SUBORDINATION AGREEMENT
Dated as of January 15, 2024
among
KELVANTIS LENDING CORP. a Delaware corporation (the "Senior Lender")
and
RIDGELINE VENTURES FUND IV, L.P. a Delaware limited partnership
BEACON HILL CAPITAL PARTNERS, LLC a Delaware limited liability company
NORTHSTAR INNOVATION FUND II, L.P. a Delaware limited partnership
HALCYON GROWTH EQUITY, L.P. a Delaware limited partnership
(collectively, the "Subordinated Creditors" or "Noteholders")
and
SKYBRIDGE FINTECH LTD. a Delaware corporation (the "Company" or "Borrower")
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This SUBORDINATION AGREEMENT (this "Agreement") is entered into as of January 15, 2024, by and among Kelvantis Lending Corp., a Delaware corporation (the "Senior Lender"), Ridgeline Ventures Fund IV, L.P., a Delaware limited partnership, Beacon Hill Capital Partners, LLC, a Delaware limited liability company, Northstar Innovation Fund II, L.P., a Delaware limited partnership, and Halcyon Growth Equity, L.P., a Delaware limited partnership (each, a "Subordinated Creditor" and, collectively, the "Subordinated Creditors" or "Noteholders"), and Skybridge Fintech Ltd., a Delaware corporation (the "Company" or "Borrower").
RECITALS
WHEREAS:
A. The Company and the Senior Lender are parties to that certain Loan and Security Agreement, dated as of August 15, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Senior Loan Agreement"), by and between Kelvantis Lending Corp. and Skybridge Fintech Ltd., pursuant to which the Senior Lender has extended a venture debt facility to the Company in the original principal amount of Fifteen Million Dollars ($15,000,000) (the "Senior Debt"), maturing on August 15, 2025. The Senior Loan Agreement, together with all promissory notes, guarantees, security agreements, intellectual property security agreements, pledge agreements, and all other ancillary documents, instruments, and agreements executed and delivered in connection therewith, as each may be amended, restated, supplemented, or otherwise modified from time to time (collectively, the "Senior Loan Documents"), govern the terms and conditions of the Senior Debt.
B. The Company, the Subordinated Creditors, and certain other parties are entering into that certain Note Purchase Agreement, dated as of January 15, 2024 (the "Note Purchase Agreement"), pursuant to which the Company is issuing convertible promissory notes in the aggregate principal amount of Sixty Million Dollars ($60,000,000) (collectively, the "Subordinated Notes" or "Subordinated Debt"), bearing interest at a rate of 6.00% per annum (600 basis points), simple interest, computed on a 365-day year basis, and maturing on January 15, 2026. The individual commitments of the Subordinated Creditors under the Note Purchase Agreement are as follows: Ridgeline Ventures Fund IV, L.P. — Thirty Million Dollars ($30,000,000); Beacon Hill Capital Partners, LLC — Fifteen Million Dollars ($15,000,000); Northstar Innovation Fund II, L.P. — Ten Million Dollars ($10,000,000); and Halcyon Growth Equity, L.P. — Five Million Dollars ($5,000,000). The Note Purchase Agreement, the Subordinated Notes, and all documents, instruments, and agreements executed and delivered in connection therewith, as each may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof (collectively, the "Subordinated Loan Documents"), govern the terms and conditions of the Subordinated Debt.
C. As a condition to the Senior Lender's consent to the issuance of the Subordinated Debt, and as a material inducement to the Senior Lender to continue to extend credit and financial accommodations to the Company under the Senior Loan Documents, the Subordinated Creditors have agreed to subordinate the payment of the Subordinated Debt to the prior payment in full of the Senior Debt, on the terms and subject to the conditions set forth herein. The Company acknowledges and agrees to the subordination of the Subordinated Debt to the Senior Debt and agrees to be bound by the terms and conditions of this Agreement.
D. Reference is made to that certain Lender Consent and Waiver Letter, dated as of January 12, 2024, delivered by Kelvantis Lending Corp. to Skybridge Fintech Ltd. (the "Consent Letter"), pursuant to which the Senior Lender has consented to the incurrence of the Subordinated Debt under the Note Purchase Agreement and has waived any default or event of default under the Senior Loan Agreement that would otherwise arise solely as a result of the Company's entry into the Note Purchase Agreement and issuance of the Subordinated Notes, subject to the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the following meanings:
"Bankruptcy Event" means, with respect to any Person, (a) the filing by such Person of a voluntary petition under Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.), as amended (the "Bankruptcy Code"), or any similar federal, state, or foreign bankruptcy, insolvency, reorganization, or debtor relief law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any similar law that is not dismissed within sixty (60) days after the date of such filing; (c) the making by such Person of a general assignment for the benefit of creditors; (d) the appointment of a receiver, trustee, custodian, conservator, liquidator, or similar official for such Person or for all or substantially all of the assets of such Person; (e) the entry of an order for relief with respect to such Person under the Bankruptcy Code; or (f) the commencement of any other proceeding under any applicable law relating to bankruptcy, insolvency, reorganization, winding-up, composition, or adjustment of debts of such Person.
