INTERCREDITOR AGREEMENT
This
INTERCREDITOR
AGREEMENT (this
“Agreement”),
dated
as of August 25, 2006, is by and among ADVANTAGE
FUND I, LLC,
a
Florida limited liability company (“Advantage
Fund”),
and
ADVANTAGE
CAPTIAL DEVELOPMENT CORP.,
a
Nevada corporation (“Advantage
Capital”)
(Advantage Fund and Advantage Capital shall individually be referred to as
a
“Creditor”
and
collectively be referred to as the “Creditors”),
CORNELL
CAPITAL PARTNERS, LP,
LP
(“Cornell”
or
the
“Lender”),
a
Delaware limited partnership,
and
GLOBAL
IT HOLDINGS, INC.,
a
Nevada corporation (“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,
the
Borrower has granted liens in substantially all of its assets in favor of
Advantage Fund pursuant to the financing documents entered into by and between
the Borrower and Advantage Fund dated August 26, 2004 (the “Advantage
Fund Documents”)
secured under the UCC-1 filed on or about February 28, 2006 (#2006006544-2),
to
secure certain obligations of the Borrower to Advantage Fund;
WHEREAS,
the
Borrower has granted liens in substantially all of its assets in favor of
Advantage Capital pursuant to the financing documents entered into by and
between the Borrower and Advantage Fund dated August 26, 2004 (the “Advantage
Capital Documents”)
secured under the UCC-1 filed on or about February 28, 2006 (#2006006544-2),
to
secure certain obligations of the Borrower to Advantage Capital;
WHEREAS,
Cornell
is purchasing Nine Hundred Fifty Thousand Dollars ($950,000) of secured
convertible debentures of the Company (the “Cornell
Convertible Debentures”)
pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith by and between the Borrower and Cornell;
WHEREAS,
the
Borrower shall file a form UCC -1 with regard to the “Pledged Property” as
defined in the Security Agreement (the Pledged Property shall be referred to
herein as the “Collateral”)
by and
between the Borrower and Cornell dated the date hereof (the “Cornell
Security Agreement”)
and
provided proof of such filing to Cornell; and
WHEREAS,
each
Creditor agrees that, upon the First Closing (as such term is defined in the
Securities Purchase Agreement) of the Cornell Convertible Debentures, Cornell
shall be a secured party pursuant to the UCC-1 filed on behalf of Cornell and
shall be superior to the Creditors herein as if Cornell’s UCC-1 was filed before
any and all of Creditors’ liens and the Advantage Fund Documents and the
Advantage Capital Documents, and for the application of proceeds of the
Collateral after certain events and certain payments with respect to the
Indebtedness and to agree upon various other matters with respect to their
respective agreements with the Borrower and their rights there under.
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 commence enforcement of any rights
or remedies under or with respect to the Cornell Convertible Debentures, (c)
for
the Lender to commence the judicial or non judicial enforcement of any rights
or
remedies under the Cornell Convertible Debentures, this Agreement and the
Cornell 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) or to otherwise take any action to realize upon the Collateral,
or (d) 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”).
“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 Cornell
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 the Lender under the Cornell Convertible Debentures,
the Collateral Documents or any agreements or instruments delivered under or
in
connection therewith, and all renewals and extensions thereof.
“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 or (b) the occurrence of any Event of Default (unless
such Event of Default has been waived pursuant to the terms of the Advantage
Convertible with the consent of the Lender)
2
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 Creditor upon or
in
any of the Collateral to secure any Indebtedness, whether these security
interests and liens are now existing or hereafter acquired or arising and
whether the security interests and liens are in or upon now existing or
hereafter arising Collateral, the security interests and liens of the Lender
on
the Collateral shall be first and prior security interests and liens in favor
of
the Lender (with the except of the security interests created in favor of
Highgate
House, LLC)
to
secure the Indebtedness. The Lender agrees that it will not subordinate its
first security interest and lien to any party without Creditor’s prior written
consent.
3. Certain
Notices.
The
Lender agrees to give to Creditor (a) copies of any notice of the occurrence
or
existence of an Event of Default sent to Borrower, upon 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, except to the extent such
failure damages or prejudices the rights and remedies of Creditor.
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 Creditor.
(c)
Any
payments received, directly or indirectly, by the Lender in excess of the
Indebtedness shall be deemed delivered in trust for the benefit of Creditor,
and
the Lender shall promptly pay over to Creditor such amounts.
5. Other
Rights.
(a) The
Lender and Creditor agree that the Lender may exercise any rights or remedies
under the Cornell 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 the Lender will
give
the Creditor prompt written notice of the exercise of any such rights or
remedies.
