SENIOR SUBORDINATION AGREEMENT
EXECUTION
DOCUMENT
This
SENIOR
SUBORDINATION AGREEMENT,
dated as
of January
31, 2006 (this “Agreement”), by and among ATLAS
MASTER FUND, LTD.,
a
Cayman Island Company (the “Junior Lender”), CAPITALSOURCE
FINANCE LLC,
a
Delaware limited liability company (the “Senior Lender”) and XXXX
MEDICAL SYSTEMS, INC.,
a
Delaware corporation (the “Borrower”).
W
I T N E S S E T H
:
WHEREAS,
the
Senior Lender and the Borrower are parties to a certain Revolving Credit and
Security Agreement dated as of January 31, 2006 (as amended, restated,
supplemented, replaced or otherwise modified from time to time, the “Senior Loan
Agreement”) under which the Senior Lender make loans, advances and other
financial accommodations to Borrower;
WHEREAS,
pursuant
to the Senior Loan Agreement, Borrower has granted in favor of the Senior Lender
a lien on and security interest in (collectively, the “Senior Lien”)
substantially all of the assets and property of Borrower as security for their
obligations to the Senior Lender under the Senior Loan Agreement;
WHEREAS,
the
Junior Lender and Borrower are parties to a certain Securities Purchase
Agreement dated as of August 5, 2005 (as amended, supplemented or otherwise
modified from time to time, the “Junior Agreement”) under which the Junior
Lender has purchased certain senior convertible notes of Borrower which are
convertible into shares of Borrower’s common stock, par value $0.001 per share
(collectively, the “Junior Note”);
WHEREAS, it
is a
condition precedent to the effectiveness of the Senior Loan Agreement that,
among other things, the Junior Lender shall have executed and delivered this
Agreement subordinating
its rights with respect to the Junior Obligations (as defined below) to the
rights of the Senior Lender with respect to the Senior Obligations
(as
defined below) and that Borrower
shall
have acknowledged this Agreement.
NOW,
THEREFORE,
in
consideration of the promises contained herein and to induce the Senior Lender
to enter into the Senior Loan Agreement, the Junior Lender hereby agrees as
follows:
SECTION
1. Definitions.
Capitalized terms used but not defined herein shall have the meanings given
to
them in the Senior Loan Agreement, and the rules of usage set forth therein
shall apply hereto.
SECTION
2. Subordination.
(a)
All
Junior Obligations, and all claims, demands rights and remedies of the Junior
Lender with respect thereto, are and shall continue at all times to be subject,
subordinate and junior in right of payment and priority to the Senior
Obligations. The term “Junior Obligations,” as used in this Agreement, shall
mean and include the principal amount of and the premium, if any, and interest
on all indebtedness and other monetary obligations of Borrower to the Junior
Lender under the Junior Agreement and the Junior Note, together with all fees,
costs and expenses relating thereto, whether direct or contingent, now or
hereafter existing, due or to become due to, or held or to be held by the Junior
Lender, whether created directly or acquired by assignment or otherwise,
including, without limitation, all principal of and premium, if any, and
interest on the Junior Note (including extensions, modifications, refinancings,
renewals and refundings thereof) and any damages payable upon a Conversion
Failure (as such term is defined in the Junior Note). The term “Senior
Obligations,” as used in this Agreement, shall mean and include the principal
amount of and the premium, if any, and interest (including, without limitation,
all interest on the Senior Obligations at the rate stated in the Senior Loan
Agreement from the date of the filing by or against Borrower of a petition
under
any bankruptcy, insolvency or similar law to the date of the indefeasible
payment in full of the Senior Obligations (“Postpetition Interest”) and all
other amounts on all of the Obligations including, without limitation, all
fees,
costs and expenses relating thereto, whether direct or contingent, now or
hereafter existing, due or to become due to, or held or to be held by, the
Senior Lender, whether created directly or acquired by assignment or otherwise
(including extensions, modifications, refinancings, renewals and refundings
thereof).
(b)
Except
for the payments specified in Section 2(c), Borrower shall not pay, and the
Junior Lender shall not receive, demand or accept, either directly or
indirectly, any payment on the Junior Obligations, whether as principal,
premium, interest or otherwise, unless and until all the Senior Obligations
including, without limitation, all Postpetition Interest, have been indefeasibly
paid in full in cash, and the obligation (the “Commitment”) of the Senior Lender
to make loans and advances under the Senior Loan Agreement has been
terminated.
