SUBORDINATION AGREEMENT
Exhibit
10.5
This
Subordination Agreement (this “Agreement”), is entered into
by and among Marquette Business
Credit, Inc., d/b/a Marquette Healthcare Finance (“Marquette”), Xxxxxx Xxxxxxxxx,
(“Junior Creditor”), and
Zynex, Inc., and Zynex Medical Inc., f/d/b/a Stroke Recovery Systems
(collectively, “Borrower).
Recitals
A. Borrower
has or is about to enter into a Loan and Security Agreement with Marquette that
may be amended, supplemented, and/or replaced from time to time (“Loan and Security Agreement”),
providing for a loan or loans by Marquette to Borrower, the repayment of which
is or shall be secured by certain assets or property of Borrower, as set forth
in the Loan and Security Agreement.
B. Junior
Creditor has extended loans or other credit accommodations to Borrower, as
described on Exhibit
A:
C. It is a
condition precedent to the agreement of Marquette to enter into the Loan and
Security Agreement and make advances to the Borrower thereunder that Junior
Creditor execute and deliver this Subordination Agreement in favor of
Marquette.
NOW,
THEREFORE, as a material inducement to Marquette to enter into and make advances
to Borrower under the Loan and Security Agreement, Borrower, Marquette, and
Junior Creditor agree as follows:
1. The term
“Subordinated Debt”
means all indebtedness, liabilities, and obligations of Borrower to Junior
Creditor, whether direct, indirect, contingent, joint, several, or independent,
now or hereafter existing, due or to become due to, or held or to be held by,
Junior Creditor, whether created directly or acquired by assignment or
otherwise, whether or not evidenced by written instrument, including, without
limitation, all principal, interest, fees, expenses, and costs of collecting
such indebtedness and obligations, including without limitation all attorneys’
fees and all interest accruing after the commencement by or against Borrower of
any bankruptcy, reorganization, or similar proceeding, but excepting all wages,
benefits and other compensation due Junior Creditor in the ordinary course of
his employment with Borrower.
2. The term
“Senior Debt” means all
indebtedness, liabilities, and obligations of Borrower to Marquette, whether
direct, indirect, contingent, joint, several, or independent, now or hereafter
existing, due or to become due to, or held or to be held by, Marquette, whether
created directly or acquired by assignment or otherwise, whether or not
evidenced by written instrument, including, without limitation, all principal,
interest, fees, expenses, and costs of collecting such indebtedness and
obligations, including without limitation all attorneys’ fees and all interest
accruing after the commencement by or against Borrower of any bankruptcy,
reorganization, or similar proceeding. The term “Loan Documents” means any
documents now or hereafter existing executed and delivered in connection with
any of the Senior Debt.
Exhibit
10.5 - Page 1 of 8
3. All
Subordinated Debt is subordinated in the right of payment to Marquette of all
Senior Debt; provided, however, that Borrower may make Permitted Note Payments
(as defined herein) pursuant to Section 5
below.
4. Junior
Creditor subordinates to Marquette any security interest or lien that Junior
Creditor may have in all assets of Borrower. Notwithstanding the
respective dates of attachment or perfection of the security interest of a
Junior Creditor and the security interest of Marquette, the security interest of
Marquette in any assets of Borrower or other collateral securing the Senior Debt
shall at all times be prior to any security interest of Junior
Creditor.
5. Junior
Creditor will not demand or receive from Borrower (and Borrower will not pay to
Junior Creditor) any payment with respect to all or any part of the Subordinated
Debt, by way of payment, prepayment, setoff, lawsuit, or otherwise, provided, however, that as
long as there is no “default” or “event of default,” as those terms are defined
under any of the Loan Documents related to the Senior Debt, Junior Creditor may
receive regularly scheduled payments of principal and interest in accordance
with the terms of the promissory notes described above, including demand payments on the demand
promissory note (the “Permitted Note Payments”). Junior
Creditor shall not exercise any remedy with respect to collateral, nor will
Junior Creditor commence, or cause to commence, prosecute, or participate in any
administrative, legal or equitable action against Borrower or any of its assets
for repayment of the Subordinated Debt, for so long as any portion of Senior
Debt remains outstanding.
6. Junior
Creditor shall hold in trust for Marquette and promptly pay or deliver to
Marquette in the form received (except for endorsement or assignment by Junior
Creditor where required by Marquette) for application to Senior Debt, any
payments, property, security, proceeds or realization on collateral received by
Junior Creditor other than in accordance with this Agreement.
7. In the
event of Borrower’s insolvency, reorganization, or any case or proceeding under
any bankruptcy or insolvency law or laws relating to the relief of debtors, this
Agreement shall remain in full force and effect, and all Senior Debt and all of
Marquette’s claims against Borrower or the estate of Borrower shall be paid in
full before any payment is made to Junior Creditor.
