EXHIBIT 10.26
INTER-CREDITOR AGREEMENT
THIS INTER-CREDITOR AGREEMENT (the "Agreement"), dated effective as of
December 31, 2001, between the parties identified on the signature pages hereof
as the Class A Creditors (the "Class A's") and the Class B Creditors (the "Class
B's") whose respective addresses are set forth on the signature pages hereof
(all of the foregoing, collectively, the "Creditors"), and Integrated Business
Systems and Services, Inc., a South Carolina corporation, whose address is 000
Xxxxxx Xxx, Xxxxx 000, Xxxxxxxx, Xxxxx Xxxxxxxx 00000 ("Debtor").
RECITALS:
WHEREAS, the Creditors and the Debtor have entered into certain Secured
Promissory Notes, Secured Convertible Debentures, Common Stock Purchase
Warrants, Guaranties and Security Agreements (collectively the "Credit
Agreements" a schedule of which is attached hereto as Exhibit A) to secure
Debtor's obligations to the Creditors;
WHEREAS, the Creditors desire to define their respective rights under the
Credit Agreements in the event of a default by Debtor under the Obligations
(as defined below), or the Credit Agreements;
NOW THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. The term "Obligations" (or "Obligation" in the singular),
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as used herein, means all of the indebtedness, obligations and liabilities of
Debtor to the Creditors, individually or collectively, whether direct or
indirect, joint or several, absolute or contingent, due or to become due, now
existing or hereafter arising under or in respect of any of the Credit
Agreements or this Agreement.
The term "default", as used herein, means the failure of the Debtor to
pay or perform any of the Obligations as and when due to be paid or performed
under the terms of this Agreement or the Credit Agreements.
2. Collection of Post-Default Payments. If a default occurs under the terms
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and conditions of any or all of the Obligations or Credit Agreements and Debtor
fails to cure such default within the applicable cure period, if any, then the
Creditor(s) claiming such default shall provide written notice of the default to
all other Creditors and Debtor. After receipt of such notice, each Creditor
shall deposit with or transfer to such representative as the Creditors may agree
(the "Representative") any payment, whether in money or in kind, payable to or
received by the Creditor after the date of such notice in partial or full
satisfaction of one or more Obligations (the "Post-Default Payments"). In
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addition, the Debtor shall make all Post-Default Payments to the Representative.
The Creditors shall deposit any Post-Default Payments with the Representative,
in the form received from the Debtor, except for the addition of any endorsement
or assignment necessary to effect a transfer of all rights therein to the
Representative. The Post-Default Payments shall be held by the Creditor or
Representative in trust for the other Creditors to be distributed according to
the terms and condition of this Agreement and shall not be commingled with other
funds or property of such Creditor or Representative.
3. Distribution of Pre-Default Payments and Post-Default Payments. Each
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Creditor agrees that all payments made to any of them under the Credit
Agreements prior to any event of default (the "Pre-Default Payments'), as well
as all Post-Default Payments as well as all proceeds received from the exercise
of the Creditors' rights and remedies under the Obligations or the Credit
Agreements, shall all be distributed and allocated among the Creditors in the
following manner:
a. First, to pay all costs and expenses incurred in connection with
the enforcement of the Creditors' rights and remedies under the
Obligations, and the Credit Agreements and the collection of any
indebtedness due under the Obligations.
b. Second, pro rata, to the Creditors in accordance with their
respective shares of all of the interest due and payable under
the Obligations until such interest has been paid in full.
c. Third, pro rata, to the Class A's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to $450,000
d. Fourth, pro rata, to the parties, if any, identified on the
signature pages hereof as the "Class C Creditors" (other
creditors of Debtor) in accordance with their respective shares
of their total unpaid principal balance, an amount equal to
$250,000.
e. Fifth, pro rata, to the Class A's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to such total unpaid principal balance.
f. Sixth, pro rata, to the Class B's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to such total unpaid principal balance.
g. The remainder, if any, to Debtor.
Debtor agrees to make payments to Creditors consistent with the above priority
system.
Each of the Creditors agrees to disclose to the other Creditors, from
time to time upon the request of any one of them, information concerning the
amounts collected
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from Debtor with respect to such Creditor's Credit Agreement for the purpose of
confirming that the aggregate of all payments made by Debtor (whether pre- or
post-default) to any of the Creditors has been allocated among the Creditors in
accordance with the distribution priority outlined above in subparagraphs (a)
through (f). Each Creditor acknowledges that conforming to the distribution
priority outlined above may require one or more such Creditors to pay to other
Creditors amounts previously received. For example (and without limiting the
generality of the foregoing sentence), if one Creditor has received all accrued
interest, whereas other Creditors have received less than all accrued interest,
equalizing payments may be due from the first Creditor to other Creditors such
that all Creditors have received the same pro rata portion of accrued interest
due to them.
4. Distribution of Key Man Insurance. Creditors acknowledge that the Debtor
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has maintained key man life insurance policies insuring the lives of two of its
key executives, Xxxxxx Xxxxxxxxxx and Xxxxxx Xxxxxx; Debtor has assigned such
policies to Seyburn, Kahn, Xxxx, Xxxx & Xxxxxx, P.C. (SKG), as collection agent
for Creditors to collect the proceeds of such policies in the event of Xx.
Xxxxxx or Xx. Xxxxxxxxxx'x death while amounts remain unpaid to the Creditors.
