Exhibit 10.14
INTERCREDITOR AGREEMENT
THIS
INTERCREDITOR AGREEMENT (this “ Agreement ”) is
made as of May 9th, 2006, by and among Commonwealth Associates,
L.P., in its capacity as collateral agent (the “
Collateral Agent ”), acting for and on behalf of the
holders of those certain Secured Convertible Promissory Notes
(collectively, the “ Notes ”) issued under that
(a) that certain Securities Purchase Agreement, dated as of the
date hereof (the “ Purchase Agreement ”) (each
holder of a Note and including, without limitation, the Collateral
Agent, a “ Lender ” and, collectively, the
“ Lenders ”), and MSO Holdings, Inc., a Delaware
corporation (the “ Borrower ”).
RECITALS
Pursuant
to the Note Purchase Agreement, the Borrower has executed and
delivered the Notes to the Lenders in the principal amounts shown
on Exhibit A attached hereto, as it may be amended from time
to time to reflect the issuance of Notes in the “First
Closing”, “Second Closing” and each
“Interim Closing” contemplated by the Purchase
Agreement.
As
of the date hereof, the Borrower has executed and delivered that
certain Security Agreement (the “Security Agreement
”) in favor of the Lenders, to secure the prompt and full
payment and performance of the Borrower’s obligations under
the Notes.
The
parties have entered into this Agreement in order to establish the
relative rights, remedies and priorities as among the Lenders with
respect to the collateral covered by the Security Agreement for the
benefit of all of the Lenders and to grant certain authority to the
Collateral Agent to act on behalf of the Lenders.
NOW,
THEREFORE, in consideration of the Purchase Agreements, the Notes
and the covenants and conditions set forth below, the Collateral
Agent, the Lenders and the Borrower agree as follows:
ARTICLE 1
DEFINITIONS
For
purposes of this Agreement and except as otherwise defined,
capitalized terms used herein shall have the following
meanings:
“
Business Day ” means any day other than a Saturday,
Sunday or legal holiday on which banks in Chicago, Illinois are
open for the transaction of a substantial part of their commercial
banking business.
“
Collateral ” means all property and rights to property
upon or in which a lien or security interest has been or will be
granted to the Collateral Agent, for the benefit of the Lenders,
under the Security Agreement or to any other, similar instrument or
document now or later delivered or to be delivered to the
Collateral Agent.
“
Collection Damages ” means all liabilities, damages,
costs, claims, expenses and losses incurred by or on behalf of the
Lenders arising out of or incidental to (a) collection of the
Obligations, (b) protection, maintenance and liquidation of the
Collateral, and/or (c) enforcement by Lenders of the Notes or the
Security Agreement.
“
Default ” means any event which with the giving of
notice or the lapse of time, or both, might become an Event of
Default.
“
Event of Default ” means the occurrence of any event
of default under the Notes or the Security Agreement, subject to
the expiration of any applicable cure period.
“
Lien ” means any mortgage, pledge, assignment, lien,
encumbrance or security interest of any kind.
“
Note Documents ” means the Purchase Agreements, the
Notes, the Security Agreement, and this Agreement, together with
all amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements or supplements to
any of the foregoing.
“
Note Debt ” means, collectively, the principal amount
outstanding and owing under the Notes, plus all interest accrued
and unpaid under the Notes, plus all other amounts which may be
owing from the Borrower to the Lenders under the Notes from time to
time.
“
Obligations ” means the Note Debt, all amounts now or
later owing under the Security Agreement and/or the other Note
Documents, and any Collection Damages, together with all
extensions, amendments, renewals or replacements of or to the
foregoing.
“
Other Obligations ” means all indebtedness,
liabilities, debts, obligations of the Borrower to Persons other
than the Lenders.
“
Person ” means any individual, corporation, limited
liability company, partnership, joint venture, trust, business
unit, unincorporated organization, or other organization, whether
or not a legal entity, or any governmental authority.
