Exhibit 10.2

 

InterCreditor and Debt Subordination Agreement

 

THIS INTERCREDITOR AND DEBT SUBORDINATION AGREEMENT (this "Subordination
Agreement"), dated March 2, 2018, between STANLEY FURNITURE COMPANY, INC., a
Delaware corporation ("Junior Creditor"), having an address of 2115 E. 7th
Street, Suite 101, Charlotte, North Carolina 28204, and NORTH MILL CAPITAL LLC,
a Delaware limited liability company ("NMC") having an office at 821 Alexander
Road, Suite 130, Princeton, New Jersey 08540.

 

RECITALS

 

WHEREAS, pursuant to an Asset Purchase Agreement, dated as of November 20, 2017
(as amended from time to time, the “Purchase Agreement”), between Junior
Creditor, as seller, and Churchill Downs LLC, a Delaware limited liability
company (the “Borrower”), as buyer, Junior Creditor has sold to the Borrower
substantially all of Junior Creditor’s assets and properties, including, without
limitation, all of the outstanding membership interests of Stanley Furniture
Company 2.0, LLC (“Stanley Furniture 2.0”), a Virginia limited liability
company;

 

WHEREAS, as a portion of the consideration paid by the Borrower to Junior
Creditor for Junior Creditor’s assets and properties sold to Junior Creditor
pursuant to the Purchase Agreement, the Borrower has executed and delivered to
Junior Creditor a Subordinated Secured Promissory Note, dated of even date
herewith (the “Junior Note”), in the original principal amount of $7,420,824,
subject to certain adjustments to the principal amount owing thereunder as more
particularly set forth in the Purchase Agreement;

 

WHEREAS, payment of the Junior Note and the other Junior Indebtedness (as
defined below) is unconditionally guaranteed by Churchill Downs Intermediate
Holdings LLC, a Delaware limited liability company (the “Parent”), the owner of
all of the issued and outstanding stock of the Borrower and in turn a wholly
owned subsidiary of Churchill Downs Holdings Ltd, a corporation formed under the
laws of the British Virgin Islands, and Stanley Furniture 2.0, and is secured by
liens and security interests granted by the Borrower, the Parent and Stanley
Furniture 2.0 (individually and collectively, the “Debtor”) in substantially all
of their respective assets and properties, including, without limitation, all of
Debtor’s accounts, inventory, documents, instruments, chattel paper, general
intangibles, equipment and all proceeds thereof;

 

WHEREAS, NMC has entered into a certain Loan and Security Agreement, dated
January 18, 2018 (as amended, restated or otherwise modified from time to time,
the “Loan Agreement”) with the Borrower under which NMC may make revolving loans
and advances or other financial accommodations to the Borrower against, among
other things, the accounts and inventory of the Borrower, to be unconditionally
guaranteed by the Parent and Stanley Furniture 2.0, and NMC is to be granted a
first priority senior and superior security interest in and lien on all of
Debtor’s assets and properties; and

 

WHEREAS, NMC is unwilling to enter into the Loan Agreement with the Borrower and
to make available the revolving credit facility thereunder to the Borrower
unless (a) Junior Creditor agrees that (i) any interest of any kind Junior
Creditor has in any of Debtor’s assets and properties shall be junior and
subordinate to the security interests and liens to be granted to NMC and (ii)
the indebtedness of Debtor to Junior Creditor under or with respect to the
Junior Note and the other Junior Indebtedness is subordinate to the indebtedness
of Debtor to NMC, and (b) Junior Creditor and NMC have entered into this
Subordination Agreement so as to set forth said priorities of their respective
liens on assets and properties of Debtor and the indebtedness of Debtor to each
of Junior Creditor and NMC.

