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EXHIBIT 10.8(q)
SUBORDINATION AGREEMENT
This Subordination Agreement ("Agreement"), dated as of March 14, 2001,
is entered into between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), and DIGITAL IMAGING TECHNOLOGIES, INC., a Delaware corporation
("Creditor"), in light of the following:
A. Creditor is interested in the financial success of INTERNATIONAL
REMOTE IMAGING SYSTEMS, INC., a Delaware corporation ("Borrower"), and
acknowledges that Foothill and Borrower and certain of its affiliates have
entered into certain financing arrangements, including that certain Loan and
Security Agreement, dated as of May 5, 1998 (together with any present or future
amendments, restatements, or supplements thereto, the "Loan Agreement"); and
B. Creditor agrees that the financing arrangements between Borrower and
Foothill are in Borrower's best interest.
NOW, THEREFORE, Foothill and Creditor agree as follows:
1. Definition of Obligations. The term "Obligations" is used in this
Agreement in its broadest and most comprehensive sense and shall mean all
present and future indebtedness of Borrower which may be, from time to time,
directly or indirectly incurred by Borrower, including, but not limited to, any
negotiable instruments evidencing the same, and all guaranties, debts, demands,
monies, indebtedness, liabilities, and obligations owed or to become owing,
including interest, principal, costs, and other charges, and all claims, rights,
causes of action, judgments, decrees, remedies, security interests, or other
obligations of any kind whatsoever and howsoever arising, whether voluntary,
involuntary, absolute, contingent, or by operation of law.
2. Subordination of Creditor Obligations. Any and all Obligations owed
to Creditor ("Creditor Obligations") including, but not limited to, the
obligations of Borrower owing to Creditor under that certain Subordinated Note
Due 2004 in the principal amount of $7,000,000 (together with any extensions,
amendments, replacements, or substitutions therefor, the "Subordinated Note")
are hereby subordinated to any and all Obligations owed to Foothill, including,
but not limited to, those Obligations arising pursuant to the Loan Agreement or
any other agreement or agreements between Foothill and Borrower, now or
hereafter existing, whether matured or not, including any interest which, but
for the application of the provisions of the Federal Bankruptcy Code, would have
accrued on such amounts (collectively, the "Foothill Obligations"). Except as
may be expressly provided in this Agreement, no payment shall be made by
Borrower on the Creditor Obligations until: (a) all of the Foothill Obligations
have been indefeasibly paid by Borrower in full, in cash; and (b) all
obligations of Foothill under the Loan Agreement to make loans or advances to,
or to issue or guarantee letters of credit for the account of, Borrower shall
have terminated.
3. Insolvency. In the event of any assignment by Borrower for the
benefit of Borrower's creditors, of any voluntary or involuntary bankruptcy
proceedings instituted by or against Borrower, of the appointment of any
receiver for Borrower or Borrower's business or
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assets, or of any dissolution or other winding up of the affairs of Borrower or
of Borrower's business (collectively, "Insolvency Proceedings"), and in all such
cases respectively, the officers of Borrower and any assignee, trustee in
bankruptcy, receiver, and other person or persons in charge, are hereby directed
to pay to Foothill the full amount of the Foothill Obligations (including all
interest accruing, and all interest which, but for the application of the
Federal Bankruptcy Code, would have accrued, after the commencement of any such
Insolvency Proceeding), in cash, before making any payments or distributions of
any kind to Creditor.
4. Limitations on Creditor's Actions. Except as may be expressly
provided in this Agreement, so long as any of the Foothill Obligations remains
unpaid, in whole or in part, and so long as Foothill is committed or otherwise
obligated to make loans and advances to, or guarantee letters of credit for the
account of, Borrower pursuant to the Loan Agreement, Creditor agrees not to: (i)
accelerate or collect or receive payment upon, by setoff or in any other manner,
any portion of the Creditor Obligations; (ii) sell, assign, exchange, redeem,
transfer, pledge, or give a security interest in the Creditor Obligations,
except for a sale or other transfer of the Creditor Obligations in connection
with sale of Creditor's business (whether by merger, sale of assets or
otherwise); (iii) enforce, collect, realize upon, or apply any collateral
security now or hereafter existing for the Creditor Obligations; (iv) join in
any Insolvency Proceeding; (v) take any lien on or security interest in any of
Borrower's real or personal property; (vi) incur any obligation to, or receive
any loans, advances, or gifts from Borrower; and (vii) modify any of the terms
and conditions of the Creditor Obligations.
