EXHIBIT 10.3
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Agreement") is made as of the 20th
day of October, 1997, by and among NPM Capital LLC, a Delaware limited
liability company with an address c/o Pembroke Companies, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ("NPM"), NPO Management LLC, a
Delaware limited liability company with an address c/o Millennium Financial
Services, Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("NPO"; NPM and NPO are sometimes hereinafter collectively referred to as the
"Senior Creditor"), Bridge Capital, LLC, a Delaware limited liability company
having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Junior
Creditor"), and DVL, Inc., a Delaware corporation having an office at ▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
W I T N E S S E T H:
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WHEREAS, NPM and the Borrower are parties to an Amended and Restated
Loan Agreement dated as of March 27, 1996, as the same has been amended as of
July 10, 1996, September 27, 1996 and March 6, 1997 (the "Loan Agreement"),
pursuant to which, among other things, NPM acquired approximately $7.5 million
of outstanding indebtedness of the Company and advanced additional sums to the
Company (the "NPM Loan"); and
WHEREAS, concurrently with the execution of the Loan Agreement, NPO,
the Borrower and certain other parties entered into an Asset Servicing
Agreement (the "Servicing Agreement") pursuant to which, among other things,
the Borrower engaged NPO to assist the Borrower to perform certain services
with respect to the ownership, sale, financing and asset management of certain
of the Borrower's assets; and
WHEREAS, the Borrower's obligations to NPM arising out of and relating
to the Loan Agreement are, among other things, secured by the pledge by the
Borrower of, and the grant by the Borrower to NPM of a first priority
perfected security interest in, certain of the Borrower's assets (the
"Collateral"), all as more specifically set forth in that certain Security,
Pledge and Guaranty Agreement and Stock Pledge and Guaranty Agreement entered
into by the Borrower and NPM concurrently with the execution of the Loan
Agreement; and
WHEREAS, the Borrower's obligations to NPO arising out of and relating
to the Servicing Agreement are, among other things, secured by the pledge by
the Borrower of, and the grant by the Borrower to NPO of a perfected security
interest in, the Collateral (the "NPO Security Interest"), all as more
specifically set forth in that certain Security Pledge and Guaranty Agreement
and Stock Pledge and Guaranty Agreement entered into by the Borrower and NPO
concurrently with the execution of the Servicing Agreement; and
WHEREAS, the NPO Security Interest in the Collateral is subordinate
to the lien in such Collateral granted by the Borrower to NPM, but otherwise
senior to all other liens which may be granted by the Borrower with respect
to the Collateral except as otherwise set forth on Schedule A hereto; and
WHEREAS, concurrently with the execution of this Agreement, the
Borrower, the Junior Creditor and NPM are entering into a Fourth Amendment to
Loan Agreement (the "Amendment") pursuant to which, among other things, the
Loan Agreement is being further amended to (i) include the Junior Creditor as
a Lender thereunder and (ii) provide for the loan by the Junior Creditor to
the Borrower of up to $1,760,000 (the "Subordinated Loan") for the express
purpose of financing the Borrower's acquisition, together with related costs
and expenses, of the Borrower's outstanding 10% Redeemable Promissory Notes
due December 31, 2005 (the Loan Agreement, as further amended by the
Amendment, being hereinafter referred to as the "Amended Loan Agreement"); and
WHEREAS, the Borrower's obligations to the Junior Creditor arising
out of and relating to the Subordinated Loan are secured by the pledge by the
Borrower to the Junior Creditor of, and the grant by the Borrower to the
Junior Creditor of a security interest in, the Collateral; and
WHEREAS, the Senior Creditor and the Junior Creditor desire to set
forth their relative rights with respect to the Borrower's obligations due
them pursuant to the Amended Loan Agreement and the Servicing Agreement and
the Collateral securing such obligations as follows.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(a) Any capitalized term which is used herein but is not otherwise
defined shall have the meaning given to it in the Amended Loan Agreement.
(b) In addition to the terms defined elsewhere herein, as used
herein, the following capitalized terms shall have the meanings indicated:
(i) "BANKRUPTCY PROCEEDING" shall mean any voluntary or
involuntary bankruptcy, insolvency, reorganization, receivership, liquidation,
or similar proceeding, whether commenced or continued under applicable
federal, state or local law.
