Prepared by XXXXXXX CORPORATION xxx.xxxxxxxxxxxxxx.xxx
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (this "Agreement"), dated as of February 18, 1998, between
BANKBOSTON, N.A., a national banking association having its head office at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, in its
capacity as agent (the "Agent") for the Banks (as hereinafter defined), XXXXXX XXXXXXX, an individual residing at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000 (the "Subordinating Creditor"), and FARGO ELECTRONICS, INC., a Minnesota corporation having its head office at 0000 Xxxxxx Xxxxx
Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxx 00000 (the "Borrower").
WHEREAS, pursuant to a Revolving Credit and Term Loan Agreement dated as of February 18, 1998 (as amended and in effect from
time to time, including any replacement agreement therefor, the "Credit Agreement"), among the financial institutions party thereto (the "Banks"), the Agent, Fargo Electronics Holdings, Inc.
("Holdings") and the Borrower, the Banks have agreed, upon the terms and subject to the conditions contained therein, to make loans and otherwise to extend credit to the Borrower; and
WHEREAS, the Subordinating Creditor has agreed to extend credit to the Borrower pursuant to a promissory note of the Borrower dated as
of the date hereof in the original principal amount of $10,000,000 (as amended with the consent of the Agent as provided herein and in effect from time to time, the "Subordinated Agreement"), between
the Subordinating Creditor and the Borrower; and
WHEREAS, it is a condition precedent to the Banks' willingness to make loans and otherwise to extend credit to the Borrower pursuant to
the Credit Agreement that the Borrower and the Subordinating Creditor enter into this Agreement with the Agent; and
WHEREAS, in order to induce the Banks to make loans and otherwise extend credit to the Borrower pursuant to the Credit Agreement, the
Borrower and the Subordinating Creditor have agreed to enter into this Agreement with the Agent;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. Terms not otherwise defined herein have the same respective meanings given to them in the Credit
Agreement. In addition, the following terms shall have the following meanings:
Senior Debt. All principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection
expenses and other reimbursement or indemnity obligations created or evidenced by the Credit Agreement or any of the other Loan Documents or any prior, concurrent, or subsequent notes, instruments or
agreements of indebtedness, liabilities or obligations of any type or form whatsoever relating thereto in favor of the Agent or any of the Banks. Senior Debt shall expressly include any and all
interest accruing or out of pocket costs or expenses incurred after the date of any filing by or against the Borrower of any petition under the federal Bankruptcy Code or any other bankruptcy,
insolvency or reorganization act regardless of whether the Agent's or any Bank's claim therefor is allowed or allowable in the case or proceeding relating thereto.
Subordinated Debt. All principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement and indemnity obligations created or evidenced by the Subordinated Agreement or any prior, concurrent or subsequent notes, instruments or agreements of
indebtedness, liabilities or obligations of any type or form whatsoever relating thereto in favor of the Subordinating Creditor; provided, however, in
no event will Subordinated
Debt include (a) the promissory note of the Borrower dated the date hereof in the original principal amount of $55,000,000 or (b) the promissory note of Holdings dated the date hereof in
the original principal amount of $32,000,000.
Subordinated Documents. Collectively, the Subordinated Agreement, any additional promissory notes executed in connection therewith and
any and all guaranties and security interests, mortgages and other liens directly or indirectly guarantying or securing any of the Subordinated Debt, and any and all
other documents or instruments evidencing or further guarantying or securing directly or indirectly any of the Subordinated Debt, whether now existing or hereafter created.
2. General. The Subordinated Debt and any and all Subordinated Documents shall be and hereby are subordinated and the
payment thereof is deferred until the full and final payment in cash of the Senior Debt, whether now or hereafter incurred or owed by the Borrower. Notwithstanding the immediately preceding sentence,
the Borrower shall be permitted to pay, and the Subordinating Creditor shall be permitted to receive, (a) any regularly scheduled payment of interest on the Subordinated Debt so long as at the
time of such payment, or after giving effect thereto, no Default or Event of Default has occurred and is continuing under the Credit Agreement or would occur after giving effect thereto; and
(b) so long as no Default or Event of Default has occurred and is continuing or would exist as a result thereof, the Net Cash Proceeds (as such term is defined in the Credit Agreement) from any
public or private offering of its capital stock in the amounts and to the extent such payments are permitted to be made pursuant to the Credit Agreement.