"Change of Control" has the meaning ascribed to such term in the Note Purchase Agreement, and includes, without limitation, any transaction or series of related transactions resulting in (a) a merger, consolidation, or other business combination in which the stockholders of the Company immediately prior to such transaction hold less than fifty percent (50%) of the outstanding voting securities of the surviving or resulting entity, (b) the sale, lease, transfer, or other disposition of all or substantially all of the assets of the Company, or (c) any other transaction or event designated as a "Change of Control" under the Note Purchase Agreement, including for purposes of determining the applicability of the 2.0x change of control premium payable under the Subordinated Notes.
"Enforcement Action" means any action by or on behalf of any Subordinated Creditor to (a) collect any amount due under the Subordinated Debt, whether by demand, lawsuit, counterclaim, set-off, or otherwise; (b) accelerate the maturity of the Subordinated Debt or declare the Subordinated Debt to be immediately due and payable; (c) commence, prosecute, or participate in any judicial, administrative, arbitral, or other proceeding (including any Bankruptcy Event proceeding) against the Company or any of its assets with respect to the Subordinated Debt; (d) exercise any right of set-off, recoupment, or netting with respect to the Subordinated Debt; (e) take any action to foreclose upon, attach, levy, garnish, or otherwise seize or collect any assets of the Company on account of the Subordinated Debt; or (f) exercise any other remedy available at law or in equity with respect to the Subordinated Debt.
"Payment Default" means any default in the payment when due (whether at stated maturity, by required prepayment, by acceleration, by mandatory repayment, or otherwise) of any principal of, or interest on, or any other amount owing in respect of, the Senior Debt under the Senior Loan Documents.
"Permitted Payments" means those payments on the Subordinated Debt that are expressly permitted to be made by the Company to the Subordinated Creditors pursuant to Section 2.3 of this Agreement, subject to the terms and conditions set forth therein.
"Person" means any individual, corporation, limited liability company, partnership, limited partnership, joint venture, trust, estate, unincorporated organization, governmental authority, or other entity of any kind.
"Qualified Financing" has the meaning ascribed to such term in the Note Purchase Agreement, and means a bona fide equity financing transaction involving the sale and issuance by the Company of shares of its Series D Preferred Stock (or such other series of Preferred Stock as may be designated in connection therewith) in a single transaction or series of related transactions, with aggregate gross cash proceeds to the Company of not less than Eighty Million Dollars ($80,000,000) in new equity capital (excluding any amounts received upon conversion of the Subordinated Notes or any other convertible securities of the Company).
"Required Subordinated Creditors" means, at any time, Subordinated Creditors holding a majority in aggregate outstanding principal amount of the Subordinated Notes at such time.
"Senior Debt" means all obligations of the Company to the Senior Lender arising under or in connection with the Senior Loan Documents, whether now existing or hereafter arising, including, without limitation, (a) the unpaid principal amount of the venture debt facility in the original principal amount of Fifteen Million Dollars ($15,000,000), (b) all accrued and unpaid interest thereon (including interest accruing after the commencement of any Bankruptcy Event, whether or not such interest is an allowed claim in such proceeding), (c) all fees, costs, and expenses (including reasonable attorneys' fees and expenses), (d) all indemnification obligations, (e) all reimbursement obligations, and (f) all other amounts owing to the Senior Lender under or in connection with the Senior Loan Documents, in each case whether direct or indirect, absolute or contingent, due or to become due, joint or several, and howsoever and whensoever arising.
"Senior Lender" means Kelvantis Lending Corp., a Delaware corporation, with its principal office located at 350 Park Avenue, 18th Floor, New York, New York 10022, together with its successors and assigns.
"Standstill Period" has the meaning ascribed to such term in Section 3.2 of this Agreement.
"Subordinated Debt" means all obligations of the Company to the Subordinated Creditors arising under or in connection with the Subordinated Loan Documents, whether now existing or hereafter arising, including, without limitation, (a) the unpaid aggregate principal amount of the Subordinated Notes in the original aggregate principal amount of Sixty Million Dollars ($60,000,000), (b) all accrued and unpaid interest thereon at a rate of 6.00% per annum (the aggregate annual interest on the full principal amount being Three Million Six Hundred Thousand Dollars ($3,600,000)), (c) all fees, costs, and expenses, and (d) all other amounts owing to any Subordinated Creditor under or in connection with the Subordinated Loan Documents, in each case whether direct or indirect, absolute or contingent, due or to become due, joint or several, and howsoever and whensoever arising.
All capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Senior Loan Agreement or, if not defined therein, in the Note Purchase Agreement, as applicable.
