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EXHIBIT 10.11
NationsBank, N.A. SUBORDINATION
AGREEMENT 4293718
1501 Pennsylvania Ave. N.W.
Washington DC 20005
THIS SUBORDINATION AGREEMENT (the "Subordination Agreement") is made this 31st
day of August, 1994, by and between William C. Thompson Revocable Trust, Patsy
A. Thompson Revocable Trust, William A. Thompson, Individual, and/or Patsy A.
Thompson, individual (individually or collectively, the "Creditor"), FileTek,
Inc. and/or FileTek UK Limited (individually or collectively, the "Borrower"),
and NATIONSBANK, N.A., (the "Bank").
RECITALS
1. The Borrower has requested and/or obtained certain loans or other
credit accommodations from the Bank to the Borrower which are or may be from
time to time secured by assets and property of the Borrower.
2. The Creditor has extended loans or other credit accommodations to the
Borrower, and/or may extend loans or other credit accommodations to the
Borrower from time to time.
3. In order to induce the Bank to extend credit to the Borrower, the
Creditor is willing to subordinate all of the Borrowers indebtedness and
obligations to the Creditor to all indebtedness and obligations of the Borrower
to the Bank.
4. This Subordination Agreement sets forth the relative rights,
obligations, and priorities of the Bank and the Creditor with respect to the
payment and collection of the Senior Obligations and Junior Obligations.
NOW, THEREFORE, in consideration of the premises and the agreements
and covenants contained herein and of the Bank's agreement to extend credit to
the Borrower, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Creditor, the Borrower and the
Bank, intending to be legally bound, agree as follows:
TERMS AND CONDITIONS
1. Construction of Agreement and Definitions. Unless varied by this
Subordination Agreement, all of the terms used herein without definition which
are defined by the District of Columbia Uniform Commercial Code shall have the
meanings assigned to them by the District of Columbia Uniform Commercial Code.
Whenever used herein, the words "Borrower," "Creditor," and "Bank" shall be
deemed to include their respective heirs, legal representatives, successors and
assigns. All words used herein shall be deemed to refer to the singular,
plural, masculine, feminine or neuter as the identity of the person or entity
or the context may require.
1.1 INTENTIONALLY DELETED.
1.2 "COLLATERAL" shall mean all of the assets and property of the Borrower
securing the Senior Obligations, whether presently existing or as may be
acquired or created in the future, and wherever located and any replacements,
additions, accessories, or substitutions thereof, and the proceeds and products
thereof and where applicable, the proceeds of insurance concerning any such
assets and property.
1.3 INTENTIONALLY DELETED.
1.4 "JUNIOR OBLIGATIONS" shall mean all liabilities, indebtedness, and
obligations of the Borrower to the Creditor, whether presently existing or
arising in the future, direct or indirect, contingent or non-contingent,
secured or unsecured, liquidated or unliquidated, due or not due, primary or
secondary,
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jointly and/or severally, and whether arising or contracted directly between
the Borrower and the Creditor or acquired by the Creditor outright,
conditionally, or as collateral security from another, and all claims, demands,
actions, and causes of action, arising therefrom. Junior Obligations shall
include, without limitation, all indebtedness of the Borrower to the Creditor
evidenced by any promissory notes or other instruments, copies of which are
attached to and incorporated in this Subordination Agreement.
1.5 "LOAN" shall mean the loan and other credit accommodations made or to
be made by the Bank to the Borrower.
1.6 "LOAN DOCUMENTS" shall mean any loan agreement, security agreement,
promissory note, guaranty, mortgage, deed of trust, indemnity deed of trust,
collateral pledge agreement, guaranty security agreement, indemnity agreement,
assignment, letter of credit application, letter of credit, commitment letter,
commitment, opinion of counsel, subordination agreement, financing statement,
certifications, or any other agreement, document, or instrument made or to be
made by the Borrower, the Bank, or any other person as evidence of, security
for, guarantee of, or in connection with the Loan.
