INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT ("Agreement") dated as of Nov 6, 2000
is made by and among Telenetics Corporation, a California corporation (the
"Borrower"), Xxxxxx Xxxxxxxx ("Xxxxxxxx"), Xxxxx Xxxxxxxx, doing business as SMC
Group, a sole proprietorship ("Shashani"), and SMC Communications Group, Inc.
("SMC"). Each of Bibicoff, Shashani and SMC are referred to herein as a "Lender"
and collectively as the "Lenders".
RECITALS:
A. As of the date hereof, Borrower, Bibicoff and certain other parties
have entered into a Settlement Agreement and Mutual Release (the "Settlement
Agreement"), pursuant to which Borrower is obligated to pay Bibicoff a total sum
of $530,000 plus any accrued but unpaid interest, as calculated under the
Settlement Agreement (the "Settlement Proceeds"). The Settlement Proceeds
consist of (i) $230,000 of outstanding principal, plus accrued but unpaid
interest, under that certain Promissory Note, dated on or about December 31,
1998, delivered by Borrower to Bibicoff (the "Bibicoff Note"), and (ii) $300,000
plus accrued but unpaid interest pursuant to paragraph 2 of the Settlement
Agreement. The Settlement Proceeds are secured by that certain Security
Agreement, dated as of the date hereof, by and between Borrower and Bibicoff
(the "Bibicoff Security Agreement").
B. As of December 30, 1997, Borrower delivered to Shashani that certain
(i) Secured Promissory Note in the principal amount of $141,500, and (ii)
Secured Promissory Note in the principal amount of $250,000 (collectively, the
"Shashani Notes"). The amounts owed to Shashani under the Shashani Notes are
secured by that certain Amendment to Security Agreement, dated as of March 31,
1998, by and between Borrower and Shashani (the "Shashani Security Agreement"),
which amended and replaced that certain Security Agreement, dated February 7,
1992, by and between Borrower and Shashani.
C. As of December 31, 1997, Borrower delivered to SMC that certain
Secured Promissory Note in the principal amount of $115,535 (the "SMC Note").
The amount owed to SMC under the SMC Note is secured by that certain Security
Agreement, dated as of December 31, 1997, by and between Borrower and SMC (the
"SMC Security Agreement")
C. The Borrower and each of the Lenders have requested, subject to the
terms and conditions set forth herein, that the Lenders enter into this
Agreement in order to induce Bibicoff to enter into the Settlement Agreement.
Accordingly, for valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, each of the Lenders agree with the other Lenders that so
long as any Secured Indebtedness (as defined below) is outstanding, the Borrower
and each Lender will comply with such of the following provisions as are
applicable to it.
1. CERTAIN DEFINITIONS.
1.1 PROMISSORY DOCUMENT: The term "Promissory Document" shall mean each
of the Settlement Agreement, including the Bibicoff Note referred to therein,
the Shashani Notes and the SMC Note, as each is amended, restated, increased or
refinanced from time to time.
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1.2 SECURITY AGREEMENT: The term "Security Agreement" shall mean each
of the Bibicoff Security Agreement, the Shashani Security Agreement and the SMC
Security Agreement, as each is amended, restated, increased or refinanced from
time to time.
1.3 SECURED INDEBTEDNESS. The term "Secured Indebtedness" shall mean
the aggregate outstanding principal amount, together with accrued but unpaid
interest (including any interest accruing after the commencement of any action
or proceeding under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable domestic or foreign federal or state
bankruptcy, insolvency or other similar law, and any other interest that would
have accrued but for the commencement of such proceeding), premiums and any
other amounts (including any fees or expenses) owed or payable with respect to
the Promissory Documents or the Security Agreements.
2. INTERCREDITOR AGREEMENT.
2.1 PARI PASSU STATUS IN SECURED INDEBTEDNESS. Each of the Lenders
hereby acknowledges and agrees that no Lender shall have priority over any other
Lender with respect to any payments in respect of, or any collateral securing,
the Secured Indebtedness. Each of the Lenders hereby acknowledges and agrees
that its rights and priority are PARI PASSU with the rights and priority of the
other Lenders. In addition, and without limitation of the generality of the
foregoing, each Lender hereby confirms that regardless of the relative times of
attachment or perfection thereof or the order of filing of financing statements,
mortgages or other documents, and regardless of anything to the contrary
contained in any documents executed in connection with any of the Secured
Indebtedness, any security interests or liens granted from time to time to any
Lender as security for any Secured Indebtedness shall in all respects be PARI
PASSU with the security interests and liens granted from time to time to the
other Lenders. Notwithstanding the foregoing, each of Shashani and SMC
acknowledge and agree that, except as set forth in Section 2.3, Borrower may
make payments to Bibicoff in satisfaction of its obligations to pay Bibicoff the
Settlement Proceeds pursuant to and in accordance with the Settlement Agreement
without making payments to Shashani or SMC under the Shashani Notes or the SMC
Note, as the case may be.
