printer-friendly

Sample Business Contracts

Intercreditor Agreement - SheerVision Inc.

Sponsored Links

                                                                  EXECUTION COPY
================================================================================



                  --------------------------------------------

                             INTERCREDITOR AGREEMENT

                           RELATING TO THE OFFERING OF

                     12% SECURED CONVERTIBLE NOTES DUE 2006

                                       OF

                                SHEERVISION, INC.

                  --------------------------------------------





                         DATED AS OF SEPTEMBER 13, 2005


================================================================================
<PAGE>

       INTERCREDITOR AGREEMENT (this "AGREEMENT"),  dated as of September
       13, 2005, between SHEERVISION, INC., a California corporation with
       offices  located  at 4040 Palos  Verdes  Drive  North,  Suite 105,
       Rolling Hills Estates,  California  90274 (the  "COMPANY") and THE
       HOLDERS (the "INVESTORS") of the 12% Secured Convertible Notes due
       2006 of the COMPANY (the "NOTES").


                                  INTRODUCTION

       In accordance with the Confidential Private Placement  Memorandum,  dated
August 24, 2005, of the Company and the documents  attached thereto,  including,
without   limitation,   the   Subscription   Package   attached   thereto   (the
"SUBSCRIPTION"),  the  Investors  have agreed to  purchase  from the Company the
Notes,  each dated as of the date  hereof,  and  delivered  respectively  to the
Investors  pursuant to the  Subscription,  dated as of the date  hereof,  by and
between  the  Company  and  each  of  the  Investors.  Pursuant  to  Notes,  the
obligations  of the Company under the Notes are secured by a security  interest,
granted  in favor of the  Investors  in and to all  property  and  assets of the
Company (the "SECURITY INTEREST").  The Company's  obligations,  as set forth in
the Notes, are sometimes referred to herein as the "COMPANY'S OBLIGATIONS".  The
Investors  desire to enter  into  this  Agreement  in order to set  forth  their
understanding with respect to several matters pertaining to the servicing of the
Loan (as  hereinafter  defined) and the enforcement of their  respective  rights
with  respect to the  Notes,  as well as  matters  related to the  subordination
thereof.

       NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises,  representations,  warranties, and covenants hereinafter set forth and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:

       1.     Loan Advance.

              The Investors have advanced,  pursuant to the terms and conditions
set forth in the  Transaction  Documents (as defined in the Notes),  the amounts
set forth in Exhibit A attached hereto (in the aggregate,  the "LOAN").  For the
purposes of this  Agreement,  the amount of  principal,  plus  interest  accrued
thereon,  owed to each Investor under its respective Note as a proportion of the
aggregate amount of the Loan, shall be referred to as such Investor's respective
percentage interest (the "PERCENTAGE INTERESTS").

       2.     Ownership Interest.

              Each  Investor  shall  own an  interest  in the Loan  equal to its
Percentage  Interest as described on Exhibit A and each  Investor  shall own its
interest the  Company's  Obligations.  Except as otherwise  stated  herein,  the
Investor  shall own,  PARI PASSU to each of the other  Investors,  an  undivided
fractional  interest equal to such  Investor's  Percentage  Interest in: (a) the

<PAGE>

Loan;  (b) all payments made on or in respect of the Loan; (c) all recoveries or
distributions  in  connection  with the Loan;  and (d) all  present  and  future
collateral (and all proceeds in connection therewith) securing the same.

       3.     No Representation or Warranty Relating to Loan.

              3.1.   No Investor has made any warranty or  representation to any
other Investor,  expressed or implied, with respect to the Loan, the adequacy of
security for the Loan, the existing or future solvency or financial worth of the
Company,  and the  ability of the  Company  to repay the Loan and the  Company's
Obligations.  Each  Investor  acknowledges  that  the  Loan  and  the  Company's
Obligations  carry a high  degree of risk;  that the  Company may default on the
Loan, which may result in a bankruptcy filing and/or foreclosure action and/or a
deterioration  of the  collateral  for the Loan; and that it may not be possible
for the Investors to collect the full principal  balance of the Loan, any or all
of the accrued  interest on the Loan,  and/or any or all other  amounts due with
respect to the Loan.

