Exhibit 10.1


SUBSCRIPTION
BOOKLET


VELOCITY
INVESTMENTS, LLC


Best Efforts
Offering

UP TO $2,000,000 OF

SUBORDINATED 14% PROMISSORY NOTES


May
15, 2008


	
 

	
 


	
CONTENTS

	
 


	
 

	
 


	
Instructions for Subscription


	
 

	
 


	
Exhibit A:

	
Wiring and Check Instructions


	
 

	
 


	
Exhibit B:

	
Summary of the Offering


	
 

	
 


	
Exhibit C:

	
Subscription Agreement


	
 

	
 


	
Exhibit D:

	
Confidential Purchaser Questionnaire 


	
 

	
 


	
Exhibit E

	
Form of Subordinated 14% Promissory Note


	
 

	
 


	
Exhibit F

	
Subordination Agreement


	
 

	
 


	
Exhibit G:

	
Risk Factors Rider


	
 

	
 


	
Exhibit H:

	
The Company’s Annual Report on Form 10-K for the
  fiscal year ended December 31, 2007 











VELOCITY
INVESTMENTS, LLC


SUBSCRIPTION BOOKLET


INSTRUCTIONS FOR SUBSCRIPTION FOR
NOTES


	
 

	
 

	
 


	
 

	
Each subscriber for Notes offered must do the
  following:


	
 

	
 

	
 


	
 

	
1.

	
Complete, sign and deliver the Subscription
  Agreement included in this Subscription Booklet.


	
 

	
 

	
 


	
 

	
2.

	
Complete, sign and deliver the Confidential
  Purchaser Questionnaire included in this Subscription Booklet.


	
 

	
 

	
 


	
 

	
3.

	
Complete, sign and deliver the Subordination
  Agreement in cluded in this Subscription Agreement


	
 

	
 

	
 


	
 

	
4.

	
Deliver payment in the amount of the Promissory Note
subscribed for in accordance with the wire transfer and check instructions
attached hereto as Exhibit A. 


	
 

	
 

	
 


	
 

	
 

	
Delivery of the completed subscription documents
  described above and check (if applicable) should be delivered directly to the
  Company at the following address:





Velocity Asset Management, Inc.

1800 Route 34 North, Building 4, Suite 404B

Wall, NJ 07719


Attention:
James J. Mastriani


THE COMPANY MAY ACCEPT OR REJECT SUBSCRIPTIONS IN ITS
SOLE DISCRETION.  THE OFFERING IS
AVAILABLE ONLY TO “ACCREDITED INVESTORS” AS DEFINED UNDER REGULATION D UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
In the event that a subscription offer is not accepted by the Company,
the subscription funds shall be returned to the subscriber, without interest or
deduction thereon.






EXHIBIT
A


Wire
and Check Instructions


Wiring
Instructions:


Wiring instructions will be provided under separate
cover.


Checks:


Checks should be made out to “Velocity Investments,
LLC”






Exhibit B


SUMMARY OF THE OFFERING


The
following summary is qualified in its entirety by the detailed information
appearing elsewhere in this Subscription Booklet.  Although this Subscription Booklet may provide potential Investors
with some references to subject headings, the information appearing under those
headings is not necessarily a complete or exclusive discussion or description
of that subject. References in this Subscription
Booklet to “we,” “us” and “our” are Velocity Investments,
LLC.


An
investment in the Securities offered hereby involves a high degree of
risk.  Prospective Investors are urged to read this Subscription Booklet carefully in its entirety including the
section entitled “Risk Factors,” and the exhibits attached hereto, including
the discussion and risk factors set forth in the Annual Report on Form 10-K for
the fiscal year ended December 31, 2007 of the Company’s parent, Velocity Asset
Management, Inc., a copy of which is attached hereto as Exhibit F.


	
 

	
 

	
 


	
The
  Company:

	
 

	
Velocity Investments, LLC (the “Company”) is a New Jersey limited
  liability company engaged primarily in acquiring, managing, collecting and
  servicing consumer receivable portfolios.
  The Company is a wholly-owned subsidiary of Velocity Asset Management,
  Inc., a Delaware corporation. The Company’s offices are located at 1800 Route
  34 North, Building 4, Suite 404A Wall, NJ, 07719, and our telephone number is
  (732) 556-9090.


	
 

	
 

	
 


	
Offering:

	
 

	
Subordinated 14% Promissory Notes (the “Notes”).


	
 

	
 

	
 


	
Amount
  of Offering:

	
 

	
The Company is offering up to an aggregate amount of
  $2,000,000 (the “Maximum Amount”)
  of Notes.  


	
 

	
 

	
 


	
Minimum
  Subscription:

	
 

	
$50,000, provided that the Company may, in its sole
  discretion and without notice to Investors, accept subscriptions for lesser
  amounts.


	
 

	
 

	
 


	
Management
  Participation:

	
 

	
The Company’s management, directors and 5%
  shareholders (the “Insiders”)
  shall have the right to participate as investors in the Offering.











	
 

	
 

	
 


	
Terms
  of the Placement:

	
 

	
The Notes are being offered by the Company only to
  persons who qualify as “accredited investors” on a “best efforts” basis
  during the term of the Offering, unless the Offering is terminated earlier in
  the Company’s sole discretion. The term of the Offering may be extended by an
  additional thirty (30) days, without notice to investors.  Subscriptions for Notes may not be revoked
  or withdrawn once tendered, except in accordance with certain state laws.


	
 

	
 

	
 


	
No
  Minimum and No Escrow

	
 

	
We are selling the Notes on a “best efforts” basis.
  There is no minimum amount of Notes which we must sell before we receive, and
  have the right to expend, the net proceeds from the sale of any Notes. The
  proceeds from the sale of the Notes will not be held in escrow, and we, upon
  accepting subscription, at our discretion may immediately expend the
  subscription proceeds.


	
 

	
 

	
 


	
Offering
  Period

	
 

	
The term of the Offering shall commence on the date
  hereof and shall terminate on the earlier to occur of: (i) the date, if any,
  on which the Maximum Amount has been subscribed for and accepted by the
  Company, or (ii) June 30, 2008 (the “Termination
  Date”).  The Termination
  Date may be extended for an additional thirty (30) days by the Company,
  without notice to Investors.


	
 

	
 

	
 


	
Closings:

	
 

	
The Company intends to conduct an initial closing
  (the “Initial Closing”) on or
  before the Termination Date, and may, after such initial closing, if any,
  conduct subsequent closings (each a “Subsequent
  Closing”) during the remainder of the term of the Offering until
  the earlier to occur of: (i) the date, if any, on which the Maximum Amount
  has been subscribed for and accepted by the Company, or (ii) the Termination
  Date.  The Termination Date may be
  extended for an additional thirty (30) days in the Company’s sole discretion,
  without notice to investors.


	
 

	
 

	
 


	
Restrictions
  on Resale:

	
 

	
None of the Notes have been registered under the
  Securities Act of 1933, as amended (the “Act”)
  and any certificates representing such Securities will contain a legend
  restricting the distribution, resale, transfer, pledge, hypothecation or
  other disposition of the Securities unless and until the Securities are
  registered under the Act or an opinion of counsel for the Company is received
  that registration is not required under the Act.  










	
 

	
 

	
 


	
Selling
  Agent Fees:

	
 

	
The Company has not engaged a selling agent,
  exclusive or otherwise, to assist it in the Offering.  However, the Company may do so at its
  discretion.  If the services of a selling
  agent are utilized, the Company may compensate such selling agent with: (i) a
  cash fee of up to five percent (105 of the aggregate consideration (prior to
  the payment of expenses) received by the Company for Notes sold by such
  selling agent (to be paid simultaneously with each applicable Closing. 


	
 

	
 

	
 


	
Subscription
  Agreement:

	
 

	
An investment in the Notes will be made pursuant to
  a Subscription Agreement substantially in the form of Exhibit C
  attached hereto and a Confidential Investor Questionnaire substantially in
  the form of Exhibit D attached hereto to be completed by each
  prospective Investor which, among other things, will require each prospective
  Investor to make certain representations to the Company regarding their
  status as accredited investors.


	
 

	
 

	
 


	
Use of Proceeds:

	
 

	
The net proceeds from this Offering (after deduction
  of offering expenses payable by the Company shall be used primarily for the purchase of portfolios of
  unsecured consumer receivables and for general corporate purposes, including
  working capital..  


	
 

	
 

	
 


	
Shares of Common Stock Presently
  Outstanding:

	
 

	
As of the date of this Memorandum, the Company had a
  total of 17,066,821 shares of Common Stock issued and outstanding. Such
  amounts do not include 10,109,410 shares of Common Stock underlying options,
  warrants, convertible debt or convertible preferred shares outstanding as of
  the date hereof, the exercise prices thereof ranging from $1.04 to $3.10 per
  share.


	
 

	
 

	
 


	
Shares of Series A-1 Preferred
  Stock Presently Outstanding:

	
 

	
As of the date of this Memorandum, the Company had a
  total of 1,380,000 shares of Series A-1 Convertible Preferred Stock issued
  and outstanding.  Such shares of
  series A-1 Convertible Preferred Stock are currently convertible into
  5,520,000 shares of the Company’s common stock.










EXHIBIT
C


SUBSCRIPTION
AGREEMENT


Please
review, sign on page S-1, and return to:


Velocity
Asset Management, Inc.

1800 Route 34 North, Building 4, Suite 404B

Wall,
NJ 07719


Attention: James J. Mastriani


Phone: (732) 556-9090

Fax: (732) 783-0406






VELOCITY
INVESTMENTS, LLC


SUBSCRIPTION
AGREEMENT


               The
undersigned (hereinafter “Subscriber”) hereby confirms his/her/its subscription
for the purchase of a Subordinated 14% Promissory Note (“Note”) of Velocity
Investments, LLC., a New Jersey limited liability company (the “Company”), on
the terms described below.  


          Capitalized
terms used and not otherwise defined herein shall have the respective meanings
set forth in the Memorandum.  The Notes
are sometimes referred to herein as the “Securities.”


          In
connection with this subscription, Subscriber and the Company agree as follows:


1. Purchase and Sale of the Note.


          (a)
The Company hereby agrees to issue and to sell to Subscriber, and Subscriber
hereby agrees to purchase from the Company, a Subordinated 14% Promissory Note
for the aggregate subscription amount set forth on the signature page
hereto.  The Subscriber understands that
this subscription is not binding upon the Company until the Company accepts
it.  The Subscriber acknowledges and
understands that acceptance of this Subscription will be made only by a duly
authorized representative of the Company executing and mailing or otherwise
delivering to the Subscriber at the Subscriber’s address set forth herein, a
counterpart copy of the signature page to this Subscription Agreement
indicating the Company’s acceptance of this Subscription.  The Company reserves the right, in its sole
discretion for any reason whatsoever, to accept or reject this subscription in
whole or in part.  Following the
acceptance of this Subscription Agreement by the Company, the Company shall
issue and deliver to Subscriber a Subordinated 14% Promissory Note subscribed
for hereunder against payment in U.S. Dollars of the Purchase Price (as defined
below).  If this subscription is
rejected, the Company and the Subscriber shall thereafter have no further
rights or obligations to each other under or in connection with this
Subscription Agreement.  If this
subscription is not accepted by the Company on or before the last day of the
Offering Period, this subscription shall be deemed rejected.


          (b)
Subscriber has hereby delivered and paid concurrently herewith the aggregate
purchase price for the Note set forth on the signature page hereof in an amount
required to purchase and pay for the Note subscribed for hereunder (the
“Purchase Price”), which amount has been paid in U.S. Dollars by wire transfer
or check, subject to collection, to the order of “Velocity Investments, LLC” 


          (c)
Subscriber understands and acknowledges that this subscription is part of a
private placement by the Company of up to $2,000,000 of Notes (the “Maximum Amount”), which offering is being made on a “best efforts” basis. Subscriber understands that there is no minimum amount of Notes which the Company must sell before it receives,
and have the right to expend, the net proceeds from the sale of any Notes. The proceeds from the sale of the Notes will not be held in escrow, and the Company,
upon accepting subscriptions, at its discretion may immediately expend the
subscription proceeds. 


1






2. Representations and Warranties of Subscriber.  Subscriber represents and warrants to the
Company and the Placement Agent as follows:


          (a)
Subscriber is an “accredited investor” as defined by Rule 501 under the
Securities Act of 1933, as amended (the “Act”), and Subscriber is capable of
evaluating the merits and risks of Subscriber’s investment in the Note and has
the ability and capacity to protect Subscriber’s interests. 


          (b)
Subscriber understands that the Note is not presently registered.  Subscriber understands that the Note will
not be registered under the Act on the ground that the issuance thereof is
exempt under Section 4(2) of the Act as a transaction by an issuer not involving
any public offering and that, in the view of the Commission, the statutory
basis for the exception claimed would not be present if any of the
representations and warranties of Subscriber contained in this Subscription
Agreement or those of other purchasers of the Notes are untrue or, notwithstanding
the Subscriber’s representations and warranties, the Subscriber currently has
in mind acquiring any of the Notes for resale upon the occurrence or
non-occurrence of some predetermined event.


          (c)
Subscriber is purchasing the Note subscribed for hereby for investment purposes
and not with a view to distribution or resale, nor with the intention of
selling, transferring or otherwise disposing of all or any part thereof for any
particular price, or at any particular time, or upon the happening of any
particular event or circumstance, except selling, transferring, or disposing
the Note in full compliance with all applicable provisions of the Act, the
rules and regulations promulgated by the United States Securities and Exchange
Commission (the “SEC”) thereunder, and applicable state securities laws; and
that an investment in the Securities is not a liquid investment. 


          (d)
Subscriber acknowledges that Subscriber has had the opportunity to ask
questions of, and receive answers from, the Company or any authorized person
acting on its behalf concerning the Company and its business and to obtain any
additional information, to the extent possessed by the Company (or to the
extent it could have been acquired by the Company without unreasonable effort
or expense) necessary to verify the accuracy of the information received by
Subscriber.  In connection therewith,
Subscriber acknowledges that Subscriber has had the opportunity to discuss the
Company’s business, management and financial affairs with the Company’s
management or any authorized person acting on its behalf.  Subscriber has received and reviewed the
Subscription Booklet and all the information concerning the Company and the
Notes, both written and oral, that Subscriber desires.  Without limiting the generality of the
foregoing, Subscriber has been furnished with or has had the opportunity to
acquire, and to review: (i) copies of all of the Company’s publicly available
documents, including but not limited to those attached to the Subscription
Booklet, and (ii) all information, both written and oral, that Subscriber
desires with respect to the Company’s business, management, financial affairs
and prospects.  In determining whether
to make this investment, Subscriber has relied solely on (i) Subscriber’s own
knowledge and understanding of the Company and its business based upon
Subscriber’s own due diligence investigations and the information furnished
pursuant to this paragraph, and (ii) the information described in subparagraph
2(g) below.  Subscriber understands that
no person has been authorized to give any information or to make any
representations which were not contained in the Subscription Booklet and
Subscriber has not relied on any other representations or information.


2






          (f)
Subscriber has all requisite legal and other power and authority to execute and
deliver this Subscription Agreement and to carry out and perform Subscriber’s
obligations under the terms of this Subscription Agreement.  This Subscription Agreement constitutes a
valid and legally binding obligation of Subscriber, enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other general principles of equity, whether
such enforcement is considered in a proceeding in equity or law.


          (g)
Subscriber has carefully considered and has discussed with the Subscriber’s
legal, tax, accounting and financial advisors, to the extent the Subscriber has
deemed necessary, the suitability of this investment and the transactions
contemplated by this Subscription Agreement for the Subscriber’s particular
federal, state, local and foreign tax and financial situation and has
independently determined that this investment and the transactions contemplated
by this Subscription Agreement are a suitable investment for the
Subscriber.  Subscriber has relied
solely on such advisors and not on any statements or representations of the
Company or any of its agents.
Subscriber understands that Subscriber (and not the Company) shall be
responsible for Subscriber’s own tax liability that may arise as a result of
this investment or the transactions contemplated by this Subscription Agreement.


          (h)
This Subscription Agreement and the Confidential Purchaser Questionnaire
accompanying this Subscription Agreement do not contain any untrue statement of
a material fact or omit any material fact concerning Subscriber.