Section 1.2 — Rules of Construction
Unless the context otherwise requires: (a) the headings and captions contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement; (b) words importing the singular shall include the plural and vice versa; (c) words importing any gender shall include all genders; (d) references to "including," "include," "includes," or words of similar import shall be deemed to be followed by the phrase "without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it; (e) references to any statute, rule, or regulation shall include all amendments, modifications, codifications, replacements, and successor statutes, rules, and regulations thereto; (f) references to any agreement or document shall include all amendments, restatements, supplements, and modifications thereto to the extent permitted by the terms of this Agreement; (g) references to any Person shall include such Person's successors and permitted assigns; (h) references to "herein," "hereof," "hereunder," "hereby," and similar words shall refer to this Agreement as a whole and not to any particular provision; and (i) this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware in all respects regarding the interpretation of defined terms and rules of construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement, and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — SUBORDINATION
Section 2.1 — Agreement to Subordinate
Each Subordinated Creditor hereby covenants and agrees, for itself and its successors and assigns, that the payment of the Subordinated Debt is and shall at all times be subordinate and junior in right of payment, to the extent and in the manner provided in this Agreement, to the prior payment in full in cash of all Senior Debt. The subordination effected by this Agreement shall apply to all Senior Debt, whether now existing or hereafter arising, including, without limitation, any Senior Debt arising under any amendment, restatement, supplement, modification, refinancing, renewal, extension, increase, or replacement of the Senior Loan Agreement or any other Senior Loan Document, whether or not any such amendment, restatement, supplement, modification, refinancing, renewal, extension, increase, or replacement is contemplated as of the date hereof. The subordination effected by this Agreement shall be effective regardless of the time, manner, or order of attachment, perfection, or granting of any liens, security interests, or other encumbrances, regardless of the time or order of the creation, incurrence, or assumption of any of the Senior Debt or the Subordinated Debt, and regardless of whether any of the Senior Debt or the Subordinated Debt is contingent, unliquidated, or unmatured. Each Subordinated Creditor acknowledges and agrees that the subordination provisions contained in this Agreement are intended to benefit the Senior Lender and are enforceable by the Senior Lender directly against each Subordinated Creditor.
Section 2.2 — Liquidation; Dissolution; Bankruptcy
In the event of any Bankruptcy Event with respect to the Company, or in the event of any dissolution, winding up, liquidation, reorganization, receivership, insolvency proceeding, assignment for the benefit of creditors, marshalling of assets, or any other similar proceeding involving the Company or its assets (each, a "Proceeding"):
(a) All Senior Debt shall first be paid and satisfied in full in cash before any payment, distribution, or other consideration of any kind (whether in cash, securities, property, or otherwise) shall be made on account of or applied to the Subordinated Debt. To the extent necessary to effectuate the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property, or securities, that would otherwise be payable or deliverable upon or with respect to the Subordinated Debt shall instead be paid or delivered directly to the Senior Lender (or its agent or representative) for application to the Senior Debt until all Senior Debt shall have been paid and satisfied in full in cash.
(b) Each Subordinated Creditor hereby irrevocably authorizes and empowers the Senior Lender to demand, sue for, collect, and receive every such payment or distribution referred to in clause (a) above, and to file claims and proofs of claim and to take such other actions (including voting the Subordinated Debt claims in any such Proceeding) as the Senior Lender may deem necessary or advisable for the enforcement of the provisions of this Section 2.2.
(c) In the event that any Subordinated Creditor fails to file a proof of claim or other required filing in any Proceeding within thirty (30) days prior to the applicable bar date for the filing of such claims, the Senior Lender is hereby irrevocably authorized and empowered (but shall have no obligation) to file such proof of claim or other filing on behalf of such Subordinated Creditor, and each Subordinated Creditor hereby appoints the Senior Lender as its agent and attorney-in-fact for such purpose, which appointment is coupled with an interest and is irrevocable.
(d) Each Subordinated Creditor agrees that it will not, in any Proceeding, contest the validity, perfection, priority, or enforceability of any lien or security interest granted to, or held by, the Senior Lender in connection with the Senior Debt, and will not take any action to challenge the claims of the Senior Lender with respect to the Senior Debt.
Section 2.3 — Permitted Payments on Subordinated Debt
Notwithstanding the subordination provisions of Sections 2.1 and 2.2, and subject to the terms and conditions of this Section 2.3, the Company may make the following Permitted Payments to the Subordinated Creditors, provided that at the time of such Permitted Payment (and after giving effect thereto) no Payment Default exists or would result therefrom:
(a) Conversion. The Company may convert the Subordinated Notes into equity securities of the Company (i) upon the occurrence of a Qualified Financing (automatic conversion in accordance with the terms of the Subordinated Notes), or (ii) at the maturity of the Subordinated Notes (optional conversion at the Valuation Cap of Seven Hundred Fifty Million Dollars ($750,000,000)), in each case as set forth in and in accordance with the terms of the Note Purchase Agreement and the applicable Subordinated Note. The parties hereto agree and acknowledge that the conversion of the Subordinated Notes into equity securities of the Company does not constitute a cash payment on the Subordinated Debt and shall not be subject to or restricted by the subordination provisions of this Agreement.
(b) Change of Control Payments. Upon the occurrence of a Change of Control, the Company may make payments to the Subordinated Creditors in respect of the Subordinated Debt in an amount equal to the greater of (i) two times (2.0x) the outstanding principal amount of the Subordinated Notes, plus all accrued and unpaid interest thereon, and (ii) the amount that would be payable upon conversion of the Subordinated Notes into equity securities at the Valuation Cap (the "Change of Control Payment Amount"); provided, however, that no such Change of Control payment shall be made unless and until the Senior Debt is simultaneously paid in full in cash (or such payment is made concurrently with the payment in full in cash of all Senior Debt) in connection with such Change of Control.
