<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________________ to_________________________
Commission file number: 1-8356
DVL, Inc.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2892858
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
24 River Road, Bogota, New Jersey 07603
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (201) 487-1300
--------------
- -----------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days Yes: X No:
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class Outstanding at August 13, 1997
- ----------------------------- ------------------------------
Common Stock, $.01 par value 15,679,450
DVL, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information: Page No.'s
----------
Consolidated Balance Sheets -
June 30, 1997 (unaudited) and December 31, 1996 1-2
Consolidated Statements of Operations -
Three Months Ended June 30, 1997 (unaudited)
and 1996 (unaudited) 3
Six Months Ended June 30, 1997 (unaudited)
and 1996 (unaudited) 4
Consolidated Statement of Shareholders' Equity
for the period ended June 30, 1997 (unaudited) 5
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 (unaudited)
and 1996 (unaudited) 6-7
Notes to Consolidated Financial Statements 8-10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
Part II. Other Information:
Item 1 - Legal Proceedings 16
Item 4 - Submission of Matters to a Vote 16
of Security Holders
Item 6 - Exhibits and Reports on Form 8-K 16-17
<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
------
June 30, December 31,
1997 1996
--------- ------------
(unaudited)
<S> <C> <C>
Loans receivable, including amounts maturing
after one year - principally pledged
Affiliates:
Wrap around and other mortgages due from
affiliated partnerships (net of underlying
liens of $47,338 and $49,749, respectively) $ 36,937 $ 42,163
Unearned interest (10,552) (12,325)
-------- --------
Net mortgage loans receivable from affiliated
partnerships (including $3,862 and $5,104 of
non-performing loans, respectively) 26,385 29,838
Others:
Non-performing loans collateralized by limited
partnership interests due from limited partners 2,773 3,066
-------- --------
Total loans receivable 29,158 32,904
Allowance for loan losses (11,554) (12,854)
-------- --------
Net loans receivable 17,604 20,050
Cash (including restricted cash of $77 for 1997
and 1996) 364 355
Due from affiliated partnerships (net of an allowance
for loss of $1,727 for 1997 and 1996) 137 114
Investments
Real estate at cost - pledged (net of an allowance
for loss of $208 for 1997 and 1996) 289 289
Real estate lease interests 1,663 1,965
Affiliated limited partnerships (net of an allowance
for loss of $1,523 and $1,342, respectively) 968 2,221
Other investments (net of an allowance for loss
of $400 for 1997 and 1996) 667 667
Other assets 991 973
-------- --------
Total assets $ 22,683 $ 26,634
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
1
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
June 30, December 31,
1997 1996
----------- ------------
(unaudited)
<S> <C> <C>
Liabilities:
Long-term debt - NPM Capital LLC $ 6,181 $ 7,502
Long-term debt - Other 3,745 6,203
Notes payable - litigation settlement 7,196 6,635
Convertible subordinated debentures 5 334
Accrued liability for indebtedness of Kenbee
Management, Inc. and affiliates - 115
Accounts payable and accrued liabilities 1,883 1,942
-------- --------
Total liabilities 19,010 22,731
-------- --------
Deferred credits 321 321
-------- --------
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock $10.00 par value, authorized -
100 shares, issued 100 shares 1 1
Common stock, $.01 par value, authorized -
40,000,000 shares, issued and to be issued -
15,679,450 and 15,479,450, respectively 157 155
Additional paid-in capital 95,174 95,146
Deficit (91,980) (91,720)
-------- --------
Total shareholders' equity 3,352 3,582
-------- --------
Total liabilities and shareholders'
equity $ 22,683 $ 26,634
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
2
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
(unaudited)
Three Months Ended
June 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Income from affiliates
Interest on mortgage loans $ 305 $ 265
Partnership management fees 110 104
Transaction and other fees from partnerships 242 75
Rent income 32 9
Other income - 24
Income from others
Interest on mortgage loans - 25
Interest on loans to limited partners
collateralized by limited partnership interests - 10
Other interest 2 5
Other income - 30
---------- ----------
691 547
---------- ----------
Operating expenses
General and administrative 366 607
Asset servicing fee - NPO Management LLC 150 -
Legal and professional fees 62 97
Interest expense
NPM Capital LLC 233 -
Others 427 608
---------- ----------
1,238 1,312
---------- ----------
(Loss) before extraordinary gain (547) (765)
Extraordinary gain on the settlement of
indebtedness 651 809
---------- ----------
Net income $ 104 $ 44
========== ==========
Earnings (loss) per share:
(Loss) before extraordinary gain $ (.03) $ (.05)
Extraordinary gain on the settlement of
indebtedness .04 .06
---------- ----------
Net income $ .01 $ . 01
========== ==========
Weighted average shares outstanding 15,679,450 14,279,287
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
3
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
(unaudited)
Six Months Ended
June 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Income from affiliates
Interest on mortgage loans $ 595 $ 542
Partnership management fees 212 217
Transaction and other fees from partnerships 266 169
Rent income 41 18
Other income - 26
Income from others
Interest on mortgage loans - 56
Interest on loans to limited partners
collateralized by limited partnership interests - 14
Other interest 4 8
Other income 36 40
---------- ----------
1,154 1,090
---------- ----------
Operating expenses
Provision for losses - 56
General and administrative 744 1,044
Asset servicing fee - NPO Management LLC 300 -
Legal and professional fees 112 136
Interest expense
NPM Capital LLC 475 -
Others 887 1,317
---------- ----------
2,518 2,553
---------- ----------
(Loss) before extraordinary gain (1,364) (1,463)
Extraordinary gain on the settlement of
indebtedness 1,104 1,855
---------- ----------
Net (loss) income $ (260) $ 392
========== ==========
Earnings (loss) per share:
(Loss) before extraordinary gain $ (.09) $ (.10)
Extraordinary gain on the settlement of
indebtedness .07 .13
---------- ----------
Net (loss) income $ (.02) $ . 03
========== ==========
Weighted average shares outstanding 15,679,450 14,022,137
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
4<PAGE>
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands except share data)
(unaudited)
Preferred Stock Common Stock Additional
--------------- -------------------- paid-in
Shares Amount Shares Amount capital Deficit Total
-------- ------ ----------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-January 1, 1997 100 $ 1 15,479,450 $ 155 $ 95,146 $(91,720) $ 3,582
Issuance of common stock in satisfaction
of certain claims 50,000 1 7 8
Issuance of common stock in connection
with the Loan from NPM Capital LLC 150,000 1 21 22
Net loss (260) (260)
-------- ------ ---------- ------- -------- -------- -------
Balance-June 30, 1997 100 $ 1 15,679,450 $ 157 $ 95,174 $(91,980) $ 3,352
======== ====== ========== ======= ======== ======== =======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
5
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net (loss) before extraordinary gain $ (1,364) $ (1,463)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities
Provision for losses - 55
Accrued interest added to indebtedness 185 198
Amortization of unearned interest on
loan receivable (100) (29)
Amortization of deferred charges 114 227
Imputed interest on notes and debentures 561 481
Amortization of debt discount 98 -
Net (increase) in other assets (132) (123)
Net (increase) in due from affiliated
partnerships (23) -
Net (decrease) in accounts payable
and accrued liabilities (7) (68)
-------- --------
Net cash (used in) operating activities (668) (722)
-------- --------
Cash flows from investing activities
Collections on loans receivable (net of
payments on underlying loans) 2,546 8,350
Net reductions in real estate lease
interests 302 160
Distributions received on affiliated
limited partnership interests and
other investments 1,253 186
-------- --------
Net cash provided by investing
activities $ 4,101 $ 8,696
-------- --------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
6
<TABLE>
<CAPTION>
DVL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
(continued)
Six Months Ended
June 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities
Proceeds from new borrowings $ 2,537 $ -
Repayment of indebtedness (5,517) (7,897)
Payments on subordinated debentures (329) -
Payments on guaranteed indebtedness (115) (66)
-------- --------
Net cash (used in) financing activities (3,424) (7,963)
-------- --------
Net increase in cash 9 11
Cash - beginning of year 355 1,042
-------- --------
Cash - end of period $ 364 $ 1,053
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest,
excluding amounts paid on underlying loans $ 370 $ 529
======== ========
Supplemental disclosure of non-cash
investing and financing activities:
Investments in affiliated partnerships
transferred to settle litigation claims $ - $ 108
======== ========
Net reduction in indebtedness pursuant
to creditor settlements $ 1,104 $ 1,855
======== ========
Reduction in accrued liabilities upon
issuance of common stock $ 22 $ 160
======== ========
Common stock issued in connection with
a creditor settlement $ 8 $ -
======== ========
Increase in other assets upon issuance
of common stock $ - $ 46
======== ========
Prepaid extension fee added to
indebtedness $ - $ 100
======== ========
Reduction in loans due from limited partners
upon receipt of investments in affiliated
partnerships $ - $ 6
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
7
DVL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Financial Condition
(A) In the opinion of DVL, Inc. ("DVL"), the accompanying financial
statements contain all adjustments (consisting of only normal accruals)
necessary for a fair presentation of the financial position and the results
of operations for the periods presented. The results of operations for the
six months ended June 30, 1997 should not be regarded as necessarily
indicative of the results that may be expected for the full year.
(B) DVL continues to experience liquidity problems primarily as a result of
the limited cash flow generated by its restructured mortgage portfolio, as the
mortgage debt service is used to pay senior liens before cash flow on such
mortgages is available to DVL. DVL's cash flow provided by current operations
is insufficient to meet its cash requirements, and DVL continues to liquidate
and/or refinance its assets in order to meet its operating cash flow
deficiency. There can be no assurance that the cash flow generated by DVL's
potential asset liquidations or refinancings will be sufficient to meet any
future operating cash flow deficiencies or future mandatory debt repayments.
DVL's ability to continue as a going concern is dependent upon (1) the
sale or refinancing of certain assets to improve its cash position to meet
operating expenses and mandatory debt payments, (2) the realization of the
estimated value of its loan portfolio over an extended period of time rather
than the value of the assets on a liquidation basis, (3) the return to
profitable operations and (4) availability of additional borrowings. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
2. Loans Receivable/Long Term Debt
(A) In January 1997, DVL, refinanced four underlying mortgages and generated
$821,000 in proceeds in excess of the existing underlying mortgage loans. The
excess proceeds were used to repay the NPM Loan, as required by the NPM loan
agreement.
(B) In February 1997, DVL repaid a creditor $1,474,000 in full satisfaction
of a loan which had a principal amount due of $1,901,000. This repayment
resulted in an extraordinary gain of approximately $406,000 in the first
quarter of 1997. The payment was made by refinancing that creditor's
collateral with a new unaffiliated lender in the principal sum of $2,000,000.
The new loan requires monthly payments of principal and interest equal to cash
flow, as defined, from the loan's collateral. Interest on the outstanding
balance of the loan shall accrue at 12% per annum. The principal amount of
the loan, and all accrued interest, is due February 27, 2000. The loan may
be prepaid prior to maturity, with certain prepayment penalties. From this
loan refinancing, DVL remitted approximately $406,000 to NPM to repay the NPM
Loan, as required by the NPM loan agreement.
8
(C) In February 1997, DVL settled a creditor claim, which resulted in an
extraordinary gain of $47,000, in the quarter ended March 31, 1997.
(D) During the three months ended March 31 and June 30, 1997, NPM advanced
aggregate amounts of approximately $250,000 and $87,500, respectively, to pay
certain creditors of DVL, as required by the NPM loan agreement.
(E) In March and April 1997, NPM advanced DVL an aggregate of $200,000.
These advances, which were not required under the original NPM loan documents,
bear interest at 15% per annum and will be paid pari passu with the original
NPM loan.
(F) In April 1997, DVL paid approximately $358,000, including principal and
interest, in satisfaction of its subordinated debenture obligations, as
required by the terms thereof.
(G) In May 1997, DVL, as the general partner of a certain limited
partnership, negotiated the sale of the partnership's property which resulted
in net proceeds of approximately $625,000 to DVL in satisfaction of the
partnership's mortgage indebtedness. All of the proceeds were used to pay
interest and principal on the NPM Loan, as required by the NPM loan agreement.
(H) In June 1997, DVL repaid a creditor $1,037,335 in cash and transferred
its rights and economic interests in two mortgage loan receivables from
affiliated limited partnerships, as well as its ownership interest in a
limited partnership, in exchange for full satisfaction of its long-term debt
obligation to this creditor in the amount of $2,173,000. This transaction
resulted in an extraordinary gain of approximately $650,000 in the second
quarter ended June 30, 1997. The source of the cash payment was the sale of
a partnership property in which DVL held a 55% limited partnership interest.
3. Shareholders' Equity
In January 1997, DVL issued 150,000 shares of stock to an investment
banker for services rendered in connection with the NPM loan transaction and
issued 50,000 shares of stock to certain unrelated individuals in exchange for
100,000 warrants which such individuals received in connection with a prior
transaction with DVL.
4. Legal Proceedings
(A) A suit entitled DONALD LEVY, ET AL. V. ROGER D. STERN, ET AL. ("LEVY"),
originally filed in New Castle County, Delaware on February 13, 1991, on
behalf of certain individual shareholders alleged breaches of fiduciary duty
of care and candor. The defendants prevailed on a motion for summary judgment
and plaintiffs filed an appeal. On appeal, the court reopened discovery for
the plaintiffs. Plaintiffs in IN RE DEL-VAL, the shareholder class action
case, which settled in 1995 permitted the Plaintiffs in LEVY to participate
in their settlement with certain third party defendants. As of June 1997, the
parties to the action agreed in principle as to the terms of a settlement
pursuant to which DVL will deliver 500,000 shares of DVL common stock of which
the company will issue approximately 228,000 shares of new stock. The
settlement documents are now being circulated for signature.
9
(B) Federal Insurance Company ("Federal"), which carried DVL's directors and
officers insurance policy, declined to cover DVL for any legal costs or
liability. DVL commenced an action against its insurance broker and Federal
entitled DEL-VAL FINANCIAL CORPORATION, ET AL. V. FEDERAL INSURANCE COMPANY
ET AL. ("FEDERAL INSURANCE") on September 23, 1991 in the Supreme Court of the
State of New York, County of New York in which DVL alleged negligence against
its broker and sought declaratory and injunctive relief against Federal. The
New York Court in this matter has held that the Settling Defendants' insurance
excluded coverage of these matters. DVL has filed a notice of appeal of that
decision. DVL and the broker have agreed to the terms of a settlement
pursuant to which DVL will receive after legal fees and other costs, of
approximately $24,000. The settlement documents are now being circulated for
signature.
(C) DVL was named in an action entitled VANGUARD CAPITAL V. KENBEE
MANAGEMENT, INC. ET AL. ("VANGUARD"), which was filed in 1994 in the Superior
Court of the State of California, in which Vanguard sought contractual
indemnity, equitable indemnity and declaratory relief on certain matters filed
against Vanguard in the Superior Court, State of California, by an investor.
This action is based on complaints by an investor with a $350,000 investment
in an affiliated limited partnership who alleged that the investor's broker
sold to her unsuitable investments. DVL defended the case and Vanguard
voluntarily dismissed the action without prejudice. On March 22, 1996, the
investor in the underlying matter against VANGUARD filed in the Superior Court
of Los Angeles, a motion to vacate an NASD Arbitration award made in July 1995
in favor of VANGUARD and has named DVL as an additional respondent in that
Petition.
