Exhibit
10.54
 
 THIS AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT AMENDS AND RESTATES IN ITS ENTIRETY THAT CERTAIN
LOAN AND SECURITY AGREEMENT DATED DECEMBER 27, 2005, AS AMENDED ENTERED INTO BY
DVL, INC., AS BORROWER AND PEMMIL FUNDING LLC, AS LENDER
  AMENDED AND
RESTATED
 LOAN AND SECURITY
AGREEMENT
 
 This
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of December 31,
2009, by and between DVL, INC., a Delaware corporation having its principal
place of businessat 70 East 55th
Street, 7th
Floor, New York, New York 10022 (the "Borrower"), and PEMMIL FUNDING LLC, a New
York limited liability company (the “Lender”).
 
 WITNESSETH:
 
 WHEREAS, pursuant to that certain Loan
and Security Agreement, dated December 27, 2005, between Borrower and Lender, as
amended by Amendment No. 1 to Loan and Security Agreement, dated march 15, 2007,
and as further amended by Amendment No. 2 to Loan and Security Agreement, dated
November 10, 2008 (as amended, the “Original Loan Agreement”), Lender made a
loan (the “Original Loan”) to Borrower in the original principal amount of
$2,500,000;
 
 WHEREAS, the Borrower has to date made
principal payments on the Original Loan resulting in the outstanding principal
balance of the Original Loan being reduced to $1,128,563.21;
 
 WHEREAS, the Original Loan matures on
December 31, 2009;
 
 WHEREAS, the Original Loan
was secured by a first priority lien on the Shares which lien was
subsequently subordinated to a loan in favor of Conestoga Bank, as
successor-in-interest to First Penn Bank (the “Senior Lender”) in the amount
$1,500,000 pursuant to the terms of that certain Intercreditor Agreement, dated
June 5, 2006, between Senior Lender and the Lender;
 
 WHEREAS,
the Borrower has requested that the Lender extend the maturity date of the loan
to December 31, 2011 and in connection therewith the Lender has agreed to do so
subject to the Lender obtaining additional collateral for the Loan and subject
to the terms and conditions set forth herein;
 
 NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby amend and restate the Original Loan Agreement in its
entirety and agree as follows:
  
  1.             BACKGROUND
 
 1.1           Defined
Terms  As used in this Agreement, the following terms shall
have the following meanings (all terms defined in this Article I or other
provisions in the singular shall have the same meanings when used in the plural
and vice versa):
 
 "Affiliate" - With respect to a
specified Person, (i) a Person who, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, the
specified Person, (ii) any Person who is an officer, director, partner or
trustee of, or serves in a similar capacity with respect to, the specified
Person or of which the specified Person is an officer, partner or trustee, or
with respect to which the specified Person serves in a similar capacity, (iii)
any Person who, directly or indirectly, is the beneficial owner of 10% or more
of any class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified Person or of which the specified Person has a
substantial beneficial interest and (iv) the spouse, issue, or parent of the
specified Person.
 
 “Asset Servicing Agreement” – That
certain Asset Servicing Agreement dated March 27, 1996, among Borrower,
Professional Services Corporation, K. M. Realty Corporation and NPO Management
LLC, as amended, extended or modified.
 
 “Borrower Subsidiary” – shall mean any
entity wholly-owned, directly or indirectly through one or more entities, by the
Borrower.
  “Business
Day” - Any day on which banking institutions in New York, New York, are open for
the transaction of banking business.
 
 “Capital Transactions” – shall mean a
sale, transfer, exchange or other disposition, refinancing, financing,
condemnation or casualty affecting all or a portion of the Borrower’s or a
Borrower Subsidiary’s assets.
 
 “Change of Control” - shall mean an
acquisition by an individual or legal entity or group (as defined in Section
13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)) of more than
50% of the voting rights or capital stock of the Borrower, other than any
Permitted Holder.
  “Collateral” – shall mean the Pledged
Loans and the Shares.
  “Collateral Assignments” – as defined
in Section 4.1.
  “Corporation” – S2 Holdings, Inc., a
Delaware corporation.
  “Default Rate” – shall mean the
Interest Rate plus 6% per annum, compounded monthly.
  2
  “Governmental Authority” - Any foreign,
federal, state, regional, local, municipal or other government, or any
department, commission, board, bureau, agency, public authority or
instrumentality thereof, or any court or arbitrator.
 