Notwithstanding anything to the contrary contained in this Agreement,
so long as there does not exist an Event of Default under the Loan Agreement,
Creditor shall be entitled to receive regularly scheduled payments of principal
and interest on the Creditor Obligations (but not prepayments, redemptions, or
payments as a result of acceleration) in accordance with the terms of the
Subordinated Note as presently in effect.
5. Intentionally Omitted.
6. Legending Instruments. Creditor agrees that if part or all of the
Creditor Obligations shall be evidenced by one or more promissory notes or other
instruments, Creditor shall place or cause to be placed on the face of each such
note and instrument a legend stating that the payment thereof is subject to the
terms of this Agreement and is subordinate to the prior payment of all of the
Foothill Obligations and shall, within the later of seven days after the
execution of any such promissory note or instrument or seven days after the date
of this Agreement, deliver a copy of such legended promissory note or legended
instrument to Foothill. Creditor agrees to xxxx all books of account in such
manner as to indicate that payment thereof is subordinated pursuant to the terms
of this Agreement.
7. Modification of Foothill Obligations. Creditor agrees that Foothill
shall have absolute power and discretion, without notice to Creditor (except
that Foothill will use its best efforts to provide Creditor with written notice
of any written default notices to Borrower or written amendments to the Loan
Agreement; provided, however, that Foothill shall not have any liability to
Creditor if it fails to provide such notice), to deal in any manner with the
Foothill Obligations, including, but not by way of limitation, the power and
discretion to do any of the following: (a) any demand for payment of any
Foothill Obligation may be rescinded in whole or
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in part, and any Foothill Obligation may be continued, and the Foothill
Obligations or the liability of Borrower or any other party upon or for any part
thereof, or any collateral security or guaranty therefor, or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered, or released;
and (b) the Loan Agreement and any document or instrument evidencing or
governing the terms of any other Foothill Obligations or any collateral security
documents or guaranties or documents in connection with the Loan Agreement or
the Foothill Obligations may be amended, modified, supplemented, or terminated,
in whole or in part, as Foothill may deem advisable from time to time, and any
collateral security at any time held by Foothill for the payment of any of the
Foothill Obligations may be sold, exchanged, waived, surrendered, or released.
Creditor will remain bound under this Agreement, and the subordination provided
for herein shall not be impaired, abridged, released, or otherwise affected
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender, or release. The Foothill Obligations shall conclusively be deemed to
have been created, contracted, or incurred in reliance upon this Agreement, and
all dealings between Borrower and Foothill shall be deemed to have been
consummated in reliance upon this Agreement.
8. Creditor's Waivers. Except for the best efforts notice provided in
Section 7 hereof, Creditor waives: (a) any and all notice of the creation,
modification, renewal, extension, or accrual of any of the Foothill Obligations
and notice of or proof of reliance by Foothill upon this Agreement; (b) and
agrees not to assert against Foothill any rights which a guarantor or surety
could exercise; but nothing in this Agreement shall constitute Creditor a
guarantor or surety; (c) the right, if any, to require Foothill to marshal or
otherwise require Foothill to proceed to dispose of or foreclose upon collateral
in any manner or order; and (d) any right of subrogation, contribution,
reimbursement, or indemnity which it may have against Borrower arising directly
or indirectly out of this Agreement.
9. Continuing Nature of This Agreement. Notwithstanding any action or
inaction by Foothill with respect to the Foothill Obligations or with respect to
any collateral therefor or any guaranties thereof, this Agreement, the
obligations of Creditor owing to Foothill, and Foothill's rights and privileges
hereunder, shall continue until indefeasible payment in full, in cash, of all of
the Foothill Obligations and termination of any obligation of Foothill to make
loans or advances to, or guarantee letters of credit for the account of,
Borrower. All rights, power, and remedies hereunder shall apply to all past,
present, and future Foothill Obligations, including those arising out of
successive transactions which may continue renew, increase, decrease, or from
time to time create new Foothill Obligations. The subordinations, agreements,
and priorities set forth herein shall remain in full force and effect,
regardless of whether any party hereto in the future seeks to rescind, amend,
terminate, or reform, by litigation or otherwise, its respective agreements with
Borrower.
10. No Creditor Liens; etc. Creditor further agrees that in case
Creditor shall, in contravention of the terms of this Agreement, take or receive
any security interest in, or lien by way of attachment, execution, or otherwise,
on any of the real or personal property of Borrower, or should take or join in
any other measure or advantage contrary to this Agreement, at any time prior to
the payment in full, in cash, of all of the Foothill Obligations, Foothill shall
be entitled to have the same vacated, dissolved, and set aside by such
proceedings at law or otherwise as
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Foothill may deem proper, and this Agreement shall constitute full and
sufficient grounds therefor and shall entitle Foothill to become a party to any
proceedings at law or otherwise initiated by Foothill or by any other party, in
or by which Foothill may deem it proper to protect Foothill's interest
hereunder.
