Exhibit 10.7
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this "Agreement"), dated as of September 7,
2005, is by and among the investors identified on the signature page hereto,
(collectively, the "Investors"), Montgomery Equity Partners, LTD ("Montgomery"),
a Delaware limited partnership, (Montgomery also referred to as the "Lender"),
and In Veritas Medical Diagnostics, Inc. a Colorado 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, Montgomery is purchasing from the Company Seven Hundred Fifty
Thousand Dollars ($750,000) of Secured Convertible Debentures of the Company
(the "Convertible Debentures").
WHEREAS, the Borrower shall have filed a form UCC-1 with regard to the
Pledged Property (the "Collateral") as detailed in the Security Agreement
("Security Agreement") dated the date hereof between the Company and Montgomery,
and provided proof of such filing to Montgomery.
WHEREAS, the Borrower has, or will be granting liens in substantially all
of its assets in favor of the Investors, pursuant to a certain investment that
the Investors made in the Company.
WHEREAS, The Investors desires to agree upon Montgomery purchasing the
Convertible Debentures that Montgomery shall be a secured party pursuant to the
UCC-1 filed on behalf of Montgomery and shall be superior to the Investors as if
Montgomery's UCC-1 was filed before any and all of the Investor's liens, 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 the 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 the 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
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time, (c) for the Lender to commence enforcement of any rights or remedies under
or with respect to the Convertible Debentures, 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 the Lender to commence the
judicial or non judicial enforcement of any rights or remedies under the
Convertible Debentures, this Agreement and the 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 Convertible Debentures, which is not waived by the Lender.
"Indebtedness" shall mean the principal amount of and interest due to the
Lender, 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 Convertible Debenture, 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.
"Enforcement Date" with respect to an Enforcement shall mean the earliest
date on or prior to the date of such Enforcement and (a) on which an Enforcement
Event occurs and (b) on each date after which, until the date of such
Enforcement, one or more Enforcement Events were in effect.
"Enforcement 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 Convertible Debentures with the consent of the Lender), or (c)
any refusal by the Lender to make any revolving loan requested by the Borrower
(irrespective of whether the conditions precedent thereto specified in the
applicable Convertible Debentures have been satisfied) where such revolving loan
would not cause the Borrower to exceed the limitations set forth in such
Convertible Debentures.
2. Lien Priorities.
The parties hereto expressly agree that the security interests and liens
granted to the Lender shall secure the Indebtedness of the Lender 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
Investors 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 of
the Lender shall be first and prior security interests and liens in favor of the
Lender to secure the Indebtedness.
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3. Certain Notices.
The Lender agrees to use its reasonable efforts to give to the Investors
(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 an Event of Default, all proceeds of Collateral received by the 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
Lender.
(b) Distribution of Payments. On and after the occurrence of an Event of
Default, and any other payments received, directly or indirectly, by the
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 not be shared by the Lender and the
Investors.
5. Other Guaranties; Liens and Security Interests.
(a) The Lender and the Investors agree that the Lender may exercise
any rights or remedies under the Convertible Debentures 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 Lender prompt written notice of the
exercise of any such rights or remedies.
(b) Nothing contained in this Agreement shall (i) prevent the Lender
from imposing a default rate of interest in accordance with the applicable
Convertible Debentures, as applicable, or prevent the 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 the
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, the 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 Convertible
Debenture.
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(c) Subject to the provisions set forth in this Agreement, the Lender
may (without having to account therefore 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 Lender may prior to an
Event of Default 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
Investors.
6. Accounting; Adjustments.
(a) The Lender agrees to render an accounting to the Investors 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 Investors 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.
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8. Contesting Liens or Security Interests; No Partitioning or Marshalling of
Collateral; Contesting Indebtedness.
The Investors shall not 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 the 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.
9. No Additional Rights for Borrower Hereunder.
Borrower, by its consent hereto, acknowledges that it shall have no rights
under this Agreement. If the 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
the 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. This Agreement shall
survive the commencement of any Insolvency Proceeding.
11. Independent Credit Investigation.
The 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 Convertible Debentures, 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. The
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, the 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. Amendment.
This Agreement and the provisions hereof may be amended, modified or waived
only by a writing signed by all of the Lender and the Investors.
14. 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
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to the Convertible Debentures 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 Convertible Debenture 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 Convertible Debenture.
Upon an assignment by any Lender of all or any portion of the Convertible
Debentures and the assumption by the transferee of such Lender's obligations
hereunder in respect of such Convertible Debentures, or portion thereof, so
assigned, such Lender shall be automatically released from all obligations
thereafter accruing hereunder in respect of such Convertible Debenture or
portion thereof, so assigned.
15. Termination.
In the event (i) a Convertible Debenture is terminated, all Indebtedness of
the Borrower is paid in full, and (ii) the Lender shall have no outstanding
obligations hereunder with respect to payments previously received and
distributed hereunder, this Agreement shall terminate ninety one (91) business
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.
16. Amendment, Supplement or Waiver of Agreements with Borrower, etc.
Nothing contained in this Agreement shall limit or restrict the rights of
the Lender and the Borrower to amend, supplement, restate or waive any provision
of the Convertible Debentures to which they are a party, any note, convertible
debenture 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 the Convertible
Debentures.
17. Cooperation.
The Lender and The Investors hereby agree to fully cooperate with each
other in order to promptly discharge the terms and provisions of this Agreement.
The Lender and the Investors 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.
18. Representations and Warranties.
The Lender and the Investors represents and warrants that each 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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19. No Third Party Beneficiaries.
This Agreement is intended solely to govern the relationship among the
Lender and The Investors, and intended for the sole benefit of the Lender and
the Investors 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.
20. 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.
21. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED AS TO VALIDITY, INTERPRETATIONS,
ENFORCEMENT EVENT AND EFFECT BY THE LAWS OF THE STATE OF NEW JERSEY (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 Agreement as of the day
and year first written above.
COMPANY:
IN VERITAS MEDICAL DIAGNOSTICS, INC.
By: /s/
------------------------------
Name: John Fuller
Title: Chief Executive Officer
INVESTOR:
MONTGOMERY EQUITY PARTNERS, LTD
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/
------------------------------
Name: Mark Angelo
Title: Portfolio Manager
Investors:
LONGVIEW FUND L.P.
By: /s/
------------------------------
Name: S. Michael Rudolph
Title: General Partner
WHALEHAVEN CAPITAL FUND LTD.
By:
------------------------------
Name:
Title:
THE RUBIN FAMILY IRREVOCABLE STOCK TRUST
By:
------------------------------
Name:
Title:
TRIUMPH RESEARCH PARTNERS, L.L.C.
By: /s/
------------------------------
Name: Kenneth Orr
Title:
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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 September ___, 2005.
BORROWER:
IN VERITAS MEDICAL DIAGNOSTICS, INC.
By:
Name: John Fuller
Title: Chief Executive Officer
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