Document:

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                                                                   Exhibit 10.25

                              SMITH BROTHERS, INC.,
                              a Texas Corporation

                                    GUARANTY

To:  Fleet National Bank (as successor-in-interest to BankBoston, N.A., the
     "Bank") as lender under the Amended and Restated Loan Agreement dated as of
     December 11, 2003 between the Borrower (as herein defined) and the Bank
     (the "Loan Agreement"):

     1. Guaranty of Payment and Performance of Obligations. In consideration of
the Bank's extending credit or otherwise in its discretion giving time,
financial or banking facilities or accommodations to Dover Saddlery, Inc., a
Massachusetts corporation (the "Borrower"), an affiliate of the undersigned
Smith Brothers, Inc., a corporation organized and existing under the laws of the
State of Texas (the "Guarantor"), the Guarantor hereby unconditionally
guarantees to the Bank that the Borrower will duly and punctually pay or
perform, at the place specified therefor, or if no place is specified, at the
Bank's head office at 100 Federal Street, Boston, Massachusetts 02110, (i) all
Obligations under (and as defined in) the Loan Agreement; and (ii) without
limitation of the foregoing, all fees, costs and expenses incurred by the Bank
in attempting to collect or enforce any of the foregoing, accrued in each case
to the date of payment hereunder (collectively the "Obligations" and
individually an "Obligation"). This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance by the
Borrower of the Obligations and not of their collectibility only and is in no
way conditioned upon any requirement that the Bank first attempt to collect any
of the Obligations from the Borrower or resort to any security or other means of
obtaining payment of any of the Obligations which the Bank now has or may
acquire after the date hereof or upon any other contingency whatsoever. Upon any
default by the Borrower in the full and punctual payment and performance of the
Obligations, the liabilities and obligations of the Guarantor hereunder shall,
at the option of the Bank, become forthwith due and payable to the Bank without
demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Bank on
any number of occasions.

     2. Guarantor's Further Agreements to Pay. The Guarantor further agrees, as
the principal obligor and not as a guarantor only, to pay to the Bank forthwith
upon demand, in funds immediately available to the Bank, all reasonable costs
and expenses (including court costs and legal expenses) incurred or expended by
the Bank in connection with this Guaranty and the enforcement hereof, together
with interest on amounts recoverable under this Guaranty from the time such
amounts become due until payment at the rate which is at all times equal to 2%
above the then rate of interest applicable to Base Rate Loans under (and as
defined in) the Loan Agreement; provided that if such interest exceeds the
maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
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     3. Payments. The Guarantor covenants and agrees that the Obligations will
be paid strictly in accordance with their respective terms regardless of any
law, regulation or order now or hereinafter in effect in any jurisdiction
affecting any of such terms or the rights of the Bank with respect thereto.
Without limiting the generality of the foregoing, the Guarantor's obligations
hereunder with respect to any Obligation shall not be discharged by a payment in
a currency other than the currency in which the Obligation is denominated (the
"Obligation Currency") or at a place other than the place specified for the
payment of the Obligation, whether pursuant to a judgment or otherwise, to the
extent that the amount so paid on conversion to the Obligation Currency and
transferred to Boston, Massachusetts, U.S.A., under normal banking procedures
does not yield the amount of Obligation Currency due thereunder.

     4. Taxes. All payments hereunder shall be made without any counterclaim or
set-off, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority on payments hereunder,
all of which will be for the account of and paid by the Guarantor. If for any
reason, any such reduction is made or any Taxes are paid by the Bank, the
Guarantor will pay to the Bank such additional amounts as may be necessary to
ensure that the Bank receives the same net amount which it would have received
had no reduction been made or Taxes paid.

     5. Consent to Jurisdiction. The Guarantor hereby absolutely and irrevocably
consents and submits to the jurisdiction of the Courts of the Commonwealth of
Massachusetts and of any Federal Court located in the said Commonwealth in
connection with any actions or proceedings brought against the Guarantor by the
Bank arising out of or relating to this Guaranty. In any such action or
proceeding, the Guarantor hereby absolutely and irrevocably waives personal
service of any summons, complaint, declaration or other process and hereby
absolutely and irrevocably agrees that the service thereof may be made by
certified, registered or recorded first-class airmail directed to the Guarantor.
Anything hereinbefore to the contrary notwithstanding, the Bank may sue the
Guarantor in the courts of any other country, State of the United States or
place where the Guarantor or any of the property or assets of the Guarantor may
be found or in any other appropriate jurisdictions.