          (i)
There are no actions, suits, proceedings or investigations pending against
Subscriber or Subscriber’s assets before any court or governmental agency (nor,
to Subscriber’s knowledge, is there any threat thereof) which would impair in
any way Subscriber’s ability to enter into and fully perform Subscriber’s
commitments and obligations under this Subscription Agreement or the
transactions contemplated hereby.


          (j)
The execution, delivery and performance of and compliance with this
Subscription Agreement and the issuance of the Note will not result in any
violation of, or conflict with, or constitute a default under, any of
Subscriber’s articles of incorporation or by-laws, or equivalent limited
liability company, trust or partnership documents, if applicable, or any
agreement to which Subscriber is a party or by which it is bound, nor result in
the creation of any mortgage, pledge, lien, encumbrance or charge against any
of the assets or properties of Subscriber or the Securities.


3






          (k)
Subscriber acknowledges that an investment in the Note is speculative and
involves a high degree of risk and that Subscriber can bear the economic risk
of the purchase of the Note, including a total loss of his/her/its investment.


          (l)
Subscriber acknowledges that he/she/it has carefully reviewed and considered
the risk factors discussed in the “Risk Factors” section of the Subscription
Booklet.


          (m)
Subscriber recognizes that no federal, state or foreign agency has recommended
or endorsed the purchase of the Note.


          (n)
Subscriber is aware that the Note is and will be, when issued, “restricted
securities” as that term is defined in Rule 144 of the general rules and
regulations under the Act.


          (o)
Subscriber understands that the Note shall bear the following legend or one
substantially similar thereto, which Subscriber has read and understands:


NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT
MAY BE CONVERTED HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY SECURITY INTO
WHICH IT MAY BE CONVERTED NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF AT ANY TIME IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION.  


          (p)
Subscriber understands that the security interest granted to Subscriber with
respect to the assets of the Company is subordinate to Wells Fargo Foothill,
LLC and Subscriber has simultaneously herewith executed that certain
Subordination Agreement which is attached to the Subscription Booklet as
Exhibit G.  Subscriber understands that
the Note shall bear the following legend or one substantially similar thereto,
which Subscriber has read and understands:


NOTICE
OF SUBORDINATION


THIS NOTE IS
SUBORDINATED TO ALL SENIOR INDEBTEDNESS (AS DEFINED HEREIN) OWING TO WELLS
FARGO FOOTHILL, LLC, AND CERTAIN OTHER LENDERS.  BY ACCEPTANCE OF THIS NOTE, THE HOLDER HEREOF AGREES TO BE BOUND
BY THE SUBORDINATION PROVISIONS SET FORTH HEREIN.


          (q)
Because of the legal restrictions imposed on resale, Subscriber understands
that the Company shall have the right to note stop-transfer instructions in its
stock transfer records, and Subscriber has been informed of the Company’s
intention to do so.  Any sales,
transfers, or other dispositions of the Note by Subscriber, if any, will be
made in compliance with the Act and all applicable rules and regulations
promulgated thereunder.


4






          (r)
Subscriber acknowledges that Subscriber has such knowledge and experience in
financial and business matters that Subscriber is capable of evaluating the
merits and risks of an investment in the Securities and of making an informed
investment decision with respect thereto.


          (s)
Subscriber represents that: (i) Subscriber is able to bear the economic risks
of an investment in the Securities and to afford a complete loss of the
investment, and (ii) (A) Subscriber could be reasonably assumed to have the
ability and capacity to protect his/her/its interests in connection with this
subscription; or (B) Subscriber has a pre-existing personal or business
relationship with either the Company or any affiliate thereof of such duration
and nature as would enable a reasonably prudent purchaser to be aware of the
character, business acumen and general business and financial circumstances of
the Company or such affiliate and is otherwise personally qualified to evaluate
and assess the risks, nature and other aspects of this subscription.


          (t)
Subscriber further represents that the address of Subscriber set forth below is
his/her principal residence (or, if Subscriber is a company, partnership or
other entity, the address of its principal place of business); that Subscriber
is purchasing the Note for Subscriber’s own account and not, in whole or in
part, for the account of any other person; Subscriber is purchasing the Note
for investment and not with a view to the resale or distribution thereof; and
that Subscriber has not formed any entity, and is not an entity formed, for the
purpose of purchasing the Note.


          (u)
Subscriber understands that the Company shall have the unconditional right to
accept or reject this subscription, in whole or in part, for any reason or
without a specific reason, in the sole and absolute discretion of the Company
(even after receipt and clearance of Subscriber’s funds).  This Subscription Agreement is not binding
upon the Company until accepted in writing by an authorized officer of the
Company.  In the event that this
subscription is rejected, then Subscriber’s subscription funds (to the extent
of such rejection) will be promptly returned in full without interest thereon or
deduction therefrom.


          (v)
Subscriber has not been furnished with any oral representation or oral
information in connection with the offering of the Notes that is not contained
in, or is in any way contrary to or inconsistent with, statements made in the
Memorandum and this Subscription Agreement.


          (w)
Subscriber represents that Subscriber is not subscribing for the Note as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over the Internet, television or radio or presented at any seminar or
meeting or any public announcement or filing of or by the Company.


5






          (x)
Subscriber has carefully read this Subscription Agreement and the Subscription
Booklet, and Subscriber has accurately completed the Confidential Purchaser
Questionnaire which accompanies this Subscription Agreement.


          (y)
No representations or warranties have been made to Subscriber by the Company,
or any officer, employee, agent, affiliate or subsidiary of the Company, other
than the representations of the Company contained herein, and in subscribing
for the Securities the Subscriber is not relying upon any representations other
than those contained in the Memorandum or in this Subscription Agreement.


          (z)
Subscriber represents and warrants, to the best of Subscriber’s knowledge, that
no finder, broker, agent, financial advisor or other intermediary, nor any
purchaser representative or any broker-dealer acting as a broker, is entitled
to any compensation in connection with the transactions contemplated by this
Subscription Agreement.


          (aa)
Subscriber represents and warrants that Subscriber has: (i) not distributed or
reproduced the Subscription Booklet, in whole or in part, at any time, without
the prior written consent of the Company, (ii) kept confidential the existence
of the Subscription Booklet and the information contained therein or made
available in connection with any further investigation of the Company and (iii)
refrained and shall refrain from trading in the publicly-traded securities of
the Company for so long as such recipient has been in possession of the
material non-public information contained in the Subscription Booklet.


          (bb)
If the Subscriber is a corporation, partnership, limited liability company,
trust, or other entity, the person executing this Subscription Agreement hereby
represents and warrants that the above representations and warranties shall be
deemed to have been made on behalf of such entity and the Subscriber has made
the same after due inquiry to determine the truthfulness of such
representations and warranties.


          (cc)  If the Subscriber is a corporation,
partnership, limited liability company, trust, or other entity, it represents
that: (i) it is duly organized, validly existing and in good standing in its
jurisdiction of incorporation or organization and has all requisite power and
authority to execute and deliver this Subscription Agreement and purchase the
Note as provided herein; (ii) its purchase of the Note will not result in any
violation of, or conflict with, any term or provision of the charter, By-Laws
or other organizational documents of Subscriber or any other instrument or
agreement to which the Subscriber is a party or is subject; (iii) the execution
and delivery of this Subscription Agreement and Subscriber’s purchase of the
Note has been duly authorized by all necessary action on behalf of the
Subscriber; and (iv) all of the documents relating to the Subscriber’s
subscription to the Note have been duly executed and delivered on behalf of the
Subscriber and constitute a legal, valid and binding agreement of the
Subscriber.


6






3. Representations and Warranties of the Company.  The Company represents and warrants to
Subscriber as follows:


          (a)
The Company is duly organized and validly exists as a limited liability company
in good standing under the laws of the State of New Jersey.


          (b)
The Company has all requisite corporate power and authority to enter into,
deliver and perform this Subscription Agreement.


          (c)
All necessary corporate action has been duly and validly taken by the Company
to authorize the execution, delivery and performance of this Subscription
Agreement by the Company, and the issuance and sale of the Notes to be sold by
the Company pursuant to this Subscription Agreement.  This Subscription Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity, whether considered in a proceeding in equity or law.


          (d)
The transaction contemplated hereby will not result in the application of any
anti-dilution or price protection provisions attributable to any of the
Company’s existing and outstanding securities, whether equity, debt or a hybrid
thereof.


4. Indemnification.  Subscriber agrees to indemnify and hold harmless the Company, the
Placement Agent, and their respective officers, directors, employees,
shareholders, agents, attorneys, representatives and affiliates, and any person
acting for or on behalf of the Company or the Placement Agent, from and against
any and all damage, loss, liability, cost and expense (including reasonable
attorneys’ fees and disbursements) which any of them may incur by reason of the
failure by Subscriber to fulfill any of the terms and conditions of this
Subscription Agreement, or by reason of any breach of the representations and
warranties made by Subscriber herein, or in any other document provided by
Subscriber to the Company in connection with this investment.  All representations, warranties and
covenants of each of Subscriber and the Company contained herein shall survive
the acceptance of this subscription and the Closings.


5. Miscellaneous.


          (a)
Subscriber agrees not to transfer or assign this Subscription Agreement or any
of Subscriber’s interest herein and further agrees that the transfer or
assignment of the Securities acquired pursuant hereto shall be made only in
accordance with all applicable laws.


          (b)
Subscriber agrees that Subscriber cannot cancel, terminate, or revoke this
Subscription Agreement or any agreement of Subscriber made hereunder, and this
Subscription Agreement shall survive the death or legal disability of
Subscriber and shall be binding upon Subscriber’s heirs, executors,
administrators, successors, and permitted assigns.


          (c)
Subscriber has read and has accurately completed this entire Subscription
Agreement.


7






          (d)
This Subscription Agreement, together with the Subscription Booklet and the
Note, constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and may be amended or waived only by a written
instrument signed by all parties.


          (f)
Subscriber acknowledges that it has been advised and has had the opportunity to
consult with Subscriber’s own attorney regarding this subscription and
Subscriber has done so to the extent that Subscriber deems appropriate.


          (g)
Any notice or other document required or permitted to be given or delivered to
the parties hereto shall be in writing and sent: (i) by fax if the sender on
the same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid) or (c) by a recognized overnight
delivery service (with charges prepaid). 


	
 

	
 


	
 

	
If to the Company, at:


	
 

	
 


	
 

	
Velocity Investments, LLC.


	
 

	
Building 4, Suite 404A


	
 

	
Wall, NJ 07719 


	
 

	
Attn. James J. Mastriani 


	
 

	
Tel: (732) 556-9090, Fax: (732) 783-0406


	
 

	
 


	
 

	
With a copy to:


	
 

	
 


	
 

	
Douglas S. Ellenoff, Esq.


	
 

	
Ellenoff Grossman & Schole LLP


	
 

	
150 East 42nd Street


	
 

	
New York, NY 10017


	
 

	
Tel: (212) 370-1300, Fax: (212) 370-7889


	
 

	
 


	
 

	
If to the Subscriber, at its address set forth on
  the signature page to this Subscription Agreement, or such other address as
  Subscriber shall have specified to the Company in writing 





          (h)
Failure of the Company to exercise any right or remedy under this Subscription
Agreement or any other agreement between the Company and the Subscriber, or
otherwise, or any delay by the Company in exercising such right or remedy, will
not operate as a waiver thereof.  No
waiver by the Company will be effective unless and until it is in writing and
signed by the Company.


          (i)
This Subscription Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of New York, as such laws are
applied by the New York courts except with respect to the conflicts of law
provisions thereof, and shall be binding upon the Subscriber and the
Subscriber’s heirs, estate, legal representatives, successors and permitted assigns
and shall inure to the benefit of the Company, and its successors and assigns.



8






          (j)
Any legal suit, action or proceeding arising out of or relating to this
Subscription Agreement or the transactions contemplated hereby shall be
instituted exclusively in New York Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York.  The parties hereto hereby: (i) waive any
objection which they may now have or hereafter have to the venue of any such suit,
action or proceeding, and (ii) irrevocably consent to the jurisdiction of the
New York Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding.  The parties further agree
to accept and acknowledge service of any and all process which may be served in
any such suit, action or proceeding in the New York Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New York and agree that service of process upon a party which is mailed by
certified mail to such party’s address shall be deemed in every respect
effective service of process upon such party in any such suit, action or
proceeding.


          (k)
If any provision of this Subscription Agreement is held to be invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed modified to conform with such statute or rule of law.  Any provision hereof that may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provisions hereof.


          (l)  The parties understand and agree that money
damages would not be a sufficient remedy for any breach of this Subscription
Agreement by the Company or the Subscriber and that the party against which
such breach is committed shall be entitled to equitable relief, including an
injunction and specific performance, as a remedy for any such breach, without
the necessity of establishing irreparable harm or posting a bond therefor.  Such remedies shall not be deemed to be the
exclusive remedies for a breach by either party of this Subscription Agreement
but shall be in addition to all other remedies available at law or equity to
the party against which such breach is committed.


          (m)
All pronouns and any variations thereof used herein shall be deemed to refer to
the masculine, feminine, singular or plural, as identity of the person or
persons may require.  


          (n)  This Subscription Agreement may be executed
in counterparts and by facsimile, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.


[Remainder of Page
intentionally left blank]


[Signature Pages
Follow]


9






Signature
Page for Individuals:


          IN
WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
executed as of the date indicated below.


	
 

	
 

	
 


	
$

	
 

	
 


	


	
 

	



	
Purchase Price

	
 

	
Principal Amount of Note


	
 

	
 

	
 


	


	
 

	



	
Print or Type Name

	
 

	
Print or Type Name (Joint-owner)


	
 

	
 

	
 


	


	
 

	



	
Signature

	
 

	
Signature (Joint-owner)


	
 

	
 

	
 


	


	
 

	



	
Date

	
 

	
Date (Joint-owner)


	
 

	
 

	
 


	


	
 

	



	
Social Security Number

	
 

	
Social Security Number (Joint-owner)


	
 

	
 

	
 


	


	
 

	



	
Address

	
 

	
Address (Joint-owner)


	
 

	
 

	
 


	
_________ Joint Tenancy

	
 

	
______ Tenants in
  Common





S-1






Signature Page for Partnerships, Corporations or Other
Entities:


          IN
WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
executed as of the date indicated below.


	
 

	
 

	
 


	
$

	
 

	
$


	


	
 

	



	
Total Purchase Price

	
 

	
Principal Amount of Note


	
 

	
 

	
 


	


	
 

	
 


	
Print or Type Name of Entity

	
 

	
 


	
 

	
 

	
 


	



	
Address

	
 

	
 


	
 

	
 

	
 


	


	
 

	



	
Taxpayer I.D. No. (if applicable)

	
 

	
Date


	
 

	
 

	
 


	


	
 

	



	
Signature

	
 

	
Print or Type Name and Indicate


	
 

	
 

	
Title or Position with Entity


	
 

	
 

	
 


	


	
 

	



	
Signature (other authorized signatory)

	
 

	
Print or Type Name and Indicate


	
 

	
 

	
Title or Position with Entity





S-1






Acceptance:


          IN
WITNESS WHEREOF, the Company has caused this Subscription Agreement to be
executed, and the foregoing subscription accepted, as of the date indicated
below, as to a Subordinated 14% Promissory Note in the principle amount of
$_______.


	
 

	
 

	
 

	
 


	
 

	
 

	
VELOCITY INVESTMENTS, LLC.


	
 

	
 

	
 


	
 

	
 

	
By: 

	
/s/ Peter Ragan, Jr.


	
 

	
 

	
 

	



	
 

	
 

	
 

	
Peter Ragan, Jr.


	
 

	
 

	
 

	
President


	
 

	
 

	
 


	
Date: ______________________________, 2008





S-2






EXHIBIT
D


CONFIDENTIAL
PURCHASER QUESTIONNAIRE


Please
review, sign on page 6, and return to:


Velocity
Asset Management, Inc.

1800 Route 34 North, Building 4, Suite 404B

Wall,
NJ 07719


Attention: James J. Mastriani


Phone: (732) 556-9090

Fax: (732) 783-0406






CONFIDENTIAL
PURCHASER QUESTIONNAIRE


VELOCITY
INVESTMENTS, LLC


THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED
ALONG WITH YOUR COMPLETED SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR
PROSPECTIVE PURCHASE OF SECURITIES FROM VELOCITY INVESTMENTS, LLC (THE
“COMPANY”).


THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE
HELD IN STRICT CONFIDENCE.  NO
INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS
REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR IN
LITIGATION INVOLVING THE COMPANY.


Capitalized terms used herein without definition shall
have the respective meanings given such terms as set forth in the Subscription
Agreement between Velocity Investments, LLC. and the subscriber signatory
thereto (the “Subscription Agreement”).


          (1)
The undersigned represents and warrants that he, she or it comes within at
least one category marked below, and that for any category marked, he, she or
it has truthfully set forth, where applicable, the factual basis or reason the
undersigned comes within that category.
The undersigned agrees to furnish any additional information which the
Company deems neces­sary in order to verify the answers set forth below.


	
 

	
 

	
 


	
Category A _____

	
 

	
The undersigned is an
  individual (not a partnership, corporation, etc.) whose individual net worth,
  or joint net worth with his or her spouse, presently exceeds $1,000,000.


	
 

	
 

	
 


	
 

	
 

	
Explanation.  In calculating net worth you may include
  equity in personal property and real estate, including your principal
  residence, cash, short-term investments, stock and securities.  Equity in personal property and real
  estate should be based on the fair market value of such property less debt
  secured by such property.


	
 

	
 

	
 


	
Category B _____

	
 

	
The undersigned is an
  individual (not a partnership, corporation, etc.) who had an income in excess
  of $200,000 in each of the two most recent years, or joint income with his or
  her spouse in excess of $300,000 in each of those years (in each case
  including foreign income, tax exempt income and full amount of capital gains
  and losses but excluding any income of other family members and any
  unrealized capital appreciation) and has a reasonable expectation of reaching
  the same income level in the current year.










	
 

	
 

	
 


	
Category C _____

	
 

	
The undersigned is a
  director or executive officer of the Company which is issuing and selling the
  Securities.


	
 

	
 

	
 


	
Category D _____

	
 

	
The undersigned is a bank,
  as defined in Section 3(a)(2) of the Securities Act of 1933, as amended
  (the “Act”); a savings and loan associa­tion or other institution as defined
  in Section 3(a)(5)(A) of the Act, whether acting in its individual or
  fiduciary capacity; any insurance company as defined in Section 2(13) of
  the Act; any investment company registered under the Investment Company Act of
  1940 or a business development company as defined in Section 2(a)(48) of
  that Act; any Small Business Investment Company licensed by the U.S. Small
  Business Administration under Section 301(c) or (d) of the Small
  Business Investment Act of 1958; any plan established and maintained by a
  state, its political subdivisions, or any agency or instrumentality of a
  state or its political subdivisions, for the benefit of its employees, if
  such plan has total assets in excess of $5,000,000; any employee benefit plan
  within the meaning of the Employee Retirement Income Security Act of 1974 if
  the investment decision is made by a plan fiduciary, as defined in
  Section 3(21) of such act, which is either a bank, savings and loan
  association, insurance company, or registered investment advisor, or if the
  employee benefit plan has total assets in excess of $5,000,000 or, if a
  self-directed plan, with investment decisions made solely by persons that are
  accredited investors (describe entity).


	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	



	
 

	
 

	
 


	
Category E _____

	
 

	
The undersigned is a
  private business development company as defined in section 202(a) (22) of the
  Investment Advisors Act of 1940 (describe entity).  


	
 

	
 

	
 


	
Category F _____

	
 

	
The undersigned is either
  a corporation, partnership, Massachusetts business trust, or non-profit
  organization within the meaning of Section 501(c)(3) of the Internal
  Revenue Code, in each case not formed for the specific purpose of acquiring
  the Securities and with total assets in excess of $5,000,000 (describe
  entity).


	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	











	
 

	
 

	
 


	
Category G _____

	
 

	
The undersigned is a trust
  with total assets in excess of $5,000,000, not formed for the specific
  purpose of acquiring the Securities, where the purchase is directed by a
  “sophisticated investor” as defined in Regulation  506(b)(2)(ii) under the Act.


	
 

	
 

	
 


	
Category H _____

	
 

	
The undersigned is an
  entity (other than a trust) in which all of the equity owners are “accredited
  investors” within one or more of the above categories.  If relying upon this Category alone, each
  equity owner must complete a separate copy of this Purchaser Questionnaire
  (describe entity).


	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	



	
 

	
 

	
 


	
 

	
 

	
The undersigned agrees
  that the undersigned will notify the Company at any time on or prior to the
  applicable Closing (as defined in the Memorandum) in the event that the
  representations and warranties in this Purchaser Questionnaire shall cease to
  be true, accurate and complete.








	
 

	
 

	
 

	
 

	
 


	
(2)

	
 

	
Suitability (please answer
  each question)


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
 

	
For an individual, please
  describe your current employment, including the company by which you are
  employed and its principal business:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	



	
 

	
 

	



	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
 

	
For an individual, please
  describe any college or graduate degrees held by you:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	



	
 

	
 

	



	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
 

	
For all subscribers,
  please list types of prior investments:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	



	
 

	
 

	



	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(d)

	
 

	
For all subscribers,
  please state whether you have you participated in other private placements before:








	
 

	
 

	
 

	
 

	
 


	
 

	
YES  __________

	
 

	
NO  __________

	
 










	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(e)

	
 

	
If your answer to question
  (d) above was “YES”, please indicate frequency of such prior participation in
  private placements of:








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Public

  Companies

	
 

	
Private

  Companies


	
 

	
 

	
 

	


	
 

	



	
 

	
Frequently

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	


	
 

	



	
 

	
Occasionally

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	


	
 

	



	
 

	
Never

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	


	
 

	









	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(f)

	
 

	
For individuals, do you
  expect your current level of income to significantly decrease in the
  foreseeable future?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________








	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(g)

	
 

	
For trust, corporate,
  partnership and other institutional subscribers, do you expect your total
  assets to significantly decrease in the foreseeable future?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________








	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(h)

	
 

	
For all subscribers, do
  you have any other investments or contingent liabilities which you reasonably
  anticipate could cause you to need sudden cash requirements in excess of cash
  readily available to you?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________








	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
 

	
For all subscribers, are
  you familiar with the risk aspects and the non-liquidity of investments such
  as the Securities for which you seek to purchase?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________








	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(j)

	
 

	
For all subscribers, do
  you understand that there is no guarantee of financial return on this
  investment and that you run the risk of losing your entire investment?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________










	
 

	
 

	
 

	
 

	
 


	
(3)

	
 

	
Manner in which title is
  to be held: (circle one)








	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
 

	
Individual Ownership


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
 

	
Community Property


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
 

	
Joint Tenant with Right of
  Survivorship (both parties must sign)


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(d)

	
 

	
Partnership


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(e)

	
 

	
Tenants in Common


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(f)

	
 

	
Company


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(g)

	
 

	
Trust


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(h)

	
 

	
Other


	
 

	
 

	
 

	
 

	
 


	
(4)

	
 

	
FINRA Affiliation.


	
 

	
 

	
 


	
 

	
 

	
Are you affiliated or
  associated with an FINRA member firm (please check one):








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
________

	
 

	
NO

	
__________








	
 

	
 


	
 

	
If Yes, please describe
  how you are affiliated/associated:


	
 

	
 


	
 

	



	
 

	



	
 

	



	
 

	
 


	
 

	
*If subscriber is a
  Registered Representative with an FINRA member firm, have the following
  acknowledgment signed by the appropriate party:


	
 

	
 


	
 

	
The undersigned FINRA
  member firm acknowledges receipt of the notice required by the FINRA Conduct
  Rules.








	
 

	
 

	
 


	
 

	



	
 

	
Name of FINRA Member Firm


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
 

	
Authorized Officer


	
 

	
 

	
 


	
 

	
Date:

	
 


	
 

	
 

	











	
 

	
 

	
 

	
 

	
 


	
(5)

	
 

	
For Trust Subscribers





          A. Certain trusts generally may not qualify as
accredited investors except under special circumstances.  Therefore, if you intend to purchase the
shares of the Company’s stock in whole or in part through a trust, please
answer each of the following questions.


          Is
the trustee of the trust a national or state bank that is acting in its
fiduciary capacity in making the investment on behalf of the trust?


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o





          Does
this investment in the Company exceed 10% of the trust assets?


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o





          B.
If the trust is a revocable trust,
please complete Question 1 below.  If
the trust is an irrevocable trust,
please complete Question 2 below.


	
 

	
 

	
 

	
 


	
 

	
1.

	
 

	
REVOCABLE
  TRUSTS


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Can the trust be amended
  or revoked at any time by its grantors:








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o








	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
If yes, please answer the
  following questions relating to each grantor (please add sheets if
  necessary):


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Grantor Name:
  _________________________





          Net
worth of grantor (including spouse, if applicable), including home, home
furnishings and automobiles exceeds $1,000,000?


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o





OR


          Income
(exclusive of any income attributable to spouse) was in excess of $200,000 for
2006 and 2007 and is reasonably expected to be in excess of $200,000 for 2008?


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o





OR


          Income
(including income attributable to spouse) was in excess of $300,000 for 2006
and 2007 and is reasonably expected to be in excess of $300,000 for 2008?


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o










	
 

	
 

	
 

	
 


	
 

	
2.

	
 

	
IRREVOCABLE
  TRUSTS


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
If the trust is an
  irrevocable trust, please answer the following questions:


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Please provide the name of
  each trustee:


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Trustee Name:


	
 

	
 

	
 

	



	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Trustee
  Name:


	
 

	
 

	
 

	



	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
          Does
  the trust have assets greater than $5 million?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o








	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
          Do
  you have such knowledge and experience in financial and business matters as
  to be capable of evaluating the merits and risks of an investment in the
  Company?








	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
YES

	
o

	
 

	
NO

	
o








	
 

	
 

	
 

	
 

	
 


	
 

	
Indicate how often you
  invest in:


	
 

	
 


	
 

	
Marketable Securities


	
 

	
 


	
 

	
Often o

	
Occasionally o

	
Seldom o

	
Never o


	
 

	
 

	
 

	
 

	
 


	
 

	
Restricted Securities


	
 

	
 

	
 

	
 

	
 


	
 

	
Often o

	
Occasionally o

	
Seldom o

	
Never o


	
 

	
 

	
 

	
 

	
 


	
 

	
Venture Capital Companies


	
 

	
 

	
 

	
 

	
 


	
 

	
Often o

	
Occasionally o

	
Seldom o

	
Never o










          The
undersigned has been informed of the significance to the Company of the foregoing
representations and answers contained in this Confidential Purchaser
Questionnaire and such representations and answers have been provided with the
understanding that the Company and the Selling Agent will rely on them.  


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Individual


	
 

	
 

	
 

	
 

	
 


	
Date:

	
 

	
 

	
 

	
 


	
 

	


	
 

	
 

	



	
 

	
 

	
 

	
 

	
Name of Individual


	
 

	
 

	
 

	
 

	
(Please type or print)


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
Signature of Individual


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
Name of Joint Owner 


	
 

	
 

	
 

	
 

	
(Please type or print)


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
Signature (Joint Owner)


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Partnership,
  Corporation or


	
 

	
 

	
 

	
 

	
Other
  Entity


	
 

	
 

	
 

	
 

	
 


	
Date:

	
 

	
 

	
 

	
 


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
Print or Type Entity Name


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
By:

	
Name:


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
Print or Type Name


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Title:

	
 


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	



	
 

	
 

	
 

	
Signature


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Title:

	
 


	
 

	
 

	
 

	
 

	



	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	



	
 

	
 

	
 

	
Signature (other
  authorized signatory)










Exhibit E


NEITHER THIS SECURITY
NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE
CONVERTED NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF AT
ANY TIME IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION. 


NOTICE
OF SUBORDINATION


          THIS NOTE IS
SUBORDINATED TO ALL SENIOR INDEBTEDNESS (AS DEFINED HEREIN) OWING TO WELLS
FARGO FOOTHILL, LLC, AND CERTAIN OTHER LENDERS. BY ACCEPTANCE OF THIS NOTE, THE
HOLDER HEREOF AGREES TO BE BOUND BY THE SUBORDINATION PROVISIONS SET FORTH
HEREIN.


VELOCITY
INVESTMENTS, LLC

a New Jersey limited liability company


14%
SUBORDINATED NOTE


	
   

  	
   

  
	
  No. __

  	
   

  
	
  $ _______

  	
  May __, 2008

  



          FOR VALUE
RECEIVED, VELOCITY INVESTMENTS, LLC, a New Jersey limited liability
company (the “Company”), hereby promises to pay to ________________,
(hereinafter referred to as the “Holder”), or registered assigns, the principal
sum of _____________ Dollars ($_______), with interest at a rate of fourteen
percent (14.0%) per annum.


1. This Note. Unless this subordinated
note (“Note”) is otherwise redeemed pursuant to Section 5 hereof, interest and
principal on this Note shall be payable at the address indicated in the
Subscription Agreement executed by the Holder in connection with the investment
in this Note or any such other address as the Holder may from time to time
designate in writing to the Company, regardless of whether payment becomes due
on the Maturity Date (as defined below) or upon the occurrence of an Event of
Default (as defined below). 






2.  Payment of Principal and Interest. This
Note will mature on May __, 2011 (the “Maturity Date”). Interest shall be
payable quarterly in arrears beginning on the last day of the month that is
four months from the date of this Note (each, an “Interest Payment Date”).
Interest shall be computed based on the actual number of days elapsed, but on
the basis of a 360-day year of twelve 30-day months calculated on the unpaid
balance of the principal sum from the date of issue. Principal shall be due and
payable upon the Maturity Date or upon the occurrence of an Event of Default
(as defined below). Except as provided herein, all payments of principal and
interest by the Company under this Note shall be made in United States dollars
in immediately available funds to an account specified by the Holder.


3. Security Interest


          (a)
To secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all of the obligations and
liabilities of the Company to the Holder under this Note (the “Obligations’),
the Company hereby assigns, pledges and grants to Holder, a continuing
subordinated security interest in and lien upon all of the Company’s property
and assets (the “Collateral”), whether real or personal, tangible or
intangible, and whether now owned or hereafter acquired, or in which it now has
or at any time in the future may acquire any right, title or interest,
including without limitation, all of the following property in which it now has
or at any time in the future may acquire any right, title or interest: all
accounts, inventory, equipment, goods, documents, instruments (including,
without limitation, promissory notes), contract rights, general intangibles
(including, without limitation, payment intangibles), chattel paper, supporting
obligations, investment property, letter-of-credit rights, trademarks,
tradestyles, patents and copyrights in which the Company now has or hereafter
may acquire any right, title or interest, all books, records, computer
programs, tapes, disks, and related data processing software that at any time
evidence or contain information relating to Collateral or are otherwise
necessary or helpful in the collection thereof or realization thereof; all
proceeds and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or therefor.
The Company authorizes the Holder to file such financing statements and
amendments thereto and all other documents and instruments and to do such other
acts and things as are reasonably necessary to establish and maintain a valid,
enforceable, perfected security interest in the Collateral as provided herein
and the other ·rights and security contemplated hereby all in accordance with
the Uniform Commercial Code of the State of New Jersey as in effect from time
to time. The security interest granted hereby shall be prior in right to all
other security interests granted by the Maker in its assets, except that such
security interest will be junior in right to the security interest held by
Wells Fargo Foothill, LLC as set forth in Section 4 of this Note. 