1.7 "SENIOR OBLIGATIONS" shall mean all liabilities, indebtedness, and
obligations of the Borrower to the Bank, whether presently existing or arising
in the future, direct or indirect, contingent or non-contingent, secured or
unsecured, liquidated or unliquidated, due or not due, primary or secondary,
jointly and/or severally, and whether arising or contracted directly between
the Borrower and the Bank or acquired by the Bank outright, conditionally, or
as collateral security from another and all claims, demands, actions, and
causes of action arising therefrom. Senior Obligations shall include,
without limitation, all indebtedness of the Borrower to the Bank evidenced by
the Loan Documents.
2. Subordination. The Creditor subordinates, to the extent and in the
manner provided in this Subordination Agreement, payment of the Junior
Obligations to the full and absolute payment of all of the Senior Obligations.
The Borrower consents to the subordination provided for in this Section.
3. Warranties, Representations and Covenants of the Creditor. The
Creditor represents and warrants that: (a) it has not relied and will not rely
on any representation or information of any nature made by or received from the
Bank relative to the Borrower in deciding to execute this Subordination
Agreement or to permit it to continue in effect; (b) the Creditor is the lawful
owner of the Junior Obligations and no part of the Junior Obligations is
subject to any defense, offset, or counterclaim; (c) the Creditor has not
previously assigned or transferred any of the Junior Obligations, or any
interest therein; (d) the Creditor has not previously given any subordination
in respect to the Junior Obligations; and (e) it holds no security interest in
any property or assets of the Borrower for payment of the Junior Obligations.
Until all of the Senior Obligations have been paid in full: (a) the Creditor
shall not commence or join with any other creditors of the Borrower in
commencing any bankruptcy, reorganization, receivership or insolvency
proceeding against the Borrower; (b) the Creditor shall not take or permit any
action prejudicial to or inconsistent with the Bank's priority position over
the Creditor that is created by this Subordination Agreement; and (c) except
for the limited payments expressly permitted under Section 4 of this
Subordination Agreement, the Creditor shall not demand, take, or receive, by
setoff or in any other manner, any payments upon the Junior Obligations unless
and until all of the Senior Obligations shall have been satisfied in full and
no commitment by the Bank to extend credit, make loans, or otherwise extend
financial accommodations to or for the Borrower is outstanding.
4. Exercise by the Creditor of Rights Under the Junior Obligations.
Without the Bank's prior written consent, the Creditor (a) will take no action
to assert, sue upon, set off against, collect, or enforce all or any part of
the Junior Obligations, including principal and interest; and (b) will take no
enforcement actions against the Borrower with respect to the Junior
Obligations, unless and until all of the Senior Obligations shall have been
satisfied in full and no commitment by the Bank to extend credit, make loans,
or otherwise extend financial accommodations to or for the Borrower is
outstanding. Except as provided in this Section of this Subordination
Agreement, the Borrower will not, without the Bank's prior written consent,
pay, by setoff or in any other manner, all or any part of the Junior
Obligations or grant any security for the Junior Obligations unless and until
all of the Senior Obligations shall have been satisfied in full and no
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commitment by the Bank to extend credit, make loans, or otherwise extend
financial accommodations to or for the Borrower is outstanding.
Notwithstanding any other provision of this Subordination Agreement, so long as
the Borrower is in compliance with all of the Loan Documents and no event of
Default under the Loan Documents exists and is continuing, the Borrower may pay
and the Creditor may receive, in the ordinary course of business, payments of
principal and current accrued interest on account of the Junior Obligations
provided the payments do not cause an event of default to occur after giving
effect to such payments. Upon and after the occurrence of non-compliance or an
event of default under the Loan Documents, the Borrower shall not pay and the
Creditor shall not receive, whether directly or indirectly or by way of setoff
or otherwise, any of the Junior Obligations unless the Bank shall consent in
writing. The Bank shall use reasonable efforts to notify the Creditor of the
occurrence of non-compliance or an event of default under the Loan Documents,
but any failure of the Bank to give the Creditor any such notice shall not in
any way impair, diminish, or affect the rights and remedies of the Bank under
the Loan Documents or this Subordination Agreement.