 

 

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NOW THEREFORE, Junior Creditor and Lender agree as follows:

 

1.     Definitions. All capitalized terms used in this Subordination Agreement
without definition shall have the meanings ascribed to such terms in the Loan
Agreement. In addition to the defined terms set forth above or in the Loan
Agreement or as otherwise provided for herein: (A) each of Junior Creditor and
NMC is sometimes referred to as a "Lender" and collectively the "Lenders"; (B)
"Obligations" means the present and future liabilities of Debtor to each Lender,
including, without limitation, all principal, interest, fees and expenses,
whether incurred or accruing prior to or after a bankruptcy or similar
insolvency proceeding of Debtor; (C) "Security Agreement" means and collectively
refers to the loan and security agreement, security agreement, notes,
instruments and all other documents executed or delivered by Debtor in favor of
each Lender; (D) "Enforcement Action" means taking any action, judicial or
otherwise, to collect payment on any Obligations or pursuing any other remedy
with respect to the Obligations, including commencing or joining with any other
junior creditor in commencing any proceeding under any bankruptcy or similar
insolvency proceeding, further including, without limitation, enforcement of or
foreclosure of any lien on any Collateral; (E) "Senior Indebtedness" means and
include all present and future principal of and interest (including, without
limitation, any post-petition interest) on all Obligations owing to NMC
evidenced by or arising under or related to the Loan Agreement or any of the
other Loan Documents, accruing whether or not granted or permitted in any
bankruptcy or similar insolvency proceeding), and all fees, costs and expenses,
including attorneys' fees, on all Obligations of Debtor to NMC evidenced by or
arising under or related to the Loan Agreement or any of the other Loan
Documents, whether direct or indirect, absolute or contingent, joint, several or
independent, now or hereafter existing, due or to become due to, or held or to
be held by NMC, whether created directly or acquired by assignment or otherwise;
(F) "Junior Indebtedness" means and includes the principal of and interest on
the Junior Note and all other present and future principal of and interest and
all fees, costs and expenses, including attorneys' fees, on all Obligations of
Debtor to Junior Creditor evidenced by or arising under or related to the Junior
Note or any of the other Purchase Documents, whether direct or indirect,
absolute or contingent, joint, several or independent, now or hereafter
existing, due or to become due, or held or to be held by Junior Creditor whether
created directly or acquired by assignment or otherwise; (G) “Collateral” means
all of the assets and properties of Debtor in which any Lender has or claims a
security interest or lien pursuant to its Security Agreement with Debtor; (H)
“Availability” means, at any date of the determination thereof, the amount, if
positive, by which the lesser of the Advance Limit or the Borrowing Base, less
reserves, at such date exceeds the aggregate amount of Advances then
outstanding; and (I) “Excess Cash Flow” shall have the meaning ascribed to such
term in the Junior Note.

 

2.     Representations. Junior Creditor represents that:

 

(A)     As of the date hereof the total principal amount of the Junior
Indebtedness is $7,420,824 which is evidenced by the Junior Note.

 

(B)     Junior Creditor is the unconditional owner of the Junior Indebtedness,
free and clear of all liens, claims and encumbrances, and the Junior
Indebtedness has not been subordinated in favor of any other party.

 

(C)     Junior Creditor holds no security for the Junior Indebtedness, or any
guarantees of any third parties of such Junior Indebtedness, except as disclosed
on Exhibit A annexed hereto.

 

(D)     This Subordination Agreement constitutes the valid and binding
obligation of Junior Creditor and is enforceable against Junior Creditor in
accordance with its terms.

 

3.     Subordination.

 

(A)     Upon the terms and subject to the provisions of this Subordination
Agreement, Junior Creditor hereby subordinates the payment of the Junior
Indebtedness to payment in full of the Senior Indebtedness.

 

(B)     Upon any distribution of the assets or readjustment of indebtedness of
Debtor, whether by reason of liquidation, dissolution, bankruptcy,
reorganization, receivership or any other action or proceeding involving the
readjustment of all or any of the Junior Indebtedness, or the application of
assets of Debtor to the payment or liquidation thereof, NMC shall be entitled to
receive payment in full of the Senior Indebtedness prior to the payment of all
or any part of the Junior Indebtedness hereby subordinated.

 

(C)     In order to enable NMC to enforce its rights hereunder in any action or
proceeding referred to in (B) above, NMC is hereby irrevocably authorized and
empowered in NMC's discretion to make and present for, and on behalf of Junior
Creditor, such proofs or claims against Debtor on account of the Junior
Indebtedness as NMC may deem expedient or proper, and to vote such proofs or
claims in any such proceedings, and to receive and collect any and all dividends
or other payments or disbursements made thereon in whatever form the same may be
paid or issued, and to apply same on account of the Senior Indebtedness.
Further, in order to enable NMC to enforce its rights hereunder in any action or
proceeding referred to in (B) above, Junior Creditor hereby appoints NMC, or its
designee, attorney to take the above mentioned with full power of substitution
in the premises. Junior Creditor further agrees to execute and deliver any
further documents or other instruments which may be necessary or expedient to
enable NMC to collect any and all dividends or other payments or disbursements
which may be made at any time on account of all or any of the Junior
Indebtedness (except for the payments permitted by Section 4(A) below) or
otherwise enforce its rights under this Subordination Agreement.