(c) Maturity Repayment. At the maturity of the Subordinated Notes on January 15, 2026, the Company may repay principal and accrued and unpaid interest on the Subordinated Notes to those holders who have elected cash repayment in lieu of conversion; provided, however, that no such maturity repayment shall be made unless and until (i) the Senior Debt has been paid in full in cash and all commitments under the Senior Loan Documents have been terminated, or (ii) the Senior Lender has provided its prior written consent to such repayment, which consent may be withheld, conditioned, or delayed in the Senior Lender's sole and absolute discretion.
Section 2.4 — Improper Payments
If any Subordinated Creditor shall receive any payment, distribution, or other consideration of any kind (whether in cash, property, securities, or otherwise) on account of the Subordinated Debt at any time when such payment, distribution, or other consideration is not permitted under this Agreement, including, without limitation, any payment or distribution received in violation of Sections 2.1, 2.2, or 2.3, then such Subordinated Creditor shall hold such payment, distribution, or other consideration in trust for the benefit of the Senior Lender and shall promptly deliver the same to the Senior Lender, in the form received (duly endorsed or assigned to the Senior Lender, if applicable), for application to the payment of the Senior Debt in such order as the Senior Lender shall determine in its sole discretion. Until such delivery, such payment, distribution, or other consideration shall be held by such Subordinated Creditor as trustee for the Senior Lender and shall not be commingled with the assets of such Subordinated Creditor. The Senior Lender is hereby authorized to apply any such payment, distribution, or other consideration to the Senior Debt in such order and manner as the Senior Lender may elect.
Section 2.5 — Subrogation
Upon the payment in full in cash of all Senior Debt and the termination of all commitments under the Senior Loan Documents, the Subordinated Creditors shall be subrogated to the rights of the Senior Lender to receive payments or distributions of assets of the Company made on account of the Senior Debt, until all amounts owing on the Subordinated Debt shall have been paid in full. For the purposes of such subrogation, no payments or distributions to the Senior Lender of any cash, property, or securities to which the Subordinated Creditors would be entitled except for the provisions of this Agreement, and no payments made pursuant to the provisions of this Agreement to the Senior Lender by the Subordinated Creditors, shall, as between the Company, its creditors (other than the Senior Lender), and the Subordinated Creditors, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. The provisions of this Section 2.5 are solely for the purpose of defining the relative rights of the Subordinated Creditors on the one hand and the Senior Lender on the other hand, and nothing herein shall impair, as between the Company and the Subordinated Creditors, the obligations of the Company to pay the Subordinated Debt in accordance with its terms, subject to the provisions of this Agreement.
ARTICLE III — STANDSTILL; ENFORCEMENT LIMITATIONS
Section 3.1 — No Enforcement Actions
Each Subordinated Creditor hereby covenants and agrees that, so long as any Senior Debt remains outstanding (whether or not then due and payable), such Subordinated Creditor shall not take, or cause or permit to be taken, any Enforcement Action with respect to the Subordinated Debt, except as expressly permitted under Section 3.2 of this Agreement. Without limiting the generality of the foregoing, no Subordinated Creditor shall (a) accelerate the maturity of the Subordinated Debt, (b) commence, prosecute, or join in any suit, action, or proceeding against the Company to collect or enforce the Subordinated Debt, (c) exercise any right of set-off or recoupment against the Company with respect to the Subordinated Debt, (d) file or join in the filing of any involuntary bankruptcy or insolvency proceeding against the Company, or (e) take any other action to collect, enforce, or realize upon the Subordinated Debt, in each case unless and until such Enforcement Action is permitted under Section 3.2.
Section 3.2 — Standstill Period
If the Subordinated Debt has been accelerated in accordance with the terms of the Subordinated Loan Documents, or if a default or event of default exists under the Subordinated Loan Documents, the Subordinated Creditors (or the Required Subordinated Creditors on behalf of all Subordinated Creditors) shall provide prompt written notice thereof to the Senior Lender (an "Enforcement Notice"), specifying in reasonable detail the nature of such acceleration, default, or event of default. Following the delivery of such Enforcement Notice, the Subordinated Creditors shall refrain from taking any Enforcement Action with respect to the Subordinated Debt for a period of one hundred eighty (180) days following the date of delivery of such Enforcement Notice (the "Standstill Period"). During the Standstill Period, no Subordinated Creditor shall take, or cause or permit to be taken, any Enforcement Action with respect to the Subordinated Debt.
Upon the expiration of the Standstill Period (and provided that the Senior Debt has not been paid in full in cash during such period), the Subordinated Creditors may commence Enforcement Actions with respect to the Subordinated Debt; provided, however, that any and all proceeds, payments, distributions, or other amounts received by any Subordinated Creditor in connection with or as a result of any such Enforcement Action shall remain subject to the subordination provisions of Article II of this Agreement, and any amounts required to be turned over to the Senior Lender pursuant to Article II shall be promptly delivered to the Senior Lender in accordance with Section 2.4.
Section 3.3 — Senior Lender Cure Rights
The Senior Lender (but not the Company) shall have the right, but not the obligation, to cure any default or event of default under the Subordinated Loan Documents during the Standstill Period. Any such cure effected by the Senior Lender shall be deemed to be a cure of such default or event of default for all purposes under the Subordinated Loan Documents, and each Subordinated Creditor hereby agrees to accept any such cure by the Senior Lender as if such cure had been made by the Company. The Senior Lender shall have no obligation to cure any such default or event of default, and no failure by the Senior Lender to exercise such cure right shall constitute a waiver of any rights of the Senior Lender under this Agreement or the Senior Loan Documents. Any amounts advanced or paid by the Senior Lender in connection with the exercise of its cure rights under this Section 3.3 shall constitute additional Senior Debt for all purposes under this Agreement and the Senior Loan Documents.