2.2 NOTICES OF DEFAULT. Each of the Lenders shall provide a copy to the
other Lenders of any written notice provided by such Lender to Borrower with
respect to (i) the occurrence of any act or breach by Borrower constituting a
default or the occurrence of any event that, with notice or the passage of time,
or both, would constitute a default by Borrower under any Promissory Document or
Security Agreement, (ii) the acceleration of amounts due and payable by Borrower
to such Lender, or (iii) the occurrence of any event or condition that would
constitute, in the reasonable judgment of such Lender, a material adverse change
in the business or operations of Borrower (each, an "Event of Default"). Such
notices shall be delivered in accordance with Section 6 below within three (3)
calendar days of the date any such notice is given to Borrower.
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2.3 DISPOSITION OF BORROWER'S ASSETS. In the event of (i) an Event of
Default, (ii) any insolvency, bankruptcy, receivership, liquidation,
reorganization, assignment for the benefit of creditors or other similar
proceeding relating to the Borrower, whether voluntary or involuntary, (iii) any
proceeding for the voluntary liquidation, dissolution or other winding-up of the
Borrower, whether involving insolvency or bankruptcy proceedings or not, or (iv)
any attachment of, foreclosure on, or other judicial action with respect to all
or any portion of the assets of the Borrower, or any transfer of such asset in
lieu of any such judicial action, or any creation of any lien, security
interest, mortgage, or deed of trust or the security on any such assets, then,
and in any such event, any payment or other distribution of any character,
whether in cash, securities or other property out of or in respect of the assets
of the Borrower or any proceeds thereof or any such security, shall be shared by
the Lenders on a PARI PASSU basis with the amount thereto to which each such
Lender is entitled determined by reference to the principal amount of Secured
Indebtedness held by each Lender in proportion to the total outstanding
principal amount of all Secured Indebtedness; provided, however, that no Lender
shall take any action without written notice to the other Lenders.
2.4 PAYMENTS TO BE HELD IN TRUST. If (i) Shashani or SMC shall have
received any payment, distribution or security out of any of the assets of the
Borrower, whether arising out of or as a result of any event described in
Section 2.3 above or otherwise, or (ii) Bibicoff shall have received any
payment, distribution or security out of any of the assets of the Borrower which
arises out of or as a result of any event described in Section 2.3 above, then,
and in any such event, the receiving party thereof shall promptly provide each
of the other Lenders a clear and detailed accounting thereof, and shall promptly
take all action necessary to implement the sharing contemplated by Section 2.3
above. Any such payment, distribution or security so received shall be deemed to
be held in trust by the receiving party thereof for the benefit of the Lenders
until such sharing has been implemented and completed as contemplated by Section
2.3 above. If Bibicoff receives any payment, distribution or security out of any
of the assets of the Borrower and such payment does not arise out of or as a
result of an event described in Section 2.3 above, then Bibicoff shall not be
obligated to provide each of the other Lenders an accounting thereof and is not
obligated to implement the sharing contemplated by Section 2.3 above.
2.5 COOPERATION. Each of the Lenders agrees to use reasonable best
efforts to cooperate with one another in the realization upon and liquidation of
the assets of the Borrower following an Event of Default, and to promptly advise
one another of any actions taken with respect thereto, or of any modification or
amendment of any or all of the documents with respect to the Secured
Indebtedness; provided, however, that no Lender shall enter into any such
modification or amendment that would (i) extend the term of such Secured
Indebtedness, (ii) increase the applicable rate of interest thereunder, or (iii)
increase the amount of Borrower's indebtedness thereunder, without the prior
written approval of a majority in interest of the Lenders (determined by
reference to the principal amount of Secured Indebtedness held by each Lender in
proportion to the total outstanding principal amount of all Secured
Indebtedness).
