Subordinated
Debt irrevocably consents to service of process in the manner provided for
notices in Section 12. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.
15. 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 ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 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 AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties' respective successors and assigns,
subject to the provisions hereof, including all future holders of Senior Debt
and Subordinated Debt, except, notwithstanding any other provisions contained in
the Subordinated Debt Documents, no Subordinated Lender may assign or transfer
the Subordinated Debt without receiving a written acknowledgement from the
proposed assignee or transferee, addressed to the Senior Lenders and the
Subordinated Lender making such assignment or transfer, a copy of which shall be
delivered to the Senior Lender on the date of its execution or within two
Business Days thereafter, acknowledging that such proposed assignee or
transferee is receiving debt subordinate to the Senior Debt in such transaction
and agreeing to be bound by this Agreement as a "Subordinated Lender". Any
assignment or transfer in violation of this Section shall be void.
17. INTEGRATED AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the within matters and may not be
modified or amended except upon a writing signed by all parties.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
19. HEADINGS. The headings contained in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
20. SEVERABILITY. Any provision of this Agreement that is prohibited by
law or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision. To the extent
permissible, the parties waive any law that prohibits any provision of this
Agreement or renders any provision hereof unenforceable.
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21. TERMINATION. This Agreement shall continue in full force and effect
until the one year anniversary from the date that the Company has satisfied in
full in cash the Senior Debt and Senior Lender's commitments to advance Senior
Debt has terminated.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
VFINANCE, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Ceo and President
SBI INVESTMENTS (USA) INC.,
a British Virgin Islands corporation
By: /s/ ▇▇▇▇ Sin Just
-------------------------------------
Name: ▇▇▇▇ Sin Just
Title: Director
UBS AMERICAS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
Title: Asst. Secretary
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Exhibit A
SUBORDINATION PROVISIONS
Section 1. SUBORDINATION TO SENIOR DEBT. The Company and the
each holder of Subordinated Debt agree for the benefit of the Senior Lender that
the Subordinated Debt shall, in the manner hereinafter set forth, be subordinate
and junior in right of payment to all Senior Debt of the Company.
Section 2. COMPANY NOT TO MAKE PAYMENTS HEREUNDER IN CERTAIN
CIRCUMSTANCES. (a) Upon the maturity of all or any part of the Senior Debt by
lapse of time, acceleration or otherwise, such Senior Debt shall first be paid
in full, or such payment shall be duly provided for in cash or in a manner
satisfactory to the holders of such Senior Debt, before any payment by the
Company or any Subsidiary (as defined in the Credit Agreement dated as of
January 7, 2002 by and between vFinance Inc., as Borrower and UBS Americas Inc.,
as Lender, as amended (the "CREDIT AGREEMENT")) is made on account of the
principal of or premium, if any, or interest on the Subordinated Debt or to
acquire any of the Subordinated Debt or on account of any sinking fund for the
Subordinated Debt.
(b) In the event and during the continuation of any Default or
Event of Default (all capitalized terms used but not defined in these
subordination provisions shall have the respective meanings assigned to such
terms in the Credit Agreement, PROVIDED, that any Default that would become an
Event of Default only upon the giving of notice of such Default to the Company,
shall constitute a Default for purposes of this Agreement only if such notice
shall have been given) with respect to any Senior Debt (each such Default or
Event of Default being referred to in this Agreement as a "SENIOR DEBT
DEFAULT"), no payment shall be made by the Company or any Subsidiary on or with
respect to the principal of, or, premium, if any, or interest on, the
Subordinated Debt or to acquire any Subordinated Debt or on account of any
sinking fund for the Subordinated Debt unless and until such Senior Debt Default
shall have been remedied, nor shall any such payment be made if after giving
effect, as if paid, to such payment, any Senior Debt Default would exist. In any
such event, no holder of Subordinated Debt shall demand, accept or receive, any
direct or indirect payment (in cash or property or by setoff, exercise of
contractual or statutory rights or otherwise) of or on account of any
Subordinated Debt, notwithstanding the terms of the Subordinated Debt or of any
agreement or instrument which governs the Subordinated Debt, and no such payment
shall be due.
