THIS AGREEMENT OF SUBORDINATION AND ASSIGNMENT, is entered into as of
November 1, 2000 by Thomas Povinelli, an individual having an office at 1311
Mamaroneck Avenue, Suite #160, White Plains, NY 10605 (the "Creditor"), in favor
of and for the benefit of EUROPEAN AMERICAN BANK, a New York banking corporation
(the "Bank").
RECITALS
A. The Bank has made and may make, from time to time, loans,
advances, extensions of credit and/or other financial accommodations
(collectively, the "Loans") for the account of GILMAN + CIOCIA, INC. (the
"Debtor").
B. The Creditor, being affiliated with the Debtor, acknowledges and
agrees that the Creditor will receive direct and indirect benefits from the
extension of the Loans and any further extensions of credit made to the Debtor
from time to time.
C. In order to induce the Bank, its successors or assigns, from time
to time to make the Loans and such other advances, loans, discounts or
extensions of credit as it may deem advisable, directly or indirectly, to or for
the account of the Debtor, or to others upon the Debtor's obligations, or to
acquire obligations (direct or indirect) of the Debtor, or to have the Debtor
become obligated to the Bank in any manner, and/or to grant to or for the
account of the Debtor such renewals, extensions, forbearances, releases of
collateral or other relinquishments of legal rights, as the Bank may deem
advisable and in consideration of advances, loans, discounts or extensions of
credit, due or to become due, whether heretofore or hereafter made to the Debtor
and for other valuable consideration, receipt of which is hereby duly
acknowledged, the Creditor agrees to subordinate the obligations of the Debtor
to the Creditor on the terms set forth herein.
Accordingly, the Creditor hereby agrees as follows:
1. Subordination.
-------------- The Creditor agrees that all indebtedness now or
hereafter owing to the Creditor by the Debtor whether for principal, interest,
extensions of credit after the filing of a petition initiating any proceeding
referenced in paragraph 2 hereof, premiums, fees, indemnities, expenses or
otherwise and all claims and demands which the Creditor now has or may hereafter
have or acquire against the Debtor (such indebtedness, claims and demands,
collectively, hereinafter called "Subordinated Indebtedness") are not to be
payable other than as provided herein, and that no payment on account thereof,
nor any security therefor, shall be received, accepted or retained by the
Creditor (other than as permitted herein) and no suit or proceeding seeking such
payment or to foreclose or take any other action with respect to the collateral
therefor shall be commenced unless and until the Debtor has paid and satisfied
in full all its obligations to the Bank of every kind and description whether
for principal, interest (including, without limitation, interest after the
filing of a petition initiating any proceeding referenced in paragraph 2
hereof), premiums, fees, indemnities, expenses or otherwise, whether or not
represented by negotiable instruments or other writings, whether direct or
indirect, absolute or contingent, due or not due, secured or unsecured,
original, deferred, renewed or extended, now in existence or hereafter incurred,
originally contracted with the Bank or, with another and assigned or transferred
to or otherwise acquired by the Bank, or in which the Bank may acquire a
participation, and whether contracted by the Debtor alone or jointly and/or
severally with another or others (such obligations, collectively, hereinafter
called the "Senior Indebtedness"). Notwithstanding anything to the contrary
contained herein, so long as no default has occurred under any instrument,
document or agreement evidencing or securing the Senior Indebtedness, the Debtor
shall be permitted to make, and the Creditor shall be permitted to receive
regularly scheduled payments of accrued interest only.
2. Intentionally omitted.
----------------------
3. Waiver and Consent.
-------------------- The Creditor waives any and all notice of
acceptance of this agreement and of the creation, modification, renewal or
extension or accrual of the Senior Indebtedness, or any part thereof, present or
future, and of the reliance of the Bank upon this agreement. The Creditor hereby
consents that, without notice to or further assent by the Creditor, the Senior
Indebtedness, or any part thereof, may from time to time in whole or in part, be
renewed, extended, modified, compromised or released by the Bank, as the Bank
may deem advisable, that any collateral and/or lien or liens for the Senior
Indebtedness, or any part thereof, made from time to time, in whole or in part,
be exchanged, sold or surrendered by the Bank, as it deems advisable, and that
any deposit balance or balances as to the credit of the Debtor may from time to
time, in whole or in part, be surrendered or released by the Bank, as it may
deem advisable, all without impairing, abridging, affecting or releasing the
subordination and rights of the Bank contained in this agreement.