“
Pro Rata Share ” means, as to each Lender, the
fraction determined by dividing the outstanding principal of, and
accrued interest on, the Notes of such Lender by the aggregate
outstanding principal of, and accrued but unpaid interest on, all
of the Notes, in each case as of the time determined.
ARTICLE 2
COLLATERAL
2.1.
Interest in Collateral . The Collateral shall be held by the
Collateral Agent for the benefit of all of the Lenders to secure
the Obligations. Each Lender shall have an undivided interest in
the Collateral, with the distribution of the proceeds thereof to be
as described in Section 2.2 hereof.
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2.2.
Distribution of Proceeds of Collateral . All proceeds of any
realization on the Collateral received by any Lender shall be
delivered to the Collateral Agent. Without limiting the foregoing,
after the occurrence of any Default or Event of Default, if any
Lender shall obtain payment of any Obligations from the Collateral
or from the Borrower by direct or indirect payment, including,
without limitation, any payment under any guaranty, lien,
counterclaim, or right of set-off, that Lender shall immediately
deliver the same to the Collateral Agent for distribution in
accordance with this Section. All proceeds of any realization on
the Collateral received by the Collateral Agent subsequent to and
during the continuance of any Event of Default shall be allocated
and distributed by the Collateral Agent as follows:
2.2.1
First, to the payment of all costs and expenses, including, without
limitation, all attorneys fees, of the Collateral Agent in
connection with the enforcement of the Note Documents and otherwise
administering this Agreement;
2.2.2
Second, to each Lender, and among them in accordance with their
respective Pro Rata Shares, up, and to be applied, to the
Obligations owing to each Lender;
2.2.3
Third, to the payment of any costs, expenses (including without
limitation all attorneys fees), or any other indebtedness or
liabilities owing to the Lenders under the Note Documents and not
described above, on a pro rata basis in accordance with the
Obligations consisting of such amounts, to be applied, for purposes
of this Agreement, to the payment of such liabilities;
and
2.2.4
Fourth, to the Borrower or to such other Person as may be legally
entitled to such proceeds.
2.3.
Rescission or Repayment . The Lenders agree among themselves
that if any payment described in this Article 2 shall be rescinded
or must otherwise be repaid, each Lender which shall have shared
the benefit of such payment shall, by repurchase of Obligations
theretofore sold or by distributions to other Lenders, or
otherwise, return its share of that benefit to each Lender whose
payment shall have been rescinded or otherwise restored so that the
allocation of payments is in accordance with Section 2.2 hereof.
The Borrower agrees that any Lender so purchasing such Obligations
may, to the fullest extent permitted by law, exercise all rights of
payment, including setoff, bankers lien or counterclaim, with
respect to such purchased Obligations as fully as if such Lender
were the original holder of such Obligations in the amount of such
purchase and that the rights of payment, including setoff, bankers
lien or counterclaim, under its original Obligations, of any Lender
making distributions to other Lenders hereunder shall not be
affected by the making of such distributions.
2.4.
Termination of Security Interest and this Agreement . In the
event of conversion of the Notes to capital stock of the Borrower
as provided in the Notes or payment in full thereof, this Agreement
shall terminate. In the event any holder of Notes shall exercise
all or any portion of the optional conversion rights in such
holder’s Note, any rights of such holder in the Collateral
and under this Agreement and the Security Agreement shall thereupon
terminate.
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ARTICLE 3
DEFAULT
3.1.
Enforcement of Rights . Upon the occurrence and during the
continuance of any Event of Default, the Collateral Agent shall
exercise and enforce all rights and remedies available to the
Collateral Agent or the Lenders under this Agreement, any of the
Note Documents (including particularly, without limitation, the
Security Agreement) or applicable law. The Collateral Agent shall
have the exclusive right to foreclose or enforce any remedies
against any of the Collateral.
3.2.
