INTERCREDITOR AGREEMENT
THIS
INTERCREDITOR AGREEMENT
(this
“Agreement”),
dated
as of September 28, 2007, (the “Effective
Date”),
by
and between Hercules
Technology Growth Capital, Inc. (“Senior
Creditor”)
and
each of Iroquois
Capital LP, Cranshire Capital, L.P., Portside Growth and Opportunity Fund and
▇▇▇▇▇▇▇▇ Investment Master Fund Ltd.
(together, the “Subordinated
Creditor”).
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in Section 1 below.
RECITALS
A. Senior
Creditor and each of Diomed Holdings, Inc. and Diomed, Inc., each a Delaware
corporation (together, the “Borrower”),
have
entered into that certain Loan and Security Agreement dated as of September
28,
2007 (as the same may be amended, restated, or otherwise modified from time
to
time, the “Senior
Creditor Agreement”).
The
funds advanced to or owed by Borrower under the Senior Creditor Agreement shall
be referred to collectively herein as the “Senior
Loans.”
To
secure the Senior Loans, Borrower granted to Senior Creditor under the Senior
Creditor Agreement a security interest in all of Borrower’s personal property
assets. The making of the Senior Loans and the granting of the security interest
in all of Borrower’s personal property assets are hereinafter referred to as the
“Senior
Transactions”.
B. Prior
to
the date hereof, Diomed Holdings, Inc. issued one or more Variable Rate
Convertible Debentures (the “Existing
Debenture”)
to the
Subordinated Creditor.
C. The
Existing Debenture prohibits the consummation of the Senior Transactions.
D. The
Subordinated Creditor is willing to permit the Borrower to enter into the Senior
Transactions, subject to, among other things, the execution and delivery of
an
amendment to the Variable Rate Convertible Debenture, pursuant to which, among
other things, the Subordinated Creditor shall receive a security interest in
substantially all of the Borrower’s personal property assets.
E. Subordinated
Creditor and Senior Creditor desire to establish and agree upon their respective
rights, priorities and interests governing their respective relationships with
Borrower and any collateral for the loans granted pursuant to the Subordinated
Loan Documents and the Senior Loan Documents at all times on and after the
Effective Date.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing, Senior Creditor and Subordinated
Creditor hereby agree as follows:
| 1. |
DEFINITIONS;
EFFECTIVENESS
|
As
used
herein, the following terms shall have the following meanings:
“Availability
Period”
has
the
meaning set forth in the Senior Creditor Agreement.
“Insolvency
Proceeding”
is
any
proceeding by or against any Person under the United States Bankruptcy Code,
or
any other bankruptcy or insolvency law, including assignments for the benefit
of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
“Lien”
means
any mortgage, deed of trust, pledge, hypothecation, assignment for security,
security interest, encumbrance, lien or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, against any property,
any
conditional sale or other title retention agreement, and any lease in the nature
of a security interest, and the filing of any financing statement (other than
a
precautionary financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of any
jurisdiction.
“Lien
Enforcement Action”
means
(a) any action by Senior Creditor to foreclose on the Lien of such Person in
any
Collateral, (b) any action by Senior Creditor to take possession of, sell or
otherwise realize (judicially or non-judicially) upon any Collateral (including,
without limitation, by setoff or notification of account debtors), and/or (c)
the commencement by Senior Creditor of any legal proceedings against the
Borrower or with respect to any Collateral to facilitate the actions described
in (a) or (b) above.
“Permitted
Subordinated Debt Payments”
means
payments of interest on the Subordinated Debt due and payable in accordance
with
the terms of the Subordinated Loan Documents as in effect on the date hereof
or
as modified in accordance with the terms of this Agreement (for the avoidance
of
doubt, the Subordinated Creditor may receive payment of or reimbursement for
reasonable fees and expenses of counsel to the Subordinated Creditor incurred
in
connection with the negotiation, documentation and closing of the transactions
contemplated hereby).
“Person”
means
any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.
“Remedies
Notice”
has
the
meaning set forth in Section 9(b).
“Reorganization
Securities”
means
(a) any common equity securities and any other equity securities that do
not
contain a mandatory redemption provision, put right or any other such similar
right or require dividends (other than dividends paid in kind) to be paid
on a
date prior to the date that all Senior Debt is due or paid in full in cash
and
(b) any securities of the Borrower that are distributed to any Subordinated
Creditor in respect of the Subordinated Debt and that (i) are subordinated
in
right of payment to the Senior Debt (or any debt or equity securities issued
in
substitution of all or any portion of the Senior Debt) to at least the same
extent as the Subordinated Debt is subordinated to the Senior Debt hereunder
and
(ii) do not have any terms, and are not subject to or entitled to the benefit
of
any agreement or instrument that has terms, that are more advantageous to
the
Subordinated Creditors or that are more burdensome to the issuer of or other
obligor on such debt or equity securities than are, in either case, the terms
of
the Senior Debt (or any debt or equity securities issued in substitution
for all
or any portion of the Senior Debt). Additionally, “Reorganization Subordinated
Securities”, shall include (A) any equity securities and/or debt securities
which are distributed pursuant to a plan of reorganization accepted by the
class
of Senior Debt so long as such equity or debt securities are distributed
both on
account of the Senior Debt and the Subordinated Debt and so long as such
equity
or debt securities are subject to the provisions of this Agreement and the
terms
of this Agreement will apply with like effect to such securities, and (B)
any
equity securities and/or debt securities deemed in writing by Senior Creditor
to
constitute Reorganization Securities.
