EXHIBIT 10.3
 

 

 
SUBORDINATION AGREEMENT
 
 

Borrower:
Blonder Tongue Laboratories, Inc.
One Jake Brown Road
Old Bridge, NJ 08857
 
and
 
R. L. Drake Holdings, L.L.C. One Jake Brown Road
Old Bridge, NJ 08857
 
Lender:
Santander Bank, N.A. (f/k/a Sovereign Bank, N.A.) MAIL CODE PA1-106-RM1
3 Terry Drive
Newtown, PA 18940
 
Creditor:
Robert J. Pallé and Carol Pallé, jointly
21 Desai Court
Freehold, NJ 07728

THIS SUBORDINATION AGREEMENT dated February 11th, 2016, is made and executed
among Blonder Tongue Laboratories, Inc., One Jake Brown Road, Old Bridge, NJ
08857 (the “Company”) and R. L. Drake Holdings, L.L.C., One Jake Brown Road, Old
Bridge, NJ 08857 (“Drake”; and together with the Company, collectively, jointly
and severally, “Borrower”); Robert J. Pallé, and Carol Pallé, jointly, 21 Desai
Court, Freehold NJ 07728 (“Creditor”); and Santander Bank, N.A. (f/k/a Sovereign
Bank, N.A.), MAIL CODE PA1-106-RM1, 3 Terry Drive, Newtown, PA 18940 (“Lender”).
 
1.           REQUESTED FINANCIAL ACCOMMODATIONS.  Creditor and Borrower each
want Lender to provide financial accommodations to Borrower in the form of (A)
new credit or loan advances, (B) an extension of time to pay or other
compromises regarding all or part of Borrower’s present indebtedness to Lender,
or (C) other benefits to Borrower.  Borrower and Creditor each represent and
acknowledge to Lender that Creditor will benefit as a result of these financial
accommodations from Lender to Borrower, and Creditor acknowledges receipt of
valuable consideration for entering into this Agreement. Based on the
representations and acknowledgments contained in this Agreement, Borrower and
Creditor agree with Lender as follows:
 
2.           SUBORDINATED INDEBTEDNESS.  The words “Subordinated Indebtedness”
as used in this Agreement mean all present and future indebtedness, obligations,
liabilities, claims, rights, and demands of any kind for borrowed money, which
may be now or hereafter owing from Borrower to Creditor, including, without
limitation, under and pursuant to that certain Senior Subordinated Convertible
Loan and Security Agreement, dated on or about the date hereof (the “Creditor
Loan Agreement”), pursuant to which Creditor may make loans and advances to
Borrower, all as more fully contemplated thereby.  The term “Subordinated
Indebtedness” is used in its broadest sense and includes without limitation all
principal, all interest, all costs, reasonable attorneys’ fees, all sums paid
for the purpose of protecting the rights of a holder of security, all contingent
obligations of Borrower (such as a guaranty), and all other obligations, secured
or unsecured, of any nature whatsoever; provided, however that “Subordinated
Indebtedness” does not and is not intended to include any amount owing from time
to time to Creditor in Creditor’s capacity as an employee officer, director or
stockholder of Borrower.
 
3.           SUPERIOR INDEBTEDNESS.  The words “Superior Indebtedness” as used
in this Agreement mean and include all present and future indebtedness,
obligations, liabilities, claims, rights, and demands of any kind which may be
now or hereafter owing from Borrower to Lender.  The term “Superior
Indebtedness” is used in its broadest sense and includes without limitation all
principal, all interest, all costs, reasonable attorneys’ fees, all sums paid
for the purpose of protecting Lender’s rights in security (such as paying for
insurance on collateral if the owner fails to do so), all contingent obligations
of Borrower (such as a guaranty), all obligations arising by reason of
Borrower’s accounts with Lender (such as an overdraft on a checking account),
and all other obligations of Borrower to Lender, secured or unsecured, of any
nature whatsoever.
 
 

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4.           SUBORDINATION.  All Subordinated Indebtedness of Borrower to
Creditor is and shall be subordinated in all respects to all Superior
Indebtedness of Borrower to Lender.  Creditor holds or will hold one or more
Security Interests, whether now existing or hereafter acquired, in Borrower’s
real property and/or personal property, as contemplated by the Creditor Loan
Agreement; provided, however, that Creditor also subordinates all such
Creditor’s Security Interests to all Security Interests held by Lender, whether
now existing or hereafter acquired; provided, however, that notwithstanding the
foregoing, Lender acknowledges and agrees that Creditor’s Security Interests in
equipment hereafter acquired by Borrower in connection with a permitted
acquisition, which will be identified with specificity (‘Specified Equipment”),
the purchase of which is financed with advances by Creditor to Borrower of
Subordinated Indebtedness, will be senior to the Security Interests in favor of
Lender, in such Specified Equipment and the proceeds thereof.
 