 “Interest Rate” – 12% per annum,
compounded monthly.
 
 “Lease” – shall mean a lease for space
at a Property.
  “Lien” -
Any mortgage, deed of trust, security interest, pledge, hypothecation,
assignment, attachment, deposit arrangement, encumbrance, lien (statutory,
judgment or otherwise), or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction).
 
 “Loan” - as defined in Section
2.1.
 
 “Loan Amount” –
$1,128,563.21
 
 “Loan Documents” – This Agreement, the
Note, the Collateral Assignments and any other documents entered into in
connection herewith and any and all
amendments, modifications, replacements, restatements, and substitutions
thereto..
 
 “Maturity Date”- December 31,
2011
 
 “Net Proceeds” – The excess, if any, of
(i) all cash amounts received by the Borrower or a Borrower Subsidiary in
connection with a Capital Transaction over (ii) the sum of (a) all reasonable
costs and expenses (including the satisfaction of any debt that is the subject
of such Capital Transaction) incurred in connection with such Capital
Transaction and (b) any payments required to be made by Borrower from such
Capital Transaction to the Gross Settlement Fund established in connection with
the disposition of the 1992 class action litigation in which the Borrower was a
defendant.
 
 "Note" -the Second
Amended and Restated Term Note, dated December 31, 2009, from Borrower to Lender
in the original principal amount of $1,128,563.21, together with any and all
amendments, modifications, replacements, restatements, and substitutions
thereto.
 
 "Obligations" - all of the
indebtedness, liabilities and obligations of the Borrower to the Lender, whether
now existing or hereafter arising, whether or not currently contemplated, direct
or indirect, joint or several, certain or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising out of or incurred under this Agreement or the
Note, including, without limitation, the Loans, and including in every case
interest thereon and all other amounts payable in respect thereof pursuant to
this Agreement.
  3
  “Organizational Documents” – With
respect to any Person, to the extent applicable, its certificate of limited
partnership, certificate of formation, certificate of incorporation, limited
partnership agreement, operating agreement, by-laws and all other equity holder
agreements, voting trusts and similar arrangements applicable to the equity
interests of such Person.
 
 “Permitted Holder” means any Person or
group that, as of the date of this Agreement, beneficially owns (as defined in
Section 13(d) of the Exchange Act) greater than 10% of the Company’s common
stock.
 
 “Pledged Loans” – means those certain
loans listed on Exhibit A hereto, together with any substitutions or
replacements therefor.
 
 “Properties” – means the real
properties and improvements located thereon which secure the Pledged
Loans.
 
 “Senior Lender” – as defined in the
Recitals.
 
 “Shares” – means 100
shares of common stock of the Corporation, together with any (i)stock
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits, (ii) option, warrant, or right,
whether as an addition to or in substitution or in exchange for any of the
Shares, or otherwise, and (iii) dividend or distributions payable in cash
or property at such time, if at all, that the entire unpaid balance of principal
of and interest on the Note outstanding has become due and payable in accordance
with Article 5 hereof.
 
 “UCC” – The Uniform Commercial Code of
the State of New York as in effect from time to time.
 
 1.2           Borrower.  Borrower
is a corporation organized under the laws of the State of Delaware.
 
 1.3           Use of Loan
Proceeds.  Borrower represents and warrants that it previously
obtained from Lender for a loan in the amount of TWO MILLION FIVE HUNDRED
THOUSAND AND XX/100 ($2,500,000) (“Loan”), the proceeds of which were used for
the repayment of the Borrower’s existing indebtedness.
 
 1.4           Loan.  Subject
to all of the terms, conditions and provisions of this Agreement, and of the
agreements and instruments referred to herein, the Lender agrees to make a loan
to the Borrower in a principal amount equal to the Loan Amount, and Borrower
agrees to accept and repay the Loan.
 