Creditors agree that any proceeds collected from such key man life insurance
policies shall be distributed by SKG in the following manner:
a. First, to pay all costs and expenses incurred in connection with
the enforcement of the Creditors' rights and remedies under the
Obligations, and the Credit Agreements and the collection of any
indebtedness due under the Obligations.
b. Second, pro rata, to the Creditors in accordance with their
respective shares of all of the interest due and payable under
the Obligations until such interest has been paid in full.
c. Third, pro rata, to the Class A's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to $450,000
d. Fourth, pro rata, to the parties, if any, identified on the
signature pages hereof as the "Class C Creditors" (other
creditors of Debtor) in accordance with their respective shares
of their total unpaid principal balance, an amount equal to
$250,000.
e. Fifth, pro rata, to the Class A's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to such total unpaid principal balance.
f. Sixth, pro rata, to the Class B's in accordance with their
respective shares of their total unpaid principal balance, an
amount equal to such total unpaid principal balance.
g. The remainder, if any, to Debtor.
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Creditors acknowledge that SKG is legal counsel to certain of the
Creditors and all Creditors waive any conflict of interest which may arise as a
result of SKG representing some but not all of the Creditors while at the same
time acting as agent for purposes of collection of key man life insurance
proceeds. As agent for collection, SKG shall only be liable for gross negligence
hereunder and shall have no duty to enforce or collect such key man life
insurance proceeds.
5. Liability of Creditors. Neither the Creditors, nor the Representative,
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nor any officer or employee of the Creditors or Representative, shall be liable
for any act or omission to act pursuant to this Agreement except for such act or
omission to act which is in bad faith. The Creditors may rely upon any notice or
document believed by the Creditors to be in good faith and to be genuine, and to
have been signed or made on behalf of the person purporting so to do and, in
respect of legal matters, upon the advice provided by its counsel and shall not
be liable hereunder on account of any such good faith reliance.
6. Validity of Obligation. The provisions of this Agreement regarding the
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distribution of the Pre-Default Payments and the Post-Default Payments and the
proceeds from the exercise of the Creditors rights and remedies under the
Obligations, and the Credit Agreements are solely for the purpose of defining
the relative rights of each Creditor and shall not impair, as between each
Creditor and Debtor, the obligation of Debtor, which is unconditional and
absolute, to pay and perform the Obligations in accordance with their terms.
7. Indulgence not Waivers. Neither the failure nor any delay on the part of
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the Creditors to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of the Agreement, nor shall any single or partial
exercise of any rights, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
8. Duration and Termination. This Agreement shall terminate only upon
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payment or performance in full of all of the Obligations. Neither the death nor
the bankruptcy of any Creditor shall effect a termination hereof.
9. Default. Subject to the terms and conditions of Paragraph 5 above, if at
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any time any Creditor fails to comply with any provision of this Agreement that
is applicable to Creditor, the other Creditors may demand specific performance
of this Agreement and may exercise any other remedy available at law or equity.
10. Notices. All notices, requests, demand and other communication required
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or permitted under this Agreement or by law shall be in writing and shall be
deemed to have been duly given, made and received only when sent by facsimile
transmission (receipt confirmed) or reputable overnight delivery service
(receipt
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confirmed), when delivered against receipt, or when deposited in the United
Stated mail, certified mail, return receipt requested, postage prepaid,
addressed as set forth above (if to Debtor) and as set forth on the signature
page hereof (if to the Creditors). Any addressee may alter the address to which
communications are to be sent by giving notice of such change of address in
conformity with the provisions of this section for the giving of notice.
11. Entire Agreement. This Agreement constitutes and expresses the entire
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understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement in
writing signed by the Debtor and the Creditors.
12. Additional Documentation. Debtor and Creditor shall execute and deliver
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such further instruments and shall take such further action as may at any time
or times be reasonably requested in order to carry out the provisions and intent
of this Agreement.
13. Expenses. Debtor agrees to pay on demand all costs and expenses of
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every kind, including court costs and reasonable attorney's fees, that may be
incurred in enforcing the Obligations, the Credit Agreements or this Agreement.
Said costs and expenses shall constitute additional Obligations and shall bear
interest, from the date payment thereof is demanded until paid, at the rate of
ten (10%) percent per annum.
14. Successors and Assigns. This Agreement shall inure to and shall be
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binding upon Debtor and each Creditor and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
15. Governing Law. The validity construction and enforcement of this
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Agreement shall be governed by the laws of the State of Michigan, without regard
to its conflict of laws and rules.
16. Severability. The provisions of this Agreement are independent of and
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separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
(Signatures on Following Page)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed and delivered effective as of the date first above written.
CLASS A CREDITORS: DEBTOR:
Integrated Business Systems and
Services, Inc.
IBSS Class A Investors, a
Michigan co-partnership By: /s/ XXXXXX X. XXXXXXXXXX
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Name of Class A Creditor Its: Chief Executive Officer
By: /s/ XXXXXXX X. XXXXXX
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Its: Agent
Address:
c/o Seyburn, Kahn, Xxxx, Xxxx and Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
CLASS B CREDITORS:
IBSS Class B Investors, a
Michigan co-partnership
Name of Class B Creditor
By: /s/ XXXXXXX X. XXXXXX
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Its: Agent
Address:
c/o Seyburn, Kahn, Xxxx, Xxxx and Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
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