              3.2.   Any  information,  data,  projections  and other  materials
heretofore  supplied  to each  Investor  has  been  extrapolated  from  material
supplied by the Company or due diligence.  Each Investor acknowledges and agrees
that no  Investor  makes any  representation  or  warranty  as to the nature and
quality of such information.  Each Investor  acknowledges and agrees that it has
had ample opportunity to make and have made such investigations as it has deemed
necessary under the circumstances.

       4.     Expenses.

              All expenses including, but not limited to, counsel fees and court
costs paid or incurred by any Investor (an  "OBLIGATED  PARTY") in any action to
collect or foreclose on any of the Company's Obligations,  the Security Interest
or the Loan, shall be borne by the Investors in accordance with their respective
Percentage  Interests  at the time of the default or the failure of  performance
giving  rise to the action to collect  or  enforce  the rights of the  Investors
under  the  Noteor  the  Company's  Obligations.  Payment  shall be made by each
Investor to the Obligated  Party within five (5) days after receipt of notice of
demand for the payment of such Investor's PRO RATA share. If such payment is not
made when due,  the  Obligated  Party may make such  payment  on the  defaulting
Participant's  behalf,  such  payment  shall  bear  interest  at the rate of ten
percent (10%) PER ANNUM and shall be automatically repaid to the Obligated Party
out of the first funds received on behalf of the defaulting  Participant from or
on behalf of the Company.

       5.     Distribution of Sale or Refinance Proceeds.

              5.1.   If Company repays or refinances the Loan, or if the Company
is in default of the Company's Obligations and any Investor sells or disposes of
any  Collateral for the Loan or any Investor  otherwise  recovers all or part of
the  principal  and interest and other amounts due and owing under the Company's
Obligations,  the net  proceeds  of said  refinances  or sale or the  amount  of
principal,  interest  and  other  amounts  repaid  shall be  distributed  in the
following order of priority:

                     (a)    First,   repayment  of  each   Investor's   expenses
described above in Section 4;

                                      -2-
<PAGE>


                     (b)    Second,   repayment  of  remaining   principal   and
interest (exclusive of default interest and late charges to each Investor);

                     (c)    Third, repayment of default interest,  late charges,
and any other  amounts  to each  Investor  PARI PASSU in  accordance  with their
respective Percentage Interests;

              5.2.   The priorities of allocation set forth in Section 5.1 shall
apply in all  circumstances,  including with respect to any distribution made in
any  case or  proceeding  under  Title 11 of  United  States  Code or any  other
proceeding  relating  to  the  Company  under  any  bankruptcy,  reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation.

              5.3.   If any  Investor  (an  "EXCESS  PARTY")  shall  obtain  any
payment or other recovery  (whether  voluntary,  involuntary,  by application of
setoff,  or otherwise) as a result of the  realization,  sale or other  remedial
disposition  of, or foreclosure  on, any  Collateral or any repayment  under the
Note in excess of the amount it is then  entitled to receive  under the terms of
this  Agreement and the Note,  such Excess Party shall hold such amount in trust
for the ratable  benefit of the other  Investors in accordance with the terms of
this Agreement.

       6.     Subordination.

              6.1.   The Investors hereby expressly  subordinate the obligations
under the Notes to the Qualified Facility (as hereinafter  defined) as set forth
below.  Notwithstanding  the respective dates of attachment or perfection of the
security  interest of the  Investors  and the  security  interest  securing  the
Qualified Facility, the security interest securing the Qualified Facility in the
Collateral  shall at all times be senior to the security  interest of Investors.
For purposes hereof, the term "QUALIFIED FACILITY" shall mean a single revolving
credit  line or  term  loan  entered  into by the  Company  and an  FDIC-insured
commercial  bank  lender  between  the Issue Date and the  Maturity  Date with a
principal amount not to exceed $1,000,000.

              6.2.   The Notes shall be  subordinated in right of payment to the
payment  obligations  of the Company  set forth in the  Qualified  Facility  now
existing  or  hereafter  arising,  together  with all costs of  collecting  such
obligations  (including  attorneys' fees),  including,  without limitation,  all
interest  accruing  after the  commencement  by or  against  the  Company of any
bankruptcy, reorganization or similar proceeding.

              6.3.   The  Investors  shall be entitled to receive the payment of
the principal amount of, and accrued and unpaid interest on, the Notes, provided
that an Event of Default,  as defined in the Notes,  has not occurred and is not
continuing and would not exist  immediately  after such payment.  Nothing in the
foregoing paragraph shall prohibit the Investors from converting all or any part
of the obligations under the Notes into equity securities of the Company.