5. Subsequent Events
(A) In July 1997, DVL received net proceeds of approximately $210,000 in
satisfaction of a partnership's mortgage indebtedness to DVL.
(B) In July 1997, DVL realized net cash proceeds of approximately $372,000
in full satisfaction of a certain limited partnership's mortgage indebtedness.
In connection therewith, as a result of a prior settlement agreement, an
affiliate of DVL released all of its rights under a certain master lease
agreement. From these cash proceeds, DVL repaid a long-term creditor
approximately $219,000.
(C) In July 1997, DVL as the general partner of a certain limited
partnership, negotiated the sale of the partnership's property. The sale
resulted in net cash proceeds of $1,075,000 to DVL in satisfaction of the
partnership's mortgage indebtedness to DVL. All of these proceeds were paid
to one of DVL's long-term creditors, as required.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DVL continues to experience liquidity problems principally as a result
of the reduced cash flow received on the restructured and non-performing
portions of its loan portfolio. Although the limited partner settlement
substantially reduced the non-performing portion of DVL's loan portfolio, this
reclassification has not resulted, nor is it expected to result, in
significant income or cash flow on the majority of the restructured mortgages,
as the mortgage debt service is used to pay liens senior to DVL's.
To enable DVL to meet its short-term operating needs, DVL must continue
to augment its cash flow with the proceeds from the sale or refinancing of
assets and borrowings. There is a risk that DVL may not be able to raise the
necessary funds with which to continue operations.
DVL's ability to continue as a going concern is dependent upon (1) the
sale or refinancing of certain assets to improve its cash position to meet
operating expenses and mandatory debt payments; (2) the realization of the
estimated value of the assets collateralizing its loan portfolio over an
extended period of time rather than the value of the assets on a liquidation
basis; (3) the return to profitable operations and (4) availability of
additional borrowings.
Results of Operations
- ---------------------
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
- ----------------------------------------------------------------------------
DVL realized net income of $104,000 for the three months ended June 30,
1997, compared to net income of $44,000 for the corresponding 1996 period, a
change of $60,000. The income in 1997 was a result of an operating loss of
$547,000 offset by extraordinary gains realized upon the restructuring of
indebtedness which aggregated $651,000. The income in 1996 was primarily a
result of the extraordinary gains realized upon DVL's prepayments to a
creditor principally offset by DVL's continued operating losses including a
reduction in transaction fees. The operating loss decreased by $218,000 in
1997. The effects of these items and the other factors contributing to the
net income are as follows:
Interest income on mortgage loans due from affiliates increased from 1996
to 1997. The increase in income is attributable to adjustments to unearned
interest resulting from loan payoffs, refinancings, etc. There was a
reduction in the amount of interest income on loans to affiliated partnerships
due to the satisfaction of certain loans upon the sale of partnership
properties. However, this decrease was offset by a corresponding decrease in
interest expense on the underlying debt obligations.
Transaction and other fees from partnerships aggregating $242,000 in 1997
and $75,000 in 1996 principally represent the fees received upon the sale of
certain partnership properties.
11
Rent income from affiliated partnerships increased from 1996 to 1997,
primarily as a result of the collection of amounts due DVL that was not
accrued for in the prior year.
Interest income on non-affiliate mortgage loans decreased due to the fact
that as of December 31, 1996 the mortgage loan matured that generated this
income.
General and administrative expenses decreased by $241,000, primarily as
a result of a decrease in payroll and operating costs incurred in 1997.
However, this decrease was partially offset by a $150,000 asset service fee
to NPO.
Legal and professional fees decreased by $35,000 as a result of decreased
legal, accounting and other professional costs as compared to the same period
of the prior year.
Interest expense for the quarter ended June 30, 1997 aggregated $660,000
compared to $608,000 for the same period in 1996. During 1997 and 1996, there
was a significant amount of refinancings and restructurings of existing debt,
which resulted in substantial reductions in long-term debt obligations.
However, this is offset by $48,000 of amortization expense on the long-term
debt discount, that arose from the issuance of the NPM warrants. Also,
included in the other interest expense, is interest on the notes issued in
connection with the shareholder class action litigation settlement of
approximately $286,000. All the interest on the litigation settlement is
deferred.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
- -------------------------------------------------------------------------
DVL realized a net loss of $260,000 for the six months ended June 30,
1997, as compared to a net income of $392,000 for the corresponding 1996
period, a change of $652,000. The loss in 1997 was a result of an operating
loss of $1,364,000 offset by extraordinary gains realized upon the
restructuring of indebtedness which aggregated $1,104,000. The income in 1996
was primarily a result of the extraordinary gains realized upon DVL's
prepayments to a creditor and the discount received upon the payoff of
indebtedness to another creditor partially offset by DVL's continued operating
losses including a reduction in transaction fees. The operating loss decreased
by $99,000 in 1997. The effects of these items and the other factors
contributing to the loss are as follows:
Interest income on mortgage loans due from affiliates increased from 1996
to 1997. The increase in income is attributable to adjustments to unearned
interest resulting from loan payoffs, refinancing, etc. There was a reduction
in the amount of interest income on loans to affiliated partnerships due to
the satisfaction of certain loans upon the sale of partnership properties.
However, this decrease was offset by a corresponding decrease in interest
expense on the underlying debt obligations.
12
Transaction and other fees from partnerships aggregating $266,000 in 1997
and $169,000 in 1996 principally represent the fees received upon the sale of
certain partnership properties.
Rent income from affiliated partnerships increased from 1996 to 1997,
primarily as a result of the collection of old amounts due DVL that were not
accrued for in the prior year.
Interest income on non-affiliate mortgage loans decreased due to the fact
that as of December 31, 1996 the mortgage loan matured that generated this
income.
Other income in 1997 primarily represents a cash collection in the amount
of $35,000 received from the settlement of a lawsuit in February 1997.
General and administrative expenses decreased by $300,000 primarily as
a result of a decrease in payroll and operating costs incurred in 1997.
However, this decrease was offset by a $300,000 asset service fee to NPO.
Legal and professional fees decreased by $24,000 primarily as a result
of decreased legal, accounting and other professional costs as compared to the
same period of the prior year.
Interest expense for the six months ended June 30, 1997 aggregated
$1,362,000 compared to $1,317,000 for the same period in 1996. During 1997
and 1996, there was a significant amount of refinancings and restructurings
of existing debt, which resulted in substantial reductions in long-term debt
obligations. However, this is offset by $98,000 of amortization expense on
the long-term debt discount, that arose from the issuance of the NPM warrants.
Also, included in the other interest expense, is interest on the notes issued
in connection with the shareholder class action litigation settlement of
approximately $560,000. All the interest on the litigation settlement is
deferred.
Liquidity and Capital Resources
- -------------------------------
DVL continues to experience liquidity problems and its cash flow provided
by operations is not sufficient to meet its operating needs. DVL is
attempting to augment its cash flow with the proceeds from the sale or
refinancing of assets. There is a risk that DVL may not be able to raise the
necessary funds with which to continue operations.
DVL has the right to refinance a number of mortgage loans underlying its
wrap-around mortgages due from affiliated partnerships and arrange senior
financing secured by properties on which it holds first or second mortgage
loans by subordinating its mortgage position. During the quarter ended March
31, 1997, DVL refinanced four underlying mortgages and generated $821,000 in
proceeds in excess of the existing underlying mortgage loans. The excess
proceeds were used to repay the NPM loan as required by the NPM loan
agreement. The amounts obtained from these refinancings were primarily based
13
on the value of the base rents during the period of the base lease term
subsequent to the payoff of the existing first mortgages. As a result of
DVL's prior and current refinancings, DVL's asset base available for future
refinancings has diminished. No additional mortgage loans were refinanced in
the quarter ended June 30, 1997.
In the quarter ended March 31, 1997, DVL entered into a new loan for an
initial principal amount of $2,000,000. From the proceeds of this financing,
DVL repaid an existing creditor $1,474,000 in full satisfaction of a loan
which had a principal amount due of $1,901,000. This payment resulted in an
extraordinary gain, net of other amounts, of approximately $406,000 in the
first quarter of 1997. DVL used the $406,000 of excess proceeds to pay
interest and principal on the NPM loan, as required by the NPM Loan Agreement.
For the six months ended June 30, 1997, DVL borrowed $200,000 from NPM.
These advances were not required by the original NPM loan agreement. In
addition, NPM made advances, as required by the NPM Loan Agreement, in the
amount of $337,500.
In the quarter ended June 30, 1997, DVL paid aggregate amounts of
approximately $358,000, including principal and interest, in satisfaction of
its subordinated debenture obligations, as required by the terms thereof.
In May 1997, DVL, as the general partner of a certain limited partnership,
negotiated the sale of the partnership's property which resulted in net
proceeds of approximately $625,000 to DVL in satisfaction of the partnership's
mortgage indebtedness. All of the proceeds were used to pay interest and
principal on the NPM loan to NPM, as required by the NPM loan agreement. In
addition, DVL earned approximately $82,000 in fees on the sale transaction.
In June 1997, DVL repaid a creditor $1,037,000 in cash and transferred its
rights and economic interest in two mortgage loan receivables from affiliated
limited partnerships, as well as its ownership interest in a limited
partnership, in exchange for full satisfaction of its long-term debt
obligation to this creditor. This transaction resulted in an extraordinary
gain of approximately $651,000 in the second quarter ended June 30, 1997. The
source of the cash payment was the sale of a partnership's property in which
DVL held a 55% limited partnership interest. In addition, DVL realized fees
on the sale of this property of approximately $153,000.
The following three transactions occurred subsequent to the quarter ended
June 30, 1997:
In July 1997, DVL received net proceeds of approximately $210,000 in
satisfaction of a partnership's mortgage indebtedness to DVL. In addition,
DVL earned approximately $23,000 in fees from the sale.
14
In July 1997, DVL realized net cash proceeds of approximately $372,000
in full satisfaction of a certain limited partnership's mortgage indebtedness.
In connection therewith, as a result of a prior settlement agreement, an
affiliate of DVL released all its rights under a certain master lease
agreement. From these cash proceeds, DVL repaid a long-term creditor
approximately $219,000.
In July 1997, DVL as the general partner of a certain limited partnership,
negotiated the sale of the partnership's property. The sale resulted in net
cash proceeds of $1,075,000 to DVL, in satisfaction of the partnership's
mortgage indebtedness. All of these proceeds were paid to one of DVL's long-
term creditors, as required. In addition, DVL earned approximately $45,000
in fees from this sale.
15
Part II - Other Information
Item 1. Legal Proceedings
-----------------
The information set forth in Note 4 [Legal Proceedings] of the Notes
to the Financinal Statements included in Part I of this Report, regarding the
settlement of LEVY and FEDERAL litigations, is incorporated by reference
herein in response to this Item 1.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders of DVL, for the election of
directors, was held on June 20, 1997. All of the incumbent directors were
nominated for re-election, and were so elected. The votes cast were as
follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
- ----------------------- ----------- --------------
<S> <C> <C>
Myron Rosenberg 10,673,945 245,377
Frederick E. Smithline 10,675,753 243,569
Allen Yudell 10,678,581 240,741
<FN>
There were no broker non-votes.
</FN>
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(A) There were no reports on Form 8-K filed during the three months ended
June 30, 1997.
(B) Exhibits:
11 - Computation of Per Share Data
10.1 - Employment Agreement, and Indemnification Agreement
comprising Exhibit A thereto, between DVL and Daniel
Baldwin, dated March 14, 1997 (effective as of April
7, 1997)
10.2 - Employment Agreement, and Indemnification Agreement
comprising Exhibit A thereto, between DVL and Gary
Flicker, dated April 16, 1997 (effective as of said
date)
10.3.1 - Amendment dated as of July 10, 1996, to Amended and
Restated Loan Agreement dated as of March 27, 1996
between DVL Inc. and NPM Capital LLC
10.3.2 - Second Amendment dated as of September 27, 1996,
to Amended and Restated Loan Agreement dated as of
March 27, 1996 between DVL Inc. and NPM Capital LLC
10.3.3 - Third Amendment dated as of March 6, 1997, to
Amended and Restated Loan Agreement dated as of
March 27, 1996 between DVL Inc. and NPM Capital LLC
and Promissory Note dated as of March 6, 1997,
comprising Exhibit A-1 thereto.
27 - Financial Data Schedule
16
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DVL, INC.
By: /s/ Gary Flicker
------------------------------
Gary Flicker, Vice President
and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
August 13, 1997
17
<TABLE>
<CAPTION>
EXHIBIT 11
DVL, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE DATA
(in thousands except share data)
(unaudited)
Three Months Ended
June 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
(Loss) before extraordinary gain $ (547) $ (765)
Extraordinary gain on the settlement of
indebtedness 651 809
---------- ----------
Net income $ 104 $ 44
========== ==========
Weighted average number of common shares issued
and to be issued used for computation 15,679,450 14,279,287
========== ==========
(Loss) before extraordinary gain $ (.03) $ (.05)
Extraordinary gain on the settlement of
indebtedness .04 .06
---------- ----------
Net income $ .01 $ .01
========== ==========
Six Months Ended
June 30,
-----------------------
1997 1996
---------- ----------
(Loss) before extraordinary gain $ (1,364) $ (1,463)
Extraordinary gain on the settlement of
indebtedness 1,104 1,855
---------- ----------
Net (loss) income $ (260) $ 392
========== ==========
Weighted average number of common shares issued
and to be issued used for computation 15,679,450 14,022,137
========== ==========
(Loss) before extraordinary gain $ (.09) $ (.10)
Extraordinary gain on the settlement of
indebtedness .07 .13
---------- ----------
Net (loss) income $ (.02) $ .03
========== ==========
</TABLE>
18
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made as of March 14, 1997 between DVL,
Inc., a Delaware corporation (the "Company") and Daniel Baldwin (the
"Employee").
RECITALS
The Company desires to employ the Employee as an executive officer, and
the Employee desires to accept such employment, upon the terms and conditions
hereinafter set forth.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. EMPLOYMENT. Effective as of April 7, 1997, the Company hereby
employs the Employee as the General Counsel, Vice President and Secretary of
the Company, and the Employee accepts such employment and agrees to devote his
full business time and efforts to the performance of his duties hereunder.
During the term of employment under this Agreement (the "Employment Term"),
the Employee shall perform such duties as shall reasonably be required of him
by the President of the Company. Employee agrees to report to work at the
Company on April 7, 1997. Employee represents and warrants to the Company as
follows: (1) Employee is licensed to practice law in the States of New Jersey
and New York; (2) Employee's execution and delivery of this Agreement and his
performance of his duties and obligations hereunder will not conflict with,
or cause a default under, or give any person or entity a right to damages
under, or to terminate, any other agreement to which Employee is a party or
which he is bound, (3) there are no agreements or understandings that would
make unlawful Employee's execution or delivery of this Agreement or his
employment hereunder and (4) this Agreement contains the entire agreement of
Employee and the Company with respect to the employment by the Company of
Employee and no other promises, representations or agreements exist between
Employee and the Company.