4. Subordination. The Holder hereby
irrevocably and unconditionally subordinates his, her or its right of payment
and collection under this Note to all Senior Indebtedness of the Company.
“Senior Indebtedness” shall mean all indebtedness of the Company, including,
without limitation, the Company’s obligations under that certain Loan and
Security Agreement, dated as of January 27, 2005 (as heretofore or hereafter
amended, from time to time, the “WFF Loan Agreement”), among Velocity Asset
Management, Inc., the Company and WFF, but “Senior Indebtedness” shall not
include any other indebtedness of the Company incurred following the issuance
of this Note that qualifies as long-term debt in accordance with U.S. generally
accepted accounting principles. In furtherance of the foregoing, except as
expressly permitted herein, the Company will not make, and no Holder of this
Note will accept or receive, any payment of this Note until all the Senior
Indebtedness has been indefeasibly paid in full in cash. If any Holder of this
Note shall receive any payment on account of this Note in violation of the
subordination provisions of this Note, it shall hold such payment in trust for
the benefit of the holders of the Senior Indebtedness and, promptly upon
discovery or notice of such violation, pay it over to such holders for
application in payment of the Senior Indebtedness. So long as no Default or
Event of Default (as such terms are defined in the WFF Loan Agreement) shall
have occurred and be continuing, or would result therefrom, the Company may pay
to the Holder and the Holder may accept and retain, (i) regularly scheduled
payments of interest and principal as and at the times when due and payable
under this Note, as originally executed and delivered, or, with the prior
written consent of WFF, as amended and (ii) with the prior written consent of
WFF, other payments prior to the due date thereof, including, but not limited
to, those arising upon the acceleration of the Company’s obligations hereunder
pursuant to Section 9 herof. The holders of the Senior Indebtedness are
intended to be third-party beneficiaries of this Note. As such, this Note may
not be modified except by an instrument in writing signed by the holders of the
Senior Indebtedness.


5. Call of Notes by the Company. The
Company shall not, directly or indirectly, call for redemption, redeem, prepay,
repurchase, or otherwise acquire (any such event referred to herein as a
“call”) this Note or any portion thereof except as set forth in this Section 6.


          a. Optional Redemption Upon Call by
the Company. Beginning on the date hereof, the Company may, at its option,
call this Note at a price equal to the outstanding principal sum of, plus
accrued but unpaid interest on, any late charges associated with this Note and
a call premium as follows:


	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  From the
  date hereof through November __, 2008 - 104.0% of the principal amount

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  From
  November __, 2008 through May __, 2009 - 103.0% of the principal amount

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  From May __,
  2009 through November __, 2010 - 102.0% of the principal amount

  
	
   

  	
   

  	
   

  
	
   

  	
  (iv)

  	
  From
  November __, 2010 through May __, 2010 - 101.0% of the principal amount

  
	
   

  	
   

  	
   

  
	
   

  	
  (v)

  	
  From May __,
  2009 through November __, 2010 - 100.5% of the principal amount

  



          b. Notice of Call. The right of
the Company to call this Note pursuant to this Section 6 shall be conditioned
upon the Company’s giving notice of such call (the “Call Notice”, and the date
the Call Notice is given being referred to as the “Call Notice Date”), by
personal delivery, overnight courier, certified mail or by facsimile, signed by
an authorized officer, to the Holder of this Note, not less than sixty (60) days
prior to the date upon which the call is to be effective (the “Call Effective
Date”). The Call Notice shall be irrevocable and shall specify the Call
Effective Date, which may not be less than 60 days after the Call Notice Date. 






6. Transfer. Subject to the provisions of
the legend above, this Note is freely transferable, in whole or in part, by the
Holder, and such transferee shall have the same rights hereunder as the Holder.
The Company may not assign or delegate any of its obligations under this Note
without the prior written consent of the Holder (or its successor, transferee
or assignee). Upon surrender of this Note for transfer or exchange, a new Note
or new Notes of the same tenor, dated the date to which interest has been paid
on the surrendered Note and in an aggregate principal amount equal to the
unpaid principal amount of this Note so surrendered, will be issued to and
registered in the name of the transferee or transferees. The Company may treat
the person in whose name this Note is registered as the owner hereof for the
purpose of receiving payments and for all other purposes.


7. Note Register. This Note is
transferable only upon the books of the Company which it shall cause to be
maintained for such purpose. The Company may treat the registered holder of
this Note as the Holder appears on the Company’s books at any time as the
Holder for all purposes.


8. Defaults and Remedies. The entire
unpaid principal of this Note shall become and be immediately due and payable
upon written demand by the Holder, without any other notice or demand of any
kind or any presentment or protest, if any one of the following events (each,
an “Event of Default”) shall occur and be continuing at the time of such
demand, whether voluntarily or involuntarily, or, without limitation, occurring
or brought about by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
governmental body:


          a. the Company is delinquent in payment
of any interest for a period of more than 30 days or the Company fails to pay
the entire principal amount of this Note within ten days after the Maturity
Date;


          b.
the Company defaults in any of its other financial obligations in excess of
$500,000 that are not cured within 30 days; 


          c.
the Company, pursuant to or within the meaning of any applicable U.S. federal
and state laws relating to bankruptcy, insolvency, winding up, administration,
receivership and other similar matters for the relief of creditors (each, a
“Bankruptcy Law”):


                    i.
commences a voluntary case;


                    ii.
consents to the entry of an order for relief against it in an involuntary case;


                    iii.
consents to the appointment of a custodian of it or for any substantial part of
its property;


                    iv.
makes a general assignment for the benefit of its creditors; or


                    v.
is unable to, or admits in writing its inability to, pay its debts as they
become due.






          d.
there shall be commenced against the Company any case, proceeding or action of
the type referred to below or a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:


                    i.
is for relief against the Company in an involuntary case;


                    ii.
appoints a custodian of the Company or for any substantial part of its
property; or


                    iii.
orders the winding up or liquidation of the Company.


Upon an Event
of Default, without any further notice or demand, in addition to and not in
limitation of any other rights or remedies which the Holder may otherwise have,
the Company shall pay the Holder a late charge computed at the rate of 18% per
annum of the amount not paid. Notwithstanding the foregoing, an Event of
Default under Section 9(b) hereof shall not constitute an Event of Default
without written notice from the holders of a majority of the principal amount
of the Notes then outstanding.


9. Parity of Notes. In the event any other
holder of notes issued contemporaneously with this Note (each, and “Offering
Note” and, collectively, the “Offering Notes”) elects to accelerate the
Offering Note held by such holder as a result of an Event of Default, the
Company shall notify the Holder of this Note of such event and all holders of
Offering Notes shall be deemed to have equal parity.


10. 
Loss,
Etc., of Note. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Note, and of indemnity
reasonably satisfactory, to the Company if lost, stolen or destroyed, and upon
surrender and cancellation of this Note if mutilated, and upon reimbursement of
the Company’s reasonable incidental expenses, the Company shall execute and
deliver to the Holder a new Note of like date, tenor and denomination.


11. 
Amendment,
Waiver Etc., By Holder. The terms of this Note may be amended or
waived upon the written consent of the Company and the Holder.


12. 
Governing
Law. This Note shall be governed by and construed in accordance
with the laws of the State of New Jersey.


13. 
Waiver.
The Company hereby waives presentment, demand, notice of nonpayment, protest
and all other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note. If an action is brought for collection
under this Note, the Holder shall be entitled to receive all costs of
collection, including, but not limited to, its reasonable attorneys’ fees.






[Signature
Page Follows]






          WITNESS
the following signature and seal:


	
   

  	
   

  	
   

  
	
   

  	
  VELOCITY INVESTMENTS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Ragan, Jr.

  
	
   

  	
   

  	
  


  
	
   

  	
   

  	
  Peter Ragan,
  Jr.

  
	
   

  	
   

  	
  President

  



[Corporate Seal]









Exhibit F


SUBORDINATION
AGREEMENT


          THIS
SUBORDINATION AGREEMENT (this “Agreement”), is dated
as of May __, 2008, by and among:


          Each
of the individuals and entities now or hereafter executing a counterpart
signature page hereto for a “Subordinated Lender” (each, a “Subordinated
Lender”, and collectively, the “Subordinated Lenders”); and


          WELLS FARGO
FOOTHILL, LLC, a
Delaware limited liability company (“Senior Lender”), which is the Lender under
that certain Loan and Security Agreement, dated as of January 27, 2005, by and
between VELOCITY
INVESTMENTS, L.L.C., a New Jersey limited liability company (“Borrower”),
and Senior Lender, as successor-in-interest to Wells Fargo Foothill, Inc. (as
the same has been and may hereafter be amended, restated, renewed, replaced,
supplemented, extended or otherwise modified from time to time, the “Loan
Agreement”).


W I T N E S S E T H  T H A T:


          In
order to induce Senior Lender to continue to make the financial accommodations
to Borrower provided for in the Loan Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, each
Subordinated Lender hereby agrees with Senior Lender that, so long as any
Senior Indebtedness (as hereinafter defined) is outstanding or committed to be
advanced, each such party will comply with such of the following provisions as
are applicable to it.


          1. Certain
Definitions.


          1.1 Insolvency
Proceeding. The term “Insolvency Proceeding” shall mean any
voluntary or involuntary dissolution, winding-up, total or partial liquidation,
reorganization or bankruptcy, insolvency, receivership or other statutory or
common law proceedings or arrangements involving Borrower or any guarantor of
the Senior Indebtedness, or the readjustment of the liabilities of Borrower or
such guarantor or any assignment for the benefit of creditors or any
marshalling of the assets or liabilities of Borrower or such guarantor.


          1.2
Senior Indebtedness. The term “Senior Indebtedness”
shall mean any and all loans, advances, extensions of credit to, and all other
indebtedness, obligations and liabilities, now existing or hereafter arising,
direct or contingent, of Borrower now or hereafter owing to Senior Lender,
outstanding from time to time, arising under or in connection with the Loan
Agreement, and any and all indebtedness to Senior Lender in respect of any and
all future loans or advances or extensions of credit made to Borrower by Senior
Lender, prior to, during or following any proceeding in respect of any
Insolvency Proceeding, together with interest thereon and all fees, expenses
and other amounts (including costs of collection and reasonable attorneys’
fees) at any time owing to Senior Lender, whether arising in connection with
the Loan Agreement or such other indebtedness (regardless of the extent to
which the Loan Agreement or such other indebtedness is enforceable against
Borrower and regardless of the extent to which such amounts are allowed as
claims against Borrower in any Insolvency Proceeding, and including any
interest thereon accruing after the commencement of any Insolvency Proceeding
and any other interest that would have accrued thereon but for the commencement
of such Insolvency Proceeding) and all advances made for the preservation,
maintenance, insurance or protection of any collateral securing any of the
foregoing, and all refinancings of the foregoing, and all guaranties of the
foregoing. All Senior Indebtedness shall be entitled to the benefits of this
Agreement without notice thereof being given to Subordinated Lenders.






          1.3 Subordinated
Indebtedness. The term “Subordinated Indebtedness” shall
mean all existing and hereafter arising indebtedness, obligations and
liabilities of Borrower to any or all of the Subordinated Lenders and the
obligations of each Person that guarantees or grants a security interest in or
lien against such Person’s property to secure, or otherwise is or becomes
liable for, payment of any Senior Indebtedness that is also a party (other than
the Subordinated Lenders) to or in respect of any agreement or instrument
securing or guaranteeing any of Borrower’s obligations to any Subordinated
Lender, whether direct or contingent, including any and all accounts payable,
advances of funds or property, principal, interest, fees, expenses and any sums
owing in connection with the redemption or repurchase of any equity interests
in Borrower held by any of the Subordinated Lenders, and all claims, rights,
causes of action, judgments and decrees in respect of the foregoing, including,
without limitation:


          (a) all indebtedness and obligations under all 14%
Subordinated Notes executed by Borrower, payable to the order of any
Subordinated Lender (collectively, the “Subordinated Notes”); and


          (b) the obligations of each party (other than a
Subordinated Lender) to, under or in respect of any agreement or instrument
securing or guaranteeing any of Borrower’s obligations to any Subordinated
Lender under the Subordinated Notes (the Subordinated Notes and any other
agreement evidencing or relating to Subordinated Indebtedness being hereinafter
collectively referred to as the “Subordinated Agreements”).


For the purposes of this Agreement, the term “Subordinated
Lenders” shall mean the Subordinated Lenders named in the preamble to this
Agreement, their respective heirs, legal representatives, successors and
assigns, and any and all assignees or holders of Subordinated Indebtedness.


          1.4 Other Capitalized Terms. Except
as otherwise specified herein, capitalized terms used in this Agreement which
are defined in the Loan Agreement have the same meanings herein as therein.


          2.
Representations and Warranties. Each of the
Subordinated Lenders hereby represents and warrants to Senior Lender that there
is no default in respect of any Subordinated Indebtedness owing to such
Subordinated Lender, and the Subordinated Lenders have delivered to Senior
Lender true and correct copies of each of the Subordinated Agreements as in effect
on the date hereof.






          3.
Terms of Subordination.


          3.1
No Transfer. No Subordinated Lender shall sell or
otherwise dispose of any of the Subordinated Indebtedness except with the
prior, written consent of Senior Lender and except to a Person who agrees in
advance in writing, pursuant to an agreement in form acceptable to Senior
Lender, to become a party hereto. A Subordinated Lender shall give Senior
Lender at least thirty (30) days’ prior, written notice of any such proposed
transfer stating the identity of the transferee and providing such other
information as Senior Lender shall require.


          3.2
Payment Subordinated. Anything in the instruments or
agreements evidencing Subordinated Indebtedness to the contrary notwithstanding,
the payment of the Subordinated Indebtedness is and shall be expressly
subordinate and junior in right of payment and exercise of remedies to the
prior indefeasible payment in full in cash of the Senior Indebtedness to the
extent and in the manner provided herein, and the Subordinated Indebtedness is
hereby subordinated as a claim against Borrower or any guarantor of the Senior
Indebtedness or any of the assets of, or ownership interests in, Borrower or
such guarantor, whether such claim be (i) in the event of any distribution of
the assets of Borrower or such guarantor upon any Insolvency Proceeding, or
(ii) other than in connection with an Insolvency Proceeding, to the prior
indefeasible payment in full in cash of the Senior Indebtedness. In furtherance
of the foregoing, except as expressly permitted by Section 3.7 hereof, or
unless Senior Lender shall otherwise consent in writing, Borrower will not
make, and no holder of Subordinated Indebtedness will demand, accept or
receive, any payment of Subordinated Indebtedness until all the Senior
Indebtedness has been indefeasibly paid in full in cash, except to the extent
filing of a claim is required to avoid the effect of any applicable statute of
limitations. In the event that all or any part of payment of the Senior
Indebtedness is rescinded or recovered directly or indirectly from Senior
Lender as a preference, fraudulent transfer or otherwise (whether by demand,
settlement, litigation or otherwise), such rescinded or recovered payments
shall constitute Senior Indebtedness for all purposes hereunder and the
obligations of Subordinated Lenders hereunder shall continue and remain in full
force and effect or be reinstated, as the case may be.


          3.3 Distributions
in Insolvency Proceeding. In the event of any Insolvency
Proceeding relative to Borrower or any guarantor of the Senior Indebtedness or
such party’s property, all of the Senior Indebtedness owed by Borrower shall
first be indefeasibly paid in full in cash before any payment on account of
principal, premium or interest or otherwise is made upon or in respect of the
Subordinated Indebtedness, and in any such proceedings any payment or
distribution of any kind or character, whether in cash or property or
securities which may be payable or deliverable in respect of the Subordinated
Indebtedness shall be paid or delivered directly to Senior Lender for
application in payment of the Senior Indebtedness, unless and until all such
Senior Indebtedness shall have been indefeasibly paid and satisfied in full in
cash. In the event that, notwithstanding the foregoing, upon any such
Insolvency Proceeding, any payment or distribution of assets of Borrower or a
guarantor of the Senior Indebtedness of any kind or character, whether in cash,
property or securities, shall be received by any holder of the Subordinated
Indebtedness before all Senior Indebtedness is indefeasibly paid in full in
cash, such payment or distribution shall be immediately paid over to the holder
of the Senior Indebtedness, for application to the payment of all Senior
Indebtedness remaining unpaid until all Senior Indebtedness shall have been
indefeasibly paid in full in cash, after giving effect to any concurrent
payment or distribution to the holder of Senior Indebtedness.






          3.4 Attorneys-in-Fact,
Proof and Voting of Claims.


          (a) Attorneys-in-Fact. Each Subordinated Lender,
for himself or herself or itself and his or her or its heirs, legal
representatives, successors and assigns, hereby irrevocably authorizes and
directs Senior Lender and any trustee in bankruptcy, receiver, custodian or
assignee for the benefit of creditors of Borrower or any guarantor of the
Senior Indebtedness in any Insolvency Proceeding, on such Subordinated Lender’s
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided for in this Agreement and irrevocably appoints, which
appointment is coupled with an interest, upon any Event of Default under the
Loan Agreement and during the continuance thereof or any failure to comply with
the terms of this Agreement, Senior Lender or any such trustee, receiver,
custodian or assignee, his or her or its attorneys-in-fact for such purpose
with full powers of substitution and revocation.


