Exhibit 10.4
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT is made as of November 21, 2001, between
FLEET CAPITAL CORPORATION ("Fleet") and XXXXXX MICRO INC., a Delaware
corporation ("Xxxxxx"); and accepted by EMTEC, INC. (the "Borrower").
BACKGROUND
A. The Borrower and Fleet executed a certain a Loan and Security
Agreement dated as of the date hereof (such agreement, as amended from time to
time hereafter, the "Loan Agreement") whereby Fleet agreed to extend to Borrower
a revolving credit facility in the maximum principal amount of Ten Million
Dollars ($10,000,000.00) (the "Revolving Credit").
B. The Borrower's obligations to repay the Revolving Credit are
evidenced by a certain promissory note executed by the Borrower dated as of the
date hereof in the face amount of $10,000,000 payable to the order of Fleet (the
"Note").
C. The Borrower's obligations to Fleet with respect to the Revolving
Credit, together with any and all obligations of the Borrower to Fleet, whether
now existing or hereafter incurred, direct or indirect, absolute or contingent,
and whether or not arising in connection with the Revolving Credit including,
without limitation, principal, interest (including without limitation
post-petition interest if any), fees, costs and expenses of administration and
enforcement (including reasonable attorney's fees and expenses), and any amount
paid to Fleet but thereafter rescinded, restored or returned by the recipient
thereof are hereinafter referred to collectively as the "Fleet Debt".
D. To secure the Borrower's obligations to repay Fleet Debt, among
other things, the Borrower granted to Fleet a security interest in and to all of
the Borrower's tangible and intangible personal property including without
limitation accounts, chattel paper, contract rights, deposit accounts,
documents, equipment including fixtures, financial assets, general intangibles,
including payment intangibles and software, instruments, intellectual property,
inventory, investment property, letter-of-credit rights, money, security
entitlements, software, supporting obligations, uncertificated securities and
any proceeds of the foregoing (collectively the "Fleet Collateral").
E. The Borrower is indebted to Xxxxxx for amounts (the "Xxxxxx Debt")
incurred in connection with the sale of inventory by Xxxxxx (the "Xxxxxx
Inventory") to the Borrower.
F. The Xxxxxx Debt is secured by a security interest in and to all of
the Borrower's equipment, inventory, accounts and chattel paper, including but
not limited to the Xxxxxx Inventory and the proceeds thereof (collectively, the
"Xxxxxx Collateral"). The Xxxxxx Collateral excluding the Xxxxxx Inventory but
including the proceeds of sale of the Xxxxxx Inventory (except as otherwise
provided herein) shall be referred to herein as the "Fleet Priority Collateral.
-1-
G. The parties hereto desire to set forth their agreement with respect
to the relative rights of Xxxxxx and Fleet in the Fleet Priority Collateral and
the Xxxxxx Inventory.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound hereby, agree as follows:
SECTION 1. Priorities as to Collateral.
1.1 Any lien or security interest now existing or hereafter acquired by
Xxxxxx in and to the Fleet Priority Collateral, including without limitation all
accounts and general intangibles of the Borrower shall be subject and
subordinate in all respects and for all purposes to the liens and security
interests now existing or hereafter acquired by Fleet in and to the Fleet
Priority Collateral, including without limitation the Borrower's accounts and
general intangibles whether or not proceeds of Xxxxxx Inventory. Xxxxxx shall
have no lien on Fleet Collateral which is not part of the Fleet Priority
Collateral.
1.2 Any lien or security interest now existing or hereafter acquired by
Fleet in and to the Xxxxxx Inventory shall be subject and subordinate in all
respects and for all purposes to the liens and security interests now existing
or hereafter acquired by Xxxxxx in and to the Xxxxxx Inventory. Notwithstanding
the foregoing, as set forth above, Fleet shall have a prior and superior right
in and to all accounts and general intangibles whether or not proceeds of Xxxxxx
Inventory.
1.3 The priorities of liens and security interests stated in
subsections 1.1 and 1.2 above, of this Section 1, shall be applicable regardless
of the order of creation, attachment, or perfection of such liens or security
interests or any priority that might otherwise be available under applicable law
and notwithstanding any representation, warranty, covenant, or agreement to the
contrary made by the Borrower.
SECTION 2. Priorities Generally.
