EXHIBIT 10.16
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this "Agreement"), dated as of June 28,
2004, is by and among CrossHill Georgetown Capital, L.P. ("CrossHill"), a
Delaware limited partnership, Cornell Capital Partners, L.P. ("Cornell"), a
Delaware limited partnership, (Cornell and CrossHill, collectively, the
"Lenders") and Solution Technology International, Inc., a Delaware corporation
(the "Borrower"). All terms used herein which are defined in Section 1 hereof or
in the text of any other Section hereof shall have the meanings given therein.
WITNESSETH:
WHEREAS, pursuant to that certain Loan and Security Agreement dated as of
January 10, 2003, as amended (the "CrossHill Loan Agreement") between the
Borrower and CrossHill, CrossHill has made and may hereafter make revolving
loans to the Borrower in the maximum principal amount of $750,000 (the
"CrossHill Loan");
WHEREAS, pursuant to the CrossHill Loan Agreement, the Borrower has
granted liens in substantially all of its assets (the "Collateral") in favor of
CrossHill to secure the Obligations defined in the CrossHill Loan Agreement;
WHEREAS, pursuant to that certain Convertible Debenture dated as of June
28, 2004 (the "Cornell Loan Agreement" and, together with the CrossHill Loan
Agreement, collectively, the "Loan Agreements") among the Borrower and Cornell,
Cornell is making a loan on the date hereof to the Borrower in the maximum
principal amount of $600,000 (the "Cornell Loan" and together with the CrossHill
Loan, the "Loans" and each a "Loan");
WHEREAS, pursuant to that certain Security Agreement dated as of June 28,
2004 (the "Cornell Security Agreement"), the Borrower has granted a lien in the
Collateral in favor of Cornell and to secure its obligations under the Cornell
Loan Agreement;
WHEREAS, the Borrower must obtain the consent of CrossHill to the lien
granted to Cornell under the Cornell Security Agreement;
WHEREAS, the Lenders desire to agree upon the priorities of their
respective liens on the Collateral and for the application of proceeds of the
Collateral after certain events and certain payments with respect to the
Indebtedness (as that term is defined below) and to agree upon various other
matters with respect to their respective agreements with the Borrower and their
rights thereunder.
NOW, THEREFORE, for the above reasons, in consideration of the mutual
covenants herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
Unless otherwise defined herein, for the purposes of this Agreement,
the following terms shall have the meanings specified with respect thereto
below. Any plural term that is used herein in the singular shall be taken to
mean each entity or item of the defined class and any singular term that is used
herein in the plural shall be taken to mean all of the entities or items of the
defined class, collectively.
"Enforcement" shall mean (a) for any Lender to make written demand
for payment of or accelerate the time for payment of any of the Indebtedness (as
that term is defined below)in favor of such Lender, (b) for any Lender to
terminate its commitment to make revolving loans prior to the scheduled date for
the expiration of such commitment, as such date may be extended from time to
time, (c) for any Lender to commence enforcement of any rights or remedies under
or with respect to any Loan Agreement, any note, or any other Indebtedness, or
to set off or appropriate any balances held by it for the account of Borrower or
any other property at any time held or owing by it to or for the credit or
account of Borrower, (d) for any Lender to commence the judicial or non judicial
enforcement of any rights or remedies under the Loan Agreements or the Cornell
Security Agreement (the "Collateral Documents") (other than an action solely for
the purpose of establishing, continuing or defending the lien or security
interest intended to be created by the Collateral Documents upon or in any
Collateral as against or from claims of third parties on or in such Collateral),
to appropriate any property at any time held or owing by it to or for the credit
or for the account of any Borrower or to otherwise take any action to realize
upon the Collateral, or (e) the commencement by, against or with respect to
Borrower of any proceeding under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law or for the appointment of a receiver ("Insolvency Proceedings")
either.
"Enforcement Proceeds" shall have the meaning given in Section 4(a)
hereof.
"Event of Default" shall mean the occurrence of an "Event of
Default", as defined in the Loan Agreements, which is not waived by a Lender.