2. EMPLOYMENT TERM. Unless terminated in accordance with Sections 4 or
5, the Employment Term shall consist of a term of twelve (12) calendar months
time period beginning on April 7, 1997 and ending April 6, 1998 (the
"Employment Year").
3. COMPENSATION.
(a) The basic annual compensation of the Employee for his employment
services hereunder shall be $125,000.00 per annum, which shall be payable in
bi-monthly payments (less applicable federal, state and local withholding
taxes with respect thereto) at the same time and method as the other employees
of the Company are paid.
(b) Employee shall also be eligible to receive an annual bonus from
the Company at the end of the 1997 calendar year (which may be payable in
cash, additional stock options, or a combination of cash and stock options)
as determined in the sole and absolute discretion of the President of the
Company.
(c) As soon as possible after April 7, 1997, the Company shall grant
to Employee an option to purchase 25,000 shares of common stock of the Company
(the "Option Shares") pursuant to, and under the existing 1996 Stock Option
Plan of the Company, dated as of September 17, 1996. The exercise price for
such Option shares shall be the market price of the common stock of the
Company as of the date of such grant. It is agreed that the Option Shares
shall vest for all purposes as of the date of grant.
(d) Employee shall be entitled to receive reimbursement throughout the
Employment Term for normal and customary business expenses; provided that such
expenses are approved in advance by the President of the Company.
(e) Employee shall receive a car allowance in the amount of $500.00
per calendar month, which amount shall be paid, in advance, on a monthly basis
to Employee.
(f) The Company will provide Employee with health insurance benefits
and life insurance coverage and other benefits in accordance with current
Company policy as described in the Schedule A, attached hereto and made a part
hereof.
(g) The Company shall pay Employee's COBRA payments for coverage for
Employee and his family until Employee vests under the Company's health and
benefit plan(s).
4. TERMINATION FOR CAUSE - WITHOUT SEVERANCE COMPENSATION. The Employment
Term may be terminated for "Cause" by the Company without written notice only
upon the occurrence of any of the following: (I) the inability of the
Employee to perform his duties hereunder by reason of any mental or physical
disability for a period of more than three consecutive months; (ii) the death
of the Employee; or (iii) the gross negligence of the Employee, or (iv) the
indictment of the Employee for fraud, misappropriation, embezzlement or any
felony; or (v) the wilful refusal of the Employee to perform or execute any
reasonable directive of the President of the Company or the board of directors
of the Company. No severance payments shall be payable to Employee in the
event the Employment Term or this Agreement is terminated by the Company for
Cause.
5. TERMINATION WITHOUT CAUSE - WITH SEVERANCE COMPENSATION. The Company
shall have the right at any time to terminate the Employment Term without
Cause (as set forth in Paragraph 4), for any reason or for no reason. If the
Employee is terminated without Cause, the Employee shall be entitled to
receive severance from the Company for a one month period following the
effective date of such termination, which severance (1) shall be equal to
three equal payments of 1/12th of the then current base salary of Employee
(less applicable federal, state and local withholding with respect thereto)
and (2) shall be payable at the same time and by the same method as the base
salary of Employee would have been paid to Employee if Employee were employed
by the Company for such three-month period. During the three-month severance
period, the car allowance and the other benefits of the Company would not be
payable to Employee. If the Employment Agreement is not renewed or is not
extended or is not renewed at the same salary level, in each case, for any
reason other than for Cause, then the foregoing severance payments shall be
2
payable by the Company to Employee. Except for a resignation by Employee
following a reduction of Employee's salary level, no severance payments shall
be payable to Employee in the event Employee voluntarily resigns from the
Company for any reason or for no reason. No payments shall be made to
Employee for unused vacation days under any circumstances.
6. INDEMNIFICATION. The Company shall indemnify Employee pursuant to
the Indemnity Agreement attached hereto as .
7. CONFIDENTIALITY.
(a) During the Employment Term and for an additional period of five
years thereafter, Employee shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company other than the Company or its
subsidiaries, any Confidential Information. "CONFIDENTIAL INFORMATION" means
information relating to the services or operations of the Company or any
subsidiary thereof that is not generally known, is proprietary to the Company
or such subsidiary and is made known to Employee or learned or acquired by
Employee while in the employ of the Company, including, without limitation,
(i) information relating to research, development, purchasing, accounting,
marketing, merchandising, advertising, selling, leasing, finance and business
methods and techniques, (ii) customer lists and other information relating to
past, present or prospective customers and (iii) the terms and conditions of
any lease, mortgage or other property document related to any property owned,
leased or operated by the Company or by any partnership controlled by the
Company. However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing matters that
becomes publicly available through no fault of Employee or is available to
Employee from other sources who have not secured such information on a
confidential basis from the Company or any affiliate thereof. All materials
or articles of information of any kind furnished to Employee by the Company,
by any partnership controlled by the Company or any of its subsidiaries or
developed by Employee in the course of his employment hereunder are and shall
remain the sole property of the Company, such partnership or such subsidiary,
as applicable; and if the Company, such partnership or such subsidiary, as
applicable, requests the return of such information at any time during, upon
or after the termination of Employee's employment, Employee shall immediately
deliver the same to the Company, such partnership or such subsidiary, as
applicable.
(b) Employee acknowledges that, in view of the nature of the business
in which the Company and its subsidiaries are engaged, the restrictions
contained in Section 7(a) above (the "RESTRICTIONS") are reasonable and
necessary in order to protect the legitimate interests of the Company and its
subsidiaries, and that any violation thereof would result in irreparable
injuries to the Company and its subsidiaries, and Employee therefore further
acknowledges that, in the event Employee violates, or threatens to violate,
any of such Restrictions, the Company and its subsidiaries shall be entitled
to obtain from any court of competent jurisdiction, without the posting of any
bond or other security, preliminary and permanent injunctive relief as well
as damages and an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies in law or equity to which the Company
or its subsidiaries may be entitled. In addition, Employee acknowledges that
a wilful violation of the Restrictions by Employee shall also constitute
"Cause" for the purpose of this Agreement.
3
(c) If any Restriction, or any part thereof, shall be determined in any
judicial or administrative proceeding to be invalid or unenforceable, the
remainder of the Restrictions shall not thereby be affected and shall be given
full effect, without regard to the invalid provisions. If the period of time
or the area specified in the Restrictions shall be determined in any judicial
or administrative proceeding to be unreasonable, then the court or
administrative body shall have the power to reduce the period of time or the
area covered and, in its reduced form, such provisions shall then be
enforceable and shall be enforced.
8. GENERAL.
(a) GOVERNING LAW. The terms of this Agreement shall be governed by
the laws of the State of New Jersey.
(b) ASSIGNABILITY. The Employee may not assign his interest in or
delegate his duties under this Agreement.
(c) BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns and Employee.
(d) NOTICES. Any notices required hereunder shall be in writing and
shall be deemed to have been given when personally delivered or when mailed,
certified or registered mail, postage prepaid, to the following addresses (or
to such other address as one party may designate by written notice to the
other):
If to the Employee: Daniel Baldwin
150 West End Avenue
New York, New York 10023
If to the Company: DVL, Inc.
24 River Road
Bogota, NJ 07603
Or to the office of the President
(e) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by the
parties hereto.
(f) DURATION. Notwithstanding the termination of the Employment Term
and of the Employee's employment by the Company, this Agreement shall continue
to bind the parties for so long as any obligations remain under this
Agreement.
(g) WAIVER. No waiver by the Company of any breach by the Employee of
this Agreement shall be construed to be a waiver as to succeeding breaches.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto duly executed this Agreement as of the date first written above.
DVL, Inc.
By: /s/ Alan E. Casnoff
-----------------------
Alan E. Casnoff
President
/s/ Daniel Baldwin
-----------------------
Daniel Baldwin
4
SCHEDULE A
----------
1. Health Insurance Benefits for Employee: Oxford Freedom Plan or
substantially similar coverage, on file at the offices of the Company
2. Dental Insurance Benefits: Fortis Benefits Insurance Company
Participation Number 2000209 or substantially similar coverage, on file at the
offices of the Company.
3. Life and Accidental Death and Dismemberment Plan: UNUM Life Insurance
Company of America Policy Number 107650-012 or substantially similar coverage,
on file at the offices of the Company
4. 401K Savings Plan: DVL, Inc. Savings Plan dated January 1, 1987, as
amended, on file at the offices of the Company
5. Vacation and sick/personal time: 4 weeks vacation for each Employment
Year, which may not be carried over from year to year if unused.
6. Such other benefits which may, from time to time, be provided by the
Company to the senior executives of the Company.
5
EXHIBIT A
---------
<PAGE>
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, made and entered into the 14th day of
March, 1997 ("Agreement"), by and between DVL, Inc., a Delaware corporation
(the "Company", which term shall include any one or more of its subsidiaries
where appropriate), and Daniel Baldwin ("Indemnitee"):
WHEREAS, highly competent persons are more reluctant to serve publicly-
held corporations as directors or officers or in other capacities unless they
are provided with adequate protection against inordinate risks of claims and
actions against them arising out of their service to, and activities on behalf
of, such corporation; and
WHEREAS, the statutes and judicial duties regarding officers' and
directors' duties are often difficult to apply, ambiguous or conflicting and
therefore fail to provide such persons with adequate and reliable knowledge
of legal risks to which they are exposed or information regarding the proper
cause of action to take; and
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that such difficulty is detrimental to the best interests of the
Company's stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the future; and
WHEREAS, the Company believes it is unfair for the directors and officers
to assume the risk of huge judgments and other expenses which may occur in
cases in which the director or officer acted in good faith; and
WHEREAS, Section 145 of the General Corporation law of Delaware ("Section
145") under which the Company is organized, empowers the Company to indemnify
its officers and directors by agreement and expressly provides that the
indemnification provided by Section 145 is not exclusive; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to take
on additional service for or on behalf of the Company on the condition that
he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS FOR PURPOSES OF THIS AGREEMENT:
(a) "Change in Control" means a change in control of the Company
that would be required to be reported in response to Item 5(f) of Schedule 14A
of Regulation 14A (or in response to any similar item or similar schedule or
form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the Board in office immediately prior to such person attaining
such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as
a consequence of which members of the Board in office immediately prior to
such transaction or event constitute less than two-thirds of the Board
thereafter; (iii) during any period of twenty-four (24) consecutive months,
individuals who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least two-
thirds of the Board; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions)
of all or substantially all of the Company's assets.
(b) "Potential Change in Control" shall be deemed to have occurred
if (i) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) a person (including the
Company) publicly announces a legitimate intention to take or to consider
taking actions which if consummated would constitute a Change in Control;
(iii) any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding Voting Securities, increases his beneficial ownership of such
securities by five percentage points or more over the percentage so owned by
such person; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(c) "Corporate Status" describes the status of a person who is or
was or has agreed to become a director or officer of the Company.
(d) "Disinterested Directors" means a director of the Company who
is and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(e) "Proceeding" includes any threatened, pending or completed
inquiry, action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an
Indemnitee pursuant to Section 12(a) of this Agreement to enforce his rights
under this Agreement.
(f) "Expenses" includes all direct and indirect costs of any type
or nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements, other out-of-pocket costs and reasonable compensation
for time spent by the Indemnitee for which he is not otherwise compensated by
the Company or any third party, provided that the rate of compensation and
estimated time involved is approved in advance by the Board), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a Proceeding (including amounts paid in
settlement by or on behalf of Indemnitee), or the prosecution of an action or
proceeding, including appeals, to establish or enforce a right to
indemnification under this Agreement, Section 145 or otherwise. Expenses as
defined herein, shall not include any judgments, fines, or penalties actually
levied against the Indemnitee.
2
(g) "Independent Counsel" means (i) any law firm or member of a law
firm which the Board may designate from time to time provided that the law
firm or member of the law firm so designated is experienced in matters of
corporate law and neither presently is, nor in the past five years has been,
retained to represent: (A) the Company or Indemnitee in any matter material
to either such party, or (B) any other party to the Proceeding giving rise to
a claim for indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement arising on or
after the date of this Agreement, regardless of when the Indemnitee's act or
failure to act occurred.
2. SERVICES BY INDEMNITEE.
Indemnitee agrees to serve or continue to serve as an officer of the
Company so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the By-Laws of the Company or until such
time as he tenders his resignation in writing. This Agreement shall not
impose any obligation on the Indemnitee or the Company to continue the
Indemnitee's position with the Company beyond any period otherwise applicable,
nor to create any right to continued employment of the Indemnitee in any
capacity.
3. GENERAL.
The Company shall indemnify, and shall advance Expenses to Indemnitee
as provided in this Agreement and to the fullest extent permitted by law.
4. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE
RIGHT OF THE COMPANY.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any Proceeding, other than a Proceeding by
or in the right of the Company. Pursuant to this Section 4, Indemnitee shall
be indemnified against Expenses, including amounts paid in settlement, as well
as any judgments, fines and penalties levied or awarded against him in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
5. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section 5, if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses actually incurred by him or on his behalf in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the Company.
Notwithstanding the foregoing, no indemnification against such Expenses shall
be made in respect of any claim, issue or matter as to which Indemnitee shall
have been adjudged to be liable to the Company if such indemnification is not
permitted by the laws of the State of Delaware or other applicable law;
provided, however, that indemnification against Expenses nevertheless shall
be made by the Company in such event to the extent that the court in which
such Proceeding shall have been brought or is pending, shall determine.
3
6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY
OR PARTLY SUCCESSFUL.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually incurred by him or
on his behalf in connection with each successfully resolved claim, issue or
matter. For purposes of this Section, but without limitation, the termination
of any claim, issue or matter in such a Proceeding by dismissal or withdrawal,
with or without prejudice, shall be deemed to be a successful result as to
such claim, issue or matter.
7. ADVANCE OF EXPENSES.
The Company shall advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding within twenty days
after the receipt by the Company of a statement(s) from Indemnitee requesting
such advance(s) from time to time, whether prior to or after final disposition
of such Proceeding. Such statement or statements shall evidence or reflect
the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
expenses advanced if it is determined ultimately that Indemnitee is not
entitled to be indemnified against such Expenses.
