INTERCREDITOR AGREEMENT
EXHIBIT
10.24
This
Intercreditor Agreement (“Agreement”) is entered into as of December 18, 2007,
by and among Xxxxxxx X. Xxxxxxx, an individual (“Xxxxxxx”), Advanced Biotherapy,
Inc., a Delaware corporation (“Advanced”) and Organic Farm Marketing, LLC, a
Wisconsin limited liability company (“Company”). This Agreement is made with
respect to the following facts:
RECITALS
A. The
Company has issued to Xxxxxxx a convertible note dated as of April 17, 2007,
in
the original principal amount of $1,000,000 (the “April Convertible Note”), and
an additional convertible note dated as of June 14, 2007, in the original
principal amount of $625,000 (the “June Convertible Note”). The Company’s
obligations under the April Convertible Note and the June Convertible Note
are
secured by a security interest in all of the Company’s personal property and all
proceeds and products thereof, pursuant to a security agreement entered into
by
the Company in favor of Xxxxxxx (the “Xxxxxxx Security Agreement”).
B. Concurrently
herewith at the request of the Company, Advanced plans to arrange for The
Northern Trust Company (“Bank”) of Chicago, Illinois, to issue an irrevocable
letter of credit for the benefit of the Wisconsin Department of Agriculture,
Trade and Consumer Protection, the designee of the Company (the “Letter of
Credit”) as required by the State of Wisconsin in order for the Company to
distribute certain dairy products. The Letter of Credit will be obtained on
behalf of the Company by Advanced pursuant to the terms of the Investment
Agreement and the Reimbursement Agreement, each dated herewith. The
Reimbursement Agreement is set forth in Exhibit A hereto (the
“Reimbursement Agreement”). As collateral for repayment of funds advanced under
the Letter of Credit, the Bank requires that Advanced enter into a pledge
agreement (“Bank Pledge Agreement”) pursuant to which the Bank will be granted a
security interest in a certificate of deposit account maintained by Advanced
at
the Bank. The terms of payment of certain obligations by the Company to Advanced
under the Reimbursement Agreement will be evidenced by a promissory note (the
“Promissory Note”), and the Company’s obligations under the Promissory Note and
the Reimbursement Agreement are secured by the Company’s personal property and
all proceeds and products thereof pursuant to a security agreement entered
into
concurrently herewith (the “Advanced Security Agreement”)
C. Concurrently
herewith Advanced also plans to make a working capital loan to the Company
in
the aggregate principal amount of $800,000 (the “Working Capital Loan’), of
which $293,750 shall be used by the Company to redeem 23,850 Company Units
from
CWBA-OFM, LLC, in consideration of which the Company will issue to Advanced
a
convertible note in the original principal amount of $800,000 (the “December
Convertible Note”). The Company’s obligations under the December Convertible
Note also will be secured by the assets of the Company pursuant to the Advanced
Security Agreement.
D. As
a
condition to Advanced entering into the Bank Pledge Agreement in favor of the
Bank and making the Working Capital Loan to the Company, Advanced requires
that
the Company and Xxxxxxx enter into this agreement which provides, in part,
that
(i) the claims of Xxxxxxx relating to the April Convertible Note, and the June
Convertible Note shall be subordinate to payment of the Promissory Note and
the
Company’s obligations under the Reimbursement Agreement, in the manner set forth
below, (ii) the December Convertible Note shall rank in the same priority,
pari
passu, with the April Convertible Note and the June Convertible Note, as set
forth below, and (iii) the security interest granted by Company to Xxxxxxx
pursuant to the Xxxxxxx Security Agreement shall be subordinate to the rights
of
Advanced with respect to the Promissory Note, as set forth below.
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X. Xxxxxxx
holds a majority of the issued and outstanding shares of Advanced and serves
as
its Chairman of the Board. Xxxxxxx has the right to nominate and elect a
director of the Company. The April Convertible Note and the June Convertible
Note are convertible into units of the Company representing in the aggregate
a
majority of the outstanding units on a fully diluted basis. Xxxxxxx hereby
acknowledges and affirms that Advanced’s loans to the Company constitute
valuable consideration to the Company.
Now
therefore, in consideration of the foregoing recitals and for other good and
valuable consideration had and received, the parties agree as
follows:
1. Subordination.
(a) Indebtedness.