"Indebtedness" shall mean the principal amount of and interest due
to the Lenders, and all of the other present or future indebtedness, liabilities
and obligations of Borrower now or hereafter owed to any or all of the Lenders
under the Note, the Loan Agreements, the Collateral Documents or any agreements
or instruments delivered under or in connection therewith, and all renewals and
extensions thereof; provided that any amount of Indebtedness that is not allowed
as a claim against the Borrower in any Insolvency Proceeding shall not
constitute "Indebtedness" for the purposes of Section 4(c) and 4(d) of this
Agreement.
"Note" shall mean the note issued pursuant to the CrossHill Loan
Agreement.
"Sharing Date" with respect to an Enforcement shall mean the
earliest date on or prior to the date of such Enforcement and (a) on which a
Sharing Event occurs and (b) on each date after which, until the date of such
Enforcement, one or more Sharing Events were in effect.
"Sharing Event" shall mean (a) an Enforcement, (b) the occurrence of
any Event of Default (unless such Event of Default has been waived pursuant to
the terms of the Loan Agreements with the consent of the respective Lender), or
(c) any refusal by either Lender to make any revolving loan requested by the
Borrower (irrespective of whether the conditions precedent thereto specified in
the applicable Loan Agreement have been satisfied) where such revolving loan
would not cause the Borrower to exceed the limitations set forth in such Loan
Agreement.
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2. Lien Priorities. The parties hereto expressly agree that the
security interests and liens granted to the Lenders shall secure the
Indebtedness on a pro-rata basis and that, notwithstanding the relative priority
or the time of grant, creation, attachment or perfection under applicable law of
any security interests and liens of the Lenders upon or in any of the Collateral
to secure any Indebtedness, whether such security interests and liens are now
existing or hereafter acquired or arising and whether such security interests
and liens are in or upon now existing or hereafter arising Collateral, such
security interests and liens shall be first and prior security interests and
liens in favor of the Lenders to secure the Indebtedness on a pro-rata basis.
3. Certain Notices. Each Lender agrees to use its reasonable efforts to
give to the others (a) copies of any notice of the occurrence or existence of an
Event of Default sent to Borrower, promptly after the sending of such notice to
Borrower, (b) notice of the occurrence or existence of an Event of Default of
which such party has knowledge, promptly after obtaining knowledge thereof, (c)
notice of refusal of a Lender to make a revolving loan promptly after such
refusal, and (d) notice of an Enforcement by such party, prior to commencing
such Enforcement, but the failure to give any of the foregoing notices shall not
affect the validity of such notice of an Event of Default given to the Borrower
or create a cause of action against or cause a forfeiture of any rights of the
party failing to give such notice or create any claim or right on behalf of any
other Lender or third party.
4. Distribution of Proceeds of Collateral After Enforcement; Sharing of
Certain Payments.
(a) Distribution of Enforcement Proceeds. On and after the
occurrence of a Sharing Event, all proceeds of Collateral received by any Lender
(including, without limitation, any amount of any balances held by any Lender
for the account of any other Lender or any other property held or owing by it to
or for the credit or for the account of any Lender setoff or appropriated by it)
("Enforcement Proceeds") shall be delivered to the Lenders and distributed on a
pro rata basis.
(b) Distribution of Payments to be Shared. On and after the
occurrence of a Sharing Event, and any other payments received, directly or
indirectly, by any Lender on or with respect to any Indebtedness (including,
without limitation, any payment under any guaranty agreement, any payment in any
Insolvency Proceeding and the proceeds from any sale of any Indebtedness or any
interest therein to Borrower) shall be shared by the Lenders on a pro rata
basis.
(c) Priority of Distributions. The distribution of amounts
described in Section 4(a) and (b) shall be made to the Lenders on a pro rata
basis, with payments being made to each Lender in the following order:
(i) first, to pay each Lender's reasonable costs and
expenses in connection with such Enforcement;
(ii) second, to pay accrued and unpaid interest on each Loan;
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(iii) third, to pay unpaid principal on each Loan; and
(iv) finally, the balance of proceeds of the Collateral and
any payments, if any, shall be paid as required by law.
(e) Application of Payments to be Shared by Lenders. The
distribution provisions of this Section 4 are for the purpose of determining the
relative amounts to be distributed to the Lenders and not for the purpose of
creating an agreement among the parties as to the manner in which any payments
and/or proceeds distributed to them pursuant to this Section 4 are actually to
be applied to pay the Indebtedness.
