EXHIBIT 10.19
SUBORDINATION AGREEMENT
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SUBORDINATION AGREEMENT, dated as of April 17, 2001 (the "Agreement"), made
by Xxxxxx Respiratory Care Inc. (the "Borrower"), FS Equity Partners IV, L.P., a
Delaware limited partnership, and the additional parties signatory hereto
(collectively, the "Subordinated Creditors"), and Bankers Trust Company, as
Administrative Agent for the Lenders (collectively the "Lenders") from time to
time party to the Credit Agreement (as defined below) (in such capacity, the
"Administrative Agent").
RECITALS
A. The Borrower previously entered into that certain Credit Agreement
dated as of April 7, 1998 among the Borrower, River Holding Corp., the Lenders
party thereto (the "Lenders"), Salomon Brothers Inc, as Arranger, Advisor and
Syndication Agent, and Bankers Trust Company, as Administrative Agent and
Collateral Agent, as amended (the "Credit Agreement") whereby the Lenders agreed
to extend credit to the Borrower upon the terms and conditions contained in the
Credit Agreement.
B. The Borrower is contemplating borrowing up to an aggregate of $15.0
million from the Subordinated Creditors pursuant to one or more Senior
Subordinated Convertible Promissory Notes dated as of the date of this Agreement
or of a subsequent date made by the Borrower in favor of the Subordinated
Creditors (collectively, and together with any accrued interest thereon, the
"Subordinated Debt").
C. The Subordinated Creditors and the Borrower have agreed that the
Subordinated Debt will be subordinated to the Senior Debt (as defined in Section
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1).
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D. The Subordinated Creditors desire to subordinate the Subordinated Debt
at any time owed to such Subordinated Creditors to the Senior Debt in accordance
with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises, the Subordinated
Creditors and the Borrower hereby agree as follows:
AGREEMENT
1. Agreement to Subordinate. The Subordinated Creditors and Borrower
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agree that the Subordinated Debt is and shall be subordinate, to the extent and
in the manner hereinafter set forth, in right of payment to the prior payment in
full in cash of the Senior Debt.
"Senior Debt" of the Borrower means (a) all obligations consisting of the
principal, accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Borrower to the extent post-filing interest is
allowed in such proceeding) and fees and other amounts payable by the Borrower
to the Administrative Agent or the Lenders from time to time under the Credit
Documents (as defined in the Credit Agreement) in respect of indebtedness of the
Borrower under the Credit Documents; and (b) all obligations of the Borrower (i)
for the reimbursement of any obligor on any letter of credit, bankers'
acceptance or similar credit transaction with respect to the Credit Documents;
and (ii) under any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, foreign currency exchange agreement or other
interest or exchange rate hedging agreement entered into with respect to the
Credit Documents designed to protect against fluctuations in interest rates.
2. No Payment on the Subordinated Debt. Unless and until the Senior Debt
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and all other obligations of Borrower with respect to the Senior Debt are paid
in full in cash, the Subordinated Creditors hereby agree not to accept, ask,
demand, xxx for, take, create or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including without limitation from or by way of collateral), payment of all or
any of the Subordinated Debt. The parties hereto acknowledge that at the option
of the Borrower, interest on the Subordinated Debt may (a) be paid semi-annually
on each April 15 and October 15, beginning on October 15, 2001 (each such semi-
annual date that an interest payment is due, an "Interest Payment Date") but
only through the issuance on any Interest Payment Date of an additional
promissory note of equal ranking to the Subordinated Debt and on the same terms
and conditions provided for therein, such additional promissory note to be
issued in a principal amount that corresponds with the amount of the interest
payment that would otherwise be due on such Interest Payment Date or (b) accrue,
such accruing amount to be compounded semi-annually.
3. In Furtherance of Subordination. The Subordinated Creditors hereby
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agree as follows:
a. Upon any distribution of all or any of the assets of the Borrower
to creditors of the Borrower, in connection with any bankruptcy, reorganization,
insolvency or other similar proceeding (a "Proceeding"), any payment or
distribution of any kind (whether in cash, property or securities) which
otherwise would be payable or deliverable upon or with respect to the
Subordinated Debt shall be paid or delivered directly to the Administrative
Agent in such capacity.