3
(b) Nothing
contained in this Agreement shall (i) prevent the Lender from imposing a default
rate of interest in accordance with the Cornell 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 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 Cornell Convertible Debentures.
(c) Subject
to the provisions set forth in this Agreement, the Lender may 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
in
accordance with the terms of the Cornell Convertible Debentures.
6. Accounting;
Adjustments.
(a) The
Lender agrees to render an accounting to Creditor 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 Creditor as soon as reasonably practicable after any 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 portion 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.
4
8. Contesting
Liens or Security Interests; Contesting Indebtedness.
Creditors
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
party.
10. Insolvency
Proceedings.
Nothing
contained herein shall limit or restrict the independent right of either party
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. {Intentionally
omitted}
12. {Intentionally
omitted}
13. Amendment.
This
Agreement and the provisions hereof may be amended, modified or waived only
by a
writing signed by the Lender and Creditor.
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 to the
Cornell 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 Cornell Convertible Debentures 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 Cornell Convertible
Debentures. Upon an assignment by any Lender of all or any portion of the
Cornell Convertible Debentures and the assumption by the transferee of such
Lender’s obligations hereunder in respect of such Cornell Convertible
Debentures, or portion thereof, so assigned, such Lender shall be automatically
released from all obligations thereafter accruing hereunder in respect of such
Cornell Convertible Debentures or portion thereof, so assigned, except to the
extent such Lender has received proceeds in excess of the amount to which it
is
entitled to receive with respect to the Indebtedness which it would be required
to pay over to Creditor hereunder.
5
15. Termination.
In the
event (i) a Cornell Convertible Debentures 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 Cornell
Convertible Debentures to which they are a party, any note, Cornell Convertible
Debentures 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 Cornell
Convertible Debentures or otherwise prejudices the rights of
Creditor.
17. Cooperation.
The
Lender and Creditor hereby agree to fully cooperate with each other in order
to
promptly discharge the terms and provisions of this Agreement. The Lender and
Creditor 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.
Each of
the Lender and (to the extent applicable) Creditor represents and warrants
that
it 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.
19. No
Third Party Beneficiaries.
This
Agreement is intended solely to govern the relationship among the Lender and
Creditor, and intended for the sole benefit of the Lender and Creditor 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 Lender, Creditor and their transferees, successors and
assigns.
6
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). THE PARTIES HERETO AGREE THAT ANY DISPUTES,
CLAIMS, DISAGREEMENTS, LAWSUITS, ACTIONS OR CONTROVERSIES OF ANY TYPE OR NATURE
WHATSOEVER THAT, DIRECTLY OR INDIRECTLY, ARISE FROM OR RELATE TO THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, CLAIMS RELATING TO THE INDUCEMENT, CONSTRUCTION,
PERFORMANCE OR TERMINATION OF THIS AGREEMENT, SHALL BE BROUGHT IN THE STATE
SUPERIOR COURT LOCATED IN XXXXXX COUNTY, NEW JERSEY OR THE FEDERAL DISTRICT
COURT LOCATED IN NEWARK, NEW JERSEY, AND THE PARTIES HERETO AGREE NOT TO
CHALLENGE THE SELECTION OF THAT VENUE IN ANY SUCH PROCEEDING FOR ANY REASON,
INCLUDING, WITHOUT LIMITATION, ON THE GROUNDS THAT SUCH VENUE IS AN INCONVENIENT
FORUM. THE PARTIES HERETO SPECIFICALLY AGREE THAT SERVICE OF PROCESS MAY BE
MADE, AND SUCH SERVICE OF PROCESS SHALL BE EFFECTIVE IF MADE, PURSUANT TO
SECTION 7 HEREIN.
[SIGNATURE
PAGE TO IMMEDIATELY FOLLOW]
7
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first written above.
Cornell
Capital Partners, LP
By:
Yorkville
Advisors, LLC
Its: General
Partner
By:
Name: Xxxx
Xxxxxx
Title: Portfolio
Manager
Creditors
Advantage
Fund I, LLC
By:
Name: Xxxxx
Xxxxxxxxx
Title: Managing
Member
Advantage
Capital Development Corp.
By:
Name: Xxxxxxx
Xxxxxxxxx
Title: President
ACKNOWLEDGMENT
OF AND CONSENT AND 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, and has no 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 August __, 2006.
| GLOBAL IT HOLDINGS, INC. | ||
| |
|
|
| By: | /s/ | |
|
Name: Xxxxx Press |
||
| Title: Vice President | ||
