Exhibit 4.21
SUBORDINATION AND STANDSTILL AGREEMENT
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This Agreement is made as of this the 25th day of March, 1999, among
FINOVA CAPITAL CORPORATION, a Delaware corporation ("Senior Lender"), and
M-Wave, Inc., a Delaware corporation ("Subordinated Lends"), and PC Dynamics
of Texas, Inc., a Texas corporation, ("Borrower").
W I T N E S S E T H:
WHEREAS, Senior Lender and Borrower have entered into a Loan and
Security Agreement, dated as of the date hereof (as from time to time
modified, extended, renewed, or restated, the "Loan Agreement"), together
with the other Loan Documents (as defined in the Loan Agreement), whereby
Senior Lender has made and shall make available to Borrower a credit
facility in the aggregate amount of Two Million Thirty Five Thousand Dollars
($2,035,000.00) (collectively, the "Senior Loan") therein set forth, which
Senior Loan is secured by certain assignments of and security interests in
the assets of Borrower, now or hereafter existing, all as more fully set
forth in the Loan Documents; and
WHEREAS, Borrower has issued certain promissory notes (collectively,
the "Notes") and has incurred certain otter indebtedness and payment
obligations under that certain Asset Purchase Agreement, dated as of March
25,1999 (as amended, the "Purchase Agreement"), all as described in the
"Subordinated Debt Schedule" attached hereto and incorporated herein, (the
Purchase Agreement and all other documents or instruments executed in
connection therewith, as from time to time modified, extended, renewed or
restated, collectively the "Subordinated Documents"); and
WHEREAS, as set forth in Section 19 hereof, Subordinated Lender shall
benefit from the execution and delivery of the Loan Agreement and the making
of the Senior Loan; and
WHEREAS, as a condition of the financing accommodations under the Loan
Documents, the parties hereto are required to enter into this Agreement to
establish the priority of the repayment of the Borrowers debt, and to
address certain related matters; and
WHEREAS, Subordinated Lender and Borrower desire to enter into this
Agreement in order to induce Senior Lender to enter into the Loan Agreement
with Borrower and to make the Senior Loan.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Definitions. Except as otherwise provided herein, all
capitalized terms used in this Agreement shall have the meanings ascribed to
such terms in the Loan Agreement, provided that the following terms shall
have the meanings set forth below:
"Borrowers Property" means all assets, property and property rights,
of any kind or nature, tangible or intangible, now or hereafter existing, in
which Borrower owns, asserts or maintains an interest.
"Finally Paid" or "Final Payment," when used in connection with the
Senior Indebtedness shall mean the full, final and indefeasible payment of
all of the Senior Indebtedness and the irrevocable termination of Senior
Lenders obligation to make loans or other advances under the loan Agreement.
"Insolvency Proceeding" shall mean any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, including assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"Liens" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge, set-off right or other encumbrance, whether now existing
or hereafter created, acquired or arising.
"Notes" shall have the meaning set forth in the recitals hereof.
"Senior Indebtedness" means all principal, interest and other
obligations at any time due and owing by Borrower to Senior Lender arising
out of or incurred in connection with the Loan Documents or other documents
executed in connection with the Senior Loan (and any indebtedness which
refinances such principal, interest or other obligations), as modified,
extended, renewed or restated, whether direct or contingent, and whether now
existing or hereafter created. Senior Indebtedness shall include, without
limitation, interest which accrues on the principal amount of the Senior
Indebtedness subsequent to the commencement of, a case under Chapter 11 of
the Bankruptcy Code, but only to the extent such interest is allowed as a
claim in such case.
"Subordinated Lender" means, individually and collectively, the
individuals and entities named on the signature page hereto, and each
reference herein to "Subordinated Lender" shall be deemed to mean each
Subordinated Lender, individually and collectively, as the context requires.