Except
as set forth in Section 2 of this Agreement, unless and until all Senior
Indebtedness (as herein defined) has been fully paid and satisfied in cash,
Xxxxxxx shall not accept or receive, by setoff or in any other manner, from
the
Company any sums, in whole or in part, which may now or hereafter be owing
to
Xxxxxxx by the Company, or any of its successors or assigns, including, without
limitation, a receiver, trustee or debtor in possession (the term “Company”
shall hereinafter include any such successors or assigns) under or in connection
with the Subordinated Obligations (as herein defined); provided
that
nothing herein shall be a prohibition against the accrual of payment-in-kind
interest on the terms and subject to the conditions set forth in the April
Convertible Note and the June Convertible Note (collectively, the “Subordinated
Instrument”).
(b) Liens
and Security Interests.
Any and
all liens and security interests of Xxxxxxx, whether now existing or hereafter
granted or arising, including, without limitation, the security interest granted
pursuant to the Xxxxxxx Security Agreement, in each case shall be subordinate
to
the rights, liens and interests held by Advanced with respect to the Senior
Indebtedness, but only the Senior Indebtedness.
(c) Restrictions.
Except
as set forth in the last sentence of Section 3(a), unless and until all of
the
Senior Indebtedness has been fully and indefeasibly paid and satisfied in cash,
Xxxxxxx shall have no right either to possess any such assets, enforce any
security interests in, foreclose, levy or execute upon, or collect or attach
any
such assets, whether by private or judicial action or otherwise.
(d) Senior
Indebtedness.
The
term “Senior Indebtedness” shall mean, collectively, (i) all indebtedness and
other obligations of the Company now or hereafter existing under that certain
Promissory Note of even date herewith and the Reimbursement Agreement (each
as
amended, restated, supplemented, modified or extended from time to time, subject
to Section 7 below).
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(e) Subordinated
Obligations.
The
term “Subordinated Obligations” shall mean, collectively, all indebtedness and
other obligations of the Company to Xxxxxxx under the April Convertible Note
and
the June Convertible Note, and any other document, instrument, or agreement
related to such Notes, whether the sums represent principal, interest,
dividends, costs, attorneys’ fees, charges, or other obligations due or not due,
whether incurred directly or indirectly and whether absolute or
contingent.
2. Permitted
Payments. Subject to the conditions set forth herein, the Company may pay to
Xxxxxxx, and Xxxxxxx may accept or receive and shall not be required to hold
in
trust, payments made in accordance with the April Convertible Note and the
June
Convertible Note, subject to and in accordance with Section 4 below
(collectively, the “Permitted Payments”); provided, that no payment on any of
the Subordinated Obligations may be made during any Payment Blockage instituted
pursuant to Section 3 of this Agreement. Xxxxxxx agrees that prepayments of
the
Subordinated Obligations or payments resulting from either the breach of any
covenant or warranty contained in the Subordinated Instrument or the
acceleration of any amounts due thereunder shall not be Permitted Payments
for
the purpose of this Agreement.
3. Payment
Blockages.
(a) Payment
Blockage Notices.
Upon
the occurrence and at any time during the continuation of any Event of Default
under the Promissory Note or a breach by Xxxxxxx of this Agreement, Advanced
may
deliver written notice thereof to Xxxxxxx in the manner set forth herein (each
a
“Payment
Blockage Notice”),
specifying the default or breach upon which such Payment Blockage Notice is
based. A “Payment Blockage” shall be in effect for the purposes of Section 2
hereof and no Permitted Payments may be made from (i) the earlier of (A) the
date Xxxxxxx knew of such defaults or breaches and (B) the date of delivery
or
deemed delivery of any Payment Blockage Notice through (ii) the earlier of
(A)
the date 180 days after the date any otherwise Permitted Payment was due and
payable to Xxxxxxx and could not be paid due to a Payment Blockage and (B)
the
date on which all defaults or breaches are cured or waived in writing or the
benefits of such Payment Blockage are waived in writing by Advanced. Upon the
expiration of the 180-day period provided for above (or upon any earlier written
waiver by Advanced or full cure of such default and breaches by the Company),
the prohibitions applicable to Xxxxxxx set forth in this Section 3(a) shall
no longer be effective.
(b) Payments
Received by Xxxxxxx.
Except
for Permitted Payments as provided in Section 2 hereof, if any payment,
distribution or any collateral proceeds thereof is received by Xxxxxxx from
the
Company with respect to the Subordinated Obligations prior to the satisfaction
in full of all the Senior Indebtedness in cash, Xxxxxxx shall receive and hold
the same in trust as trustee for the benefit of Advanced and shall forthwith
deliver such assets to Advanced in precisely the form received (except for
the
endorsement or assignment by Xxxxxxx where necessary), for application on any
of
the Senior Indebtedness, due or not due. In the event of the failure of Advanced
to make any such endorsement or assignment to Advanced, Advanced and any of
its
officers or agents are hereby irrevocably authorized to make such endorsement
or
assignment.