(ii) "ENFORCEMENT ACTION" shall mean, with respect to the
Senior Debt or the Subordinated Debt, any action to collect all or any portion
of the Senior Debt or the Subordinated Debt or to enforce any of the material
rights and remedies of the holder of the Senior Debt or the Subordinated Debt,
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including, but not limited to: (i) commencing or pursuing legal proceedings
to collect any amounts owed with respect to the Senior Debt or the
Subordinated Debt; (ii) executing upon, or otherwise enforcing, any judgment
obtained with respect to amounts owed on the Senior Debt or the Subordinated
Debt; (iii) commencing or pursuing any judicial or nonjudicial proceedings to
foreclose upon, acquire any interest in, or to acquire title in lieu of
foreclosure as to, all or any portion of the Collateral; or (iv) taking
possession of, seeking the appointment of a receiver for, or taking any other
action to realize upon, all or any portion of the Collateral.
(iii) "NPM NOTES" shall mean (a) that certain promissory note of the
Borrower in the original principal amount of $8,360,000 issued by the Borrower
to NPM on September 27, 1996 and evidencing the Borrower's monetary
obligations to NPM pursuant to the Amended Loan Agreement as of that time, (b)
that certain promissory note of the Borrower in the original principal amount
of $200,000 issued by the Borrower to NPM as of March 6, 1997 and evidencing
the Borrower's further monetary obligations to NPM as of the date of issuance
of such $200,000 note pursuant to the Loan Agreement and (c) any promissory
notes or other instruments evidencing any Permitted Working Capital Advances,
as such NPM Notes may be amended, extended, renewed, refinanced, increased,
supplemented or assigned from time to time.
(iv) "SENIOR DEBT" shall mean all of the following: (A) the aggregate
principal indebtedness under the NPM Notes outstanding from time to time; (B)
all interest accrued and accruing on the aggregate principal outstanding under
the NPM Notes from time to time; (C) all amounts payable by Borrower to NPO
pursuant to the Servicing Agreement; (D) all costs actually incurred by the
Senior Creditor in commencing or pursuing any Enforcement Action(s) with
respect to the amounts described in clauses (A), (B) and (C), including,
without limitation, reasonable attorneys' fees and disbursements; (E) any
advances made by the Senior Creditor to protect the Collateral or the rights
of the Senior Creditor with respect to the Collateral; and (F) subject to the
next sentence, all other indebtedness, monetary liabilities and monetary
obligations from time to time owed by the Borrower to the Senior Creditor
under any of the Loan Documents, PROVIDED, HOWEVER, that following the
satisfaction, in their entirety, of all obligations of Borrower under the NPM
Notes and the Servicing Agreement (other than obligations arising solely from
the indemnification provisions set forth in the Servicing Agreement), Senior
Debt shall not include any indebtedness, monetary liabilities or monetary
obligations arising solely from the indemnification provisions set forth in
the Servicing Agreement. For purposes of this Agreement, "Senior Debt" shall
not include, however, any Subordinated Debt.
(v) "STANDSTILL NOTICE" shall mean a written notice from the Senior
Creditor to the Junior Creditor indicating that an Event of Default has
occurred and is continuing under and as defined in the Amended Loan Agreement.
(vi) "STANDSTILL PERIOD" shall mean that period of time commencing
upon the delivery of a Standstill Notice from the Senior Creditor to the
Junior Creditor and expiring on that date which is the earliest to occur of
(A) that date upon which the Event of Default(s) described in the Standstill
Notice and any other Events of Default arising thereafter have been cured in
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full, (B) that date upon which all of the Senior Debt has been repaid in full
and discharged or (C) that date which is 180 days following the date of
delivery of a Standstill Notice, PROVIDED, HOWEVER, that the Senior Creditor
shall not be permitted to deliver to the Junior Creditor more than one
Standstill Notice during any 365-day period.
