Exhibit 10.3
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Agreement") is entered into this
13th day of July by and among Unigene Laboratories, Inc., a Delaware corporation
(the "Company"), Xxx Xxxx, a resident of New Jersey, Xxxxxx X. Xxxx, a resident
of New Jersey, and Xxxxxx X. Xxxx, a resident of New Jersey (Xxxxxx X. Xxxx and
Xxxxxx X. Xxxx are referred to herein individually as a "Subordinated Creditor"
and collectively as the "Subordinated Creditors").
WITNESSETH:
WHEREAS, Xxx Xxxx and the Subordinated Creditors jointly hold a
promissory note (the "March 2 Note"), dated March 2, 1995, in the original
principal amount of $500,000 issued by the Company; and
WHEREAS, Xxx Xxxx and the Subordinated Creditors jointly hold a
promissory note (the "June 29 Note"), dated June 29, 1995, in the original
principal amount of $700,000 issued by the Company; and
WHEREAS, the aggregate principal amount outstanding and owed by the
Company to Xxx Xxxx under the March 2 Note and the June 29 Note as of the date
hereof is $60,000 and the aggregate amount of accrued and unpaid interest owed
by the Company to Xxx Xxxx under the March 2 Note and the June 29 Note as of the
date hereof is $103,541; and
WHEREAS, Xxx Xxxx holds a promissory note (the "Restated Note") of even
date herewith in the principal amount of $1,600,000 issued by the Company; and
WHEREAS, the payment of the March 2 Note, the June 29 Note and the
Restated Note are secured by a security interest in the Collateral granted by
the Company to Xxx Xxxx and the Subordinated Creditors pursuant that certain
Amended and Restated Security Agreement of even date herewith by and among the
Company, Xxx Xxxx and the Subordinated Creditors (the "Security Agreement"); and
WHEREAS, to induce Xxx Xxxx to make certain of the loans to the Company
evidenced by the Restated Note, each of the Subordinated Creditors has agreed to
subordinate his security interest in the Collateral to the security interest in
the Collateral granted to Xxx Xxxx, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made 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.
1.1 All terms used herein and not defined shall have the meanings
ascribed to such terms in the Security Agreement.
1.2 The following terms when used herein shall have the following
meanings:
(a) "Senior Debt" shall mean all indebtedness, liabilities,
and obligations of the Company to Xxx Xxxx under the Restated Note, the March 2
Note and the June 29 Note, including, without limitation, principal, interest
(including interest accruing after the bankruptcy of the Company) and fees
payable thereunder.
(b) "Subordinated Debt" shall mean all indebtedness,
liabilities, and obligations of the Company to the Subordinated Creditors under
the March 2 Note and the June 29 Note, including, without limitation, principal,
interest and fees payable thereunder.
2. Subordination. Each Subordinated Creditor hereby agrees that any and all
liens on and security interests in the Collateral granted by the Company,
whether pursuant to the Security Agreement or otherwise, to such Subordinated
Creditor to secure any Subordinated Debt is hereby immediately made subordinate
and junior to, and postponed in priority and effect to, the liens on and
security interests in the Collateral granted by the Company pursuant to the
Security Agreement to Xxx Xxxx to secure the Senior Debt, all as if Xxx Xxxx'x
security interests had been perfected by the timely filing of financing
statements or by any other legal means prior to the time the security interest
with respect to the Subordinated Debt was perfected and prior to the filing of
any financing statements in connection with the Subordinated Debt.
3. Rights to Collect Prior to Subordinated Debt. In the event of, and commencing
with the date of, any dissolution, winding up, liquidation, reorganization or
other similar proceeding relating to the Company, its creditors or its property
(whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership, or upon assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the Company
or any sale of the assets of the Company), the Senior Debt shall be satisfied in
full in cash or otherwise to the reasonable satisfaction of Xxx Xxxx before the
Subordinated Creditors shall be entitled to receive and/or retain any payment,
distribution, asset or other property of the Company in respect of the
Subordinated Debt and, in order to implement the foregoing, all payments,
distributions or transfers of property of any kind in respect of the
Subordinated Debt to which any Subordinated Creditor would be entitled but for
the provisions of this Agreement shall be made directly to Xxx Xxxx (and each
Subordinated Creditor hereby directs any person making such payment or
distribution to make such payment or distribution directly to Xxx Xxxx).
4. Postponement of Enforcement. Each Subordinated Creditor hereby agrees that he
shall not attempt to assert, enforce or take any action in furtherance of any
rights or remedies granted pursuant to the Security Agreement in respect of the
Subordinated Debt unless and until the Senior Debt shall have been satisfied in
full in cash or otherwise to the reasonable satisfaction of Xxx Xxxx; provided
that the foregoing shall not terminate or otherwise void the rights granted to
the Subordinated Creditors pursuant to the Security Agreement.
5. Further Assurances. Each Subordinated Creditor hereby agrees to execute any
and all such further agreements, documents and instruments, and to take or
refrain from taking any further action, as Xxx Xxxx reasonably may request to
carry into effect the intent of this Agreement.
6. Term. This Agreement shall remain in full force and effect until all Senior
Debt has been satisfied in full in cash or otherwise to the reasonable
satisfaction of Xxx Xxxx.
7. Binding Effect. This Agreement shall be binding upon the Company and the
Subordinated Creditors and their respective, heirs, executors, administrators,
successors and assigns and shall inure to the benefit of Xxx Xxxx and his heirs,
executors, administrators, successors and assigns.
8. Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
(i) on the same day if given by personal delivery, (ii) on the following
business day if given by telecopier with confirmation of receipt, or (iii) on
the following business day if given by nationally recognized overnight air
courier, in each case addressed to the party to be notified at:
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx, 00000,
Attention: [Name of Party]
Facsimile: 000-000-0000
or at such other address as such party may designate by ten days' advance
written notice given hereunder to any other party.
9. Waiver. No delay or failure on the part of any party in exercising any right,
privilege, remedy or option hereunder shall operate as a waiver of such or any
other right, privilege, remedy or option, and no waiver shall be valid unless in
writing and signed by each party and then only to the extent therein set forth.
10. Modifications and Amendments. This Agreement constitutes the complete
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect thereto. This Agreement may not be
changed, modified or amended orally, but only by a writing signed by all parties
hereto.
11. Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New Jersey without giving effect
to conflicts of laws principles.
12. Severability. If one or more provisions of this Agreement is held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which shall
constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
UNIGENE LABORATORIES, INC.
By:
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Name:
Title:
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XXX XXXX
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XXXXXX X. XXXX
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XXXXXX X. XXXX
Prepared by:
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X. Xxxxxx Van Dam, Esq.