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4. Payment
Pari Passu; Same Priority. Without limiting Sections 1, 2 and 3 above, the
December Convertible Note shall have the same priority and shall be paid pari
passu with the April Convertible Note and the June Convertible Note, and
vice-versa. No payment of principal or interest (including, without limitation,
any regularly scheduled installment, any prepayment, any payment upon maturity,
any payment upon default or acceleration, any payment arising as a result of
the
exercise of any rights in and to any collateral securing such notes, or
otherwise) shall be made by the Company to Xxxxxxx relating to the April
Convertible Note or the June Convertible Note unless a proportional payment
of
principal and/or interest, as applicable, shall be made to Advanced relating
to
the December Convertible Note, unless Advanced otherwise agrees in writing.
No
payment of principal or interest (including, without limitation, any regularly
scheduled installment, any prepayment, any payment upon maturity, any payment
upon default or acceleration, any payment arising as a result of the exercise
of
any rights in and to any collateral securing such notes, or otherwise) shall
be
made by the Company to Advanced relating to the December Convertible Note unless
a proportional payment of principal and/or interest, as applicable, shall be
made to Xxxxxxx relating to the April Convertible Note and the June Convertible
Note, unless Xxxxxxx otherwise agrees in writing.
5. Liens
and Security Interest.
(a) Subject
to Sections 1, 2 and 3 above, notwithstanding the order or time of attachment,
or the order, time or manner of perfection, or the order, or time of filing
or
recordation of any document or instrument, or other method of perfecting a
security interest in favor of either Xxxxxxx or Advanced in assets or rights
of
the Company (the “Collateral”), and notwithstanding any conflicting terms or
conditions which may be contained in any of the agreements between the Company
and/or Xxxxxxx and Advanced, as applicable, any cash, consideration or other
rights received by Xxxxxxx or Advanced upon foreclosure or exercise of any
right
or other remedy with respect to the Collateral shall be subject to the
provisions of Sections 1, 3 and 4 hereof.
(b) Each
party hereto shall be solely responsible for perfecting and maintaining the
perfection of its lien in and to each item constituting Collateral in which
such
party has been granted a lien. The provisions of Sections 1, 4 and 5 hereof
are intended solely to govern the respective lien priorities as between the
parties hereto and shall not impose on either party any obligations with respect
to the disposition of proceeds of foreclosure on any other creditor’s Collateral
which would conflict with prior perfected claims therein in favor of any other
person or entity or any order or decree of any court or other governmental
authority or any applicable law. Neither Xxxxxxx nor Advanced will contest
the
validity, perfection, priority or enforceability of the lien of the other party
upon the Collateral as provided herein including, without limitation, as set
forth in Sections 1 and 4 hereof and, as between the parties hereto, the terms
of this Agreement shall govern even if part or all of such party’s debt or the
lien securing payment and performance thereof are not perfected or are avoided,
disallowed, set aside or otherwise invalidated in any judicial proceeding or
otherwise.
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(c) Subject
to Sections 1, 4 and 5 hereof, each party hereto shall have the exclusive
right to manage, perform, and enforce the terms of its agreements with the
Company and to exercise its rights with respect to the Collateral, to exercise
and enforce all privileges and rights thereunder according to its discretion
and
the exercise of its business judgment including, without limitation, the right
to take or retake control or position of the Collateral and to hold, prepare
for
sale, process, sell, lease, dispose of or liquidate such Collateral; provided,
however, that Xxxxxxx and Advanced each agree that it shall give the other
party
not less than ten (10) business days’ notice of its intent to take any action
with respect to the Collateral or the debt owed to it by the Company or to
commence any procedure against the Company under any insolvency laws or similar
laws for liquidation, dissolution or winding up or the appointment of a
receiver, trustee or liquidator.
(d) The
lien
and payment priorities provided for in this Agreement shall not be altered
or
otherwise affected by any action or inaction which either party hereto may
take
or fail to take with respect to the Collateral upon which such party has a
lien.
6. Maturity
of Advanced’s Loans to Company. Xxxxxxx acknowledges that the Promissory
Note and the December Convertible Note mature by their respective terms on
a
date prior to the designated maturity date of the April Convertible Note and
the
June Convertible Note. From and after the maturity date of the December
Convertible Note, Advanced agrees that any payments made by the Company to
it
shall be subject to Section 4 above (but excluding payments of any type or
for
any reason in connection with the Promissory Note), and treated the same as
payments made by the Company in accordance with, or upon any default under
the
December Convertible Note, in each case in accordance with Section 4 above.