b. If any Proceeding is commenced by or against the Borrower:
i. The Administrative Agent is hereby irrevocably authorized and
empowered, but shall have no obligation, to demand, xxx for, collect and receive
every payment or distribution referred to in subsection 3.1 above and give
acquittance therefor and to file claims and proofs of claim and take such other
actions (including, without limitation, voting the Subordinated Debt or
enforcing any security interest or other lien securing payment of the
Subordinated Debt) as it may deem necessary or advisable for the exercise or
enforcement of any of its rights or interests hereunder; and
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ii. The Subordinated Creditors shall duly and promptly take such
action as the Administrative Agent may request (A) to collect the Subordinated
Debt for account of the Administrative Agent and to file appropriate claims or
proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver
to the Administrative Agent on behalf of the Lenders such powers of attorney,
assignment, or other instruments as it may request in order to enable it to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinated Debt, and (C) to collect and receive
any and all payments or distributions which may be payable or deliverable upon
or with respect to the Subordinated Debt.
c. All payments or distributions upon or with respect to the
Subordinated Debt which are received by any Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit of
the Administrative Agent on behalf of the Lenders, shall be segregated from
other funds and property held by such Subordinated Creditor and shall be
forthwith paid over to the Administrative Agent in the same form as so received
(with any necessary indorsement) to be applied (in the case of cash) to or held
as collateral (in the case of non-cash property or securities) for the payment
or prepayment of Senior Debt in accordance with its terms.
d. The Administrative Agent is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall have complied
with any of the provisions hereof applicable to it, at any time when any
Subordinated Creditor shall have failed to comply with any of the provisions of
this Agreement applicable to it. The Subordinated Creditors hereby irrevocably
waive any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
4. No Commencement of Any Proceeding. Each Subordinated Creditor agrees
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that, so long as any of the obligations under the Senior Debt shall remain
unpaid, such Subordinated Creditor will not commence, or join with any creditor
other than the Administrative Agent in commencing, any Proceeding.
5. Rights of Subrogation. The Subordinated Creditors agree that no
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payment or distribution to the Administrative Agent pursuant to the provisions
of this Agreement shall entitle any Subordinated Creditor to exercise any rights
of subrogation in respect thereof until the Senior Debt has been paid in full in
cash.
6. Subordination Legend; Further Assurances. The Subordinated Creditors
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and the Borrower will cause each instrument evidencing Subordinated Debt to be
endorsed with the following legend:
"THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF THE SENIOR DEBT (AS DEFINED IN THE SUBORDINATION
AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED
IN, THE SUBORDINATION AGREEMENT
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DATED AS OF APRIL 17, 2001 BY THE MAKER HEREOF AND PAYEE NAMED HEREIN IN
FAVOR OF BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT FOR THE LENDERS
UNDER THE CREDIT AGREEMENT REFERRED TO IN SUCH SUBORDINATION AGREEMENT."
The Subordinated Creditors and the Borrower will further xxxx their respective
books of account in such a manner as shall be effective to give proper notice of
the effect of this Agreement and will, in the case of any Subordinated Debt
which is not evidenced by any instrument, upon the Administrative Agent's
written request, cause such Subordinated Debt to be evidenced by an appropriate
instrument or instruments endorsed with the above legend. The Subordinated
Creditors will upon the Administrative Agent's request deliver to the
Administrative Agent true and correct copies of all instruments, if any,
evidencing Subordinated Debt. The Subordinated Creditors and the Borrower will,
at their expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action,
that, may be necessary or desirable, or that the Administrative Agent may
reasonably request, in order to protect any right or interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder.
7. No Change in or Disposition of Subordinated Debt. The Subordinated
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Creditors will not, without the consent of the Administrative Agent:
a. Cancel or otherwise discharge any of the Subordinated Debt (except
upon (a) payment in full in cash thereof paid to the Administrative Agent as
contemplated by Section 3.3 or (b) conversion of the Subordinated Debt into
common stock of the Borrower in accordance with the terms of the Subordinated
Debt) or subordinate any of the Subordinated Debt to any indebtedness of the
Borrower other than the Senior Debt;
b. Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Debt, except that the Subordinated Creditors may transfer up to
$1,000,000 in principal amount of Subordinated Debt within thirty (30) days of
the date hereof, provided that, in connection with such transfer, such
transferee executes a counterpart of the signature page to this Agreement
evidencing such transferee's agreement to be bound by the provisions of this
Agreement; or
c. Permit the terms of any of the Subordinated Debt to be changed in
any manner other than changes that only extend the maturity of or lower the
interest rate on the Subordinated Debt.
8. Agreements by the Borrower. The Borrower agrees that it will not make
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any payment of any of the Subordinated Debt, or take any other action, in
contravention of the provisions of this Agreement.