              6.4.   The Investors  shall promptly  deliver to the creditor with
respect to the Qualified  Facility in the form received  (except for endorsement
or assignment by the Investor where required by the creditor with respect to the
Qualified  Facility)  for  application  to the  obligations  under the Qualified
Facility  any  payment,  distribution,  security or proceeds  received


                                      -3-
<PAGE>


by, or on behalf of, the  Investor  with  respect to the  obligations  under the
Notes other than in accordance with this Agreement.

              6.5.   In the event of the Company's insolvency, reorganization or
any case or proceeding  under any  bankruptcy or insolvency law or laws relating
to the  relief of  debtors,  these  provisions  shall  remain in full  force and
effect,  and the claims of the creditor with respect to the  Qualified  Facility
against  the  Investors  and the  estate of any  Investor  shall be paid in full
before any payment is made to any Investor.

              6.6.   By the execution of this  Agreement,  the Investors  hereby
authorize  the  creditor  under the  Qualified  Facility to amend any  financing
statements  filed  by  or  on  behalf  of  the  Investors  against  the  Company
substantially  as follows:  "In accordance with a terms and conditions set forth
in the 12%  Secured  Convertible  Notes  due 2006 by the  Debtor in favor of the
creditors,  has  subordinated  any  security  interest or lien that such secured
party may have in any  property  of the Debtor to the  security  interest of the
undersigned in all assets of the Debtor, notwithstanding the respective dates of
attachment or  perfection of the security  interest of the secured party and the
undersigned."

              6.7.   No amendment of the documents evidencing or relating to the
obligations  under the Notes shall directly or indirectly  modify the provisions
of  this   Agreement  in  any  manner  which  might   terminate  or  impair  the
subordination  of the obligations  under the Notes or the  subordination  of the
security  interest or lien that the  Investors  may have in any  property of the
Company.  By way of  example,  such  instruments  shall  not be  amended  to (i)
increase the rate of interest with respect to the  obligations  under the Notes,
or (ii) accelerate the payment of the principal or interest or any other portion
of the obligations under the Notes.

       7.     Miscellaneous.

              7.1.   Authorization.   Each  of  the   Investors   warrants   and
represents  that it is duly authorized to execute this Agreement and comply with
its obligations hereunder.

              7.2.   Survival.  The representations,  warranties,  covenants and
agreements made herein shall survive the execution of this Agreement.

              7.3.   Assignment.  This Agreement and the rights and  obligations
hereunder  shall not be assignable or  transferable  by any party hereto without
the prior written consent of the other party. Any instrument  purporting to make
an assignment in violation of this Section 7.3 shall be void.

              7.4.   Benefits of Agreement.  This Agreement and all  obligations
hereunder  shall be binding  upon the  successors  and  assigns  of the  parties
hereto,  and  shall,  together  with the rights and  remedies  of the  Investors
hereunder, inure to the benefit of the Investors and their respective successors
and assigns.

              7.5.   Entire Agreement. This Agreement and the Exhibit hereto and
the  Transaction  Documents  constitute  the full and entire  understanding  and
agreement  between the parties with regard to the  subjects  hereof and no party
shall be  liable or bound to any  other in any  manner  by any  representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.

                                      -4-
<PAGE>


              7.6.   Severability.  In case any provision of the Agreement shall
be invalid, illegal or unenforceable,  the validity, legality and enforceability
of the  remaining  provisions  shall  not in any  way be  affected  or  impaired
thereby.

              7.7.   Further Assurances. Each party agrees to execute such other
documents, instruments,  agreements and consents, and take such other actions as
may be  reasonably  requested  by the other  parties  hereto to  effectuate  the
purposes of this Agreement.

              7.8.   Amendment  and  Waiver.  This  Agreement  may  be  amended,
modified or waived only with the prior written consent of each of the parties.

              7.9.   Delays or Omissions. It is agreed that no delay or omission
to exercise any right,  power or remedy accruing to any party,  upon any breach,
default  or   noncompliance  by  another  party  under  this  Agreement  or  the
Transaction  Documents,  shall impair any such right, power or remedy, nor shall
it be construed to be a waiver of any such breach, default or noncompliance,  or
any  acquiescence  therein,  or  of  or  in  any  similar  breach,   default  or
noncompliance  thereafter  occurring.  It is  further  agreed  that any  waiver,
permit,  consent or approval of any kind or character of any breach,  default or
noncompliance under this Agreement or the Transaction  Documents,  or any waiver
on such  party's part of any  provisions  or  conditions  therein and must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies shall be cumulative and not alternative.