Advanced, in its discretion, may extend the maturity date of the Promissory
Note
and the December Convertible Note, without notice to Xxxxxxx.
7. No
Modification. Xxxxxxx understands and agrees that the April Convertible
Note, the June Convertible Note and the Xxxxxxx Security Agreement shall not
be
modified or amended, without Advanced’s prior written consent. Advanced
understands and agrees that the Promissory Note, the Reimbursement Agreement,
the December Convertible Note and the Advanced Security Agreement shall not
be
modified or amended without Xxxxxxx’x prior written consent, which consent shall
not unreasonably withheld or delayed.
8. Notice
Upon Default.
(a) Upon
the
occurrence of any default or breach of the April Convertible Note or the June
Convertible Note, Xxxxxxx shall deliver written notice thereof to Advanced
in
the manner set forth herein (each a “Default Notice”), specifying the default or
breach by the Company. For the purposes of this Section 5(a), “default” means
any Event of Default under and as defined in the April Convertible Note or
the
June Convertible Note, or the Investment Agreement dated as of April 17, 2007,
between the Company and Xxxxxxx, or any other document, instrument or agreement
evidencing all or any part of the Company’s indebtedness to Xxxxxxx, or any
other failure to pay any portion of the principal of, premium, if any, or
interest on any such indebtedness as and when due and payable (as a result
of
maturity, acceleration or otherwise).
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(b) Upon
the
occurrence of any default or breach of the Promissory Note or the December
Convertible Note, Advanced shall deliver written notice thereafter to Xxxxxxx
in
the manner set forth herein specifying the default or breach by the Company.
For
purposes of this Section 5(b), a “default” means any Event of Default under and
as defined in the Promissory Note or the December Convertible Note, or the
Investment Agreement dated as of even date herewith between the Company and
Advanced, or any other document, instrument or agreement evidencing all or
any
part of the Company’s indebtedness to Advanced, or any other failure to pay a
portion of the principal of, premium, if any, or interest on any such
indebtedness as and when due and payable (as a result of maturity, acceleration
or otherwise).
9. Xxxxxxx
Representations about Obligations. Xxxxxxx warrants and represents that
Xxxxxxx has not previously assigned any interest in the obligations of the
Company set forth in the April Convertible Note or the June Convertible Note
(collectively, “Xxxxxxx Obligations”), that no other party owns an interest in
any of the Xxxxxxx Obligations (whether as joint holders, participants or
otherwise), and that the entire Xxxxxxx Obligations is owing only to
Xxxxxxx.
Xxxxxxx
further warrants and represents that the only indebtedness owing by the Company
to him is the Xxxxxxx Obligations; that to the best of his knowledge as of
the
date hereof, there is no default or breach with respect to any of such
indebtedness; and, specifically, that nothing herein contained and nothing
contained in any other document, instrument or agreement with or in favor of
Advanced and known to Xxxxxxx constitutes a default or breach with respect
to
any of such indebtedness.
10. Unauthorized
Payments. Except for payments by the Company in connection with the
Promissory Note or the Senior Indebtedness, if any payment, distribution or
any
collateral proceeds thereof is received by either Xxxxxxx or Advanced from
Company in excess of the amount provided in Section 4 hereof, such party shall
receive and hold the same in trust as trustee for the benefit of the other
party
(“shortfall party”) and shall forthwith deliver such amount of the excess
payment, distribution or collateral proceeds to such shortfall party in
precisely the form received (except for the endorsement or assignment where
necessary), for application on any of the indebtedness, due or not
due.
11. Claims
in Bankruptcy. In the event of any bankruptcy, assignment for the benefit of
creditors or similar proceedings against the Company, Xxxxxxx and Advanced
may
file all claims he or it may have against the Company, and shall notify the
debtor in possession or trustee in bankruptcy, as appropriate, as to the
existence of this Agreement and that payments to Xxxxxxx and Advanced shall
be
made in the same priority, pari passu.
12. Instrument
Legends. The April Convertible Note and the June Convertible Note and any
other instrument evidencing the Xxxxxxx Obligations or any portion thereof
will
be forthwith inscribed with a legend conspicuously indicating that payment
thereon is subject to the terms of this Agreement, and copies thereof will
forthwith be delivered to Advanced. The December Convertible Note and any other
instrument evidencing the obligations of the Company thereunder to Advanced
or
any portion thereof will be forthwith inscribed with a legend conspicuously
indicating that payment thereon is subject to the terms of this Agreement,
and
copies thereof will forthwith be delivered to Xxxxxxx.