(e) Pro-rata Sharing. All of the rights, interests and obligations
of each Lender under the Loan Agreements and the Collateral Documents, including
security interests in the Collateral, shall be shared by the Lenders in the
ratio of (a) the aggregate original principal amount of the sum of such Lender's
Loans under the Loan Agreements to (b) the aggregate principal amount of all
Loans to Borrower under the Loan Agreements. Any reference in this Agreement to
an allocation between or sharing by the Lenders of any right, interest or
obligation "ratably," "proportionally" or in similar terms shall refer to this
ratio.
5. Other Guaranties; Liens and Security Interests.
(a) Each of the Lenders agrees that it may exercise any rights or
remedies under the Loan Agreements or the Collateral Documents which have or may
have arisen or which may arise as a result of an Event of Default or an
acceleration of the maturities of the Indebtedness and that it will give the
other Lender prompt written notice of the exercise of any such rights or
remedies.
(b) No Lender shall take or receive a security interest in or lien
upon any of the property or assets of Borrower as security for the payment of
any indebtedness of Borrower other than the Indebtedness, nor shall Lender take
or receive a security interest in or a lien upon any of the property or assets
of Borrower as security for the payment of any Indebtedness other than liens and
security interests granted to such Lender in the Collateral pursuant to the Loan
Agreements and/or the Collateral Documents.
(c) Nothing contained in this Agreement shall (i) prevent either
Lender from imposing a default rate of interest in accordance with the
applicable Loan Agreement, or the Note, as applicable, or prevent a Lender from
raising any defenses in any action in which it has been made a party defendant
or has been joined as a third party, or (ii) affect or impair the right aither
Lender may have under the terms and conditions governing the Indebtedness to
accelerate and demand repayment of such Indebtedness. Subject only to the
express limitations set forth in this Agreement, each Lender retains the right
to freely exercise its rights and remedies as a general creditor of Borrower in
accordance with applicable law and agreements with Borrower, including without
limitation the right to file a lawsuit and obtain a judgment therein against
Borrower and to enforce such judgment against any assets of the Borrower other
than the Collateral. Nothing contained in this Agreement shall be construed as
an amendment of, or a waiver of or a consent to the departure by Borrower from,
any provision of the Loan Agreements.
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(e) Subject to the provisions set forth in this Agreement, each
Lender may (without having to account therefor to any other Lender) own, sell,
acquire and hold equity and debt securities of the Borrower and lend money to
and generally engage in any kind of business with the Borrower, and, subject to
the provisions of this Agreement, the Lenders may prior to a Sharing Event
accept interest, principal payments, fees and other consideration from the
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the other Lender.
6. Accounting; Adjustments.
(a) Each Lender agrees to render an accounting to the other Lender
of the amounts of the outstanding Indebtedness, receipts of payments from the
Borrower and of other items relevant to the provisions of this Agreement upon
the reasonable request from the other Lender as soon as reasonably practicable
after such request, giving effect to the application of payments and collections
as hereinbefore provided in this Agreement.
(b) Each party hereto agrees that (i) to the extent any payment of
any payment distributed to it hereunder is in excess of the amount due to be
distributed to it hereunder, it shall pay to the other parties hereto such
amounts so that, after giving effect to such payments, the amounts received by
all parties are equal to the amounts to be paid to them hereunder, and (ii) in
the event any payment of any payment made to any party hereto is subsequently
invalidated, declared fraudulent or preferential, set aside or required to be
paid to a trustee, receiver, or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then each of the other parties
hereto shall pay such party such amounts so that, after giving effect to the
payments hereunder by all other parties, the amounts received by all parties are
not in excess of the amounts to be paid to them hereunder as though such payment
so invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid had not been made.
7. Notices. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
three (3) business days after deposit in the United States mails, with proper
postage prepaid, one business day after delivery to a courier for next day
delivery, upon delivery by courier or upon transmission by telecopy or similar
electronic medium (provided that a copy of any such notice sent by such
transmission is also sent by one of the other means provided hereunder within
one day after the date sent by such transmission) to the addresses set forth
below the signatures hereto, with a copy to any person or persons set forth
below such signature shown as to receive a copy, or to such other address as any
party designates to the others in the manner herein prescribed. Any party giving
notice to any other party hereunder shall also give copies of such notice to all
other parties.
