SUBORDINATION AGREEMENT
EXHIBIT
G
July
8,
0000
XXXX
XXXXXXXXX XXX XXXXX XX ANNEX B
Ladies
and Gentlemen:
The
undersigned lenders (each a “Creditor”,
and
collectively referred to as “Creditors”)
are
creditors of QPC Lasers, Inc. and/or each of the subsidiaries set forth on
Annex
A
attached
hereto (each, a “Borrower”
and
collectively referred to herein as “Borrowers”)
and
desire that each lender set forth on Annex
B
attached
hereto (each, a “Senior
Lender”
and
collectively, the “Senior
Lenders”)
extend
such financial accommodations to the Borrowers as Borrowers may request and
as
the Senior Lenders may deem proper, including, without limitation, up to an
aggregate of $3,888,500 in Principal Amount of secured convertible debentures
pursuant to that certain Securities Purchase Agreement dated on or about July
8,
2008 among QPC Lasers, Inc. and the Creditors (the “Purchase
Agreement”).
Defined
terms not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement.
For the
purpose of inducing Senior Lenders to grant, continue or renew such financial
accommodations, and in consideration thereof, Creditors agree as
follows:
1.
Any
and
all claims of Creditors against any Borrower, now or hereafter existing, are,
and shall be at all times, subject and subordinate to any and all claims, now
or
hereafter existing which any Senior Lender may have against any Borrower
(including any claim by the Senior Lenders for interest accruing after any
assignment for the benefit of creditors by any Borrower or the institution
by or
against any Borrower of any proceedings under the Bankruptcy Code, or any claim
by the Senior Lenders for any such interest which would have accrued in the
absence of such assignment or the institution of such proceedings).
2.
Each
Creditor agrees not to commence or threaten to commence any action or
proceeding, xxx upon, or to collect, or to receive payment of the principal
or
interest of any claim or claims now or hereafter existing which such Creditor
may hold against any Borrower, and not to sell, assign, transfer, pledge,
hypothecate, or encumber such claim or claims except subject expressly to this
Agreement, and not to enforce or apply any security now or hereafter existing
therefor, nor to file or join in any petition to commence any proceeding under
the Bankruptcy Code, nor to take any lien or security on any of Borrower's
property, real or personal, so long as any claim of Senior Lenders against
any
Borrower shall exist. In addition, each Creditor agrees not to convert any
preferred stock or indebtedness of the Borrower held by it or otherwise receive
shares of Common Stock or any other property in satisfaction or partial
satisfaction of any claim against any Borrower so long as any claim of Senior
Lenders against any Borrower shall exist.
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3.
In
case
of any assignment for the benefit of creditors by any Borrower or in case any
proceedings under the Bankruptcy Code are instituted by or against any Borrower,
or in case of the appointment of any receiver for any Borrower's business or
assets, or in case of any dissolution or winding up of the affairs of any
Borrower: (a) Each Borrower and any assignee, trustee in Bankruptcy, receiver,
debtor in possession or other person or persons in charge are hereby directed
to
pay to Senior Lenders the full amount of Senior Lenders claims against any
Borrower (including interest to the date of payment) before making any payment
of principal or interest to Creditors, and insofar as may be necessary for
that
purpose, each Creditor hereby assigns and transfers to the Senior Lenders all
security or the proceeds thereof, and all rights to any payments, dividends
or
other distributions, and (b) each Creditor hereby irrevocably constitutes and
appoints each Senior Lender its true and lawful attorney to act in its name
and
stead: (i) to file the appropriate claim or claims on behalf of such Creditor
if
such Creditor does not do so prior to 30 days before the expiration of the
time
to file claims in such proceeding and if any Senior Lender elects at its sole
discretion to file such claim or claims and (ii) to accept or reject any plan
of
reorganization or arrangement on behalf of Creditors, and to otherwise vote
Creditors’ claim in respect of any indebtedness now or hereafter owing from any
Borrower to Creditors in any manner the Senior Lenders deem appropriate for
their respective own benefit and protection.
