EXHIBIT 10.6
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made and entered
into by and among XXXX X. XXXXX ("Xxxxx"), XXXX XXXXXXX, and XXXXX XXXXXX
("Xxxxxx"; Crowe, Brown, and Xxxxxx are sometimes hereinafter collectively
referred to as the "Directors"), effective as of the 8th day of April, 1999,
for the benefit of FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lessor").
R E C I T A L S
A. Mobile PET Systems, Inc., a Delaware corporation ("Lessee"), is
or will be obligated to Lessor pursuant to that certain Equipment Lease No.
4125, together with each and every Lease Schedule now or hereafter to be
entered into between Lessee and Lessor and attached thereto (as amended,
restated, supplemented or modified from time to time, collectively, the
"Lease"). All obligations of Lessee to Lessor, as evidenced by the Lease, are
collectively referred to herein as the "FINOVA Debt." Except as otherwise
defined herein, all capitalized terms used herein shall have the same
meanings as set forth in the Lease.
B. Each of the Directors is an affiliate of Lessee, and Xxxxx and
Xxxxx are also officers of Lessee. As such, each of the Directors will or may
be receiving salary, bonuses, compensation and/or other forms of
remuneration, director's fees, and dividends or other forms of capital
distributions, from Lessee (collectively herein, "Distributions"). Such
Distributions, together with any and all indebtedness of Lessee to the
Directors now existing or hereafter incurred (as such concept is more fully
elaborated upon in the following Recital C), are herein collectively referred
to as the "Director Debt."
C. The terms "Debt", "FINOVA Debt" and "Director Debt", as used
herein, mean all debts, obligations and liabilities, now or hereafter
existing, direct or indirect, absolute or contingent, joint or several,
secured or unsecured, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, irrespective of the
person in whose favor such debt may have originally been created and
regardless of the manner in which such debt has been or hereafter may be
acquired by Lessor in respect of the FINOVA Debt or the Directors in respect
of the Director Debt, as the case may be, and include all costs incurred to
obtain, preserve, perfect or enforce any security interest, lien or other
encumbrance securing such debt, or to collect any debt, or to maintain,
preserve, collect and enforce any collateral, and interest on all such
amounts.
D. The FINOVA Debt is secured by, among other things: (i) the lien
of that certain Security Agreement of even date herewith between Lessor and
Lessee pursuant to which Lessee granted in favor of Lessor a security
interest in those items of tangible and
intangible personal property described on EXHIBIT A attached hereto (the
"Property"), (ii) the rights of Lessor, pursuant to the Lease, with respect to
the various items of equipment leased thereby, and (iii) that certain
Collateral Assignment of Agreements of even date herewith from Lessee in
favor of Lessor, pursuant to which Lessee has collaterally assigned to Lessor
its rights in various beneficial contractual arrangements related to the
Lease.
NOW, THEREFORE, in consideration of Lessor's agreement to enter
into the Lease with Lessee, and for other good and valuable consideration,
the Directors hereby agree as follows:
1. The Director Debt shall at all times be subordinate, and is
hereby made subordinate, to the FINOVA Debt until the FINOVA Debt is paid in
full. Notwithstanding anything to the contrary in the Lessee's organizational
documents and any and all amendments thereto, no payment of any obligation,
principal or interest of any portion of the Director Debt shall be required,
demanded, made or collected until after such time as the FINOVA Debt has been
paid in full, EXCEPT that, in the absence of an event of default under the
Lease (any such default being referred to herein as an "Event of Default"),
Lessee shall be permitted to pay regularly accruing salary, bonus, and other
compensation to Xxxxx (at an annual level not greater than $150,000 during
the period from the date hereof through June 30, 2000, and for each
subsequent twelve-month period commencing July 1st thereafter, at a level not
greater than 125% of the total compensation paid during the prior
twelve-month period); provided, however, that until such time as Lessee has
achieved a level of Operating Cash Flow (as hereafter defined) to Contractual
Debt Service (as hereafter defined) of not less than 1.0 to 1.0, Xxxxx and
shall cause twenty-five percent (25%) of the foregoing amounts to be deferred
and accrued. At such time as Lessee has attained a level of Operating Cash
Flow to Contractual Debt Service (herein, the "Debt Service Coverage Ratio")
of greater than 1.0 to 1.0, Lessee shall be permitted to pay, and Xxxxx and
shall be permitted to receive, payments of accrued deferred compensation to
the extent such payments can be made without causing Lessee's Debt Service
Coverage Ratio to fall below 1.0 to 1.0. "Operating Cash Flow" shall mean,
for any period, Lessee's net income or loss (excluding the effect of any
extraordinary gains or losses) determined in accordance with generally
accepted accounting principles ("GAAP"), PLUS each of the following items, to
the extent deducted from the revenues of Lessee in the calculation of net
income or loss: (i) depreciation; (ii) amortization and other non-cash
charges; (iii) rent paid to Lessor in respect of the Lease; (iv) without
duplication of amounts described in the preceding clause (iii), interest
expense paid or accrued, including, without limitation, interest imputed on
leases which would, in accordance with GAAP, be classified as "capital
leases"; and (v) total federal and state income tax expense determined as the
accrued liability of Lessee in respect of such period, regardless of what
portion of such expense has actually been paid by Lessee during such period,
and AFTER DEDUCTION FOR each of (a) federal and state income taxes, to the
extent actually paid during such period; (b) any non-cash income (but only to
the extent such non-
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cash income was included in the revenues of Lessee in the calculation of net
income or loss); and (c) all actual capital expenditures made by Lessee
during such period and not financed (with the qualification that all amounts
expended by Lessee pursuant to the Lease, if considered capital expenditures
under GAAP, shall be deemed financed for purposes of this definition).