(c) Commencing
on June 15, 2006 and continuing on each June 15 and December 15 thereafter,
the
Junior Lender may receive, accept and retain regularly
scheduled semi-annual interest
payments under the Junior Note at a rate per annum
equal to
6.5% commencing, unless:
(A)(i)
an
Event of Default has occurred and is continuing under Section 8.1(a) of the
Senior Loan Agreement (a “Senior Payment Default”) and (ii) the Junior Lender
has not received a written notice from the Senior Lender informing the Junior
Lender that such Senior Payment Default has been waived or cured;
or
(B)(i)
a
Default or an Event of Default has occurred and is continuing under the Senior
Loan Agreement (other than under Section 8.1(a) thereof)(a “Senior Non-Payment
Default”) with respect to which the Junior Lender has received from the Senior
Lender a notice (a “Senior Non-Payment Default Notice”) prohibiting the Junior
Lender from receiving, collecting or accepting any of the foregoing
payments and
from
commencing any Enforcement Action (as defined below) and (ii) the Junior Lender
has not received a written notice from the Senior Lender informing the Junior
Lender that such Senior Non-Payment Default has been waived or cured.
2
Nothing
in this subsection (c) shall prohibit the accrual (but not the payment to the
Junior Lender) of interest on the Junior Obligations at the default rate in
accordance with the terms of the Junior Agreement or the Junior Note following
the occurrence of an event of default under the Junior Agreement or the Junior
Note.
(d)
If
the
Junior Lender shall receive any payment or prepayment (including from any
account debtor under any accounts receivable of Borrower) on the Junior
Obligations that it is not entitled to receive under this Agreement, the Junior
Lender will hold any amount so received in trust for the Senior Lender and
shall, as soon as possible, turn over such payment to the Senior Lender in
the
form received (together with any necessary endorsements) to be applied to the
Senior Obligations.
(e)
Unless
and until the Senior Obligations shall have been indefeasibly paid in full
in
cash and the Commitment has been terminated, the Junior Lender will not
take
any
Enforcement Action. For purposes hereof, “Enforcement Action” shall mean (a) any
acceleration of the Junior Obligations (including
the exercise of any right of redemption under Section 4(b) of the Junior
Note),
(b) the
filing or initiating, or joining with any other person in filing or initiating,
an Insolvency Event against, Borrower, or (c) any judicial proceeding or other
action initiated or taken by Junior Lender, or by Junior Lender in concert
with
other persons against Borrower, or any other person to collect the Junior
Obligations, to foreclose any lien or security interest securing the Junior
Obligations, execute, levy upon or dispose of any of the Collateral, or
otherwise enforce the rights or remedies of the Junior Lender under the Junior
Agreement, the Junior Note or applicable law with respect to the Junior
Obligations; provided, however, that the declaration of an event of default
under the Junior Note shall not be deemed to be an Enforcement Action.
Notwithstanding the foregoing, on or after July 31, 2006, the Junior Lender
may
commence or otherwise proceed with an Enforcement Action (i) brought with the
written consent of the Senior Lender or (ii) an event of default has occurred
and is continuing under Section 4(a) of the Junior Note (a “Junior Default”),
written notice of which the Junior Lender has delivered to the Senior Lender
(the “Junior Default Notice”), and thirty (30) days (or three hundred sixty
(360) days from the date of delivery by the Senior Lender of a Senior
Non-Payment Default Notice if delivered during such thirty-day period) have
expired since the date of the Senior Lender’s receipt of the Junior Default
Notice and such Junior Default has not been cured or waived during such time
periods. Any proceeds of any Enforcement Action by the Junior Lender shall
be
paid or delivered directly to the Senior Lender for application to the Senior
Obligations until the Senior Obligations shall have been indefeasibly paid
in
full in cash and the Commitment has been terminated. The Junior Lenders shall
not take any action with respect to the Collateral if the Senior Lender shall
have given prior written notice to the Junior Lender that such action would,
in
the reasonable credit judgment of the Senior Lender, impair the proceeds that
could be obtained from such Collateral.