"Subordinated Indebtedness" means all indebtedness of Borrower to
Subordinated Lender pursuant to the Subordinated Documents and all present
and future loans, advances, debts, liabilities, obligations, and
indebtedness otherwise owing by Borrower to any Subordinated Lender, whether
evidenced by any note, or other instrument or document, whether absolute or
contingent, due or to become due, including, without limitation, all
interest charges, expenses, fees, attorneys' fees and any other sums
chargeable to Borrower. Notwithstanding the foregoing, Subordinated
Indebtedness shall not include lease payments due and owing Subordinated
Lender pursuant to that certain Lease Agreement of the facility located at
00000 XX 000 Xxxx, Xxxxxx, Xxxxx 00000, by and between Subordinated Lender
and Borrower, dated March 25, 1999.
"Subordinated Lender Remedies" means any action which results in (A)
the sale, foreclosure, realization on or liquidation of any of Borrowers
Property, (B) the execution on any judgment obtained against Borrower, (C)
the acceleration of the Subordinated Indebtedness, (D) the filing of any
petition or lien under any bankruptcy, insolvency or creditors' rights laws
with respect to Borrower, or (E) the institution or exercise against
Borrower of any suit, legal action, arbitration or other enforcement remedy.
"UCC" shall mean Article 9 of the Uniform Commercial Code, as in
effect in the State of Arizona from time to time.
2. Subordination. Subordinated Lender hereby postpones and
subordinates in right of payment all of the Subordinated Indebtedness to the
Final Payment of all of the Senior Indebtedness as per this Subordination
and Standstill Agreement. Subordinated Lender does not, as of the date
hereof, hold any Liens or security interests in Borrowers Property and
hereby agrees that any Liens, security interests, claims and rights of any
kind Subordinated Lender may hereafter acquire against Borrower and
Borrowers Property (with the prior written consent of Senior Lender) shall
be subordinate and subject to the Liens, security interests, claims and
rights against Borrower and/or Borrowers Property of Senior Lender arising
from or out of the Senior Indebtedness, regardless of the order or time as
of which any Liens attach to any of the Borrowers Property, the order or
time of UCC filings or any other filings or recordings., the order or time
of granting of any such Liens, or the physical possession of any of the
Borrowers Property until this Agreement is terminated in accordance with
Section 26 hereof. If Borrower issues any instrument or document evidencing
the Subordinated Indebtedness each such instrument and document shall bear a
conspicuous legend that it is subordinated to the Senior Indebtedness in
accordance with the terms of this Agreement Borrowers books shall be marked
to evidence the subordination of all of the Subordinated Indebtedness to the
holder of Senior Indebtedness, in accordance with the terms of this
Agreement Senior Lender is authorized to examine such books from time to
time arid to make any notations required by this Agreement.
3. Warranties and Representations of Borrower and Subordinated
Lender. Borrower and Subordinated Lender each hereby severally represents
and warrants to the Senior Lender that the Senior Lender has been furnished
with a true and correct copy of all instruments and securities evidencing or
pertaining to the Subordinated Indebtedness. Borrower hereby represents and
warrants to the Senior Lender that this Agreement has been duly executed and
delivered by Borrower and constitutes a legal, valid and binding obligation
of Borrower enforceable in accordance with its terms except to the extent
that the enforceability thereof may be limited by any applicable bankruptcy
insolvency, reorganization, moratorium or similar laws from time to time in
effect affecting generally the enforcement of creditors' rights and remedies
and general principles of equity. Subordinated Lender represents and
warrants to the Senior Lender: (A) that this Agreement has been duly
executed and delivered by Subordinated Lender and constitutes a legal, valid
and binding Obligation of Subordinated Lender enforceable against the
Subordinated Lender in accordance with its terms, except to the extent that
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency; reorganization, moratorium or similar laws from, time to time in
effect affecting generally the enforcement of creditors' rights and remedies
and general principles of equity; (B) that Subordinated Lender is a Delaware
corporation having its chief executive office at the address set forth below
his name on the signature page hereto; (C) that Subordinated Lender is
acquiring the Subordinated Indebtedness for its [his or her] own account and
not with a view to the distribution thereof and has no present intention of
distributing the Subordinated Indebtedness; (D) that Subordinated Lender has
not relied and shall not rely on any representation or information of any
nature made by or received from Senior Lender relative to Borrower in
deciding to execute this Agreement or to permit it to continue in effect.