2
“Senior
Creditor Warrants”
means
any and all warrants issued by a Borrower to the Senior Creditor.
“Senior
Debt”
means
any and all indebtedness and obligations (including, without limitation,
principal, premium (if any), interest, fees, charges, expenses, costs,
professional fees and expenses, and reimbursement and indemnity obligations)
at
any time or from time to time owing from Borrower to Senior Creditor under
the
Senior Loan Documents or otherwise, including but not limited to such amounts
as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership, or reorganization
case by or against Borrower; provided,
however,
the
aggregate outstanding principal amount of Loans constituting Senior Debt shall
not exceed at any one time outstanding, (a) the greater of (i) $6,600,000 and
(ii) the sum of (A) $6,600,000 and (B) 110% of the Term Loan Advances (not
to
exceed $4,400,000) made during the Availability Period) minus
(b)
the
amount of all payments and prepayments of principal made with respect to such
Loans.
“Senior
Default Notice”
means
a
written notice from Senior Creditor to Subordinated Creditor that a Senior
Payment Default has occurred.
“Senior
Loan Documents”
means
the Senior Creditor Agreement and any security agreement, pledge agreement,
promissory note, UCC financing statement, account control agreement or any
other
agreement, instrument or document, excluding the Senior Creditor Warrants,
executed by Borrower pursuant to or in connection with the Senior Debt or the
Senior Creditor Agreement including, for the avoidance of doubt, any Loan
Document (as defined in the Senior Creditor Agreement), as any of the foregoing
may from time to time be amended, modified, supplemented, extended, renewed,
restated or replaced.
“Senior
Payment Default”
means
an Event of Default exists by reason of either (i) Borrower’s failure to pay a
monetary obligation constituting Senior Debt (including by virtue of
acceleration or otherwise), or (ii) the commencement of any Insolvency
Proceeding by or against Borrower has occurred and is continuing under the
Senior Credit Agreement.
“Standstill
Period”
has
the
meaning set forth in Section 2.
“Subordinated
Creditor Warrants”
means
any and all warrants issued by a Borrower to a Subordinated
Creditor.
“Subordinated
Debt”
means
any and all indebtedness and obligations (including, without limitation,
principal, premium (if any), interest, fees, charges, expenses, costs,
professional fees and expenses, and reimbursement obligations) at any time
or
from time to time owing from Borrower to Subordinated Creditor (or the
affiliates or subsidiaries of Subordinated Creditor) under the Subordinated
Loan
Documents, including but not limited to such amounts as may accrue or be
incurred before or after default or workout or the commencement of any
liquidation, dissolution, bankruptcy, receivership, or reorganization case
by or
against Borrower.
3
“Subordinated
Loan Documents”
means
that certain Securities Purchase Agreement entered into between Subordinated
Creditor and Diomed Holdings, Inc. dated as of September 28, 2004, each Variable
Rate Convertible Debenture entered into between a Subordinated Creditor and
Diomed Holdings, Inc. and any financing statement, other agreement, instrument
or document, other than the Subordinated Creditor Warrants, executed by Borrower
pursuant to or in connection therewith, as the same may from time to time be
amended, modified, supplemented, extended, renewed, restated or
replaced.
“Term
Loan Advances”
has
the
meaning set forth in the Senior Creditor Agreement (as in effect on the date
hereof).
Unless
otherwise specified, all references in this Agreement to a “Section” shall refer
to the corresponding Section in or to this Agreement. Other capitalized terms
used herein and not otherwise defined herein shall have the meaning given such
terms in the Uniform Commercial Code as in effect in the State of California,
as
in effect from time to time (the “UCC”)
or in
the Senior Loan Documents.
| 2. |
SUBORDINATION
|
(a) On
the
terms and conditions set forth below, Subordinated Creditor’s right to payment
and performance of the Subordinated Debt and any and all liens and security
interests securing the Subordinated Debt are hereby subordinated to Senior
Creditor’s right to full payment and performance of the Senior Debt and all
liens and security interests securing the Senior Debt. The Subordinated Creditor
shall not ask, demand, ▇▇▇ for, take or receive from Borrower, by setoff
or in
any other manner, the whole or any part of any monies which may now or hereafter
be owing by Borrower to Subordinated Creditor, or be owing by any other person
to Subordinated Creditor under a guaranty or similar instrument, on account
of
the Subordinated Debt, nor any collateral security for any of the foregoing,
including, without limitation, any personal property collateral granted to
Subordinated Creditor pursuant to the Subordinated Loan Documents, unless
and
until the Senior Debt shall have been fully paid in cash and all commitments
to
extend credit under the Senior Creditor Agreement shall have been terminated
(the temporary reduction of outstanding obligations, liabilities and
indebtedness of Borrower to Senior Creditor not being deemed to constitute
full
payment or satisfaction thereof), provided
that (i)
the Subordinated Creditor may receive Reorganization Securities, (ii) the
Subordinated Creditor may exercise the Subordinated Creditor Warrants in
accordance with terms thereof, (iii) the Subordinated Creditor may be granted
a
subordinate security interest in the Collateral in accordance with the terms
of
clause
(c)
below pursuant to the Subordinated Loan Documents as in effect on the date
hereof, and (iv) the Subordinated Creditor may file lawsuits solely to prevent
the running of any applicable statute of limitations or other similar
restrictions on claims with respect to the Subordinated Debt and so long
as the
adjudication of such lawsuit and any remedies granted as a result therefore
shall be otherwise subject to the terms of this Agreement in all
respects.