For
purposes of this Agreement, the term “Insolvency Event” shall mean, with respect
to Borrower, the occurrence of any of the following: (i) Borrower shall be
adjudicated insolvent or bankrupt or institutes proceedings to be adjudicated
insolvent or bankrupt, or shall generally fail to pay or admit in writing its
inability to pay its debts as they become due,
(ii)
Borrower shall seek dissolution or reorganization or the appointment of a
receiver, trustee, custodian, or liquidator for it or a substantial portion
of
its property, assets or business or to effect a plan or other arrangement with
its creditors, (iii) Borrower shall make a general assignment for the benefit
of
its creditors, or consent to or acquiesce in the appointment of a receiver,
trustee, custodian, or liquidator for a substantial portion of its property,
assets or business, (iv) Borrower shall file a voluntary petition under any
bankruptcy, insolvency, or similar law, (v) Borrower shall take any corporate
or
similar act in furtherance of any of the foregoing, or (vi) Borrower, or a
substantial portion of its property, assets or business, shall become the
subject of an involuntary proceeding or petition for (A) its dissolution or
reorganization or (B) the appointment of a receiver, trustee, custodian or
liquidator , and (I) such proceeding shall not be dismissed or stayed within
sixty (60) days, (II) such receiver, trustee, custodian or liquidator shall
be
appointed or (III) such Person fails to contest in a timely or appropriate
manner any such proceeding or petition.
3
(f)
Upon
the
occurrence of any Insolvency Event of Borrower or in the event of a sale of
all
or substantially all of the assets, or any other marshaling of the assets and
liabilities, or any recapitalization, refinancing or reorganization, of
Borrower, the provisions of this Agreement shall continue to govern the relative
rights and priorities of the Senior Obligations and Junior Obligations as
provided herein and the Senior Obligations shall first be indefeasibly paid
in
full in cash and the Commitment terminated before the Junior Lender shall be
entitled to receive any money, distributions or other assets in any such
proceeding even if all or part of the Senior Obligations or the liens and
security interests securing the Senior Obligations are subordinated, set aside,
avoided or disallowed in connection with any Insolvency Event or other
proceeding or situation noted above. In
any
such event, the Junior Lender shall demand, xxx for, collect or receive every
such payment or distribution of cash, property, stock or obligations, give
acquittance therefor, file claims and proofs of claim in any statutory or
nonstatutory proceeding, exercise the rights of the Junior Lender arising under
or relating to the Junior Agreement or the Junior Note and vote the claim of
the
Junior Lender under the Junior Agreement or the Junior Note in its sole
discretion in connection with any such event, including, without limitation,
the
right to participate in any composition of creditors and to vote at creditors’
meetings for the election of trustees, acceptances of plans of reorganization
and any other matter upon which the Junior Lender would be otherwise entitled
to
vote; provided, that if the Junior Lender votes its claim, the Junior Lender
shall not, without the prior written consent of the Senior Lender, vote to
accept a plan of liquidation, reorganization, arrangement, composition or
extension that does not provide for the payment, refinancing, restatement or
recognition in full of all of the Senior Obligations. In the event that the
Junior Lender shall fail to take any such action following the written request
of the Senior Lender or fail to vote its claim in any proceedings prior to
5
days before the expiration of the time to vote, the Senior Lender may (but
shall
not be obligated) demand, xxx for, collect or receive every such payment or
distribution of cash, property, stock or obligations, give acquittance therefor,
file claims and proofs of claim in any statutory or nonstatutory proceeding,
exercise the rights of the Junior Lender arising under or relating to the Junior
Agreement or the Junior Note and vote the claim of the Junior Lender under
the
Junior Agreement or the Junior Note in its sole discretion in connection with
any such event, including, without limitation, the right to participate in
any
composition of creditors and to vote at creditors’ meetings for the election of
trustees, acceptances of plans of reorganization and any other matter upon
which
the Junior Lender would be otherwise entitled to vote. In
such
an event, the Junior Lender hereby irrevocably authorizes the Senior Lender
and
grants to the Senior Lender an exclusive power of attorney (which power of
attorney is coupled with an interest and is irrevocable), but without imposing
any obligation upon the Senior Lender, to demand, xxx for, collect or receive
every such payment or distribution of cash, property, stock or obligations,
to
give acquittance therefor, to file claims and proofs of claim in any statutory
or nonstatutory proceeding, to exercise the rights of the Junior Lender arising
under or relating to the Junior Agreement or the Junior Note and to vote the
claim of the Junior Lender under the Junior Agreement or the Junior Note in
its
sole discretion in connection with any such event, including, without
limitation, the right to participate in any composition of creditors and to
vote
at creditors’ meetings for the election of trustees, acceptances of plans of
reorganization and any other matter upon which the Junior Lender would be
otherwise entitled to vote. In furtherance of the foregoing, at the request
of
the Senior Lender, the Junior Lender shall execute and deliver to the Senior
Lender a separate power of attorney and such further powers and instruments
as
the Senior Lender may request to enable the Senior Lender to enforce its rights
under this subsection.