(vii) "SUBORDINATED DEBT" shall mean all of the following: (A) the
aggregate principal indebtedness under the Subordinated Note outstanding from
time to time; (B) all interest accrued and accruing on the aggregate principal
outstanding under the Subordinated Note from time to time; (C) the aggregate
principal indebtedness under all other promissory notes of the Borrower issued
from time to time to the Junior Creditor in satisfaction of the Borrower's
interest obligations under the Subordinated Note, together with all interest
accrued and accruing on the aggregate principal outstanding under such other
notes from time to time; (D) all costs actually incurred by the Senior
Creditor in commencing or pursuing any Enforcement Action(s) with respect to
the amounts described in clauses (A), (B) and (C), including, without
limitation, reasonable attorneys' fees and disbursements; (E) any advances
made by the Junior Creditor to protect the Collateral or the rights of the
Junior Creditor with respect to the Collateral and (F) all other indebtedness,
monetary liabilities and monetary obligations from time to time owed by the
Borrower to the Junior Creditor.
(viii) "SUBORDINATED NOTE" shall mean that certain promissory note
of the Borrower in the original principal amount of $1,760,000 issued by the
Borrower to the Junior Creditor concurrently with the execution of the
Amendment.
2. SUBORDINATED DEBT SUBORDINATED TO SENIOR DEBT.
(a) The Borrower covenants and agrees for itself and its successors
and assigns, and the Junior Creditor covenants and agrees for itself and its
successors and assigns, that, to the extent and in the manner hereinafter set
forth in this Section, the payment of Subordinated Debt is hereby expressly
made subordinate and subject in right of payment to the prior payment in full
in cash, cash equivalents, securities or other property of all Senior Debt.
So long as the Senior Debt is not paid in full in cash or cash equivalents,
the Borrower shall not make any payment on account of the Subordinated Debt,
provided, however, that so long as no Event of Default (as defined in each of
the Amended Loan Agreement and the Servicing Agreement) exists or is
continuing, the Borrower shall pay to the Junior Creditor when due and owing
pursuant to the terms of the Amendment, any Prepayments and the PIK Notes of
the Borrower (as defined in the Amendment) in satisfaction of the Borrower's
then owing interest obligations to the Junior Creditor pursuant to the
Amendment. The provisions of this Section 2 shall constitute a continuing
offer to all persons who, in reliance upon such provisions, become holders of
or continue to hold, Senior Debt, and such provisions are made for the benefit
of the holders of Senior Debt, and each such holder is hereby made an obligee
hereunder the same as if its name were written herein as such and is entitled
to enforce the provisions of this Section 2, subject to provisions hereof,
without any act or notice of acceptance hereof or reliance hereon.
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3. STANDSTILL PERIOD; RESTRICTIONS ON PAYMENT AND ENFORCEMENT OF
SUBORDINATED DEBT.
(a) The Junior Creditor acknowledges that, notwithstanding anything
to the contrary set forth herein, the Junior Creditor's right to pursue any
Enforcement Action against the Borrower independent of the Senior Creditor at
any time while Senior Debt remains outstanding shall be limited to the
circumstance where the Borrower fails to (i) remit any Prepayments pursuant
to the Amendment to the Junior Creditor or (ii) issue to the Junior Creditor
the PIK Notes pursuant to the Amendment in satisfaction of the Borrower's then
owing interest obligations to the Junior Creditor.
(b) Following receipt by the Junior Creditor of a Standstill Notice
that the Senior Creditor is entitled to send, and during the pendency of any
Standstill Period, the Junior Creditor shall not accelerate, demand, ▇▇▇ for,
commence or pursue any Enforcement Action or other proceeding, nor take,
receive, accept or retain any payment or distribution of any character
(whether in cash, securities or other property) on account of the principal,
interest or other charges owed on or with respect to any of the Subordinated
Debt until all of the Senior Debt shall have been paid in full.
(c) If the Junior Creditor has commenced an Enforcement Action or
taken any other steps prohibited by the terms of this Section 3 prior to the
receipt by it of a Standstill Notice from the Senior Creditor, then, upon
receipt of a Standstill Notice, the Junior Creditor shall take no further
actions except that the Junior Creditor shall take all of those actions
necessary or appropriate to cease, delay or suspend (to the fullest extent
practicable) all ongoing or pending actions of the type prohibited by the
terms of Section 3(b) above.