ARTICLE IV — LIENS AND SECURITY
Section 4.1 — No Liens for Subordinated Debt
Each Subordinated Creditor hereby covenants and agrees that it shall not acquire, hold, or enforce any lien on, or security interest in, any assets, properties, or revenues of the Company (or any subsidiary of the Company) as security for the Subordinated Debt. The Subordinated Notes are unsecured obligations of the Company, and no Subordinated Creditor shall seek or accept any collateral or other security for the Subordinated Debt. In the event that any Subordinated Creditor inadvertently or otherwise acquires any such lien or security interest, such Subordinated Creditor shall promptly release, terminate, and discharge such lien or security interest and execute and deliver to the Company and the Senior Lender all documents, instruments, and agreements reasonably necessary to effectuate such release, termination, and discharge.
Section 4.2 — Senior Lender Liens
Nothing in this Agreement shall in any way affect, impair, diminish, or otherwise limit the existing liens, security interests, and other encumbrances held by the Senior Lender in and to the assets, properties, and revenues of the Company under or pursuant to the Senior Loan Documents. Each Subordinated Creditor acknowledges that the Senior Lender holds a first-priority perfected security interest in substantially all of the assets of the Company, as more particularly described in the Senior Loan Documents, and agrees not to challenge, contest, or interfere with the validity, perfection, priority, or enforceability of any such lien or security interest.
ARTICLE V — REPRESENTATIONS AND WARRANTIES
Section 5.1 — Representations of the Subordinated Creditors
Each Subordinated Creditor hereby represents and warrants to the Senior Lender and the Company, severally and not jointly, as of the date hereof, as follows:
(a) Organization and Good Standing. Such Subordinated Creditor is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, as follows:
(i) Ridgeline Ventures Fund IV, L.P. is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware;
(ii) Beacon Hill Capital Partners, LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware;
(iii) Northstar Innovation Fund II, L.P. is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware; and
(iv) Halcyon Growth Equity, L.P. is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Power and Authority. Such Subordinated Creditor has full power and authority (including, in the case of any limited partnership, the full power and authority of its general partner, and in the case of any limited liability company, the full power and authority of its managing member or manager) to execute and deliver this Agreement and to perform its obligations hereunder.
(c) No Conflicts. The execution, delivery, and performance of this Agreement by such Subordinated Creditor does not and will not (i) violate, conflict with, or result in a breach of any provision of such Subordinated Creditor's certificate of limited partnership, limited partnership agreement, certificate of formation, limited liability company agreement, or other organizational or governing documents, (ii) violate any applicable law, statute, rule, regulation, order, judgment, or decree, or (iii) result in a breach of, constitute a default under, or require consent under any material agreement, contract, indenture, or instrument to which such Subordinated Creditor is a party or by which it or its assets may be bound.
(d) Enforceability. This Agreement has been duly executed and delivered by such Subordinated Creditor and constitutes the legal, valid, and binding obligation of such Subordinated Creditor, enforceable against such Subordinated Creditor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
Section 5.2 — Representations of the Company
The Company hereby represents and warrants to the Senior Lender and each Subordinated Creditor, as of the date hereof, as follows:
(a) Organization and Good Standing. The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware (Delaware Division of Corporations File Number 6384291; Employer Identification Number 83-2147605).
(b) Corporate Power and Authority. The Company has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(c) Board Authorization. The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all necessary corporate action, including pursuant to the Unanimous Written Consent of the Board of Directors of the Company, dated as of January 10, 2024, which approved the execution and delivery of this Agreement and each of the transactions contemplated hereby.
(d) No Conflicts. The execution, delivery, and performance of this Agreement by the Company does not and will not (i) violate, conflict with, or result in a breach of any provision of the Company's Amended and Restated Certificate of Incorporation, as amended, or the Company's Bylaws, as amended, (ii) violate, conflict with, or result in a breach of, or constitute a default under, the Senior Loan Agreement or any other Senior Loan Document, (iii) violate any applicable law, statute, rule, regulation, order, judgment, or decree, or (iv) result in a breach of, constitute a default under, or require consent under any material agreement, contract, indenture, or instrument to which the Company is a party or by which it or its assets may be bound.
(e) Consents and Approvals. No consent, approval, authorization, order, registration, qualification, filing, or other action of or with any governmental authority or any other Person is required for the execution, delivery, and performance by the Company of this Agreement, other than those that have been obtained or made as of the date hereof, including (i) the consent of Kelvantis Lending Corp. pursuant to the Consent Letter, dated as of January 12, 2024, and (ii) the written consent of the stockholders of the Company, dated as of January 12, 2024, to the extent required under the Company's Amended and Restated Certificate of Incorporation or applicable law.
Section 5.3 — Representations of the Senior Lender
Kelvantis Lending Corp. hereby represents and warrants to each Subordinated Creditor and the Company, as of the date hereof, as follows:
(a) Organization and Good Standing. The Senior Lender is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware.