 1.5           Rules of
Interpretation.
  4
  (a)           A
reference to any document or agreement shall include such document or agreement
as amended, modified or supplemented from time to time in accordance with its
terms and the terms of this Agreement.
  (b)           The
singular includes the plural and the plural includes the singular.
  (c)           A
reference to any law includes any amendment or modification to such
law.
  (d)           A
reference to any Person includes its permitted successors and permitted
assigns.
  (e)           The
words "include", "includes" and "including" are not limiting.
  (f)           The
words "herein", "hereof", "hereunder" and words of like import shall refer to
this Agreement as a whole and not to any particular section or subdivision of
this Agreement.
  (g)           Unless
otherwise expressly indicated, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding," and the
word "through" means "to and including."
  (h)           This
Agreement and the other Loan Documents are the result of negotiation among, and
have been reviewed by counsel to, among others, the Lender and the Borrower and
are the product of discussions and negotiations among all
parties.  Accordingly, this Agreement and the other Loan Documents are
not intended to be construed against the Lender merely on account of the
Lender's involvement in the preparation of such documents.
 
 2.            
LOAN PROVISIONS.
 
 2.1           Amount of Loan. 
Subject to the terms and conditions set forth in this Agreement, on the date
hereof, the Lender agrees to lend to the Borrower an aggregate amount equal to
the Loan Amount.
 
 2.2           Maturity
Date.  The Loan shall mature on the Maturity Date.
 
 2.3           Interest Rate and Payment
Terms.  The Loan shall be payable as to interest and principal
in accordance with the provisions of this Agreement and the
Note.  This Agreement also provides for prepayment
rights.
  5
  2.3.1           Payment and Calculation of
Interest.  All interest shall be: (a) payable in arrears
commencing the first Business Day of the month immediately following the month
in which the Loan is made and on the first Business Day of each month thereafter
until the principal together with all interest and other charges payable with
respect to the Loan shall be fully paid; and (b) calculated at the Interest
Rate, or, from and after an Event of Default, the Default Rate, on the basis of
a 360 day year and the actual number of days elapsed; provided, however, that so long
as there is then no Event of Default, the Borrower shall not be required to make
monthly interest payments provided above except in connection with the mandatory
prepayments relating to a Capital Transaction required to be made under Section
2.3.3 hereof, and any accrued interest that is not paid when due as provided
above (subject to applicable grace periods under Section 5.1.1) shall be added
to the principal amount of the Loan.
 
 2.3.2           Principal.   The
entire principal balance of the Loan shall be due and payable in full on the
Maturity Date.
 
 2.3.3           Voluntary
Prepayment.  The Loan or any portion thereof may be prepaid in
full or in part by the Borrower at any time upon three (3) days prior written
notice to the Lender, without premium or penalty.  Any voluntary
prepayment shall be applied first to interest and then to
principal.
 
 2.3.4           Mandatory
Prepayment.  The Borrower shall be required to make a
prepayment on account of the Loan, which mandatory prepayment shall be applied
first to interest and then to principal:
 
 (i)           upon
the consummation of a Capital Transaction which results in Net Proceeds, in an
amount equal to 50% of the Net Proceeds,
 
 (ii)          in
full upon (x) the expiration, cancellation or termination of the Asset Servicing
Agreement or (y) a Change in Control;
 
 (iii)         during
the continuance of an Event of Default, (x) upon the receipt of any payments on
account of a Pledged Loan, 100% of the amount of such payment, and (y) upon the
receipt of any dividends or other payments on account of the Shares, 100% of the
amount of such dividend or other payment less any amounts from such dividend or
other payment required to be paid to the Senior Lender.
 
 2.3.5           Maturity.  On
the Maturity Date all accrued interest, principal and other charges due with
respect to the Loan shall be due and payable in full.
 
 2.3.6           Method and Application of
Payment; Date of Credit.  All payments of interest and
principal shall be made in lawful money of the United States in immediately
available funds, without counterclaim or setoff and free and clear of, and
without any deduction or withholding for, any taxes or other payments, unless
required by applicable law.  All payments received on account of the
Loan shall be applied first accrued and unpaid interest and then to
principal.
 