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13. Waivers.
All of the indebtedness of the Company to Advanced shall be deemed to have
been
made or incurred in reliance upon this Agreement. Subject to Section 7 hereof,
each of Advanced and Xxxxxxx may, from time to time, enter into agreements
and
settlements with the Company as he or it may determine, including, without
limitation, any substitution of collateral, any release of any lien or security
interest and any release of the Company, without notice to or consent by the
other party hereto. No waiver shall be deemed to be made by Advanced or Xxxxxxx
of any of their respective rights hereunder unless it is in writing signed
by
the waiving party. Each such waiver shall be a waiver only with respect to
the
specific instance involved and shall in no way impair the rights of the waiving
party or the obligations of the other party to the waiving party in any other
respect at any other time.
14. Information
Concerning Financial Condition. Xxxxxxx and Advanced hereby assume
responsibility for keeping himself and itself informed of the financial
condition of the Company and of all other circumstances bearing upon the risk
of
nonpayment of the respective indebtedness of the Company to such party, and
each
agrees that the other party shall have no duty to advise it of information
regarding such condition or any such circumstances. In the event Xxxxxxx or
Advanced, in his or its sole discretion, undertakes, at any time or from time
to
time, to provide any such information (“Disclosing Party”) to the other party
(“Recipient Party”), the Disclosing Party shall be under no obligation (i) to
provide any such information to the Recipient Party on any subsequent occasion,
(ii) to undertake any investigation not a part of its regular business routine,
or (iii) to disclose any information which such Disclosing Party otherwise
wishes to maintain confidential.
15. Third
Party Beneficiaries. This Agreement is solely for the benefit of Xxxxxxx and
Advanced and their respective successors and assigns, and neither the Company
nor any other persons or entities are intended to be third party beneficiaries
hereunder or to have any right, benefit, priority or interest under, or because
of the existence of, or to have any right to enforce, this Agreement. Advanced
and Xxxxxxx shall have the right to modify or terminate this Agreement at any
time pursuant to a written agreement signed by both parties, without notice
to
or approval of the Company or any other person or persons. Neither party hereto
may assign all or any part of their interest in the obligations of the Company
to any other person or entity unless such assignment or transfer shall be made
expressly subject to the terms and provisions of this Agreement. Any assignment
or transfer which is not made subject to the terms and provisions of this
Agreement shall be, for the purposes of this Agreement, null and
void.
16. Notices.
For the purposes of this Agreement, written notices shall be made by personal
delivery; or by facsimile confirmed by the recipient; or by reputable overnight
delivery (with evidence of delivery) and addressed to the notified party at
its
address set forth below its signature line, or such other address specified
by
the party with like notice. Notices shall be deemed received on the day of
personal delivery to the recipient, or on the day of delivery if by facsimile
(with evidence of transmission) or if by overnight courier (with evidence of
delivery).
17. Costs
and Attorneys’ Fees. If there is any claim or controversy litigated in any
lawsuit between any of the parties hereto in connection with this Agreement,
the
prevailing parties in the lawsuit shall be entitled to recover from the other
parties their costs and reasonable attorneys’ fees.
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18. Governing
Law. This Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the internal laws (as opposed
to conflict of laws provisions) of the State of Delaware.
19. Successors
and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the parties’ respective successors and assigns, subject to the
provisions hereof.
20. Integrated
Agreement. This Agreement sets forth the entire understanding of the parties
with respect to the within matters, supersedes all drafts, understandings,
representations or other agreements regarding the subject matter hereof, and
may
not be modified or amended except upon a writing signed by all parties. Each
party has been represented by his or its own counsel and this Agreement has
been
negotiated and prepared by all such counsel.
21. Authority.
Each of the signatories hereto certifies that such party has all necessary
authority to execute this Agreement.
22. Counterparts.
This Agreement may be executed in one or more counterparts, each one of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
date first above written.
|
ADVANCED
BIOTHERAPY, INC.
|
|
|
By:
_____________________________
|
________________________________
|
|
Xxxxxxxxxxx
X. Xxxxx,
Chief
Executive Officer
|
Xxxxxxx
X. Xxxxxxx
|
All
of
the foregoing is consented and agreed to as of
the
date
first set forth above:
ORGANIC
FARM MARKETING, LLC
By:______________________________
Xxxx
X.
Xxxxxx, Xx., President
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