(b) Corporate Power and Authority. The Senior Lender has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(c) Enforceability. This Agreement has been duly executed and delivered by the Senior Lender and constitutes the legal, valid, and binding obligation of the Senior Lender, enforceable against the Senior Lender in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
ARTICLE VI — COVENANTS
Section 6.1 — No Amendment to Subordinated Loan Documents
The Subordinated Creditors and the Company hereby covenant and agree that they shall not, without the prior written consent of the Senior Lender, amend, modify, supplement, restate, or otherwise change any Subordinated Loan Document (including the Note Purchase Agreement and any Subordinated Note) in any manner that would:
(a) increase the aggregate principal amount of the Subordinated Debt beyond Sixty Million Dollars ($60,000,000);
(b) increase the interest rate applicable to the Subordinated Debt above six percent (6.00%) per annum;
(c) shorten the stated maturity date of the Subordinated Debt to a date earlier than January 15, 2026, or add any mandatory prepayment, redemption, or put obligation with respect to the Subordinated Debt (other than as expressly provided in the Subordinated Loan Documents as of the date hereof);
(d) add any security interest, lien, or other encumbrance on any assets, properties, or revenues of the Company (or any subsidiary of the Company) as security for the Subordinated Debt;
(e) add or modify any covenant, event of default, or other provision that would be more restrictive on the Company than those contained in the Subordinated Loan Documents as of the date hereof in any manner that could reasonably be expected to adversely affect the Senior Lender's rights or interests under this Agreement or the Senior Loan Documents; or
(f) otherwise adversely affect the Senior Lender's rights or interests under this Agreement in any material respect.
For the avoidance of doubt, the Subordinated Creditors and the Company may amend, modify, supplement, or restate the Subordinated Loan Documents in any manner that does not implicate any of clauses (a) through (f) above without the consent of the Senior Lender.
Section 6.2 — No Amendment to Senior Loan Documents
The Senior Lender and the Company hereby covenant and agree that they shall not amend, modify, supplement, or restate the Senior Loan Documents in any manner that would materially increase the obligations of the Company thereunder, including, without limitation, (a) increasing the aggregate principal amount of the Senior Debt above Fifteen Million Dollars ($15,000,000), or (b) extending the stated maturity date of the Senior Debt beyond August 15, 2025, in each case without providing written notice of such amendment, modification, supplement, or restatement to the Subordinated Creditors (or the Required Subordinated Creditors) within ten (10) Business Days following the effectiveness of such amendment, modification, supplement, or restatement; provided, however, that the failure of the Senior Lender or the Company to give such notice shall not in any way affect the validity or enforceability of any such amendment, modification, supplement, or restatement, and shall not affect or impair the subordination of the Subordinated Debt to the Senior Debt pursuant to this Agreement.
Section 6.3 — Further Assurances
Each party hereto agrees that it shall, from time to time, at the reasonable request of any other party hereto, execute and deliver such further instruments, documents, agreements, and assurances (including, without limitation, acknowledgments, consents, ratifications, and confirmations) as may be reasonably necessary or desirable to carry out the purposes and intent of this Agreement and to give full effect to the subordination provisions set forth herein.
Section 6.4 — Legends
Each Subordinated Note issued pursuant to the Note Purchase Agreement shall bear a conspicuous legend in substantially the form set forth in Exhibit C attached hereto, referencing this Subordination Agreement and the subordination of the Subordinated Debt to the Senior Debt. Each Subordinated Creditor covenants and agrees that it shall not sell, transfer, assign, or otherwise dispose of any Subordinated Note unless such Subordinated Note bears such legend or the transferee or assignee has otherwise acknowledged in writing that it is bound by the terms of this Agreement. The Company shall not register the transfer of any Subordinated Note on its books unless the conditions set forth in this Section 6.4 have been satisfied.
Section 6.5 — Notice of Default
The Company shall promptly (and in any event within five (5) Business Days of obtaining knowledge thereof) notify both the Senior Lender and each Subordinated Creditor in writing of the occurrence of any default or event of default under the Senior Loan Documents or the Subordinated Loan Documents, specifying in reasonable detail the nature of such default or event of default and the actions, if any, being taken or proposed to be taken by the Company with respect thereto.
ARTICLE VII — ADDITIONAL AGREEMENTS
Section 7.1 — Senior Lender's Rights
The Senior Lender may, at any time and from time to time, without notice to or the consent of the Subordinated Creditors, and without in any way releasing, impairing, or otherwise affecting the subordination of the Subordinated Debt to the Senior Debt or the other obligations of the Subordinated Creditors or the Company under this Agreement:
(a) renew, extend, modify, amend, restate, supplement, increase, or refinance the Senior Debt, or enter into any new credit agreement or other financing arrangement with the Company, in each case on such terms and conditions as the Senior Lender may determine in its sole discretion;
(b) release, substitute, exchange, surrender, or otherwise dispose of any collateral or other security held by the Senior Lender in connection with the Senior Debt, or release any guarantor or other obligor with respect to the Senior Debt;
(c) waive any default or event of default under the Senior Loan Documents, or grant any consent, waiver, or approval under the Senior Loan Documents, in each case on such terms and conditions as the Senior Lender may determine in its sole discretion;
(d) exercise or refrain from exercising any right, power, or remedy available to the Senior Lender under the Senior Loan Documents or applicable law, including any right to accelerate the Senior Debt, foreclose upon any collateral, or pursue any other enforcement action; and
(e) take or refrain from taking any other action with respect to the Senior Debt, the Senior Loan Documents, or any collateral or other security held by the Senior Lender, in each case as the Senior Lender may determine in its sole discretion.
