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EXHIBIT 10.5
(000) 000-0000
May 5, 1995
Xx. Xxx Xxxxxxx
Komag, Incorporated
Director of Planning
000 X. Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: Intercreditor Agreement regarding Phase Metrics, Inc.
Dear Xx. Xxxxxxx:
Phase Metrics, Inc. ( "Phase Metrics") and ProQuip, Inc. (collectively the
"Borrowers") have entered into a Credit Agreement with Canadian Imperial Bank of
Commerce as Agent for the Lenders listed in that certain Credit Agreement dated
as of March 15, 1995 (the "Credit Agreement"). Pursuant to the Credit Agreement,
Borrowers have executed a Security Agreement of even date (the "Security
Agreement") which grants a blanket lien in all assets of the Borrowers,
including inventory, work in process, and deposits (the "Agent's Collateral").
Komag has entered into a Master Security Agreement with Phase Metrics
dated as of May __, 1995 (the "Master Security Agreement") pursuant to which
Komag has taken a security interest in the Komag Deposit Account (the "Komag
Deposit Account") and the Applicable Collateral (the "Applicable Collateral")
each as defined in the Master Security Agreement.
In order to clarify the respective rights of Komag and the Agent for
itself and the benefit of the Lenders, the Agent for itself and on behalf of the
Lenders and Komag hereby agree as follows:
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KOMAG, Inc. Page 2
1. The Agent for itself and on behalf of each of the Lenders hereby
agrees that neither it nor the Lenders shall have any lien or claim to any
amounts on deposit in the Komag Deposit Account.
2. The Agent for itself and on behalf of each of the Lenders hereby
agrees (a) that neither it nor the Lenders shall have any lien or claim in any
of the Applicable Collateral and (b) to the extent it is difficult or
impractical to segregate the Agent's Collateral from any of the Applicable
Collateral, to subordinate the priority of its and the Lenders' lien and
security interest in any of such Agent's Collateral and the Applicable
Collateral in favor of the lien and security interest, now or hereafter
existing, of Komag, regardless of the time or order of attachment or perfection
of any liens, the time or order of filing of financing statements, the
acquisition of purchase money or other liens, or any other circumstances
whatsoever. Until Phase Metrics has fully performed all of its obligations (the
"Phase Metrics Purchase Obligations") in favor of Komag under the Purchase
Agreements and the other documents entered into pursuant thereto (the "Purchase
Documents") the Agent for itself and on behalf of the Lenders agrees that
neither it nor the Lenders will enforce, or attempt to enforce, any rights or
remedies under or with respect to any Applicable Collateral (and any Agent's
Collateral that is impractical to segregate from the Applicable Collateral),
including causing or compelling the pledge or delivery of any such collateral,
any attachment of, levy upon, execution against, foreclosure upon or the taking
of other action against or institution of other proceedings with respect to any
such collateral, or asserting any claim or interest in any insurance with
respect to any such collateral. The Agent further agrees to execute (or cause to
be executed) any further documents or financing statements in order to evidence
the subordination provided for herein.
3. The Agent for itself and on behalf of the Lenders further agrees
that neither it nor the Lenders will interfere with or in any manner oppose a
disposition of any Applicable Collateral by Komag in accordance with applicable
law.
4. The Agent for itself and on behalf of the Lenders waives any and all
notice from Komag of the incurrance of any Phase Metrics Purchase Obligations or
any part thereof and any right to require Komag to xxxxxxxx assets.
5. Until the payment and performance in full of all Phase Metrics
Purchase Obligations, the Agent for itself and on behalf of the Lenders agrees
that neither it nor the Lenders shall have, or shall directly or indirectly
exercise, any rights that any such party may acquire by way of subrogation
hereunder upon any payment or distribution to Komag hereunder or otherwise.
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KOMAG, Inc. Page 3
6. Phase Metrics agrees to pay to Komag on demand all reasonable costs
and expenses of Komag, and the reasonable fees and disbursements of counsel, in
connection with the enforcement of this letter agreement.
7. This letter agreement is a continuing agreement of subordination and
shall continue in effect and be binding upon the Agent and the Lenders until
payment and performance in full of the Phase Metrics Purchase Obligations and
the termination of the Master Security Agreement. 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 Phase
Metrics. This letter agreement shall continue to be effective or shall be
reinstated, as the case may be, if, for any reason, any payment of the Phase
Metrics Purchase Obligations by or on behalf of Phase Metrics shall be rescinded
or must otherwise be restored by Komag, whether as a result of any bankruptcy or
similar proceeding involving Phase Metrics or otherwise.