     6. Unlimited Liability of Guarantor. The liability of the Guarantor
hereunder shall be unlimited and, as to the Obligations of the Borrower, shall
be joint and several with the liability of each other party who has guaranteed
or who will guarantee the Obligations of the Borrower. The Bank has and shall
have the absolute right to enforce the liability of the Guarantor hereunder
without resort to any other right or remedy including any right or remedy under
any other guaranty, and the release or discharge of any guarantor of any
Obligations shall not affect the continuing liability of the Guarantor
hereunder.

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     7. Effectiveness. The obligations of the Guarantor under this Guaranty
shall continue in full force and effect and shall remain in operation until all
of the Obligations shall have been paid in full or otherwise be fully satisfied,
and continue to be effective or be reinstated, as the case may be, if at any
time payment or other satisfaction of any of the Obligations is rescinded or
must otherwise be restored or returned upon the bankruptcy, insolvency, or
reorganization of the Borrower, or otherwise, as though such payment had not
been made or other satisfaction occurred. No invalidity, irregularity or
unenforceability by reason of applicable bankruptcy laws, or any other similar
law, or any law or order of any government or agency thereof purporting to
reduce, amend or otherwise affect, the Obligations, shall impair, affect, be a
defense to or claim against the obligations of the Guarantor under this
Guaranty.

     8. Security; Set-off. The Guarantor grants to the Bank, as security for the
full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or other
property belonging to the Guarantor now or hereafter held by the Bank and in all
deposits and other sums credited by or due from the Bank to the Guarantor or
subject to withdrawal by the Guarantor. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, the Bank
may at any time and without notice to the Guarantor set off the whole or any
portion or portions of any or all such deposits and other sums credited by or
due from the Bank to the Guarantor or subject to withdrawal by the Guarantor
against amounts payable under this Guaranty, whether or not any other person or
persons could also withdraw money therefrom. Any deposits or other sums which
may at any time be credited to the Guarantor by or due to it from any other
financing institution which may invest or participate in the Obligations (each
such financing institution being referred to in this Section 8 as a
"Participant") may at any time be applied to or set off by such Participant
against the Guarantor's obligations hereunder. The Guarantor irrevocably invites
each financing institution which may consider becoming a Participant to rely on
the provisions contained in this Section 8 as making the Participant a creditor
of the Guarantor and agrees that its becoming a Participant shall constitute an
acceptance of the offer hereby made.

     9. Freedom of Bank to Deal with Borrower and Other Parties. The Bank shall
be at liberty, without giving notice to or obtaining the assent of the Guarantor
and without relieving the Guarantor of any liability hereunder, to deal with the
Borrower and with each other party who now is or after the date hereof becomes
liable in any manner for any of the Obligations, in such manner as the Bank in
its sole discretion deems fit, and to this end the Guarantor gives to the Bank
full authority in its sole discretion to do any or all of the following things:
(a) extend credit, make loans and afford other financial accommodations to
Borrower at such times, in such amounts and on such terms as the Bank may
approve, (b) vary the terms and grant extensions of any present or future
indebtedness or obligation to the Bank of the Borrower or of any such other
party, (c) grant time, waivers and other indulgences in respect thereto, (d)
vary, exchange, release or discharge, wholly or partially, or delay in or
abstain from perfecting and enforcing any security or guaranty or other means of
obtaining payment of any of the Obligations which

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the Bank now has or may acquire after the date hereof, (e) accept partial
payments from the Borrower or any such other party, (f) release or discharge,
wholly or partially, any endorser or guarantor, and (g) compromise or make any
settlement or other arrangement with the Borrower or any such other party.

     10. Unenforceability of Obligations Against the Borrower; Invalidity of
Security or Other Guaranties. If for any reason the Borrower has no legal
existence or is under no legal obligation to discharge any of the Obligations
undertaken or purported to be undertaken by it or on its behalf, or if any of
the moneys included in the Obligations have become irrecoverable from the
Borrower by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal debtor on all such Obligations. This
Guaranty shall be in addition to any other guaranty or other security for the
Obligations, and it shall not be prejudiced or rendered unenforceable by the
invalidity of any such other guaranty or security.