 2.4           Acceleration.  The
Lender may, in its sole discretion, accelerate the Loan after the occurrence and
during the continuance of an Event of Default.
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  3.             REPRESENTATIONS,
WARRANTIES AND COVENANTS
 
 Section
3.1                Representations and
Warranties.  The Borrower hereby represents and warrants to the
Lender as follows:
  3.1.1           Organization. 
The Borrower (1) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (2) has all requisite company
power to own its property and conduct its business as now conducted and as
presently contemplated, and (3) is in good standing as a foreign limited
liability company and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so qualified
would not have a material adverse effect on the Borrower.
  3.1.2           Due
Execution.  The execution, delivery and performance of this
Loan Agreement and the other documents entered into in connection herewith to
which the Borrower is or is to become a party and the transactions contemplated
hereby and thereby (a) are within the authority of the Borrower, (b) have been
duly authorized by all necessary corporate action, (c) do not conflict with the
Organizational Documents, or (d) do not conflict with, cause a breach of default
under or give any other entity or person a right of termination, amendment or
acceleration or cancellation of, or result in the creation of a lien on any
asset of the Borrower, pursuant to the terms of any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Borrower is a party or by which the
Borrower or any of its properties or assets is bound or affected, except, in the
case of this clause (e), as would not have a material adverse effect on the
Borrower.
  3.1.3           Enforceability.  The
execution and delivery of this Loan Agreement and the other documents to be
entered into in connection herewith to which the Borrower is or is to become a
party will result in valid and legally binding obligations of the Borrower
enforceable against it in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
  3.1.4           Consents.  The
execution, delivery and performance by the Borrower of this Loan Agreement and
the other documents to be entered into in connection herewith to which it is or
is to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained, other than required filings with
the Securities and Exchange Commission.
  3.1.5           Litigation. 
There are no actions, suits, proceedings or investigations of any kind pending
or threatened against the Borrower before any governmental agency that, if
adversely determined, might, either in any case or in the aggregate, (i) have a
material adverse effect on the Borrower or (ii) materially impair the right of
the Borrower and its subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them.
  7
  3.1.6             No
Violations.  The Borrower is not in violation of any provision
of its Organizational Documents, or any agreement or instrument to which it may
be subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or have a material adverse effect on the Borrower.
  3.1.7             Representations with Respect
to the Shares.  The Borrower is the legal and beneficial owner of
the Shares, and except for the lien granted hereunder to the Lender and the lien
granted in favor of Senior Lender, are owned by the Borrower free and clear of
any pledge, mortgage, hypothecation, lien, charge, encumbrance, security
interest or other encumbrance in such shares or the proceeds
thereof.  The pledge of the Shares pursuant to this Agreement creates
a valid security interest in such Shares as security for the prompt and full
satisfaction of the Obligations and the Lender shall, upon delivery of such
Shares to it, have a perfected security interest in such Shares junior only to
the lien of the Senior Lender.  The Shares represent all of the issued
and outstanding stock of the Corporation.
 
 3.1.8             Representations
with Respect to the Pledged Loans.Except
for the lien granted hereunder to the Lender, Borrower is the legal and
beneficial owner of the Pledged Loans, free and clear of any
Liens.  The pledge of the Pledged Loans pursuant to this Agreement
creates a valid security interest in the Pledged Loans as security for the
prompt and full satisfaction of the Obligations and the Lender shall, upon
delivery of such Pledged Loans to Lender, together with such assignment
documents as Lender may request Lender will have a perfected first priority
security interest in the Pledged Loans.  The Pledged Loans constitute
valid mortgage loans which are recorded in the appropriate land records and are
secured by the applicable Property.
 
 3.1.9             Taxes.  Borrower
and has made all required tax filings and have paid all federal, state and local
taxes applicable to them and/or their respective assets.
 
 3.1.10           Bankruptcy
Filings.  The Borrower is not contemplating either a filing of
a petition under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of its assets or property, and the
Borrower has no knowledge of any Person contemplating the filing of any such
petition against any of the Borrower.
 
 3.1.11           Options.  No
Person holds a right of first refusal or option to purchase with respect to the
Shares or Pledged Loan.
 
 3.1.12           Investment
Company.  Borrower is not an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.
 
 3.1.13           Holding
Company.  Borrower is not a “holding company,” or a “subsidiary
company” of a “holding company,” or an “affiliate” of a “holding company” or of
a “subsidiary company” of a “holding company,” within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
  8
  Section
3.2                Covenants.  The
Borrower covenants and agrees as follows:
 
 3.2.1           Books and
Records.  The Borrower shall keep and maintain proper and accurate
books, records and accounts reflecting all of the financial affairs of the
Borrower and all items of income and expense in connection with its business and
operations and in connection with any services, equipment or furnishings
provided in connection with the operation of the business of the Borrower,
whether such income or expense is realized thereby or by any other person or
entity.
 