8. The Agent for itself and on behalf of the Lenders agrees that at any
time and from time to time, without notice to or the consent of the Agent or the
Lenders, without incurring responsibility to the Agent or the Lenders, and
without impairing or releasing the subordination provided for herein or
otherwise impairing the rights of Komag hereunder: (a) the time for Phase
Metrics performance of or compliance with any of its agreements contained in the
Purchase Documents may be extended or such performance or compliance may be
waived by Komag; (b) the agreements of Phase Metrics with respect to the
Purchase Documents may from time to time be modified by Phase Metrics and Komag
for the purpose of adding any requirements thereto or changing in any manner the
rights and obligations of Phase Metrics and Komag thereunder; provided, however,
that the defined terms "Applicable Security Interest", "Applicable Collateral",
"Applicable Pledged Inventory", "Applicable Deposits", "Komag Deposit Account"
or "Purchase Documents" (each as defined in the Master Security Agreement) may
not be amended nor may any amendment to the Master Security Agreement be made
which would adversely affect the rights of the Agent or the Lenders without the
prior written consent of the Agent, which will not be unreasonably withheld; (c)
the manner, place or terms for payment of any Phase Metrics Purchase
Obligations, or any portion thereof may be altered or the terms for payment
extended, or the Phase Metrics Purchase Obligations, may be renewed in whole or
in part; (d) the maturity of any Phase Metrics Purchase Obligations may be
accelerated in accordance with the terms of any present or future agreement by
either Phase Metrics and Komag; (e) any Applicable Collateral may be sold,
exchanged, released or substituted and any lien in favor of Komag may be
terminated, subordinated or fail to be perfected or become unperfected; (f)any
person liable in any manner for any Phase Metrics Purchase Obligations, may be
discharged, released or substituted; and (g)all other rights against Phase
Metrics, any other
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KOMAG, Inc. Page 4
person or with respect to any Applicable Collateral may be exercised (or Komag
may waive or refrain from exercising such rights).
9. Komag agrees that at any time and from time to time, without notice
to or the consent of Komag, without incurring responsibility to Komag and
without impairing the rights of the Agent or the Lenders hereunder: (a) the time
for Phase Metrics performance of or compliance with any of its agreements
contained in the Credit Agreement, the Security Agreement and any of the other
"Loan Documents" (as defined in the Credit Agreement) may be extended or such
performance or compliance may be waived by the Agent or the Lenders; (b) the
Loan Documents may from time to time be modified by Phase Metrics and the Agent
and the Lenders for any reason whatsoever; (c) the manner, place or terms for
payment of any obligations or any portion thereof owing under the Loan Documents
may be altered or the terms for payment extended, or Phase Metrics' obligations
may be renewed in whole or in part; (d) the maturity of any obligations of Phase
Metrics under the Loan Documents may be accelerated in accordance with the terms
of any present or future agreement by either Phase Metrics or the Agent and the
Lenders; (e) any of the Agent's Collateral may be sold, exchanged, released or
substituted and any lien in favor of the Agent or the Lenders may be terminated,
subordinated or failed to be perfected of become unperfected; (f) any person
liable in any manner for any obligations of Phase Metrics under the Loan
Documents, may be discharged, released or substituted; and (g) all other rights
against Phase Metrics, any other person or with respect to any Agent's
Collateral may be exercised or the Agent and the Lenders may waive or refrain
from exercising such rights. Neither this Letter Agreement, the Security
Agreement nor any Purchase Document shall be considered to be a Loan Document.
10. This Letter Agreement shall be binding on each of the parties hereto
and any successors and assigns. This Letter Agreement shall be construed in
accordance with California law and may not be amended or modified unless in a
writing executed by both parties hereto. This Letter Agreement may be executed
in one or more counterparts.
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KOMAG, Inc. Page 5
Please evidence your acceptance of the terms set forth in this Letter
Agreement by countersigning below where indicated.
Very truly yours,
CANADIAN IMPERIAL BANK OF
COMMERCE as Agent for the Lenders
By:______________________________________
Its:_____________________________________
Agreed and accepted:
Komag, Inc.
By:_________________________________
Its:________________________________
Consented to:
Phase Metrics, Inc.
By: /s/ X. X. XXXXXXXX
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Its: Vice President
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