(d) Concurrently with the delivery of a Standstill Notice to the
Junior Creditor, the Senior Creditor shall deliver a copy of such Standstill
Notice to the Borrower. The Borrower shall not make, cause to be made, or
permit to be made, any payments on account of any of the Subordinated Debt in
violation of the restrictions set forth in this Agreement.
(e) Notwithstanding the prohibitions imposed by Section 3, the Junior
Creditor shall be entitled to appear in, join, intervene or otherwise become
involved in, any pending Enforcement Action undertaken by the Senior Creditor
to the extent reasonably necessary or appropriate to protect and defend the
rights of the Junior Creditor with respect to the Subordinated Debt or the
Collateral, subject, however, to the priority accorded to the Senior Creditor
under the terms of this Agreement.
4. CHANGES TO SUBORDINATED DEBT. While this Agreement remains in
effect, the Junior Creditor and the Borrower covenant and agree with the
Senior Creditor that neither the Junior Creditor nor the Borrower will do any
of the following without the prior written consent of the Senior Creditor,
which consent may be withheld for any reason whatsoever, in the Senior
Creditor's sole discretion: (a) make additional advances or otherwise
increase the maximum amount of indebtedness permitted under the Subordinated
Note; (b) enter into any new notes (other than the PIK Notes), loan agreements
or other arrangements for the borrowing of money from the Junior Creditor to
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the Borrower; (c) modify, amend, supplement, consolidate or recast the
Subordinated Note or any of the terms or conditions of the Subordinated Note
or the Subordinated Debt (including the PIK Notes) in order to increase the
maximum principal amount due thereunder or to increase the applicable interest
rate (or default interest rate); or (d) assign any of the rights of the Junior
Creditor or delegate any of the duties or obligations of the Junior Creditor
under the Subordinated Note or Subordinated Debt to any other party or
parties, except as otherwise expressly permitted in the Amendment.
5. PAYMENTS DURING BANKRUPTCY PROCEEDINGS. In the event of the
institution of and in connection with any Bankruptcy Proceedings relative to
the Borrower or any property of the Borrower or any proceedings to liquidate,
dissolve, wind-up or terminate the Borrower (whether or not involving any
Bankruptcy Proceedings):
(a) All Senior Debt shall be paid in full first before any payment
or distribution of any character, whether in cash, securities or other
property, shall be made on account of any of the Subordinated Debt; and
(b) Any payment or distribution of any character, whether in cash,
securities or other property, which would otherwise (but for the terms hereof)
be payable or deliverable on account of any of the Subordinated Debt shall be
paid or delivered directly to the Senior Creditor, until all of the Senior
Debt shall have been paid in full, and the Junior Creditor hereby irrevocably
authorizes, empowers and directs all receivers, trustees, liquidators,
conservators and others having authority to effect all such payments and
deliveries.
6. FURTHER ASSURANCES. The Junior Creditor shall execute and
deliver to the Senior Creditor all such further instruments confirming the
authorization referred to in Section 5(b) above and all such other powers of
attorney, proofs of claim, assignments of claim and other instruments, and
shall take all such other actions as may be reasonably requested by the Senior
Creditor in order to enable the Senior Creditor to enforce all of its rights
hereunder and all claims of the Senior Creditor upon or with respect to the
Subordinated Debt, and failing execution of such instruments or taking of such
actions by the Junior Creditor, the Senior Creditor is hereby authorized and
empowered to execute and perform same on behalf of the Junior Creditor. The
provisions of Section 5 above and this Section 6 shall not be construed as a
waiver by the Junior Creditor of its right to vote upon or participate in any
plan of reorganization involving the Borrower.