          (b) Proof and Vote of Claims. Each Subordinated
Lender hereby irrevocably appoints, which appointment is irrevocable and
coupled with an interest, Senior Lender as such Subordinated Lender’s true and
lawful attorney, with full power of substitution, in the name of such
Subordinated Lender, Senior Lender, or otherwise, for the sole use and benefit
of Senior Lender, to the extent permitted by law, to prove and vote all claims
relating to the Subordinated Indebtedness, either in the name of Senior Lender
or in the name of such Subordinated Lender, by proof of debt, proof of claim,
suit or otherwise, to collect any assets of Borrower or any guarantor of the
Senior Indebtedness and to receive and collect all distributions, securities,
property and payments to which such Subordinated Lender would be otherwise
entitled on any liquidation of Borrower or such guarantor or any of its
property or in any proceeding affecting Borrower or such guarantor or its
property under any bankruptcy or insolvency laws or any laws or proceedings
relating to the relief of Borrower or such guarantor, readjustment, composition
or extension of indebtedness or reorganization, provided, however, that if
Senior Lender shall not have made and presented a proof of claim in connection
with the Subordinated Indebtedness (or any portion thereof) on or before 15
days prior to the bar date for the filing of such proof of claim, then a
Subordinated Lender may make and present such proof of claim in any Insolvency
Proceeding. In no event shall Senior Lender be liable to any Subordinated
Lender for any failure to prove the Subordinated Indebtedness, to exercise any
right with respect thereto or to collect any sums payable thereon.


          (c) No Interference. In addition, each Subordinated
Lender agrees that to the extent such Subordinated Lender holds any
Subordinated Indebtedness at the relevant time, it will not take any action as
the holder of any such Subordinated Indebtedness that will impede, interfere
with or restrict or restrain the exercise by Senior Lender of rights and
remedies under the Loan Documents and, upon the commencement of any Insolvency
Proceeding, such Subordinated Lender will take such commercially reasonable
actions as the holder of any such Subordinated Indebtedness as may be
reasonably necessary or appropriate to effectuate the subordination provided
hereby. In furtherance thereof, such Subordinated Lender, in its capacity as a
holder of Subordinated Indebtedness, hereby agrees not to (i) object to the
amount of the Senior Indebtedness allowed or permitted to be asserted under the
Bankruptcy Code or the extent to which the Senior Indebtedness is deemed a
secured claim, (ii) oppose or object to any motion filed or supported by Senior
Lender for relief from stay or for adequate protection in respect of the Senior
Indebtedness, and (iii) oppose or object to any motions supported by Senior
Lender for Borrower’s or any guarantor’s use of cash collateral or
post-petition borrowing from Senior Lender or any proposed sale of Borrower’s
assets pursuant to Section 363 of the Bankruptcy Code.






          3.5 Effect
of Provisions. The provisions hereof as to subordination are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand, and the holders of the Subordinated Indebtedness
on the other hand, and none of such provisions shall impair, as between
Borrower and the holders of its Subordinated Indebtedness, the obligations of
Borrower, which are unconditional and absolute, to pay to such holders all of
the Subordinated Indebtedness in accordance with the terms thereof, nor, except
as provided in Section 7 below,
shall any such provisions prevent the holders of Subordinated Indebtedness from
exercising all remedies otherwise permitted by applicable law or under the
terms of such Subordinated Indebtedness upon a default thereunder, subject to
the rights, if any, of the holders of Senior Indebtedness under the foregoing
provisions of this Agreement.


          3.6
Subrogation, Etc. Each holder of Subordinated
Indebtedness hereby subordinates to the Senior Indebtedness all rights to be
subrogated to the rights of the holders of the Senior Indebtedness in respect
of payments made, or distributions of assets of Borrower, on the Senior
Indebtedness, until the payment in full in cash of the Senior Indebtedness.


          3.7
Permitted Payments. Borrower may, from time to time,
pay or cause to be paid to any Subordinated Lender, and such Subordinated
Lender may accept and retain, so long as no Default or Event of Default under
the Loan Agreement shall have occurred and be continuing, or would result
therefrom, (a) regularly scheduled payments of interest as and at the times
when due and payable under the Subordinated Indebtedness, as originally
executed and delivered, and (b) payments or prepayments of principal of the
Subordinated Indebtedness, only with the prior written consent of the Senior
Lender.


          4. Agreement
to Hold in Trust. If any holder of Subordinated Indebtedness
shall receive any payment on account of the Subordinated Indebtedness in
violation of this Agreement, it shall hold such payment in trust for the
benefit of the holders of the Senior Indebtedness and, promptly upon discovery
or notice of such violation, pay it over to such holders for application in payment
of the Senior Indebtedness. 


          5.   Amendments to Subordinated Agreements /
Liens on Collateral. Each Subordinated Lender covenants and
agrees that, unless Senior Lender otherwise consents thereto in writing, (a)
such Subordinated Lender will not amend any of the provisions of any of the
Subordinated Agreements, and (b) such Subordinated Lender will not obtain liens
on or security interests in the Collateral as security for the Subordinated
Indebtedness, and that to the extent any such liens or security interests are
created on or in the Collateral (by operation of law or otherwise) all such
liens and security interests shall be fully subordinated and junior to the
liens on and security interests in the Collateral in favor of Senior Lender.


          6.   Evidence of Subordinated
Indebtedness/Legend. Each Subordinated Lender, for himself or
herself or itself and his or her or its heirs, legal representatives,
successors and assigns as holders of Subordinated Indebtedness, covenants to
cause each agreement and instrument representing or evidencing any of the
Subordinated Indebtedness issued or executed by Borrower and held by any
Subordinated Lender to have affixed upon it a legend which reads substantially
as follows:


“THIS INSTRUMENT IS SUBJECT TO A SUBORDINATION
AGREEMENT DATED AS OF MAY __, 2008, AMONG THE SUBORDINATED
LENDERS (AS DEFINED THEREIN), AND WELLS FARGO FOOTHILL, LLC, AS SENIOR LENDER, OR ANY REPLACEMENT
THEREOF. BY ITS ACCEPTANCE OF THIS INSTRUMENT, THE HOLDER HEREOF AGREES
TO BE BOUND BY THE PROVISIONS OF SUCH SUBORDINATION AGREEMENT OR ITS
REPLACEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS ARE BOUND.”






Each Subordinated Lender hereby further covenants and
agrees, at the request of Senior Lender, to pledge and deliver to Senior Lender
any and all promissory notes or other negotiable instruments evidencing
Subordinated Indebtedness and to assign and deliver to Senior Lender any and
all collateral therefor as security for such Subordinated Lender’s obligations
under this Agreement. Senior Lender agrees promptly to release and redeliver
same to Subordinated Lenders upon payment in full of the Senior Indebtedness.


          7.   Limit on Right of Action. Each
Subordinated Lender, for himself or herself or itself and his or her or its heirs,
legal representatives, successors and assigns, agrees for the benefit of the
holders of the Senior Indebtedness that, except as otherwise provided herein,
so long as the Senior Indebtedness remains outstanding or committed to be
advanced, such Subordinated Lender will not, directly or indirectly, take any
action to accelerate or demand payment of the Subordinated Indebtedness by
Borrower or any guarantor of the Senior Indebtedness, to collect or receive any
direct or indirect payment or distribution of assets of any kind or character,
whether in cash, properties or securities, by setoff or otherwise, on or with
respect to the Subordinated Indebtedness, to exercise any of its remedies in
respect of the Subordinated Indebtedness, to initiate or join with any creditor
in initiating any Insolvency Proceeding of, or litigation against, Borrower or
any guarantor of the Senior Indebtedness, or to foreclose or otherwise realize
on any security given by Borrower or any other person to secure the
Subordinated Indebtedness prior to the payment in full in cash of the Senior
Indebtedness. The foregoing provisions of this Section 7 are solely for the purpose of defining the relative
rights of the holders of Senior Indebtedness on the one hand and the holders of
the Subordinated Indebtedness on the other and shall not otherwise limit or
affect any rights which the holders of the Subordinated Indebtedness may have
against Borrower under the terms of the agreements evidencing the Subordinated
Indebtedness.


          8. Marshaling. Each Subordinated
Lender, for himself or herself or itself and his or her or its heirs, legal
representatives, successors and assigns, hereby expressly waives any right that
he or she or it otherwise might have to require the holders of Senior Indebtedness
to marshal any of the property of Borrower or any guarantor of the Senior
Indebtedness, to resort to Collateral in any particular order or manner,
whether provided for by common law or statute, or to enforce any guaranty or
any Lien given by Borrower as a condition precedent or concurrent to the
exercise of any of their remedies.


          9. Additional
Rights of Senior Lender. If any Subordinated Lender, in
violation of this Agreement, shall commence, prosecute or participate in any
suit, action or proceeding against Borrower or any guarantor of the Senior
Indebtedness, Borrower or such guarantor may interpose as a defense or plea the
making of this Agreement and Senior Lender may intervene and interpose such
defense or plea in Senior Lender’s name or in the name of Borrower or such
guarantor. If any Subordinated Lender, in violation of this Agreement, shall
attempt to enforce any security agreement, real estate mortgage, deed of trust,
guaranty or any Lien Instrument or other encumbrance, Senior Lender may, by
virtue of this Agreement, restrain the enforcement thereof in Senior Lender’s
name or in the name of Borrower. If any Subordinated Lender obtains any assets
of Borrower or a guarantor of the Senior Indebtedness as a result of any
administrative, legal or equitable action, or otherwise, such Subordinated
Lender agrees forthwith to pay, deliver and assign to Senior Lender any such
assets for application to the Senior Indebtedness.






          10. Subsequent
Changes. Each Subordinated Lender expressly agrees that Senior
Lender may, in its sole and absolute discretion, without notice to or further
assent of such Subordinated Lender or any holder of Subordinated Indebtedness
and without in any way releasing, affecting or impairing the obligations and
liabilities of such Subordinated Lender or holder hereunder: (a) waive
compliance with, or any default under, or grant any other indulgences with
respect to, the Loan Documents (including, without limitation, any waiver of a
condition to an Advance); (b) modify, amend or change any provisions of the
Loan Documents (including, without limitation, any changes to the interest
rates, payment schedules or maximum amount of the Senior Indebtedness); (c)
grant extensions or renewals of or with respect to the Loan Documents, and/or
effect any release, compromise or settlement in connection therewith;
(d) agree to the substitution, exchange, release or other disposition of
Borrower, any guarantor or other obligor of the Senior Indebtedness or of all
or any part of the collateral securing the Senior Indebtedness (whether or not
anything or any amount is received in return therefore); (e) make advances
for the purpose of performing any term or covenant contained in the Loan
Documents, with respect to which Borrower shall be in default; (f) assign or
otherwise transfer the Loan Documents, including, without limitation, this
Agreement, or any interest therein; and (g) deal in all respects with Borrower,
the Senior Indebtedness or any Collateral or guaranty securing the Senior
Indebtedness as if this Agreement were not in effect. The obligations of the
Subordinated Lenders under this Agreement shall be absolute and unconditional,
irrespective of the genuineness, validity, regularity, enforceability or
priority of the Loan Documents or any other circumstances which might otherwise
constitute a legal or equitable discharge of a surety or guarantor. No exercise
or nonexercise by Senior Lender of any right given to it hereunder or under the
Loan Documents, and no change, impairment or suspension of any right or remedy
of Senior Lender, shall in any way affect any Subordinated Lender’s obligations
hereunder or give any Subordinated Lender any recourse against Senior Lender.
No right of any current or future holder of any Senior Indebtedness to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Borrower; by any act or
failure to act by any such holder, by any act or failure to act by any other holder
of the Senior Indebtedness, or by any noncompliance by Borrower with the terms
hereof, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with.


          11. Waivers.
Each Subordinated Lender hereby expressly waives: (a) notice of acceptance of
this Agreement; (b) notice of any default hereunder or under the Loan Documents
and of all indulgences; (c) demand for observance or performance of, or
enforcement of, any terms or provisions of the Loan Documents; (d) notice of
extensions of credit by Senior Lender to Borrower and of any change in the rate
at which interest accrues under the Loan Documents; (e) except as set forth
herein, all other notices and demands otherwise required by law which such
Subordinated Lender may lawfully waive; (f) the right to assert in any action
or proceeding hereupon any setoff, counterclaim or other claim which it may
have against Senior Lender; (g) all rights of subrogation, reimbursement or
contribution against Borrower or any guarantor of the Senior Indebtedness which
might otherwise arise by reason of such Subordinated Lender’s execution or
performance of this Agreement, until payment in full in cash of the Senior
Indebtedness; (h) all rights (statutory or otherwise) that require Senior
Lender to make an election of remedies where Senior Lender holds security
interests and liens on both the real and personal property of Borrower, any
guarantor of or any other obligor on the Senior Indebtedness or to take
recourse first or solely against any particular Collateral securing the Loan
Agreement or the other Loan Documents; (i) all rights (statutory or otherwise)
that restrict, affect or impair the rights or remedies of Senior Lender to
collect any deficiency after the application to the Obligations of any proceeds
arising from the foreclosure of security interests and liens granted to Senior
Lender; (j) any defense based on the adequacy of a remedy at law which might be
asserted as a bar to the remedy of specific performance of this Agreement in
any action brought therefor by any party hereto; and (k) so long as this
Agreement remains in effect, the benefit of all other principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the
terms hereof.






          12.
Indulgences Not Waivers. Neither the failure nor any delay on the part of Senior Lender to
exercise any right, remedy, power or privilege hereunder shall operate as a
waiver thereof or give rise to an estoppel, nor be construed as an agreement to
modify the terms of this Agreement, nor shall any single or partial exercise of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver by a party hereunder shall be effective unless
it is in writing and signed by the party making such waiver, and then only to
the extent specifically stated in such writing.


          13. Covenant Not to Challenge. This
Agreement has been negotiated by the parties with the expectation and in
reliance upon the assumption that the instruments and documents evidencing the
Senior Indebtedness and the Subordinated Indebtedness are valid and
enforceable. In determining whether to enter into this Agreement, Subordinated
Lenders, on the one hand, and Senior Lender, on the other hand, have assumed
such validity and enforceability, and have agreed to the provisions contained
herein, without relying upon any reservation of a right to challenge or call
into question such validity or enforceability. As among Subordinated Lenders,
on the one hand, and Senior Lender, on the other hand, such parties hereby
covenant and agree, to the fullest extent permitted by law, that neither Senior
Lender nor Subordinated Lenders shall initiate in any proceeding a challenge to
the validity or enforceability of the documents and instruments evidencing or
securing the Senior Indebtedness or the Subordinated Indebtedness, as
applicable.


          14. Independent Credit Investigations.
None of the Subordinated Lenders, Senior Lender, or their respective directors,
officers, agents, or employees, shall be responsible to any other party for
Borrower’s or any guarantor of the Senior Indebtedness’s solvency,
creditworthiness, financial condition, or ability to repay any of their claims
or for the accuracy of any recitals, statements, representations, or warranties
of Borrower or such guarantor, oral or written, or for the validity,
sufficiency, enforceability, or perfection of their claims or their respective
loan documents, or any security interests or liens granted by Borrower or such
guarantor to any claimant in connection therewith. Each claimant has entered
into its respective financing agreements with Borrower based upon his or her or
its own independent investigation, and makes no warranty or representation to
the other claimant, nor does he or she or it rely upon any representation of
the other claimant with respect to matters identified or referred to in this
paragraph.