No such action by the Senior Lender shall impair, release, or otherwise affect the subordination of the Subordinated Debt to the Senior Debt or the obligations of the Subordinated Creditors or the Company under this Agreement, and each Subordinated Creditor hereby waives any defense to its obligations under this Agreement that may arise by reason of any such action.
Section 7.2 — Waiver of Certain Defenses
The subordination provisions of this Agreement shall not be affected, modified, or impaired by any defense that the Company may have or assert against the Senior Lender or any Subordinated Creditor, whether arising under the Senior Loan Documents, the Subordinated Loan Documents, or otherwise. Each Subordinated Creditor hereby waives any right to assert any defense of the Company (whether based on fraud, mistake, duress, illegality, failure of consideration, or otherwise) as a basis for avoiding or limiting its obligations under this Agreement. Without limiting the foregoing, the obligations of each Subordinated Creditor under this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of the Senior Debt is rescinded, reduced, or must otherwise be returned for any reason whatsoever.
Section 7.3 — Reliance
Each Subordinated Creditor acknowledges and agrees that the Senior Lender has entered into this Agreement and has consented to the incurrence of the Subordinated Debt by the Company in material reliance upon the subordination provisions and the other agreements of the Subordinated Creditors set forth in this Agreement. Each Subordinated Creditor further acknowledges that the Senior Lender would not have consented to the issuance of the Subordinated Notes or the execution and delivery of the Note Purchase Agreement by the Company absent the execution and delivery of this Agreement by the Subordinated Creditors.
ARTICLE VIII — TERMINATION
Section 8.1 — Termination
This Agreement shall terminate and be of no further force or effect upon the earliest to occur of:
(a) the payment in full in cash of all Senior Debt and the termination or expiration of all commitments of the Senior Lender to extend credit or financial accommodations to the Company under the Senior Loan Documents (including, without limitation, the maturity of the venture debt facility under the Senior Loan Agreement on August 15, 2025, or the earlier repayment of the Senior Debt in full in cash);
(b) the payment in full of all Subordinated Debt, whether by conversion of the Subordinated Notes into equity securities of the Company in accordance with the terms of the Note Purchase Agreement and the Subordinated Notes, or by cash repayment, or by any combination of the foregoing; or
(c) the written agreement of all parties hereto (including the Senior Lender, each Subordinated Creditor, and the Company) to terminate this Agreement.
Upon termination of this Agreement, the provisions hereof shall have no further force or effect; provided, however, that no such termination shall affect any rights or obligations of the parties hereto that have accrued prior to such termination, including, without limitation, any obligation of any Subordinated Creditor to deliver to the Senior Lender any payment or distribution received in violation of this Agreement prior to such termination.
Section 8.2 — Reinstatement
If at any time after the termination of this Agreement pursuant to Section 8.1(a) above, all or any part of any payment theretofore applied to the Senior Debt is rescinded, avoided, or must be returned, restored, or otherwise repaid by the Senior Lender for any reason whatsoever (including, without limitation, as a result of any Bankruptcy Event or any determination that such payment constituted a fraudulent conveyance or a preferential transfer under any applicable bankruptcy, insolvency, or similar law), then, to the extent that such payment is so rescinded, avoided, or returned, the subordination provisions of this Agreement shall be reinstated and deemed to be in full force and effect as if such payment had not been made, and each Subordinated Creditor shall promptly pay over to the Senior Lender all payments, distributions, or other amounts received by such Subordinated Creditor on account of the Subordinated Debt during the period from and after the date on which this Agreement was purportedly terminated through the date of such reinstatement, to the extent such payments, distributions, or amounts would not have been permitted under this Agreement if this Agreement had remained in effect. The provisions of this Section 8.2 shall survive any termination of this Agreement.