 

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(D)     Junior Creditor agrees that Junior Creditor will make proper notations
on the Junior Note and in Junior Creditor's books and records indicating that
the Junior Indebtedness is subject to this Subordination Agreement. The Junior
Note and all other evidences of indebtedness accepted by the Junior Creditor
from Debtor shall contain a specific statement that the indebtedness thereby
evidenced is subject to the provisions of this Subordination Agreement.

 

(E)     Junior Creditor hereby waives any and all notice of the creation,
renewal, modification or extension of the Senior Indebtedness and acknowledges
that NMC shall be deemed to have relied on this Subordination Agreement when
extending any credit, loaning any monies or providing any financial
accommodation to Debtor or otherwise acting with respect to the occurrence of
the Senior Indebtedness, now or at any time in the future, and Junior Creditor
expressly waives proof of reliance by NMC upon this Subordination Agreement and
waives all notice of any actions that NMC may take with respect to the Senior
Indebtedness, or the acceptance by NMC of this Subordination Agreement or the
extension of credit by NMC to Debtor.

 

4.     Payments and Other Acts With Regard to Junior Indebtedness. Until
satisfaction in full of the Senior Indebtedness and termination of this
Subordination Agreement in accordance with its terms, Junior Creditor agrees
that:

 

(A)     Junior Creditor will not ask, demand, sue for, take or receive from
Debtor any payment or distribution on account of the Junior Indebtedness
(whether in cash, property or securities), including, but not limited to, by
setoff or any other manner or accelerate the maturity thereof; provided,
however, if and only to the extent that, immediately before and after giving pro
forma effect to any payment on the Junior Indebtedness, (i) no Event of Default
shall exist or would result from the making of such payment, (ii) Availability
shall be at least One Million Dollalrs ($1,000,000), (iii) all taxes are
current, and (iv) the combined amount of all payables and other obligations of
Debtor that are then delinquent or are outside their payment terms are no more
than Twenty-Five Thousand Dollars ($25,000), Debtor may pay and Junior Creditor
may receive the following payments (but no other payments) on the Junior
Indebtedness on the due dates thereof:

 

(1)     monthly payments of interest on the Junior Indebtedness at a per annum
rate not greater than six percent (6.0%) per annum (computed on the basis of a
365 or 366 day year, as applicable, and the number of days elapsed); provided,
however, that any interest payable on the Junior Indebtedness at the default
rate of interest may be accrued, capitalized and added to the principal balance
of the Junior Indebtedness to the extent permitted by the terms of the Junior
Note and applicable law;

 

(2)     no earlier than twenty (20) days after delivery to the Lenders of the
Borrower’s audited financial statements for each fiscal year required to be
delivered to each Lender pursuant to the respective Security Agreement with each
Lender, commencing with the fiscal year ending December 31, 2018, a payment of
principal in the amount of the Borrower’s Excess Cash Flow for such fiscal year;
and

 

(3)     a payment of principal in the amount of the unpaid principal balance of
the Junior Note, together with any other amounts owing on the Junior
Indebtedness, on the fifth (5th) anniversary date of the Junior Note.

 

(B)     Junior Creditor will not obtain, ask for or require any additional
security for or any additional guaranty of the Junior Indebtedness (other than
as set forth on Exhibit A annexed hereto); and

 

(C)     If, notwithstanding any terms of this Subordination Agreement to the
contrary, Junior Creditor receives any payment or distribution on account of the
Junior Indebtedness not permitted to be received under (A) above, and/or Junior
Creditor receives any payment or proceeds on any accounts of Debtor or other
Collateral, Junior Creditor will hold same in trust for NMC and immediately
deliver same in the form received, except for the addition of any endorsement or
assignment necessary to effect a transfer, to NMC for application on account of
the Senior Indebtedness. If Junior Creditor fails to endorse any instrument for
the payment of money payable to it or its order, which has been turned over to
NMC, NMC is hereby irrevocably constituted and appointed attorney-in-fact for
the Junior Creditor with full power to make any such endorsement, and with full
power of substitution. All actions taken by such attorney-in-fact as permitted
by the terms of this Subordination Agreement or applicable law are hereby
ratified and approved.