4.
Each
Senior Lender is hereby authorized by Creditors to: (a) renew, compromise,
extend, accelerate or otherwise change the time of payment, or any other terms,
of any existing or future claim of such Senior Lender against any Borrower,
(b)
increase or decrease the rate of interest payable thereon or any part thereof,
(c) exchange, enforce, waive or release any security therefor, (d) apply such
security and direct the order or manner of sale thereof in such manner as such
Senior Lender may at its discretion determine, (e) release any Borrower or
any
guarantor of any indebtedness of a Borrower from liability, and (f) make
optional future advances to any Borrower, all without notice to Creditors and
without affecting the subordination provided by this Agreement.
5.
On
request of any Senior Lender, a Creditor shall deliver to the Collateral Agent
(as defined in the Security Agreement) the original of any preferred stock,
promissory note or other evidence of any existing or future indebtedness of
any
Borrower to such Creditor, and xxxx same with a conspicuous legend which reads
substantially as follows:
“THIS
PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE INDEBTEDNESS OWING
FROM
THE MAKER TO THE SENIOR LENDERS AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN
ACCORDANCE WITH THAT CERTAIN SUBORDINATION AGREEMENT DATED _______, 2008 WITH
THE SENIOR LENDERS”
6.
In
the
event that any payment or any cash or noncash distribution is made to any
Creditor in violation of the terms of this Agreement, such Creditor shall
receive same in trust for the benefit of the Senior Lenders, and shall forthwith
remit it to the Collateral Agent (as defined in the Purchase Agreement) in
the
form in which it was received, together with such endorsements or documents
as
may be necessary to effectively negotiate or transfer same to the Senior
Lenders.
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7.
Until
all
such claims of Senior Lenders against the Borrowers, now or hereafter existing,
shall be paid in full, no gift or loan shall be made by any Borrower to any
Creditor.
8.
For
violation of this Agreement, each Creditor shall be liable for all loss and
damage sustained by reason of such breach, and upon any such violation each
Senior Lender may, at its option, accelerate the maturity of any of its existing
or future claims against any Borrower.
9.
This
Agreement shall be binding upon the heirs, successors and assigns of Creditors,
the Borrowers and the Senior Lenders. This Agreement and any existing or future
claim of a Senior Lender against a Borrower may be assigned by such Senior
Lender, in whole or in part, without notice to Creditors or such
Borrower.
10. Any
and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.
11. All
questions concerning the construction, validity, enforcement and interpretation
of this agreement shall be determined in accordance with the provisions of
the
Purchase Agreement.
12. This
agreement may be executed in counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party,
it
being understood that both parties need not sign the same counterpart.
13. This
agreement constitutes the entire agreement among the parties with respect to
the
matters covered hereby and thereby and supersede all previous written, oral
or
implied understandings among them with respect to such matters.
14. The
invalidity of any portion hereof shall not affect the validity, force or effect
of the remaining portions hereof. If it is ever held that any restriction
hereunder is too broad to permit enforcement of such restriction to its fullest
extent, such restriction shall be enforced to the maximum extent permitted
by
law.
15. Each
of
the parties hereto acknowledges that this agreement has been prepared jointly
by
the parties hereto, and shall not be strictly construed against either
party.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement
to
be duly executed by their respective authorized signatories as of the date
first
indicated above.
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Name
of Creditor
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By:
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Name and Title:
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Address for Notice:
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Acceptance
of Subordination Agreement by Borrower
The
undersigned being the Borrower named in the foregoing Subordination Agreement,
hereby accepts and consents thereto and agrees to be bound by all the provisions
thereof and to recognize all priorities and other rights granted thereby to
the
Senior Lenders, their respective successors and assigns, and to perform in
accordance therewith.
Dated:
July 8, 2008
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QPC
LASERS, INC.
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By:
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Name:
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Title:
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QUINTESSENCE
PHOTONICS CORPORATION
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By:
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Name:
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Title:
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