4
(b) Notwithstanding
clause
(a)
above,
the Borrower shall be permitted to pay, and the Subordinated Creditor shall
be
permitted to receive, any Permitted Subordinated Debt Payment so long as at
the
time of such payment, or after giving effect thereto, no Senior Payment Default
exists, and such Senior Payment Default shall not have been cured or waived.
The
Borrower shall not be permitted to prepay or repay the Subordinated Debt without
the written consent of the Senior Creditor.
(c) Any
existing security interest in or lien on any property of Borrower in favor
of
Subordinated Creditor shall be, and hereby are agreed to be, junior and
subordinated to the security interests and liens securing the Senior Debt.
If
any lien shall be created or shall arise in favor of Subordinated Creditor,
whether by operation of law or otherwise, in or on any property of Borrower
or
any of its subsidiaries or affiliates to secure all or any portion of the
Subordinated Debt, then the liens granted by Borrower in any such property
in
favor of Senior Creditor to secure the Senior Debt shall in all respects be
first and senior liens, superior to such liens that may be created or arise,
and
superior to any security interest or lien that may exist on the date hereof,
in
either case which liens are in favor of Subordinated Creditor securing the
Subordinated Debt notwithstanding (i) the date, manner or order of creation,
attachment or perfection of any such security interests or liens, (ii) the
provisions of the UCC or any other applicable statutes or court decisions that
would provide otherwise in the absence of this Agreement, (iii) the provisions
of any contract between Subordinated Creditor, on the one hand, and Borrower
or
any subsidiary or affiliate thereof, on the other, and (iv) whether
Subordinated Creditor or any agent or bailee thereof holds possession of any
part any such collateral. In the event Subordinated Creditor shall have or
obtain possession of any such property or shall, in contravention of this
Agreement, foreclose upon or enforce its security interest or lien upon any
such
property, whether by self-help, judicial action or otherwise, then (A) all
such
property shall be immediately delivered to Senior Creditor or, if not
deliverable, all cash or non-cash proceeds and profits of such property shall
be
paid over to Senior Creditor, without any deduction or offset, and (B) until
duly delivered or paid to Senior Creditor, any such property or cash or non-cash
proceeds and profits of such property shall be held in trust for the benefit
of
Senior Creditor, in the case of each of clause (A) and clause (B), unless and
until all of the Senior Debt shall have been paid in cash in full and all
commitments to extend credit under the Senior Creditor Agreement shall have
been
terminated.
(d)
A
copy of
this Agreement may be filed as a financing statement in any Uniform Commercial
Code recording office.
(e) The
subordination contained in this Agreement is intended to define the rights
and
duties of Subordinated Creditor and Senior Creditor; it is not intended that
any
third party (including Borrower or any of its subsidiaries or affiliates, any
bankruptcy trustee, receiver, or debtor-in-possession) shall benefit from it.
If
the effect of the subordination contained in this Agreement would be to give
any
third party a priority status to which that party would not otherwise be
entitled, then that provision shall, to the extent necessary to avoid that
priority, be given no effect and the rights and priorities of Senior Creditor
and Subordinated Creditor shall be determined in accordance with applicable
law
and this Agreement.
5
Notwithstanding
anything to the contrary in this Section 2, upon the earliest to occur of (i)
acceleration of the Senior Debt, (ii) the occurrence of an Insolvency Proceeding
involving Borrower, (iii) notice by the Subordinated Creditor to the Senior
Creditor that an Event of Default in payment of the Subordinated Debt has
occurred and is continuing and for a period of 150 days thereafter (the
“Standstill
Period”),
or
(iv) the filing by the Senior Creditor of a complaint commencing judicial
foreclosure against all or substantially all of the Collateral or other judicial
enforcement of the terms and provisions of the applicable Senior Loan Documents,
upon 5 Business Days prior written notice to the Senior Creditor, the
Subordinated Creditor may accelerate the Subordinated Obligations, provided
that any
payment or distribution received by the Subordinated Creditor (other than
Reorganization Securities) shall be received
in trust for the benefit of the Senior Creditor and shall be forthwith paid
over
to the Senior Creditor, for the benefit of the Senior Creditor.