 

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(D)     After all of the Senior Indebtedness has been paid in full and until all
of the Junior Indebtedness has been paid in full, Junior Creditor shall be
subrogated to the rights of NMC to receive payments and distributions of assets
with respect to the Senior Indebtedness, to the extent that distributions
otherwise payable to Junior Creditor have been applied to the payment of Senior
Indebtedness in accordance with the provisions of this Subordination Agreement. 
As between Debtor and Junior Creditor, a distribution applied to the payment of
Senior Indebtedness in accordance with the provisions of this Subordination
Agreement which would otherwise have been made to Junior Creditor shall not be
deemed a payment by Debtor on the Junior Indebtedness, it being understood that
the subordination and other intercreditor provisions of this Subordination
Agreement are intended solely for the purpose of defining the relative rights of
Junior Creditor, on the one hand, and NMC, on the other hand, and nothing
contained in this Subordination Agreement shall impair the obligations of
Debtor, which are absolute and unconditional, to pay to Junior Creditor the
Junior Indebtedness as and when the same shall become due and payable in
accordance with its terms, except as such obligation is modified by the rights
confirmed hereunder in favor of NMC, or affect the relative rights of Junior
Creditor and the creditors of Debtor other than NMC.

 

5.     Priorities. Notwithstanding the terms of any Security Agreement
heretofore or hereafter entered into between either Lender and Debtor, or the
date of the filing of any financing statements heretofore or hereafter filed by
either Lender against Debtor, or any other action by either Lender with regard
to perfection of a security interest or lien, Junior Creditor agrees that any
security interest, lien, claim or right now or hereafter asserted by Junior
Creditor with respect to the Collateral, shall be subject, junior and
subordinate to any security interest, lien, claim or right now or hereafter
asserted by NMC with respect thereto.

 

6.     Exercise of Rights Under Security Agreements, Notes and Other Agreements.

 

(A)     Junior Creditor will not take any action which interferes with the
exercise of NMC's rights and remedies with respect to the Senior Indebtedness,
or interfere with NMC's exercise of NMC's superior security interest in, or lien
on, the Collateral, and specifically and without limitation, Junior Creditor
will not, without the prior written consent of NMC, notify any account debtors
of Debtor of Junior Creditor's security interest in the accounts of Debtor and
will not notify any such account debtor to remit any payments on accounts to
Junior Creditor.

 

(B)     If an event of default exists under the Obligations of Debtor to Junior
Creditor that permits Junior Creditor to exercise any of its rights or remedies
to collect the Junior Indebtedness, Junior Creditor will not take any
Enforcement Action until the date the Obligations of Debtor to NMC are
indefeasibly paid and satisfied in full.; provided that following the
acceleration of the Senior Indebtedness, Junior Creditor may accelerate the
Junior Indebtedness. Any Enforcement Action by Junior Creditor shall be subject
to the terms of this Subordination Agreement.

 

(C)    Each Lender waives the right to require a marshalling of assets.

 

(D)     Each Lender agrees to endeavor to promptly notify the other Lender if
such Lender declares an event of default under the Obligations of Debtor to such
Lender, however the failure of any Lender to so notify the other Lender shall
not impose any liability on the Lender failing to give such notice or in any
manner restrict or limit the rights and remedies of such Lender.

 