7. PAYMENTS RECEIVED BY THE JUNIOR CREDITOR. Any payments or
distributions received by the Junior Creditor from or on behalf of the
Borrower, whether in cash, securities or other property, in contravention of
the terms of this Agreement prior to the payment in full of all of the Senior
Debt shall: (a) be held by the Junior Creditor as trustee of an express trust
for the benefit of the Senior Creditor as sole beneficiary; and (b) be paid
over to the Senior Creditor for application by the Senior Creditor to all
Senior Debt remaining unpaid until such time as the Senior Debt shall have
been paid in full. The Junior Creditor hereby assigns to the Senior Creditor
all rights of the Junior Creditor to any such payments or distributions and
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agrees to provide the Senior Creditor with prompt written notice of the
receipt of the same. The Senior Creditor may exercise all rights to such
payments or distributions in the Senior Creditor's name or in the name of the
Junior Creditor. The Junior Creditor covenants and agrees to execute and
deliver such instruments and to take such actions as may be reasonably
required by the Senior Creditor to enable the Senior Creditor to enforce its
claims thereto. Any payments or distributions received by the Senior Creditor
from the Junior Creditor in excess of the amount sufficient to pay all of the
Senior Debt in full shall be returned by the Senior Creditor to the Junior
Creditor.
8. SUBORDINATED NOTE AND OTHER INSTRUMENTS. Each of the Subordinated
Note, the PIK Notes and any other instrument constituting a portion of the
Subordinated Debt shall indicate conspicuously on the face thereof that such
Note is subject to the terms of this Agreement.
9. COLLATERAL PRIORITY. Notwithstanding anything to the contrary
contained in any other instrument or document delivered in connection with the
Subordinated Debt or otherwise (including, but not limited to, any prior
perfection of a security interest or Lien), any Liens or security interests
now or hereafter held by the Junior Creditor in any Collateral for any portion
of the Subordinated Debt shall be junior and subordinate to any Liens and
security interests now or hereafter held by the Senior Creditor in the same
Collateral, and the Junior Creditor hereby expressly subordinates all of such
Junior Creditor's Liens, mortgages, and security interests in and to the
Collateral to the Liens, mortgages, and security interests of the Senior
Creditor in the same Collateral. So long as the Senior Debt remains unpaid,
the Senior Creditor may, at all times, in its sole discretion, exercise any
and all rights, remedies and powers which it now has or may hereafter acquire
with respect to any of the Collateral securing the Senior Debt, all without
the necessity of obtaining any consent or approval of the Junior Creditor.
In furtherance of the provisions of this Section 9, the Junior Creditor
covenants and agrees to execute, acknowledge and deliver to the Senior
Creditor such additional instruments or documents as may be reasonably
necessary to confirm the foregoing.
10. SECURITY INTEREST DOCUMENTATION. Notwithstanding anything to the
contrary set forth herein, simultaneously with the time that all of the Senior
Debt is satisfied in its entirety, (i) Borrower shall execute and deliver all
assignments, financing statements, mortgages, deeds of trust and any other
documents reasonably requested by the Junior Creditor in order for the Junior
Creditor to perfect its Lien with respect to the Collateral and (ii) the
Senior Creditor shall execute and deliver, without recourse and without
representation or warranty (express or implied), all assignments to relevant
financing statements, mortgages and deeds of trust previously filed by the
Senior Lender with respect to the Collateral, all as may reasonably be
requested by the Junior Lender.
11. REPRESENTATIONS AND WARRANTIES OF THE JUNIOR CREDITOR. The Junior
Creditor hereby represents and warrants to the Senior Creditor as follows: (a)
attached hereto as Exhibit "A" is a true, correct and complete copy of the
Subordinated Note held by the Junior Creditor; (b) the Subordinated Note has
not been modified, amended or rescinded and remains in full force and effect;
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(c) as of the date hereof, no other promissory notes, agreements or other
documents or instruments evidencing the Subordinated Debt exist other than the
Subordinated Note and the Amended Loan Agreement; (d) the Junior Creditor has
full power and authority to enter into this Agreement and to perform in
accordance with its terms and conditions; (e) upon execution and delivery of
this Agreement by the Junior Creditor, this Agreement shall constitute the
valid and binding obligation of the Junior Creditor, enforceable against the
Junior Creditor in accordance with its terms, subject to the customary
qualifications involving equitable principles and bankruptcy; and (f) neither
the execution and delivery of this Agreement, nor the performance by the
Junior Creditor of this Agreement in accordance with its terms, will violate
any applicable laws or regulations nor constitute a default under, or breach
of, any agreement to which the Junior Creditor is a party or by which the
Junior Creditor or any of the assets or properties of the Junior Creditor is
bound; provided, however, that no representation or warranty is made with
respect to any agreement to which the Borrower is a party or by which any of
the assets or properties of the Borrower is bound.