3. RELEASE OF COLLATERAL. Without limiting any of the rights
(including the right to foreclose upon any collateral) of the Lenders under any
of the Promissory Documents or Security Agreements or under the provisions of
any applicable law, in the event that a majority of the Lenders (the "RELEASING
LENDERS") shall have fully released all of their security interests in, and
liens upon, any collateral which secures the Secured Indebtedness subject to a
security interest or lien in favor of the other Lenders (the "OTHER LENDERS"),
the Other Lenders agree that such collateral shall thereupon be released from
all such security interests and liens in favor of the Other Lenders, provided
that such collateral is being sold or transferred either (a) in the ordinary
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course of business or (b) following the occurrence of an Event of Default, which
Event of Default has not been cured or waived by the Releasing Lenders, and
after the giving of ten (10) days' prior written notice to the Other Lenders of
any such proposed sale or transfer, for consideration which is reasonably
equivalent to the fair value of such collateral, and subject to the net proceeds
of such sale or transfer being shared by the Lenders on a PARI PASSU basis with
the amount thereto to which each such Lender is entitled determined by reference
to the principal amount of Secured Indebtedness held by each Lender in
proportion to the total outstanding principal amount of all Secured
Indebtedness. The Other Lenders agree that within ten (10) days after the
written request of the Releasing Lenders, the Other Lenders will execute,
deliver and file any and all such termination statements, lien releases or other
agreements or instruments as the Releasing Lenders shall reasonably deem
necessary or appropriate in order to give effect to the foregoing provisions of
this Section 3. Without limiting the generality of the foregoing provisions of
this Section 3, the Lenders, and each of them, may (but shall not be obligated
to) cause an independent appraisal to be made as to the fair value of any
collateral proposed to be sold or transferred and may conclusively rely upon the
results of any such appraisal.
4. RIGHT TO AMEND, ETC. Any demand for payment of any Secured Indebtedness made
by any holder of Secured Indebtedness may be rescinded in whole or in part by
such holder. The holders of Secured Indebtedness may exercise or refrain from
exercising any rights and/or remedies against the Borrower and others, if any,
liable under the Secured Indebtedness. The Secured Indebtedness shall
conclusively be deemed to have been created, contracted and incurred and
permitted to remain outstanding in reliance upon the provisions of this
Agreement.
5. FURTHER ASSURANCES. The Borrower, for itself and its respective successors
and assigns, agrees to execute and deliver to the Lenders, at the expense of the
Borrower, such further documents and instruments and to take such further action
as the Lenders, or any of them, may at any time or times reasonably request in
order to carry out the provisions and intent of this Agreement.
6. NOTICES. All notices and other communications hereunder to any Lender shall
be in writing and shall be personally delivered or mailed by first class mail,
postage prepaid, to the respective addresses set forth under the signature of
such Lender set forth on the signature page(s) to this Agreement, or to such
other address or addresses as the party to whom such notice is directed may have
designated in writing to the other parties hereto. All notices and other
communications hereunder to Borrower shall be in writing and shall be personally
delivered or mailed by first class mail, postage prepaid, to the following
addresses:
Telenetics Corporation
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: President
with a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
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or to such other address or addresses as the party to whom such notice is
directed may have designated in writing to the other parties hereto. A notice
shall be deemed to have been given upon the earlier to occur of (i) three (3)
days after the date on which it is deposited in the U.S. mails or (ii) receipt
by the party to whom such notice is directed.
7. SUCCESSORS; CONTINUING EFFECT, ETC. This Agreement is being entered
into for the benefit of, and shall be binding upon, the holders of the Secured
Indebtedness and their respective successors and assigns. This Agreement shall
be a continuing agreement and shall be irrevocable and shall remain in full
force and effect so long as there is Secured Indebtedness outstanding.
8. BINDING AUTHORITY. Xxxxx Xxxxxx is the duly elected President of
Borrower and has the authority to bind Borrower to the terms and provisions of
this Agreement.
9. MISCELLANEOUS. In case any provision in this 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.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by the laws of the State of
California without reference to the choice of law principles thereof.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date first above written.
BORROWER: TELENETICS CORPORATION
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By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
LENDERS:
/s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx
Address:
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Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx, dba SMC Group
Address:
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SMC COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx, President
Address:
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