4. Negative Covenants. Until all at the Senior Indebtedness has
been Finally Paid (A) Borrower shall not1 directly or indirectly, grant a
security interest in, mortgage, pledge, assign or transfer any properties,
to secure or satisfy all or any part of the Subordinated Indebtedness; (B)
Subordinated Lender shall not demand or accept from Borrower any collateral;
(C) Borrower shall not discharge the Subordinated Indebtedness other than in
accordance with its terms; (D) Subordinated Lender shall not demand or
accept from Borrower any consideration which would result in a discharge of
the Subordinated Indebtedness other than in accordance with its terms; (E)
Subordinated Lender shall not hereafter give any subordination in respect of
the Subordinated Indebtedness or convert any or all of the Subordinated
Indebtedness to capital stock, equity, ownership interest or other
securities of Borrower; (F) Subordinated Lender shall not transfer or assign
any of the Subordinated Indebtedness to any person1 except upon the prior
written consent of Senior Lender and subject to the condition that such
transferee or assignee shall have agreed in writing to be bound by the terms
of this Agreement as a Subordinated Lender hereunder; (G) Borrower shall not
hereafter issue any instrument security or other writing evidencing any part
of the Subordinated Indebtedness, and Subordinated Lender shall not receive
any such writing, except upon the condition that such security shall bear
the legend referred to in Section 2 above and a true copy thereof shall be
furnished to Senior Lender; (H) neither Borrower nor Subordinated Lender
otherwise shall take any action contrary to Senior Lenders priority position
over Subordinated Lender that is created by this Agreement, except with
respect to the exercise by Subordinated Lender of the rights granted to it
in this Agreement.
5. Payments of Subordinated Indebtedness. Until all of the Senior
Indebtedness has been Finally Paid, Borrower shall not make and Subordinated
Lender shall not accept any direct or indirect payment or prepayment in
cash, property or securities, by set-off or otherwise, with respect to any
Subordinated Indebtedness, except that scheduled payments of principal
and/or interest under the Notes may be paid in arrears ("Allowed Payment")
if, and only to the extent that at the time of any such Allowed Payment: (a)
no "Event of Default" has occurred and is continuing under the Loan
Agreement and no Event of Default would result from the making of such
Allowed Payment, and (b) according to the monthly financial statements
submitted to Senior Lender by Borrower pursuant to the Loan Agreement (i)
Borrower will have a Debt Service Coverage Ratio of no less than 1.10 to 1.0
and will be in compliance with the other financial covenants set forth in
Section 5(k) of the Loan Agreement after giving effect to the Allowed
Payment, and (ii) Borrower will have at least Two Hundred Thousand Dollars
($200,000.00) of Excess Availability under the Revolving Credit Loans after
giving effect to the Allowed Payment.
6. Prohibition on Payments.
(A) Notwithstanding the provisions of Section 5 above, upon the
happening of any Event of Default under and as defined in the Loan
Agreement, and upon receipt by Subordinated Lender of written notice thereof
(the "Default Notice") from the Senior Lender, no direct or indirect payment
or prepayment in cash, property or securities, by set-off or otherwise,
shall be made or agreed to be made by the Borrower or accepted by the
Subordinated Lender on account of the principal of. premium or interest on,
or any other amounts in respect of the Subordinated Indebtedness, and the
Borrower shall not segregate or hold in trust money for any such payment or
distribution, unless and until the Subordinated Lender has received a
written notice from the Senior Lender that the default referred to in such
Default Notice has been cured or waived by Senior Lender, and thereafter
Subordinated Lender shall be entitled to the payment of suspended payments
of the Subordinated Indebtedness from Borrower, to the extent permitted as
an Allowed Payment under Section 5 hereof, provided that no Event of Default
will result from the making of such payments by Borrower.
(B) In the event that the Borrower shall make or Subordinated Lender
shall collect any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness in
contravention of this Section 6, such payments shall be paid over and
delivered to the Senior Lender immediately upon receipt thereof.
(C) In the event that any failure of the Borrower to make or the
Subordinated Lender to receive any payment with respect to the Subordinated
Indebtedness as a result of the provisions of this Section 6 shall be deemed
a default under the Subordinated Documents, such event shall not give rise
to any right of Subordinated Lender to exercise any Subordinated Lender
Remedies, any provision of the Subordinated Documents to the contrary
notwithstanding.