2.1 Xxxxxx represents and warrants that it does not have, and covenants
that without Fleet's prior written consent, it will not take, any lien or
security interest in and to any assets of the Borrower, any Subsidiary or
Affiliate of Borrower other than its now existing security interest in the Fleet
Priority Collateral and the Xxxxxx Inventory and the Borrower covenants and
agrees not to grant or allow any of its Subsidiaries or Affiliates to grant any
lien or security interest to Xxxxxx, in and to any assets other than the
interest in favor of Xxxxxx in the Fleet Priority Collateral and the Xxxxxx
Inventory. In the event that Xxxxxx has or hereafter takes such lien or security
interest, whether in violation of the preceding sentence or with the prior
written consent of Fleet, (1) to the extent that Fleet has a lien or security
interest in the same property, the lien or security interest of Xxxxxx shall be
subject and subordinate in all respects and for all purposes to the liens and
security interests now existing or hereafter acquired by Fleet therein,
regardless of the order of creation, attachment or filing or other perfection
(excluding Xxxxxx'x xxxx on the Xxxxxx Inventory which shall be superior and
senior in all respects to the lien of Fleet
-2-
in the Xxxxxx Inventory), and (2) to the extent that Fleet does not have a lien
or security interest in the same property (excluding Xxxxxx Inventory), the lien
or security interest received by Xxxxxx shall be received by it IN TRUST for the
benefit of Fleet and Xxxxxx shall promptly assign such lien or security interest
and any and all perfection filings to Fleet, shall transfer possession of any
such collateral at any time in its possession, and shall pay over to Fleet any
and all payments or proceeds received by it in respect to such lien or security
interest, and in either such case Fleet shall be entitled to receive from the
proceeds thereof all amounts due to Fleet by the Borrower, whether principal,
interest, costs of collection or otherwise, before Xxxxxx receives any proceeds
therefrom.
2.2 Xxxxxx covenants and agrees that the Xxxxxx Debt and all of the
rights and remedies of Xxxxxx with respect to the Xxxxxx Debt (excluding any and
all rights and remedies with respect to the Xxxxxx Inventory) are hereby made
subordinate and subject in right of payment to the prior payment in full of any
and all Fleet Debt, and the Borrower covenants and agrees not to make any
payment on or with respect to the Xxxxxx Debt until payment in full of any and
all Fleet Debt, except as set forth in the immediately following sentence.
Xxxxxx shall be entitled to receive and the Borrower shall be permitted to pay
regularly scheduled payments due under the Xxxxxx Debt, provided that each of
the following conditions are met at the time of each such payment due: (a) any
such payment shall be made on or after the date such payment is due; (b) on or
prior to the date on which payment under the Xxxxxx Debt is to be paid, the
Borrower shall have paid to Fleet any and all amounts which were due and payable
to Fleet under or in connection with the Fleet Debt; and (c) such payment shall
not be prohibited by Section 3 hereof. Notwithstanding anything to the contrary
contained herein, Xxxxxx shall be permitted to retain any proceeds received by
Xxxxxx from the exercise of its remedies in accordance with Section 3.2 hereof
or payments received by Xxxxxx for or on account of Xxxxxx Inventory in advance
of, or simultaneously with, delivery thereof ("c.o.d. payments").
SECTION 3. Exercise of Remedies.
3.1 Xxxxxx covenants and agrees that until the Fleet Debt shall have
been paid in full, except as expressly permitted under this Agreement, Xxxxxx
will not take any action to accelerate the obligations outstanding under the
Xxxxxx Debt, to exercise any of its remedies in respect of such obligations,
including without limitation to initiate a reorganization of, or litigation
against, the Borrower or to foreclose or otherwise realize on any Fleet Priority
Collateral. Xxxxxx shall be entitled: (i) to accelerate the obligations
outstanding under the Xxxxxx Debt if an event of default shall have occurred
under the Xxxxxx Debt or if Fleet has accelerated the Fleet Debt; and (ii)
during any period when there is no Standstill Period (as hereinafter defined)
but only during such period, after giving not less than five (5) Business Days
prior written notice thereof to Fleet, to take any action prohibited by the
prior sentence of this Section 3.1 but otherwise available under the Xxxxxx Debt
(excluding actions to foreclose upon or exercise remedies with respect to the
Xxxxxx Inventory), provided however that, if Fleet accelerates the Fleet Debt,
commences legal proceedings against the Borrower, seizes Fleet Priority
Collateral or takes any other remedial action permitted by the Fleet Debt
(collectively, "Remedial Actions") (other than solely instituting legal
proceedings against the Borrower without accelerating or undertaking any other
Remedial Action) after Xxxxxx commences any action permitted under this Section
3.1(ii),
-3-
Xxxxxx will discontinue such action until the Fleet Debt is repaid in full or
Fleet otherwise consents in writing. Any proceeds received by Xxxxxx in
connection with the Xxxxxx Debt (excluding payments received from the Xxxxxx
Inventory) shall be immediately paid over to Fleet to be applied toward
repayment of the Fleet Debt, until the Fleet Debt is repaid in full.