"Contractual Debt Service" shall mean, for any period, the sum of payments
made (or, as to clauses (i) and (ii) of this sentence, required to be made)
by Lessee during such period for (i) scheduled payments of rent and any other
amounts due under the Lease, (ii) scheduled interest and principal payments
due on any and all outstanding indebtedness of Lessee, other than indebtedness
described in the following clause (iii), and (iii) interest and principal
payments made on any indebtedness of Lessee the repayment of which has been
subordinated to the payment of Lessee's obligations in respect of the Lease.
2. The Directors will not attempt to foreclose on any collateral
securing any part of the Director Debt until after such time as the FINOVA
Debt has been paid in full. Anything of value received by the Directors from
Lessee not in accordance with this Agreement shall be held by the Directors
in trust and immediately turned over to Lessor in the form received (with any
necessary endorsement attached or affixed thereto), to be applied by Lessor
to the FINOVA Debt.
3. Any time after the delivery by Lessor to the Directors of a
written notice of, and during the existence and continuance of, an Event of
Default, the Directors will not demand or accept from Lessee (and Lessee will
not make) any payment of all or any portion of the Director Debt. At such
time as an Event of Default, the result of which was to prohibit the Lessee
from making payments of the Director Debt, has been cured, all deferred
payments of the Director Debt which were otherwise payable during such time
may be paid to the Directors, PROVIDED that the payment of such amounts will
not result in Lessee's Debt Service Coverage Ratio falling below 1.0 to 1.0
or otherwise give rise to an Event of Default.
4. Until after such time as the FINOVA Debt has been paid in full,
the Directors will not (i) be a party to any action or proceeding against
Lessee to enforce payment of or on the Director Debt; (ii) exercise any
self-help remedies such as setoff or repossession with respect to any
property owned by Lessee; or (iii) foreclose (judicially or otherwise) any
lien on or security interest in real property, personalty or other collateral
with respect to any property owned by Lessee. Without limiting the generality
of the foregoing, until after such time as the FINOVA Debt is paid in full,
the Directors will not assert any claims in any insurance proceeds which may
be payable to Lessee and/or Lessor, and the Directors will not exercise (and
will, upon Lessor's request, specifically waive) any right (in their capacity
as the Directors hereunder) to participate in the negotiation or settlement
of any claim for insurance proceeds.
5. At any time and from time to time, without the Directors'
consent or notice to the Directors, and without liability to Lessor and
without impairing any of Lessor's rights against the Directors created
hereunder or any of the Directors' obligations hereunder,
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Lessor may take additional or other security for the FINOVA Debt and may also
release, exchange, subordinate or relinquish any security for the FINOVA
Debt; release any person obligated on the FINOVA Debt; modify, amend or waive
compliance with any agreement relating to the FINOVA Debt; modify or amend the
conditions pursuant to which Distributions may be made by Lessee; increase
the amount of the FINOVA Debt; delay, omit, fail or refuse to take or
prosecute any action for collection of any FINOVA Debt or to foreclose upon
any collateral or take or prosecute any action on any agreement securing any
FINOVA Debt.
6. The Directors represent and warrant that the Director Debt is
not presently secured by any security interests, liens, or deeds of trust.