4. Payments.
--------- Should any payment, dividend, security, proceeds or
other distribution be received by the Creditor for or on account of the
Subordinated Indebtedness, or any part thereof, prior to the satisfaction of all
Senior Indebtedness, the Creditor shall promptly deliver and assign the same to
the Bank in the form received and, if necessary, properly endorsed to permit
collection, for application on account of the Senior Indebtedness or any part
thereof (principal and/or interest as the Bank may elect), whether matured or
unmatured, and until so delivered, the same shall be held in trust by the
Creditor as the property of the Bank and shall not be commingled with any assets
of the Creditor. In the event of the failure of the Creditor to endorse or
assign any security or instrument for the payment of money so received by the
Creditor or payable to the Creditor's order, the Bank or any officer or employee
thereof is hereby irrevocably constituted and appointed attorneys in fact for
the Creditor, with full power to make any such endorsement or assignment and
with full power of substitution.
5. Representations and Warranties; Additional Instruments; Books and
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Records.
- -------- The Creditor represents and warrants to the Bank that: (i) the
aggregate principal sum of the Subordinated Indebtedness on the date hereof is
$750,000.00 without counterclaim, defense or offset, (ii) the Subordinated
Indebtedness is not represented by any notes or other negotiable instruments,
other than that certain promissory note in the principal amount of $70,000.00
dated November 1, 2000 and (iii) the Creditor is solvent and has granted no
security interest in and has made no prior transfer or assignment of the
Subordinated Indebtedness or any part thereof. The Creditor agrees that at no
time hereafter will the Subordinated Indebtedness, or any part thereof, be
represented by any notes, other negotiable instruments or other writings, except
notes, other negotiable instruments or other writings endorsed and delivered to
the Bank, or marked with a legend, as above provided. The Creditor agrees that
(i) its books and records shall appropriately indicate that the Subordinated
Indebtedness is subject to this agreement and (ii) the Bank shall have access
from time to time to its books and records in order that the Bank may examine
the state of accounts of the Creditor with the Debtor and the Bank shall be
permitted to make copies thereof.
6. Continuing Agreement.
----------------------- This is a continuing agreement of
subordination and assignment and shall remain in full force and effect and be
binding upon the undersigned and its legal representatives, successors and
assigns until the Bank shall actually receive from the Creditor written notice
of its discontinuance; provided, however, this agreement shall remain in full
force and effect thereafter until all of the Senior Indebtedness outstanding, or
contracted or committed for, whether or not outstanding, before the receipt of
such notice by the Bank, and any extension or renewals thereof, whether made
before or after receipt of such notice, together with interest accruing thereon
after such notice, shall be finally and irrevocably paid in full. If after
receipt of any payment of all or any part of the Senior Indebtedness, the Bank
is for any reason compelled to surrender such payment to any person or entity,
because such payment is determined to be void or voidable as a preference,
impermissible set off, or a diversion of trust funds, or for any other reason,
this agreement shall continue in full force and effect notwithstanding any
contrary action which may have been taken by the Bank in reliance upon such
payment; and any such contrary actions so taken shall be without prejudice to
the Bank's right under this agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable. The Creditor
agrees that payment in full of the Senior Indebtedness from time to time shall
not operate as a termination of this agreement.
7. Further Assurances.
-------------------- The Creditor agrees, upon request of the
Bank, to execute such further documents and instruments, including, without
limitation, additional notes or negotiable instruments, assignments, security
agreements and financing statements under the Uniform Commercial Code, as the
Bank may require.
8. Expenses.
--------- In the event that the Creditor has received payment(s)
on the Subordinated Indebtedness that is(are) prohibited hereunder and refuses
to deliver any part or all of such payment(s) to the Bank and the Bank shall
retain or engage an attorney or attorneys to collect, enforce or protect its
interest with respect to this agreement or the Subordinated Indebtedness, all
the costs and expenses of such collection, enforcement or protection, including,
without limitation, reasonable attorneys' fees, shall be payable by the Creditor
to the extent such collection, enforcement or protection is sought against the
Creditor.