Nothing
herein shall limit or impair the right of the (x) Subordinated Creditor to
bid
for or purchase Collateral at any private or judicial foreclosure upon such
Collateral initiated by Senior Creditor (so long as, if in the event,
Subordinated Creditor “credit bids”, all or a portion of, the Subordinated Debt
in such private or judicial sale, the Senior Creditor shall be entitled to
receive in cash that portion of the Subordinated Debt that is “credit bid” in
such private or judicial sale by the Subordinated Creditor), (y) Subordinated
Creditor to join (but not control) any foreclosure or other judicial lien
enforcement proceeding with respect to the Collateral initiated by Senior
Creditor, so long as it does not delay or interfere in any material respect
with
the exercise by Senior Creditor of its rights as provided in this Agreement
and
(z) Subordinated Creditor to receive any remaining proceeds of Collateral after
satisfaction and payment in full in cash of all Senior Debt.
| 3. |
ASSIGNMENT
OF SUBORDINATED DEBT
|
Subordinated
Creditor hereby covenants to Senior Creditor that prior to the termination
of
this Agreement in accordance with Section 8, the entire Subordinated Debt
created in favor of Subordinated Creditor shall continue to be owing only to
Subordinated Creditor, and any collateral security therefor (including, without
limitation, any collateral security granted to Subordinated Creditor pursuant
to
the Subordinated Loan Documents) shall continue to be held solely for the
benefit of Subordinated Creditor, unless assigned pursuant to an assignment
in
which the assignee agrees in writing to be bound by all of the terms and
provisions of this Agreement. Any promissory note issued pursuant to the
Subordinated Loan Documents shall be legended to expressly state that it is
subject to this Agreement.
| 4. |
SENIOR
CREDITOR’S PRIORITY
|
In
the
event of any distribution, division, or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or any part
of the property of Borrower or any of its subsidiaries or affiliates or the
proceeds thereof to the creditors of Borrower or any of its subsidiaries or
affiliates, or the readjustment of the Senior Debt and the Subordinated Debt,
whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors or any other action or proceeding
involving the readjustment of all or any part of the Senior Debt or the
Subordinated Debt, or the application of the property of Borrower or any of
its
subsidiaries or affiliates to the payment or liquidation thereof, or upon the
dissolution, liquidation, reorganization, or other winding up of Borrower’s or
any of its subsidiaries’ or affiliates’ business, or upon the sale of all or any
substantial part of Borrower’s or any of its subsidiaries’ or affiliates’
property (any of the foregoing being hereinafter referred to as an “Insolvency
Event”),
then,
and in any such event, Senior Creditor shall be entitled to receive the payment
in cash in full of the Senior Debt before Subordinated Creditor shall be
entitled to receive any payment on account of the Subordinated Debt, and to
that
end and in furtherance thereof:
6
(a) All
payments and distributions of any kind or character, whether in cash, property,
or securities (other than a distribution of Reorganization Securities), in
respect of the Subordinated Debt to which Subordinated Creditor would be
entitled if the Subordinated Debt were not subordinated pursuant to this
Agreement, shall be paid to Senior Creditor and applied in payment of the Senior
Debt; and
(b) Notwithstanding
the foregoing, if any payment or distribution of any kind or character, whether
in cash, properties or securities (other than a distribution of Reorganization
Securities), shall be received by Subordinated Creditor on account of the
Subordinated Debt before all of the Senior Debt has been paid, then such payment
or distribution shall be received by Subordinated Creditor in trust for and
shall be immediately paid over to Senior Creditor for application to the
payments of amounts due on the Senior Debt until the Senior Debt shall have
been
paid in cash in full.
| 5. |
GRANT
OF AUTHORITY
|
In
the
event of the occurrence of an Insolvency Event, and to enable Senior Creditor
to
enforce its rights hereunder in any of the aforesaid actions or proceedings,
Senior Creditor is hereby irrevocably authorized and empowered, in Senior
Creditor’s discretion, as follows:
(a) Senior
Creditor is hereby irrevocably authorized and empowered (in its own name or
in
the name of Subordinated Creditor or otherwise), but shall have no obligation,
(i) to demand, ▇▇▇ for, collect and receive every payment or distribution
referred to in Section 4, and give acquittance therefor and
(ii) (if Subordinated Creditor has failed to file claims or proofs of
claim on or before ten (10) days prior to the last date such claims or
proofs of claim may be filed pursuant to law or the order of any court
exercising jurisdiction over such proceeding) to file claims and proofs of
claim. The Subordinated
Creditor will take such reasonable action as the Senior Creditor may reasonably
request to enable the Senior Creditor to
enforce
any claim
or
proof of claim
filed by
the Senior Creditor in accordance with clause
(ii)
above.
(b) To
the
extent that payments or distributions on account of the Subordinated Debt are
made in property or securities other than cash, Subordinated Creditor authorizes
Senior Creditor to sell or dispose of such property or securities (other than
a
distribution of Reorganization Securities) on such terms as are commercially
reasonable in the situation in question. Following full payment in cash of
the
Senior Debt and the termination of all commitments related thereto, Senior
Creditor shall remit to the Subordinated Creditor (with all necessary
endorsements), to the extent of Subordinated Creditor’s interest therein, all
payments and distributions of cash, property, or securities paid to and held
by
Senior Creditor in excess of the allowed amount of the Senior Debt.