9. Obligations Hereunder Not Affected. All rights and interests of the
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Administrative Agent hereunder, and all agreements and obligations of the
Subordinated
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Creditors and the Borrower under this Agreement, shall remain in full force and
effect irrespective of:
i. any lack of validity or enforceability of the Senior Debt or
any agreement or instrument relating thereto;
ii. any change in the time, manner of place of payment of, or in
any other term of the Senior Debt, or any other amendment or waiver of or any
consent to departure from the Senior Debt;
iii. any taking and holding of any collateral or security or
additional guarantees for all or any of the Senior Debt; or any amendment,
alteration, exchange, substitution, transfer, enforcement, waiver,
subordination, termination or release of any collateral or such guarantees, or
any non-perfection of any collateral, or any consent to departure from any such
guaranty;
iv. any manner of application of collateral or proceeds thereof,
to all or any of the Senior Debt, or the manner of sale of any collateral or
other security;
v. any consent by the Administrative Agent to the change,
restructure or termination of the partnership structure or existence of the
Borrower and any corresponding restructure of the Senior Debt, or any other
restructure or refinancing of the Senior Debt or any portion thereof;
vi. any modification, compounding, compromise, settlement,
release by the Administrative Agent, collection or other liquidation of the
Senior Debt or of any collateral or security in whole or in part, and any
refusal of payment to the Administrative Agent in whole or in part, from any
obligor or guarantor in connection with any of the Senior Debt, whether or not
with notice to, or further assent by, or any reservation of rights against, the
Subordinated Creditors; or
vii. any other circumstance (including, but not limited to, any
statute of limitations) which might otherwise constitute a defense available to,
or a discharge of the Borrower or the Subordinated Creditors.
Without limiting the generality of the foregoing, the Subordinated
Creditors hereby consent to, and hereby agree, that the rights of the
Administrative Agent hereunder, and the enforceability hereof, shall not be
affected by any and all releases of any collateral or security from the liens
and security interests created by any security agreement, pledge agreement or
other agreement whether for purposes of sales or other dispositions of assets or
for any other purpose. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by the Administrative Agent upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all
as though such payment had not been made.
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10. Waiver.
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a. The Subordinated Creditors and the Borrower hereby waive
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Senior Debt and this Agreement and any requirement that the
Administrative Agent protect, secure, perfect or insure any security interest or
lien or any property subject thereto or exhaust any right or take any action
against the Borrower or any collateral or security.
b. The Subordinated Creditors and the Borrower hereby waive any right
to require the Administrative Agent to proceed against any party hereto or any
other Person, or proceed against or exhaust any collateral or security, or
pursue any other remedy in the power of the Administrative Agent or any other
Person.
c. The Subordinated Creditors and the Borrower agree that the
Administrative Agent, in its sole discretion, without notice or demand and
without affecting the enforceability of this Agreement, may foreclose on any
deed of trust or mortgage securing all or a portion of the Senior Debt and the
interests in real property secured thereby by nonjudicial sale; and the
Subordinated Creditors and the Borrower hereby waive any defense to the
enforceability hereof by the Administrative Agent against the Subordinated
Creditors or the Borrower after a nonjudicial sale even though the Subordinated
Creditors' right of subrogation may be altered, impaired or extinguished
thereby.
11. Representations and Warranties. Each of the Subordinated Creditors
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and the Borrower hereby represents and warrants as follows:
a. The Subordinated Debt (i) has been duly authorized by the Borrower
as applicable, (ii) has not been, and will not be, amended or otherwise modified
and (iii) constitutes the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms. There exists no
default in respect of any such Subordinated Debt.
b. The Subordinated Creditors own the Subordinated Debt free and
clear of any lien, security interest, charge or encumbrance or any rights of
others.
12. Amendments, Etc. No amendment or waiver of any provision of this
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Agreement nor consent to any departure by the Subordinated Creditors or the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders (as defined in the Credit Agreement)
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
13. Expenses. The Subordinated Creditors and the Borrower jointly and
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severally agree to pay, upon demand, to the Administrative Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel, which the Administrative
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Agent may incur in connection with the exercise or enforcement of any of its
rights or interests hereunder.
14. Addresses for Notices. All notices, requests, demands and other
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communications provided for or permitted hereunder shall, unless otherwise
stated herein, be in writing (including telex, or telecopied communications) and
shall be sent by mail (by registered or certified mail, return receipt
requested), telex, telecopier or hand delivery:
a. If to any Subordinated Creditor or the Borrower, to it at its
address set forth on the signature pages hereof or at such other address as
shall be designated by it in a written notice to the Administrative Agent
complying as to delivery with the terms of this Section; or
b. If to the Administrative Agent, addressed to it at the address for
notices to the Administrative Agent provided in the Credit Agreement.