9. No Waiver; Cumulative Remedies.
------------------------------- No waiver shall be deemed to have
been made by the Bank of any of its rights hereunder unless same shall be in
writing and each waiver, if any, shall be a waiver only with respect to the
specific instance involved and shall in no way impair the Bank's rights and/or
the obligations of the Creditor to the Bank in any other respect or at any other
time, nor shall same establish a course of conduct. The rights, remedies, powers
and privileges provided in this Agreement are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
10. Amendments; Continued Enforceability.
-------------------------------------- No modification, waiver,
release or amendment of any provision of this Agreement shall be made except by
a written agreement executed by the Creditor and a duly authorized officer of
the Bank. Any provision of this agreement which may prove unenforceable under
any law shall not effect the validity of any other provisions contained herein.
11. Successors and Assigns.
----------------------- This Agreement shall be binding upon and
inure to the benefit of the Creditor and the Bank and their respective
successors and assigns and, if applicable, heirs and legal representations.
12. Notices.
-------- Any notice to the Bank shall be deemed effective only if
in writing and sent to and received at the branch, division or department of the
Bank conducting the transaction or transactions hereunder. Any notice to the
Creditor shall be deemed sufficient when sent to the Creditor at the last known
address of the Creditor appearing on the records of the Bank.
13. Severability.
------------- If any one or more of the provisions contained in
this agreement, or any application thereof, shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein, and any other application thereof, shall
not in any way be affected or impaired thereby.
14. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
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THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE CREDITOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW
YORK AND ANY COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT AGAINST THE CREDITOR AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE CREDITOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT THE CREDITOR IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH
COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM,
THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS
AGREEMENT OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT
MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE CREDITOR AGREES (i) NOT TO SEEK AND HEREBY
WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF
ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN
ENFORCEMENT OF SUCH JUDGMENT AND (ii) NOT TO ASSERT ANY COUNTERCLAIM, IN ANY
SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM COULD NOT, BY REASON OF
ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR
ALLEGED IN ANY OTHER ACTION. THE CREDITOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE UPON THE CREDITOR BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR
NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW
YORK. THE CREDITOR IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT,
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed on the date written in the first paragraph hereof.
/s/ Thomas Povinelli
________________________________
THOMAS POVINELLI
STATE OF NEW YORK
COUNTY OF Westchester ss.:
On the 1st day of November, in the year 2000 before me, the undersigned, a
notary public in and for said State, personally appeared Thomas Povinelli,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
/s/ Jennifer Zacharczyk
_________________________________
Notary Public
(seal)
AGREEMENT OF THE DEBTOR
The undersigned, the Debtor described in the Agreement of
Subordination and Assignment dated the date hereof between Thomas Povinelli and
European American Bank (the "Agreement"), hereby acknowledges receipt of a copy
thereof, acknowledges that the Subordinated Indebtedness mentioned therein is
payable as stated therein, and agrees to make no payment, whether principal,
interest fees, indemnities, expenses or otherwise on the Subordinated
Indebtedness so long as the undersigned shall be indebted to the Bank, except
such payments as are permitted pursuant to the Agreement, as may be made to the
Bank or with the prior written consent of the Bank. If (i) the undersigned makes
any other payment of the Subordinated Indebtedness, (ii) the undersigned makes
any loan, advances or extensions of credit to the Creditor or acquires any notes
receivables or other obligations as to which the Creditor is the obligor, (iii)
any term of the foregoing agreement or this Agreement of the Debtor is breached
by any party which executed same, or (iv) the undersigned fails to make any
payment of the Subordinated Indebtedness when due after the Bank has given its
written consent to the making of such payment, then the Bank may, at its sole
election, declare all or any part of the Senior Indebtedness or the Subordinated
Indebtedness as defined in the Agreement to be immediately due and payable
without demand or notice of any kind.
Dated: November 1, 2000
GILMAN + CIOCIA, INC.
By: /s/ David D. Puyear
___________________________________
David D. Puyear
Chief Financial Officer
STATE OF NEW YORK
COUNTY OF NASSAU ss.:
On the 1st day of November, in the year 2000 before me, the undersigned, a
notary public in and for said State, personally appeared David D. Puyear,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
/s/
__________________________________
Notary Public