          15. Effect of Bankruptcy/Additional Financing.
This Agreement is intended to be enforceable as a subordination agreement under
Bankruptcy Code Section 510 notwithstanding the commencement of any bankruptcy
or other Insolvency Proceeding by or against Borrower and, to the full extent
permitted by law, shall apply with full force and effect to any indebtedness
arising pursuant to debtor-in-possession financing arrangements or pursuant to
financing arrangements entered into in connection with the confirmation of a
plan of reorganization under Chapter 11 of the Bankruptcy Code. Each
Subordinated Lender acknowledges and consents that, to the extent that Senior
Lender elects at its option to provide to Borrower additional financing upon
terms and conditions satisfactory to Senior Lender and Borrower, whether prior
to, during, or after an Insolvency Proceeding, or at any other time prior to
the Senior Indebtedness having been indefeasibly paid in full in cash to Senior
Lender, such additional indebtedness (represented by such additional
financing), together with any and all interest or fees thereon (collectively,
the “Additional Financing”), shall become a part of the Senior
Indebtedness, and shall be treated as provided under this Agreement. Further,
each Subordinated Lender acknowledges and agrees that no Subordinated Lender
shall object to any terms or conditions of the Additional Financing, whether in
the form of debtor-in-possession financing or cash collateral use, as may be
agreed to by Senior Lender and Borrower, and each Subordinated Lender
acknowledges and agrees that no Subordinated Lender shall be entitled to any
adequate protection under the Bankruptcy Code (whether in the form of
replacement liens or adequate protection payments) nor shall any Subordinated Lender
seek relief from any automatic stay until the Senior Indebtedness is
indefeasibly paid in full in cash to Senior Lender.


          16. Notices.
All notices, requests, demands and other communications provided for hereunder
shall be in writing (including telecopied communication) and mailed or
telecopied or delivered to the applicable party at the addresses indicated
below.


          If
to Senior Lender:


Wells Fargo Foothill, LLC

14241 Dallas Parkway, Suite 1300

Dallas, Texas 75254

Attention: Loan Portfolio Manager—Velocity Investments

Telecopy No.: (972)
387-4375


          with
a copy (which shall not constitute notice) to:


Kirkpatrick & Lockhart, Preston Gates Ellis LLP

1717 Main Street, Suite 2800

Dallas, Texas 75201

Attention: Gary G. Null

Telecopy No.: (214)
939-5849






If to any Subordinated Lender:


          To
such Subordinated Lender at the address listed at its signature block, 


          And
to:


	
 

	
 


	
 

	
Velocity Investments,
  L.L.C.

  3100 Route 138 West

  Brinley Plaza, Building 1

  Wall, New Jersey 07719

  Attention: James J. Mastriani

  Telecopy No.: (732) 556-0365





with a copy (which shall not constitute notice) to:


	
 

	
 


	
 

	
Ragan & Ragan, PC

  3100 Route 138 West

  Brinley Plaza, Building 1

  Wall, New Jersey 07719

  Attention: W. Peter Ragan, Sr.

  Telecopy No.: (732) 280-4108





or, as to each party, at such other address as shall
be designated by such parties in a written notice to the other parties
complying as to delivery with the terms of this Section 16. All such notices,
requests, demands and other communication shall be deemed given upon receipt by
the party to whom such notice is directed.


          17. Successors; Continuing Effect, Etc.
This Agreement is being entered into for the benefit of Senior Lender and the
holders of the Senior Indebtedness and the Subordinated Indebtedness, and their
respective heirs, legal representatives, successors and assigns. This Agreement
shall be a continuing agreement and shall be irrevocable and shall remain in
full force and effect so long as there are both Senior Indebtedness and
Subordinated Indebtedness outstanding or committed to be advanced. The
liability of each Subordinated Lender hereunder shall be reinstated and
revived, and the rights of the holders of the Senior Indebtedness shall
continue, with respect to any amount at any time paid on account of the Senior
Indebtedness which shall thereafter be required to be restored or returned by
the holders of the Senior Indebtedness in any Insolvency Proceeding (including,
without limitation, any repayment made pursuant to any provision of Chapter 5 of
Title 11, United States Code) or otherwise, all as though such amount had not
been paid.


          18. Entire Agreement; Amendment.
This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof, and no modification or waiver of any provision of
this Agreement shall in any event be effective unless the same shall be in
writing signed by each of Senior Lender and Subordinated Lenders.






          19. Miscellaneous. This Agreement, which
may be executed in any number of counterparts, shall take effect as a sealed
instrument and shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and performed in said
State. The headings in this Agreement are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof.


          20. CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.


          (a) EACH OF THE SUBORDINATED LENDERS AND SENIOR
LENDER, TO THE EXTENT THAT HE OR
SHE OR IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS,
FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF
HIS OR HER OR ITS OBLIGATIONS ARISING HEREUNDER OR UNDER THE LOAN DOCUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY, KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY, WAIVES ANY AND ALL OBJECTIONS HE OR
SHE OR IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT
THAT HE OR SHE OR IT MAY LAWFULLY DO SO, EACH OF THE SUBORDINATED LENDERS
CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE PARTIES AT THE
ADDRESSES PROVIDED HEREIN. TO THE EXTENT THAT ANY SUBORDINATED LENDER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO HIMSELF OR HERSELF
OR ITSELF OR HIS OR HER OR ITS PROPERTY, EACH SUBORDINATED LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF HIS OR HER OR ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS TO THE MAXIMUM EXTENT PERMITTED BY LAW.


          (b) WAIVER OF JURY TRIAL. EACH OF THE
SUBORDINATED LENDERS AND SENIOR LENDER HEREBY VOLUNTARILY, KNOWINGLY,
INTENTIONALLY, AND IRREVOCABLY WAIVES TRIAL BY JURY IN RESPECT OF ANY ACTION
BROUGHT ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
SECURITY DOCUMENTS OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS OR ACTIONS OF SENIOR LENDER RELATING TO THE ADMINISTRATION OF THE
FINANCING UNDER THE LOAN DOCUMENTS OR THE ENFORCEMENT OF THE LOAN DOCUMENTS,
AND AGREES THAT NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBORDINATED LENDERS HEREBY KNOWINGLY,
INTENTIONALLY, VOLUNTARILY, AND IRREVOCABLY WAIVES ANY RIGHT HE OR SHE OR IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. EACH OF THE SUBORDINATED LENDERS CERTIFIES THAT NO REPRESENTATIVE,
AGENT, OR ATTORNEY OF SENIOR LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SENIOR LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR AGENT AND
SENIOR LENDERS TO MAKE OR CONTINUE TO MAKE THE LOANS.






          21. No
Third-Party Beneficiaries. This Agreement is solely for the
benefit of each of Senior Lender and the other holders of Senior Indebtedness,
the Subordinated Lenders and their respective heirs, legal representatives,
successors and assigns, and neither Borrower nor any other Person is intended
to be a third party beneficiary hereunder or to have any right, benefit,
priority or interest under, or because of the existence of, or to have any
right to enforce, this Agreement. Senior Lender and Subordinated Lenders shall
have the right to modify or terminate this Agreement at any time without notice
to or approval of Borrower or any other Person. Nothing in this Agreement is
intended to or shall impair, as among Borrower and Subordinated Lenders, the
obligations of Borrower, which are absolute and unconditional, to pay the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with its terms, or affect the relative rights of any Subordinated
Lender and creditors of Borrower other than Senior Lender and any other holder
of Senior Indebtedness.


          22. Inconsistent or Conflicting Provisions.
In the event a provision of the documents
evidencing or governing the Senior Indebtedness or the Subordinated
Indebtedness is inconsistent or conflicts with the provisions of this
Agreement, the provisions of this Agreement shall govern and prevail.


          23. Counterparts. This Agreement may
be executed and delivered in counterparts, including facsimile counterpart
signatures (to be followed in due course by delivery of original signature
counterparts), shall be effective with respect to a party when such party has
delivered its counterpart signature, and all counterparts taken together shall
be deemed a single original agreement.


*The next page is
a signature page*






          IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
under seal as of the day and year first above written.


	
 

	
 

	
 


	
 

	
SENIOR LENDER:


	
 

	
 


	
 

	
WELLS FARGO FOOTHILL, LLC, 

  a Delaware limited
  liability company


	
 


	
 

	
By: 

	
 


	
 

	
 

	



	
 

	
Name: 

	
 


	
 

	
 

	



	
 

	
Title: 

	
 


	
 

	
 

	





SIGNATURE PAGE TO SUBORDINATION AGREEMENT





COUNTERPART
SIGNATURE PAGE


TO


SUBORDINATION
AGREEMENT


FOR A
SUBORDINATED LENDER


          The
undersigned Subordinated Lender, by executing this Counterpart Signature Page,
(i) hereby becomes a party to the Subordination Agreement (as amended,
restated, supplemented or otherwise modified from time to time, the “Subordination
Agreement”), dated as of May __, 2008, by and among Wells Fargo Foothill,
LLC, a Delaware limited liability company, as Senior Lender, and each Subordinated
Lender who executes a Counterpart Signature Page to the Subordination
Agreement, which Subordination Agreement is acknowledged by Velocity
Investments, L.L.C., a New Jersey limited liability company, as Borrower, and
(ii) hereby agrees to be bound by the terms, conditions, and limitations set
forth in the Subordination Agreement as a Subordinated Lender (as defined in
the Subordination Agreement). Execution below by or on behalf of a corporation,
partnership, limited liability company, trust, or other non-individual Investor
(an “Entity”) constitutes
a representation and warranty that (a) the Entity is duly organized, validly
existing, and in good standing under the laws of its state of organization; (b)
it has full organizational power to execute and agree to the Operating
Agreement and to perform its obligations thereunder; and (c) the individual
executing below on behalf of such Entity has been duly authorized to do so and
binds the Entity.


	
 

	
 

	
 


	
Individual Subordinated Lender:
  

	
 

	
Entity Subordinated Lender:
  


	
 

	
 

	
 


	


	
 

	



	
Print Name

	
 

	
Print Name of Entity


	
 

	
 

	
 


	


	
 

	



	
Signature

	
 

	
Signature


	
 

	
 

	
 


	


	
 

	



	
Address (Street/Mailing Address)

	
 

	
Title


	
 

	
 

	
 


	


	
 

	



	
Address (City, State, Zip Code)

	
 

	
Address (Street/Mailing Address)


	
 

	
 

	
 


	
 

	
 

	



	
 

	
 

	
Address (City, State, Zip Code)




SIGNATURE PAGE TO SUBORDINATION AGREEMENT





ACKNOWLEDGED AND ACCEPTED AND AGREED TO BY BORROWER:


          Borrower
hereby assents to the foregoing Subordination Agreement (and the terms thereof)
and agrees to abide thereby and to keep, observe and perform the several
matters and things therein intended to be kept, observed and performed by it,
and specifically agrees not to make or permit to be made any payments contrary
to the intention and terms of such Agreement.


Executed as of the __ day of
May, 2008


VELOCITY INVESTMENTS, L.L.C.,

a New Jersey limited
liability company


	
 

	
 

	
 


	
By:

	
 

	
 


	
 

	


	
 


	
Name:

	
 

	
 


	
 

	


	
 


	
Title:

	
 

	
 


	
 

	


	
 




SIGNATURE PAGE TO SUBORDINATION AGREEMENT





The State of _____________


County of ________________


          Before
me _____________ (here insert the name and character of the officer) on this
day personally appeared ______________________________, known to me (or proved
to me on the oath of _______________ or through _________________ (description
of identity card or other document)) to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same
for the purposes and consideration therein expressed.


          (Seal)


          Given
under my hand and seal of office this ______ day of _____________, A.D.,
_________.


	
 

	
 


	
 

	
________________________________________


	
 

	
Notary Public in and for ____________________


	
 

	
Notary’s Name (printed): ___________________


	
 

	
My commission expires: ___________________





The State of _____________


County of ________________


          Before
me _____________ (here insert the name and character of the officer) on this
day personally appeared ______________________________, known to me (or proved
to me on the oath of _______________ or through _________________ (description
of identity card or other document)) to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same
for the purposes and consideration therein expressed.


          (Seal)


          Given
under my hand and seal of office this ______ day of _____________, A.D.,
_________.


	
 

	
 


	
 

	
________________________________________


	
 

	
Notary Public in and for ___________________


	
 

	
Notary’s Name (printed): __________________


	
 

	
My commission expires: ___________________




1





The State of _____________


County of ________________


          Before
me _____________ (here insert the name and character of the officer) on this
day personally appeared ______________________________, known to me (or proved
to me on the oath of _______________ or through _________________ (description
of identity card or other document)) to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same
for the purposes and consideration therein expressed.


          (Seal)


          Given
under my hand and seal of office this ______ day of _____________, A.D.,
_________.


	
 

	
 


	
 

	
________________________________________


	
 

	
Notary Public in and for ___________________


	
 

	
Notary’s Name (printed): __________________


	
 

	
My commission expires: ___________________




2






Exhibit G


RISK
FACTORS


          An
investment in our company and the Securities involves a high degree of risk.
You should carefully consider the risks below which are related to Velocity
Asset Management, Inc. and its subsidiaries including Velocity Investments,
LLC, together with the other information contained in this Memorandum and the
attached Exhibits, before you decide to invest in our company. If any of the
following risks occur, our business, results of operations and financial
condition could be harmed, the trading price of our common stock and/or our
Series A-1 convertible preferred stock could decline, and you could lose all or
part of your investment. The
risks and uncertainties described below are intended to be the material risks
that are specific to us and to our industry. New risk factors emerge from time
to time and it is not possible for us to predict all such risk factors, nor can
we assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause future actual results to
differ materially from those contained in any historical or forward-looking
statements.


Risks Related to Our Business 


We have a limited operating history
and our business and future prospects are difficult to evaluate. 


          Prior
to our acquisition of STB, Inc. (the former parent of our current subsidiaries)
on February 3, 2004, our company had been inactive since 1991. STB was
organized in 2003, and none of its subsidiaries has conducted business for more
than five years. Due to our limited operating history, our ability to execute
our business strategy is materially uncertain and our operations and prospects
are subject to all risks inherent in a developing business enterprise. Our
limited operating history also makes it difficult to evaluate our long term
commercial viability. Our ability to execute our business strategy must be
evaluated in light of the problems, expenses and difficulties frequently
encountered by new businesses in general and a distressed asset management and
liquidation company specifically. 


We may not be able to purchase
consumer receivable portfolios at favorable prices or on sufficiently favorable
terms or at all. 


          Our
ability to execute our business strategy depends upon the continued
availability of consumer receivable portfolios that meet our purchasing
criteria and our ability to identify and finance the purchases of such assets.
The availability of consumer receivable portfolios at favorable prices and on
terms acceptable to us depends on a number of factors outside of our control,
including: 


	
 

	
 


	
·

	
the continuation of the
  current growth trend in debt; 


	
 

	
 


	
·

	
the continued volume of
  consumer receivable portfolios available for sale; 


	
 

	
 


	
·

	
competitive factors affecting
  potential purchasers and sellers of consumer receivable portfolios; and 


	
 

	
 


	
·

	
fluctuation in interest
  rates. 





3






          The
market for acquiring consumer receivable portfolios is becoming more
competitive, thereby possibly diminishing our ability to acquire such
portfolios at attractive prices in future periods. The growth in consumer debt
may also be affected by:


	
 

	
 


	
·

	
a slowdown in the economy;
  


	
 

	
 


	
·

	
reductions in consumer
  spending; 


	
 

	
 


	
·

	
changes in the
  underwriting criteria by originators; 


	
 

	
 


	
·

	
changes in laws and
  regulations governing lending and bankruptcy; and 


	
 

	
 


	
·

	
fluctuation in interest
  rates. 





          Any
slowing of the consumer debt growth trend could result in a decrease in the
availability for purchase of consumer receivable portfolios that could affect
the purchase prices of such portfolios. Any increase in the prices we are
required to pay for such assets in turn will reduce the possible profit, if
any, we generate from such assets. 


We may not be able to recover
sufficient amounts from the assets we acquire to recover the costs associated
with the purchase and servicing of those assets and to fund our operations. 


          We
acquire and collect on consumer receivable portfolios that contain charged-off
receivables. In order to operate profitably over the long term, we must
continually purchase and collect on a sufficient volume of receivables to
generate revenue that exceeds our costs. Our inability to realize value from
our receivable portfolios in excess of our expenses may compromise our ability
to remain as a going concern. For accounts that are charged-off, the
originators or interim owners of the receivables generally have: 


	
 

	
 


	
·

	
made numerous attempts to
  collect on these obligations, often using both their in-house collection
  staff and third-party collection agencies; 


	
 

	
 


	
·

	
subsequently deemed these
  obligations as uncollectible; and 


	
 

	
 


	
·

	
charged-off these
  obligations. 