8. For so
long as any of the Senior Debt remains unpaid, Junior Creditor irrevocably
appoints Marquette as Junior Creditor’s attorney-in-fact, and grants to
Marquette a power of attorney with full power of substitution, in the name of
Junior Creditor or in the name of Marquette, for the use and benefit of
Marquette, without notice to Junior Creditor, to perform at Marquette’s option
the following acts in any bankruptcy, insolvency, or similar proceeding
involving Borrower:
(a) To file
the appropriate claim or claims in respect of the Subordinated Debt on behalf of
Junior Creditor if Junior Creditor does not do so prior to 30 days before the
expiration of the time to file claims in such proceeding and if Marquette
elects, in its sole discretion, to file such claim or claims; and
Exhibit
10.5 - Page 2 of 8
(b) To accept
or reject any plan of reorganization or arrangement on behalf of Junior Creditor
and to otherwise vote Junior Creditor’s claims in respect of any Subordinated
Debt in any manner that Marquette deems appropriate for the enforcement of its
rights under this Agreement.
9. This
Agreement shall remain effective for so long as Marquette has any obligation to
make advances to Borrower or any Senior Debt is due Marquette pursuant to the
Loan Documents. If, at any time after payment in full of the Senior
Debt, Marquette must disgorge any payment by Borrower for any reason (including,
without limitation, the bankruptcy of Borrower), this Agreement and the relative
rights and priorities set forth herein shall be reinstated as to all such
disgorged payments as though such payments had not been made. Junior
Creditor shall immediately pay over to Marquette all payments received with
respect to the Subordinated Debt to the extent that such payments would have
been prohibited under this Agreement.
10. At any
time and from time to time, without notice to Junior Creditor, Marquette may
take such actions with respect to the Senior Debt as Marquette in its sole
discretion may deem appropriate, including, without limitation: terminating
advances to Borrower; increasing the principal amount; extending the time of
payment; increasing applicable interest rates; renewing, compromising, or
otherwise amending the terms of the Loan Documents; selling, exchanging
releasing, or otherwise dealing with any collateral securing the Senior Debt;
releasing anyone liable in any manner for the payment or collection of the
Senior Debt; and enforcing or failing to enforce any rights against Borrower or
any other person.
11. Marquette
shall have no liability to Junior Creditor with respect to, and Junior Creditor
waives any claim or defense which Junior Creditor may now or hereafter have
against Marquette in law or under equitable principles arising from (i) any
and all actions which Marquette takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
liens in any collateral securing any of the Senior Debt, actions with respect to
the occurrence of any default under any Senior Debt, actions with respect to the
foreclosure upon, sale, release of, depreciation of or failure to realize upon
any of such collateral, and actions with respect to the collection of any claim
for all or any part of the Senior Debt from any account debtor, guarantor or any
other person or entity) with respect to the Senior Debt or the valuation, use,
protection or release of any collateral now or hereafter securing same;
(ii) any right, now or hereafter existing, to require Marquette to proceed
against or exhaust any collateral at any time securing the Senior Debt or to
marshal any assets in favor of Junior Creditor; (iii) any notice of the
incurrence or increase of Senior Debt, it being understood that Marquette may
make advances now or hereafter relating to the Senior Debt, without notice to or
the authorization of Junior Creditor; (iv) any defense based upon or
arising by reason of (a) any disability or other defense of Borrower or any
other person or entity or (b) any lack of authority of any agent or any
other person or entity acting or purporting to act on behalf of Borrower or
Junior Creditor or (c) any failure by Marquette to properly perfect any
lien in any asset of Borrower; (v) Marquette’s election, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
§101 et seq.) (the “Bankruptcy Code”), of the
application of Section 1111(b)(2) of the Bankruptcy Code; and/or (vi) any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code.
Exhibit
10.5 - Page 3 of 8
12. Marquette
shall have no obligation to give notice to Junior Creditor, and Junior Creditor
hereby waives any right to any advance or extension of time given to Borrower,
of any amendment, modification, or restatement of any of the Loan Documents, or
of any default of Borrower to Marquette. No extension of time given
to Borrower, or failure of Marquette to pursue Borrower or any collateral, or to
resort to any security or remedies that may be available, or release of any
security for the Senior Debt, or any act or omission other than a release in
writing, shall impair or constitute a waiver of Marquette’s rights under this
Agreement. Junior Creditor shall not challenge, object to, or in any
respect inhibit or otherwise interfere with Marquette’s enforcement of any of
its rights and remedies in respect of the Senior Debt or this
Agreement.
13. Nothing
herein shall be construed as an undertaking on the part of Marquette to make any
loan to Borrower.
14. This
Agreement shall be enforced and construed in accordance with the laws of the
State of Oregon other than its conflicts of laws principles. Any
legal proceeding arising out of or in any way related to this Agreement may be
brought and litigated in any one of the state or federal courts located in
Multnomah County, Oregon, having jurisdiction. The parties hereto waive and
agree not to assert, by way of motion, as a defense or otherwise, that any such
proceeding is brought in an inconvenient forum or that the venue thereof is
improper.
15. The
parties expressly waive any right to a trial by jury on any claim or cause of
action arising out of or related in any way to this Agreement.