In the event of any distribution or payment to the Creditor on or with respect
to the Junior Obligations, whether partial or complete, voluntary or
involuntary, by operation of law or otherwise, other than as permitted in this
Section of this Subordination Agreement, then, and in any such event, any such
payment or distribution of any kind or character, which shall be payable or
deliverable upon or with respect to any of the Junior Obligations, shall, until
all of the Senior Obligations have been fully paid and satisfied, be paid or
delivered directly to the Bank for application against such of the Senior
Obligations, whether due or not due and whether secured or unsecured, as the
Bank shall determine in its sole discretion. Such distribution or payment shall
be delivered in the form of its receipt (except for the addition of any
endorsement or assignment necessary to effect a transfer of all rights therein
to the Bank), and the Bank is irrevocably authorized to supply any endorsement
or assignment which may have been omitted or insufficient. Until so delivered,
any such distribution or payment shall be held in trust by the Creditor for the
Bank and shall not be commingled with other funds or property of the Creditor.
5. Intentionally deleted.
6. Authority to Act for the Creditor.
6.1 For so long as any of the Senior Obligations remain unpaid, the
Creditor irrevocably appoints the Bank as the Creditors attorney-in-fact, and
grants to the Bank a power of attorney with full power of substitution, in the
name of the Creditor or in the name of the Bank, for the use and benefit of the
Bank, without notice to the Creditor or any of its representatives, successors
or assigns, to perform at the Bank's option the following acts:
(a) At any meeting of creditors of the Borrower or in connection with any
case or proceeding, whether voluntary or involuntary, for the distribution,
division, or application of assets of the Borrower or the proceeds thereof,
regardless of whether such case or proceeding is for the liquidation,
dissolution, winding up of affairs, reorganization or arrangement of the
Borrower, or for the composition of the creditors of the Borrower, in
bankruptcy or in connection with a receivership, or under an assignment for the
benefit of creditors of the Borrower or otherwise: (i) to enforce claims
comprising the Junior Obligations, either in its own name or in the name of the
Creditor, by proof of debt, proof of claim, suit, or otherwise; (ii) to collect
any assets of the Borrower distributed, divided or applied by way of dividend
or payment, or any securities issued, on account of the Junior Obligations and
to apply the same, or the proceeds thereof, to the Senior Obligations until all
of the Senior Obligations (including, without limitation, collection expenses
and all interest accruing on the Senior Obligations after the commencement of
any bankruptcy case) have been paid in full, rendering any surplus to the
Creditor if and to the extent permitted by law; (iii) to vote claims comprising
the Junior Obligations to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, or extension; and (iv)
to take generally any action in connection with any such meeting, case, or
proceeding that the Creditor would be authorized to take but for this
Subordination Agreement.
(b) To execute any endorsement, assignment, power of attorney, or
instruments provided for in this Subordination Agreement.
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6.2 In no event shall the Bank be liable to the Creditor for any
failure to prove the Junior Obligations or exercise any right with respect to
the Junior Obligations, or to collect any sums payable on the Junior
Obligations.
6.3 This power of attorney shall be deemed to be coupled with an interest
and shall survive the disability, if any, of the Creditor.
7. Consents, Waivers and Indulgences.
7.1 The Bank may, at any time and from time to time, with or
without consideration, and without further consent of or notice to the Creditor
and without in any manner affecting, impairing, lessening, discharging, or
releasing the Senior Obligations, or any Collateral, or the Creditor or the
Borrower from the terms of this Subordination Agreement: (a) renew, extend,
alter, change the manner, time, place, and terms of payment of, grant any
indulgence with respect to, sue for and collect upon, and otherwise deal with
the Senior Obligations; (b) sell, exchange, release, substitute, surrender,
realize upon, or otherwise dispose of or deal with any Collateral that may now
or hereafter come into the possession or control of the Bank; (c) grant any
indulgence to, release, or otherwise deal with any party primarily or
secondarily liable upon any of the Senior Obligations; and, (d) release any
balance of funds of the Borrower held by the Bank.