 3.2.2           Tax
Returns.  The Borrower shall cause all tax returns required to
be filed by it to be filed on a timely basis and any taxes due on account
thereof to be paid on a timely basis, unless and to the extent that such taxes
are being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established.
 
 3.2.2           Organizational
Documents.  Except with the prior written consent of the
Lender, the Borrower shall not permit to be modified, amended, supplemented or
terminated in any material respect, or the Corporation’s Organizational
Documents, or any of them.
 
 3.2.4           Legal
Existence.  The Borrower will do or cause to be done all things
necessary to preserve and keep in full force and effect its legal existence,
rights and franchises.
 
 3.2.5           Security Agreements and
Financing Statements.  As of the date of closing hereunder,
there shall be no matters of record with respect to the Properties other than
those of record as of the date hereof.
  3.2.6           Insurance.  The
Borrower will maintain with financially sound and reputable insurers insurance
with respect to its properties and business against such casualties and
contingencies as shall be in accordance with the general practices of businesses
engaged in similar activities in similar geographic areas and in amounts,
containing such terms, in such forms and for such periods as may be reasonable
and prudent.
 
 3.2.7           Compliance with
Laws.  The Borrower will comply in all material respects with
(a) the applicable laws and regulations wherever its business is conducted, (b)
the provisions of its Organizational Documents, (c) all material agreements and
instruments by which it or any of its properties may be bound, and (d) all
applicable decrees, orders, and judgments.  If any authorization,
consent, approval, permit or license from any office, agency or instrumentality
of any government shall become necessary or required in order that the Borrower
may fulfill any of its obligations hereunder or any of the other Loan Documents
to which the Borrower is a party, the Borrower will promptly take or cause to be
taken all reasonable steps within the power of the Borrower to obtain such
authorization, consent, approval, permit or license and furnish the Lender with
evidence thereof.
  9
  3.2.8           Indemnification.  Borrowers
shall at all times, both before and after repayment of the Loan, at its sole
cost and expense defend, indemnify, exonerate and save harmless Lender and all
those claiming by, through or under Lender (“Indemnified Party”) (to the extent
not paid by Borrowers in this Section 3.2.8 or under the applicable provisions
of this or any other Loan Document) against and from all damages, losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any kind
whatsoever, including, without limitation, reasonable attorneys’ fees and
experts’ fees and disbursements, which may at any time (including, without
limitation, before or after discharge or foreclosure of the Security Documents)
be imposed upon, incurred by or asserted or awarded against the Indemnified
Party and arising from or out of:
 
 (i)           any
liability for damage to person or property arising out of any violation of any
applicable legal requirement by the Borrower,
 
 (ii)          as
a result of litigation that may arise in connection with the Borrower’s
activities (excluding the Loan or the Loan Documents), or
 
 (iii)         any
and all liabilities, damages, penalties, costs, and expenses, relating in any
manner to any brokerage or finder’s fees in respect of the Loan.
 
 Notwithstanding
the foregoing, an Indemnified Party shall not be entitled to indemnification in
respect of claims arising from acts of its own gross negligence or willful
misconduct to the extent that such gross negligence or willful misconduct is
determined by the final judgment of a court of competent jurisdiction, not
subject to further appeal, in proceedings to which such Indemnified Party is a
proper party.
 
 3.2.9           Costs and Expenses.
Borrower shall pay all legal fees reasonably incurred by Lender in connection
with the implementation of the Loan and the administration of the Loan, and
reasonably incurred by the Lender in connection with the enforcement of the
Lender’s rights under the Loan Documents.  Borrowers’ obligations to
pay such costs and expenses shall include, without limitation, all attorneys’
fees and other costs and expenses for preparing and conducting litigation or
dispute resolution arising from any breach by Borrower of any covenant,
warranty, representation or agreement under any one or more of the Loan
Documents.  Unless an Event of Default has occurred and is then
continuing, the Lender shall use its best efforts to notify the Borrower prior
to the incurrence of any such cost or expense if the aggregate amount of such
costs and expenses in any one calendar year will exceed $5,000.00; provided,
however, that the failure to provide such notice shall not affect in any manner
whatsoever on the Borrowers’ obligations hereunder.
 