3. Enforcement. The Subordinating Creditor will not take or omit to take any action or assert any claim with respect to
the Subordinated Debt or otherwise which is inconsistent with the provisions of this Agreement. Without limiting the foregoing, the Subordinating Creditor will not assert, collect or enforce the
Subordinated Debt or any part thereof or take any action to foreclose or realize upon the Subordinated Debt or any part thereof or enforce any of the Subordinated Documents except (a) in each
such case as necessary, so long as no Default or Event of Default has occurred and is then continuing under the Credit Agreement or would occur after giving effect thereto, to collect any sums
expressly permitted to be paid by the Borrower pursuant to §2, or (b) to the extent (but only to such extent) that the commencement of a legal action may be required to toll the
running of any applicable statute of limitation. Until the Senior Debt has been finally paid in full in cash, the Subordinating Creditor shall not have any right of subrogation, reimbursement,
restitution, contribution or indemnity whatsoever from any assets of the Borrower or any guarantor of or provider of collateral security for the Senior Debt. The Subordinating Creditor further waives
any and all rights with respect to marshalling.
4. Payments Held in Trust. The Subordinating Creditor will hold in trust and immediately pay over to the Agent for the
account of the Banks and the Agent, in the same form of payment received, with appropriate endorsements, for application to the Senior Debt any cash amount that the Borrower pays to the Subordinating
Creditor with respect to the Subordinated Debt, or as collateral for the Senior Debt any other assets of the Borrower that the Subordinating Creditor may receive with respect to the Subordinated Debt,
in each case except with respect to payments expressly permitted pursuant to §2.
5. Defense to Enforcement. If the Subordinating Creditor, in contravention of the terms of this Agreement, shall
commence, prosecute or participate in any suit, action or proceeding against the Borrower, then the Borrower may interpose as a defense or plea the making of this Agreement, and the Agent or any Bank
may intervene and interpose such defense or plea in its name or in the name of the Borrower. If the Subordinating Creditor, in contravention of the terms of this Agreement, shall attempt to collect
any of the Subordinated Debt or enforce any of the Subordinated Documents, then
the Agent, any Bank or the Borrower may, by virtue of this Agreement, restrain the enforcement thereof in the name of the Agent or such Bank or in the name of the Borrower. If the Subordinating
Creditor, in contravention of the terms of this Agreement, obtains any cash or other assets of the Borrower as a result of any administrative, legal or equitable actions, or otherwise, the
Subordinating Creditor agrees forthwith to pay, deliver and assign to the Agent, for the account of the Banks and the Agent, with appropriate endorsements, any such cash for application to the Senior
Debt and any such other assets as collateral for the Senior Debt.
6. Bankruptcy, etc.
6.1.Payments relating to Subordinated Debt. At any meeting of creditors of the Borrower or in the event of any case or proceeding,
voluntary or involuntary, for the distribution, division or application of all or part of the assets of the Borrower or the proceeds thereof, whether such case or proceeding be for the liquidation,
dissolution or winding up of the Borrower or its business, a receivership, insolvency or bankruptcy case or proceeding, an assignment for the benefit of creditors or a proceeding by or against the
Borrower for relief under the federal Bankruptcy Code or any other bankruptcy, reorganization or insolvency law or any other law relating to the relief of debtors, readjustment of indebtedness,
reorganization, arrangement, composition or extension or marshalling of assets or otherwise, the Agent is hereby irrevocably authorized at any such meeting or in any such proceeding to receive or
collect for the benefit of the Banks and the Agent any cash or other assets of the Borrower distributed, divided or applied by way of dividend or payment, or any securities issued on account of any
Subordinated Debt, and apply such cash to or to hold such other assets or securities as collateral for the Senior Debt, and to apply to the Senior Debt any cash proceeds of any realization upon such
other assets or securities that the Agent in its discretion elects to effect, until all of the Senior Debt shall have been paid in full in cash, rendering to the Subordinating Creditor any surplus to
which the Subordinating Creditor is then entitled.
6.2.Securities by Plan of Reorganization or Readjustment. Notwithstanding the foregoing provisions of §6.1, the
Subordinating Creditor shall be entitled to receive and retain any securities of the Borrower or any other corporation or other entity provided for by a plan of reorganization or readjustment
(a) the payment of which securities is subordinate, at least to the extent provided in this Agreement with respect to Subordinated Debt, to the payment of all Senior Debt under any such plan of
reorganization or readjustment and (b) all other terms of which are acceptable to the Banks and the Agent.
6.3.Subordinated Debt Voting Rights. At any such meeting of creditors or in the event of any such case or proceeding, the Subordinating
Creditor shall retain the right to vote and otherwise act with respect to the Subordinated Debt (including, without limitation, the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension), provided that the Subordinating Creditor shall not vote with respect to any such
plan or take any other action in any way so as to contest (a) the validity of any Senior Debt or any collateral therefor or guaranties thereof, (b) the relative rights and duties of any
holders of any Senior Debt established in any instruments or agreements creating or evidencing any of the Senior Debt with respect to any of such collateral or guaranties or (c) the
Subordinating Creditor's obligations and agreements set forth in this Agreement.