The Directors and Lessee agree that the Director Debt will not hereafter be
secured by any security interests, liens, or deeds of trust covering property
of the Lessee. The Directors hereby subordinate and make inferior any
security interests, liens, deeds of trust or other encumbrances now or
hereafter securing the Director Debt to all security interests, liens, and
other encumbrances covering property of the Lessee now or hereafter securing
the FINOVA Debt.
7. The Directors will notify Lessor at the address stated below
not less than ten (10) days before any assignment of the Director Debt and
will notify the Directors' assignee of the terms of this Agreement. Any
assignment of the Director Debt shall be subject to the condition that the
proposed assignee acknowledge and agree in writing to be bound by the terms
of this Agreement. Lessor's rights under this Agreement may be assigned in
connection with any assignment or transfer of any FINOVA Debt. This Agreement
is cumulative of all other rights, remedies, and security of Lessor. No
waiver by Lessor of any right under this Agreement shall affect or impair its
rights in any matters thereafter occurring.
8. The Directors shall pay Lessor's attorneys' fees and costs
(including expert witness fees) incurred in enforcing this Agreement whether
or not suit is brought, including any attorneys' fees and costs (including
expert witness fees) incurred by Lessor in proceeding under the Federal
Bankruptcy Code in order to collect any indebtedness hereunder.
9. This Agreement is binding upon and shall inure to the benefit
of the successors and permitted assigns of each of the parties to this
Agreement. The rights and interests of any assignee of any of the undersigned
shall be subject in all respects to the terms of this Agreement.
10. THIS AGREEMENT AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE
PARTIES THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT THE LAWS
OF SUCH STATE, THE LAWS OF THE UNITED STATES.
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11. THE DIRECTORS: (A) HEREBY IRREVOCABLY SUBMIT THEMSELVES TO THE
PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA,
MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT,
ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE SUBJECT MATTER HEREOF, OR, IF LESSOR INITIATES SUCH ACTION, ANY COURT IN
WHICH LESSOR SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL
IN ALL INSTANCES BE AT LESSOR'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF
MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM
THAT ANY DIRECTOR IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. THE DIRECTORS HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
JUDGMENT OR ACTION IN ANY OTHER FORUM.
12. LESSOR AND THE DIRECTORS ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING
WITHOUT A JURY, AND THE DIRECTORS HEREBY KNOWINGLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY SUCH PROCEEDING.
PC JF BN
------------ ------------ ------------ the Directors' Initials
as to PARAGRAPHS 9, 10, AND 11
13. All notices required or permitted to be given hereunder shall
be in writing, and shall be deemed delivered (a) one (1) Business Day after
such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service, or (b) three (3) Business Days after
such are deposited in the United States mails, certified or registered mail,
in either case, with all postage prepaid, and addressed as set forth below,
or to such other address as either party may, from time to time, designate in
writing. Written notice may be given by telecopy to the telecopier number
shown below or such other telecopier number as either party may designate,
from time to time, in writing, provided that such notice shall not be deemed
effective unless it is confirmed within twenty-four (24) hours by courier
delivery or mailing of a copy of such notice in accordance with the
requirements set forth above.
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If to Lessor: FINOVA Capital Corporation
000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Vice President - Group Counsel
Telecopy No.: 000-000-0000
If to the MOBILE PET SYSTEMS, INC.
Directors: ------------------------
0000 XXXXXXX XXXXXX XXXXX
------------------------
SUITE 205
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XXX XXXXX, XX 00000
------------------------
Attention: Xxxx Xxxxx
----------------
Telecopy No.: (000) 000-0000
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[SIGNATURE PAGE FOLLOWS]
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Executed effective as of the date and year first written above.
/s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx
PC
------- check here to confirm that paragraphs 9,
10 and 11 have been initialed.
/s/ Xxxx X. Xxxxxxx
-------------------------------
Xxxx X. Xxxxxxx
XX
----------- check here to confirm that
paragraphs 9, 10 and 11 have been initialed.
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
BN
----------- check here to confirm that
paragraphs 9, 10 and 11 have been initialed.
Accepted:
MOBILE PET SYSTEMS, INC., a
Delaware corporation
By: /s/ Xxxx X. Xxxxx
-----------------------------
Name: Xxxx Xxxxx
-----------------------
Title: CEO/PRESIDENT
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EXHIBIT A
TO SUBORDINATION AGREEMENT
DESCRIPTION OF PROPERTY
(to be attached)
