SUBORDINATION AGREEMENT
Exhibit
10.4
This
Subordination Agreement (the “Agreement”) dated Oct.
17,
2006,
is
between the undersigned (“Creditor”) and the Silicon Valley Bank
(“Bank”).
Recitals
A.
Zynex
Medical Holdings, Inc. (“Borrower”) has requested and/or obtained credit from
Bank which may be secured by Borrower’s property.
B.
Creditor has extended credit to Borrower and/or may later extend other credit
to
Borrower.
C.
To
induce Bank to consent to the receipt of Subordinated Debt, Creditor will
subordinate: (i) all of Borrower’s indebtedness and obligations to Creditor
existing now or later (the “Subordinated Debt”) to all of Borrower’s
indebtedness and obligation to Bank existing now or later including, without
limitation, collection costs thereof (including attorneys’ fees), and interest
accruing after any bankruptcy, reorganization or similar proceeding (the “Senior
Debt"); and (ii) all of the Creditor’s security interests in Borrower’s property
to all of Bank’s security interests in Borrower’s property.
THE
PARTIES AGREE AS FOLLOWS:
1.
Creditor subordinates to Bank any security interest or lien that it has in
any
property of Borrower. Despite attachment or perfection dates of Creditor’s
security interest and Bank’s security interest, bank’s security interest in
Borrower’s property to all of Bank’s security interests in Borrower’s property
is prior to Creditor’s security interest therein..
2.
All
Subordinated Debt payments are subordinated to all Senior Debt
payments.
3.
(i)
Except as set forth in Section 3(ii) below, Creditor will not:
|
(a)
|
demand
or receive from Borrower (and Borrower will not pay) any part of
the
Subordinated Debt, by payment, prepayment, or
otherwise;
|
|
(b)
|
exercise
any remedy against Borrower’s property,
or
|
|
(c)
|
accelerate
the Subordinated Debt, or begin to or participate in any action against
Borrower, until all the Senior debt is
paid.
|
(ii)
Notwithstanding anything to the contrary herein, Creditor, may receive regularly
scheduled payments of interest or principal pursuant to the terms of the note
between Creditor and Borrower that constitute Subordinated Debt, if an Event
of
Default (defined in that certain Loan and Security Agreement by and among
Borrower, Zynex Medical, Inc. and Bank dated September 29, 2005, as amended,
restated, or otherwise modified from time to time) has not occurred, is not
continuing and
would
not
exist immediately after payment. This does not prohibit Creditor from converting
any Subordinated Debt into equity securities of Borrower.
4.
Creditor must deliver to Bank in the form received (except for endorsement
or
assignment by Creditor) any payment, distribution, security or proceeds it
received on the Subordinated Debt other than according to this
Agreement.
5.
These
provisions remain in full force and effect, despite Borrower’s insolvency,
reorganization or any case or proceeding under any bankruptcy or insolvency
law,
and Bank’s claims against Borrower and Borrower’s estate will be fully paid
before any payment is made to Creditor.
6.
Until
the Senior Debt is paid and Bank has no further obligation to make any loans
or
other extensions of credit for Borrower’s benefit, Creditor irrevocably appoints
Bank as its attorney-in-fact, with power of attorney with power of substitution,
in Creditor’s name or in Bank’s name for Bank’s use and benefit without notice
to Creditor, to do the following in any bankruptcy, insolvency or similar
proceeding involving Borrower:
|
(a)
|
file
any claims for the Subordinated Debt for Creditor if Creditor does
not do
so at least 30 days before the time to file claims expires,
and
|
|
(b)
|
accept
or reject any plan of reorganization or arrangement for Creditor
and vote
Creditor’s claims in respect of the Subordinated Debt in any way it
chooses.
|
7.
Creditor will immediately put a legend on the Subordinated Debt instruments
that
the instruments are subject to this Agreement. No amendment of the Subordinated
Debt documents will modify this Agreement in any way that terminates or impairs
the subordination of the Subordinated Debt or the subordination of the security
interest or lien that Bank has in Borrower’s property. For example, instruments
may not be amended to: (a) increase the interest rate of the Subordinated Debt,
or (b) accelerate payment of primal or interest or any other portion of the
Subordinated Debt.
8.