 3.2.10           Transfer
of Shares; Issuance of Additional Share.  Except for
the lien granted in favor of the Senior Lender, the Borrower shall not
sell, assign or otherwise encumber the Shares until the Obligations are
satisfied in full.  The Borrower shall not consent to the issuance of,
or permit the Corporation to issue, any additional equity interests in the
Corporation.
 
 3.2.11           Transfer
of Pledged Loans.The
Borrower shall not sell, assign or otherwise encumber the Pledged Loans until
the Obligations are satisfied in full.  The Borrower shall not consent
to any amendment, deferral, extension, modification, increase, renewal,
replacement, consolidation, supplement or waiver to the Pledged Loans or any
documents constituting a portion thereof.
  10
  3.2.12           Leases.  Borrower
shall notify Lender immediately upon becoming aware of the breach of any
material condition contained in any Lease by any lessee thereunder and Borrower
shall make all commercially reasonable efforts to cause said breach to be cured
by the lessee.  Borrower will not consent to any modification of a
Lease, the effect of which could have a material adverse effect on the value of
the applicable Property.
  3.2.13           Further
Assurances.  Borrower shall execute, re-execute, cause third
parties involved in the loan transaction to execute and/or re-execute and to
deliver to Lender or its legal counsel, as may be deemed appropriate, any
document or instrument signed in connection with the Loan which was incorrectly
drafted and/or signed, as well as any document or instrument which should have
been signed at or prior to the closing of the Loan, but which was not so signed
and delivered.  Borrower agrees to comply with any written request by
Lender within ten (10) days after receipt by Borrower of such
request.
 
 4.           COLLATERAL SECURITY,
PLEDGE
 
 As
security for the prompt and full satisfaction and payment of the Obligations,
the Borrower hereby pledges and assigns the Shares and the Pledged Loans to the
Lender and grants the Lender a security interest therein subject only, in the
case of the Shares, to the lien of the Senior Lender.  The Borrower
shall deliver, upon execution of this Agreement, Collateral Assignments of Note,
Mortgage and Other Documents from Borrower to Lender (the “Collateral
Assignments”) with respect to the Pledged Loans.
 
 5.           EVENTS
OF DEFAULT
 
 5.1           Default.  If any
one or more of the following events ("Events of Default") shall occur and be
continuing with respect to the Borrower, the entire unpaid balance of principal
of and interest on the Note outstanding shall immediately become due and payable
upon written notice to that effect given to the Borrower by the Lender (except
that in the case of the occurrence of any Event of Default described in
subparagraph 5.1.5 hereof, no such notice shall be required), without
presentment or demand for payment, notice of non-payment, protest or further
notice or demand of any kind, all of which are expressly waived by the
Borrower:
 
 5.1.1           Payments. 
Failure by the Borrower to make any payment of principal or interest upon the
Note when due; or
 
 5.1.2           Covenants. 
Failure by a Borrower to perform or observe in any material respect any of the
covenants or agreements contained in Section 3.2 hereof; or
 
 5.1.3           Representations and
Warranties.  Any representation or warranty made by the Borrower to
the Lender hereunder or in connection with the making of the Loans shall have
been false or misleading in any material respect when made or delivered;
or
  11
  5.1.4           Default under a Loan
Document.  Any other default in any material respect in the
performance of any term or provision of the Note, or of any of the other Loan
Documents, or a breach, or other failure to satisfy, in any material respect,
any other term, provision, condition or warranty under the Note, or any other
Loan Document, regardless of whether any then undisbursed portion of the Loan is
sufficient to cover any payment of money required thereby, and the specific
grace period, if any, allowed for the default in question shall have expired
without such default having been cured.
 