7
| 6. |
PAYMENTS
RECEIVED BY SUBORDINATED
CREDITOR
|
Should
any payment, distribution, or security (other than a distribution of
Reorganization Securities) be received by the Subordinated Creditor upon or
with
respect to the Subordinated Debt in contravention of this Agreement or other
than those amounts discussed in Section 2, prior to termination of this
Agreement in accordance with Section 8, Subordinated Creditor shall receive
and
hold the same in trust for the benefit of Senior Creditor and shall immediately
deliver the same to Senior Creditor in precisely the form received (except
for
the endorsement or assignment of Subordinated Creditor where necessary) for
application to the Senior Debt (and the permanent reduction thereof), and,
until
so delivered, the same shall be held in trust by such Subordinated Creditor
for
the benefit of Senior Creditor; provided
that
notwithstanding anything to the contrary contained in this Agreement, the
Subordinated Creditor may (i) receive and retain Conversion Shares (as defined
in the Subordinated Loan Documents) and Reorganization Securities and (ii)
exercise the Subordinated Creditor Warrants in accordance with the terms
thereof.
| 7. |
FURTHER
ASSURANCES; COOPERATION; NO
OFFSET
|
Subordinated
Creditor agrees to cooperate with Senior Creditor and to take all actions that
Senior Creditor may reasonably require to enable Senior Creditor to realize
the
full benefits of this Agreement. Subordinated Creditor agrees not to offset
any
amounts owing to Borrower against the Subordinated Debt, but shall pay all
such
amounts in accordance with their terms.
| 8. |
TERMINATION
OR AMENDMENT OF AGREEMENT; NO
AMENDMENTS
|
This
Agreement shall be effective upon its execution by each of Senior Creditor
and
Subordinated Creditor. After the Effective Date, this Agreement shall remain
in
effect and shall not be revoked or amended by Subordinated Creditor, except
with
the prior written consent of the Senior Creditor. Senior Creditor and
Subordinated Creditor agree that no amendment hereto shall be binding upon
Borrower unless Borrower shall have received notice of such amendment. Subject
to Section 12, this Agreement shall terminate upon the date on which the Senior
Debt has been paid in cash in full and all commitments to extend credit under
the Senior Creditor Agreement has been terminated. No amendment of the
Subordinated Loan Documents shall directly or indirectly modify the provisions
of this Agreement in any manner which might terminate or impair the
subordination of the Subordinated Debt or the subordination of the security
interest or lien that Subordinated Creditor may have in any property of
Borrower. By
way of
example, the Subordinated Loan Documents shall not be amended to (i) increase
the rate of interest with respect to the Subordinated Debt, (ii) increase the
principal amount of the Subordinated Debt, (iii) accelerate the payment of
the
principal or interest or any other portion of the Subordinated Debt or (iv)
increase the warrants or other equity issued to Subordinated Creditor in
consideration of the funding of the Subordinated Debt.
No
amendment of the Senior Loan Documents shall directly or indirectly (a) increase
the interest rate applicable to any of the Senior Debt by more than 2.0%
(excluding increases resulting from the accrual of interest at the default
rate), (b) extend the scheduled maturity of the Senior Debt, (c) add any
additional restrictions or limitations with respect to the payment of the
Subordinated Debt, (d) modify (or have the effect of modification of) any
prepayment provisions thereof, or (e) change (to earlier dates) any dates upon
which payments of principal or interest are due thereon.
8
| 9. |
ADDITIONAL
AGREEMENTS
|
(a) Senior
Creditor may administer and manage its credit and other relationships with
Borrower in its own best interest, without notice to or consent of Subordinated
Creditor. Subject to the limitations contained in Section
8
hereof,
at any time and from time to time, Senior Creditor may enter into any amendment
or agreement with Borrower as Senior Creditor may deem proper, including without
limitation extending the time of payment of or renewing or otherwise altering
the terms of all or any of the obligations constituting Senior Debt or affecting
the collateral security for, supporting or underlying any or all of the Senior
Debt, and may exchange, sell, release, surrender or otherwise deal with any
such
collateral without in any way thereby impairing or affecting this Agreement,
and
all such additional agreements and amendments shall be Senior Loan Documents
evidencing the Senior Debt; provided,
that
neither this Section 9 nor any provision of such agreements shall affect the
limitations contained in the definitions of “Senior Creditor” or “Senior Debt”;
provided
further
that any
sale or other disposition of the Collateral shall be conducted in a commercially
reasonable manner and the proceeds of Collateral shall be applied to the
permanent reduction of the indebtedness constituting Senior Debt.