8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. Promptly upon receipt of such a request for
indemnification, the Secretary of the Company shall advise the Board of
Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to Section 8(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case
as follows: (i) if a Change in Control shall have occurred, by Independent
Counsel in a written opinion to the Board of Directors, a copy of which shall
be delivered to Indemnitee (unless Indemnitee shall request that such
determination be made by the Board of Directors, in which case the
determination shall be made in the manner provided below in clauses (ii) or
(iii)); (ii) if a Change of Control shall not have occurred, (A) by the Board
by a majority vote of a quorum consisting of Disinterested Directors, or (B)
if a quorum of the Board consisting of Disinterested Directors is not
obtainable or, even if obtainable, if such quorum of Disinterested Directors
so directs, by Independent Counsel in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; (iii) as provided
in Section 9(B) of this Agreement; and, if it is determined that Indemnitee
is entitled to indemnification, payment to Indemnitee shall be made within
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification. Any costs or Expenses (including
4
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
shall be borne by the Company (regardless of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, and no
counsel shall have been designated previously by the Board or the Independent
Counsel so designated is unwilling or unable to serve, then (i) if no Change
of Control shall have occurred, the Independent Counsel shall be selected by
the Board and the Company shall give written notice to Indemnitee advising him
of the identity of the Independent Counsel so selected; (ii) if a Change of
Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board, in which event the preceding sentence shall apply), and Indemnitee
shall give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company,
as the case may be, may, within 7 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case
may be, a written objection to such selection. Such objection may be asserted
only on the ground that the Independent Counsel so selected does not meet the
requirement of "Independent Counsel" as defined in this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 8(a) hereof, no Independent Counsel shall have been selected or if
selected, shall have been objected to, in accordance with this Section 8(c),
either the Company or Indemnitee may petition the Court of Chancery of the
State of Delaware or other court of competent jurisdiction for resolution of
any objection which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom an objection
is favorably resolved or the person so appointed shall act as Independent
Counsel under Section 8(b) hereof. The Company shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with the performance of his responsibilities
pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees
and Expenses incident to the implementation of the procedures of this Section
8(c), regardless of the manner in which such Independent Counsel was selected
or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 12 hereof, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that the
Indemnitee is entitled to indemnification under this Agreement if the
Indemnitee has submitted a request for indemnification in accordance with
Section 8(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making of any
determination contrary to that presumption by any person, persons or entity.
5
(b) If within 30 days after receipt by the Company of the request
for indemnification, the Board shall not have made a determination under
Section 8(b)(i) or 8(b)(ii)(A) with regard thereto, the requisite
determination of entitlement to indemnification shall be deemed to have been
made in favor of the Indemnitee who then shall be entitled to such
indemnification. The foregoing provisions of this Section 9(b) shall not
apply if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b)(i) or 8(b)(ii)(B) of this
Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not act in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interest of the Company or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe that
his conduct was unlawful.
10. ASSUMPTION OF DEFENSE.
In the event the Company shall be obligated to pay the Expenses of any
Proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such Proceeding, with counsel reasonably
acceptable to the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of
such counsel by the Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to the Indemnitee under this Agreement
for any fees of counsel subsequently incurred by the Indemnitee with respect
to the same Proceeding, provided that (i) the Indemnitee shall have the right
to employ his counsel in such Proceeding at the Indemnitee's expense; and (ii)
if (a) the employment of counsel by the Indemnitee has been previously
authorized in writing by the Company, (b) the Company shall have reasonably
concluded that there may be a conflict of interest between the Company and the
Indemnitee in the conduct of any such defense, or (c) the Company shall not,
in fact, have employed counsel to assume the defense of such Proceeding, the
fees and Expenses of the Indemnitee's counsel shall be at the expense of the
Company.
11. ESTABLISHMENT OF A TRUST.
(a) In the event of a Potential Change in Control, the Company, upon
written request by the Indemnitee, shall create a trust for the benefit of the
Indemnitee and from time to time upon written request of the Indemnitee shall
fund such trust in an amount sufficient to satisfy any and all Expenses which
at the time of each such request it is reasonably anticipated will be incurred
in connection with a Proceeding for which the Indemnitee is entitled to rights
of indemnification under Section 4 or 5 hereof, and any and all judgments,
fines, penalties and settlement amounts of any and all proceedings for which
the Indemnitee is entitled to rights of indemnification under Section 4 or 5
from time to time actually paid or claimed, reasonably anticipated or proposed
to be paid. The amount or amounts to be deposited in the trust pursuant to
the foregoing funding obligation shall be determined by the party who would
be required to make the determination of the Indemnitee's right to
indemnification under Section 8(b) hereof (the "Reviewing Party"). The terms
of the trust shall provide that upon a Change in Control (i) the trust shall
not be revoked or the principal thereof invaded, without the written consent
of the Indemnitee, (ii) the trustee shall advance, within two business days
of a request by the Indemnitee, any and all Expenses to the Indemnitee (and
the Indemnitee hereby agrees to reimburse the trust under the circumstances
6
under which the Indemnitee would be required to reimburse the Company under
Section 7 hereof), (iii) the trust shall continue to be funded by the Company
in accordance with the funding obligation set forth above, (iv) the trustee
shall promptly pay to the Indemnitee all amounts for which the Indemnitee
shall be entitled to indemnification pursuant to this Agreement or otherwise,
and (v) all unexpended funds in such trust shall revert to the Company upon
a final determination by the Reviewing Party or a court of competent
jurisdiction, as the case may be, that Indemnitee has been fully indemnified
under the terms of this Agreement. The trustee shall be an institutional
trustee with a highly regarded reputation chosen by the Indemnitee. Nothing
in this Section 11 shall relieve the Company of any of its obligations
hereunder.
(b) Nothing contained in this Section 11 shall prevent the Board in
its discretion at any time and from time to time, upon request of the
Indemnitee, from providing security to the Indemnitee for the Company's
obligations hereunder through an irrevocable line of credit, funded trust as
described in Section (a) above, or other collateral. Any such security, once
provided to the Indemnitee, may not be revoked or released without the prior
written consent of the Indemnitee.
12. REMEDIES OF INDEMNITEE.
(a) In the event that any one or more of the following events shall
have occurred: (i) a determination is made pursuant to Section 8 of this
Agreement that Indemnitee is not entitled to indemnification under this
Agreement; (ii) Expenses are not advanced timely in accordance with Section
7 of this Agreement; (iii) the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement and such determination shall not have been made and delivered in a
written opinion within 90 days after receipt by the Company of the request for
indemnification; (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten days after receipt by the Company of
a written request therefor; (v) payment of indemnification is not made within
ten days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 9(b) of this Agreement; and/or (vi) the Company fails to comply with
its obligations under Section 11(a) with regard to the establishment or
funding of a trust for Expenses, the Indemnitee shall be entitled to an
adjudication of his entitlement to such indemnification, advancement of
Expenses or the establishment and funding of the trust in an appropriate court
of the State of Delaware, or in any other court of competent jurisdiction.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Indemnitee shall commence such proceeding seeking
an adjudication or an award in arbitration within 180 days following the date
on which Indemnitee first has the right to commence such proceeding pursuant
to this Section 12. The Company shall not oppose Indemnitee's right to seek
any such adjudication or award in arbitration.
(b) Whenever a determination is made pursuant to Section 8 of this
Agreement that Indemnitee is not entitled to indemnification, the judicial
proceeding or arbitration commenced pursuant to this Section 12 shall be
conducted in all respects as a de novo trial, or arbitration, on the merits
and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification
or advancement of Expenses, as the case may be, in any judicial proceeding or
arbitration commenced pursuant to this Section 12.
7
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 12
absent (i) a misstatement by Indemnitee of a material fact, or an omission of
a material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 12 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 12 seeks
a judicial adjudication or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall
be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the
definition of Expenses in this Agreement) actually incurred by him in
connection with obtaining such judicial adjudication or arbitration, but only
if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but
not all of the indemnification or advancement of Expenses sought, the Expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
13. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE:
SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's certificate of incorporation or by-laws, any other
agreement, a vote of stockholders or a resolution of directors, or otherwise.
This Agreement shall continue until and terminate upon the later of: (a) 10
years after the date that Indemnitee shall have ceased to serve as an officer
or director of the Company, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 12 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of Indemnitee and his heirs,
executors and administrators.
(b) (i) To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors and officers of the
Company, Indemnitee shall be covered by such policy or policies in accordance
with the terms thereof to the maximum extent of the coverage available for any
such director or officer under such policy or policies. The Company shall
take all necessary or appropriate action to cause such insurers to pay on
behalf of the Indemnitee all amounts payable as a result of the commencement
of a proceeding in accordance with the terms of such policy.
(ii) For a period of three years after the date the Indemnitee
shall have ceased to serve as an officer or director of the Company, the
Company will provide officers and directors liability insurance for Indemnitee
on terms no less favorable than the terms of the liability insurance which the
Company then provides to the current officers and directors, provided that the
8
Company provides officers and directors liability insurance to its current
officers and directors, and provided further that the annual premiums for the
liability insurance to be provided to the Indemnitee do not exceed by more
than 50% the premium charged for the coverage available for any of the
Company's current officers and directors.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee otherwise actually has received such payment under any insurance
policy, contract, agreement or otherwise.
14. SEVERABILITY.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
15. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES.
Except as otherwise provided specifically herein, Indemnitee shall not
be entitled to indemnification or advancement of Expenses under this Agreement
with respect to any Proceeding, or any claim herein, brought or made by him
against the Company.
16. HEADINGS.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
17. MODIFICATION AND WAIVER.
This Agreement may be amended from time to time to reflect changes in
Delaware law or for other reasons. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver or any other provision hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
18. NOTICE BY INDEMNITEE.
Indemnitee agrees promptly to notify the Company in writing upon being
served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or matter which may
be subject to indemnification or advancement of Expenses covered hereunder;
provided, however, that the failure to give any such notice shall not
disqualify the Indemnitee from indemnification hereunder.
9
19. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if (i) delivered by
hand to the party to whom said notice or other communication shall have been
directed, or (ii) mailed by certified or registered mail with postage paid.
(a) If to Indemnitee, to:
Daniel Baldwin
150 West End Avenue
New York, New York 10023
(b) If to the Corporation, to:
DVL, Inc.
P.O. Box 408
24 River Road
Bogota, New Jersey 07603
ATTN: President
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
20. GOVERNING LAW.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
ATTEST: DVL, INC.
/s/ Joyce K. Helman By: /s/ Alan Casnoff
- --------------------------- ---------------------------
Joyce K. Helman, Assistant Alan Casnoff, President
Secretary
INDEMNITEE:
/s/ Daniel Baldwin
---------------------------
Daniel Baldwin
10
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made as of April 16, 1997 between DVL, Inc.,
a Delaware corporation (the "Company") and Gary Flicker (the "Employee").
RECITALS
The Company desires to employ the Employee as an executive officer, and
the Employee desires to accept such employment, upon the terms and conditions
hereinafter set forth.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. EMPLOYMENT. Effective as of April 16, 1997, the Company hereby
employs the Employee as the Chief Financial Officer and Vice President of the
Company, and the Employee accepts such employment and agrees to devote his
full business time and efforts to the performance of his duties hereunder.
During the term of employment under this Agreement (the "Employment Term"),
the Employee shall perform such duties as shall reasonably be required of him
by the President of the Company. Employee agrees to commence work as an
officer of the Company on April 16, 1997. Employee represents and warrants
to the Company as follows: (1) Employee's execution and delivery of this
Agreement and his performance of his duties and obligations hereunder will not
conflict with, or cause a default under, or give any person or entity a right
to damages under, or to terminate, any other agreement to which Employee is
a party or which he is bound, (2) there are no agreements or understandings
that would make unlawful Employee's execution or delivery of this Agreement
or his employment hereunder and (3) this Agreement contains the entire
agreement of Employee and the Company with respect to the employment by the
Company of Employee and no other promises, representations or agreements exist
between Employee and the Company.
2. EMPLOYMENT TERM. Unless terminated in accordance with Sections 4 or
5, the Employment Term shall consist of a term of twelve (12) calendar months
time period beginning on April 16, 1997 and ending April 15, 1998 (the
"Employment Year").
3. COMPENSATION.
(a) The basic annual compensation of the Employee for his employment
services hereunder shall be $120,000.00 per annum, which shall be payable in
bi-monthly payments (less applicable federal, state and local withholding
taxes with respect thereto) at the same time and method as the other employees
of the Company are paid.
(b) Employee shall also be eligible to receive an annual bonus from the
Company at the end of the 1997 calendar year (which may be payable in cash,
additional stock options, or a combination of cash and stock options) as
determined in the sole and absolute discretion of the President of the
Company.
(c) As soon as possible after April 16, 1997, the Company shall grant
to Employee an option to purchase 50,000 shares of common stock of the Company
(the "Option Shares") pursuant to, and under the existing 1996 Stock Option
Plan of the Company, dated as of September 17, 1996. The exercise price for
such Option shares shall be the market price of the common stock of the
Company as of the date of such grant. It is agreed that the Option Shares
shall vest for all purposes as of the date of grant.
(d) Employee shall be entitled to receive reimbursement throughout the
Employment Term for normal and customary business expenses; provided that such
expenses are approved in advance by the President of the Company.
(e) Employee shall receive a car allowance in the amount of $500.00 per
calendar month, which amount shall be paid, in advance, on a monthly basis to
Employee.
(f) The Company will provide Employee with health insurance benefits
and life insurance coverage and other benefits in accordance with current
Company policy as described in the Schedule A, attached hereto and made a part
hereof.
4. TERMINATION FOR CAUSE - WITHOUT SEVERANCE COMPENSATION. The Employment
Term may be terminated for "Cause" by the Company without written notice only
upon the occurrence of any of the following: (i) the inability of the
Employee to perform his duties hereunder by reason of any mental or physical
disability for a period of more than three consecutive months; (ii) the death
of the Employee; or (iii) the gross negligence of the Employee, or (iv) the
indictment of the Employee for fraud, misappropriation, embezzlement or any
felony; or (v) the wilful refusal of the Employee to perform or execute any
reasonable directive of the President of the Company or the board of directors
of the Company. No severance payments shall be payable to Employee in the
event the Employment Term or this Agreement is terminated by the Company for
Cause.
5. TERMINATION WITHOUT CAUSE - WITH SEVERANCE COMPENSATION. The Company
shall have the right at any time to terminate the Employment Term without
Cause (as set forth in Paragraph 4), for any reason or for no reason. If the
Employee is terminated without Cause, the Employee shall be entitled to
receive severance from the Company for a one month period following the
effective date of such termination, which severance (1) shall be equal to one
payment of 1/12th of the then current base salary of Employee (less applicable
federal, state and local withholding with respect thereto) and (2) shall be
payable at the same time and by the same method as the base salary of Employee
would have been paid to Employee if Employee were employed by the Company for
such one-month period. During the one-month severance period, the car
allowance and the other benefits of the Company would not be payable to
Employee. If the Employment Agreement is not renewed or is not extended or
is not renewed at the same salary level, in each case, for any reason other
than for Cause, then the foregoing severance payments shall be payable by the
Company to Employee. Except for a resignation by Employee following a
reduction of Employee's salary level, no severance payments shall be payable
to Employee in the event Employee voluntarily resigns from the Company for any
reason or for no reason. No payments shall be made to Employee for unused
vacation days under any circumstances.
6. INDEMNIFICATION. The Company shall indemnify Employee pursuant to
the Indemnity Agreement attached hereto as EXHIBIT A.
2
7. CONFIDENTIALITY.
(a) During the Employment Term and for an additional period of five
years thereafter, Employee shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company other than the Company or its
subsidiaries, any Confidential Information. "CONFIDENTIAL INFORMATION" means
information relating to the services or operations of the Company or any
subsidiary thereof that is not generally known, is proprietary to the Company
or such subsidiary and is made known to Employee or learned or acquired by
Employee while in the employ of the Company, including, without limitation,
(i) information relating to research, development, purchasing, accounting,
marketing, merchandising, advertising, selling, leasing, finance and business
methods and techniques, (ii) customer lists and other information relating to
past, present or prospective customers and (iii) the terms and conditions of
any lease, mortgage or other property document related to any property owned,
leased or operated by the Company or by any partnership controlled by the
Company. However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing matters that
becomes publicly available through no fault of Employee or is available to
Employee from other sources who have not secured such information on a
confidential basis from the Company or any affiliate thereof. All materials
or articles of information of any kind furnished to Employee by the Company,
by any partnership controlled by the Company or any of its subsidiaries or
developed by Employee in the course of his employment hereunder are and shall
remain the sole property of the Company, such partnership or such subsidiary,
as applicable; and if the Company, such partnership or such subsidiary, as
applicable, requests the return of such information at any time during, upon
or after the termination of Employee's employment, Employee shall immediately
deliver the same to the Company, such partnership or such subsidiary, as
applicable.