     11. Representations, Warranties and Covenants. The Guarantor hereby
represents, warrants, and covenants to and with the Bank that:

          11.1. Corporate Status. The Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and authority to
own its property, conduct its business as now being conducted and to make and
perform this Guaranty and the transactions contemplated hereby, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where the nature and extent of the business conducted by it, or
property owned by it, and applicable law require such qualification.

          11.2. Authorization. The execution, delivery and performance of this
Guaranty have been duly authorized by all necessary corporate action and will
not violate any provision of law or any order of any court or governmental
agency or the articles of organization or other incorporation papers or bylaws
of the Guarantor, or conflict with, or result in a breach of, or constitute
(with or without notice or lapse of time or both) a default under, or result in
the creation of any security interest, lien, charge or encumbrance upon any
property or assets of the Guarantor, pursuant to any agreement, indenture or
other instrument to which it is a party or by which it may be bound.

          11.3. Litigation. Except as disclosed to the Bank in writing prior to
the execution hereof, no action, suit, investigation or proceeding is pending or
known to be threatened against or affecting the Guarantor which, if adversely
determined, would have a material adverse effect upon its financial condition or
operations.

          11.4. Absence of Default. The Guarantor is not in default under any
provision of its articles of organization or other incorporation papers, bylaws
or stock provisions or any amendment of any thereof or of any indenture relating
to borrowed

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money or agreement to which it is a party or by which it is bound or of any
other indenture or of any order, regulation, ruling or requirement of a court or
public body or authority by which it is bound.

          11.5. No Consents Required. No license, consent or approval of, or
filing with, any governmental body or other regulatory authority is required for
the making and performance of this Guaranty or any instrument or transaction
contemplated herein. The Guarantor holds all certificates and authorizations of
all governmental agencies and authorities required by law to enable it to engage
in the business currently transacted by it.

          11.6. Additional Representations and Warranties; Survival. In addition
to the foregoing representations and warranties, the Guarantor hereby makes each
of the representations and warranties set forth in Section 4 of the Loan
Agreement, which representations and warranties are incorporated herein by this
reference, as if each of such representations and warranties were made by the
Guarantor with each reference therein to the "Borrower" changed to the
"Guarantor", provided that with respect to any representations or warranties
which are in conflict with the specific representations and warranties made
herein, the representations and warranties made herein shall control. All
representations and warranties made herein shall survive until payment in full
of all of the Obligations.

          11.7. Covenants. (a) The Guarantor will not at any time after the date
of this Guaranty create, assume, incur, or permit to exist, any mortgage, lien,
pledge, charge, security interest or other encumbrance of any kind
("Encumbrances") in respect of any of its property, assets, income or revenues
of any character, whether heretofore or hereafter acquired by it, except (i)
Encumbrances in favor of the Bank securing the payment or performance of all or
any part of the Obligations, whether existing on the date of this Guaranty or
arising from time to time thereafter and (ii) Encumbrances permitted under
Sections 5.6(iii), (iv) and (v) of the Loan Agreement. (b) The Guarantor will
not at any time cause or permit any of the charter or other incorporation
documents or by-laws of the Guarantor to be modified, amended or supplemented in
any respect whatever, except for any such modification or amendment as would be
permitted under the terms of Section 5.14 of the Loan Agreement, without the
express prior written agreement, consent or approval of the Bank. (c) The
Guarantor will not at any time after the date hereof engage, directly or
indirectly, in any business other than the business now conducted by the
Guarantor. (d) The Guarantor has, and will continue to have, no Indebtedness (as
defined in the Loan Agreement) except for the Indebtedness evidenced hereby or
otherwise permitted by Section 5.5 of the Loan Agreement to the extent
applicable. (e) The Guarantor hereby agrees to comply with and be bound by each
of the covenants set forth in Sections 5 and 6 of the Loan Agreement, which
covenants are incorporated herein by this reference, as if each of such
covenants were made by the Guarantor with each reference therein to the
"Borrower" changed to the "Guarantor", provided that with respect to any
covenants which are in conflict with the specific covenants made herein, the
covenants made herein shall control.