(b) The
Senior Creditor will give the Subordinated Creditor 2 Business Days written
notice of its intent to commence any Lien Enforcement Action with respect to
the
Collateral (a “Remedies
Notice”)
| 10. |
SUBROGATION
|
If
cash
or other property otherwise payable or deliverable to the Subordinated Creditor
or on account of the Subordinated Debt shall have been applied pursuant to
this
Agreement to the payment of the Senior Debt, and if the Senior Debt shall have
been paid in cash in full and all commitments to extend credit under the Senior
Creditor Agreement shall have been terminated, then Subordinated Creditor shall
be subrogated to any rights of Senior Creditor to receive further payments
or
distributions applicable to the Senior Debt until the Subordinated Debt shall
have been fully paid. No such payments or distributions received by the
Subordinated Creditor by reason of such subrogation shall, as between Borrower
and its creditors other than Senior Creditor, on the one hand, and Subordinated
Creditor, on the other hand, be deemed to be a payment by Borrower on account
of
the Subordinated Debt owed to Subordinated Creditor. For purposes of this
Agreement, payments made by the Borrower not in contravention of this Agreement
to the Subordinated Creditor in respect of the Subordinated Debt with proceeds
of loans by Senior Creditor to Borrower shall not be construed to constitute
proceeds of Collateral.
| 11. |
SUBORDINATED
CREDITOR’S WAIVERS AND
COVENANTS
|
(a) Without
limiting the generality of any other waiver made by Subordinated Creditor in
this Agreement, Subordinated Creditor hereby expressly waives (i) reliance
by
Senior Creditor upon the subordination and other agreements herein provided,
and
(ii) any claim that Subordinated Creditor may now or hereafter have against
Senior Creditor arising out of any and all actions that Senior Creditor, in
good
faith, takes or omits to take (A) with respect to the creation, perfection
or
continuation of liens in or on any collateral security for the Senior Debt,
(B)
with respect to the foreclosure upon, sale, release, or depreciation of, or
failure to realize upon, any of the collateral security for the Senior Debt,
(C)
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 third party and (D) with
respect to the valuation, use, protection or release of any collateral security
for the Senior Debt.
9
(b) Without
limiting the generality of any other covenant or agreement made by Subordinated
Creditor in this Agreement, Subordinated Creditor hereby covenants and agrees
that (i) Senior Creditor has not made any warranties or representations with
respect to the due execution, legality, validity, completeness or enforceability
of the Senior Creditor Agreement or any of the other Senior Loan Documents,
or
the collectibility of the Senior Debt; and (ii) Subordinated Creditor will
not
interfere with or in any manner oppose a disposition of any collateral security
for the Senior Debt by Senior Creditor.
| 12. |
REINSTATEMENT
OF SENIOR DEBT
|
To
the
extent that Senior Creditor receives payments on or in respect of the Senior
Debt or proceeds of any collateral security for the Senior Debt, which payments
or proceeds are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or
any
other party under any bankruptcy law, state or federal law, common law, or
equitable cause, then, to the extent of such payments or proceeds invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid,
the Senior Debt, or part thereof, intended to be satisfied shall be revived
and
continue in full force and effect as if such payments or proceeds had not been
received by Senior Creditor. The provisions of this Section 12 shall survive
termination of this Agreement.
| 13. |
NO
WAIVERS
|
Senior
Creditor shall not be prejudiced in its rights under this Agreement by any
act
or failure to act of Borrower or Subordinated Creditor or any noncompliance
of
Borrower or Subordinated Creditor with any agreement or obligation, regardless
of any knowledge thereof which Senior Creditor may have, or with which Senior
Creditor may be charged; no action permitted hereunder that has been taken
by
Senior Creditor shall in any way affect or impair the rights or remedies of
Senior Creditor in the exercise of any other right or remedy or shall operate
as
a waiver thereof; no single or partial exercise by Senior Creditor of any right
or remedy shall preclude any other or further exercise thereof; and no
modification or waiver of any of the provisions of this Agreement shall be
binding upon Senior Creditor, in each case except as expressly set forth in
a
writing duly signed and delivered by Senior Creditor.
| 14. |
PERFECTION
OF CERTAIN SECURITY INTERESTS
|
The
Senior Creditor agrees to hold or control that part of the Collateral that
is in
its possession or control (or in the possession or control of its agents or
bailees) to the extent that possession or control thereof is taken to perfect
a
Lien thereon under the UCC or other applicable law (such Collateral being
referred to as the “Pledged
or Controlled Collateral”),
as
bailee and as a non-fiduciary agent for the Subordinated Creditor, solely for
the purpose of perfecting the security interest granted under the Subordinated
Loan Documents, subject to the terms and conditions of this Section. To secure
the prompt payment and performance of the Subordinated Debt and in addition
to,
and separate from, any other grant of a security interest to the Senior
Creditor, the Borrower hereby grants to the Senior Creditor, as agent for the
Subordinated Creditor, a security interest in all right, title and interest
of
the Borrower in and to all now existing or hereafter acquired deposit accounts
of the Borrower. The obligations and responsibilities of the Senior Creditor
to
the Subordinated Creditor under this Section 14 shall be limited to holding
or
controlling the Pledged or Controlled Collateral as a non-fiduciary agent in
accordance with this Section 14.
