THIS INTERCREDITOR AGREEMENT (this “
Agreement” ) dated as of November 5, 2008,
among Longview Fund, L.P. and Alpha Capital Anstalt (collectively
the “ Junior Lenders ”) and each of the
holders of the Bridge Notes (the “ Senior
Lenders ”) identified on the signature pages hereof,
and Irvine Sensors Corporation, a Delaware corporation (the “
Borrower ”).
WHEREAS, the Junior Lenders have made various
loans and advances to the Borrower as described below in the
definition of “ Junior Obligations
”;
WHEREAS, the Senior Lenders have purchased the
Bridge Notes issued by the Borrower pursuant to a Private Placement
Memorandum dated as of September 29, 2008 (the “
Bridge Notes ”) and are the holders of the
“ Senior Obligations ” as defined
below;
WHEREAS, the Junior Lenders and the Senior
Lenders have entered into a Collateral Agent Agreement with the
Collateral Agent as defined below dated even date herewith pursuant
to which the Junior Lenders and the Senior Lenders have agreed to
appoint the Collateral Agent to administer certain “
Collateral ” as defined below;
WHEREAS, the Junior Lenders and the Senior
Lenders desire to enter into this Agreement to provide for the
relative priorities of their obligations.
NOW, THEREFORE, in consideration of the premises
set forth herein and for other good and valuable consideration, the
parties hereto agree as follows:
(a) “ Collateral
” shall mean the Collateral as defined in Section 1(b) of the
Collateral Agent Agreement as limited by Section 1(c) of the
Collateral Agent Agreement.
(b) “ Collateral Agent
” shall mean S. Michael Rudolph or any successor serving as
the Collateral Agent under the Collateral Agent
Agreement.
(c) “ Collateral Agent
Agreement ” shall mean the Collateral Agent Agreement
of even date herewith among the Junior Lenders, the Senior Lenders
and the Collateral Agent, as amended from time to time
hereafter.
(d) “ Junior
Obligations ” shall mean the Initial Lenders
Obligations as defined in the Collateral Agent
Agreement.
(e) “
Lenders ” shall mean collectively the Senior
Lenders and the Junior Lenders.
(f) “
Majority in Interest ” shall have the meaning
set forth in the Collateral Agent Agreement.
(g) “
MOU ” shall have the meaning set forth in the
Collateral Agent Agreement.
(h) “
Optex Collateral ” shall have the meaning set
forth in the Collateral Agent Agreement.
(i) “ Payment in Full or Paid
in Full ” shall mean the indefeasible payment in full
in cash of the Senior Obligations.
(j) “ Proceeding
” shall mean any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors,
appointment of a custodian, receiver, trustee or other officer with
similar powers or any other proceeding for the liquidation,
dissolution or other winding up of the Borrower.
(k) “ Senior
Obligations ” shall mean the Bridge Lenders
Obligations as defined in the Collateral Agent
Agreement.
2. Subordination of Junior
Obligations to the Senior Obligations . Borrower hereby
covenants and agrees, and the Junior Lenders likewise hereby
covenant and agree, that the payment of any and all of the Junior
Obligations shall be subordinate and subject in right of payment,
to the extent and in the manner hereinafter set forth, to the prior
Payment in Full of the Senior Obligations. Each holder of the
Senior Obligations, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, shall be deemed to have acquired
the Senior Obligations in reliance upon the provisions contained in
this Agreement.
3. Distributions from Collateral
Agent . Until the Payment in Full of the Senior
Obligations, the Junior Lenders shall instruct the Collateral Agent
to deliver to the Senior Lenders all Collateral or proceeds thereof
(net of any expenses which the Collateral Agent is entitled to
retain from collections under the Collateral Agent Agreement)
obtained or received from the exercise of any remedies against, or
otherwise in connection with, the Collateral. Any payments made by
the Collateral Agent to the Junior Lenders in violation of the
preceding sentence shall be subject to the terms of Section 6
below. Anything to the contrary herein notwithstanding, the Junior
Lenders shall be entitled to all distributions from the Collateral
Agent of the proceeds of the Optex Collateral.
4. Proceedings . In the
event of any Proceeding involving Borrower the following shall
apply:
(a) all Senior Obligations shall be Paid in
Full before any payment of or with respect to the Junior
Obligations shall be made;
(b) any payment or distribution, whether in
cash, property or securities, which not including proceeds of the
Optex Collateral, but for the terms hereof would otherwise be
payable or deliverable in respect of the Junior Obligations, shall
be paid or delivered directly to the Senior Lenders until all
Senior Obligations are Paid in Full, and the Junior Lenders
irrevocably authorize, empower and direct all receivers, trustees,
liquidators, custodians, conservators and others having authority
in the premises to effect all such payments and distributions, and
the Junior Lenders also irrevocably authorize, empower and direct
the Senior Lenders to demand, sue for, collect and receive every
such payment or distribution;
(c) the Junior Lenders agree to execute and
deliver to the Senior Lenders or their representative all such
further instruments confirming the authorization referred to in
clause (b) above; and
(d) the Junior Lenders agree not to
initiate or prosecute or encourage any other person to initiate or
prosecute any claim, action or other proceeding challenging the
enforceability of the Senior Obligations or their rights under the
Collateral Agent Agreement and any documents executed in connection
therewith as a secured creditor to share in the
Collateral.
The Senior Obligations shall continue to be
treated as Senior Obligations and the provisions of this Agreement
shall continue to govern the relative rights and priorities of
Senior Lenders and the Junior Lenders even if all or part of the
Senior Obligations or the Senior Lenders rights under the
Collateral Agent Agreement or any security interests or liens
securing the Senior Obligations are subordinated, set aside,
avoided or disallowed in connection with any such Proceeding and
this Agreement shall be reinstated if at any time any payment of
any of the Senior Obligations is rescinded or must otherwise be
returned by any holder of the Senior Obligations or any
representative of such holder.
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5. Permitted Payments on Junior
Obligations . Until the Payment in Full of the Senior
Obligations, the Borrower shall be permitted to pay and, the Junior
Lenders shall be permitted to receive and retain, the following
payments on account of the Junior Obligations: (i) interest;
(ii) fees and expenses; (iii) payments of any amounts
owed by the Borrower for indemnification; and (iv) the payment
of principal but only in connection with (x) the conversion of
some or all of the principal amount of the Junior Obligations into
convertible preferred stock or other equity security of the
Borrower, or (y) the receipt of cash proceeds or assets from
the extinguishment of some or all of the principal amount of the
Junior Obligations upon a credit bid or other application in the
sale or distribution of the Optex Collateral or release of the
Optex Collateral or the proceeds thereof to Junior Lenders
(collectively, the “ Permitted Payments
”). Notwithstanding the forgoing, upon the receipt by the
Collateral Agent of written instructions of a Majority in Interest
that there is a default or Event of Default under the Senior
Obligations or to accelerate the maturity of the Senior
Obligations, the Borrower shall not be permitted to make, nor the
Junior Lenders to receive, any payments of any kind on account of
the Junior Obligations, except that the Junior Lenders shall be
permitted to receive and retain the equity securities upon the
conversion of Junior Obligations to equity securities of the
Borrower and the cash proceeds or assets in connection with the
Optex Collateral described in clauses (iv)(x) and (y) of this
Section 5. For the avoidance of doubt, Senior Lenders
acknowledge that they have no interest in the Optex
Collatera
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