7. Forbearance of Legal Remedies. Until all of the Senior
Indebtedness has been Finally Paid, the Subordinated Lender shall not
exercise any Subordinated Lender Remedies or other remedies it may have for
a default under the Subordinated Documents, except as permitted below.
Whether or not a Default Notice is then in effect, the Subordinated Lender
may exercise one or more or all of the following rights and remedies (in
each case, subject at all times to the payment subordination and lien
subordination provisions set forth in this Agreement), but only the
following rights and remedies, after prior written notice to Senior Lender
and upon the occurrence of any of the following conditions, including any
such occurrence during the effective period of any Default Notice: (a) an
Insolvency Proceeding shall occur, or (b) the Senior Lender commences legal
proceedings against the Borrower.
(i) accelerate payment of the Subordinated Indebtedness;
(ii) commence legal proceedings against the Borrower and, if
requested by the Senior Lender, become a co-plaintiff in any legal
proceedings commenced by the Senior Lender, provided, that in no event shall
Subordinated Lender be permitted to execute on any judgment obtained against
Borrower until the Senior Indebtedness shall have been Finally Paid unless
the proceeds of such execution of judgment are paid to the Senior Lender for
application against the Senior Indebtedness, and further provided that
Subordinated Lender shall not be permitted to execute on any judgment
obtained against Borrower if the only predicate act above the acceleration
of payment of the Senior Indebtedness; and
(iii) file a proof of claim and otherwise participate in any
Insolvency Proceeding. The Subordinated Lender agrees to provide the Senior
Lender with not less than six (6) days prior written notice of its intent to
exercise any legal remedy, which notice may be given during any period of
time that a Default Notice is in effect.
8. Subordinated Indebtedness Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution. Liquidation or Reorganization of the
Borrower. Upon any distribution of assets of the Borrower in any
dissolution, winding up, liquidation or reorganization of the Borrower
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise) tending toward
liquidation of the business and assets of Borrower:
(A) the holder of all Senior Indebtedness shall first be entitled to
receive payment in full (or to have such payment duly provided for in a
manner previously agreed upon or otherwise satisfactory to it) of the
principal thereof, and premium and interest due thereon, and other amounts
payable comprising such Senior Indebtedness, before the Subordinated Lender
is entitled to receive any payment on account of the principal of, premium
or interest on or any other amounts due under the Subordinated Indebtedness;
and
(B) any payment or distribution of assets of the Borrower of any
kind or character, whether in cash, property or securities, to which the
Subordinated Lender would be entitled except for these provisions, shall be
paid by the liquidating trustee or agent or other person making such payment
or distribution directly to the holder of the Senior Indebtedness, to the
extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior
Indebtedness.
The Borrower shall give prompt written notice to the Senior Lender and
the Subordinated Lender of any dissolution, winding up. liquidation or
reorganization of the Borrower or any assignment for the benefit of any of
the creditors of the Borrower tending toward the liquidation of the business
and assets of the Borrower.
9. Obligation of Borrower Unconditional. Nothing contained herein
or in the Loan Documents is intended to or shall impair, as between the
Borrower and the Subordinated Lender only, the obligation of the Borrower,
which is absolute and unconditional, to pay to the holder of the
Subordinated Indebtedness the Subordinated Indebtedness as and when the same
shall become due and payable in accordance with their terms, or to affect
the relative rights of the Subordinated Lender and creditors of the Borrower
other than the Senior Lender.