10
| 15. |
PURCHASE
RIGHT
|
At
any
time on or after the date that any of the following events has occurred and
is
continuing (each a “Purchase
Event”):
(i)
the occurrence of a Senior Payment Default; (ii) the Senior Creditor having
provided a Remedies Notice; (iii) Senior Creditor has exercised any of its
enforcement remedies with respect to Borrower or taken any Lien Enforcement
Action against any Collateral in accordance with the Senior Loan Documents;
(iv)
the occurrence of an Insolvency Proceeding involving Borrower; or (v) at any
time during the Standstill Period.
(a)The
Subordinated Creditor shall have an option, exercised by delivery of notice
to
the Senior Creditor (a “Purchase
Notice”)
given
in accordance with Section 17 and no later than 10 days after a Purchase Event
to purchase all (but not less than all) of the Senior Debt and assume all
commitments under the Senior Loan Documents from the Senior Creditor. The
Purchase Notice shall be irrevocable and shall specify a date for the closing
of
the purchase, which shall not be more than 10 Business Days after receipt by
the
Senior Creditor of the Purchase Notice. If no Subordinated Creditor exercises
such right within 5 Business Days after the occurrence of a Purchase Event,
the
Senior Creditor shall have no further obligation pursuant to this Section 15
and
may take any further actions in their sole discretion in accordance with the
Senior Loan Documents and this Agreement.
(b)The
purchase and sale with respect to the Senior Debt and assumption of commitments
under the Senior Loan Documents provided for in this Section 15 shall have
closed within 10 Business Days after receipt by the Senior Creditor of the
Purchase Notice and the Senior Creditor shall have received payment in full
of
the Senior Debt and the Subordinated Creditor shall have assumed all commitments
under the Senior Loan Documents as provided for herein within such 10 Business
Day period. If more than one Person constituting the Subordinated Creditor
shall
have exercised the purchase option, the purchase price shall be divided pro
rata
among such persons according to each such Person’s portion of the Subordinated
Debt outstanding on the date of purchase pursuant to this Section
15.
(c)On
the
date specified by the Subordinated Creditor in the Purchase Notice (which shall
not be more than 10 Business Days after the receipt by the Senior Creditor
of
the Purchase Notice), the Senior Creditor shall sell and assign to the
Subordinated Creditor and the Subordinated Creditor shall purchase and assume
from the Senior Creditor, the Senior Debt (including and for the avoidance
of
doubt any prepayment fee, early termination fee, end of term charge or any
other
fee payable by Borrower and constituting Senior Debt) and all commitments under
the Senior Loan Documents. The Senior Creditor and the Senior Secured Creditors
hereby represent and warrant that, as of the date hereof, no approval of any
court or other regulatory or governmental authority is required for such
sale.
11
(d)Upon
the
date of such purchase and sale, the Subordinated Creditor shall (i) pay to
the
Senior Creditor as the purchase price therefor the full amount of all the Senior
Debt then outstanding and unpaid, and (ii) assume all commitments under the
Senior Loan Documents pursuant to assignment and assumption documents reasonably
satisfactory to the Senior Creditor.
(e)Such
purchase shall be expressly made without representation or warranty of any
kind
by the Senior Creditor as to the Senior Debt or otherwise and without recourse
to the Senior Creditor, except that the Senior Creditor shall represent and
warrant: (i) the amount of the Senior Debt being purchased from it, (ii) that
the Senior Creditor owns the Senior Debt, free and clear of any Liens or
encumbrances and (iii) the Senior Creditor has the right to assign such Senior
Debt and the assignment is duly authorized by the Senior Creditor.
| 16. |
INFORMATION
CONCERNING BORROWER; CREDIT
ADMINISTRATION
|
Subordinated
Creditor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, its subsidiaries and affiliates, any and all
endorsers and any and all guarantors of the Senior Debt and of all other
circumstances bearing upon the risk of nonpayment of the Senior Debt or the
Subordinated Debt that diligent inquiry would reveal, and Subordinated Creditor
hereby agrees that Senior Creditor shall not have any duty to advise the
Subordinated Creditor of information known to Senior Creditor regarding such
condition.
| 17. |
NOTICES
|
Except
as
otherwise provided herein, all notices and service of process required,
contemplated, or permitted hereunder or with respect to the subject matter
hereof shall be in writing, and shall be deemed to have been validly served,
given or delivered upon the earlier of: (i) the first Business Day after
transmission by facsimile or hand delivery or deposit with an overnight express
service or overnight mail delivery service; or (ii) the third calendar day
after
deposit in the United States mails, with proper first class postage prepaid,
and
shall be addressed to the party to be notified as follows:
If
to Senior Creditor:
HERCULES
TECHNOLOGY GROWTH CAPITAL, INC.
Legal
Department
Attention:
Chief Legal Officer
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
If
to Subordinated Creditor, to each of:
IROQUOIS
CAPITAL LP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
ATTN:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
12
CRANSHIRE
CAPITAL, L.P.
▇▇▇
▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
ATTN:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PORTSIDE
GROWTH AND OPPORTUNITY FUND
c/o
Ramius Capital Group, LLC (investment adviser)
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
ATTN:
▇▇▇▇ ▇▇▇▇▇
Telephone:
Tel. ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇
INVESTMENT MASTER FUND LTD.