5.           PAYMENTS TO CREDITOR.  Borrower will not make and Creditor will not
accept, at any time while any Superior Indebtedness is owing to Lender, (A) any
payment upon any Subordinated Indebtedness, (B) any advance, transfer, or
assignment of assets to Creditor in any form whatsoever that would reduce at any
time or in any way the amount of Subordinated Indebtedness (except with respect
to the Specified Equipment, as contemplated by section 4 above), or (C) any
transfer of any assets as security for the Subordinated Indebtedness (other than
as contemplated by the Creditor Loan Agreement and consented to herein), except
upon Lender’s prior written consent.
 
In the event of any distribution, division, or application, whether partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of Borrower’s assets, or the proceeds of Borrower’s assets, in whatever
form, to creditors of Borrower or upon any indebtedness of Borrower, whether by
reason of the liquidation, dissolution or other winding-up of Borrower, or by
reason of any execution sale, receivership, insolvency, or bankruptcy
proceeding, assignment for the benefit of creditors, proceedings for
reorganization, or readjustment of Borrower or Borrower’s properties, then and
in such event other than with respect to the proceeds derived from the sale or
other disposition of the Specified Equipment, (A) the Superior Indebtedness
shall be paid in full before any payment is made upon the Subordinated
Indebtedness, and (B) all payments and distributions, of any kind or character
and whether in cash, property, or securities, which shall be payable or
deliverable upon or in respect of the Subordinated Indebtedness shall be paid or
delivered directly to Lender for application in payment of the amounts then due
on the Superior Indebtedness until the Superior Indebtedness shall have been
paid in full.  Nothing contained in this Agreement will limit or impair
Creditor’s exercise of its rights under the Creditor Loan Agreement to convert
all or any portion of the Subordinated Indebtedness into capital stock of the
Company, as contemplated by the Creditor Loan Agreement.
 
In order that Lender may establish its right to prove claims and recover for its
own account dividends based on the Subordinated Indebtedness, Creditor does
hereby assign all its right, title, and interest in such claims to Lender,
subject to Creditor’s rights in the proceeds of the Specified
Equipment.  Creditor further agrees to supply such information and evidence,
provide access to and copies of such of Creditor’s records as may pertain to the
Subordinated Indebtedness, and execute such instruments as may be required by
Lender to enable Lender to enforce all such claims and collect all dividends,
payments, or other disbursements which may be made on account of the
Subordinated Indebtedness.  For such purposes, Creditor hereby irrevocably
authorizes Lender in its discretion to make and present for or on behalf of
Creditor such proofs of claims on account of the Subordinated Indebtedness as
Lender may deem expedient and proper and to vote such claims in any such
proceeding and to receive and collect any and all dividends, payments, or other
disbursements made thereon in whatever form the same may be paid or issued and
to apply the same on account of the Superior Indebtedness, other than the
proceeds of the Specified Equipment.
 
Should any payment, distribution, security, or proceeds thereof be received by
Creditor at any time on the Subordinated Indebtedness contrary to the terms of
this Agreement, Creditor promptly will deliver the same to Lender in precisely
the form received (except for the endorsement or assignment of Creditor if
necessary), for application on or to secure the Superior Indebtedness, whether
it is due or not due, and until so delivered the same shall be held in trust by
Creditor as property of Lender.  In the event Creditor fails to make any such
endorsement or assignment, Lender, or any of its officers on behalf of Lender,
is hereby irrevocably authorized by Creditor to make the same.
 
6.           CREDITOR’S NOTES.  Creditor agrees to deliver to Lender, at
Lender’s request, all notes of Borrower to Creditor or other evidence of the
Subordinated Indebtedness, now held or hereafter acquired by Creditor, while
this Agreement remains in effect.  At Lender’s request, Borrower will also
execute and deliver to Creditor a promissory note evidencing any book amount or
claim now or hereafter owed by Borrower to Creditor, which note also shall be
delivered by Creditor to Lender.  Creditor agrees not to sell, assign, pledge or
otherwise transfer any of such notes except subject to all of the terms and
conditions of this Agreement. Notwithstanding the foregoing, in the event that,
pursuant to a request by Lender, Creditor supplies to Lender original loan
documents memorializing Creditor’s loan to Borrower, the provision of such
original loan documents to Lender shall not impair any of Creditor’s rights to
enforce any of the provisions in the loan documents or any of the Creditor’s
rights generally.
 