 5.1.5           Financial Status and
Insolvency.  The Borrower shall: (i) admit in writing its
inability to pay its debts generally as they become due; (ii) file a petition in
bankruptcy or a petition to take advantage of any insolvency act; (iii) make an
assignment for the benefit of creditors; (iv) consent to, or acquiesce in, the
appoint­ment of a receiver, liquidator or trustee of itself or of the whole
or any substantial part of its properties or assets; (v) file a petition or
answer seeking reorganiza­tion, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Federal Bankruptcy laws or
any other applicable law; (vi) have a court of competent jurisdiction enter an
order, judgment or decree appointing a receiver, liquidator or trustee of the
Borrower, or of the whole or any substantial part of the property or assets of
the Borrower, and such order, judgment or decree shall remain unvacated or not
set aside or unstayed for sixty (60) days; (vii) have a petition filed against
it seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the Federal Bankruptcy laws or any other
applicable law and such petition shall remain undismissed for sixty (60) days;
(viii) have, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdic­tion assume custody or control of
the Borrower or of the whole or any substantial part of its property or assets
and such custody or control shall remain unterminated or unstayed for sixty (60)
days; or (ix) have an attachment or execution levied against any substantial
portion of the property of the Borrower or against any substantial portion of
the Collateral which is not discharged or dissolved by a bond within sixty (60)
days; or
 
 5.1.6           Loan
Documents.  If any Loan Document for any reason other than the
satisfaction in full of all Obligations shall cease to be in full force and
effect (other than in accordance with its terms), thereby preventing the Lender
from obtaining the practical realization of the benefits thereof, or if any Loan
Document shall be declared null and void, or if the Liens and security interests
purported to be created by any of the Loan Documents shall cease to be valid,
perfected, first priority (except as otherwise expressly provided herein)
security interests;
 
 5.1.7           Judgments.  One
or more judgments or decrees shall be entered against the Borrower involving a
liability (not paid or fully covered by a reputable and solvent insurance
company) and such judgments and decrees either shall be final and non-appealable
or shall not be vacated, discharged or stayed or bonded pending appeal for any
period of sixty (60) consecutive days, and the aggregate amount of all such
judgments exceeds $250,000.
 
 5.1.8           Change of
Control.  If a Change of Control shall occur.
 
 5.1.9           Termination of Asset
Servicing Agreement.  If the Asset Servicing Agreement shall
expire or be cancelled or terminated.
  12
  5.1.10           Default of Other
Obligations.  Any failure by the Borrower to pay at maturity,
or within any applicable grace period, any obligation for borrowed money, or in
respect of any capitalized lease, in an aggregate amount exceeding $500,000, or
any failure to observe or perform any material term, covenant or agreement
contained in any agreement by which the Borrower is bound, evidencing or
securing borrowed money, or in respect of any capitalized lease, such that the
holder or holders thereof or of any obligations issued thereunder have
accelerated the maturity thereof.
 
 5.2           Remedies.In case any one or more of
the Events of Default shall have occurred and be continuing, and whether or not
the Lender shall have accelerated the maturity of the Loans, the Lender, if owed
any amount with respect to the Loan, may proceed to protect and enforce its
rights by suit in equity, action at law or other appropriate proceeding, whether
for the specific performance of any covenant or agreement contained in this Loan
Agreement and the other documents entered into in connection herewith or any
instrument pursuant to which the Obligations to the Lender are evidenced,
including as permitted by applicable law the obtaining of theexparteappointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Lender.  No remedy herein conferred upon the
Lender is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.In addition to all of its other rights
and remedies hereunder the Lender shall have all of the rights and remedies of a
secured party under the UCC from time to time and shall comply with all
procedures thereunder for disposition and sale of the Collateral.  The
Lender shall have the right to sell or otherwise dispose of all or any of the
Collateral subject to appropriate UCC rules.  Such sales may be
adjourned and continued from time to time, with or without notice.  To
enable the Lender to effect any such sale, assignment and/or transfer and to
take any action and to execute any instrument which the Lender may deem
necessary or advisable to accomplish the purposes of this Agreement, the
Borrower hereby makes, constitutes and appoints the Lender as the true and
lawful attorney, in its name, place and stead, and for its account and risk, to
make, executed and deliver any and all assignments or other instruments which
the Lender may deem necessary or proper to effectuate the authority hereby
conferred by signing the Borrower’s name only or by signing the same as its
attorney-in-fact, as may be deemed by the Lender to be necessary or proper in
connection with any sale, assignment, or transfer of all or any part of the
Collateral.  The foregoing power of attorney is coupled with an
interest and shall be a continuing one and irrevocable so long as any portion of
the Obligations remains unpaid in whole or in part.  The Lender may
purchase all or any part of the Collateral at public sale or, if permitted by
law, private sale, subject to appropriate UCC rules, and in lieu of actual
payment of such purchase price, may set off the amount of such price against the
Obligations.
 