▇▇▇
▇
▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇
ATTN:
▇▇▇▇▇ ▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
| 18. |
LEGEND.
|
Until
the
termination of this Agreement in accordance with Section 8 hereof, the Borrower
and each Subordinating Creditor will cause to be clearly, conspicuously and
prominently inserted on the face of each Subordinated Loan Document as well
as
any replacements thereof, the following legend (or such other notice reasonably
acceptable to the Agent) in substantially the form hereof:
“This
instrument and the rights and obligations evidenced hereby are subordinate
in
the manner and to the extent set forth in that certain Intercreditor Agreement
(as the same may be amended or otherwise modified from time to time pursuant
to
the terms thereof, the “Intercreditor Agreement”), dated as of September 28,
2007, among Hercules Technology Growth Capital, Inc. (the “Senior Creditor”) and
each of Iroquois Capital LP, Cranshire Capital, L.P., Portside Growth and
Opportunity Fund and ▇▇▇▇▇▇▇▇ Investment Master Fund Ltd. (the “Subordinated
Creditors”). Each holder of this instrument, by its acceptance hereof,
irrevocably agrees to be bound by the provisions of the Intercreditor Agreement
applicable to a “Subordinated Creditor” (as such term is defined in the
Intercreditor Agreement), as if such holder were an original signatory thereto
as a Subordinated Creditor for all purposes of the Intercreditor
Agreement.”
| 19. |
SEVERABILITY
|
Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of
this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this
Agreement.
13
| 20. |
GOVERNING
LAW
|
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of California without regard to principles of conflict of laws that
would cause the application of laws of any other jurisdiction.
| 21. |
ASSIGNMENT
|
This
Agreement shall be binding upon Subordinated Creditor and its respective
successors and assigns, and shall inure to the benefit of and be enforceable
by
Senior Creditor and its successors and assigns.
| 22. |
NO
THIRD PARTY
BENEFICIARIES
|
Neither
the Borrower and its successors and assigns nor any other Persons or entities
are beneficiaries of any portion of this Agreement and shall not have any rights
arising under this Agreement or the right to enforce any provision hereof.
| 23. |
JUDICIAL
REFERENCE
|
Because
disputes arising in connection with complex financial transactions are most
quickly and economically resolved by an experienced and expert person and the
parties wish applicable state and federal laws to apply (rather than arbitration
rules), the parties desire that their disputes be resolved by a judge applying
such applicable laws. EACH OF SUBORDINATED CREDITOR AND SENIOR CREDITOR AGREE
THAT A JUDICIAL REFEREE WILL BE APPOINTED UNDER CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 631 TO DETERMINE ANY FACTUAL ISSUES ANY CAUSE OF ACTION,
CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM
(COLLECTIVELY, “CLAIMS”)
ASSERTED BY BORROWER, SUBORDINATED CREDITOR, OR SENIOR CREDITOR AGAINST THE
OTHER PARTY OR PARTIES TO THIS AGREEMENT. SUBORDINATED CREDITOR AND SENIOR
CREDITOR SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE
OR
FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS.
IN THE EVENT THAT SUBORDINATED CREDITOR AND SENIOR CREDITOR CANNOT AGREE UPON
A
REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. SUBORDINATED CREDITOR
AND
SENIOR CREDITOR SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE UNLESS
THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION. This agreement
regarding the judicial referee extends to all such claims, including, without
limitation, claims which involve persons or entities other than Borrower, the
Subordinated Creditor, and Senior Creditor; claims which arise out of or are
in
any way connected to the relationships between or among Borrower, the
Subordinated Creditor, and Senior Creditor; and any claims for damages, breach
of contract, specific performance, or any equitable or legal relief of any
kind.
14
| 24. |
COUNTERPARTS
|
This
Agreement and any amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts, and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute
but
one and the same instrument.
Signature
page follows.
15
|
SENIOR
CREDITOR:
|
||
|
Hercules
Technology Growth Capital, Inc.
|
||
|
Signature:
|
|
|
|
Print Name:
|
▇. ▇▇▇▇▇▇▇▇ Martitsch | |
|
Title:
|
Associate
General Counsel
|
|
|
SUBORDINATED
CREDITORS:
|
||
|
Iroquois
Capital LP
|
||
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
|
Cranshire
Capital, L.P.
|
||
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
|
Portside
Growth and Opportunity Fund
|
||
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
|
▇▇▇▇▇▇▇▇
Investment Master Fund Ltd.
|
||
|
Signature:
|
||
|
Print
Name:
|
||
|
Title:
|
||
16
The
undersigned hereby accepts and consents to the foregoing Agreement and agrees
to
be bound by all of the provisions thereof and to recognize all priorities and
other rights granted by Subordinated Creditor thereby or thereunder to Senior
Creditor and to pay Senior Creditor in accordance therewith.
BORROWER:
|
Diomed
Holdings, Inc.
|
||
|
By:
|
||
|
Name:
|
|
|
|
Title:
|
||
|
Diomed,
Inc.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
17