10. Subordination Rights Not Impaired by Acts or Omissions of
Borrower or Holder of Senior Indebtedness. No right of any present or future
holder of any Senior Indebtedness to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Borrower by any act or failure to act,
which act or failure is in good faith, by any such holder; by any act or
failure to act by any other holder of the Senior Indebtedness; or by any
noncompliance by the Borrower with the terms hereof, regardless of any
knowledge thereof which any such holder may have or be otherwise charged
with. Subordinated Lender shall not be released, nor shall Subordinated
Lenders obligation hereunder be in anyway diminished, by any of the
following: (A) the exercise or the failure to exercise by Senior Lender of
any rights or remedies conferred on it or them under the Loan Documents
hereunder or existing at law or otherwise, or against any of Borrowers
Property; (B) the commencement of an action at law or the recovery of a
judgment at law against Borrower or any obligor ("Obligor") for the
performance of the Senior Indebtedness and the enforcement thereof through
levy or execution or otherwise; (C) the taking or institution or any other
action or proceeding against Borrower or any Obligor; or (D) any delay in
taking, pursuing, or exercising any of the foregoing actions, rights,
powers, or remedies (even though requested by Subordinated Lender) by Senior
Lender or anyone acting for Senior Lender. Without limiting the generality
of the foregoing, and anything else contained herein to the contrary
notwithstanding, Senior Lender, from time to time, without prior notice to
or the consent of Subordinated Lender, may take all or any of the following
actions without in any manner affecting or impairing the obligation or
liability of Subordinated Lender hereunder (I) obtain a lien or a security
interest in any property to secure any of the Senior Indebtedness; (II)
obtain the primary and secondary liability of any party or parties with
respect to any of the Senior Indebtedness; (III) renew, extend, or otherwise
change the time for payment of the Senior Loan or any installment thereof
for any period; (IV) release or compromise any liability of any nature of
any person or entity with respect to the Senior Indebtedness; (V) exchange,
enforce, waive, release, and apply any of Borrowers Property and direct the
order or manner of sale thereof as Senior Lender may in its discretion
determine; (VI) enforce their rights hereunder, whether or not Senior Lender
shall proceed against any other person or entity; (VII) exercise its rights
to consent to any action or non-action of Borrower which may violate the
covenants and agreements contained in the Loan Documents, with or without
consideration, on such terms and conditions as may be acceptable to it; or
(VIII) exercise any of its rights conferred by the Loan Documents or by law.
11. Authority to Act for Subordinated Lender. Until the Senior
Indebtedness has been Finally Paid, in the event an Insolvency Proceeding
shall occur and be continuing, if the Subordinated Lender is within forty-
five (45) days of a final bar on exercising its right to present a proof of
debt, proof of claim, suit or other similar right available for the purpose
of protecting the Senior Lenders rights created by the subordination herein
(to the extent that any of the foregoing proofs, procedures, or rights are
relevant in the context of the particular Insolvency Proceeding involved),
Subordinated Lender shall advise Senior Lender prior to the date thirty (30)
days before such final bar occurs whether Subordinated Lender intends to
exercise its rights and present a proof of debt, proof of claim, file suit,
or preserve such other rights as are available to Subordinated Lender prior
to the expiration of such rights. In the event that Subordinated Lender
advises Senior Lender of its intention to let any such rights lapse, Senior
Lender shall thereupon immediately have the right to act as Subordinated
Lender's attorney-in-fact for the purposes specified in the remainder of
this Section 11 (but solely to the extent that any of the actions on behalf
of Senior Lender authorized hereby are relevant in the context of the
particular Insolvency Proceeding involved). In the event Subordinated
Lender, regardless of whether Subordinated Lender notified Senior Lender of
its intention to preserve its rights or not, is within fifteen (15) days
of a final bar on exercising its right to present a proof of debt, proof of
claim, file suit or exercise such other similar rights as are available to
Subordinated Lender, Senior Lender shall have the right to act as
Subordinated Lender's attorney-in-fact for the purposes specified herein,
and Subordinated Lender hereby irrevocably appoints Senior Lender its true
and lawful attorney, with full power of substitution, in the name of
Subordinated Lender or in the name of Senior Lender, for the use and benefit
of Senior Lender, without further or additional notice to Subordinated
Lender or any of its representatives. successors or assigns, to perform the
following acts, at Senior Lenders option, in such Insolvency Proceeding:
(A) To enforce or vote claims comprising the Subordinated
Indebtedness, either in its own name or in the name of Subordinated Lender,
by proof of debt, proof of claim, suit or otherwise; and
(B) To collect any assets of Borrower distributed, divided or
applied by way of dividend or payment, or any securities issued, on account
of the Subordinated Indebtedness and to apply the same, or the proceeds of
any realization upon the same that Senior Lender in its discretion elects to
effect, to the Senior Indebtedness until all of the Senior Indebtedness
(including, without limitation, interest accruing on the Senior Indebtedness
after the commencement of any bankruptcy case, but only to the extent such
interest is included within the definition of Senior Indebtedness hereunder)
has been paid in full, rendering any surplus to Subordinated Lender if and
to the extent permitted by law.