4
(g)
The
Senior Lender may, at any time and from time to time, without the consent of
or
notice to the Junior Lender, without incurring responsibility or liability
to
the Junior Lender and without impairing or releasing any right or remedy of
the
Senior Lender hereunder:
| (i) |
change
the manner, place or terms of payment of, change or extend the time
of
payment of, or renew, increase or alter the Senior Obligations, or
waive
defaults under or amend, modify, alter or waive the provisions of
the
Senior Loan Agreement or any other Loan Document in any manner (except
as
otherwise provided by this Agreement) or enter into or amend in any
manner
or waive defaults under any other agreement relating to the Senior
Obligations;
|
| (ii) |
sell,
exchange, release or otherwise deal with any property by whomsoever
at any
time pledged to secure, or howsoever securing, the Senior
Obligations;
|
| (iii) |
release
any Person liable in any manner for the payment or collection of
any of
the Senior Obligations;
|
| (iv) |
exercise
or refrain from exercising any rights against Borrower or any other
Person; or
|
| (v) |
apply
any sums by whomsoever paid or however realized to the Senior
Obligations.
|
Notwithstanding
any provision of this Agreement to the contrary, the Senior Lender agrees not
to
increase the outstanding aggregate principal amount of the Senior Obligations
to
an aggregate amount greater than, or to refinance the Senior Obligations so
that
the outstanding aggregate principal amount thereof exceeds, an
amount
equal to (i) the amount of $10,000,000 plus
(ii)
any amount of post-petition financing approved by the court in a bankruptcy
proceeding. The
immediately preceding sentence shall not be construed to limit or otherwise
affect the Senior Lender’s right to accrue and receive payment of interest
(including at the default rate and
including Postpetition Interest),
fees
or other charges comprising part of the Senior Obligations.
5
(h)
The
Junior Lender waives notice of acceptance of this Agreement.
(i)
The
Junior Lender will cause each note or other instrument that evidences any Junior
Obligations (including, without limitation, the Junior Agreement and the Junior
Note) to bear upon its face a statement or legend to the effect that such note
or other instrument is subordinated to the Senior Obligations in the manner
and
to the extent set forth in this Agreement. The Junior Lender shall xxxx its
books and records, including any financial statements, to show that the Junior
Obligations are so subordinated to the Senior Obligations.
(j)
The
Junior Lender will not (i)
increase
the per annum rate of interest applicable to the Junior Obligations,
(ii)
make any
covenant, event of default or other provision under the Junior Agreement or
the
Junior Note more restrictive than such covenants, events of default and
provisions thereunder as of the date hereof, (iii) accelerate the date of any
regularly scheduled fees, interest or principal payments on the Junior
Obligations, (iv) shorten the final maturity date of the Junior Obligations,
or
(v) increase or decrease the principal amount of the Junior Obligations. The
Borrower and Junior Lender will give Senior Lender at least ten (10) business
days prior notice before any material amendment, modification or supplement
of
or to the Junior Agreement or the Junior Note, which notice shall be accompanied
by a copy of the proposed amendment, modification or supplement. The Borrower
and Junior Lender agree that they will not amend, modify or supplement the
Junior Agreement or the Junior Note, if Senior Lender notifies them that the
proposed amendment, modification or supplement would result in a default under
the Senior Loan Documents or this Section 2(j).
(k)
Subject
to the indefeasible payment in full of the Senior Obligations in cash and the
termination of the Commitment, the Junior Lender shall be subrogated to the
Senior Lender’s rights to receive payments or distributions in cash or property
applicable to the Senior Obligations, and no payment or distribution made to
the
Senior Lender by virtue of this Agreement that otherwise would have been made
to
the Junior Lender shall be deemed to be a payment by Borrower on account of
the
Junior Obligations.
(l)
The
Junior Lender will not sell, assign, transfer or otherwise dispose of all or
any
part of, or any interest in, the Junior Obligations to any Person without having
first obtained (i) such Person’s agreement in writing to be bound as the
Junior Lender’s successor by the terms of this Agreement or, in the case of an
interest in the Junior Obligations, an acknowledgment by such interest holder
of
the terms hereof, or (ii) the Senior Lender’s prior written consent (which
consent shall not be unreasonably withheld by the Senior Lender).
(m)
The
Junior Lender agrees that it will not exercise any right of setoff it may have
against the Junior Obligations in respect of any obligation owed by the Junior
Lender to Borrower.