          These
receivable portfolios are purchased at significant discounts to the actual
amounts the obligors owe. These receivables are difficult to collect and actual
recoveries may vary and be less than the amount expected. In addition, our
collections may worsen in a weak economic cycle. We may not recover amounts in
excess of our acquisition and servicing costs. 


          Our
ability to recover on our consumer receivable portfolios and produce sufficient
returns can be negatively impacted by the quality of the purchased receivables.
In the normal course of our portfolio acquisitions, some receivables may be
included in the portfolios that fail to conform to certain terms of the
purchase agreements and we may seek to return these receivables to the seller
for payment or replacement receivables. However, we cannot guarantee that any
of such sellers will be able to meet their payment obligations to us. Accounts
that we are unable to return to sellers may yield no return. If cash flows from
operations are less than anticipated as a result of our inability to collect
sufficient amounts on our receivables, our ability to satisfy our debt
obligations, purchase new portfolios and our future growth and profitability
may be materially adversely affected. 


4






We are subject to intense
competition for the purchase of consumer receivables that may affect our ability
to purchase distressed assets at acceptable prices or at all. 


          We
compete with other purchasers of consumer receivable portfolios, with
third-party collection agencies and with financial services companies that
manage their own portfolios of these portfolios. We compete on the basis of
reputation, industry experience and performance. Some of our competitors have
greater capital, personnel and other resources than we have. The possible entry
of new competitors, including competitors that historically have focused on the
acquisition of different asset types, and the expected increase in competition
from current market participants, may reduce our access to consumer receivable
portfolios. Aggressive pricing by our competitors could raise the price of such
distressed assets above levels that we are willing to pay, which could reduce
the amount of such assets suitable for us to purchase or, if purchased by us,
reduce the profits, if any, generated by such assets. If we are unable to
purchase distressed assets at favorable prices or at all, our revenues and our
ability to cover operating expenses may be negatively impacted and our earnings
could be materially reduced. 


We are dependent upon third
parties, in particular, the law firm of Ragan & Ragan, P.C., to service the
legal collection process of our consumer receivable portfolios. 


          We
are dependent upon the efforts of our third party servicers, in particular the
law firm of Ragan & Ragan, P.C., to service and collect our consumer
receivables. Any failure by our third party servicers to adequately perform
collection services for us or remit such collections to us could materially
reduce our revenues and possibly our profitability. In addition, our revenues
and profitability could be materially adversely affected if we are not able to
secure replacement servicers. Until December 2004, our sole servicer had been
the law firm of Ragan & Ragan, P.C., the principals of which are W. Peter
Ragan, Sr. and W. Peter Ragan, Jr., our vice president and a director, and
president of our wholly-owned subsidiary, VI, respectively. Since December
2004, we have purchased portfolios with receivables from obligors in all 50
states, and entered into third party servicing arrangements with approximately
85 law firms under which such attorneys service and collect our consumer
receivables. 


It is a conflict of interest for W.
Peter Ragan, Sr. to serve as a director and officer of our company and for W.
Peter Ragan, Jr. to serve as an officer of our company, while also being the
principals of Ragan & Ragan, P.C., our third party servicer in the State of
New Jersey. 


          As
officers and, in the case of W. Peter Ragan, Sr., also as a director, of our
company, Messrs. Ragan and Ragan have a fiduciary duty to our stockholders.
However, their position as the principals of the law firm Ragan & Ragan,
P.C., the primary third party servicer of our consumer receivable portfolios,
interests in distressed real property and tax lien certificates, may compromise
their ability to make decisions in the best interests of our stockholders. 


          Each
of Messrs. Ragan and Ragan devotes approximately 50% of his business time to
our affairs in accordance with the terms of his respective employment agreement
and the balance of his business time to his law practice which includes the
representation of companies that may be deemed our competitors. Accordingly,
there are potential conflicts of interest inherent in such relationship. The
current agreement by and between our wholly-owned subsidiary, VI, and Ragan
& Ragan P.C. is for one calendar year, and automatically extends for
additional periods of one calendar year each unless terminated by us. The
agreement provides for the payment to such firm of a contingency fee equal to
25% of all amounts collected and paid by the obligors. The shareholders of
Ragan & Ragan, P.C. are W. Peter Ragan, Sr., our vice president and a
director, and W. Peter Ragan Jr., president of our wholly-owned subsidiary, VI.
During 2007 and 2006, we paid Ragan & Ragan, P.C an aggregate of $1,134,345
and $1,241,244 respectively, for services rendered in accordance with the terms
of the agreements between our subsidiaries and Ragan & Ragan, P.C. Pursuant
to an employment agreement dated January 1, 2004, by and between W. Peter
Ragan, Sr. and us, Mr. Ragan, Sr. is entitled to an annual salary of $100,000
in consideration for his position as our Vice President and president of our
wholly-owned subsidiaries, J. Holder, Inc. (“JHI”) and VOM, LLC. In addition,
pursuant to an employment agreement dated January 1, 2004, by and between W.
Peter Ragan, Jr. and us, Mr. Ragan, Jr. is entitled to an annual salary of
$100,000 per year in consideration for his position as president of our wholly
owned subsidiary, VI. 


5






          Our
subsidiary, JHI, has entered into a one-year retainer agreement with the law
firm of Ragan & Ragan, P.C. and such firm has agreed to provide legal
services at varying hourly rates in connection with the purchase and sale of
JHI’s interests in distressed real property with a minimum fee of $1,500 per
each purchase and sale. In addition, such firm is entitled to receive a
finder’s fee equal to 15% of JHI’s net profit, if any, at the time of sale of
any property interest referred to us by Ragan & Ragan, P.C. The retainer
agreement is for a one year period commencing January 1, 2005, and renews for
successive periods of one year each unless terminated by our subsidiary. 


          Each
of Messrs. Ragan and Ragan beneficially own approximately 13.7% of our issued
and outstanding shares of common stock. 


          Our
subsidiary, VOM has entered into a retainer agreement with the law firm of
Ragan & Ragan, P.C., in which such firm has agreed to provide legal
services at varying hourly rates in connection with the foreclosure of tax lien
certificates with a minimum fee of $1,500 per foreclosed tax lien certificate
and a commission equal to 15% of VOM’s net profit, if any, at the time of sale
of any real property acquired by VOM upon foreclosure of a tax lien certificate.



          Ragan
& Ragan, P.C. is currently our third party servicer for collections in the
State of New Jersey. Our third party servicing agreements with Ragan &
Ragan, P.C. have terms no more favorable than our third party servicing
agreements with other third party servicers in other states. 


The loss of any of our executive
officers may adversely affect our operations and our ability to successfully
acquire distressed assets. 


          John
C. Kleinert, our president and chief executive officer, W. Peter Ragan, Sr.,
our vice president, W. Peter Ragan, Jr., president of our wholly-owned
subsidiary, VI, and Mr. James J. Mastriani, our chief financial officer, chief
legal officer, treasurer and secretary, are responsible for making
substantially all management decisions, including determining which distressed
assets to purchase, the purchase price and other material terms of such
acquisitions. Although we have entered into employment agreements with each of
such individuals, the loss of any of their services could disrupt our
operations and adversely affect our ability to successfully acquire consumer
receivable portfolios, interests in distressed real property and tax lien
certificates. In addition, we have not obtained “key man” life insurance on the
lives of Mr. Kleinert, Mr. Ragan, Sr., Mr. Ragan, Jr. and Mr. Mastriani. 


If we are unable to access external
sources of financing we may not be able to fund and grow our operations. 


          We
depend on loans from our credit facility and other external sources to fund and
expand our operations. Our ability to grow our business is dependent on our
access to additional financing and capital resources at acceptable rates. The
failure to obtain financing and capital on acceptable financing terms as needed
would limit our ability to purchase consumer receivable portfolios, interests
in distressed real property and tax lien certificates and achieve our growth
plans. 


          Our
agreement with Wells Fargo, our credit facility, is limited to $22,500,000. As
of April 15, 2008, we have approximately $9,000,000 of credit remaining
available. As such, we may have insufficient credit lines available to purchase
additional receivables, unless we successfully obtain additional credit. 


6






          We
may also consider raising additional capital from time to time which financings
may take the forms of private placement offerings, pipes or public offerings of
equity or debt securities, or a combination thereof. Although we have no
specific capital raising transactions currently under negotiation, we may
determine to undertake such transactions at any time. Such transactions could
include the sale of equity at less than the market price of our common stock at
the time of such transaction, although we have no present intention to
undertake below market transactions, and could be for gross proceeds of as low
as $1,000,000 to approximately $10,000,000 or more. The terms of any such
capital raising transaction would be considered by the Board of Directors at
the time it is proposed by management. 


We may incur substantial
indebtedness from time to time in connection with our operations. 


          We
may incur substantial debt from time to time in connection with our purchase of
consumer receivable portfolios which could affect our ability to obtain
additional funds and may increase our vulnerability to economic downturns. In
particular, 


	
 

	
 


	
·

	
we could be required to
  dedicate a portion of our cash flows from operations to pay debt service
  costs and, as a result, we would have less funds available for operations,
  future acquisitions of consumer receivable portfolios, interests in
  distressed real property and tax lien certificates, and other purposes; 


	
 

	
 


	
·

	
it may be more difficult
  and expensive to obtain additional funding through financings, if available
  at all; 


	
 

	
 


	
·

	
we would be more
  vulnerable to economic downturns and fluctuations in interest rates, less
  able to withstand competitive pressures and less flexible in reacting to
  changes in our industry and general economic conditions; and 


	
 

	
 


	
·

	
if we defaulted under our
  existing senior credit facility or other indebtedness or if our lenders
  demanded payment of a portion or all of our indebtedness, we may not have
  sufficient funds to make such payments. 





If an event of default occurs under
our secured financing arrangements, it could seriously harm our operations. 


          On
January 27, 2005, VI entered into a Loan and Security Agreement with Wells
Fargo, through which Wells Fargo agreed to provide VI with a three year $12,500,000
senior credit facility (the “Initial Credit Facility”) to finance up to 60% of
the purchase price of the acquisition of individual pools of unsecured consumer
receivables that are approved by Wells Fargo under specific eligibility
criteria set forth in the Loan and Security Agreement. On February 27, 2006, VI
entered into a First Amendment to the Loan and Security Agreement with Wells
Fargo (the “Amended and Restated Loan Agreement”). Pursuant to the Amended and
Restated Loan Agreement, Wells Fargo extended the Initial Credit Facility until
January 27, 2009 (formerly January 27, 2008) and agreed to increase the advance
rate under the credit facility to 75% (up from 60%) of the purchase price of
individual pools of unsecured consumer receivables that are approved by Wells
Fargo. Wells Fargo also agreed to reduce the interest rate on the loan from
3.5% above the prime rate of Wells Fargo Bank, N.A. to 1.5% above such prime
rate. In addition, the amortization schedule for each portfolio has been extended
from twenty-four to thirty months. Wells Fargo also agreed to reduce the
personal guarantees associated with the line from $1,000,000 to $250,000. On
February 23, 2007, Wells Fargo increased the line to $17,500,000 pursuant to
the Third Amendment to the Loan and Security Agreement. On February 29, 2008,
Wells Fargo increased the line to $22,500,000, extended the maturity date of
the facility to January 2011 and eliminated limited personal guarantees,
pursuant to the Fourth Amendment to the Loan and Security Agreement. 


7






          Any
indebtedness that we incur under such line of credit is secured by a first lien
upon all of our assets, including all of our portfolios of consumer receivables
acquired for liquidation. If we default under the indebtedness secured by our
assets, those assets would be available to the secured creditor to satisfy our
obligations to the secured creditor. Any of these consequences could adversely
affect our ability to acquire consumer receivable portfolios, interests in distressed
real property and tax lien certificates, and operate our business. 


The restrictions contained in the
secured financings could negatively impact our ability to obtain financing from
other sources and to operate our business. 


          VI
has agreed to maintain certain ratios with respect to outstanding advances on
the Credit Facility against the estimated remaining return value on Wells Fargo
financed portfolios. As of February 29, 2008, VI has agreed to maintain at
least $14,000,000 in VI’s member’s equity. In addition, the net income of VI
for each calendar quarter will not be less than $350,000. We have also agreed
to maintain at least $25,000,000 in stockholders’ equity and subordinated debt
for the duration of the facility and the net income for each calendar quarter
will not be less than $200,000. 


          Our
loan and security agreement contains certain restrictive covenants that may
restrict our ability to operate our business. Furthermore, the failure to
satisfy any of these covenants could: 


	
 

	
 


	
·

	
cause our indebtedness to
  become immediately payable; 


	
 

	
 


	
·

	
preclude us from further
  borrowings from these existing sources; and 


	
 

	
 


	
·

	
prevent us from securing
  alternative sources of financing necessary to purchase consumer receivable
  portfolios, interests in distressed real property and tax lien certificates
  and to operate our business. 





          As
a result of our line of credit with Wells Fargo, we anticipate that we will
incur significant increases in interest expense offset, over time, by expected
increased revenues from consumer receivable portfolios purchased utilizing
funds under such line of credit. No assurance can be given that the expected
revenues from such purchased portfolios will exceed the additional interest
expense. 


Our collections on unsecured
consumer receivables may decrease if bankruptcy filings increase. 


          During
times of economic recession, the amount of defaulted consumer receivables
generally increases, which contributes to an increase in the amount of personal
bankruptcy filings. Under certain bankruptcy filings an obligor’s assets are
sold to repay credit originators, but since certain of the receivables we
purchase are unsecured, we often would not be able to collect on those
receivables. We cannot assure you that our collection experience would not
decline with an increase in bankruptcy filings. If our actual collection
experience with respect to our unsecured receivable portfolios is significantly
lower than we projected when we purchased the portfolios, our realization on
those assets may decline and our earnings could be negatively affected. We use
estimates for recognizing revenue on a majority of our receivable portfolio
investments and our earnings would be reduced if actual results are less than
estimated. 


8






We may not be able to acquire
consumer receivables of new asset types or implement a new pricing structure. 


          We
may pursue the acquisition of consumer receivable portfolios of asset types in
which we have little current experience. We may not be able to complete any
acquisitions of receivables of these asset types and our limited experience in
these asset types may impair our ability to collect on these receivables. This
may cause us to pay too much for these receivables, and consequently, we may
not generate a profit from these receivable portfolio acquisitions. 


If we fail to manage our growth
effectively, we may not be able to execute our business strategy. 


          We
have experienced rapid growth over the past several years and expect to
maintain our growth. However, our growth will place demands on our resources
and we cannot be sure that we will be able to manage our growth effectively.
Future internal growth will depend on a number of factors, including: 


	
 

	
 


	
·

	
the effective and timely
  initiation and development of relationships with sellers of consumer
  receivable portfolios and strategic partners; 


	
 

	
 


	
·

	
our ability to efficiently
  collect consumer receivables; and 


	
 

	
 


	
·

	
the recruitment,
  motivation and retention of qualified personnel. 





          Sustaining
growth will also require the implementation of enhancements to our operational
and financial systems and will require additional management, operational and
financial resources. There can be no assurance that we will be able to manage
our expanding operations effectively or that we will be able to maintain or
accelerate our growth and any failure to do so could adversely affect our
ability to generate revenues and control our expenses. 


Our operations could suffer from
telecommunications or technology downtime, disruption or increased costs. 


          Our
ability to execute our business strategy depends in part on sophisticated
telecommunications and computer systems. The temporary loss of our computer and
telecommunications systems, through casualty, operating malfunction or
servicer’s failure, could disrupt our operations. In addition, we must record
and process significant amounts of data quickly and accurately to properly bid
on prospective acquisitions of consumer receivable portfolios and to access,
maintain and expand the databases we use for our collection and monitoring
activities. Any failure of our information systems and their backup systems
would interrupt our operations. We may not have adequate backup arrangements for
all of our operations and we may incur significant losses if an outage occurs.
Any interruption in our operations could have an adverse effect on our results
of operations and financial condition. 


Our inability to obtain or renew
required licenses could have a material adverse effect upon our results of
operations and financial condition. 