 

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7.           CREDITOR’S REPRESENTATIONS AND WARRANTIES.  Creditor represents and
warrants to Lender that: (A) no representations or agreements of any kind have
been made to Creditor which would limit or qualify in any way the terms of this
Agreement; (B) this Agreement is executed at Borrower’s request and not at the
request of Lender; (C) Lender has made no representation to Creditor as to the
creditworthiness of Borrower; and (D) Creditor has established adequate means of
obtaining from Borrower on a continuing basis information regarding Borrower’s
financial condition.  Creditor agrees to keep adequately informed from such
means of any facts, events, or circumstances which might in any way affect
Creditor’s risks under this Agreement, and Creditor further agrees that Lender
shall have no obligation to disclose to Creditor information or material
acquired by Lender in the course of its relationship with Borrower.
 
8.           CREDITOR’S WAIVERS.  Creditor waives any right to require Lender:
(A) to make, extend, renew, or modify any loan to Borrower or to grant any other
financial accommodations to Borrower whatsoever; (B) to make any presentment,
protest, demand, or notice of any kind, including notice of any nonpayment of
the Superior Indebtedness or of any nonpayment related to any Security
Interests, or notice of any action or nonaction on the part of Borrower, Lender,
any surety, endorser, or other guarantor in connection with the Superior
Indebtedness, or in connection with the creation of new or additional Superior
Indebtedness; (C) to resort for payment or to proceed directly or at once
against any person, including Borrower; (D) to proceed directly against or
exhaust any Security Interests held by Lender from Borrower, any other
guarantor, or any other person; (E) to give notice of the terms, time, and place
of any public or private sale of personal property security held by Lender from
Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to
commit any act or omission of any kind, at any time, with respect to any matter
whatsoever.
 
9.           LENDER’S RIGHTS.  Lender may take or omit any and all actions with
respect to the Superior Indebtedness or any Security Interests for the Superior
Indebtedness without affecting whatsoever any of Lender’s rights under this
Agreement.  In particular, without limitation, Lender may, without notice of any
kind to Creditor, (A) make one or more additional secured or unsecured loans to
Borrower; (B) repeatedly alter, compromise, renew, extend, accelerate, or
otherwise change the time for payment or other terms of the Superior
Indebtedness or any part thereof, including increases and decreases of the rate
of interest on the Superior Indebtedness; extensions may be repeated and may be
for longer than the original loan term; (C) take and hold Security Interests for
the payment of the Superior Indebtedness, and exchange, enforce, waive, and
release any such Security Interests, with or without the substitution of new
collateral; (D) release, substitute, agree not to sue, or deal with any one or
more of Borrower’s sureties, endorsers, or guarantors on any terms or manner
Lender chooses; (E) determine how, when and what application of payments and
credits, shall be made on the Superior Indebtedness; (F) apply such security and
direct the order or manner of sale thereof, as Lender in its discretion may
determine; and (G) assign this Agreement in whole or in part.
 
10.           DEFAULT BY BORROWER.  If Borrower becomes insolvent or bankrupt,
this Agreement shall remain in full force and effect.  Any default by Borrower
under the terms of the Subordinated Indebtedness also shall constitute an event
of default under the terms of the Superior Indebtedness in favor of Lender.
 
11.           DURATION AND TERMINATION.  This Agreement will take effect when
received by Lender, without the necessity of any acceptance by Lender, in
writing or otherwise, and will remain in full force and effect until Creditor
shall notify Lender in writing at the address shown above to the contrary.  Any
such notice shall not affect the Superior Indebtedness owed Lender by Borrower
at the time of such notice, nor shall such notice affect Superior Indebtedness
thereafter granted in compliance with a commitment made by Lender to Borrower
prior to receipt of such notice, nor shall such notice affect any renewals of or
substitutions for any of the foregoing.  Such notice shall affect only
indebtedness of Borrower to Lender arising after receipt of such notice and not
arising from financial assistance granted by Lender to Borrower in compliance
with Lender’s obligations under a commitment. Any notes lodged with Lender
pursuant to the section titled “Creditor’s Notes” above need not be returned
until this Agreement has no further force or effect.
 
12.           MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions
are a part of this Agreement:
 
 

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Amendments.  This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement.  No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.
 