6
(n)
In
the
event Borrower shall become subject to a case under the Bankruptcy Code, the
Junior Lender agrees that the Senior Lender may permit or consent to the use
of
cash collateral or provide (or permit another Person to provide) financing
to
Borrower under either Section 363 or Section 364 of the Bankruptcy Code in
such
amounts and on such terms and conditions as the Senior Lender may decide in
its
sole discretion and, in connection therewith, the Senior Lender may permit
Borrower to enter into cash collateral or financing arrangements and to grant
to
the Senior Lender or any other Person providing post-petition financing liens
and security interests upon the Collateral (and the Junior Lender shall not
object to Borrower entering into such arrangements or granting such liens and
security interests), which liens and security interests (i) shall secure payment
of all Senior Obligations (whether such Senior Obligations arose prior to the
commencement of the case under the Bankruptcy Code or at any time thereafter)
if
such financing is provided by the Senior Lender or all financing provided by
such other lender during such case if provided by a lender other than the Senior
Lender and (ii) shall be superior in priority to any liens and security
interests securing the Junior Obligations. The Junior Lender agrees not to
assert any right it may have to “adequate protection” of its interest, if any,
in any of the Collateral in any case under the Bankruptcy Code and agrees that
it will not seek to have the automatic stay lifted, modified or annulled with
respect to any Collateral without the prior written consent of the Senior
Lender, and agrees not to take any action during any such case that would
reasonably be expected to adversely affect the Senior Lender’s rights or
interests in any Collateral under this Agreement or otherwise. In connection
with any of the foregoing, the Junior Lender agrees adequate notice to the
Junior Lender shall be deemed to have been given to the Junior Lender if the
Junior Lender receives notice at least five (5) Business Days prior to the
hearing held by the applicable
bankruptcy court
to
consider entry of an order approving such use or financing, provided
that
nothing in this subsection shall be deemed to entitle the Junior Lender to
any
notice not required by the Bankruptcy Code. For
purposes of this subsection, notice of a proposed financing or use of cash
collateral shall be deemed given when made in the manner prescribed by this
Agreement, or as the applicable
bankruptcy court
may
approve, or, actual notice is given to the Junior Lender or its counsel,
whichever is soonest.
(o)
All
liens, pledges, and security interests of any nature upon or in any Collateral
held by the Junior Lender or any other Person for the benefit of the Junior
Lender shall be and are hereby made inferior and junior to the liens, pledges
and security interests of any nature upon or in any Collateral held by or in
favor of the Senior Lender, regardless of the failure to perfect or the order
or
manner of perfection of any such liens, pledges and security interests. The
priorities set forth in this Agreement are applicable irrespective of any
priority available to the Senior Lender or the Junior Lender under contract
or
applicable law or any representation or warranty of Borrower to the contrary
in
any agreement, instrument, or other document to which the Junior Lender is
a
party.
(p)
The
Senior Lender may take any judicial or nonjudicial action, including any action
to enforce its liens on or security interests in any or all of the Collateral,
including, without limitation, to foreclose, execute, levy upon, or collect
or
dispose of any or all of the Collateral as it shall determine in its sole and
exclusive judgment.
(q)
The
Senior Lender (to the exclusion of the Junior Lender) shall have (whether or
not
any default or event of default under the Senior Loan Agreement, the Junior
Agreement, the Junior Note, or any agreement relating thereto shall have
occurred and be continuing, and both before and after the occurrence of any
Insolvency Event of Borrower) the sole and exclusive right to administer,
enforce and consent to all matters in respect of the Collateral, including
the
right (A) to release, or direct or consent to the release of, with or
without consideration, the Collateral from the lien of the Senior Loan Agreement
or the Junior Note, and (B) to direct or consent to the sale, transfer,
lease, or other disposition of the Collateral, the foreclosure or forbearance
from foreclosure in respect of the Collateral (including, without limitation,
seeking or not seeking relief from any stay against foreclosure in respect
of
the Collateral upon the occurrence of any Insolvency Event), and the acceptance
of the Collateral in full or partial satisfaction of the Senior
Obligations.
7
(r)
Upon
the
sale of any Collateral by or on behalf of the Senior Lender, the Junior Lender
shall be deemed to have consented (and does hereby consent) to such sale and
to
have released (and does hereby release) any lien in the Collateral being sold
in
such sale and shall, at the request of the Senior Lender, take all action and,
if required, execute and deliver all documents requested by the Senior Lender
in
connection therewith. The Junior Lender hereby appoints and constitutes the
Senior Lender as its attorney-in-fact and authorizes the Senior Lender to make
any payment on or take any act necessary or desirable to protect or preserve
any
of the Collateral. This power of attorney is coupled with an interest and is
irrevocable.