          We
currently hold a number of licenses issued under applicable consumer credit
laws. Certain of our current licenses and any licenses that we may be required
to obtain in the future may be subject to periodic renewal provisions and/or
other requirements. Our inability to renew such licenses or take any other
required action with respect to such licenses could limit our ability to
collect on some of our receivables and otherwise have a material adverse effect
upon our results of operations and financial condition. 


9






Risk Factors Relating to Our
Industry 


Government regulations may limit
our ability to recover and enforce the collection of our consumer receivables. 


          Federal,
state and municipal laws, rules, regulations and ordinances may limit our
ability to recover and enforce our rights with respect to the consumer
receivables acquired by us. These laws include, but are not limited to, the
following Federal statutes and related regulations and comparable statutes in
states where obligors reside and/or where creditors are located: 


	
 

	
 


	
·

	
the Fair Debt Collection
  Practices Act; 


	
 

	
 


	
·

	
the Federal Trade
  Commission Act; 


	
 

	
 


	
·

	
the Truth-In-Lending Act; 


	
 

	
 


	
·

	
the Fair Credit Billing
  Act; 


	
 

	
 


	
·

	
the Equal Credit
  Opportunity Act; 


	
 

	
 


	
·

	
the Fair Credit Reporting
  Act; and 


	
 

	
 


	
·

	
the Fair Foreclosure Act. 





          We
may be precluded from collecting consumer receivables we purchase where the
creditors or other previous owners or servicers failed to comply with
applicable law in originating or servicing such acquired receivables. Laws
relating to the collection of consumer debt also directly apply to our
business. Our failure to comply with any laws applicable to us, including state
licensing laws, could limit our ability to recover on our receivables and could
subject us to fines and penalties, which could reduce our earnings and result
in a default under our loan arrangements. 


          Additional
laws may be enacted that could impose additional restrictions on the servicing
and collection of consumer receivables. Such new laws may adversely affect the
ability to collect on our receivables which could also adversely affect our
revenues and earnings. 


Class action suits and other
litigation in our industry could divert our management’s attention from
operating our business and increase our expenses. 


          Certain
originators and servicers in the consumer credit industry have been subject to
class actions and other litigation. Claims have included failure to comply with
applicable laws and regulations and improper or deceptive origination and
servicing practices. If we become a party to any such class action suit or
other litigation, our results of operations and financial condition could be
materially adversely affected. 


Risk Factors Relating to Our
Securities 


Our quarterly operating results may
fluctuate and cause our stock price to decline. 


          Because
of the nature of our business, our quarterly operating results may fluctuate,
which may adversely affect the market price of our common stock. Our results
may fluctuate as a result of any of the following: 


	
 

	
 


	
·

	
the timing and amount of
  collections on our consumer receivable portfolios; 





10






	
 

	
 


	
·

	
our inability to identify
  and acquire additional consumer receivable portfolios; 


	
 

	
 


	
·

	
a decline in the estimated
  value of our consumer receivable portfolio recoveries; 


	
 

	
 


	
·

	
the timing of sales of
  interests in distressed real property and redemption of tax lien
  certificates; 


	
 

	
 


	
·

	
increases in operating
  expenses associated with the growth of our operations; and 


	
 

	
 


	
·

	
general and economic
  market conditions. 





Because three stockholders own a
large percentage of our voting stock, other stockholders’ voting power may be
limited. 


          As
of April 15, 2008, John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan,
Jr., three of our executive officers, beneficially owned or controlled
approximately 81.9% (including shares issuable upon exercise of warrants owned
by such stockholders) of our shares. If those stockholders act together, they
will have the ability to control matters submitted to our stockholders for
approval, including the election and removal of directors and the approval of
any merger, consolidation or sale of all or substantially all of our assets. As
a result, our other stockholders may have little or no influence over matters
submitted for stockholder approval. In addition, the ownership of such three
stockholders could preclude any unsolicited acquisition of us, and
consequently, materially adversely affect the price of our common stock. These
stockholders may make decisions that are adverse to your interests. 


Our organizational documents and
Delaware law make it more difficult for us to be acquired without the consent
and cooperation of our board of directors and management. 


          Provisions
of our organizational documents and Delaware law may deter or prevent a
takeover attempt, including a takeover attempt in which the potential purchaser
offers to pay a per share price greater than the current market price of our
common stock. Under the terms of our certificate of incorporation, our board of
directors has the authority, without further action by the stockholders, to
issue shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions of such shares. The ability to issue
shares of preferred stock could tend to discourage takeover or acquisition
proposals not supported by our current board of directors. In addition, we are
subject to Section 203 of the Delaware General Corporation Law, which restricts
business combinations with some stockholders once the stockholder acquires 15%
or more of our common stock. 


The issuance of authorized shares
of preferred stock and additional common stock may result in dilution to
existing stockholders, adversely affect the rights of existing stockholders and
depress the price of our common stock. 


          We
have 10,000,000 shares of authorized “blank check” preferred stock, the terms
of which may be fixed by our board of directors. Our board of directors has the
authority, without stockholder approval, to create and issue one or more series
of such preferred stock and to determine the voting, dividend and other rights
of the holders of such preferred stock. Depending on the rights, preferences
and privileges granted when the preferred stock is issued, it may have the
effect of delaying, deferring or preventing a change in control without further
action by the stockholders, may discourage bids for our common stock at a
premium over the market price of the common stock and may adversely affect the
market price of and voting and other rights of the holders of our common stock.
In connection with this Placement, we agreed that for a time period commencing
upon the initial closing date and continuing until the date which is twelve
months from the date hereof, that we would not grant any right to any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities; provided, however, that the foregoing shall not preclude
the entering into share-based adjustment provisions for stock splits, mergers,
consolidations and the like. 


11






          As
of April 15, 2008, there were 1,380,000 shares of preferred stock outstanding.
In addition to the preferred stock, we are authorized to issue 40,000,000
shares of our common stock. As of April 15, 2008, there were 17,066,821 shares
of our common stock issued and outstanding. However, the total number of shares
of common stock issued and outstanding does not include outstanding unexercised
options, warrants, convertible debt or convertible preferred shares exercisable
for 10,109,410 of shares of common stock. As of April 15, 2008, we have
reserved up to 10,109,410 shares of our common stock for issuance upon exercise
of outstanding stock options, warrants, convertible debt and convertible
preferred stock. We have reserved a total of 1,000,000 shares of common stock
under our 2004 Equity Incentive Program. As of April 15, 2008, 232,000 shares
have been issued. 


          Under
most circumstances, our board of directors has the right, without stockholder
approval, to issue authorized but unissued and nonreserved shares of our common
stock. If all of these shares were issued, it would dilute the existing
stockholders and may depress the price of our common stock. 


          Any
of (i) the exercise of the outstanding options and warrants, (ii) the
conversion of the preferred stock, or (iii) the conversion by the convertible
note holders of such notes into shares of our common stock will reduce the
percentage of common stock held by the public stockholders. Further, the terms
on which we could obtain additional capital during the life of the options and
warrants may be adversely affected, and it should be expected that the holders
of the options and the warrants would exercise them at a time when we would be
able to obtain equity capital on terms more favorable than those provided for
by such options and warrants. As a result, any issuance of additional shares of
common stock may cause our current stockholders to suffer significant dilution
and depress the price of our common stock. 


Common stock eligible for future
sale may depress the price of our common stock in the market. 


          As
of April 15, 2008, there were 17,066,821 shares of common stock held by our
present stockholders, and approximately 14,247,720 shares may be available for
public sale by means of ordinary brokerage transactions in the open market
pursuant to Rule 144, promulgated under the Securities Act, subject to certain
limitations. 3,100,063 shares, 1,364,005 shares and 1,076,250 shares may be
sold pursuant to current registration statements effective on August 12, 2005,
December 29, 2005 and December 18, 2007, respectively. In general, pursuant to
Rule 144, after satisfying a six month holding period: (i) affiliated
stockholders (or stockholders whose shares are aggregated) may, under certain
circumstances, sell within any three month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common
stock or the average weekly trading volume of the class during the four
calendar weeks prior to such sale and (ii) non-affiliated stockholders may sell
without such limitations, provided we are current in our public reporting
obligations. Rule 144 also permits the sale of securities by non-affiliates
that have satisfied a one year holding period without any limitation or restriction.
Based on the number of shares of common stock outstanding, approximately
3,100,000 shares could be sold under Rule 144 during the next 90 days. The sale
of such a large number of shares may cause the price of our common stock to
decline. 


12






The limited prior public market and
trading market may cause possible volatility in the price of our securities. 


          There
has only been a limited public market for our securities and there can be no
assurance that an active trading market in our securities will be maintained.
In addition, the overall market for securities in recent years has experienced
extreme price and volume fluctuations that have particularly affected the
market prices of many smaller companies. The trading price of our common stock
is expected to be subject to significant fluctuations including, but not
limited to, the following: 


	
 

	
 


	
·

	
quarterly variations in
  operating results and achievement of key business metrics; 


	
 

	
 


	
·

	
changes in earnings
  estimates by securities analysts, if any; 


	
 

	
 


	
·

	
any differences between
  reported results and securities analysts’ published or unpublished
  expectations; 


	
 

	
 


	
·

	
announcements of new
  contracts or service offerings by us or our competitors; 


	
 

	
 


	
·

	
market reaction to any
  acquisitions, divestitures, joint ventures or strategic investments announced
  by us or our competitors; 


	
 

	
 


	
·

	
demand for our services
  and products; 


	
 

	
 


	
·

	
shares being sold pursuant
  to Rule 144 or upon exercise of warrants; and 


	
 

	
 


	
·

	
general economic or stock
  market conditions unrelated to our operating performance. 





          These
fluctuations, as well as general economic and market conditions, may have a
material or adverse effect on the market price of our securities. 


We have never paid dividends on our
common stock and do not anticipate paying dividends on our common stock for the
foreseeable future; therefore, returns on your investment may only be realized
by the appreciation in value of our securities, if any. 


          We
have never paid any cash dividends on our common stock and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. We
plan to retain any future earnings to finance growth. Because of this,
investors who purchase our common stock and/or convert their warrants into
common stock may only realize a return on their investment if the value of our
common stock appreciates. If we determine that we will pay dividends to the
holders of our common stock, there is no assurance or guarantee that such
dividends will be paid on a timely basis. 


We may be de-listed from the AMEX
if we do not meet continued listing requirements. 


          If
we do not meet the continued listing requirements of the AMEX and our common
stock is delisted by the AMEX, trading of our common stock would thereafter
likely be conducted on the OTC Bulletin Board. In such case, the market
liquidity for our common stock would likely be negatively affected, which may
make it more difficult for holders of our common stock and preferred stock to
sell their securities in the open market and we could face difficulty raising
capital necessary for our continued operations. 


          As
set forth in AMEX Company Guide Section 1002: 


          The
Board of Governors of AMEX may, in its discretion, at any time, and without
notice, suspend dealings in, or may remove any security from, listing or
unlisted trading privileges. 


13






          AMEX,
as a matter of policy, will consider the suspension of trading in, or removal
from listing or unlisted trading of, any security when, in their opinion: 


	
 

	
 


	
·

	
the financial condition
  and/or operating results of the issuer appear to be unsatisfactory; or 


	
 

	
 


	
·

	
it appears that the extent
  of public distribution or the aggregate market value of the security has
  become so reduced as to make further dealings on the AMEX inadvisable; or 


	
 

	
 


	
·

	
the issuer has sold or
  otherwise disposed of its principal operating assets, or has ceased to be an
  operating company; or 


	
 

	
 


	
·

	
the issuer has failed to
  comply with its listing agreements with the AMEX; or 


	
 

	
 


	
·

	
any other event shall
  occur or any condition shall exist which makes further dealings on the AMEX
  unwarranted. 





Risks Related to this Private Placement


There is no minimum offering size
and no escrow.


          We
are selling the Notes on a “best efforts” basis. There is no minimum amount of
Notes which we must sell before we receive, and have the right to expend, the
net proceeds from the sale of any Notes. The proceeds from the sale of the
Notes will not be held in escrow, and we, upon accepting subscription, at our
discretion may immediately expend the subscription proceeds.


Subscription
to this placement is restricted to accredited investors. There is no assurance
that you will receive a return on your investment because securities acquired
in this placement will be restricted. 


          We
are offering the Notes pursuant to exemptions from registration that depend in
part on the investment intent of the investors. In order to purchase the Note,
you will be required to represent that you are purchasing the securities for
your own account for investment purposes and not with a view to resale or
distribution. We will place a restrictive legend on the securities that we sell
in this placement. 


          You
should be prepared to bear the economic risk of your investment for an
indefinite period. Our cash flows from operations are not sufficient to pay our
operating expenses. We rely on outside financing, including the proceeds from
the sale of our shares of common stock and the proceeds of this placement to
provide necessary working capital. You should be able to withstand the total
loss of your investment. 


This
placement is on a “best efforts” basis, which means that we may not be ale to
raise the funds we expect to raise. We may not raise the Maximum Amount, and
even if we do, we may not be able to fund our working capital requirements
without additional financing. 


          The
Notes are being offered hereby on a “best efforts” basis and not on a “firm
commitment” basis and as a result, we may not be able to consummate this
placement. There can be no assurance that the Maximum Amount will be raised.
There is no assurance as to how long our funding will enable us to operate
without additional financing. We may close upon amounts less than the Maximum
Amount. We may require additional capital in order to continue to support and
increase our acquisition of consumer receivable portfolios. If you purchase
Notes, you will do so without any assurance that we will raise enough money to
meet our ongoing working capital needs. 


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You should consult your own tax and legal advisors concerning
income tax risks. 


          We
urge our prospective investors to consult with their own representatives,
including their own tax and legal advisors, with respect to the federal (as
well as state and local) income tax consequences of this investment before
subscribing to this private placement. Prospective investors should not
construe the information set forth in this term sheet as providing any tax
advice and this term sheet is not intended to be a complete or definitive
summary of the tax consequences of an investment in the Notes. Prospective
investors are advised to consult with their own tax counsel concerning the tax
aspects of the purchase of our Notes.


There are restrictions on the transferability of the Notes
offered hereby.


          This
Placement is being made pursuant to Section 4(2) of the Act and/or the
provisions of Rule 506 of Regulation D thereunder and, accordingly, the Notes
offered hereby have not been registered under the Act and may not be
re-offered, sold, or otherwise. Further, the Notes are being offered only to
persons who are accredited investors. Investors must therefore be prepared to
bear the economic risk of an investment in the Securities for an indefinite
period of time. 


This offering has not been reviewed by the Securities and
Exchange Commission nor any state securities authority.


          This
Placement will not be registered with the Securities and Exchange Commission
under the Act, or with the securities agency of any state. The Notes are being
offered in reliance upon exemptions from the registration provisions of the Act
and state securities laws applicable only to offers and sales to investors
meeting the suitability requirements set forth herein. As such, investors will
not have the benefit of review by the Securities and Exchange Commission nor
any state securities authority. The terms and conditions of the Placement may
not comply with the guidelines and regulations established for offerings that
are required to be registered and qualities with those agencies.


The Notes are offered under a private offering exemption. 


          The
Notes are being offered to prospective investors under the private offering
exemptions from registration available under the Act. If we should fail to
comply with the requirements of these exemptions, Investors may have the right
to rescind their purchases if they so desire. Since compliance with the
exemption rules is highly technical, it is possible that, if a shareholder
seeks rescission, he may succeed. If a number of noteholders were to
successfully seek rescission, we would face severe financial demands that could
have a material adverse effect on the Company and the non-rescinding
noteholders.


Our management has broad discretion under applicable
principles and provisions of corporate law to manage our business, including
the allocation and use of the net proceeds of this Placement, and we may not
use the proceeds in ways with which our stockholders desire.


          Our
management will have broad discretion with respect to the expenditure of the
net proceeds of the Placement, including discretion to use the proceeds in ways
with which stockholders may disagree. Investors will be relying on the judgment
of our management regarding the application of the proceeds of the Placement.


It is not
possible to foresee all risks that may affect us. Moreover, we cannot predict
whether we will successfully effectuate our current business plan. Each
prospective investor is encouraged to carefully analyze the risks and merits of
an investment in the Securities and should take into consideration when making
such analysis, among others, the Risk Factors discussed above.


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Exhibit
H


Annual
Report on Form 10-K for the Year Ended December 31, 2007


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