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     12. Waivers by Guarantor. The Guarantor waives: notice of acceptance
hereof, notice of any action taken or omitted by the Bank in reliance hereon,
and any requirement that the Bank be diligent or prompt in making demands
hereunder, giving notice of any default by the Borrower or asserting any other
rights of the Bank hereunder. The Guarantor also irrevocably waives, to the
fullest extent permitted by law, all defenses that at any time may be available
in respect of the Guarantor's obligations hereunder by virtue of any homestead
exemption, statute of limitations, valuation, stay, moratorium law or other
similar law now or hereafter in effect.

     13. No Contest with Bank. So long as any Obligation remains unpaid or
undischarged, the Guarantor will not, as a result of paying any sum recoverable
hereunder (whether or not demanded by the Bank) or by any means or on any other
ground, exercise any rights against the Borrower or claim any set-off or
counterclaim against the Borrower in respect of any liability of the Guarantor
to the Borrower or, in proceedings under applicable bankruptcy laws or
insolvency proceedings of any nature, prove in competition with the Bank in
respect of any payment hereunder or be entitled to have the benefit of any
counterclaim or proof of claim or dividend or payment by or on behalf of the
Borrower or the benefit of any other security for any Obligation which, now or
hereafter, the Bank may hold or in which it may have any share. The Guarantor
waives any benefit of and any right to participate in any collateral which may
be held by the Bank. The payment of any amounts due with respect to any
indebtedness of the Borrower now or hereafter held by the Guarantor which arises
as a result of the Guarantor's payment of any sum recoverable hereunder is
hereby subordinated to the prior payment in full of the Obligations. The
Guarantor agrees that after the occurrence of any default in the payment or
performance of the Obligations, the Guarantor will not demand, sue for or
otherwise attempt to collect any such indebtedness of the Borrower to the
Guarantor until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantor as trustee for the Bank and be
paid over to the Bank on account of the Obligations without affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.

     14. Demands and Notices. Any demand on or notice to the Guarantor shall be
in writing and shall be effective when handed to the Guarantor or left at or
mailed or sent by telecopy or courier to the Guarantor's usual or last-known
address.

     15. Amendments, Waivers, Etc. No provision of this Guaranty can be changed,
waived, discharged or terminated except by an instrument in writing signed by
the Bank and the Guarantor expressly referring to the provision of this Guaranty
to which such instrument relates; and no such waiver shall extend to, affect or
impair any right with respect to any Obligation which is not expressly dealt
with therein. No course of dealing or delay or omission on the part of the Bank
in exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto.

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     16. Application of Funds. All payments by the undersigned pursuant to this
Guaranty shall be made to the Bank and, after the payment of all expenses as
provided in this Guaranty and the Obligations, shall be applied to the payment
of the Obligations until the same are paid in full.

     17. Further Assurances. The Guarantor at its sole cost and expense agrees
to do all such things and execute, acknowledge and deliver all such documents
and instruments as the Bank from time to time may reasonably request in order to
give full effect to this Guaranty and to perfect and preserve the rights and
powers of the Bank hereunder.

     18. Miscellaneous Provisions. This Guaranty is intended to take effect as a
sealed instrument to be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and shall inure to the benefit of the Bank and
its successors in title and assigns, and shall be binding on the Guarantor and
the Guarantor's successors in title, assigns and legal representatives. The
rights and remedies herein provided are cumulative and not exclusive of any
remedies provided by law or any other agreement. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for
ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.

     19. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES TRIAL BY
JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS GUARANTY, THE OBLIGATIONS, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER
ARISING, AMONG THE GUARANTOR, THE BORROWER AND THE BANK. THIS WAIVER OF JURY
TRIAL SHALL BE EFFECTIVE FOR EACH AND EVERY DOCUMENT EXECUTED BY THE GUARANTOR
OR THE BANK AND DELIVERED TO THE BANK OR THE GUARANTOR, AS THE CASE MAY BE,
WHETHER OR NOT SUCH DOCUMENTS SHALL CONTAIN SUCH A WAIVER OF JURY TRIAL. THE
GUARANTOR CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.

                            [Signature on next page]

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     IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the 11th
day of December __, 2003.

(Corporate Seal)

                                        SMITH BROTHERS, INC.