3.2 Xxxxxx and the Borrower acknowledge that after the occurrence and
during the continuance of an Event of Default (as defined under the Fleet Debt),
Fleet, at its option, may take any action to foreclose or realize upon or
enforce any of its rights, including without limitation any of its rights with
respect to any Fleet Collateral, without the prior consent of the Borrower or
Xxxxxx. Upon written notice of such Event of Default given to the Borrower and
Xxxxxx by Fleet unless and until there is no Standstill Period with respect to
such Event of Default, no payment shall be made by the Borrower with respect to
the Xxxxxx Debt. Fleet and the Borrower acknowledge that after the occurrence
and during the continuance of an Event of Default (as defined under the Xxxxxx
Debt), Xxxxxx, at its option, may take any action to foreclose or realize upon
or enforce any of its rights or remedies with respect to any Xxxxxx Inventory,
without the prior consent of the Borrower or Fleet.
3.3 The term "Standstill Period" shall mean a period commencing on the
date Fleet sends written notice to the Borrower and Xxxxxx that the Borrower has
failed to comply with any covenant in the Loan Documents or that an Event of
Default under the Loan Documents, not involving the Borrower's obligation to
make payments to Fleet, has occurred and that as a result, a Standstill Period
is to commence, and ending on the earlier of (i) the date that such breach,
failure or Event of Default is cured by the Borrower or waived in writing by
Fleet, or (iii) that date which is 180 days after the commencement of the
Standstill Period.
3.4 Upon any acceleration of Fleet Debt, distribution of assets,
winding up, total or partial liquidation, dissolution, reorganization or
readjustment of the debt, custodianship, bankruptcy, receivership, or insolvency
or upon an assignment for the benefit of creditors or upon any other marshalling
of the assets and liabilities of the Borrower:
(a) all of the principal, interest and other amounts
constituting Fleet Debt whether or not then due and payable shall first be paid
in full before any payment of principal, interest, or any other amount
constituting Xxxxxx Debt, excluding any payments received by Xxxxxx in
accordance with subsection 3.6(e);
(b) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities to which Xxxxxx
would be otherwise entitled (but for the terms hereof) excluding the Xxxxxx
Inventory and proceeds solely from disposition by Xxxxxx or a trustee of the
Xxxxxx Inventory shall be paid or delivered by the trustee in bankruptcy,
receiver, assignee for the benefit of creditors or other person making such
distribution directly to Fleet, for application to the payment of Fleet Debt to
the extent necessary to pay Fleet Debt in full, and Xxxxxx irrevocably (a)
authorizes and empowers Fleet or Fleet's representative to demand, xxx for,
collect and receive all such payments and distributions, and to file, vote and
prove all claims therefor and to take all such other action, in its name or
otherwise, as Fleet or Fleet's representative may determine to be necessary or
appropriate, and (b)
-4-
authorizes, empowers and directs all receivers, trustees, liquidators,
custodians, conservators and others having authority to effect all such payments
and distributions;
(c) Xxxxxx shall execute and deliver to Fleet or its
representative all such further instruments confirming the authorization
referred to in the foregoing subsection 3.6(b), and any powers of attorney
specifically confirming the rights of Fleet arising under the foregoing
subsection 3.6(b), and all such proofs of claim, assignments of claim and other
instruments and shall take all such other actions as may be reasonably requested
by Fleet in order to enable Fleet to enforce all claims upon or in respect of
the Xxxxxx Debt;
(d) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Borrower of any kind or character,
whether in cash, property or securities shall be received by Xxxxxx before all
of Fleet Debt is paid in full excluding any payment Xxxxxx is entitled to
receive in accordance with the provisions of Section 2.3 or subsection 3.6(e)
hereof, such payments or distributions shall be held IN TRUST by Xxxxxx for
Fleet and shall be forthwith paid over or delivered to Fleet, for application to
payment of Fleet Debt remaining unpaid to the extent necessary to pay Fleet Debt
in full; and
(e) in the event of any disposition of Xxxxxx Inventory
outside of the ordinary course of business of the Borrower, all proceeds of
Xxxxxx Inventory shall be distributed first to Xxxxxx until the Xxxxxx Debt has
been paid in full. Fleet agrees that if it should receive any monies from the
liquidation, collection or other disposition outside of the ordinary course of
business of the Borrower of any Xxxxxx Inventory prior to payment in full of the
Xxxxxx Debt, it will hold such monies in trust for Xxxxxx and will promptly pay
them over to Xxxxxx.