(s)
The
Junior Lender agrees not to seek to avoid, contest or bring (or join in) any
action or proceeding to contest the validity of any rights of the Senior Lender
with respect to the Collateral, or the validity or reasonableness of any actions
taken or omitted to be taken by the Senior Lender hereunder or in connection
herewith, under the Senior Loan Agreement or under any other Loan Document,
or
in respect of any of the Collateral including, without limitation, (i) the
timing, method, or manner of collecting, disposing of or liquidating any of
the
Collateral, (ii) the terms, including the price and percentage of
consideration received in cash, of any such disposition or liquidation, or
(iii) the failure to dispose of or liquidate any of the Collateral. Without
limitation of the foregoing, the Junior Lender hereby waives, to the fullest
extent permitted by law, (A) any right under Section 9-615(a) of the Code
with respect to the application of disposition proceeds to the Senior
Obligations, (B) any right to notice and objection under Section 9-620 of
the Code, promptness, diligence, notice of acceptance, and any other notice
with
respect to any of the obligations under the Junior Agreement or the Junior
Note,
and (C) any requirement that the Senior Lender exhaust any right or take
any action against Borrower, any other Person, the Collateral, or any other
collateral. In addition, the Junior Lender agrees that the Senior Lender shall
have no obligation to marshal any Collateral or to seek recourse against or
satisfaction of any of the Senior Obligations from one source before seeking
recourse against or satisfaction from another source. The Junior Lender further
agrees that the net cash proceeds resulting from the Senior Lender’s exercise of
any right to liquidate all or substantially all of the Collateral, including
any
and all Collections (after deducting all of the Senior Lender’s expenses related
thereto), may be applied by the Senior Lender to such of the Senior Obligations
and in such order as the Senior Lender may elect in its sole and absolute
discretion, whether due or to become due. The Junior Lender further agrees
that
all of the Senior Lender’s remedies under the Loan Documents shall be
cumulative, may be exercised simultaneously against any Collateral and either
Loan Party or in such order and with respect to such Collateral or such Loan
Party as the Senior Lender may deem desirable, and are not intended to be
exhaustive.
8
(t)
Notwithstanding
the lack of perfection of any of the liens or security interests of the Senior
Lender with respect to any or all of the Collateral or any priority in time
of
perfection of any of the liens or security interests of the Junior Lender over
the liens or security interests of the Senior Lender with respect to any or
all
of the Collateral, the liens and security interests of the Senior Lender with
respect to the Collateral shall be superior and prior in right of payment and
enforcement to the liens and security interests of the Junior Lender, whether
now existing or hereinafter arising, with respect to the
Collateral.
(u)
Notwithstanding
any provision of this Agreement to the contrary, this Agreement shall not limit
the right of the Junior Lender to exercise any right of conversion set forth
in
Section 3 of the Junior Note and the exercise thereof shall not be considered
an
Enforcement Action; provided, that the payment of
any
damages payable upon a Conversion Failure (as such term is defined in the Junior
Note) shall subject to the provisions of this Agreement.
(v)
Notwithstanding any provision of this Agreement to the contrary, this Agreement
shall not limit the right of the Junior Lender to receive any Reorganized
Securities. For purposes hereof, “Reorganized Securities” shall mean securities
of Borrower or any other Person (including those of Borrower as reorganized)
issued to the Junior Lender in respect of all or a part of the Junior
Obligations and provided for by a plan of reorganization in a proceeding under
the Bankruptcy Code or in connection with an Insolvency Event of Borrower,
provided, that (i) such securities are (a) equity securities or (b) debt
securities subordinated to the Senior Obligations (and any debt securities
received by the holders of the Senior Obligations in such proceeding) at least
to the same extent as the Junior Obligations are subordinated to the Senior
Obligations pursuant to this Agreement and (ii) such securities are authorized
by a court of competent jurisdiction in a final order or decree which, in the
case of debt securities, gives effect to this proviso and the subordination
of
such debt securities to the Senior Obligations (and any debt securities received
by the holders of the Senior Obligations in such proceeding) on the terms set
forth in this Agreement.
SECTION
3. Further
Assurances.
The
Junior Lender shall, at any time and from time to time, at Borrower’s expense,
promptly execute and deliver all further instruments and documents and take
all
further action that the Senior Lender may request to protect any right or
interest granted or purported to be granted hereby or to enable the Senior
Lender to exercise and enforce its rights and remedies hereunder.
SECTION
4. Obligations
Unimpaired.
Nothing
in this Agreement shall impair as between Borrower, on the one hand, and the
Senior Lender or the Junior Lender, on the other hand, the obligations of
Borrower to the Senior Lender or the Junior Lender, as the case may
be.
