EX-10.17
EXECUTION COPY
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INTERCREDITOR AGREEMENT
RELATING TO THE OFFERING OF
12% SECURED CONVERTIBLE NOTES DUE 2006
OF
SHEERVISION, INC.
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DATED AS OF SEPTEMBER 13, 2005
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INTERCREDITOR AGREEMENT (this "AGREEMENT"), dated as of September
13,
2005, between SHEERVISION, INC., a California corporation with
offices located
at 4040 Palos
Verdes Drive North, Suite 105,
Rolling Hills Estates,
California 90274 (the
"COMPANY") and THE
HOLDERS (the "INVESTORS") of the 12% Secured Convertible Notes
due
2006
of the COMPANY (the "NOTES").
INTRODUCTION
In
accordance with the Confidential Private Placement Memorandum, dated
August 24, 2005, of the Company and the documents attached thereto, including,
without
limitation, the
Subscription
Package
attached
thereto
(the
"SUBSCRIPTION"), the
Investors have agreed to purchase from the Company the
Notes, each dated as
of the date hereof,
and delivered respectively to the
Investors pursuant to
the Subscription,
dated as of the date
hereof, by and
between the
Company and each of the Investors. Pursuant to Notes, the
obligations of the
Company under the Notes are secured by a security interest,
granted in favor of
the Investors
in and to all
property and assets of the
Company (the "SECURITY INTEREST"). The Company's obligations, as set forth in
the Notes, are sometimes referred to herein as the "COMPANY'S
OBLIGATIONS". The
Investors desire to
enter into
this Agreement in order to set forth their
understanding with respect to several matters pertaining to the
servicing of the
Loan (as hereinafter
defined) and the
enforcement of their
respective rights
with respect to the
Notes, as well as matters related to the subordination
thereof.
NOW,
THEREFORE, in consideration of the foregoing recitals and the
mutual
promises,
representations,
warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of
which
are hereby acknowledged, the parties hereby agree as follows:
1.
Loan
Advance.
The Investors have advanced, pursuant to the terms and
conditions
set forth in the
Transaction Documents
(as defined in the Notes), the amounts
set forth in Exhibit A attached hereto (in the aggregate,
the "LOAN").
For the
purposes of this
Agreement, the amount
of principal,
plus interest accrued
thereon, owed to each
Investor under its respective Note as a proportion of the
aggregate amount of the Loan, shall be referred to as such
Investor's respective
percentage interest (the "PERCENTAGE INTERESTS").
2.
Ownership Interest.
Each Investor
shall own an interest in the Loan equal to its
Percentage Interest as
described on Exhibit A and each Investor shall own its
interest the Company's
Obligations.
Except as otherwise
stated herein, the
Investor shall own,
PARI PASSU to each of
the other Investors,
an undivided
fractional interest
equal to such
Investor's Percentage
Interest in: (a)
the
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Loan; (b) all payments
made on or in respect of the Loan; (c) all recoveries or
distributions in
connection
with the Loan;
and (d) all
present and future
collateral (and all proceeds in connection therewith) securing the
same.
3.
No
Representation or Warranty Relating to Loan.
3.1. No Investor
has made any warranty or representation to any
other Investor,
expressed or implied, with respect to the Loan, the adequacy of
security for the Loan, the existing or future solvency or financial
worth of the
Company, and the
ability of the
Company to repay the Loan and the
Company's
Obligations. Each
Investor acknowledges that the Loan and the Company's
Obligations carry a
high degree of risk;
that the Company may default on the
Loan, which may result in a bankruptcy filing and/or foreclosure
action and/or a
deterioration of the
collateral
for the Loan; and that
it may not be possible
for the Investors to collect the full principal balance of the Loan, any or
all
of the accrued
interest on the Loan,
and/or any or all other amounts due with
respect to the Loan.
3.2. Any
information,
data, projections and other materials
heretofore supplied
to each Investor has been extrapolated from material
supplied by the Company or due diligence. Each Investor acknowledges and
agrees
that no Investor
makes any representation or warranty as to the nature and
quality of such information. Each Investor acknowledges and agrees that it
has
had ample opportunity to make and have made such investigations as
it has deemed
necessary under the circumstances.
4.
Expenses.
All expenses including, but not limited to, counsel fees and
court
costs paid or incurred by any Investor (an "OBLIGATED PARTY") in any action to
collect or foreclose on any of the Company's Obligations,
the Security
Interest
or the Loan, shall be borne by the Investors in accordance with
their respective
Percentage Interests
at the time of the
default or the failure of performance
giving rise to the
action to collect or
enforce the rights of the Investors
under the Noteor the Company's Obligations. Payment shall be made by each
Investor to the Obligated Party within five (5) days after
receipt of notice of
demand for the payment of such Investor's PRO RATA share. If such
payment is not
made when due, the
Obligated Party may make such payment on the defaulting
Participant's behalf,
such payment shall bear interest at the rate of ten
percent (10%) PER ANNUM and shall be automatically repaid to the
Obligated Party
out of the first funds received on behalf of the defaulting
Participant from
or
on behalf of the Company.
5.
Distribution of Sale or Refinance Proceeds.
5.1. If Company
repays or refinances the Loan, or if the Company
is in default of the Company's Obligations and any Investor sells
or disposes of
any Collateral for the
Loan or any Investor
otherwise recovers all
or part of
the principal
and interest and other
amounts due and owing under the Company's
Obligations, the net
proceeds of said refinances or sale or the amount of
principal, interest
and other amounts repaid shall be distributed in the
following order of priority:
(a) First,
repayment of each Investor's expenses
described above in Section 4;
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(b)
Second,
repayment of
remaining principal and
interest (exclusive of default interest and late charges to each
Investor);
(c) Third,
repayment of default interest, late charges,
and any other amounts
to each Investor PARI PASSU in accordance with their
respective Percentage Interests;
5.2. The
priorities of allocation set forth in Section 5.1 shall
apply in all
circumstances,
including with respect to any distribution made in
any case or
proceeding
under Title 11 of United States Code or any other
proceeding relating
to the Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation.
5.3. If any
Investor (an "EXCESS PARTY") shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff, or otherwise)
as a result of the
realization, sale or
other remedial
disposition of, or
foreclosure on, any
Collateral or any
repayment under
the
Note in excess of the amount it is then entitled to receive under the terms of
this Agreement and the
Note, such Excess
Party shall hold such amount in trust
for the ratable
benefit of the other
Investors in accordance with the terms of
this Agreement.
6.
Subordination.
