1
EXHIBIT 10.30
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") dated April 14, 2000, is
entered into by and between and Taurean Investments AG, Pegasus Capital II, L.
P., Dieter Meier, Walter Bosch, Stephen D. Jackson, Milton Chang and Onset
Ventures (collectively, the "Creditors"), on the one hand, and Dieter Meier,
Walter Bosch and Onset Ventures (collectively, the "Investors"), on the other
hand.
RECITALS
A. Euphonix, Inc., a California corporation (the "Borrower") has
requested that the Investors extend credit to the Borrower as evidenced by a
Secured Promissory Note dated April 14, 2000 (the "April 14 Note"), secured by
the assets and property of Borrower.
B. The Creditors extended credit to the Borrower pursuant to a Secured
Promissory Note dated July 30, 1999 (the "July 30 Note"), and a Secured
Promissory Note dated February 22, 2000 (the "February 22 Note").
C. To induce Investors to extend credit to the Borrower pursuant to the
April 14 Note, the Creditors agree to subordinate, under the terms and
conditions set forth herein, (i) all of the Borrower's indebtedness and
obligations to the Creditors, existing now or hereafter (the "Subordinated
Debt") to all of the Borrower's indebtedness and obligations to Investors under
the April 14 Note, in an amount not to exceed $800,000 plus accrued interest
thereon, exclusive of costs of collection (the "Senior Debt"); and (ii) all of
the Creditors' security interests, to all of Investors' security interests in
the Borrower's property.
THE PARTIES AGREE AS FOLLOWS:
1. The Creditors subordinate to the Investors any security interest or
lien that they have in any property of the Borrower. Despite attachment or
perfection dates of the Creditors' security. interest and the Investors'
security interest, the Investors' security interest in the Collateral, as
defined in the April 14 Note, is prior to the Creditors' security interest.
2. All Subordinated Debt payments are subordinated to all Senior Debt,
including interest accruing after any bankruptcy, reorganization or similar
proceeding and all obligations under the April 14 Note (the "Senior Debt").
Notwithstanding the foregoing, the Creditors may (i) receive regularly scheduled
payments of interest that constitute Subordinated Debt, pursuant to the terms of
the July 30 Note and the February 22 Note, provided that no Event of Default (as
defined in the April 14 Note) has occurred and is continuing or would result
from such payment and (ii) convert any Subordinated Debt into equity securities
of the Borrower under the terms and conditions set forth in the July 30 Note and
the February 22 Note.
3. Without the written consent of the Investors, such consent to be
granted in the Investors' sole discretion, the Creditors will not:
2
(a) demand or receive from the Borrower (and the Borrower will
not pay), except as provided in Section 2, above, any part
of the Subordinated Debt, by payment, prepayment, or
otherwise,
(b) exercise any remedy against the Collateral, or
(c) accelerate the Subordinated Debt, or begin to or
participate in any action against the Borrower, until all
the Senior Debt is paid.
4. The Creditors must deliver to the Investors in the form received
(except for endorsement or assignment by the Creditors) any payment,
distribution, security or proceeds it receives on the Subordinated Debt other
than according to this Agreement.
5. This Agreement shall remain in full force and effect, despite the
Borrower's insolvency, reorganization or any case or proceeding under any
bankruptcy or insolvency law, and the Investors' claims against the Borrower and
the Borrower's estate will be fully paid, to the extent arising from sums
subordinated hereunder, before any payment is made to the Creditors.
6. Until the Senior Debt is paid, the Creditors irrevocably appoint the
Investors as their attorney-in-fact, with power of attorney with power of
substitution, in the Creditors' names or in Investors' name, for the Investors'
use and benefit, with 5 business days notice to the Creditors, to do the
following in any bankruptcy, insolvency or similar proceeding involving the
Borrower:
(a) File any claims for the Subordinated Debt for the
Creditors if the Creditors do 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 the Creditors and vote the Creditors' claims in
respect of the Subordinated Debt in any way it chooses.
7. The Creditors 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 the Investors have in
Borrower's property. For example, instruments may not be amended to (i) increase
the interest rate of the Subordinated Debt, or (ii) accelerate payment of
principal or interest or any other portion of the Subordinated Debt.
8. This Agreement shall remain in full force and effect so long as the
Borrower owes any portion of the Senior Debt to the Investors. If, after full
payment of the Senior Debt, the investors must disgorge any payments made on the
Senior Debt, 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 the Creditors will immediately pay the Investors all payments
received under the Subordinated Debt to the extent the payments would have been
prohibited under this Agreement. At any time without notice to the Creditors,
the Investors may take actions it considers appropriate on the Senior Debt such
as terminating advances, increasing the principal,
-2-
3
extending the time of payment, increasing interest rates, renewing, compromising
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
the Borrower or any other person. No action or inaction will impair or otherwise
affect the Investors' rights under this Agreement. The Creditors waive any
benefits of California Civil Code Sections 2809,2810, 2819, 2845, 2847, 2848,
2849, 2850, 2899 and 3433.
9. This Agreement binds the Creditors, their successors or assigns, and
benefits Investors' successors or assigns. This Agreement is for the Investors'
benefit and not for the benefit of the Borrower or any other party. If the
Borrower is refinancing any of the Senior Debt with a new lender, upon the
Investors' request of Creditors, the Creditors will enter into a new
subordination agreement with the new lender on substantially the terms of this
Agreement.
10. This Agreement may be executed in two or more counterparts, each of
which is an original and all of which together constitute one instrument.
11. California law governs this agreement without giving effect to
conflicts of law principles. The Creditors and the Investors submit to the
exclusive jurisdiction of the courts in Santa Clara County, California. THE
CREDITORS AND THE INVESTORS EACH WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION FROM THIS AGREEMENT.
12. This Agreement represents is the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. The Creditors are not
relying on any representations by the Investors or the Borrower in entering into
this Agreement. The Creditors will keep themselves informed of the Borrower's
financial and other conditions. This Agreement may be amended only by written
instrument signed by the Creditors and Investors.
13. 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 costs and expenses, including reasonable attorneys' fees,
incurred in the action.
-3-
4
"CREDITORS" "INVESTORS"
-------------------------------- ---------------------------------
Dieter Meier Dieter Meier
-------------------------------- ---------------------------------
Walter Bosch Walter Bosch
--------------------------------
Stephen D. Jackson
Onset Ventures
-------------------------------- ---------------------------------
Milton Chang By:
Title:
--------------------------------
Pegasus Capital II, L.P.
--------------------------------
Taurean Investments AG
Onset Ventures
--------------------------------
By:
Title:
The Borrower approves the terms of this Agreement.
The "Borrower"
EUPHONIX, INC.
By:
------------------------
Barry Margerum
Title: Chief Executive Officer