 5.3           Remedies of the
Essence.  The various rights and remedies of the Lender under
this Agreement are of the essence of the Agreement, and the Lender shall be
entitled to obtain a decree requiring specific performance of each such right
and remedy.
  13
  5.4           Recourse.  The
Loan shall be fully recourse to the Borrower and all of its assets.
 
 6.           MISCELLANEOUS
 
 6.1           Notices.  Any
notices, elections or demands permitted or required to be made under this
Agreement shall be in writing, signed by the party giving such notice, election
or demand and shall be given either by personal delivery sent postage prepaid by
registered or certified mail, return receipt requested or sent by overnight
carrier, or via facsimile followed by certified mail and shall be deemed to have
been given when evidence of receipt is received by the sender in each case
addressed as follows:
 
 if to Lender:
 
 Pemmil Funding LLC
 70 East 55th
Street, 7th
Floor
 New York, New York 10022
 Attention:  Mr. Jay
Chazanoff
 Facsimile No.:  (212)
350-9911
 
 if to
Borrower:
 
 DVL, INC.
 70 East 55th
Street, 7th
Floor
 New York, New York 10022
 Attention:  Chief Financial
Officer
 Facsimile No.:  (212)
350-9911
 
 with a copy to:
 
 Mr. Alan Casnoff
 1321 Intrepid Avenue
 Suite
200
 Philadelphia,
PA 19112
 Fax:  215-320-3785
 
 A party hereto may change the address
to which notices shall be sent by written notice to all other parties hereto
(said change of addresses to be effective upon receipt by all other parties
hereto).
 
 6.2           Lender's Right to Perform on
a Borrower's Behalf.  If the Borrower shall fail to observe or
perform any of the terms, conditions, covenants and agreements to be observed or
performed by it hereunder or under the Note, the Lender may (but shall not be
obligated to) do the same or cause it to be done or performed or observed,
either in its name or in the name and on behalf of the Borrower, and the
Borrower hereby authorizes the Lender so to do.
 
 6.3           Lender's Right to Use Agents
and to Act in Name of Borrower.  The Lender may exercise its
rights and remedies hereunder or under the Note through an agent or other
designee and, in the exercise thereof, the Lender or any such other Person may
act in its own name or in the name and on behalf of the Borrower.
  14
  6.4           Governing
Law.  This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without regard to principles of
conflicts of law thereof.
 
 6.5           Counterparts. 
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto were upon the
same instrument.
 
 6.6           Entire
Agreement.  This Agreement embodies the entire agreement among
the Borrower and the Lender relating to the subject matter hereof and supersedes
all prior agreements, representations and understandings, if any, relating to
the subject matter hereof.
 
 6.7           Successors and
Assigns.  All of the provisions of this Agreement shall be
binding and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns; provided, however, that the
Borrower is not permitted to make any assignment except with the prior written
consent of Lender.
 
 6.8           Captions.  Captions
to Sections and subsections of, and Schedules and Exhibits to, this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose or in any way affect the meaning or
construction of any provision of this Agreement.
 
 6.9           Pronouns and
Gender.  All pronouns and variations thereof used herein shall,
regardless of the pronoun actually used, be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may, in the context in which such pronoun is used, require.
 
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OF PAGE LEFT INTENTIONALLY BLANK}
  15
  IN WITNESS WHEREOF, this Agreement has
been executed as of the date and year first set forth above.
   LENDER:PEMMIL
      FUNDING LLCBy:
                /s/ Jay
      ChazanoffName:
      Jay Chazanoff
                  Title:
      Executive OfficerBORROWER:DVL,
      INC.By:
                /s/ Alan
      CasnoffName:
      Alan Casnoff
                  Title:
      Chief Executive Officer
  16
  Exhibit
A
 
 PLEDGED
LOANS
 
 
 Loan made
by DVL, Inc., as successor in interest to Kenbee Management-Oklahoma, Inc. to
Sonya Associates Limited Partnership in the original principal amount of
$1,322,000
 
 Loan made
by DVL, Inc., as successor in interest to Kenbee Management-Oklahoma, Inc. to
Douglas Associates in the original principal amount of $1,496,000