11. Creditor To Receive Payments, etc. in Trust. Except as otherwise
expressly agreed to herein, if Creditor shall receive any payments, collateral
security, or other rights in any property of Borrower in violation of this
Agreement, such payment or property shall be received by Creditor in trust for
Foothill and shall immediately be delivered and transferred to Foothill.
12. No Prior Subordinations. No currently effective subordinations of
the Creditor Obligations have previously been executed by Creditor for the
benefit of anyone else, and any such subordinations hereafter executed will be,
and shall be expressed to be, subject and subordinate to the terms of this
Agreement.
13. Financial Condition of Borrower. Creditor represents and warrants
to Foothill that Creditor is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Foothill Obligations. Creditor
hereby covenants and agrees that Foothill does not have any obligation to keep
Creditor informed of Borrower's financial condition, the financial condition of
other guarantors of the Foothill Obligations, if any, and of any other
circumstances which bear upon the risk of nonpayment or nonperformance of the
Foothill Obligations.
14. Assignees, etc. This Agreement shall be binding upon the heirs,
administrators, personal representatives, successors, and assigns of Creditor,
and shall inure to the benefit of Foothill's successors and assigns.
15. Additional Documents. Creditor agrees to execute and deliver, upon
the request of Foothill, such documents and instruments (appropriate for filing
or recording, if requested) as may be necessary or appropriate to fully
implement or to fully evidence the understanding and agreements contained in
this Agreement.
16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. Choice of Law; Venue. The validity of this Agreement, its
construction, interpretation, and enforcement, and the rights of the parties
hereunder, shall be determined under, governed by, and construed in accordance
with the laws of the State of California. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated only in the County of Los Angeles, State of California, or in
Foothill's sole discretion, such other court in which Foothill shall initiate
legal or equitable proceedings and which shall have subject matter jurisdiction
over the matter in controversy. Creditor waives any
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rights it may have to assert the doctrine of forum non conveniens or to object
to such venue and hereby consents to any court ordered relief.
18. Collection Costs; Attorneys' Fees. In the event it becomes
necessary for either party to commence any proceedings or actions to enforce the
provisions of this Agreement, the court or body before which the same shall be
tried shall award to the prevailing party all costs and expenses thereof,
including, but not limited to, reasonable attorneys' fees, the usual and
customary and lawfully recoverable court costs, and all other expenses in
connection therewith.
19. Counterparts. This Agreement may be executed by the parties hereto
in any number of separate counterparts. All of such counterparts, taken
together, shall constitute one and the same instrument.
20. Waiver, Amendments, Etc. The subordination provisions contained
herein are for the benefit of Foothill and its successors and assigns and may
not be rescinded, cancelled, or modified in any way, nor, unless otherwise
expressly provided for herein, may any provision of this Agreement be waived or
changed, without the prior written consent thereto of Foothill or its successors
or assigns.
21. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH
OF FOOTHILL AND CREDITOR EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH
RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE DEALINGS OF CREDITOR AND FOOTHILL WITH RESPECT TO THIS
AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO
THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF FOOTHILL AND CREDITOR HEREBY AGREES
THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT FOOTHILL OR CREDITOR MAY FILE
AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER TRIBUNAL AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHTS TO
TRIAL BY JURY.
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This Agreement has been executed and delivered as of the date set forth
in the first paragraph hereof.
DIGITAL IMAGING TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ XXXXXXX X. XXXXXXX
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Title: Vice President
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Address: 0000 Xx. Xxxxx #000
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Xxxxxxx, Xxxxx 00000
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ XXXXXX XXXX
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Title: Senior Vice President
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INTERNATIONAL REMOTE IMAGING SYSTEMS, INC., a Delaware corporation,
being the Borrower named in the foregoing Subordination Agreement, hereby
accepts and consents thereto and agrees to be bound by all of the provisions
thereof and to recognize all priorities and other rights granted thereby to
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), and to pay
Foothill in accordance therewith.
Dated: March 14, 2001.
INTERNATIONAL REMOTE IMAGING
SYSTEMS, INC., a Delaware corporation
By: /s/ XXXX X. X'XXXXXX
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Title: President
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