All such notices, requests, demands and other communications shall be effective
(a) when mailed, on the earlier of receipt or the third Business Day after being
deposited in the mails with postage prepaid, (b) when sent by telex, upon
confirmation by telex answerback, (c) when sent by telecopy, upon receipt
thereof, and (d) upon personal delivery thereof.
15. References to the Administrative Agent. Any reference herein to "the
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Administrative Agent" shall be a reference herein to the Administrative Agent or
any successor administrative agent appointed pursuant to the terms of the Credit
Agreement. It is understood and agreed that the Administrative Agent is not
required to act or to refrain from acting without the consent of the Required
Lenders to the extent such consent is required by the Credit Agreement.
16. No Waiver; Remedies. No failure on the part of the Administrative
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Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
17. Continuing Agreement. This Agreement is a continuing agreement and
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shall (i) remain in full force and effect until the Senior Debt shall have been
paid in full in cash, (ii) be binding upon the Subordinated Creditors and the
Borrower and their respective successors and assigns, and (iii) inure to the
benefit of, and shall be enforceable by the Administrative Agent and its
respective successors, transferees and assigns.
18. Counterparts. This Agreement may be signed in any number of
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counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective as to each party hereto after a counterpart hereof shall
have been signed by such party.
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19. Waiver of Jury Trial. The Subordinated Creditors and the Borrower
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hereby irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement.
20. Governing Law. This Agreement shall be governed by, and construed in
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accordance with, the laws of the State of New York.
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WITNESS WHEREOF, the Subordinated Creditors and the Borrower have caused
this Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
BORROWER: XXXXXX RESPIRATORY CARE INC.
By: /s/ Xxxxxxx X. Xxxxx
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Title: Chief Financial Officer
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Address:
c/x Xxxxxx Respiratory Care Inc.
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00000 Xxxx Xxxx
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Xxxxxxxx, Xxxxxxxxxx 00000
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ADMINISTRATIVE AGENT: BANKERS TRUST COMPANY, in its capacity as
Administrative Agent under the Credit Agreement
By: /s/ Xxxx Xx Xxxxx
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Title: Assistant Vice President
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SUBORDINATED FS EQUITY PARTNERS IV, L.P.
CREDITORS:
By: FS CAPITAL PARTNERS, LLC, General Partner
By: /s/ Xxx X. Xxxxx
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By: Xxx X. Xxxxx
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Title: Vice President
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Address:
c/o Xxxxxxx Xxxxxx & Co. Incorporated
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxx X. Xxxxx
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ADDITIONAL
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SUBORDINATED CREDITORS
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Address: THE XXXXX XXXXXX XXXXXX SEPARATE
PROPERTY TRUST U/D/T DATED
c/x Xxxxxx Respiratory Care JULY 17, 1997
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00000 Xxxx Xxxx
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Xxxxxxxx, XX 00000
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By: /s/ Xxxxx Xxxxxx Xxxxxx
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Xxxxx Xxxxxx Xxxxxx, Trustee
Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxxxx X. Xxxxxxxx
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27711 Xxxx Road Xxxxxxx X. Xxxxxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxx X. Xxxxx
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00000 Xxxx Xxxx Xxx X. Xxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxxxx Xxxxxxxx
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27711 Xxxx Road Xxxxxxx Xxxxxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxxxx X. Xxxxx
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27711 Xxxx Road Xxxxxxx X. Xxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxx X. Xxxxxx
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27711 Xxxx Road Xxxxx X. Xxxxxx
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Xxxxxxxx, XX 00000
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ADDITIONAL
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SUBORDINATED CREDITORS
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxx Xxxxxxxxx
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27711 Xxxx Road Xxx Xxxxxxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxxxx Xxxxx
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27711 Xxxx Road Xxxxxxx Xxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxx X. Xxxxxxxx
--------------------------- ----------------------------
27711 Xxxx Road Xxxx X. Xxxxxxxx
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Xxxxxxxx, XX 00000
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Address:
c/x Xxxxxx Respiratory Care /s/ Xxxxxxx X. Xxxxx
--------------------------- ----------------------------
00000 Xxxx Xxxx Xxxxxxx X. Xxxxx
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Xxxxxxxx, XX 00000
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