7. General. The Senior Debt, the Credit Agreement and the other Loan Documents and any and all other documents and
instruments evidencing or creating the Senior Debt shall be senior to the Subordinated Debt and all of the Subordinated Documents irrespective of the time of the execution, delivery or issuance of any
thereof.
7.1.Release of Guaranties. Without limiting any of the rights of the Agent or any Bank under the Credit Agreement, the other Loan
Documents or applicable law, in the event that the Agent releases or discharges any guaranties of the Senior Debt given by guarantors which have also guarantied the Subordinated Debt, such guarantors
shall thereupon be deemed to have been released from all such guaranties in favor of the Subordinating Creditor. The Subordinating Creditor agrees that, within ten (10) days following the
Agent's written request therefor, the Subordinating Creditor will execute, deliver and file any and all such termination statements and other agreements and instruments as the Agent reasonably deems
necessary or
appropriate in order to give effect to the preceding sentence. The Subordinating Creditor hereby irrevocably appoints the Agent, and its successors and assigns, and their respective officers, with
full power of substitution, the true and lawful attorney(s) of the Subordinating Creditor for the purpose of effecting any such executions, deliveries and filings if and to the extent that the
Subordinating Creditor shall have failed to perform such obligations pursuant to the foregoing provisions of this §7 within such ten (10) day period.
8. Banks' Freedom of Dealing. The Subordinating Creditor agrees, with respect to the Senior Debt and any and all
collateral therefor or guaranties thereof, that the Borrower and the Banks may agree to (a) increase the amount of the Senior Debt, provided that for purposes of this Agreement, that portion of
Senior Debt which is entitled to the subordination provisions contained herein shall be limited to the sum of (i) all Obligations under the Credit Agreement and the other Loan Documents
provided that the aggregate principal amount thereof does not exceed $62,500,000 at any one time outstanding less the amount of any mandatory principal payments made under the Credit Agreement that
has permanently reduced the borrowing capacity of the Borrower thereunder plus (ii) additional Indebtedness owing to the Banks and the Agent
under the Credit Agreement in an aggregate principal amount that does not in the aggregate exceed $5,000,000 plus any interest, expenses and other amounts due thereon; or (b) otherwise modify
the terms of any of the Senior Debt, and the Banks may grant extensions of the time of payment or performance to and make compromises, including releases of collateral or guaranties, and settlements
with the Borrower and all other persons, in each case without the consent of the Subordinating Creditor or the Borrower and without affecting the agreements of the Subordinating Creditor or the
Borrower contained in this Agreement; provided, however, that nothing contained in this §8 shall constitute a waiver of the right of the
Borrower itself to agree or consent to a settlement or compromise of a claim which the Agent or any Bank may have against the Borrower.
9. Modification or Sale of the Subordinated Debt. The Subordinating Creditor will not, at any time while this Agreement
is in effect, modify any of the terms of any of the Subordinated Debt or any of the Subordinated Documents or cancel, forgive or convert into equity any of the Subordinated Debt, except as expressly
permitted by the Credit Agreement; nor will the Subordinating Creditor sell, transfer, pledge, assign, hypothecate or otherwise dispose of any or all of the Subordinated Debt to any person other than
a person who agrees in a writing, satisfactory in form and substance to the Agent, to become a party hereto and to succeed to the rights and to bound by all of the obligations of the Subordinating
Creditor hereunder. In the case of any such disposition by the Subordinating Creditor, the Subordinating Creditor will notify the Agent at least ten (10) days prior to the date of any of such
intended disposition.
10. Borrower's Obligations Absolute. Nothing contained in this Agreement shall impair, as between the Borrower and the
Subordinating Creditor, the obligation of the Borrower to pay to the Subordinating Creditor all amounts payable in respect of the Subordinated Debt as and when the same shall become due and payable in
accordance with the terms thereof, or prevent the Subordinating Creditor (except as expressly otherwise provided in §3 or §6) from exercising all rights, powers and remedies
otherwise permitted by Subordinated Documents and by applicable law upon a default in the payment of the
Subordinated Debt or under any Subordinated Document, all, however, subject to the rights of the Agent and the Banks as set forth in this Agreement.