                                        By: /s/ Stephen L. Day
                                            ------------------------------------
                                        Name: Stephen L. Day
                                        Title: President

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                                                                   Exhibit 10.26

                             SUBORDINATION AGREEMENT

     SUBORDINATION AGREEMENT (this "Agreement"), dated as of December 11, 2003
among Fleet National Bank (the "Senior Bank"), Wilton Funding, LLC
("Subordinated Purchaser") and Patriot Capital Funding, Inc. ("Servicer"; and
together with Subordinated Purchaser, the "Subordinated Creditors"), and Dover
Saddlery, Inc., a Massachusetts corporation ("Borrower"), and acknowledged by
Dover Saddlery, Inc., a Delaware corporation (the "Parent"), and Smith Brothers,
Inc., a Texas corporation ("Smith").

     WHEREAS, the Borrower proposes to enter into an Amended and Restated Loan
Agreement of even date herewith (as the same may be amended or extended from
time to time, the "Loan Agreement") with the Senior Bank, and in connection
therewith the Borrower, the Parent and Smith will grant to the Senior Bank
security interests in and other liens on all their respective property (said
Loan Agreement as amended as provided herein and as in effect from time to time
and all related instruments, notes, agreements and documents evidencing the
Borrower's, the Parent's or Smith's respective obligations thereunder or
granting security interests and liens to the Senior Bank being collectively
referred to herein as the "Bank Agreements");

     WHEREAS, the Borrower, the Parent and Smith propose to enter into a Senior
Subordinated Note Purchase Agreement of even date herewith with the Subordinated
Creditors (as amended in accordance with this Agreement and as in effect from
time to time, together with all related instruments, notes, agreements and
documents evidencing the Borrower's, the Parent's or Smith's obligations
thereunder, being collectively referred to herein as the "Subordinated
Agreement");

     WHEREAS, it is a condition precedent to the Senior Bank's willingness to
enter into and to make loans pursuant to the Bank Agreements and to permit the
Borrower, the Parent and Smith to enter into the Subordinated Agreement, that
the Borrower and the Subordinated Creditors enter into this Agreement with the
Senior Bank, and that the Parent and Smith acknowledge that they will abide
hereby; and

     WHEREAS, in order to induce the Senior Bank to enter into and to make loans
pursuant to the Bank Agreements and to consent to the entering into by the
Borrower, the Parent and Smith of the Subordinated Agreement, the Borrower and
the Subordinated Creditors have agreed to enter into this Agreement with the
Senior Bank, and the Parent and Smith have agreed to acknowledge same;

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     NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:

     Section 1. Definitions. Terms not otherwise defined herein have the same
respective meanings given to them in the Loan Agreement. In addition, the
following terms shall have the following meanings:

          "Loan Parties" shall mean, collectively, the Borrower, the Parent and
Smith.

          "Senior Debt" shall mean all indebtedness and other obligations of the
Loan Parties to the Senior Bank of every kind and description, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument they may be evidenced, including, without limitation, all
"Obligations" under and as defined in the Bank Agreements and all principal,
interest, fees, costs, enforcement expenses (including reasonable legal fees and
disbursements), collateral protection expenses and other reimbursement or
indemnity obligations created or evidenced by any of the Bank Agreements or any
prior, concurrent, or subsequent notes, instruments or agreements of
indebtedness, liabilities or obligations of any type or form whatsoever in favor
of the Senior Bank; provided, however, that the principal referred to above
shall not (unless the Subordinated Creditors otherwise consent thereto in
writing) at any time exceed the sum of: (a) $16,000,000, plus (b) all
indebtedness now existing or hereafter arising of the Borrower in respect of any
interest rate protection agreement covering a notional principal amount which
shall not exceed $8,000,000, and provided, further, that the indebtedness under
this clause (b) shall not at any time exceed an aggregate amount equal to
$800,000. Such maximum principal amount, as increased in accordance with such
consent from time to time, is referred to hereafter as the "Maximum Senior
Debt". Senior Debt shall expressly include any and all interest accruing or out
of pocket costs or expenses incurred after the date of any filing by or against
any Loan Party of any petition under the federal Bankruptcy Code or any other
Bankruptcy, insolvency or reorganization act regardless of whether the Senior
Bank's claim therefor is allowed or allowable in the case or proceeding relating
thereto.