Rights in Insolvency Proceedings . In the event of any
insolvency or bankruptcy proceeding involving the Borrower or the
Collateral, the Collateral Agent will have the exclusive right to
vote and exercise the rights and interest of the Lenders
therein.
3.3.
No Amendment . At any time when any Default or Event of
Default shall have occurred and be continuing, the Borrower will
not, directly or indirectly, pay or permit to be paid to any
Lender, and the Lenders will not accept, any remuneration, whether
by way of supplemental or additional interest, fees or otherwise,
as consideration for or as inducement to the entering into of any
amendment, supplement, waiver or consent with respect to any Note
Document unless such remuneration is concurrently therewith paid,
on the same terms, ratably to all Lenders (based upon, in the case
of any Lender, the outstanding principal amount under such
Lender’s Note as it relates to the total outstanding
principal amount under the Note Purchase Agreement).
ARTICLE 4
COLLATERAL AGENT
4.1.
Appointment and Authorization . Each of the Lenders hereby
appoints Commonwealth Associates, L.P. as Collateral Agent, subject
to removal as provided in Section 4.8 hereof, and authorizes the
Collateral Agent to execute, deliver and perform as its agent, each
Note Document to which the Collateral Agent is or is intended to be
a party in the capacity as agent (including the power to execute or
authorize the execution of financing or similar statements, notices
or documents), to take such action as agent on its behalf and to
exercise such powers under this Agreement and the Note Documents as
are delegated to the Collateral Agent by their terms, together with
all such powers as are reasonably incidental thereto. In performing
its functions and duties under this Agreement, the Collateral Agent
shall act solely as agent of the Lenders and does not assume and
shall not be deemed to have assumed any obligations towards or
relationship of agency or trust with or for the
Borrower.
4.2.
Rights of Collateral Agent . The Collateral Agent, in the
Collateral Agent’s capacity as a Lender, shall have the same
rights and powers hereunder as any other Lender and may exercise or
refrain from exercising the same as though it were not the
Collateral Agent. The Collateral Agent may (without having to
account to any Lender) consult to, lend money to, and generally
engage in any kind of service, trust, financial advisory, fiduciary
or other business relationship with the Borrower (including,
without limitation, with a representative of the Collateral Agent
as a director for the Borrower) as if it were not acting as
Collateral Agent, and may accept fees and other consideration
therefor without having to account for the same to the
Lenders.
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4.3.
Scope of Duties; Liability .
4.3.1
Subject to the terms hereof and of the Note Documents, the
Collateral Agent agrees to receive, hold, administer and enforce
the Collateral and the Security Agreement, and to foreclose upon,
collect and dispose of the Collateral and to apply the proceeds, in
such manner and on such terms as are set forth herein, solely for
the benefit of the Lenders, and otherwise to perform its duties and
obligations as Collateral Agent hereunder and under each Note
Document to which it is a party in accordance with their respective
terms, provided, however, that the Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this
Agreement and the Note Documents, and shall not, by reason of this
Agreement or any other Note Document, have a fiduciary relationship
with any Lender, and no implied covenants, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Collateral Agent. The
Collateral Agent shall not be required to exercise any discretion
or take any action, but shall in all cases be fully protected in
acting, or in refraining from acting, in response to the written
consent or request of Lenders holding an aggregate Pro Rata Share
of greater than or equal to one-half (0.5); provided, however, that
the Collateral Agent need not take any action which in its judgment
may expose it to personal liability (unless the Collateral Agent is
fully indemnified to its satisfaction, as determined in its sole
discretion) or which is contrary to this Agreement, the Note
Documents or applicable law; and provided further, however, that
any such consent or request described in this sentence to any
action or omission shall be binding upon all of the
Lenders.