(c) Unless and until all principal of, premium, if any, and
interest on, and all other obligations of the Company under, any Senior Debt
shall have been paid in full, the Company shall not make, and no holder of
Subordinated Debt shall demand, accept or receive (in cash or property or by
setoff, exercise of contractual or statutory rights, legal action for breach of
representation, warranty or covenant or other damages in connection with the
issuance of Subordinated Debt or otherwise), or shall attempt to collect or
commence any legal proceedings to collect, any direct or indirect payment on
account of the Subordinated Debt prior to the date such payment becomes due and
payable pursuant to the terms thereof or, if later, prior to the first date such
amount is not prohibited from being paid pursuant to these subordination
provisions.
(d) Unless and until all principal of, premium, if any, and
interest on and all other obligations of the Company under, any Senior Debt,
shall have been paid in full, then:
(i) the Company shall not make, and no holder of
Subordinated Debt shall demand, accept or receive, or shall attempt to
collect or commence any legal proceedings to collect, any direct or
indirect payment (in cash or property or by setoff, exercise of
contractual or statutory rights or otherwise) of or on account of any
amount payable on or with respect to the Subordinated Debt; and
(ii) no such payment shall be due;
unless such payment is not prohibited by, and is made in
accordance with the terms of, any covenant or restriction set forth herein and
the failure to make any payment on or with respect to the Subordinated Debt by
reason of any covenant or restriction herein shall not constitute a breach of,
or default under, any provision applicable to the Subordinated Debt.
(e) Unless and until all principal of, premium, if any, and
interest on, and all other obligations of the Company under, the Senior Debt
shall have been paid in full, no holder of Subordinated Debt will commence or
maintain any action, suit or any other legal or equitable proceeding against the
Company or any of its Subsidiaries, or join with any creditor in any such
proceeding, under any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar law, unless the holders of Senior Debt shall
also join in bringing such proceeding, provided that this Section 2(e) shall not
prohibit a holder of Subordinated Debt from filing a proof of claim or otherwise
participating in any such proceeding not commenced by it.
Section 3. SUBORDINATED DEBT SUBORDINATED TO PRIOR PAYMENT OF
ALL SENIOR DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF COMPANY. In the
event of any insolvency or bankruptcy proceedings, and any receivership,
liquidation, reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, in their capacity as
creditors of the Company, or to substantially all of its property, and in the
event of any proceedings for voluntary liquidation, dissolution or other winding
up of the Company, whether or not involving insolvency or bankruptcy, then
(a) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, premium, if any,
interest and all other amounts payable thereon (accruing before and
after the commencement of the proceedings) before the holders of the
Subordinated Debt are entitled to receive any payment on account of the
principal of, premium, if any, or interest on the Subordinated Debt;
(b) all Subordinated Debt shall forthwith (notwithstanding the
terms of Section 2) become due and payable and any payment or
distribution of assets of the Company of any kind or character, whether
in cash, property or securities to which the holders of the
Subordinated Debt would be entitled, but for the provisions of these
subordination provisions, shall be paid or distributed by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or other trustee or agent, directly to the holder
of Senior Debt or any representative on behalf of holders of Senior
Debt, to the extent necessary to
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make payment in full of all principal, premium, if any, interest and
all other amounts payable on all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders
of the Senior Debt;
(c) the holders of all Subordinated Debt at the time
outstanding irrevocably authorize and empower (without imposing any
obligation on) each holder of Senior Debt at the time outstanding, and
any representative on behalf of holders of Senior Debt, to demand, ▇▇▇
for, collect and receive such holder's ratable share of all such
payments and distributions in respect of all Subordinated Debt and to
receipt therefor, and to file and prove all claims therefor and take
all such other action not inconsistent with the foregoing (including
the right to vote such Senior Debt holder's ratable share of the
Subordinated Debt) in the name of the holders of the Subordinated Debt
or otherwise, as such holder of Senior Debt, or any representative on
behalf of holders of Senior Debt, may determine to be necessary or
appropriate for the enforcement of these subordination provisions; and
(d) The holders of the Subordinated Debt shall execute and
deliver to holders of Senior Debt or any representative on behalf of
holders of Senior Debt all such further instruments confirming the
above authorization, and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such
other action as may be requested by any holder of Senior Debt or any
such representative, in order to enable such holder to enforce all
claims upon or in respect of each holder's ratable share of the
Subordinated Debt.