12. REPRESENTATIONS AND WARRANTIES OF EACH SENIOR CREDITOR. Each
Senior Creditor hereby represents and warrants to the Junior Creditor as
follows: (a) attached hereto as Exhibit "B" are true, correct and complete
copies of the NPM Notes held by the Senior Creditor; (b) the NPM Notes have
not been modified, amended or rescinded and remain in full force and effect;
(c) as of the date hereof, no other promissory notes, agreements or other
documents or instruments evidencing the Senior Debt exist other than the NPM
Notes, the Amended Loan Agreement, the Servicing Agreement and the other Loan
Documents; (d) each Senior Creditor has full power and authority to enter into
this Agreement and to perform in accordance with its terms and conditions; (e)
upon execution and delivery hereof by each Senior Creditor, this Agreement
shall constitute the valid and binding obligation of each Senior Creditor,
enforceable against each Senior Creditor in accordance with its terms, subject
to the customary qualifications involving equitable principles and bankruptcy;
and (f) neither the execution and delivery of this Agreement, nor the
performance by each Senior Creditor in accordance with its terms, will violate
any applicable laws or regulations nor constitute a default under, or breach
of, any agreement to which each Senior Creditor is a party or by which each
Senior Creditor or any of its assets or properties are bound.
13. CONTINUING SUBORDINATION. This Agreement is a continuing
agreement of subordination; it shall apply to, and the Subordinated Debt shall
remain subordinated to, any and all modifications, amendments, extensions,
renewals and refinancings of the Senior Debt or any portion thereof.
14. ACTIONS BY SENIOR CREDITOR. The Junior Creditor hereby
consents and agrees that the Senior Creditor may, at any time, and from time
to time, without further consent from the Junior Creditor, either with or
without consideration, and without impairing or affecting any of the Senior
Creditor's rights under this Agreement, take any of the following actions:
(a) surrender any property or other security of any kind or nature whatsoever
held by the Senior Creditor or by anyone else on behalf of the Senior
Creditor, that secures any or all of the Senior Debt; (b) substitute for any
Collateral so held by the Senior Creditor, other collateral of like kind, or
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of any kind; or (c) modify, amend or supplement the terms of any or all of the
Loan Documents, provided, however, that no such modification, amendment or
supplement shall have the intended effect of impairing or otherwise adversely
affecting the existing rights of the Junior Creditor with respect to the
Subordinated Debt. No such action which the Senior Creditor shall take or
fail to take shall release the Junior Creditor from any of its obligations
hereunder, affect this Agreement in any way, or afford the Junior Creditor any
recourse against the Senior Creditor.
15. BORROWER'S OBLIGATIONS NOT LIMITED. Subject to the provisions of
this Agreement and the rights of the Senior Creditor hereunder, as between the
Borrower and the Junior Creditor, nothing contained herein shall impair the
unconditional and absolute obligation of the Borrower to the Junior Creditor
to pay the Subordinated Debt as such Subordinated Debt shall become due and
payable in accordance with the terms of the Subordinated Note and nothing
shall prevent or impair the Junior Creditor from exercising all rights and
remedies with respect thereto provided by the terms of the Subordinated Note
and the Amended Loan Agreement.
16. REINSTATEMENT. If, at any time, any payment in respect of Senior
Debt is rescinded or must otherwise be restored or returned by the holder of
such Senior Debt in connection with any Bankruptcy Proceeding or Enforcement
Action, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
substantial part of the Borrower's property, the obligations of the holders
of Subordinated Debt under this Agreement shall continue to be effective, or
be reinstated as of the time such payment in respect of Senior Debt is so
rescinded or must otherwise be restored, as the case may be, all as though
such payment has not then been made.