(E)     Junior Creditor hereby agrees that, until the Obligations of Debtor to
NMC are indefeasibly paid and satisfied in full, NMC may dispose of, and
exercise any other rights with respect to, any or all of the Collateral, free of
the lien of Junior Creditor (except to the extent of Junior Creditor’s right to
any surplus over the amount necessary to pay the Obligations owing to NMC as
provided in the following proviso clause), provided that the proceeds thereof,
net of disposition costs and expenses, are applied to the payment of the Senior
Indebtedness and Junior Creditor retains any rights Junior Creditor may have as
a junior secured creditor with respect to the surplus (if any) over the amount
necessary to pay the Obligations owing to NMC in full in cash arising from any
such disposition or enforcement. Upon any disposition of any of the Collateral
by NMC, or by Debtor with the consent of NMC, any and all liens of Junior
Creditor in such Collateral (except to the extent of Junior Creditor’s right to
any surplus over the amount necessary to pay the Obligations owing to NMC as
provided in the following proviso clause), shall be deemed to be released
without further action on the part of Junior Creditor provided the proceeds of
such disposition, net of disposition costs and expenses, are applied to the
payment of the Senior Indebtedness, and Junior Creditor retains any rights
Junior Creditor may have as a junior secured creditor with respect to the
surplus (if any) over the amount necessary to pay the Obligations owing to NMC
in full in cash arising from any such disposition or enforcement. Junior
Creditor agrees, if requested, to execute and/or immediately deliver any and all
financing statement amendments and other documents with respect to such releases
which NMC deems necessary in its discretion.

 

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(F)      Each Lender agrees to give to the other Lender notice of default,
termination, demand, acceleration, exercise of remedies and any other notice
which is of a like nature or required to be given under its respective Security
Agreement with Debtor, or by law, in each case concurrently with the giving of
such notice to Debtor; provided, however, that no failure of any Lender to give
such notice to the other Lender shall affect the validity or enforcement of the
subordination and other provisions of this Subordination Agreement or the
relative priorities of the respective liens and security interests of the
Lenders in the Collateral established in Section 5 hereof.

 

(G)     Intercreditor Arrangements in Bankruptcy.

 

(i)     This Subordination Agreement shall remain in full force and effect and
enforceable pursuant to its terms in accordance with Section 510(a) of the
Bankruptcy Code, and all references herein to Debtor shall be deemed to apply to
Debtor as debtor in possession and to any trustee in bankruptcy for the estate
of Debtor.

 

(ii)     Except as otherwise specifically permitted in Section 6(E) or this
Section 6(F), until the Obligations of Debtor to NMC are indefeasibly paid and
satisfied in full, Junior Creditor shall not assert, without the written consent
of NMC, any claim, motion objection, or argument in respect of any of the
Collateral in connection with any insolvency or liquidation proceeding which
could otherwise be asserted or raised in connection with such insolvency or
liquidation proceeding by Junior Creditor as a secured creditor of Debtor,
including, without limitation, any claim, motion, objection or argument seeking
adequate protection or relief from the automatic stay in respect of the
Collateral.

 

(iii)     Without limiting the generality of the foregoing, Junior Creditor
agrees that, if an insolvency or liquidation proceeding occurs, (1) NMC may
consent to the use of cash collateral on such terms and conditions and in such
amounts as NMC, in its sole discretion, may decide without seeking or obtaining
the consent of Junior Creditor as holder of a subordinate interest in the
Collateral; (2) Lender may, upon notice to Junior Creditor, (A) provide
financing to Debtor, or (B) consent to the granting of a priming lien to secure
postpetition financing, in each case pursuant to Section 364 of the Bankruptcy
Code or other applicable law and on such terms and conditions and in such
amounts as NMC, in its sole discretion, may decide without seeking or obtaining
the consent of Junior Creditor as holder of an interest in the Collateral; (3)
Junior Creditor shall not oppose Debtor's use of cash collateral on the basis
that Junior Creditor's interest in the Collateral is impaired by such use or
inadequately protected by such use to the extent such use has been approved by
NMC; (4) Junior Creditor shall not oppose any sale or other disposition of any
assets comprising part of the Collateral free and clear of liens or other claims
of any party, including Junior Creditor, under Section 363 of the Bankruptcy
Code on the basis that Junior Creditor's interest in the Collateral is impaired
by such sale or inadequately protected as a result of such sale if NMC has
consented to such sale or disposition of such assets; and (5) Junior Creditor
shall not vote in favor of, nor sponsor or support any plan of reorganization of
Debtor, that does not propose to pay the Senior Indebtedness in full on the
effective date of such plan or that is not consistent with this Subordination
Agreement, absent NMC's consent to a plan that does not pay in full the Senior
Indebtedness on the effective date of such plan.

 

(iv)     Junior Creditor agrees that it will not initiate, prosecute, encourage,
or assist with any other person or entity to initiate or prosecute any claim,
action or other proceeding (1) challenging the validity or enforceability of
this Subordination Agreement, (2) challenging the validity or enforceability of
NMC's claim, (3) challenging the perfection or enforceability of any liens of
NMC, or (4) asserting any claims, if any, which Debtor may hold with respect to
NMC or any of the Obligations of Debtor to NMC.