ARTICLE IX — MISCELLANEOUS
Section 9.1 — Notices
All notices, requests, demands, consents, instructions, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) when sent by confirmed electronic mail (with a copy sent by another method specified in this Section 9.1 within two (2) Business Days thereafter), (c) one (1) Business Day after being sent by nationally recognized overnight courier service (with charges prepaid), or (d) three (3) Business Days after being mailed by certified or registered mail, return receipt requested, postage prepaid, in each case addressed to the applicable party at the address set forth below (or at such other address as such party may from time to time specify by written notice to the other parties hereto in accordance with this Section 9.1):
If to the Senior Lender:
Kelvantis Lending Corp. 350 Park Avenue, 18th Floor New York, New York 10022
Attention: Theodore "Ted" Marsh, Relationship Manager
If to the Subordinated Creditors (or any of them):
Ridgeline Ventures Fund IV, L.P. 800 Boylston Street, 34th Floor Boston, Massachusetts 02199
Attention: Samuel Okonkwo
Beacon Hill Capital Partners, LLC 222 West Adams Street, Suite 3400 Chicago, Illinois 60606
Attention: Joanna Falkner
Northstar Innovation Fund II, L.P. 555 California Street, Suite 4100 San Francisco, California 94104
Attention: Wei-Lin Chang
Halcyon Growth Equity, L.P. 1201 Third Avenue, Suite 5600 Seattle, Washington 98101
Attention: Robert "Rob" Castillo
If to the Company:
Skybridge Fintech Ltd. 1400 Market Street, Suite 2200 Wilmington, Delaware 19801
Attention: Priya Ramanathan, General Counsel
With copies (which shall not constitute notice) to Company Counsel:
Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022
Attention: Leonard Ashford
With copies (which shall not constitute notice) to Investor Counsel:
Whitfield, Pratt & Soo LLP One Federal Street, 26th Floor Boston, Massachusetts 02110
Attention: Graham Whitfield
Section 9.2 — Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 9.3 — Jurisdiction; Venue
Each party hereto irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over any particular matter, the Superior Court of the State of Delaware), or the United States District Court for the District of Delaware, and any appellate court from any thereof, in any action, suit, or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, (b) agrees that all claims in respect of any such action, suit, or proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any such action, suit, or proceeding in any such court, and (d) waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of any such action, suit, or proceeding in any such court. Each party hereto agrees that a final judgment in any such action, suit, 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.
Section 9.4 — Waiver of Jury Trial
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT OF THIS AGREEMENT. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO EACH OTHER PARTY'S AGREEMENT TO ENTER INTO THIS AGREEMENT AND THAT EACH PARTY HAS BEEN REPRESENTED BY COUNSEL IN CONNECTION WITH THIS WAIVER.
Section 9.5 — Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No Subordinated Creditor may sell, assign, transfer, pledge, or otherwise dispose of its rights or obligations under this Agreement or the Subordinated Loan Documents (whether by operation of law or otherwise) without first requiring the assignee or transferee to execute and deliver to the Senior Lender a written instrument, in form and substance reasonably satisfactory to the Senior Lender, pursuant to which such assignee or transferee agrees to become bound by and subject to the terms and conditions of this Agreement as a "Subordinated Creditor" hereunder. Any attempted assignment or transfer by a Subordinated Creditor in violation of this Section 9.5 shall be null and void and of no force or effect. The Senior Lender may assign its rights under the Senior Loan Documents to any Person, and any such assignee or transferee shall be entitled to all of the rights and benefits of the Senior Lender under this Agreement to the same extent as if such assignee or transferee were the original Senior Lender hereunder.
Section 9.6 — Entire Agreement
This Agreement, together with the Exhibits attached hereto, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, discussions, agreements, and understandings, whether written or oral, relating to the subject matter hereof. There are no representations, warranties, covenants, or agreements among the parties hereto with respect to the subject matter hereof other than those expressly set forth or referred to herein.
Section 9.7 — Amendments and Waivers
No provision of this Agreement may be amended, modified, supplemented, or waived except by a written instrument executed by (a) the Senior Lender, (b) the Required Subordinated Creditors (i.e., Subordinated Creditors holding a majority in aggregate outstanding principal amount of the Subordinated Notes at the time of such amendment, modification, supplement, or waiver), and (c) the Company; provided, however, that no such amendment, modification, supplement, or waiver shall, without the written consent of each Subordinated Creditor directly and adversely affected thereby, (i) extend the Standstill Period beyond one hundred eighty (180) days, (ii) impose any additional obligations on any Subordinated Creditor, or (iii) modify the Permitted Payment provisions of Section 2.3 in a manner that would further restrict the payments permitted to be made to any Subordinated Creditor. No failure or delay by any party hereto in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.
Section 9.8 — Severability
If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. The parties hereto shall endeavor in good faith negotiations to replace any such invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that achieves, to the greatest extent possible, the economic, business, and other purposes of the invalid, illegal, or unenforceable provision.
Section 9.9 — Counterparts; Electronic Signatures
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which, taken together, shall constitute one and the same instrument. Signatures to this Agreement delivered by facsimile transmission or by electronic means, including in portable document format (PDF) or any electronic signature complying with the U.S. Federal ESIGN Act of 2000 (e.g., Brightwater Software), shall be deemed to be, and shall have the same force and effect as, original signatures.
Section 9.10 — No Third-Party Beneficiaries
This Agreement is entered into solely for the benefit of the parties hereto and their respective successors and permitted assigns, and nothing contained herein shall confer upon any Person other than the parties hereto and their respective successors and permitted assigns any right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement.
Section 9.11 — Headings
The article and section headings contained in this Agreement are inserted for convenience of reference only and shall not affect in any way the meaning, construction, or interpretation of this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be duly executed and delivered as of the date first written above.
SENIOR LENDER
KELVANTIS LENDING CORP.
By: ________
Name: Theodore "Ted" Marsh
Title: Relationship Manager
Date: January 15, 2024
SUBORDINATED CREDITORS
RIDGELINE VENTURES FUND IV, L.P.
By: Ridgeline Ventures Management IV, LLC,
its General Partner
By: ________
Name: Samuel Okonkwo
Title: Partner
Date: January 15, 2024
BEACON HILL CAPITAL PARTNERS, LLC
By: ________
Name: Joanna Falkner
Title: Managing Director
Date: January 15, 2024