17. WAIVER BY THE JUNIOR CREDITOR. To the extent not otherwise
inconsistent with the terms of this Agreement, the Junior Creditor hereby
waives any and all notices (other than a Standstill Notice or any other
notices expressly contemplated under this Agreement) with respect to the
subject matter of this Agreement, including, but not limited to, notice of
acceptance of this Agreement, notice of the making of investments in, or loans
or advances to, the Borrower, notices of any extensions, renewals,
refinancings or modifications of all or any portion of the Senior Debt (to the
extent permitted by this Agreement), notices of any releases of Collateral or
guarantors or other indulgences of any character, or notices of the occurrence
or declaration of any default or the taking of any Enforcement Action.
18. SUBROGATION. After repayment in full of all of the Senior Debt and
prior to repayment in full of the Subordinated Debt, the Junior Creditor shall
be subrogated to the rights of the Senior Creditor to the extent that
distributions otherwise payable to the Junior Creditor have been applied to
the payment of the Senior Debt in accordance with the provisions of this
Agreement. The Senior Creditor shall not have any obligation or duty to
protect the Junior Creditor's rights of subrogation arising pursuant to this
Agreement or under any applicable law, nor shall the Senior Creditor be liable
for any loss to, or impairment of, any subrogation rights held by the Junior
Creditor.
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19. NO ORAL MODIFICATIONS OR WAIVERS; GOVERNING LAW. This Agreement
may not be modified orally nor any of its provisions waived, but only in a
writing signed by the party against whom such modification or waiver is sought
to be enforced. This Agreement shall be governed by the laws of the State of
New York, without regard to its principles of conflicts of law.
20. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Borrower or by any
act or failure to act by any such holder, or by any noncompliance by the
Borrower with the terms, provisions and covenants respecting the Subordinated
Debt contained in the Loan Documents, regardless of any knowledge thereof any
such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing, the holders
of Senior Debt may, at any time and from time to time and in their absolute
discretion, without incurring duties or other obligations to any holders of
Subordinated Debt and without impairing or releasing the subordination and
other benefits provided in this Agreement or the obligations of the holders
of the Subordinated Debt to the holders of the Senior Debt, do any one or more
of the following, all without notice to or assent from the holders of the
Subordinated Debt and even if any right of reimbursement or subrogation or
other right or remedy of any such holder is affected, impaired or extinguished
thereby:
(a) change the manner, place or terms of payment or change or extend
the time of payment of, or renew, exchange, amend or alter, the terms of any
Senior Debt, any security therefor or guarantee thereof or any liability of
the Borrower or any other guarantor to such holder, or any liability incurred
directly or indirectly in respect thereof, or otherwise amend, renew,
exchange, modify or supplement in any manner Senior Debt or any instrument
evidencing or guaranteeing or securing the same or any agreement under which
Senior Debt is outstanding; provided, however, that the holders of the Senior
Debt may not, without the prior written consent of the holders of the
Subordinated Debt, (i) increase the interest rate (or default interest rate)
charged with respect to any, (ii) shorten the Scheduled Maturity date of any
or (iii) accelerate the required rate of amortization of any, Senior Debt.
The prohibitions contained in clauses (i), (ii) and (iii) of the immediately
preceding stance shall not in any way, however, limit or otherwise restrict
the mandatory payments of principal and accrued interest due the Senior
Creditor pursuant to Article 2 of the Amended Loan Agreement.
(b) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and any order any property pledged,
mortgaged or otherwise securing Senior Debt or any liability of the Borrower
or any other guarantor to such holder, or any liability incurred directly or
indirectly in respect thereof;
10
(c) settle or compromise any Senior Debt or any other liability of
the Borrower or any other guarantor of the Senior Debt to such holder or any
security therefor or any liability incurred directly or indirectly in respect
thereof and apply any sums by whomsoever paid and however realized to any
liability (including, without limitation, Senior Debt) in any manner or order;
and
(d) fail to take or to record or otherwise perfect, for any reason
or for no reason, any lien or security interest securing Senior Debt by
whomsoever granted, exercise or delay in or refrain from exercising any right
or remedy against the Borrower or any security or any other guarantor or any
other person, elect any remedy and otherwise deal freely with the Borrower and
any security and any other guarantor of the Senior Debt or any liability of
the Borrower or any other guarantor to such holder or any liability incurred
directly or indirectly in respect thereof.