 

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(v)     To the extent that NMC receives payments or transfers on the Obligations
of Debtor to NMC or proceeds of the Collateral which are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver of any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations of Debtor to
NMC, or part thereof, intended to be satisfied shall be revived and continued in
full force and effect as if such payments or proceeds had not been received by
NMC.

 

(vi)     Subject to the provisions of this Section 6(F) above, (1) Junior
Creditor shall be entitled to file any necessary responsive or defensive
pleadings in opposition to any motion, claim, adversary proceeding or other
pleading made by any person objecting to or otherwise seeking the disallowance
of the claims of Junior Creditor, including, without limitation, any claims
secured by the Collateral, if any, and (2) Junior Creditor shall be entitled to
file any pleadings, objections, motions or subordination agreements which assert
rights or interests available to unsecured creditors of Debtor arising under
either the Bankruptcy Code or applicable non-bankruptcy law.

 

(vii)     NMC agrees that NMC will not initiate, prosecute, encourage, or assist
with any other person or entity to initiate or prosecute any claim, action or
other proceeding (1) challenging the validity of enforceability of this
Subordination Agreement, (2) challenging the validity or enforceability of
Junior Creditor's claims, (3) challenging the perfection of enforceability of
any liens of Junior Creditor, or (4) asserting any claims, if any, which Debtor
may hold with respect to Junior Creditor or any of the Obligations of Debtor to
Junior Creditor.

 

7.     No Warranties. The Lenders have not made to each other nor do they hereby
or otherwise make to each other any warranties, express or implied, nor do they
assume any liability to the other Lender with respect to: (a) Debtor or any
other obligors under any instruments of guaranty; (b) the enforceability,
validity, value or collectability of the Collateral held by such Lender or any
of the notes, guaranties, security agreements or subordination agreements
evidencing or entered into with respect to any of the Obligations; or (c)
Debtor's title or right to transfer the Collateral (or any portion thereof). A
Lender shall not be liable to the other Lender for any action or failure to act
or any error of judgment, negligence, or mistake or oversight whatsoever on the
part of such Lender or such Lender's agents, officers, employees or attorneys
with respect to any transaction relating to any of the notes or subordination
agreements evidencing or entered into with respect to any of the Obligations or
any security or guaranties therefor, provided such Lender has acted in good
faith and has not been guilty of gross negligence or willful misconduct.

 

8.     Actions by NMC. Without impairing or releasing this Subordination
Agreement, NMC may at any time and from time to time, without the consent of, or
notice to Junior Creditor, upon any terms or conditions and in whole or in part:

 

(A)     Change the manner, place or terms of payment, and/or change or extend
from time to time the time of payment or renew or alter, the Senior Indebtedness
or any security therefor, and this Subordination Agreement shall apply to the
Senior Indebtedness as so changed, extended, renewed or altered;

 

(B)     Sell, exchange, release, surrender, realize upon or otherwise deal with
in any manner and in any order any property by whomsoever at any time pledged,
mortgaged or in which a security interest is given to secure, or howsoever
securing, the Senior Indebtedness;

 

(C)     Exercise or refrain from exercising any rights against Debtor or any
surety, endorser or guarantor or subordinator (including Junior Creditor) (each
an "Obligor") or against security, or otherwise act or refrain from acting;

 

(D)     Settle or compromise the Senior Indebtedness, or any liability of any
Obligor, or dispose of any security therefor, with or without consideration, or
any liability incurred directly or indirectly in respect thereof;

 

(E)     Apply any sum by whomsoever paid or howsoever realized to the Senior
Indebtedness; and

 

(F)     Take or refrain from taking any or all actions against Debtor, any
Obligor, or any of the Collateral, whether similar or dissimilar to the
foregoing.