(b) Employee acknowledges that, in view of the nature of the business
in which the Company and its subsidiaries are engaged, the restrictions
contained in Section 7(a) above (the "RESTRICTIONS") are reasonable and
necessary in order to protect the legitimate interests of the Company and its
subsidiaries, and that any violation thereof would result in irreparable
injuries to the Company and its subsidiaries, and Employee therefore further
acknowledges that, in the event Employee violates, or threatens to violate,
any of such Restrictions, the Company and its subsidiaries shall be entitled
to obtain from any court of competent jurisdiction, without the posting of any
bond or other security, preliminary and permanent injunctive relief as well
as damages and an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies in law or equity to which the Company
or its subsidiaries may be entitled. In addition, Employee acknowledges that
a wilful violation of the Restrictions by Employee shall also constitute
"Cause" for the purpose of this Agreement.
(c) If any Restriction, or any part thereof, shall be determined in
any judicial or administrative proceeding to be invalid or unenforceable, the
remainder of the Restrictions shall not thereby be affected and shall be given
full effect, without regard to the invalid provisions. If the period of time
or the area specified in the Restrictions shall be determined in any judicial
or administrative proceeding to be unreasonable, then the court or
administrative body shall have the power to reduce the period of time or the
area covered and, in its reduced form, such provisions shall then be
enforceable and shall be enforced.
3
8. GENERAL.
(a) GOVERNING LAW. The terms of this Agreement shall be governed by
the laws of the State of New Jersey.
(b) ASSIGNABILITY. The Employee may not assign his interest in or
delegate his duties under this Agreement.
(c) BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns and Employee.
(d) NOTICES. Any notices required hereunder shall be in writing and
shall be deemed to have been given when personally delivered or when mailed,
certified or registered mail, postage prepaid, to the following addresses (or
to such other address as one party may designate by written notice to the
other):
If to the Employee: Gary Flicker
4 Martine Avenue
Apartment 1412
White Plains, NY 10606
If to the Company: DVL, Inc.
24 River Road
Bogota, NJ 07603
Or to the office of the President
(e) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by the
parties hereto.
(f) DURATION. Notwithstanding the termination of the Employment Term
and of the Employee's employment by the Company, this Agreement shall continue
to bind the parties for so long as any obligations remain under this
Agreement.
(g) WAIVER. No waiver by the Company of any breach by the Employee
of this Agreement shall be construed to be a waiver as to succeeding breaches.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto duly executed this Agreement as of the date first written above.
DVL, Inc.
By: /s/ Alan E. Casnoff
----------------------
Alan E. Casnoff
President
/s/Gary Flicker
----------------------
Gary Flicker
4
SCHEDULE A
1. Health Insurance Benefits for Employee: Oxford Freedom Plan or
substantially similar coverage, on file at the offices of the Company
2. Dental Insurance Benefits: Fortis Benefits Insurance Company
Participation Number 2000209 or substantially similar coverage, on file at the
offices of the Company.
3. Life and Accidental Death and Dismemberment Plan: UNUM Life Insurance
Company of America Policy Number 107650-012 or substantially similar coverage,
on file at the offices of the Company
4. 401K Savings Plan: DVL, Inc. Savings Plan dated January 1, 1987, as
amended, on file at the offices of the Company
5. Vacation and sick/personal time: 4 weeks vacation for each Employment
Year, which may not be carried over from year to year if unused.
6. Such other benefits which may, from time to time, be provided by the
Company to the senior executives of the Company.
5
EXHIBIT A
---------
<PAGE>
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, made and entered into the 16th day of
April, 1997 ("Agreement"), by and between DVL, Inc., a Delaware corporation
(the "Company", which term shall include any one or more of its subsidiaries
where appropriate), and Gary Flicker ("Indemnitee"):
WHEREAS, highly competent persons are more reluctant to serve publicly-
held corporations as directors or officers or in other capacities unless they
are provided with adequate protection against inordinate risks of claims and
actions against them arising out of their service to, and activities on behalf
of, such corporation; and
WHEREAS, the statutes and judicial duties regarding officers' and
directors' duties are often difficult to apply, ambiguous or conflicting and
therefore fail to provide such persons with adequate and reliable knowledge
of legal risks to which they are exposed or information regarding the proper
cause of action to take; and
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that such difficulty is detrimental to the best interests of the
Company's stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the future; and
WHEREAS, the Company believes it is unfair for the directors and
officers to assume the risk of huge judgments and other expenses which may
occur in cases in which the director or officer acted in good faith; and
WHEREAS, Section 145 of the General Corporation law of Delaware
("Section 145") under which the Company is organized, empowers the Company to
indemnify its officers and directors by agreement and expressly provides that
the indemnification provided by Section 145 is not exclusive; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to
take on additional service for or on behalf of the Company on the condition
that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS FOR PURPOSES OF THIS AGREEMENT:
(a) "Change in Control" means a change in control of the Company that
would be required to be reported in response to Item 5(f) of Schedule 14A of
Regulation 14A (or in response to any similar item or similar schedule or
form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the Board in office immediately prior to such person attaining
such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as
a consequence of which members of the Board in office immediately prior to
such transaction or event constitute less than two-thirds of the Board
thereafter; (iii) during any period of twenty-four (24) consecutive months,
individuals who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least two-
thirds of the Board; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions)
of all or substantially all of the Company's assets.
(b) "Potential Change in Control" shall be deemed to have occurred
if (i) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) a person (including the
Company) publicly announces a legitimate intention to take or to consider
taking actions which if consummated would constitute a Change in Control;
(iii) any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding Voting Securities, increases his beneficial ownership of such
securities by five percentage points or more over the percentage so owned by
such person; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(c) "Corporate Status" describes the status of a person who is or was
or has agreed to become a director or officer of the Company.
(d) "Disinterested Directors" means a director of the Company who is
and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(e) "Proceeding" includes any threatened, pending or completed inquiry,
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an
Indemnitee pursuant to Section 12(a) of this Agreement to enforce his rights
under this Agreement.
(f) "Expenses" includes all direct and indirect costs of any type or
nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements, other out-of-pocket costs and reasonable compensation
for time spent by the Indemnitee for which he is not otherwise compensated by
the Company or any third party, provided that the rate of compensation and
estimated time involved is approved in advance by the Board), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a Proceeding (including amounts paid in
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settlement by or on behalf of Indemnitee), or the prosecution of an action or
proceeding, including appeals, to establish or enforce a right to
indemnification under this Agreement, Section 145 or otherwise. Expenses as
defined herein, shall not include any judgments, fines, or penalties actually
levied against the Indemnitee.
(g) "Independent Counsel" means (i) any law firm or member of a law
firm which the Board may designate from time to time provided that the law
firm or member of the law firm so designated is experienced in matters of
corporate law and neither presently is, nor in the past five years has been,
retained to represent: (A) the Company or Indemnitee in any matter material
to either such party, or (B) any other party to the Proceeding giving rise to
a claim for indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement arising on or
after the date of this Agreement, regardless of when the Indemnitee's act or
failure to act occurred.
2. SERVICES BY INDEMNITEE.
Indemnitee agrees to serve or continue to serve as an officer of the
Company so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the By-Laws of the Company or until such
time as he tenders his resignation in writing. This Agreement shall not
impose any obligation on the Indemnitee or the Company to continue the
Indemnitee's position with the Company beyond any period otherwise applicable,
nor to create any right to continued employment of the Indemnitee in any
capacity.
3. GENERAL.
The Company shall indemnify, and shall advance Expenses to Indemnitee
as provided in this Agreement and to the fullest extent permitted by law.
4. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE
RIGHT OF THE COMPANY.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any Proceeding, other than a Proceeding by
or in the right of the Company. Pursuant to this Section 4, Indemnitee shall
be indemnified against Expenses, including amounts paid in settlement, as well
as any judgments, fines and penalties levied or awarded against him in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
5. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section 5, if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses actually incurred by him or on his behalf in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed
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to be in, or not opposed to, the best interests of the Company.
Notwithstanding the foregoing, no indemnification against such Expenses shall
be made in respect of any claim, issue or matter as to which Indemnitee shall
have been adjudged to be liable to the Company if such indemnification is not
permitted by the laws of the State of Delaware or other applicable law;
provided, however, that indemnification against Expenses nevertheless shall
be made by the Company in such event to the extent that the court in which
such Proceeding shall have been brought or is pending, shall determine.
6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY
OR PARTLY SUCCESSFUL.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually incurred by him or
on his behalf in connection with each successfully resolved claim, issue or
matter. For purposes of this Section, but without limitation, the termination
of any claim, issue or matter in such a Proceeding by dismissal or withdrawal,
with or without prejudice, shall be deemed to be a successful result as to
such claim, issue or matter.
7. ADVANCE OF EXPENSES.
The Company shall advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding within twenty days
after the receipt by the Company of a statement(s) from Indemnitee requesting
such advance(s) from time to time, whether prior to or after final disposition
of such Proceeding. Such statement or statements shall evidence or reflect
the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
expenses advanced if it is determined ultimately that Indemnitee is not
entitled to be indemnified against such Expenses.
8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. Promptly upon receipt of such a request for
indemnification, the Secretary of the Company shall advise the Board of
Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to Section 8(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case
as follows: (i) if a Change in Control shall have occurred, by Independent
Counsel in a written opinion to the Board of Directors, a copy of which shall
be delivered to Indemnitee (unless Indemnitee shall request that such
determination be made by the Board of Directors, in which case the
determination shall be made in the manner provided below in clauses (ii) or
(iii)); (ii) if a Change of Control shall not have occurred, (A) by the Board
by a majority vote of a quorum consisting of Disinterested Directors, or (B)
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if a quorum of the Board consisting of Disinterested Directors is not
obtainable or, even if obtainable, if such quorum of Disinterested Directors
so directs, by Independent Counsel in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; (iii) as provided
in Section 9(B) of this Agreement; and, if it is determined that Indemnitee
is entitled to indemnification, payment to Indemnitee shall be made within
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification. Any costs or Expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
shall be borne by the Company (regardless of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, and no
counsel shall have been designated previously by the Board or the Independent
Counsel so designated is unwilling or unable to serve, then (i) if no Change
of Control shall have occurred, the Independent Counsel shall be selected by
the Board and the Company shall give written notice to Indemnitee advising him
of the identity of the Independent Counsel so selected; (ii) if a Change of
Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board, in which event the preceding sentence shall apply), and Indemnitee
shall give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company,
as the case may be, may, within 7 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case
may be, a written objection to such selection. Such objection may be asserted
only on the ground that the Independent Counsel so selected does not meet the
requirement of "Independent Counsel" as defined in this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 8(a) hereof, no Independent Counsel shall have been selected or if
selected, shall have been objected to, in accordance with this Section
8(c),either the Company or Indemnitee may petition the Court of Chancery of
the State of Delaware or other court of competent jurisdiction for resolution
of any objection which shall have been made by the Company or Indemnitee to
the other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom an objection
is favorably resolved or the person so appointed shall act as Independent
Counsel under Section 8(b) hereof. The Company shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with the performance of his responsibilities
pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees
and Expenses incident to the implementation of the procedures of this Section
8(c), regardless of the manner in which such Independent Counsel was selected
or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 12 hereof, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
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9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that the
Indemnitee is entitled to indemnification under this Agreement if the
Indemnitee has submitted a request for indemnification in accordance with
Section 8(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making of any
determination contrary to that presumption by any person, persons or entity.
(b) If within 30 days after receipt by the Company of the request
for indemnification, the Board shall not have made a determination under
Section 8(b)(i) or 8(b)(ii)(A) with regard thereto, the requisite
determination of entitlement to indemnification shall be deemed to have been
made in favor of the Indemnitee who then shall be entitled to such
indemnification. The foregoing provisions of this Section 9(b) shall not
apply if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b)(i) or 8(b)(ii)(B) of this
Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not act in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interest of the Company or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe that
his conduct was unlawful.
10. ASSUMPTION OF DEFENSE.
In the event the Company shall be obligated to pay the Expenses of
any Proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such Proceeding, with counsel reasonably
acceptable to the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of
such counsel by the Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to the Indemnitee under this Agreement
for any fees of counsel subsequently incurred by the Indemnitee with respect
to the same Proceeding, provided that (i) the Indemnitee shall have the right
to employ his counsel in such Proceeding at the Indemnitee's expense; and (ii)
if (a) the employment of counsel by the Indemnitee has been previously
authorized in writing by the Company, (b) the Company shall have reasonably
concluded that there may be a conflict of interest between the Company and the
Indemnitee in the conduct of any such defense, or (c) the Company shall not,
in fact, have employed counsel to assume the defense of such Proceeding, the
fees and Expenses of the Indemnitee's counsel shall be at the expense of the
Company.
11. ESTABLISHMENT OF A TRUST.
(a) In the event of a Potential Change in Control, the Company, upon
written request by the Indemnitee, shall create a trust for the benefit of the
Indemnitee and from time to time upon written request of the Indemnitee shall
fund such trust in an amount sufficient to satisfy any and all Expenses which
at the time of each such request it is reasonably anticipated will be incurred
in connection with a Proceeding for which the Indemnitee is entitled to rights
of indemnification under Section 4 or 5 hereof, and any and all judgments,
fines, penalties and settlement amounts of any and all proceedings for which
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the Indemnitee is entitled to rights of indemnification under Section 4 or 5
from time to time actually paid or claimed, reasonably anticipated or proposed
to be paid. The amount or amounts to be deposited in the trust pursuant to
the foregoing funding obligation shall be determined by the party who would
be required to make the determination of the Indemnitee's right to
indemnification under Section 8(b) hereof (the "Reviewing Party"). The terms
of the trust shall provide that upon a Change in Control (i) the trust shall
not be revoked or the principal thereof invaded, without the written consent
of the Indemnitee, (ii) the trustee shall advance, within two business days
of a request by the Indemnitee, any and all Expenses to the Indemnitee (and
the Indemnitee hereby agrees to reimburse the trust under the circumstances
under which the Indemnitee would be required to reimburse the Company under
Section 7 hereof), (iii) the trust shall continue to be funded by the Company
in accordance with the funding obligation set forth above, (iv) the trustee
shall promptly pay to the Indemnitee all amounts for which the Indemnitee
shall be entitled to indemnification pursuant to this Agreement or otherwise,
and (v) all unexpended funds in such trust shall revert to the Company upon
a final determination by the Reviewing Party or a court of competent
jurisdiction, as the case may be, that Indemnitee has been fully indemnified
under the terms of this Agreement. The trustee shall be an institutional
trustee with a highly regarded reputation chosen by the Indemnitee. Nothing
in this Section 11 shall relieve the Company of any of its obligations
hereunder.