11. Termination of Subordination. This Agreement shall continue in full force and effect, and the obligations and
agreements of the Subordinating Creditor and the Borrower hereunder shall continue to be fully operative, until all of the Senior Debt shall have been paid and satisfied in full in cash and such full
payment and satisfaction shall be final and not avoidable. To the extent that the Borrower or any guarantor of or provider of collateral for the Senior Debt makes any payment on the Senior Debt that
is subsequently invalidated, declared to be fraudulent or preferential or set aside or is required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such payment being hereinafter referred to as
a "Voided Payment"), then to the extent of such Voided Payment, that portion of the Senior Debt that had been previously satisfied by such Voided Payment shall be revived and continue in full force
and effect as if such Voided Payment had never been made. In the event that a Voided Payment is recovered from the Agent or any Bank, an Event of Default shall be deemed to have existed and to be
continuing under the Credit Agreement from the date of the Agent's or such Bank's initial receipt of such Voided Payment until the full amount of such Voided Payment is restored to the Agent or such
Bank. During any continuance of any such Event of Default, this Agreement shall be in full force and effect with respect to the Subordinated Debt. To the extent that the Subordinating Creditor has
received any payments with respect to the Subordinated Debt subsequent to the date of the Agent's or any Bank's initial receipt of such Voided Payment and such payments have not been invalidated,
declared to be fraudulent or preferential or set aside or are required to be repaid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable
cause, the Subordinating Creditor shall be obligated and hereby agrees that any such payment so made or received shall be deemed to have been received in trust for the benefit of the Agent or such
Bank, and the Subordinating Creditor hereby agrees to pay to the Agent for the benefit of the Agent or (as the case may be) such Bank, upon demand, the full amount so received by the Subordinating
Creditor during such period of time to the extent necessary fully to restore to the Agent or such Bank the amount of such Voided Payment. Upon the payment and satisfaction in full in cash of all of
the Senior Debt, which payment shall be final and not avoidable, this Agreement will automatically terminate without any additional action by any party hereto.
12. Notices. All notices and other communications which are required and may be given pursuant to the terms of this
Agreement shall be in writing and shall be sufficient and effective in all respects if given in writing or telecopied, delivered or mailed by registered or certified mail, postage prepaid, as follows:
| If to the Agent:
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| BankBoston, N.A., as Agent
000 Xxxxxxx Xxxxxx
High Technology Division
Xxxxxx, Xxxxxxxxxxxxx 00000
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Attention:
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Xxxx X. Xxxxxxxxxx, Director
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with a copy to:
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Xxxxxx Xxxxxxxxx Barish, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
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If to the Subordinating Creditor:
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0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
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Attention:
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Mr. Xxxxxx Xxxxxxx
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If to the Borrower:
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Fargo Electronics, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
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Attention:
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President
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or
such other address or addresses as any party hereto shall have designated by written notice to the other parties hereto. Notices shall be deemed given and effective upon the
earlier to occur of (a) the third day following deposit thereof in the U.S. mail or (b) receipt by the party to whom such notice is directed.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL BE A SEALED INSTRUMENT UNDER SUCH LAWS.
14. Waiver of Jury Trial. EACH OF THE SUBORDINATING CREDITOR AND THE BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBORDINATING
CREDITOR AND THE BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE SUBORDINATING CREDITOR AND THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR
ANY BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
15. Miscellaneous. This Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against which enforcement is sought. The Agent, acting upon the instructions of the requisite Banks, may, in their sole and absolute discretion, waive any
provisions of this Agreement benefiting the Agent and the Banks; provided, however, that such waiver shall be effective only if in writing and signed by
the Agent and shall be limited to the specific provision or provisions expressly so waived. This Agreement shall be binding upon the successors and assigns of the Subordinating Creditor and the
Borrower and shall inure to the benefit of the Agent and the Banks, the Agent's and the Banks' respective successors and assigns, any lender or lenders refunding or refinancing any of the Senior Debt
and their respective successors and assigns, but shall not otherwise create any rights or benefits for any third party. In the event that any lender or lenders refund or refinance any of the Senior
Debt, the terms "Credit Agreement", "Loan Documents", "Event of Default" and the like shall refer mutatis mutandis to the agreements and instruments in
favor of such lender or lenders and to the related definitions contained therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| BANK:
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| BANKBOSTON, N.A., As Agent
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By:
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/s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx, Vice President
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SUBORDINATING CREDITOR:
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By:
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/s/ XXXXXX XXXXXXX
Xxxxxx Xxxxxxx, individually
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BORROWER:
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| FARGO ELECTRONICS, INC.
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| By:
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/s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Title: President
COMMONWEALTH OF MASSACHUSETTS
Suffolk
County, ss
February ,
1998
Then
personally appeared the above-named Xxxxxx Xxxxxxx and acknowledged the foregoing instrument to be his free act and deed,
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Before me,
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Notary Public
My Commission expires:
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