In no event shall Senior Lender be liable to Subordinated Lender any
failure to prove the Subordinated Indebtedness, to exercise any right with
respect thereto or to collect any sums payable thereon
12. Waivers. Borrower and Subordinated Lender each hereby waives, to
the fullest extent permitted by law, any defense based on the adequacy: of a
remedy at law which might be asserted as a bar to the remedy of specific
performance of this Agreement in any action brought therefore by Senior
Lender. To the fullest extent permitted by law and except as to any notices
specified in this Agreement, notices regarding the intended sale or
disposition of any portion of the Collateral by Senior Lender, or any notice
which may not be waived in accordance with the UCC, Borrower and
Subordinated Lender each hereby further waives: presentment, demand,
protest, notice of protest, notice of default or dishonor, notice of payment
or nonpayment and any and all other notices and demands of any kind in
connection with all negotiable instruments evidencing all or any portion of
the Senior Indebtedness or the Subordinated Indebtedness to which Borrower
or Subordinated Lender may be a party; prior notice of and consent to any
loans made, extensions granted or other action taken in reliance thereon;
and all other demands and notices of every kind in connection with this
Agreement, the Senior Indebtedness or the Subordinated Indebtedness.
Subordinated Lender consents to any release, renewal, extension, compromise
or postponement of the time of payment of the Senior Indebtedness, to any
substitution, exchange or release of collateral therefor, and to the
addition or release of any person primarily or secondarily liable thereon.
13. Indulgences Not Waivers. Neither the failure nor any delay on
the part of Senior Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an. estoppel,
nor be construed as an agreement to modify the terms of this Agreement, nor
shall any single or partial exercise of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent
specifically stated in such writing.
14. Default. If any material representation or warranty of Borrower
or Subordinated Lender in this Agreement or in any instrument evidencing,
securing or relating to the Senior Indebtedness proves to have been
materially false when made, or, in the event of a material breach by either
the Borrower or Subordinated Lender in the performance of any of the
material terms of this Agreement, or any instrument or agreement evidencing,
securing or relating to the Senior Indebtedness, all of the Senior
Indebtedness shall, at the option of Senior Lender, become immediately due
and payable without presentment, demand, protest, or notices of any kind,
notwithstanding any time or credit otherwise allowed. At any time
Subordinated Lender fails to comply with any provision of this Agreement
that is applicable to Subordinated Lender, Senior Lender may demand specific
performance of this Agreement, whether or not Borrower has complied with
this Agreement, and may exercise any other remedy available at law or
equity.
15. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Borrower referred to in
this Agreement, the Subordinated Lender shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of a trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Subordinated Lender,
for the purpose of ascertaining the persons entitled to participate in such
payment or distribution, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto
or to this Agreement.
16. Amendment of the Subordinated Documents. Subordinated Lender
agrees that it will not, without the consent of the Senior Lender, amend
the Subordinated Documents, so as to modify the financial terms thereof
(including, without limitation, the amount of principal, rate of interest,
dividends, fees and prepayment premiums, if any), extend the maturity
thereof add or change any covenants in a manner materially more
restrictive to the Borrower, or effect any other modification to the
Subordinated Documents, which would: be materially adverse to the Senior
Lender.
17. Inconsistent or Conflicting Provisions. In the event a provision
of the Loan Documents or the Subordinated Documents, is inconsistent or
conflicts with the provisions of this Agreement, the provisions of this
Agreement shall govern and prevail.
18. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when
delivered against receipt or when deposited in the United States mails,
certified or registered mail, return receipt requested, postage prepaid,
addressed as set forth below, and actually presented at the address of the
notice party.
If to Senior Lender:
FINOVA Capital Corporation
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
If to Subordinated Lender:
The address set forth below the
signature of such Subordinated
Lender on the signature page hereto.