(b) Nothing contained in this Section 11 shall prevent the Board in
its discretion at any time and from time to time, upon request of the
Indemnitee, from providing security to the Indemnitee for the Company's
obligations hereunder through an irrevocable line of credit, funded trust as
described in Section (a) above, or other collateral. Any such security, once
provided to the Indemnitee, may not be revoked or released without the prior
written consent of the Indemnitee.
12. REMEDIES OF INDEMNITEE.
(a) In the event that any one or more of the following events shall
have occurred: (i) a determination is made pursuant to Section 8 of this
Agreement that Indemnitee is not entitled to indemnification under this
Agreement; (ii) Expenses are not advanced timely in accordance with Section
7 of this Agreement; (iii) the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement and such determination shall not have been made and delivered in a
written opinion within 90 days after receipt by the Company of the request for
indemnification; (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten days after receipt by the Company of
a written request therefor; (v) payment of indemnification is not made within
ten days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 9(b) of this Agreement; and/or (vi) the Company fails to comply with
its obligations under Section 11(a) with regard to the establishment or
funding of a trust for Expenses, the Indemnitee shall be entitled to an
adjudication of his entitlement to such indemnification, advancement of
Expenses or the establishment and funding of the trust in an appropriate court
of the State of Delaware, or in any other court of competent jurisdiction.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Indemnitee shall commence such proceeding seeking
an adjudication or an award in arbitration within 180 days following the date
on which Indemnitee first has the right to commence such proceeding pursuant
to this Section 12. The Company shall not oppose Indemnitee's right to seek
any such adjudication or award in arbitration.
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(b) Whenever a determination is made pursuant to Section 8 of this
Agreement that Indemnitee is not entitled to indemnification, the judicial
proceeding or arbitration commenced pursuant to this Section 12 shall be
conducted in all respects as a de novo trial, or arbitration, on the merits
and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification
or advancement of Expenses, as the case may be, in any judicial proceeding or
arbitration commenced pursuant to this Section 12.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 12
absent (i) a misstatement by Indemnitee of a material fact, or an omission of
a material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 12 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 12 seeks
a judicial adjudication or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall
be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the
definition of Expenses in this Agreement) actually incurred by him in
connection with obtaining such judicial adjudication or arbitration, but only
if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but
not all of the indemnification or advancement of Expenses sought, the Expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
13. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE:
SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's certificate of incorporation or by-laws, any other
agreement, a vote of stockholders or a resolution of directors, or otherwise.
This Agreement shall continue until and terminate upon the later of: (a) 10
years after the date that Indemnitee shall have ceased to serve as an officer
or director of the Company, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 12 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of Indemnitee and his heirs,
executors and administrators.
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(b) (i) To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors and officers of the
Company, Indemnitee shall be covered by such policy or policies in accordance
with the terms thereof to the maximum extent of the coverage available for any
such director or officer under such policy or policies. The Company shall
take all necessary or appropriate action to cause such insurers to pay on
behalf of the Indemnitee all amounts payable as a result of the commencement
of a proceeding in accordance with the terms of such policy.
(ii) For a period of three years after the date the Indemnitee
shall have ceased to serve as an officer or director of the Company, the
Company will provide officers and directors liability insurance for Indemnitee
on terms no less favorable than the terms of the liability insurance which the
Company then provides to the current officers and directors, provided that the
Company provides officers and directors liability insurance to its current
officers and directors, and provided further that the annual premiums for the
liability insurance to be provided to the Indemnitee do not exceed by more
than 50% the premium charged for the coverage available for any of the
Company's current officers and directors.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee otherwise actually has received such payment under any insurance
policy, contract, agreement or otherwise.
14. SEVERABILITY.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
15. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES.
Except as otherwise provided specifically herein, Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding, or any claim herein, brought or made
by him against the Company.
16. HEADINGS.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
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17. MODIFICATION AND WAIVER.
This Agreement may be amended from time to time to reflect changes
in Delaware law or for other reasons. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver or any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
18. NOTICE BY INDEMNITEE.
Indemnitee agrees promptly to notify the Company in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or matter which may
be subject to indemnification or advancement of Expenses covered hereunder;
provided, however, that the failure to give any such notice shall not
disqualify the Indemnitee from indemnification hereunder.
19. NOTICES.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand to the party to whom said notice or other communication
shall have been directed, or (ii) mailed by certified or registered mail with
postage paid.
(a) If to Indemnitee, to:
Gary Flicker
4 Martine Avenue
Apartment 1412
White Plains, NY 10606
(b) If to the Corporation, to:
DVL, Inc.
P.O. Box 408
24 River Road
Bogota, New Jersey 07603
ATTN: President
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
20. GOVERNING LAW.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: DVL, INC.
/s/ Daniel Baldwin By: /s/ Alan Casnoff
- ------------------------- -------------------------------
Daniel Baldwin, Secretary Alan Casnoff, President
INDEMNITEE:
/s/ Gary Flicker
-------------------------------
Gary Flicker
11
EXHIBIT 10.3.1.
AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT
AMENDMENT, dated as of July 10, 1996 (the "Amendment"), to the Amended
and Restated Loan Agreement, dated as of March 27, 1996 (the "Loan
Agreement"), between DVL, Inc., a Delaware corporation ("Borrower"), and NPM
Capital LLC, a Delaware limited liability company ("Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender have agreed to amend the Loan Agreement,
subject to the terms and conditions of this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The following provisions of the Loan Agreement shall be, and hereby
are, amended by deleting references to "September 1, 1996" where such
references appears therein and substituting therefor, in each such case, the
date "September 30, 1996":
"Lender Default" (Article 1);
Section 3.5;
Section 3.6; and
Section 3.8.
2. Exhibit F-1 of the Loan Agreement, "Amended Articles of Incorporation,"
shall be, and hereby is, amended by and to the extent set forth in Exhibit F-
1A annexed hereto.
3. Exhibit G of the Loan Agreement, "Amendment to Limited Partner
Settlement Agreement," shall be, and hereby is, amended by deleting the
existing Exhibit G thereto and substituting therefor the Exhibit G annexed
hereto.
4. Revised Schedules 4.24, 4.25 and 4.27 to the Loan Agreement were
provided by the Borrower to the Lender, in form and substance satisfactory to
the Lender, and, solely for the convenience of the parties, are annexed hereto
and made a part hereof.
5. Except as expressly amended and modified hereby, the Loan Agreement
is hereby reaffirmed and remains in full force and effect. This Amendment may
be executed in several counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Amendment shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflict of laws rules thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective duly authorized representatives as of the
date first above written.
DVL, INC.
By: /s/ Robert W. LoSchiavo
--------------------------
Name: Robert W. LoSchiavo
Title: Vice President
NPM CAPITAL LLC
By: /s/ Lawrence J. Cohen
--------------------------
Name: Lawrence J. Cohen
Title: Managing Member
2
EXHIBIT 10.3.2
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT
SECOND AMENDMENT, dated as of September 27, 1996 (the "Second Amendment"),
to the Amended and Restated Loan Agreement, dated as of March 27, 1996, as
amended by the Amendment to Amended and Restated Loan Agreement dated as of
July 10, 1996 (the "Loan Agreement"), between DVL, Inc., a Delaware
corporation ("Borrower"), and NPM Capital LLC, a Delaware limited liability
company ("Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender have agreed to amend the Loan Agreement,
subject to the terms and conditions of this Second Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Section 3.2. Section 3.2 of the Loan Agreement is hereby deleted in
its entirety and the following is hereby substituted in lieu thereof:
"3.2 CONDITIONS PRECEDENT TO FUNDING OF MERIDIAN/FEDERAL PAYMENT
AMOUNT. Without limiting the generality of SECTION 3.1 above, Lender shall,
among other things, not be obligated to fund the Meridian/Federal Payment
Amount until such time as each of the following conditions precedent shall
have been satisfied to the satisfaction of Lender:
a. The Closing shall have occurred and each of the conditions
precedent to the effectiveness of Lender's obligations under this Agreement
shall have been satisfied to Lender's satisfaction.
b. No event shall have occurred and be continuing which
constitutes or would constitute, with the passage of time or the giving of
notice or both, a Default or an Event of Default.
c. There shall have occurred no Material Adverse Effect since
the Closing Date.
d. Borrower shall have delivered title reports or title
commitments for each of the tracts of real property described on Schedule 4.6.
e. Borrower and its Subsidiaries, if applicable, shall have
executed and delivered deeds of trusts and/or mortgages to Lender, in form and
substance acceptable to Lender, grant a contractual lien with respect to the
real property described on SCHEDULE A hereto to secure the prompt repayment
of the Obligations."
2. Except as expressly amended and modified hereby, the Loan Agreement
is hereby reaffirmed and remains in full force and effect. This Second
Amendment may be executed in several counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. This Second Amendment shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York without giving effect to the conflict of laws rules thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed by their respective duly authorized representatives as of
the date first above written.
DVL, INC.
By: /s/ Alan E. Casnoff
----------------------
Name: Alan E. Casnoff
Title: President
NPM CAPITAL LLC
By: NF Capital LLC, Managing Member
By: /s/ Robert W. Barron
----------------------
Name: Robert W. Barron
Title: Managing Member
2
EXHIBIT 10.3.3
THIRD AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT
This Third Amendment To Amended and Restated Loan Agreement, dated
as of March 6, 1997 (this "Amendment") by and between DVL, Inc.
("Borrower") and NPM Capital LLC, a Delaware limited liability company
("Lender").
RECITALS
A. Borrower and Lender entered into that certain Amended and
Restated Loan Agreement, dated as of March 27, 1996, as amended by (1)
that certain Amendment to Amended and Restated Loan Agreement dated as
of July 10, 1996 and (2) that certain Second Amendment to Amended and
Restated Loan Agreement dated as of September 27, 1996 (as amended, the
"Loan Agreement"). Each capitalized term which is used but not defined
in this Amendment shall have the meaning set forth in the Loan Agreement.
B. Borrower has requested that Lender advance additional funds
to Borrower in order to fund the payment of certain expenses incurred by
Borrower in connection with the closing of the loan evidenced by the Loan
Agreement and other Loan Documents and Lender is willing to consider such
request, in Lender's sole and absolute discretion, in accordance with the
terms and provisions of the Loan Agreement, as amended by the terms and
conditions of this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency is hereby acknowledged, Borrower and Lender hereby agrees
as follows:
1. NEW DEFINITIONS. Section 1 of the Loan Agreement is hereby
amended by adding the following new definition to such Section 1:
"Second Note" shall mean that certain promissory note in
the original principal amount of $200,000, in the form attached
hereto as EXHIBIT A-1 payable to the order of Lender, together
with all amendments, modifications and supplements thereto.
"Second Note Default Rate" shall mean a rate of interest
equal to five percent (5%) per annum, compounded monthly, PLUS
the Second Note Stated Rate (as such term is defined in the
Second Note).
2. AMENDMENT TO EXISTING DEFINITIONS. Section 1 of the Loan
Agreement is hereby amended by amending the following definitions as
follows:
a. The definition of "Lender" is hereby amended by adding
the phrase "and/or the Second Note" immediately after the phrase "the
Note," which later phrase appears twice in such definition.
b. The definition of "Loan Documents" is hereby amended by
adding the phrase "the Second Note" immediately after the phrase "this
Agreement, the Note," which is used two times in such definition.
c. The following sentence is hereby added to the end of the
definition of the term "Obligations": "The term "Obligations" shall also
include, without limitation, the Indebtedness evidenced by the Second
Note."
3. SECOND NOTE. The Loan Agreement is hereby amended by adding new
Sections 2.5A, 2.5B., 2.5C and 2.5D immediately after Section 2.5 of the
Loan Agreement as follows:
2.5A. SECOND NOTE. As of March 6, 1997, Borrower shall
execute and deliver to Lender the Second Note. In no event shall Lender
be obligated, in any way whatsoever, to advance any additional funds to
Borrower under or with respect to the Second Note or otherwise. All
outstanding principal of, and accrued interest on, the Second Note shall
become due and payable, without notice or demand, on the earlier of (1)
the date that all outstanding principal of, and accrued interest on, the
Note becomes due and payable, for any reason, including without
limitation, upon the occurrence of an Event of Default under the Loan
Agreement and (2) September 26, 2002. Notwithstanding anything to the
contrary set forth in this Agreement or in any other Loan Document, from
and after the occurrence of an Event of Default, the outstanding
principal balance of the Second Note shall bear interest at the Second
Note Default Rate until such time as all of the Obligations are paid in
full.
2.5B PAYMENTS OF PRINCIPAL AND ACCRUED INTEREST ON THE NOTE
AND THE SECOND NOTE. The payments of Cash Flow which Borrower is required
to make to Lender pursuant to Section 2.6.a of the Loan Agreement shall
be applied, on a PARI PASSU basis, to accrued interest and then to
principal with respect to the Note and the Second Note, in the priority
set forth in Section 2.7 of the Loan Agreement. Interest on the
outstanding principal balance of the Second Note shall accrue at the
Second Note Stated Rate (as such term is defined in the Second Note)
based on a year of 360 days for the actual number of days elapsed and
shall be payable, at the same time as, and on a PARI PASSU basis with,
all payments of accrued interest under the Note as set forth in SECTION
2.6.B of the Loan Agreement. In the event that, for any Fiscal Year,
Borrower fails to pay Lender accrued interest under the Note and the
Second Note at a rate of at least five percent (5%) per annum, compounded
monthly, based on a year of 360 days for the actual number of days
elapsed, then, Borrower shall make a further mandatory payment of accrued
interest to Lender in an amount equal to such shortfall on or before the
thirtieth day after the expiration of such Fiscal Year.
2
2.5C APPLICABLE PERCENTAGE REDUCTION TO SECOND NOTE. In
addition to the foregoing mandatory payments under the Second Note,
Borrower shall pay to Lender, on or before the last day of the applicable
calendar month after September 27, 1996 as set forth in the following
chart, a sufficient amount of principal of, and accrued interest on, the
Second Note in order (A) to reduce the then outstanding principal balance
of the Second Note (when combined with all other reductions of principal
by Borrower pursuant to the Loan Agreement, as amended) by an amount
equal to the applicable percentage of the original principal balance of
the Second Note set forth in the following chart ("APPLICABLE SECOND NOTE
PERCENTAGE REDUCTION") and (B) to pay in full the accrued and unpaid
interest on the entire outstanding principal balance of the Second Note
as of such last day of such calendar month.
<TABLE>
<CAPTION>
APPLICABLE SECOND NOTE
CALENDAR MONTH AFTER 9/27/96 PERCENTAGE REDUCTION
---------------------------- ----------------------
<S> <C>
Last Day of 18th Calendar Month 15%
Last Day of 27th Calendar Month 33%
Last Day of 36th Calendar Month 50%
Last Day of 42nd Calendar Month 67%
Last Day of 48th Calendar Month 72.5%
Last Day of 54th Calendar Month 80%
Last Day of 60th Calendar Month 85%
Last Day of 66th Calendar Month 92%
Last Day of 72nd Calendar Month 100%
</TABLE>
2.5D PARI PASSU TREATMENT OF NOTE AND SECOND NOTE.