 

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9.     Assignment and Transfer. Each Lender may, from time to time, without
affecting any of such Lender's rights hereunder, assign or transfer any or all
of the Obligations owing to such Lender or any interest therein, provided that
prompt written notice thereof is given to the other Lender, and the assignment
or transfer is made expressly subject to the terms of this Subordination
Agreement and the assignee or transferee of such Lender agrees in writing to be
bound by the provisions of this Subordination Agreement. Notwithstanding the
foregoing, NMC may assign to the agent of its lending group or lender, as
security for the indebtedness owing by NMC to such agent and lending group or
lender, any or all of the Obligations (or any portion thereof) owing to NMC
subject to the terms and provisions of this Subordination Agreement.

 

10.     Amendment; Waiver. No amendment, modification or waiver of any provision
of this Subordination Agreement, or of a Lender’s rights hereunder, shall be
effective or deemed to be made by a Lender unless the same shall be in writing
and signed by such Lender (and Debtor shall be bound by this Subordination
Agreement as so amended), and any such waiver shall be effective only in the
specific instance and for the specific purpose for which given, and shall in no
way impair the rights of such Lender or the obligations of the other Lender in
any other respect at any other time. No delay on the part of any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by such Lender of any right, power or
remedy preclude any other for further exercise thereof, or the exercise of any
other right, power or remedy.

 

11.     Notices. Notices and communications under this Subordination Agreement
shall be in writing and shall be given by (i) hand-delivery, (ii) first class
mail (postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid); or (iv) facsimile or other electronic transmission, to the addresses
and facsimile numbers listed below the signature of each Lender below. Notice
given by facsimile or other electronic transmission shall be deemed to have been
given and received when sent. Notice by overnight courier shall be deemed to
have been given and received on the date scheduled for delivery. Notice by mail
shall be deemed to have been given and received three (3) calendar days after
the date first deposited in the United States mail. Notice by hand-delivery
shall be deemed to have been given and received upon delivery. A Lender may
change its address and/or facsimile number by giving written notice to the other
Lender as specified herein.

 

12.   Entire Agreement. This Subordination Agreement embodies the entire
agreement and understanding of the parties hereto and supersedes all prior
understandings of the parties hereto relating to the subject matter herein
contained.

 

13.     Captions. Section captions used in this Subordination Agreement are for
convenience only and shall not affect the interpretation of the provisions of
this Subordination Agreement.

 

14.     Counterparts; Effectiveness. This Subordination Agreement may be
executed by the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. This Subordination Agreement shall become effective as of the date
hereof when one or more counterparts has been executed and delivered by each of
the parties hereto.

 

15.     Termination. This Subordination Agreement shall remain in full force and
effect until such time as all of the Obligations owing to NMC are indefeasibly
paid and satisfied in full.

 

16.     Governing Law. This Subordination Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed in such state. All terms used herein which
are not defined herein and are defined in the New Jersey Uniform Commercial Code
in effect from time to time (the "UCC") shall have the meanings therein stated,
unless the context otherwise requires. Except as otherwise provided in this
Subordination Agreement, the rights and priorities of the Lenders shall be
determined in accordance with applicable law.

 

17.     Successors and Assigns; Benefit of Subordination Agreement. This
Subordination Agreement is solely for the benefit of the Lenders and their
respective successors, designees or assigns, as the case may be, and no other
persons, including, without limitation, Debtor, shall have any right, benefit,
priority or interest under, or because of the existence of, this Subordination
Agreement.

 

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18.     Miscellaneous.

 

(A)     All rights, powers and remedies of the Lenders hereunder and under any
agreement between Debtor or any other Obligor and such Lender, now, or at any
time hereafter in force, shall be cumulative and not alternative, and shall be
in addition to all rights, powers and remedies given to Lender by law.

 

(B)     Whenever used herein, the singular shall include the plural, the plural
the singular, and the use of the masculine, feminine or neuter gender shall
include all genders.

 

(C)     The terms "Debtor", "Junior Creditor" and "NMC" as used in this
Subordination Agreement shall include the individuals, firms, corporations or
limited liability companies named herein as Debtor, or Junior Creditor or NMC as
applicable, and (i) any successor, individual or individuals, firms or
corporations to which all or substantially all of the business or assets of any
of them shall have been transferred; (ii) in the case of a partnership, any new
partnership which shall have been created by reason of the admission of any new
partner or partners therein or the dissolution of the then existing partnership
or the death, resignation or withdrawal of a partner; and (ii) in the case of a
corporation or limited liability company, any other corporation or limited
liability company into or with which such corporate or limited liability company
party shall have been merged, consolidated, reorganized or absorbed.