If to Borrower:
PC Dynamics of Texas, Inc.
00000 XX 000 Xxxx
Xxxxxx, Xxxxx 00000
Any addressee may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
19. Benefit. Subordinated Lender represents and warrants that the
making of the Senior Loan will benefit Subordinated Lender in that
Subordinated Lender is financially interested in Borrower and will benefit
from the financial success of Borrower. Subordinated Lender acknowledges
that Senior Lender would not make the Senior Loan but for the execution of
this Agreement. Therefore; Subordinated Lender has received good, sufficient
and adequate consideration for the making of this Agreement.
20. Entire Agreement. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereto and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral
or written. Neither this Agreement nor any portion or provision hereof may
be changed, waived or amended orally or in any manner other than by an
agreement in writing signed by Senior Lender and Subordinated Lender
provided, however, any such change, waiver or amendment shall be binding
upon the Borrower by its written consent thereto.
21. Additional Documentation. Borrower and Subordinated Lender
shall execute and deliver to Senior Lender such further instruments and
shall take such further action as Senior Lender may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement.
22. Expenses. Borrower agrees to pay Senior Lender on demand all
expenses of every kind, including reasonable attorney's fees, that Senior
Lender may incur in enforcing any of its rights against Borrower under this
Agreement. As between Senior Lender and the Subordinated Lender, the court
may, in the exercise of its discretion, award attorneys fees to a prevailing
party, in a manner consistent with Arizona law governing actions arising out
of a contract, and the prevailing party shall have the right to petition the
court to make such award.
23. Successors and Assigns. This Agreement shall inure to the
benefit of Senior Lender, its successors and assigns, and shall be binding
upon Borrower and its successors and assigns, and each Subordinated Lender
and their respective heirs, legatees, distributees, transferees, executors,
administrators and personal representatives and assigns, including without
limitation, any subsequent holders of the Note. Senior Lender without prior
notice or consent of any kind, may sell, assign or transfer the Senior
Indebtedness, and in such event each and every immediate and successive
assignee or transferee thereof may be given the right by Senior Lender to
enforce this Agreement in full against Borrower and Subordinated Lender, by
suit or otherwise, for its own benefit, provided that such successor,
assignee or transferee agrees to be bound by the terms of this Agreement.
24. Covenant Not to Challenge. This Agreement has been negotiated
by the parties with the expectation and in reliance upon the assumption that
the instruments and documents evidencing the Senior Indebtedness are valid
and enforceable. In determining whether to enter into this Agreement,
Subordinated Lender has assumed such validity and enforceability, and has
agreed to the provisions contained herein, without relying upon any189
reservation of a right to challenge or call into question such validity or
enforceability. As between Senior Lender and Subordinated Lender,
Subordinated Lender hereby covenants and agrees, to the fullest extent
permitted by law, that it shall not initiate in any proceeding a challenge
to the validity or enforceability of the documents and instruments
evidencing the Senior Indebtedness, nor shall Subordinated Lender instigate
other parties to raise any such challenges, nor shall Subordinated Lender
participate in or otherwise assert any such challenges which are raised by
other parties. The foregoing notwithstanding, in the event that any other
party is successful in establishing the invalidity or unenforceability of
any of the documents or instruments evidencing the Senior Indebtedness, then
Subordinated Lender shall be entitled to the benefit of such result, and
Subordinated Lender shall not be bound by the subordination provisions of
this Agreement to the extent of such invalidity or unenforceability.
25. Subrogation. Subject to the foregoing provisions hereof,
provided that the Senior Indebtedness has been Finally Paid (and shall not
be subject to avoidance under Section 547 of the Bankruptcy Code) the
Subordinated Lender shall be subrogated, to the extent of such Senior
Indebtedness so paid, to the rights of the holder of such Senior
Indebtedness to receive payments or distributions or assets of the Borrower
that secure such Senior Indebtedness until all amounts owing on the
Subordinated Indebtedness shall be paid in full. For the purpose of such
subrogation no payments or distributions to the holder of the Senior
Indebtedness by or on behalf of the Borrower or by or on behalf of
Subordinated Lender by virtue of the provisions hereof which otherwise would
have been made to the Subordinated Lender shall, as between the Borrower, a
creditor of the Borrower (other than Subordinated Lender and The Senior
Lender) and the Subordinated Lender, be deemed to be payment by the Borrower
to or on account of the Subordinated Indebtedness, it being understood that
the provisions of this Agreement are, and are intended solely, for the
purpose of defining the relative rights of Subordinated Lender on the one
hand, and Senior Lender on the other hand. In the event that Subordinated
Lender turns over to any Senior Lender any payment or contributions received
by it in accordance with this Agreement, Subordinated Lender shall, for
purposes of determining whether any default under the Subordinated Documents
has occurred, be deemed never to have received such payment or distribution.