Section 4. RIGHTS OF HOLDERS OF SENIOR DEBT; SUBROGATION. (a)
Should any payment or distribution or security or the proceeds of any thereof be
collected or received by any holder of Subordinated Debt in respect of the
Subordinated Debt, and such collection or receipt is prohibited hereunder prior
to the payment in full of the Senior Debt, such holder of Subordinated Debt will
forthwith deliver the same to the holders of Senior Debt for the equal and
ratable benefit of the holders of the Senior Debt in precisely the form received
(except for the endorsement or the assignment of or by such holder where
necessary) for application to payment of all Senior Debt in full, after giving
effect to any concurrent payment or distribution to the holders of Senior Debt
and, until so delivered, the same shall be held in trust by such holder as the
property of the holders of the Senior Debt.
(b) All payments and distributions received by the holders of
Senior Debt in respect of the Subordinated Debt, to the extent received in or
converted into cash, may be applied by the holders of Senior Debt first to the
payment of any and all reasonable out-of-pocket expenses (including attorney's
fees and legal expenses) paid or incurred by them or their representative in
enforcing the provisions hereof or in endeavoring to collect or realize upon the
Subordinated Debt or any security therefor, and any balance thereof shall,
solely as between any holder of the Subordinated Debt, on the one hand, and the
holders of the Senior Debt, on the other hand, be applied by the holders of
Senior Debt in such order of application as the holders of Senior Debt may from
time to time select, toward the payment of the Senior Debt remaining unpaid.
(c) No holder of Subordinated Debt shall be subrogated to the
rights of the holders of the Senior Debt to receive payments or distributions of
assets of the Company until all amounts payable with respect to the Senior Debt
shall be paid in full; and, for the purposes of
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such subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which any holder of Subordinated Debt
would be entitled except for these provisions shall, as between the Company, its
creditors other than the holders of the Senior Debt, and such holders of
Subordinated Debt, be deemed to be a payment by the Company to or on account of
the Senior Debt. The provisions of this Agreement are and are intended solely
for the purpose of defining the relative rights of holders of Subordinated Debt,
on the one hand, and the holders of the Senior Debt, on the other hand.
(d) Subject to the payment in full of all Senior Debt, the
holders of the Subordinated Debt shall be subrogated (equally and ratably with
the holders of all Subordinated Debt of the Company which, by its terms, is not
superior in right of payment to the Subordinated Debt, and ranks on a parity
with the Subordinated Debt) to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the Company
applicable to the Senior Debt until all amounts owing on the Subordinated Debt
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Subordinated Debt of cash, property,
securities or other assets by virtue of the subrogation herein provided which
otherwise would have been made to the holders of the Senior Debt shall, as
between the Company, its creditors other than the holders of Senior Debt and the
holders of the Subordinated Debt, be deemed to be a payment to or on account of
the Subordinated Debt. The holders of Subordinated Debt agree that, in the event
that all or any part of any payment made on account of the Senior Debt is
recovered from the holders of Senior Debt as a preference, fraudulent transfer
or similar payment under any bankruptcy, insolvency or similar law, any payment
or distribution received by the holders of Subordinated Debt on account of the
Subordinated Debt at any time after the date of the payment so recovered,
whether pursuant to the right of subrogation provided for in this Section 4(d)
or otherwise, shall be deemed to have been received by such holders of
Subordinated Debt in trust as the property of the holders of the Senior Debt and
such holders shall forthwith deliver the same to the holders of Senior Debt for
the equal and ratable benefit of the holders of the Senior Debt for application
to payment of all Senior Debt in full.