SECTION 4. Additional Representations, Warranties and Covenants of Xxxxxx.
Xxxxxx represents, warrants and covenants that (a) it has not made any prior
assignment of or other agreement respecting the Xxxxxx Debt, the Fleet Priority
Collateral or any of its rights relating thereto, (b) it will not make any such
assignment or other agreement without the prior written consent of Fleet, (c) as
of the date of this Agreement, there is no event of default or event which with
the passage of time or the giving of notice or both would be an event of default
under and as defined in the Xxxxxx Debt, (d) while this Agreement is in effect,
it will not enter into any material amendment accelerating the payment schedules
for principal or interest or accelerating the maturity date thereof; (e) the
execution, delivery and performance of this Intercreditor Agreement and all
other agreements, instruments and documents provided for herein, have been duly
authorized by all necessary and proper corporate action, no consent or approval
of any person, no consent or approval of any landlord or mortgagee, no waiver of
any lien or right of distraint or other similar right nor any other consent,
order, license, approval, authorization or declaration of, or filing with, any
governmental authority, bureau or agency, is or will be required in connection
with the execution, delivery, performance, validity or enforcement of, or
priority created by, this Intercreditor Agreement, and any other agreements,
instruments or documents to be executed or delivered pursuant hereto; (f)
neither the execution and delivery of this Intercreditor Agreement nor the
consummation of the transactions herein contemplated, nor compliance with the
terms and provisions hereof, will contravene any provision of law, statute, rule
or regulation to which Xxxxxx is subject or will conflict with or result in a
breach of any
-5-
judgment, decree, writ, injunction, ordinance, resolution, award, franchise,
order or permit or other similar document or instrument of any court or
governmental authority, bureau or agency, domestic or foreign, or its charter
documents; (g) this Intercreditor Agreement has been duly executed and delivered
and constitutes the valid and legally binding obligation of Xxxxxx, enforceable
in accordance with its terms, except to the extent that enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
principles of equity; (h) Fleet has not made any representation or warranty,
expressed or implied, to Xxxxxx, and no acts by Fleet heretofore or hereafter
taken, including any review of the financial condition or business affairs of
the Borrower shall be deemed to constitute any representation or warranty by
Fleet to Xxxxxx; and (i) in connection with its entry into and performance of
its obligations under this Intercreditor Agreement, Xxxxxx has made and shall
continue to make its own independent investigation of the financial condition
and business affairs of the Borrower, its own independent appraisal of the
creditworthiness of the Borrower, and its own independent evaluation of the
value and lien status of the Fleet Priority Collateral.
SECTION 5. Additional Representations, Warranties and Covenants of Fleet. Fleet
represents, warrants and covenants that: (a) this Intercreditor Agreement has
been duly executed and delivered and constitutes the valid and legally binding
obligation of Fleet, enforceable in accordance with its terms; (b) Xxxxxx has
not made any representation or warranty, expressed or implied, to Fleet, and no
acts by Xxxxxx heretofore or hereafter taken, including any review of the
financial condition or business affairs of the Borrower shall be deemed to
constitute any representation or warranty by Xxxxxx to Fleet; and (c) in
connection with this entry into and performance of its obligations under this
Intercreditor Agreement, Fleet has made and shall continue to make its own
independent investigation of the financial condition and business affairs of the
Borrower, its own appraisal of the creditworthiness of the Borrower, its own
independent evaluation of the value and lien status of the Fleet Priority
Collateral.
SECTION 6. Events of Default. Each of the following shall constitute an event of
default (an "Event of Default") hereunder (a) the failure of Xxxxxx to comply
with its covenants and agreements herein contained if such failure continues for
more than twenty (20) days after Xxxxxx is given written notice of such failure
by Fleet, or (b) if any representation or warranty of Xxxxxx is false or
materially misleading when made. The Borrower acknowledges that the occurrence
of any Event of Default hereunder constitutes an Event of Default as defined in
the Loan Agreement.
SECTION 7. Miscellaneous.
7.1 With respect to their respective relationships with the Borrower,
each right, power and remedy of Fleet and/or Xxxxxx provided for in this
Agreement, or any other document referred to herein, as applicable, whether now
existing or hereafter available at law or in equity or by statute or otherwise
with respect to the Borrower, shall be cumulative and concurrent (except to the
extent otherwise provided in any such document) and shall be in addition to
every other such right, power or remedy. Except to the extent otherwise provided
in this Agreement or any other document referred to herein, as applicable, the
exercise or the beginning of the exercise by
-6-
Fleet and/or Xxxxxx of any one or more of such rights, powers or remedies with
respect to the Borrower shall not preclude the simultaneous or later exercise of
all other such rights, powers or remedies, and no course of dealing or failure
or delay on the part of Fleet and/or Xxxxxx in exercising any such right, power
or remedy shall operate as a waiver thereof or otherwise prejudice its rights,
powers or remedies.