8. Contesting Liens or Security Interests; No Partitioning or
Marshalling of Collateral; Contesting Indebtedness.
No Lender shall contest the validity, perfection, priority or
enforceability of or seek to avoid, have declared fraudulent or have put aside
any lien or security interest granted to any other Lender as contemplated hereby
and each party hereby agrees to cooperate in the defense of any action
contesting the validity, perfection, priority or enforceability of such liens or
security interests.
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9. No Additional Rights for Borrower Hereunder. Borrower, by its
consent hereto, acknowledges that it shall have no rights under this Agreement.
If either Lender shall violate the terms of this Agreement, Borrower agrees, by
its consent hereto, that it shall not use such violation as a defense to any
enforcement by any such party against Borrower nor assert such violation as a
counterclaim or basis for setoff or recoupment against any such party.
10. Insolvency Proceedings. Nothing contained herein shall limit or
restrict the independent right of any Lender to initiate an action or actions in
any Insolvency Proceeding in its individual capacity and to appear or be heard
on any matter before the bankruptcy or other applicable court in any such
proceeding, including, without limitation, with respect to any question
concerning the post-petition usage of collateral and post-petition financing
arrangements, provided such initiating Lender provides other Lender prior or
concurrent notice of the initiation of any such action. This Agreement shall
survive the commencement of any Insolvency Proceeding.
11. Independent Credit Investigation. No Lender, nor any of its
respective directors, officers, agents or employees, shall be responsible to any
of the others for the solvency or financial condition of Borrower or the ability
of Borrower to repay any of the Indebtedness or perform its obligations under
any of the Collateral Documents, or for the value, sufficiency, existence or
ownership of any of the Collateral, the perfection or vesting of any lien or
security interest, or the statements of Borrower, oral or written, or for the
validity, sufficiency or enforceability of any of the Indebtedness, the Loan
Agreements, the Note, any document or agreement executed or delivered in
connection with or pursuant to any of the foregoing, or any liens or security
interests granted by Borrower in connection therewith. Each Lender has entered
into its respective financial agreements with Borrower based upon its own
independent investigation, and makes no warranty or representation to the
others, nor does it rely upon any representation by any of the others, with
respect to the matters identified or referred to in this Section.
12. Supervision of Obligations. Except to the extent otherwise expressly
provided herein, each Lender shall be entitled to manage and supervise the
obligations of the Borrower to it in accordance with applicable law and such
Lender's practices in effect from time to time without regard to the existence
of any other Lender.
13. Turnover of Collateral. If after a Sharing Event, a Lender acquires
custody, control or possession of any Collateral or any proceeds thereof other
than pursuant to the terms of this Agreement, such Lender, as the case may be,
shall promptly cause such Collateral or the proceeds thereof to be distributed
in accordance with the provisions of Section 4 of this Agreement. Until such
time as such Lender shall have complied with the provisions of the immediately
preceding sentence, such Lender shall be deemed to hold such Collateral and the
proceeds thereof in trust for the parties entitled thereto under this Agreement.
14. Amendment. This Agreement and the provisions hereof may be amended,
modified or waived only by a writing signed by all of the Lenders.
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15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each of the
parties hereof, including subsequent holders of the Indebtedness and persons
subsequently becoming parties to the Loan Agreements as a "Lender" thereunder,
provided that no Lender shall assign or transfer any interest in any
Indebtedness or permit such person to become such a party to a Loan Agreement
unless such transfer or assignment is made subject to this Agreement and such
transferee, assignee or person becomes a signatory to this Agreement and assumes
the obligations of the transferor or assignor hereunder from and after the time
of such transfer or assignment or the time such person becomes a party to a Loan
Agreement. Upon an assignment by any Lender of all or any portion of any Note
and the assumption by the transferee of such Lender's obligations hereunder in
respect of such Note, or portion thereof, so assigned, such Lender shall be
automatically released from all obligations thereafter accruing hereunder in
respect of such Note or portion thereof, so assigned.