Section 5. RENEWALS, EXTENSIONS AND INCREASES OF SENIOR DEBT.
Each holder of Subordinated Debt by his acceptance thereof thereby waives any
and all notice of renewal, extension, accrual or increase in the amount of any
of the Senior Debt, present or future, and agrees and consents that without
notice to or assent by any holder or holders of the Subordinated Debt:
(i) the obligation and liabilities of the Company or any other
party or parties for or upon the Senior Debt (or any promissory note,
security document or guaranty evidencing or securing the same) may,
from time to time, in whole or in part, be renewed, extended,
increased, modified, amended, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released;
(ii) any representative acting on behalf of holders of the
Senior Debt and the holders of the Senior Debt may exercise or refrain
from exercising any right, remedy or power granted by or in connection
with any agreements relating to the Senior Debt; and
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(iii) any balance or balances of funds with any holders of the
Senior Debt at any time standing to the credit of the Company may, from
time to time, in whole or in part, be surrendered or released;
all as any representative acting on behalf of holders of the
Senior Debt and the holders of the Senior Debt may deem advisable and all
without impairing, abridging, diminishing, releasing or affecting the
subordination of the Subordinated Debt to the Senior Debt provided for herein.
Section 6. OBLIGATION OF COMPANY UNCONDITIONAL. Nothing
contained in these subordination provisions or in the Subordinated Debt is
intended to or shall impair, as between the Company, its creditors other than
the holders of the Senior Debt, and the holders of the Subordinated Debt, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Subordinated Debt the principal of, premium, if any, and interest
on the Subordinated Debt, as and when the same shall become due and payable
(except as provided in Section 2), by lapse of time, acceleration or otherwise,
in accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Subordinated Debt and other creditors of the
Company other than the holders of the Senior Debt, nor shall anything herein or
therein prevent the holder of any Subordinated Debt (i) from taking all
appropriate actions to preserve its rights under the Subordinated Debt not
inconsistent with the rights of the holders of the Senior Debt under these
subordination provisions, or (ii) from exercising all remedies otherwise
permitted by applicable law upon default under the Subordinated Debt, subject to
the rights, if any, under these subordination provisions of the holders of the
Senior Debt in respect of cash, property or securities of the Company otherwise
payable or delivered to such holders upon the exercise of any such remedy.
Section 7. MISCELLANEOUS. (a) Each holder of Subordinated Debt
by its acceptance thereof acknowledges and agrees that the holders of the Senior
Debt have relied upon and will continue to rely upon the subordination provided
for herein in entering into the agreements relating to Senior Debt and in
extending credit to the Company pursuant thereto.
(b) No present or future holder of Senior Debt shall be
prejudiced in his right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of the
Company or any holder of the Subordinated Debt. The subordination provisions
contained herein are for the benefit of the holders of the Senior Debt from time
to time and, so long as Senior Debt is outstanding under any agreement, may not
be rescinded, cancelled, waived or modified in any way without the prior written
consent thereto of all holders of Senior Debt.
(c) The subordination provisions hereof shall be binding upon
any holder of the Subordinated Debt and upon the heirs, legal representatives,
successors and assigns of any holder of the Subordinated Debt; and, to the
extent that any holder of the Subordinated Debt is either a partnership or a
corporation, all references herein to any holder of the Subordinated Debt shall
be deemed to include any successor or successors, whether immediate or remote,
to such partnership or corporation.
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