7.2 The Creditor waives notice of acceptance of this Subordination
Agreement and of the creation of the Senior Obligations.
7.3 To the fullest extent permitted by law, the Creditor waives
presentment, demand, notice of dishonor, protest, protest and demand, notice of
protest, and notice of payment or nonpayment or other default or dishonor with
respect to the Senior Obligations and documents evidencing, creating, or
securing the Senior Obligations. The Borrower and the Creditor waive notice of
default under this Subordination Agreement.
7.4 The Creditor waives any defense based on the adequacy of a remedy at
law which might be asserted in any action brought by the Bank. To the fullest
extent permitted by law, the Creditor further waives any and all notices and
demands of any kind in connection with all negotiable instruments evidencing
all or any portion of the Senior Obligations or the Junior Obligations to which
the Borrower or the Creditor may be a party and all other demands and notices
of every kind in connection with this Subordination Agreement, the Senior
Obligations or the Junior Obligations. The Creditor assents to any release,
renewal, extension, expansion, compromise or postponement of the time of
payment of the Senior Obligations, or any increase in the amount of the Senior
Obligations, and to any substitution, exchange, or release of the Collateral.
7.5 The Creditor consents and agrees that all of the Senior Obligations
shall be deemed to have been made or incurred at the request of the Creditor
and in reliance upon this Subordination Agreement.
8. Transfer or Assignment of Claims by the Creditor. The Creditor shall
not assign or transfer to others any claim that the Creditor has or may have
against the Borrower while any of the Senior Obligations remain unpaid or there
exists any commitment of the Bank which could give rise to any Senior
Obligations unless such assignment or transfer is expressly made subject to
this Subordination Agreement. The Creditor agrees to indemnify the Bank and
hold the Bank harmless from and against any loss sustained or incurred by the
Bank as a result of the Creditor's failure to comply with the provisions of
this Section.
9. Transfer or Assignment of the Senior Obligations by the Bank.
If any of the Senior Obligations are transferred or assigned by the Bank, this
Subordination Agreement will inure to the benefit of the Bank's transferee or
assignee to the extent of such transfer or assignment; provided, however, that
the Bank shall continue to have the unimpaired right to enforce this
Subordination Agreement as to any of the Senior Obligations not so transferred
or assigned.
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10. Validity of the Junior Obligations. The provisions of this
Subordination Agreement subordinating the Junior Obligations are solely for the
purpose of defining the relative rights of the Bank and the Creditor and shall
not impair the Junior Obligations or the obligation of the Borrower to pay the
Creditor. Nothing contained in this Subordination Agreement shall be deemed to
confer any rights upon the Borrower or to alter or modify any of the rights or
duties of the Borrower with respect to either the Senior Obligations or the
Junior Obligations.
11. Default on the Junior Obligations. The Creditor shall provide the Bank
with immediate notice of the occurrence of any defaults by the Borrower under
the documentation establishing the Junior Obligations.
12. Bank's Duties Limited. The rights granted to the Bank in this
Subordination Agreement are solely for its protection and nothing contained in
this Subordination Agreement imposes on the Bank any duties with respect to any
property either of the Borrower or of the Creditor, whether received earlier or
in the future by the Bank, beyond reasonable care in the custody and
preservation of such property while in the Bank's possession. The Bank has no
duty to preserve rights against prior parties on any instrument or chattel
paper received from the Borrower or the Creditor as collateral security for the
Senior Obligations or any portion thereof.
13. Duration. This Subordination Agreement shall constitute an absolute,
unconditional, and continuing agreement of subordination. The Bank may
continue, without notice to the Creditor, to lend monies, extend credit, and
make other accommodations to or for the account of the Borrower.