 

19.     Controlling Contract. In the case of any conflict between this
Subordination Agreement and any Security Agreement with either Lender, this
Subordination Agreement shall control.

 

20.     Further Action. Each Lender shall take such further actions as the other
Lender shall reasonably request to effectuate the priorities and other matters
set forth in this Subordination Agreement, including without limitation, in the
case of UCC financing statements filed by Junior Creditor, the filing of UCC
amendment statements giving record notice that the liens and security interests
of Junior Creditor in the Collateral are junior and subordinate to the senior
liens and security interests of NMC. Junior Creditor further agrees the Junior
Indebtedness shall also be subordinate to the indebtedness owing by Debtor to a
third party lender whose loans to Debtor are used to refinance the Senior
Indebtedness, and that Junior Creditor's lien on assets of Debtor shall also be
subordinate to the lien in favor of such future lender, and that Junior Creditor
shall execute and deliver to any such future lender a Subordination Agreement in
the same form as this Subordination Agreement or such other form as the future
working capital lender and Junior Creditor shall reasonably agree to.

 

21.     WAIVER OF TRIAL BY JURY. EACH LENDER WAIVES TRIAL BY JURY IN ANY ACTION
UNDER OR RELATING TO THIS SUBORDINATION AGREEMENT.

 

 

 

[Signatures Begin on the Next Page]

 

 

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IN WITNESS WHEREOF, each Lender has caused this Subordination Agreement to be
duly executed by its authorized officer(s), as applicable, as of the day and
year first above written

 

 

STANLEY FURNITURE COMPANY, INC.

 

 

 

 

 

 

 

 

 

 

By:

s/ Anita W. Wimmer

 

 

Name:

Anita W. Wimmer

 

 

Title:

VP of Finance

 

          Address: 2115 E. 7th Street, Suite 101    

Charlotte, North Carolina 28204

Attn:       Brad Gardner

 Phone:   (252) 355-4610, Ext. 2 (work)

 *************         (mobile)

    Facsimile No.: (252) 321-1527             NORTH MILL CAPITAL LLC            
        By: /s/ Beatriz Hernandez     Name: Beatriz Hernandez     Title: EVP    
        Address:

821 Alexander Road, Suite 130

Princeton, New Jersey 08540

    Attn: Rebecca G. Smith         Senior Vice President         Phone: 
 678-217-5316 (work);         *************(mobile)     Facsimile No.: (609)
919-0067  

 

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ACKNOWLEDGEMENT AND AGREEMENT OF DEBTOR

 

Each of the undersigned, a Debtor referred to in the foregoing Subordination
Agreement, hereby accepts notice of, and consents to the execution and delivery
thereof, and of the terms and provisions thereof, and, in consideration of the
granting or continuing of the Senior Indebtedness, as therein described, agrees
to do and perform any and all acts and things which may be required on such
Debtor's part to enable Junior Creditor under the Subordination Agreement to
perform the obligations of Junior Creditor as therein expressed, and to refrain
from doing any act or thing which would cause or contribute to a violation by
Junior Creditor of the Subordination Agreement or of any of Junior Creditor's
obligations thereunder.

 

Dated: March 2nd, 2018

 

 

CHURCHILL DOWNS LLC

 

 

 

 

 

 

 

 

 

 

By:

/s/ Richard Ledger

 

 

Name:

Richard Ledger

 

 

Title:

Chief Executive Officer

 

         

CHURCHILL DOWNS INTERMEDIATE

HOLDINGS LLC

                    By: /s/ Richard Ledger     Name: Richard Ledger     Title:
Chief Executive Officer                     STANLEY FURNITURE COMPANY 2.0, LLC  
                  By: /s/ Richard Ledger     Name: Richard Ledger     Title:
Chief Executive Officer  

 

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Exhibit A

 

Liens held by Junior Creditor:

 

Liens and Security Interests in substantially all of the assets and properties
of the Borrower, the Parent and Stanley Furniture 2.0 pursuant to the terms of
the Junior Note and the other Purchase Documents.

 

Guarantees held by Junior Creditor:

 

Guarantees of Junior Indebtedness pursuant to those certain guaranty agreements
dated of even date herewith executed by the following in favor of Junior
Creditor:

 

Parent

Stanley Furniture 2.0 

 

 

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