SECTION
5. Termination;
Reinstatement. (a)
This
Agreement shall terminate and cease to be of any further force or effect ninety
(90) days after the later of (i)
the
termination of the Commitment and (ii) the indefeasible payment in full in
cash
of the Senior Obligations.
(b)
If,
at
any time, all or part of any payment with respect to the Senior Obligations
theretofore made by Borrower or any other Person is rescinded or must otherwise
be returned by the Senior Lender for any reason whatsoever (including, without
limitation, as a result of Borrower or any other Person becoming the subject
of
an Insolvency Event), this Agreement shall continue to be effective or be
reinstated, as the case may be, all as though such payment had not been
made.
9
SECTION
6. Benefit
of Agreement.
Except
as expressly provided in Section 4, nothing in this Agreement, express or
implied, shall give or be construed to give to any Person including, without
limitation, Borrower (but excluding the Senior Lender) any legal or equitable
right, remedy or claim under this Agreement or under any covenant or provision
contained herein, all such covenants and provisions being for the sole and
exclusive benefit of the Senior Lender.
SECTION
7. Notices. (a)
All
notices and other communications hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, by hand delivery, or by telecopier followed
by a hard copy sent by regular mail, if to the Senior Lender, then
to
CapitalSource Finance, LLC, 0000 Xxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxxxx Xxxxx, Xxxxxxxx 00000 Attention: Healthcare Finance Group, Portfolio
Manager (Telecopier: (000) 000-0000); if to Borrower, then to Xxxx Medical
Systems, Inc., 00000 Xxxxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 Attention:
President and Chief Executive Officer (Telecopier: (000) 000-0000); and if
to
the Junior Lender, then to Atlas Master Fund, Ltd. in
care of Balyasny
Asset Management L.P., 000 Xxxxxxx Xxxxxx - 19th
Floor,
New York, New York 10022 Attention: Legal Department (Telecopier: (000)
000-0000); and in each case, to such other address as a party may specify to
the
other parties in the manner required hereunder. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three (3) Business Days after being postmarked, (ii) if sent by
overnight delivery service or by hand delivery, when received at the above
stated addresses or when delivery is refused, and (iii) if sent by
telecopier transmission, when such transmission is confirmed.
(b)
The
Senior Lender shall provide the Junior Lender and the Junior Lender shall
provide the Senior Lender with a copy of each notice of default (to the extent
permitted hereunder) sent to Borrower concurrently with the sending thereof
and
promptly notify the Junior Lender or the Senior Lender, respectively, in the
event that the default which is the subject of such default notice is cured
or
waived, provided
that the
failure to give any such notice shall not limit or otherwise affect any party’s
rights under this Agreement. The Senior Lender and the Junior Lender, as
applicable, shall use its best efforts to provide Borrower with a copy of any
Senior Payment Default Notice, Senior Non-Payment Default Notice and Junior
Default Notice, as applicable, concurrently with the sending thereof and
promptly notify Borrower of any cure or waiver thereof, provided
that the
failure to give any such notice shall not limit or otherwise affect any party’s
rights under this Agreement.
SECTION
8. Amendments
and Waivers.
No
amendment or waiver of any provision of this Agreement, or consent to any
departure by the Junior Lender or Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Senior Lender,
Borrower and the Junior Lender.
10
SECTION
9. Delays;
Partial Exercise of Remedies.
No delay
or omission of the Senior Lender to exercise any right or remedy hereunder
shall
impair any such right or operate as a waiver thereof. No single or partial
exercise by the Senior Lender of any right or remedy shall preclude any other
or
further exercise thereof, or preclude any other right or remedy.
SECTION
10. Counterparts;
Telecopied Signatures.
This
Agreement and any waiver or amendment related hereto may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. This Agreement may be executed
and delivered by telecopier or other facsimile transmission all with the same
force and effect as if the same were a fully executed and delivered original
manual counterpart.
SECTION
11. Severability.
If any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability
of
the remaining provisions or obligations, or of such provision or obligation
in
any other jurisdiction, shall not in any way be affected or impaired
thereby.
SECTION
12. Entire
Agreement; Successors and Assigns.