14. Remedies Cumulative. Each right, power and remedy of the Bank
hereunder or now or hereafter existing at law, in equity, by statute or
otherwise shall be cumulative and concurrent, and the exercise or beginning of
the exercise of any one or more of them shall not preclude the simultaneous or
later exercise by the Bank of any or all such other rights, powers or remedies.
No failure or delay by the Bank to insist upon the strict performance of any
one or more provisions of this Subordination Agreement or to exercise any
right, power or remedy consequent upon a breach thereof or default hereunder
shall constitute a waiver thereof, or preclude the Bank from exercising any
such right, power or remedy at any other time or times.
15. Legend Evidencing Subordination. All notes and other evidences
(including guarantees) of the Junior Obligations, whether presently existing or
arising in the future, delivered by the Borrower to the Creditor shall contain
a specific statement that the Junior Obligations are subordinated to the Senior
Obligations and are subject to provisions of this Subordination Agreement. The
Creditor shall deliver to the Bank a copy of all such instruments and documents
certified by the Creditor to be a true, accurate, and complete copy of the
original instrument or document.
16. Intentionally deleted.
17. Additional Documentation. The Creditor shall execute and deliver to
the Bank such further instruments and shall take such further action as the
Bank may at any time or times reasonably request in order to carry out the
provisions and intent of this Subordination Agreement.
18. Notice. Any notice, demand, request or other communication which
the Bank or any Creditor may be required to give hereunder shall be in writing,
and shall be given: (a) by hand-delivery; (b) by facsimile transmission; (c)
by commercial overnight courier; or (d) by United States regular mail, postage
prepaid. Such notice, demand, request or other communication shall be addressed
as follows, or to such other addresses as the parties may designate by like
notice:
IF TO ANY OF THE CREDITORS:
William C. Thompson Revocable Trust,
Patsy A. Thompson Revocable Trust, William A.
Thompson and/or Patsy A. Thompson
Attention: William C. Thompson, CEO
cc: William P. Loomis, CFO
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9400 Key West Ave.
Rockville, MID 20850
Fax: (301) 251-1991
IF TO THE BANK:
NationsBank, N.A.
1501 Pennsylvania Avenue, N.W.
Washington, DC 20005
Attention: Brent H. Donnell, Vice President
Location Code: MD2-600-03-08
WITH COPY TO:
NationsBank, N.A.
100 South Charles Street
6th Floor
Baltimore, MD 21201
Attention: Loan Administration
Location Code: MD4-325-06-03
Any communication hereunder will be deemed given and effective (e)
when actually received, in the case of hand delivery; (f) when deposited in the
United States mail or with such courier, in the case of first class mail or
overnight courier; or (g) when completely sent and received, as evidenced by a
transmission report from sender's facsimile machine, in the case of facsimile
transmission.
19. Choice of Law; Consent to Jurisdiction. This Subordination Agreement
shall be governed by, construed and interpreted in accordance with the laws of
the District of Columbia (excluding the choice of law rules thereof). The
Creditor and the Borrower hereby irrevocably submit to the non-exclusive
jurisdiction of any state or federal court sitting in the District of Columbia
in any action or proceeding arising out of or relating to this Subordination
Agreement, and hereby irrevocably waive any objection they may have to the
laying of venue of any such action or proceeding in any such court and any
claim they may have that any such action or proceeding has been brought in an
inconvenient forum. A final judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law.
20. Assignment by the Creditor as Security. To secure the Senior
Obligations and the performance of the provisions of this Subordination
Agreement, the Creditor assigns, pledges, and grants to the Bank all of the
Creditors right, title and interest in and to the Junior Obligations, the
proceeds thereof, and all collateral now or hereafter securing all or any part
of the Junior Obligations. The Creditor shall execute and deliver to the Bank
such powers of attorney, assignments, or other instruments as may be requested
by the Bank in order to enable the Bank to enforce any and all claims upon or
with respect to any of the Junior Obligations and to collect and receive any
and all payments or distributions which may be payable or deliverable at any
time upon or with respect to the Junior Obligations.