This
Agreement shall remain effective until Borrower owes no amounts to Bank and
Bank
has no further obligation to make loans or other extensions of credit for
Borrower’s benefit. If, after full payment of the Senior Debt, Bank must
disgorge any payments make on the Senior Debt for any reason (including, without
limitation, the bankruptcy of Borrower), this Agreement and the relative rights
and priorities provided in it, will be reinstated as to all disgorged payments
as though the payments had not been made, and Creditor will immediately pay
Bank
all payments received under the Subordinated Debt to the extent the payments
would have been prohibited under this Agreement; proved, however, Creditor
will
not have any liability to Bank if Creditor is required to disgorge all payments
received from Borrower. At any time, without notice to Creditor, Bank may take
action it considers appropriate on the Senior Debt such as terminating advances,
increasing the principal, extending the time of payment, increasing interest
rates, revising or otherwise amending any documents affecting the Senior Debt
and any collateral securing the Senior Debt, and enforcing or failing to enforce
any rights against
-
2-
Borrower
or any other person. No action or inaction will impair or otherwise affect
Bank’s rights under this Agreement.
9.
All necessary action on the past of
the Creditor, its officers, directors, partners, members and shareholders,
as
applicable, necessary for the authorization of this Agreement and the
performance of all obligations of the Creditor hereunder has been taken.
Additionally, the execution, delivery and performance of and compliance with
this Agreement will not result in any material violation or default of any
term
of any of the Creditor’s charter, formation or other reorganization documents
(such as Articles or Certificate of Incorporation, bylaws, partnership
agreement, operating agreement, etc).
10.
This Agreement binds Creditor, its
successors, and benefits Bank’s successors or assigns. The Agreement is for
Creditor’s and Bank’s benefit and not for the benefit of Borrower or any other
party. If Borrower is refinancing any of the Senior Debt with a new lender,
upon
Bank’s request, Creditor will enter into a new subordination agreement with the
new lender on substantially the terms of this Agreement.
11.
Creditor waives the benefits, if
any, of any statutory or common law rule that may permit a subordinating
creditor to assert any defenses of a surety or guarantor, or that may give
the
subordinating creditor the right to require a senior creditor to marshal
assets,
and Creditor agrees that it shall not assert any such defenses or
rights.
12.
This Agreement may be executed in
two or more counterparts, each of which is an original and all of which together
constitute one instrument.
13.
Colorado law governs this Agreement
without giving effect to conflicts of laws and principles. Creditor and Bank
submit to the exclusive jurisdiction of the State and Federal courts in the
State of Colorado; provided, however, that if for any reason Bank can not
avail
itself of the courts of in the State of Colorado; Creditor submits to the
jurisdiction of the State and Federal courts in Santa Xxxxx County, California.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, CREDITOR AND BANK EACH
WAIVE
THEIR RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION IN CONNECTION
WITH
THIS AGREEMENT.
14.
This
Agreement represents the entire agreement about this subject matter, and
supersedes prior negotiations or agreements. Creditor is not relying on any
representations by Bank or Borrower in entering into this Agreement. Creditor
will keep itself informed of Borrower’s financial and other conditions. The
Agreement may be amended only be written instrument signed by Creditor and
Bank.
15.
If
there is an action to enforce the rights of a party under this Agreement, the
party prevailing will be entitled, in addition to other relief, all reasonable
cost and expenses, including reasonable attorneys’ fees, incurred in this
action.
[SIGNATURES
ON FOLLOWING PAGE]
-
3-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date set forth above.
|
Creditor:
|
Bank
|
|||
|
ASCENDIANT
CAPITAL GROUP, LLC
|
SILICON
VALLEY BANK
|
|||
|
By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
By:
|
/s/
Xxxxx Xxxxx
|
|
|
Name:
Xxxxxxx X. Xxxxxxx
|
Name:
Xxxxx Xxxxx
|
|||
|
Title:
Managing Director
|
Title:
Vice President
|
|||
|
The
Borrower approves the terms of this Agreement:
|
||||
|
Borrower:
|
||||
|
ZYNEX
MEDICAL HOLDINGS, INC.
|
||||
|
By:
|
/s/
Xxxxxx Xxxxxxxxx
|
|||
|
Name:
Xxxxxx Xxxxxxxxx
|
||||
|
Title:
President and CEO
|
||||
-
4-