Notwithstanding anything to the contrary set forth in the Note, this
Amendment, the Loan Agreement as amended or otherwise, Lender and
Borrower agree that, prior to the occurrence of an Event of Default, all
payments by Borrower with respect to the Note and the Second Note shall
allocated between the Note and the Second Note ON A PARI PASSU BASIS
until all of the Obligations are paid in full. The Loan Agreement and
each of the other Loan Documents are hereby deemed to be amended to
provide for such PARI PASSU application of payments with respect to the
Note and the Second Note. From and after the occurrence of an Event of
Default, Lender shall apply all payments by Borrower under the Note, the
Second Note, the Loan Agreement as amended or any of the other Loan
Documents as Lender may determine.
2.5E TRANSFER RESTRICTIONS. In no event shall Lender
(including Lender's successors and assigns) transfer legal or beneficial
ownership of the Note or the Second Note or any portion thereof unless,
in each such transfer, legal and beneficial ownership of both the Note
and the Second Note or any portion thereof are transferred to the same
person and in the same proportions. In addition to the foregoing, the
holder of the Second Note shall have the same rights and benefits with
respect to such Second Note which is given to the holder of the Note in
Section 9.1.b. and c. of the Loan Agreement.
4. AMENDMENT TO SECTION 2.8 OF THE LOAN AGREEMENT. Section 2.8 of
the Loan Agreement is hereby deleted in its entirety and the following
paragraph is hereby substituted in lieu thereof:
3
2.8 OTHER PAYMENTS. In addition to the foregoing payments by
Borrower to Lender on account of the Indebtedness evidence
evidenced by the Note and the Second Note, Borrower shall
pay Lender any and all cash and cash equivalents as and
when received by Borrower from the sale, issuance,
conversion, transfer or distribution of stock by Borrower,
or rights, options, warrants or agreements with respect
thereto, in excess of $250,000 in the aggregate at any
time or from time to time prior to the full payment of the
Note and the Second Note and all of the other Obligations
under this Agreement and the other Loan Documents,
including, but not limited to, cash received from the
Permitted Stockholders upon the exercise of the Permitted
Stockholder Warrants. Subject to the last sentence of
this Section 2.8, Lender shall apply such payment as
follows: (i) first, to the interest due and not yet paid
under the Note and the Second Note and (ii) then, to the
extent of any excess after payment pursuant to clause (i)
hereof, (A) in order of maturity, fifty percent (50%) of
such excess to the outstanding principal installments
under the Note payable under SECTION 2.6.C. hereof and to
the outstanding principal installments under the Second
Note payable under SECTION 2.5.C. hereof, and (B), in the
inverse order of maturity (without premium or penalty),
the remaining fifty percent (50%) of such excess to the
next mandatory payment due under SECTION 2.5C. and SECTION
2.6.C hereof. All such payments shall be applied, on a
pari passu basis, as between the principal of, and
interest on, the Note and the Second Note.
5. AMENDMENT TO SECTION 2.9 - MAXIMUM LAWFUL RATE. The phrase
"Second Note Stated Rate" is hereby added after each reference to "Stated
Rate" in Section 2.9 of the Loan Agreement. The phrase "Second Note
Default Rate" is hereby added after each reference to "Default Rate" in
Section 2.9 of the Loan Agreement.
6. AMENDMENT TO SECTION 2.11 - OPTIONAL PREPAYMENT. The phrase
"and/or the Second Note" is hereby added after the phrase "the Note" in
Section 2.11 of the Loan Agreement.
7. AMENDMENT TO NOTE. The terms and provisions of the Note are
hereby modified and amended i n all respects by the terms and provisions
of Section 2.5.A, B, C and D of this Second Note. Lender, in its
capacity as the holder of the Note, hereby consents to the foregoing
amendment of the Note and such pari passu treatment of the Note with the
Second Note.
8. REPRESENTATIONS OF BORROWER. Borrower hereby represents and
warrants to Lender as follows: (A) The execution, delivery and
performance of the Second Note and this Amendment by Borrower: (i) are
within Borrower's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action: (iii) are not in contravention of
any provision of Borrower's certificate or articles of incorporation or
bylaws; (iv) will not violate any Law or any order or decree of any court
of Governmental Authority; (v) will not conflict with or result in the
4
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower or any of its
Subsidiaries is a party or by which Borrower or any of its Subsidiaries
or any of their property is bound; (vi) will not result in the creation
or imposition of any Lien upon any of the property of Borrower or any of
its Subsidiaries other than those in favor of Lender, all pursuant to the
Loan Documents; and (vii) do not require the consent or approval of any
Governmental Authority or any other Person. (B) The Second Note and this
Amendment shall have been duly executed and delivered by or on behalf of
Borrower and each shall then constitute a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with
its respective terms.
9. REPRESENTATIONS OF BORROWER - AMENDMENT TO SECTION 5.1.F.
SECTION 5.1.F of the Loan Agreement is hereby amended to add the phrase
"and/or the Second Note" in each place that the phrase "the Note" is
located in such Section.
10. EFFECT OF THIS AMENDMENT. Each of the other Loan Documents
are hereby modified and amended in order that the amendments set forth
in this Amendment (including, without limitation, the amendments to
certain definitions to the Loan Agreement which are set forth in this
Amendment) shall be given full force and effect in each of the Loan
Documents from and after the date hereof. Except as expressly amended
and modified by this Amendment, the Loan Agreement is hereby ratified,
reaffirmed and remains in full force and effect in accordance with these
terms. This Amendment may be executed in several counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument. This Amendment shall be governed
in all respects, including validity, interpretation and effect, by the
laws of the State of New York without giving effect to the conflict of
rules thereof.
SIGNATURES ON NEXT PAGE
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective duly authorized representatives
a of the date first above written.
DVL, INC., a Delaware corporation
By: /s/ Daniel Baldwin
---------------------------------------
Daniel Baldwin, Vice President
NPM CAPITAL LLC,
a Delaware limited liability company
By: Pembroke Capital LLC,
its managing member
By: /s/ Lawrence J. Cohen
----------------------------------
Lawrence J. Cohen, Managing Member
6
EXHIBIT A-1
PROMISSORY NOTE
(Second Note)
New York, New York
$200,000 As of March 6, 1997
FOR VALUE RECEIVED, the undersigned, DVL, INC., a Delaware
corporation, with an address at 24 River Road, Bogota, New Jersey 07603
(hereinafter "BORROWER"), hereby unconditionally PROMISES TO PAY to the
order of NPM CAPITAL LLC, a Delaware limited liability company, with an
address c/o National Financial Companies LLC, 700 South Federal Highway,
Suite 200, Boca Raton, Florida 33432 ("LENDER"), and its successors or
assigns (together with Lender, "HOLDER"), the principal sum of TWO
HUNDRED THOUSAND DOLLARS ($200,000) or, so much thereof as may have been
advanced hereunder by Lender pursuant to the Loan Agreement (as
hereinafter defined) (the "SECOND NOTE LOAN"), together with interest
from and after the respective dates of such advances on the principal
balance from time to time outstanding as provided herein.
This Promissory Note (this "SECOND NOTE") is made in accordance
with that certain Amended and Restated Loan Agreement dated as of March
27, 1996 between Borrower and Lender, as amended (the "LOAN AGREEMENT").
The Holder is entitled to the benefits and security of the Loan Agreement
and the other Loan Documents, including but not limited to the Security
Agreement and the Stock Pledge Agreement. Capitalized terms used herein
shall have the meanings assigned to such terms on SCHEDULE 1 hereto or,
if not defined thereon, then as such terms are defined in the Loan
Agreement.
The principal amount of the Second Note Loan, and accrued interest
thereon hereunder, shall be payable in installments in the amounts and
on the dates specified herein and (unless sooner paid by prepayment,
acceleration or otherwise as provided in the Loan Agreement) shall be
paid in full on September 26, 2002.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS SECOND
NOTE, THE LOAN AGREEMENT AS AMENDED OR OTHERWISE, LENDER AND BORROWER
AGREE THAT, PRIOR TO THE OCCURRENCE OF AN EVENT OF DEFAULT, ALL PAYMENTS
BY BORROWER WITH RESPECT TO THE NOTE AND THIS SECOND NOTE SHALL BE
ALLOCATED BETWEEN THE NOTE AND THE SECOND NOTE ON A PARI PASSU BASIS
UNTIL ALL OF THE OBLIGATIONS ARE PAID IN FULL. FROM AND AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT, LENDER SHALL APPLY ALL PAYMENTS BY
BORROWER UNDER THE NOTE, THIS SECOND NOTE, THE LOAN AGREEMENT AS AMENDED
OR ANY OF THE OTHER LOAN DOCUMENTS AS LENDER MAY DETERMINE.
Pursuant to the terms of the Note and this Second Note, Borrower
shall pay to Holder, on or before the tenth (10th) day of each calendar
month, an amount equal to 100% of Cash Flow during the preceding calendar
month; provided, however, in the event Borrower has received in excess
of $10,000 of Cash Flow at any one time, Borrower shall immediately pay
all such Cash Flow to Holder. Payments shall be applied as set forth
below.
Interest on the outstanding principal balance of this Second Note
shall accrue at fifteen percent (15.0%) per annum, compounded monthly
(the "SECOND NOTE STATED RATE"), based on a year of 360 days for the
actual number of days elapsed, and shall be payable as and when payments
out of Cash Flow are made by Borrower. Such payments of Cash Flow shall
be applied, on a PARI PASSU BASIS, to accrued interest on the Note and
this Second Note. In the event that, for any fiscal year of Borrower (the
"FISCAL YEAR"), Borrower fails to pay Holder accrued interest on the Note
and the Second Note at a rate of at least five percent (5%) per annum,
compounded monthly, based on a year of 360 days for the actual number of
days elapsed (the "ANNUAL MINIMUM INTEREST PAYMENT"), then Borrower shall
make a further mandatory payment of accrued interest to Holder in an
amount equal to such shortfall on or before the thirtieth day after the
expiration of such Fiscal Year; provided, however, that in no event shall
the interest or other amounts payable on the Note and/or this Second Note
exceed the highest rate of interest permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto.
In addition to the foregoing mandatory payments, Borrower shall pay
to Holder, on or before the last day of the applicable calendar month
after September 27, 1997 as set forth in the following chart, a
sufficient amount of principal of, and accrued interest on, the Second
Note Loan evidenced by this Second Note in order (A) to reduce the then
outstanding principal balance of this Second Note (when combined with any
other reductions of principal hereof by Borrower) by an amount equal to
the applicable percentage of the original principal balance of this
Second Note set forth in the following chart ("APPLICABLE PERCENTAGE
REDUCTION") and (B) to pay in full the accrued and unpaid interest on the
entire outstanding principal balance of this Second Note as of such last
day of such calendar month. The payments set forth in the chart below
shall sometimes be referred to herein as "INSTALLMENT PAYMENTS."
<TABLE>
<CAPTION>
Applicable
Percentage
Calendar Month After September 27, 1996 Reduction
--------------------------------------- ----------
<S> <C>
Last Day of 18th Calendar Month 15%
Last Day of 27th Calendar Month 33%
Last Day of 36th Calendar Month 50%
Last Day of 42nd Calendar Month 67%
Last Day of 48th Calendar Month 72.5%
Last Day of 54th Calendar Month 80%
Last Day of 60th Calendar Month 85%
Last Day of 66th Calendar Month 92%
Last Day of 72nd Calendar Month 100%
</TABLE>
8
FOR EXAMPLE, FOR ILLUSTRATIVE PURPOSES ONLY, ON OR BEFORE THE END
OF THE 54TH CALENDAR MONTH AFTER THE DATE HEREOF, BORROWER MUST
REDUCE THE ORIGINAL PRINCIPAL BALANCE OF THIS SECOND NOTE BY AN
AMOUNT EQUAL TO AT LEAST 80% OF SUCH ORIGINAL PRINCIPAL AMOUNT
(PLUS ALL ACCRUED INTEREST ON THE ENTIRE PRINCIPAL BALANCE OF THIS
SECOND NOTE).
Except as otherwise provided in the Note and/or this Second Note,
prior to the occurrence of an Event of Default, all payments by Borrower
to Holder under the Note and/or this Second Note shall be applied in the
following order, on a PARI PASSU basis, as between the Note and this
Second Note:
(i) to accrued and unpaid interest on the Loan and Second Note
Loan;
(ii) to then due and payable fees and expenses payable to Holder;
and
(iii) to the then outstanding principal of the Loan and the Second
Note Loan.
In addition to the foregoing payments by Borrower to Holder on
account of the Indebtedness evidenced by the Note and this Second Note,
Borrower shall pay Holder any and all cash and cash equivalents as and
when received by Borrower from the sale, issuance, conversion, transfer
or distribution of capital stock of Borrower, or rights, options,
warrants, or agreements with respect thereto, in excess of $250,000 in
the aggregate at any time or from to time to time prior to the full
payment of the Note and this Second Note, including but not limited to
cash received from the Permitted Stockholders upon the exercise of the
Permitted Stockholders Warrants.
Holder shall apply such payments, on a PARI PASSU basis between the
Note and this Second Note, as follows: (i) first, to any interest due
and not yet paid under the Note and this Second Note and (ii) then, to
the extent of any excess after payment pursuant to clause (i) hereof, (A)
in order of maturity, fifty percent (50%) of such excess to the unpaid
Installment Payments due under this Second Note and the Installment
Payments (as defined in the Note) due under the Note, and (B) in inverse
order of maturity (without premium or penalty), the remaining fifty
percent (50%) of such excess to the unpaid Installment Payments due under
this Second Note and the Installment Payments (as defined in the Note)
due under the Note.
This Second Note is subject to voluntary prepayment in whole or in
part and to acceleration on default at the times and in the manner
specified in the Loan Agreement.
Holder shall, and is hereby authorized by Borrower to, endorse on
SCHEDULE 3 hereto appropriate notations evidencing the date and amount
of each advance made by Lender pursuant to the Third Amendment of the
Loan Agreement.
9
Borrower shall make each payment under this Second Note not later
than 11:00 A.M. (New York City time) on the day when due in lawful money
of the United States of America and in immediately available funds to
Holder's depositary bank as designated by Holder from time to time for
deposit in Holder's depositary account.
BORROWER HEREBY EXPRESSLY WAIVES PRESENTMENT FOR PAYMENT, DEMAND,
PROTEST, NOTICE OF PROTEST, NOTICE OF DISHONOR, NOTICE OF OCCURRENCE OF
AN EVENT OF DEFAULT, NOTICE OF ACCELERATION AND NOTICE OF NON-PAYMENT
HEREOF.
BORROWER HEREBY VOLUNTARILY AND KNOWINGLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS SECOND NOTE, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS.
This Second Note has been executed, delivered and accepted at New
York, New York and shall be interpreted, governed by, and construed in
accordance with, the laws of the State of New York (without regard to
conflict of laws rules thereof).
This Second Note may not be changed orally, but only by a writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
IN WITNESS WHEREOF, Borrower has executed this Second Note as of
the day and year first above written.
ATTEST: DVL, Inc.