21. Assignability. This Subordination Agreement shall inure to the
benefit of and be enforceable by the Bank and the Bank's successors and assigns
and any other person to whom the Bank may grant an interest in Senior
Obligations, and shall be binding and enforceable against the Creditor and the
Creditor's personal representatives, successors and assigns.
22. Counterparts. This Subordination Agreement may be executed in
duplicate originals or in several counterparts, each of which shall be deemed
an original but all of which together shall constitute one instrument.
23. Invalidity of Any Part. In the event that any of one or more of
the provisions of this Subordination Agreement shall for any reason be held to
be invalid, illegal or unenforceable, in whole or in part or in any respect, or
in the event that any one or more of the provisions of this Subordination
Agreement operate or would prospectively operate to invalidate this
Subordination Agreement, then and in any of those events, the following shall
occur: (a) the provision(s) shall be enforced to the fullest extent of
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its validity, legality and enforceability; or, (b) if such provision(s) would
operate so as to invalidate this entire Subordination Agreement, only such
provision(s) shall be void as though not herein contained, and the remainder of
the clauses and provisions of this Subordination Agreement will remain in full
force and effect.
24. Expenses. The Creditor agrees to pay to the Bank on demand
all expenses of any kind, including reasonable attorneys' fees, that the Bank
may incur in enforcing any of its rights under this Subordination Agreement.
All such costs and expenses as calculated or determined by the Bank shall bear
interest at a per annum rate of interest equal to the then highest rate of
interest charged on the principal of any of the Senior Obligations plus 2% per
annum, from the date incurred by the Bank until repaid in full.
25. WAIVER OF JURY TRIAL. THE CREDITOR AND THE BORROWER HEREBY (I)
COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT
BY A JURY, AND (II) WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH
THE BANK AND THE CREDITOR MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH OR
IN ANY WAY PERTAINING TO THIS SUBORDINATION AGREEMENT.
26. Miscellaneous. The paragraph headings of this Agreement are for
convenience only, and shall not limit or otherwise affect any of the terms
hereof. The term "Obligations" as used herein shall not include any loan
primarily for personal, family or household purposes. This Subordination
Agreement constitutes the entire agreement between the parties with respect to
their subject matter and supersedes all prior letters, representations, or
agreements, oral or written, with respect thereto. No modification, change,
waiver or amendment of this Subordination Agreement shall be deemed to be made
by the Bank unless in writing signed by the Bank, and each such waiver, if any,
shall apply only with respect to the specific instance involved. No course of
dealing or conduct shall be effective to amend, modify, waive, release or
change any provisions of this Subordination Agreement, and the Bank shall have
the right at all times to enforce the provisions of this Subordination
Agreement in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of the Bank in refraining
from so doing at any time or times.
IN WITNESS WHEREOF, and intending to create an instrument executed under seal,
the parties to this Subordination Agreement have duly executed this
Subordination Agreement under seal as of the date and year first written above.
WITNESS/ATTEST: CREDITOR
William C. Thompson Revocable Trust
By: /s/ William C. Thompson [SEAL]
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William C. Thompson, Trustee
Patsy A. Thompson Revocable Trust
By: /s/ Patsy A. Thompson [SEAL]
- ----------------------- -------------------------------------------------
Patsy A. Thompson, Trustee
By: /s/ William C. Thompson [SEAL]
- ----------------------- -------------------------------------------------
William C. Thompson, Individually
By: /s/ Patsy A. Thompson [SEAL]
- ----------------------- -------------------------------------------------
Patsy A. Thompson, Individually
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BORROWER:
FileTek, Inc.
By: /s/ William C. Thompson [SEAL]
- -------------------------- -----------------------------------------
William C. Thompson, CEO
FileTek UK Limited
By: /s/ William C. Thompson [SEAL]
- -------------------------- -----------------------------------------
Name: William C. Thompson
Title:
BANK:
NationsBank, N.A.
By: /s/ Brent Donnell [SEAL]
- -------------------------- -----------------------------------------
Brent Donnell, Vice President
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