16. Termination. In the event (i) a Loan Agreement is terminated, all
Indebtedness of the Borrower is paid in full, and (ii) the Lenders have no
outstanding obligations hereunder with respect to payments previously received
and distributed hereunder, this Agreement shall terminate 91 days after the last
to occur of any event referred to in the preceding clauses (i) and (ii) so long
as no proceeding under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law or
for the appointment of a receiver for Borrower or its assets is commenced prior
to such 91st day.
17. Amendment, Supplement or Waiver of Agreements with Borrower, etc.
Nothing contained in this Agreement shall limit or restrict the rights of the
Lenders and the Borrower to amend, supplement, restate or waive any provision of
the Loan Agreement to which they are a party, any Note or any guaranty agreement
or other agreement or instrument related thereto or executed and delivered in
connection therewith (including, without limitation, to increase the amount of
Indebtedness or waive an Event of Default), provided no such amendment increases
the amount of any Lender's Loan.
18. Cooperation. The Lenders hereby agree to fully cooperate with each
other in order to promptly discharge the terms and provisions of this Agreement.
The Lenders also hereby agree, from time to time, to execute and deliver any and
all other agreements, documents or instruments and to take such actions, all as
may be reasonably necessary to effectuate the terms, provisions and intent of
this Agreement.
19. Representations and Warranties. Each Lender represents and warrants
to the Lenders that it is duly organized, validly existing and in good standing
under the laws of this respective jurisdiction of incorporation or organization,
that it has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its respective obligations hereunder, that this
Agreement has been duly authorized, executed and delivered by it or on its
behalf, and that this Agreement is enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, arrangement, insolvency, fraudulent conveyance, moratorium or
similar laws affecting the enforcement of the rights of creditors generally as
at the time in effect, by common law or statutory requirements with respect to
commercial reasonableness, and by general principles of equity.
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20. No Third Party Beneficiaries. This Agreement is intended solely to
govern the relationship among the Lenders, and intended for the sole benefit of
the Lenders and their transferees, successors and assigns. This Agreement shall
not benefit or create any right or cause of action in, or on behalf of, Borrower
or other person, other than the Lenders and their transferees, successors and
assigns.
21. Counterparts. 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, but all of which together shall constitute but
one and the same 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 whom enforcement is sought.
23. Governing Law. THIS AGREEMENT SHALL BE GOVERNED AS TO VALIDITY,
INTERPRETATIONS, ENFORCEMENT EVENT AND EFFECT BY THE LAWS OF THE COMMONWEALTH OF
VIRGINIA (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS
AGREEMENT TO BE GOVERNED BY THE LAWS OF ANY OTHER JURISDICTION).
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Intercreditor Agreement
as of the day and year first written above.
CROSSHILL GEORGETOWN CAPITAL, L.P.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Principal
------------------------------
Address for notices:
0000 Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
CORNELL CAPITAL PARTNERS, L.P.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
Title:
------------------------------
Address for notices:
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxx X. Xxxxx, Esq.
ACKNOWLEDGMENT OF AND CONSENT AND AGREEMENT
TO INTERCREDITOR AGREEMENT
The undersigned, the Borrower described in the Intercreditor Agreement set
forth above, acknowledges and, to the extent required, consents to the terms and
conditions thereof. The undersigned Borrower does hereby further acknowledge and
agree to its agreements under the Intercreditor Agreement and acknowledges and
agrees that it is not a third-party beneficiary of, or has any rights under, the
Intercreditor Agreement. The undersigned hereby further agrees that any proceeds
or any payment made to any Lender which is required to be delivered to the
Lender in accordance with the provisions of the Intercreditor Agreement shall be
deemed to have been delivered by the Borrower to pay the Indebtedness in the
amounts in which any such proceeds or payments are allocated under Section 4
notwithstanding the amount initially paid to or received by any particular
Lender.
This Acknowledgment of and Agreement to Intercreditor Agreement and any
amendment hereof 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, but all of which together shall constitute but one of the same
instrument. In proving this Acknowledgment of and Agreement to Intercreditor
Agreement it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
IN WITNESS WHEREOF, the undersigned has caused this Acknowledgment of and
Consent and Agreement to Intercreditor Agreement to be executed by its duly
authorized officers as of June __, 2004.
SOLUTION TECHNOLOGY INTERNATIONAL, INC.
By: /s/ Xxx Xxxxxx
-------------------------------------
Name: Xxx Xxxxxx
Title: President