4.3.2
The Collateral Agent shall not be liable to the Lenders for any
action taken or not taken by it in connection with this Agreement
with the consent or at the request of Lenders holding an aggregate
Pro Rata Share of greater than or equal to one-half (0.5) or in the
absence of the Collateral Agent’s gross negligence or willful
misconduct. The Collateral Agent shall not be responsible for or
have any duty to ascertain, inquire into or verify (a) any
statement, warranty or representation made in connection with this
Agreement, the Note Documents or any borrowing by the Borrower, (b)
the performance or observance of any covenants or agreements of the
Borrower, or the satisfaction of any condition for a borrowing by
the Borrower, or (c) the validity, effectiveness, legal
enforceability, value or genuineness of this Agreement, any of the
Note Documents or any other instrument or writing furnished in
connection herewith or the perfection or priority of any lien or
security interest under the Security Agreement or otherwise with
respect to any property or assets of the Borrower.
4.3.3
The Collateral Agent shall promptly provide to all of the Lenders
copies of all reports, notices or other communications provided by
the Borrower to Collateral Agent under the Security Agreement and
shall act on behalf of any Lender that so requests for purposes of
exercising such Lender’s individual rights under the Security
Agreement; provided, however, that the Collateral Agent need not
take any such action which in its judgment may expose it to
personal liability (unless the Collateral Agent is fully
indemnified to its satisfaction by the requesting Lender, as
determined in its sole discretion) or which is contrary to this
Agreement, the Note Documents or applicable law.
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4.4.
Reliance . The Collateral Agent shall be entitled to rely
upon any certificate, notice or other document (including any
facsimile or e-mail transmission or any oral communication that is
confirmed in writing) believed by the Collateral Agent to be
genuine and correct and to have been signed or sent or made by or
on behalf of a proper Person. The Collateral Agent may rely
conclusively upon certifications from the Lenders as to the amount
of Obligations at any time owing to each of them. The Collateral
Agent may employ agents for any reasonable purpose relating to its
duties hereunder and may consult with legal counsel (who may be
counsel for the Collateral Agent, the Lenders or the Borrower),
independent public accountants and other experts selected by the
Collateral Agent and shall not be liable to the Lenders (except as
to money or other property actually received by it or its
authorized agents) for the negligence or misconduct of any such
agent selected by it with reasonable care or in good faith or for
any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
4.5.
Defaults . The Collateral Agent shall not be deemed to have
knowledge of the occurrence of any Default or Event of Default,
unless the Collateral Agent has received written notice from a
Lender or the Borrower specifying such Default or Event of Default
and expressly stating that such notice is a “notice of
default”. In the event that the Collateral Agent receives
such a notice, the Collateral Agent shall give reasonably prompt
written notice thereof to the Lenders and shall provide a copy of
such notice to each Lender. Collateral Agent may take such action
(but shall be under no obligation whatsoever to do so), or refrain
from taking such action with respect thereto, as it shall deem
advisable, acting in good faith, in the best interests of the
Lenders to prevent waste or other deterioration, diminution in
value or other loss of the Collateral. Any Lender giving notice of
an Event of Default shall send a copy to each of the Borrower and
the Collateral Agent.
4.6.
Non-Reliance by Lenders . Each Lender acknowledges and
agrees that it has not relied on the Collateral Agent or any other
Lender in connection with its analysis of the Borrower, the
Collateral and the Note Documents and it will continue to make its
own analysis and decisions in taking or not taking action under
this Agreement or the other Note Documents. The Collateral Agent
shall not be required to keep itself informed as to the performance
or observance by the Borrower of this Agreement, the Note Documents
or any other documents referred to or provided for herein or to
inspect the properties or books of the Borrower. Except as
expressly required by the terms and conditions of this Agreement,
the Collateral Agent shall have no duty or responsibility to
provide any Lender with any information concerning the affairs,
financial condition or business of the Borrower which may come into
the possession of the Collateral Agent.
4.7.
Indemnification . The Lenders agree to indemnify the
Collateral Agent (to the extent not reimbursed by the Borrower, or
not covered by distributions under Section 2 hereof, but without
limiting any obligation of the Bo