16. This
Agreement shall not be discharged or in any way affected by the death of Junior
Creditor. This Agreement may be assigned by Marquette in connection
with any assignment or transfer of the Senior Debt, or any part thereof and all
references herein to Marquette shall include any subsequent owner and/or holder
of the Loan Documents or any interest therein. This Agreement shall
be binding on and inure to the benefit of Borrower, Junior Creditor, and
Marquette, and their respective successors and assigns, provided, that Borrower may
not delegate or assign any of its duties or obligations in respect of the Senior
Debt without the prior, written consent of Marquette.
17. Junior
Creditor will advise each future holder of all or any part of the Subordinated
Debt that the Subordinated Debt is subordinated to the Senior Debt in the manner
and to the extent set forth in this Agreement, and will place a legend on each
document and instrument evidencing or related to the Subordinated Debt
indicating that such instrument or document is subject to this
Agreement.
18. No
provision of this Agreement shall be modified or waived except by a written
agreement signed by Junior Creditor, Borrower, and Marquette.
Exhibit
10.5 - Page 4 of 8
19. In case
any one or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
20. In the
event of any legal action to enforce the rights of a party under this Agreement,
the party prevailing in such action shall be entitled, in addition to such other
relief as may be granted, all reasonable costs and expenses, including
reasonable attorneys’ fees, incurred in such action.
21. All
notices, demands, instructions, and other communications required or permitted
to be given to or made upon any party hereto shall be in writing and shall be
personally delivered or sent by certified mail, postage prepaid, return receipt
requested, or by prepaid overnight private courier service (such as Federal
Express) or by facsimile transmission (with confirmation received), and shall be
deemed to be given on the day on which such writing is received by the intended
recipient thereof. Unless otherwise directed in writing, notices,
demands, instructions and other communications in writing shall be given to or
made upon the parties at the addresses set forth below:
|
If to
Marquette:
|
Marquette
Business Credit, Inc.
000
XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx,
Xxxxxx 00000
Attention: Xxxxxxxx
Xxxxxxxxxx
Facsimile
No.: (000) 000-0000
E-mail:
Xxxxxxxx.Xxxxxxxxxx@xxxxxxxxx.xxx
|
|
If to
Borrower:
|
Zynex,
Inc.
Zynex
Medical, Inc.
0000
Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxxxx
Facsimile:
(000) 000-0000
E-mail:
xxxxxxxxxx@xxxxxxxx.xxx
|
|
If to
Junior Creditor:
|
Xxxxxx
Xxxxxxxxx
0000
Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
E-mail:
xxxxxxxxxx@xxxxxxxx.xxx
|
Exhibit
10.5 - Page 5 of 8
Any such
notice or demand shall be deemed to have been duly given or made and to have
become effective (i) if delivered by hand, overnight courier, or facsimile
to a responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile, or
(ii) if sent by registered or certified first-class mail, postage prepaid,
on the third business day following the mailing thereof. Electronic
mail addresses are provided herein as a convenience to the parties
only. No notices or demands hereunder shall be effective unless
delivered in a manner contemplated by the foregoing clauses (i) and
(ii).
22. This
Agreement may be executed in multiple counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all
parties, their successors and assigns, and all of which taken together shall
constitute one and the same agreement.
[Signature
Page Follows]
Exhibit
10.5 - Page 6 of 8
Dated
effective: September 22, 2008
|
Junior
Creditor
/s/
Xxxxxx Xxxxxxxxx
Name:
Xxxxxx Xxxxxxxxx
|
Zynex,
Inc.
By: /s/ Xxxxxx
Xxxxxxxxx
Name: Xxxxxx
Xxxxxxxxx
Title: Chief
Executive Officer and President
|
|
ZYNEX,
MEDICAL INC., f/d/b/a
Stroke
Recovery Systems
By:
/s/ Xxxxxx
Xxxxxxxxx
Name: Xxxxxx
Xxxxxxxxx
Title: President
|
Marquette
Business Credit, Inc.,
d/b/a
Marquette Healthcare Finance
By:
/s/
Xxxxxxxx Xxxxxxxxxx
Name: Xxxxxxxx
Xxxxxxxxxx
Title: Senior
Vice President
|
Exhibit
10.5 - Page 7 of 8
EXHIBIT
A
To
Dated
September
22, 2008
1. 8.25%
Term Loan, made in 2006, outstanding as of June 30, 2008 in the aggregate amount
of $3,636.
2. 8.25%
Demand Note, made in 2006, outstanding as of June 30, 2008 in the aggregate
amount of $1,089.
3. 8.25%
Term Loan, dated May 15, 2007, outstanding as of June 30, 2008 in the aggregate
amount of $26,302.
4. 8.25%
Term Loan, dated June 15, 2007, outstanding as of June 30, 2008 in the aggregate
amount of $15,519.
5. 8.25%
Term Loan, dated September 29 2007, outstanding as of June 30, 2008 in the
aggregate amount of $63,284.
Exhibit 10.5 - Page 8 of 8