This
Agreement constitutes the entire agreement among the parties with respect to
the
subject matter hereof, supersedes any prior written and verbal agreements among
them with respect to the subject matter hereof, and shall bind and benefit
the
parties (including, without limitation, the Senior Lender) and their respective
successors and permitted assigns. Borrower and Junior Lender each acknowledge
and agree that Senior Lender at any time and from time to time may sell, assign
or grant participating interests in or transfer all or any part of its rights
or
obligations under this Agreement, the Senior Obligations, the Collateral and/or
the Loan Documents to one or more other persons, including, without limitation,
financial institutions (each such transferee, assignee or purchaser, a
“Transferee”). In such case, the Transferee shall have all of the rights and
benefits with respect to the portion of such Senior Obligations, the Collateral,
this Agreement and/or the Loan Documents, as the case may be, held by it as
fully as if such Transferee were the original holder thereof (including, without
limitation, rights of set off and recoupment), and shall become vested with
all
of the powers and rights given to Lender hereunder with respect thereto, and
shall be deemed to be the “Senior Lender” for all purposes hereunder, the
predecessor Senior Lender shall thereafter be forever released and fully
discharged from any liability or responsibility hereunder with respect to the
rights and interests so assigned, and either the Senior Lender or any Transferee
may be designated as the sole agent to manage the transactions and obligations
contemplated herein.
SECTION
13. Conflict.
In the
event of any express conflict between any term, covenant or condition of this
Agreement and any term, covenant or condition of any of the Senior Loan
Agreement, the other Loan Documents, the Junior Agreement or the Junior Note,
the provisions of this Agreement shall control.
SECTION
14. Statement
of Indebtedness.
Upon
demand by the Senior Lender, the Junior Lender will furnish to the Senior Lender
a statement of indebtedness owing from Borrower to the Junior Lender. The Senior
Lender may rely without further investigation upon any such
statement.
11
SECTION
15. SPECIFIC
PERFORMANCE.
THE
SENIOR LENDER IS HEREBY AUTHORIZED TO DEMAND SPECIFIC PERFORMANCE OF THIS
AGREEMENT AT ANY TIME WHEN THE JUNIOR LENDER SHALL HAVE FAILED TO COMPLY WITH
ANY OF THE PROVISIONS OF THIS AGREEMENT APPLICABLE TO IT. THE JUNIOR LENDER
HEREBY IRREVOCABLY WAIVES ANY DEFENSE BASED ON THE ADEQUACY OF A REMEDY AT
LAW
THAT MIGHT BE ASSERTED AS A BAR TO SUCH REMEDY OF SPECIFIC
PERFORMANCE.
SECTION
16. GOVERNING
LAW.
THE
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS
AND DECISIONS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE
OF
MARYLAND.
SECTION
17. SUBMISSION
TO JURISDICTION.
ALL
DISPUTES BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER SOUNDING IN
CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF MARYLAND AND THE COURTS TO WHICH AN
APPEAL THEREFROM MAY BE TAKEN; PROVIDED,
HOWEVER, THAT THE SENIOR LENDER SHALL HAVE THE RIGHT, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE JUNIOR LENDER TO ENFORCE
THE
PROVISIONS HEREOF IN ANY OTHER COURT OF COMPETENT JURISDICTION OR VENUE. EACH
OF
THE JUNIOR LENDER AND BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF ANY SUCH COURT IN WHICH THE SENIOR LENDER HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON FORUM NON CONVENIENS.
SECTION
18. JURY
TRIAL.
EACH OF
THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT OR (II) ANY
CONDUCT, ACT OR OMISSION OF THE JUNIOR LENDER, BORROWER, THE SENIOR LENDER
OR
ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
OTHER AFFILIATE, IN EACH CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY
OR
OTHERWISE.
12
SECTION
19. SERVICE
OF PROCESS.
THE
JUNIOR LENDER HEREBY IRREVOCABLY DESIGNATES ATLAS MASTER FUND, LTD. AT 000
XXXXXXX XXXXXX, XXX XXXX, XXX XXXX AS THE DESIGNEE AND AGENT OF THE JUNIOR
LENDER TO RECEIVE, FOR AND ON BEHALF OF THE JUNIOR LENDER, SERVICE OF PROCESS
IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT. IT IS UNDERSTOOD
THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY
FORWARDED BY MAIL TO THE JUNIOR LENDER, BUT THE FAILURE OF THE JUNIOR LENDER
TO
RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SENIOR LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
[SIGNATURE
PAGES NEXT FOLLOW]
13
IN
WITNESS WHEREOF,
the
undersigned have caused this Agreement to be executed by its proper and duly
authorized officer or general partner as of the date first set forth
above.
| ATLAS MASTER FUND, LTD. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxx | |
|
Name: Xxxxx Xxxxxxxxx |
||
| Title: Authorized Signatory | ||
| CAPITALSOURCE FINANCE LLC | ||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxxx | |
|
Name: Xxxxx X. Xxxxxx |
||
| Title: President | ||
| XXXX MEDICAL SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxx | |
|
Name: Xxxxxxx Xxxxx |
||
| Title: Chief Financial Officer | ||
14