21. SEVERABILITY; CAPTIONS. If any provision hereof shall be deemed
to be invalid by any court, such invalidity shall not affect the remainder of
this Agreement, which shall be deemed severable. The captions and paragraph
headings herein shall not be considered part of this Agreement.
22. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral
or written.
23. PARTIES. This Agreement shall inure to the benefit of the Senior
Creditor and its respective successors and assigns. This Agreement shall be
binding upon the Borrower and the Junior Creditor and each of their respective
successors and assigns, provided, however, as an express condition to any
permitted assignment by the Junior Creditor of any of its obligations
hereunder, the Junior Creditor shall be required to deliver to the Senior
Creditor a written acknowledgement executed by the assignee of the Junior
Creditor whereby such assignee acknowledges that the obligations of the Junior
Creditor hereunder shall be binding upon, and enforceable against, such
assignee with the same force and effect as if such assignee were an original
party to this Subordination Agreement.
24. WAIVER OF TRIAL BY JURY. Each party to this Agreement agrees that
any suit, action or proceeding, whether claim, defense or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party on or with respect to this Agreement or which in any way relates,
directly or indirectly, to any event, transaction or occurrence arising out
of or in any way connected with this Agreement or the dealings of the parties
with respect thereto, shall be tried only by a court and not by a jury. EACH
PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT
AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION
WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS CHOICE.
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25. VENUE; PERSONAL JURISDICTION; FULL FAITH AND CREDIT; PERSONAL
SERVICE.
(a) Venue for the adjudication of any claim or dispute arising out
of this Agreement shall be proper only in the state or federal courts of the
State of New York, and all parties to this Agreement hereby consent to such
venue;
(b) Each of the parties hereto intends and agrees that the courts
of the jurisdictions in which such party is formed and in which such party
conducts its business should afford full faith and credit to any judgment
rendered by a court of the State of New York against any of the other parties
hereto, and each of the parties hereto intends and agrees that such courts
should hold that the New York courts have jurisdiction to enter a valid, IN
PERSONAM judgment against any such party, as the case may be;
(c) Each of the parties hereto agrees that service of any summons
and complaint, and other process which may be served in any suit, action or
other proceeding, may be made by mailing via U.S. certified or registered mail
or by hand delivering a copy of such process to the party so served (as
applicable) at its address specified in Section 25 of this Agreement; and
(d) Each of the parties hereto expressly acknowledges and agrees
that the provisions of this Section 25 are reasonable and made for the express
benefit of the Senior Creditor.
26. NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
given to the parties by any of the following methods: (a) by certified U.S.
mail, return receipt requested, postage prepaid; (b) by facsimile transmission
(provided confirmation of the receipt thereof is obtained); (c) by recognized
overnight courier service (e.g, Federal Express); or (d) by hand delivery.
All notices or communications under this Agreement shall be delivered to the
following addresses (or to such other address as shall at any time be
designated by any party in writing to the other parties):
If to NPM: NPM Capital LLC
c/o Pembroke Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to NPO: NPO Management LLC
c/o Millennium Financial Services, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇
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With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Bridge Capital, LLC
Junior Creditor: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Manager
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Borrower: DVL, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ & Priest LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Rejection or other refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect
the effectiveness or the date of delivery for any notice sent in accordance
with the foregoing provisions. Each such notice, request or other
communication shall be deemed sufficiently given, served, sent and received
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of the messenger or the
answer back being deemed conclusive (but not exclusive) evidence of such
delivery) or at such time as delivery is refused by addressee upon
presentation.
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IN WITNESS WHEREOF, the undersigned have duly caused this
Subordination Agreement to be executed and delivered as of the date first
above written.
NPM CAPITAL LLC
By: Pembroke Capital LLC, its Manager
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Manager
NPO MANAGEMENT LLC
By: Omni Partnership Capital, Inc.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
______________________________
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
BRIDGE CAPITAL, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
DVL, INC.
By: ______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President and
General Counsel
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