              7.10.  Notices.  All notices required or permitted hereunder shall
be in writing and shall be deemed  effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed facsimile if sent during
normal  business hours of the recipient,  if not, then on the next business day,
(c) five (5) days after having been sent by registered or certified mail, return
receipt  requested,  postage  prepaid,  or (d) one (1) day after  deposit with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written  verification of receipt.  Any notice herein required or permitted to be
given shall be given by  depositing  the same in the United  States  first class
mail,  postage  prepaid,  or hand delivered or transmitted by facsimile,  in any
case with a copy sent by overnight courier service, and addressed to the parties
as follows:

                     IF TO THE INVESTORS: At the respective address set forth on
              the signature page hereto.


                     WITH A COPY TO:

or, to such  other  place or places as any of the  parties  shall  designate  by
written notice to the other party.

              7.11.  Titles  and  Subtitles.  The  titles  of the  sections  and
subsections  of the Agreement are for  convenience of reference only and are not
to be considered in construing this Agreement.

                                      -5-
<PAGE>


              7.12.  Counterparts.  This Agreement may be executed in any number
of  counterparts  (facsimile or otherwise),  each of which shall be an original,
but all of which together shall constitute one instrument.

              7.13.  Pronouns. All pronouns contained herein, and any variations
thereof,  shall be  deemed  to  refer to the  masculine,  feminine  or  neutral,
singular or plural, as the identity of the parties hereto may require.

              7.14.  Governing  Law.  This  Agreement   shall  be  construed  in
accordance  with,  and governed  by, the laws of the State of New York  (without
giving effect to conflict of laws principles).

              7.15.  Consent to Jurisdiction and Service of Process. Each of the
parties hereby  irrevocably and  unconditionally  submits to the jurisdiction of
the  courts of the State of New York and of the  Federal  courts  sitting in the
State of New York in any action or proceeding directly or indirectly arising out
of or  relating  to  this  Agreement  or the  transactions  contemplated  hereby
(whether  based in  contract,  tort,  equity or any other  theory).  Each of the
parties  agrees  that all actions or  proceedings  arising out of or relating to
this agreement must be litigated exclusively in any such State or, to the extent
permitted  by law,  Federal  court  that sits in the  County  of New  York,  and
accordingly,  each party  irrevocably  waives any objection  which it may now or
hereafter  have to the laying of the venue of any such action or  proceeding  in
any such court. Each party further irrevocably consents to service of process in
the manner provided for notices in Section 7.10.  Nothing in this Agreement will
affect the right of any party to this  Agreement  to serve  process in any other
manner permitted by law.

              7.16.  Waiver of Jury  Trial.  Each party  waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract,  tort,  equity or any other theory).  Each of
the parties (a) certifies that no representative, agent or attorney of any other
party has represented,  expressly or otherwise, that such other party would not,
in the  event of  litigation,  seek to  enforce  the  foregoing  waiver  and (b)
acknowledges  that it and the other  parties  hereto have been  induced to enter
into  this   agreement   by,  among  other  things,   the  mutual   waivers  and
certifications in this Section 7.16.

              7.17.  General. All Exhibits and Schedules are hereby incorporated
by reference and made a part of this Agreement.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                      -6-
<PAGE>


              IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the first date written above.



                                        THE COMPANY:



                                        BY:
                                           -------------------------------------
                                           NAME:
                                           TITLE:


INVESTOR:

BY:
   -------------------------------------
   NAME:
   TITLE:

Note No.:
Amount:  $
Investor Name:
Address:

Telephone:
Facsimile:

<PAGE>


                                                                       EXHIBIT A

                        PERCENTAGE INTERESTS OF INVESTORS

                            (AS OF ________________)



--------------------------------------------------------------------------------

                                                              PRINCIPAL AMOUNT
                                                              OUTSTANDING UNDER
NAME AND ADDRESS OF INVESTOR            PERCENTAGE INTEREST   RESPECTIVE NOTE
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                 TOTALS        100%                 US$
--------------------------------------------------------------------------------