/s/ Gary Flicker
- ---------------------------------
Gary Flicker, Assistant Secretary By: /s/ Daniel Baldwin
------------------------------
Daniel Baldwin, Vice President
10<PAGE>
SCHEDULE 1
DEFINITIONS
-----------
"Affiliate Partnerships" shall mean the collective reference to all
limited partnerships in which Borrower is now, or shall hereafter be, a
general partner.
"A.I. CREDIT LOAN" shall mean the Indebtedness of Borrower evidenced
by that certain Loan and Security Agreement, dated September 29, 1987,
by and between Borrower and A.I. Credit Corp., as amended, with respect
to a loan in the original principal amount of $6,966,990.16.
"AMSAVE DEBT" shall mean the Indebtedness of Borrower evidenced by
that certain Revolving Line of Credit and Security Agreement, dated
November 29, 1989, by and between Borrower and American Savings Bank (now
Federal Deposit Insurance Corporation, as receiver for American Savings
Bank), as amended, with respect to a line of credit in the original
principal amount of up to $13,000,000, together with all other documents
securing, evidencing or executed in connection with such Indebtedness,
as the foregoing may be amended, modified and supplemented from time to
time in accordance with the Loan Agreement.
"CADLE LOAN" shall mean the Indebtedness of Borrower to The Cadle
Company evidenced by that certain Credit Agreement, dated as of January
11, 1993, by and between Apple Bank for Savings, a New York savings bank,
the predecessor-in-interest to The Cadle Company and Del-Val Financial
Corporation (now known as DVL, Inc.), with respect to a line of credit
up to a principal amount of $7,000,000, together with all other documents
securing, evidencing or executed in connection with such Indebtedness,
as the foregoing may be amended, modified and supplemented from time to
time in accordance with the Loan Agreement.
"CASH FLOW" shall mean, with respect to Borrower and each of its
Subsidiaries for any period, the collective reference to the sum of (1)
the gross proceeds generated by the Primary Collateral (including,
without limitation, all payments of interest and principal, all proceeds
from the refinancing of any notes and mortgages (including without
limitation the Underlying Mortgages and the Wrap Mortgages) and all
proceeds of any payoff of, or sale of, or with respect to, any of the
Primary Collateral), PLUS (2) THE EXCESS OF (A) the gross proceeds
generated by all of the Wrap Notes and Wrap Mortgages included within the
collateral securing the Other Secured Debt (including, without
limitation, all payments of interest and principal, all proceeds from the
refinancing of any notes and mortgages (including without limitation the
Underlying Mortgages and the Wrap Mortgages included within such
collateral) and all proceeds of any payoff of, or sale of, or with
respect to such collateral) OVER (B) any and all payments then due and
11
payable under, or with respect to, such Other Secured Debt plus (3) from
and after the occurrence of an Event of Default, any and all cash and
other proceeds received by Borrower and/or Lender on account of the
Collateral or from the sale, collection or other realization of or upon
the Collateral.
"CRT LOAN" shall mean the Indebtedness of Borrower evidenced by
certain promissory notes payable to Banca CRT S.p.A. each dated September
8, 1986, as amended and restated by those certain six promissory notes
each dated September 21, 1990, in the aggregate sum of $2,000,000.
"FEDERAL INSURANCE COMPANY DEBT" shall mean that certain Indebtedness
of Borrower evidenced by that certain Loan and Security Agreement and
Release, dated June 28, 1995, by and between Borrower and Federal
Insurance Company with respect to a loan in the original principal amount
of $2,300,000.
"GAAP" shall mean generally accepted accounting principles in the
United States of America consistently applied and maintained throughout
the period indicated.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation
of such Person guaranteeing any Indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner (or otherwise providing any other assurance to
or on behalf of the primary obligor that such primary obligations will
be paid, discharged or performed), including, without limitation, any
obligation or arrangement of such Person, (a) to purchase or repurchase
any such primary obligation, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) to indemnify the owner of such primary
obligation against loss in respect thereof.
"INDEBTEDNESS" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to
trade creditors incurred in the ordinary course of business), (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(iii) all indebtedness created or arising under any conditional sale or
other title retention agreements with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
12
or sale of such property), (iv) all obligations of such Person under any
lease of property (whether real, personal or mixed) by such Person as
lessee that, in accordance with GAAP, either would be required to be
classified and accounted for as a capital lease on a balance sheet of
such Person or otherwise disclosed as such in a note to such balance
sheet, (v) all Guaranteed Indebtedness, and (vi) all Indebtedness
referred to in clause (i), (ii), (iii), (iv) or (v) above secured by (or
for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness.
"LIEN" shall mean the collective reference to any mortgage or deed
of trust (including any Mortgage), pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, easement or
encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever that has the
practical effect of creating a security interest in an asset (including,
without limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law
of any jurisdiction).
"MERIDIAN DEBT" shall mean the Indebtedness of Borrower evidenced
by that certain Repurchase Agreement, dated June 25, 1989, by and between
Borrower and Meridian Bank, with respect to a loan in the original
principal amount of $5,000,000, together with all other documents
securing, evidencing or executed in connection with such Indebtedness,
as the foregoing may be amended, modified and supplemented from time to
time in accordance with the Loan Agreement.
"MORTGAGE" shall mean each mortgage, deed of trust or similar
security agreement made or to be made by Borrower and each of its
Subsidiaries having an interest in the Real Estate to be encumbered in
favor of Lender, creating a first priority lien on any portion of the
Real Estate to secure the payment of the Obligations, including, without
limitation, all amendments, modifications and supplements thereto and
shall refer to each Mortgage as the same may be in effect at the time
such reference becomes operative.
"OTHER SECURED DEBT RELEASED COLLATERAL" shall mean any of the
assets or properties covered by the Liens securing any of the Other
Secured Debt that is released by any of the holders of such Other Secured
Debt and thereby becomes free and clear of all Liens (except Permitted
Encumbrances) for any reason or for no reason.
13
"OTHER SECURED DEBT" shall mean the collective reference to: (i) the
Amsave Debt, (ii) the Cadle Debt, (iii) the Federal Insurance Company
Debt, (iv) the Meridian Debt, (v) the Scheinberg Debt, (vi) the Textron
Debt, (vii) the Zyncon Debt and (viii) other funded long term debt of
Borrower as reflected on the audited consolidated balance sheet as at
December 31, 1995 of Borrower and its Subsidiaries set forth on SCHEDULE
2 hereto.
"PERMITTED ENCUMBRANCES" shall mean the following encumbrances: (i)
Liens created for the benefit of Lender or assigned to Lender under the
terms of the Loan Documents, (ii) Liens for taxes or assessments or other
governmental charges or levies, either not yet due or payable; (iii)
pledges or deposits securing obligations under workers' compensation,
unemployment insurance, social security or public liability laws or
similar legislation; (iv) deposits securing public or statutory
obligations of Borrower or any of its Subsidiaries which are otherwise
permitted by the Loan Agreement; (v) workers', mechanics', suppliers',
carriers', warehousemen's or other similar liens arising in the ordinary
course of business and securing indebtedness aggregating not in excess
of $10,000 at any time outstanding, not yet due and payable; and (vi)
zoning restrictions, easements, licenses, or other recorded written
restrictions on the use of real property or minor irregularities in title
(including leasehold title) thereto, (but excluding any security
interests or Liens for borrowed money), so long as the same do not
materially impair the use, value, or marketability of such real property,
leases or leasehold estates.
"PERMITTED STOCKHOLDERS" shall mean the parties to the Securities
Purchase Agreement, the Permitted Stockholder Warrant and the Stock
Purchase Agreement, other than Borrower, and such parties respective
successors and assigns.
"PERMITTED STOCKHOLDER DOCUMENTS" shall mean the collective reference
to (1) the Stock Purchase Agreement, (2) the Securities Purchase
Agreement, (3) the Permitted Stockholder Warrant, (4) all other
documents, certificates and instruments executed and delivered by
Borrower in connection with any of the foregoing and (5) all amendments,
modifications and supplements to any of the foregoing.
"PERMITTED STOCKHOLDER WARRANT" shall mean the collective reference
to each of the Common Stock Warrants, each dated as of the date hereof,
executed by Borrower in favor of a Permitted Stockholder, together with
all amendments, modifications and supplements thereto.
"PERSON" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, unincorporated organization,
association, corporation, institution, public benefit corporation, bank,
trust company, trust or other organization, whether or not a legal
entity, or government instrumentality, division, subdivision, body or
department thereof (whether federal, state, county, city, municipal or
otherwise).
14
"PRIMARY COLLATERAL" shall mean the collective reference to (1) the
Wrap Notes and the Wrap Mortgages which are listed on SCHEDULE 4 hereto
PLUS (2) all of the Wrap Notes and the Wrap Mortgages included within the
Other Secured Debt Released Collateral.
"REAL ESTATE" shall mean the collective reference to all plots,
pieces or parcels of land now owned or leased or hereafter acquired or
leased by Borrower or any of its Subsidiaries (the "LAND"), together with
any buildings, structures or other improvements on or under the Land and
all the rights, titles and interests of Borrower or any of its
Subsidiaries, if any, in any way related to the Land, buildings,
structures and other improvements.
"SCHEINBERG DEBT" shall mean that certain Indebtedness of Borrower
evidenced by that certain Loan and Security Agreement, dated September
23, 1994, by and between Borrower and Martin Scheinberg, with respect to
a loan in the original principal amount of $250,000, together with all
other documents securing, evidencing or executed in connection with such
Indebtedness, as the foregoing may be amended, modified and supplemented
from time to time in accordance with the Loan Agreement.
"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities
Purchase Agreement dated as of the date hereof by and between Borrower
and the Permitted Stockholders relating to the purchase of Preferred
Stock and Permitted Stockholder Warrants, together with all amendments,
modifications and supplements thereto as the same may be in effect at the
time such reference becomes operative.
"STOCK PURCHASE AGREEMENT" shall mean that certain Stock Purchase
Agreement dated as of the date hereof relating to the purchase of Common
Stock together with all amendments, modifications and supplements thereto
and shall refer to the Stock Purchase Agreement as the same may be in
effect at the time such reference becomes operative.
"SUBSIDIARY" shall mean, with respect to any Person, (a) any
corporation in which such Person and/or one or more its Subsidiaries,
directly or indirectly, owns legally or beneficially an aggregate of more
than fifty percent (50%) of any class of the outstanding capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time,
capital stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) or (b) any partnership or other Person in which such Person
and/or one or more its Subsidiaries shall have an interest (whether in
the form of voting or participation in profits or capital contribution)
of more than fifty percent (50%) or (c) any Person of which such Person
has the right to control the operating or financial decisions.
15
"TEXTRON DEBT" shall mean the Indebtedness of Borrower evidenced by
that certain Secured Loan Agreement, by and between Del-Val Financial
Corporation, Mortgage Financing Partners, Kenbee Management Inc. and
Signal Capital Corporation, the predecessor-in-interest to Textron
Financial Corporation, with respect to a loan in the original principal
amount of $8,700,000, together with all other documents securing,
evidencing or executed in connection with such Indebtedness, as the
foregoing may be amended, modified and supplemented from time to time in
accordance with the Loan Agreement.
"UNDERLYING MORTGAGES" shall mean the collective reference to the
mortgages, deeds of trust and similar security agreements executed by
Affiliate Partnerships covering real property owned by such Affiliate
Partnership to secure the Underlying Note executed by such Affiliate
Partnership.
"UNDERLYING NOTES" shall mean the collective reference to the
promissory notes executed by an Affiliate Partnership payable to the
order of any Person evidencing Indebtedness secured by corresponding
Underlying Mortgages.
"WESTROCK LOAN" shall mean the Indebtedness of Borrower evidenced
by that certain Amended and Restated Loan Agreement, dated August 22,
1979, by and between Borrower and Westrock Island Fund, LLC, with respect
to certain loans in the evidenced by (1) that certain Amended and
Restated Substitute and Supplemental Promissory Note, dated July 16, 1986
in the original principal amount of $17,000,000, (2) that certain Secured
Promissory Note, dated December 4, 1986 in the original principal amount
of $2,500,000, and (3) that certain Secured Promissory Note, dated March
1987 in the original principal amount of $1,150,000.
"WRAP MORTGAGES" shall mean the collective reference to the
mortgages and deeds of trust executed by Affiliate Partnerships in favor
of Borrower (whether first or junior liens) covering real property owned
by such Affiliate Partnership to secure the Wrap Note executed by such
Affiliate Partnership or such other Person.
"WRAP NOTES" shall mean the collective reference to (A) the
promissory notes executed by Affiliate Partnerships payable to the order
of Borrower, which evidences Indebtedness that includes the Indebtedness
evidenced by the corresponding Underlying Note and is secured by the
corresponding Wrap Mortgages and (B) the promissory notes executed by any
Person which are held by, or payable to the order of, Borrower and
secured by deeds of trust or mortgages securing such Indebtednesses in
favor of, or for the benefit of, Borrower or any of its Subsidiaries.
"ZYNCON DEBT" shall mean that certain Indebtedness of Borrower
evidenced by that certain Purchase and Sale Deposit, dated November 11,
1994, by and between Borrower and Zyncon of North Carolina, in the
original principal amount of $285,000, together with all other documents
securing, evidencing or executed in connection with such Indebtedness,
as the foregoing may be amended, modified and supplemented from time to
time in accordance with the Loan Agreement.
16
<TABLE>
<CAPTION>
SCHEDULE 2
----------
LENDER COLLATERAL PRINCIPAL INTEREST TOTAL
------ ---------- --------- -------- -----
<S> <C> <C> <C> <C>
FUNDED
LONG-TERM DEBT FIRST MORTGAGES $313,066 $3,489 $316,555
</TABLE>
17<PAGE>
SCHEDULE 3
----------
DVL, Inc., as Borrower under that attached Promissory Note, in the
original principal amount of $200,000 dated as of March 6, 1997, hereby
certifies and agrees that NPM Capital LLC, as Lender thereunder, has made
the following advances to Borrower pursuant to the Third Amendment to the
Loan Agreement.
<TABLE>
<CAPTION>
DATE OF ADVANCE AMOUNT OF ADVANCE
--------------- -----------------
<S> <C>
March 6, 1997 $100,000
April 30, 1997 $100,000
</TABLE>
ATTEST: DVL, INC.
/s/ Gary Flicker
--------------------------------- By: /s/ Daniel Baldwin
Gary Flicker, Assistant Secretary ------------------
Name: Daniel Baldwin
----------------
Title: Vice President
---------------
18<PAGE>
SCHEDULE 4
----------
[Schedule 4 of the Second Note contains a description of each of
the Wrap Mortgages constituting the Primary Collateral, as such
terms are defined in the Loan Agreement.]
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 364
<SECURITIES> 0
<RECEIVABLES> 29,158
<ALLOWANCES> 11,554
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,683
<CURRENT-LIABILITIES> 0
<BONDS> 17,127
<COMMON> 157
0
1
<OTHER-SE> 3,194
<TOTAL-LIABILITY-AND-EQUITY> 22,683
<SALES> 0
<TOTAL-REVENUES> 1,154
<CGS> 0
<TOTAL-COSTS> 1,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,362
<INCOME-PRETAX> (1,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,364)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,104
<CHANGES> 0
<NET-INCOME> (260)
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