7.2 Each party hereto agrees to execute such documents, instruments and
agreements as may be reasonably necessary to carry out the agreements set forth
herein.
7.3 The parties are entering into this Agreement only for the purpose
of defining the relative rights of Xxxxxx and Fleet and nothing herein shall
impair any of the obligations of the Borrower to either or both Xxxxxx and Fleet
which are unconditional and absolute; nor shall this Agreement confer any rights
on any person or entity not a party hereto nor shall the Borrower be entitled to
use the failure of Xxxxxx and/or Fleet to comply with the terms of this
Agreement as a defense against any claim by Xxxxxx or Fleet against the Borrower
or as a basis for a claim or counterclaim by the Borrower against either Fleet
or Xxxxxx.
7.4 Except as expressly set forth above, Fleet shall have the right to
amend, modify, supplement, extend or renew Fleet Debt and/or the Loan Agreement,
the Note and any other document executed or to be executed in connection with
Fleet Debt, exercise or fail to exercise any right, power, remedy or privilege
under or with respect to Fleet Debt or any of aforementioned documents, grant or
withhold any waiver, consent or approval with respect of any of the covenants,
terms, conditions or agreements contained in any of the aforementioned
documents, indulge, forebear or extend the time for performance of any covenant
or agreement of the Borrower under or in connection with the aforementioned
documents or otherwise take or fail to take any action with respect to Fleet
Debt without the prior consent of Xxxxxx and without affecting any of the rights
or privileges of Fleet hereunder. Fleet shall promptly give Xxxxxx notice of any
amendment, modification, extension or supplement of Fleet Debt and/or the Loan
Agreement, the Note, the Guaranty or any other document executed in connection
with Fleet Debt.
7.5 This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to principles of
conflicts of laws.
7.6 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, subject to the
terms and conditions hereof limiting the ability of Xxxxxx to assign the Xxxxxx
Debt or its lien on and security interest in the Fleet Priority Collateral.
7.7 The Borrower and Xxxxxx shall join with the Agent in executing one
or more financing statements pursuant to the Uniform Commercial Code or other
notice appropriate under applicable law, in form satisfactory to Fleet, for
filing in all public offices where such filing is deemed by Fleet to be
necessary or desirable.
-7-
7.8 In the event of any conflict between any term, covenant or
condition of this Intercreditor Agreement and any term, covenant or condition of
any of the documents evidencing, securing or otherwise executed in connection
with the Xxxxxx Debt, the provisions of this Intercreditor Agreement shall
control and govern.
7.9 Any notices required or permitted to be given hereunder shall be
validly given if set forth in writing and delivered by hand against receipt or
mailed, by certified mail, return receipt requested, addressed to the parties
hereto at the respective addresses set forth in this Intercreditor Agreement.
Any party hereto may designate any other address to which any notices shall be
given by notice duly given hereunder. Any notice hereunder shall be deemed given
on the day delivered by hand or on the earlier of actual receipt by the
recipient two (2) business days after deposit in the mails, if so given by mail.
7.10 This Intercreditor Agreement may not be amended or modified orally
but may be amended or modified only in writing, signed by all parties hereto. No
waiver of any term or provision of this Intercreditor Agreement shall be
effective unless it is in writing, making specific reference to this
Intercreditor Agreement and signed by the party against whom such waiver is
sought or to be enforced. This Intercreditor Agreement may be signed in one or
more counterparts which, when taken together, shall constitute one in the same
document.
-8-
IN WITNESS WHEREOF the undersigned have caused this Agreement
to be executed by their respective duly authorized officers as of the date above
written.
XXXXXX MICRO INC.
By:_Paul Savasir
Name:Xxxx Xxxxxxx
Title: Sr. Director of Credit
Address:
Xxxxxx Micro Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Vice President - Credit
FLEET CAPITAL CORPORATION
By: Xxxxx X Xxxxxxx
Name:
Title: SVP
Address:
Fleet Capital Corporation
0000 Xxxxx 00
Xxxxxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx Xxxxxxxxx
Agreed to and accepted by:
EMTEC, INC.
By: Xxx Xxxxx
Name:
Title: VP FINANCE
Address:
Emtec, Inc.
000 Xxxx Xxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