In the event that Borrower fails to make any payment on account of the
Subordinated Indebtedness by reason of any provision contained herein, such
failure shall, notwithstanding such provision contained herein, constitute a
default with respect to the Subordinated Indebtedness if and to the extent
such failure would otherwise constitute such a default in accordance with
the terms of the Subordinated Indebtedness.
26. Termination of Agreement. This Agreement shall continue and
shall be irrevocable until the date all of the Senior Indebtedness has been
Finally Paid by Borrower or otherwise discharged and released by the Senior
Lender.
27. Reinstatement. The obligations of Subordinated Lender under the
Agreement shall continue to be effective, or be reinstated, as the ease may
be, if at any time any payment in respect of any Senior Indebtedness is
rescinded or must otherwise be restored or returned by Senior Lender by
reason of any bankruptcy, reorganization, arrangement, composition or
similar proceeding or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, Borrower or
any substantial part of its property, or otherwise, all as though such
payment had not been made.
28. Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ARIZONA. BORROWER AND SUBORDINATED LENDER HEREBY AGREE THAT ALLOCATIONS OR
PROCEEDINGS INITIATED BY EITHER BORROWER OR SUBORDINATED LENDER AND ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN A190
MARICOPA COUNTY, ARIZONA SUPERIOR COURT OR THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA OR, IF SENIOR LENDER INITIATES SUCH ACTION, IN
ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE
SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH OF BORROWER AND
SUBORDINATED LENDER HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY SENIOR LENDER AND
HEREBY WAIVES ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED UPON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM AS
SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT,
BY SENIOR LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING.
BY SENIOR LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND EACH OF BORROWER AND SUBORDINATED LENDER HEREBY WAIVE THE
RIGHT TO COLLATERALLY ATTACK SUCH JUDGMENT OR ACTION.
29. Jury Trial. SENIOR LENDER, SUBORDINATED LENDER AND BORROWER
WAIVE TRIAL BY JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WTH
THIS AGREEMENT.
30. Severability. The provisions of this Agreement are independent
of and separable from each other. If any provision hereof shall for any
reason be held invalid or unenforceable, it is the intent of the parties
that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this Agreement shall
be construed as if such invalid or unenforceable provision had never been
contained herein.
31. Counterparts. This Agreement may be executed in any number of
separate counterparts, all of which, when taken together, shall constitute
one and the same instrument, notwithstanding the fact that all parties did
not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUBORDINATED LENDER: M-Wave, Inc.,
a Delaware corporation
By: /s/
Name: ____________________
Title: ___________________
Address: _________________
__________________________
SENIOR LENDER: FINOVA CAPITALCORPORATION,
a Delaware corporation
By: /s/
-----------------------------
Xxxx Xxxxxxxx, Vice-President
BORROWER: PC DYNAMICS OF TEXAS, INC.,
a Texas Corporation
By: /s/
-----------------------
D. Xxx Xxxxx, President
LEGEND TO BE INSERTED
AT THE TOP OF
SUBORDINATED NOTES
------------------
ALL INDEBTEDNESS EVIDENCED HEREBY AND REFERENCED HEREIN IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL INDEBTEDNESS OWED TO
FINOVA CAPITAL CORPORATION AS SET FORTH IN THAT CERTAIN SUBORDINATION AND
STANDS TILL AGREEMENT AMONG FINOVA CAPITAL CORPORATION, THE PAYEE OF THIS
NOTE AND THE OTHER PARTIES NAMED THEREIN