Attorneys’ Fees; Expenses.  Creditor agrees to pay upon demand all of Lender’s
costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s
legal expenses, incurred in connection with the enforcement of this
Agreement.  Lender may hire or pay someone else to help enforce this Agreement,
and Creditor shall pay the costs and expenses of such enforcement.  Costs and
expenses include Lender’s reasonable attorneys’ fees and legal expenses whether
or not there is a lawsuit, including reasonable attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services.  Creditor also shall pay all court costs and such
additional fees as may be directed by the court.
 
Authority.  The person who signs this Agreement as or on behalf of Creditor
represents and warrants that he or she has authority to execute this Agreement
and to subordinate the Subordinated Indebtedness and the Creditor’s security
interests in Creditor’s property, if any.
 
Caption Headings.  Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
 
Governing Law.  This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
New Jersey without regard to its conflicts of law provisions.  This Agreement
has been accepted by Lender in the State of New Jersey.
 
Interpretation.  In all cases where there is more than one Creditor, then all
words used in this Agreement in the singular shall be deemed to have been used
in the plural where the context and construction so require; and where there is
more than one Creditor named in this Agreement or when this Agreement is
executed by more than one , the words “Creditor” shall mean all and any one or
more of them.  Reference to the phrase “Creditor” includes the heirs,
successors, assigns, and transferees of each of them.
 
Successors and Assigns.  This Agreement shall be understood to be for the
benefit of Lender and Creditor and for such other person or persons as may from
time to time become or be the holder or owner of any of the Superior
Indebtedness or any interest therein, and this Agreement shall be transferable
to the same extent and with the same force and effect as any such Superior
Indebtedness may be transferable.
 
No Waiver by Lender.  Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender.  No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right.  A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement.  No prior waiver by Lender, nor any course of dealing between
Lender and Creditor, shall constitute a waiver of any of Lender’s rights or of
any of Creditor’s obligations as to any future transactions.  Whenever the
consent of Lender is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
 
13.          DEFINITIONS.  The following capitalized words and terms shall have
the following meanings when used in this Agreement.  Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America.  Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the
context may require.  Words and terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial Code:
 
Agreement.  The word “Agreement” means this Subordination Agreement, as this
Subordination Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Subordination Agreement from
time to time.
 
 

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Borrower.  The word “Borrower” collectively means Blonder Tongue Laboratories,
Inc. and R. L. Drake Holdings, L.L.C. and includes all co-signers and co-makers
signing the Note and all their successors and assigns.
 
Creditor.  The word “Creditor” means Robert J. Pallé and/or Carol Pallé, jointly
and their successors and assigns..
 
Lender.  The word “Lender” means Santander Bank, N.A. (f/k/a Sovereign Bank,
N.A.), its successors and assigns.
 
Note.  The word “Note” collectively means (a) the Term Note dated August 6, 2008
and executed by Blonder Tongue Laboratories, Inc. in the principal amount of
$4,000,000.00, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement and (b) the Revolving Credit Note dated August 6, 2008 and executed by
Blonder Tongue Laboratories, Inc. in the principal amount of $4,000,000.00,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
 
Related Documents.  The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements,
guaranties,  security  agreements,  mortgages,  deeds of  trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the Superior
Indebtedness.
 
Security Interest.  The words “Security Interest” mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.
 
Subordinated Indebtedness.  The words “Subordinated Indebtedness” mean the
indebtedness described in the section of this Agreement titled “Subordinated
Indebtedness”.
 
Superior Indebtedness.  The words “Superior Indebtedness” mean the indebtedness
described in the section of this Agreement titled “Superior Indebtedness”.
 
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IN WITNESS WHEREOF THE PARTIES, INTENDING TO BE LEGALLY BOUND, HAVE EXECUTED
THIS SUBORDINAITON AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN.
 
BORROWER:
 
BLONDER TONGUE LABORATORIES, INC.
 
 
By:                                                            

 
Eric Skolnik, Chief Financial Officer

 
R. L. DRAKE HOLDINGS, L.L.C.
 
 
By:                                                            

 
Eric Skolnik, Chief Financial Officer

 
CREDITOR:
 

 
                                                                   

 
Robert J. Pallé, Individually

 

 
                                                            

 
Carol Pallé, Individually

 
LENDER:
 
SANTANDER BANK, N.A. f/k/a/ Sovereign Bank, N.A.
 
 
By:                                                         

 
John Giangrossi, Vice President