          "Subordinated Debt" shall mean all indebtedness and other obligations
of the Loan Parties to the Subordinated Creditors of every kind and description,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, under the Subordinated Agreement, including, without
limitation, all principal, interest, fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses, other
reimbursement and indemnity obligations, so-called put and call rights,
tag-along rights and the like, and any fees or charges created or evidenced by
the Subordinated Agreement or any subsequent notes, instruments or agreements or
indebtedness, liabilities or obligations of any type or form issued in payment
or in connection with the Subordinated Agreement. "Subordinated Debt" shall
include,

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without limitation, any and all guaranties provided to the Subordinated
Creditors by any Subsidiary of any Loan Party.

          "Subordinated Documents" shall mean collectively, the Subordinated
Agreement, any promissory notes executed in connection therewith and any and all
guaranties, pledges and security interests, mortgages and other liens directly
or indirectly guarantying or securing any of the Subordinated Debt, any and all
other documents or instruments evidencing or further guarantying or securing
directly or indirectly any of the Subordinated Debt, whether now existing or
hereafter created.

     Section 2. Subordination.

          (a) Anything in any agreement between the Loan Parties and the
Subordinated Creditors to the contrary notwithstanding, the Subordinated Debt
shall be subordinate and junior in right of payment and priority, to the extent
and in the manner set forth in this Agreement, to the Senior Debt. If at any
time the Revolving Loans outstanding under the Loan Agreement shall be paid in
full in cash without terminating the Loan Agreement, subsequent borrowings by
the Borrower under the Loan Agreement shall constitute Senior Debt for purposes
of this Agreement. Upon the occurrence of an Event of Default, the Senior Bank
will provide the Subordinated Creditors, with reasonable promptness, a copy of
any notice of such Event of Default then being provided to the Borrower.

          (b) Except as provided in clause (c) below, unless and until all
Senior Debt shall have been paid in full in cash and the Loan Agreement shall
have been terminated, no Loan Party will, nor will permit any subsidiary or
affiliate to, directly or indirectly, make or agree to make, and neither the
holder nor any assignee or successor holder of any Subordinated Debt will
demand, accept or receive from any Loan Party or any other person or entity, (i)
any payment (in cash, property or securities, by set-off or otherwise), direct
or indirect, of or in respect of any Subordinated Debt, and no such payment
shall be accepted by any holder of any Subordinated Debt, or (ii) any payment
for the purpose of any redemption, purchase or other acquisition, direct or
indirect, of any Subordinated Debt, and no such payment shall be due.

          (c) The Senior Bank acknowledges that the Borrower may make and the
Subordinated Creditors may receive (i) regularly scheduled monthly payments of
cash interest with respect to the Subordinated Debt, at the maximum rate of
12.50% per annum as set forth in Section 3.1(a) of the Subordinated Agreement as
in effect on the date hereof and delivered to the Senior Bank, (ii) any interest
accrued at a default or overdue rate set forth in the Subordinated Agreement,
and (iii) any costs and expenses required to be reimbursed or paid by the
Borrower to the Subordinated Creditors not to exceed $50,000 in the aggregate in
any fiscal year of the Borrower, provided that on the date upon which any such
interest payment is proposed to be made, and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing; provided,
however, that if (i) during any fiscal quarter the Subordinated Creditors
receive or accept

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one or more payments under the Subordinated Debt (the "Quarterly Sub Debt
Payments") and (ii) the Senior Bank determines upon receipt of the Borrower's
quarterly financial statements with respect to the fiscal quarter immediately
preceding the fiscal quarter in which such Quarterly Sub Debt Payments were made
that a Default or Event of Default was then continuing, the Senior Bank shall
have a period of 15 Business Days after receipt of such financial statements to
request that such Quarterly Sub Debt Payments received by the Subordinated
Creditors be paid over to the Senior Bank for application to the Senior Debt. It
is hereby acknowledged and agreed that no principal shall be payable in respect
of the Subordinated Agreement until the Senior Debt has been paid in full in
cash and the Loan Agreement has been terminated, provided, however, that if the
maturity of the Senior Debt has been extended beyond March ___, 2007 (the first
date on which the Subordinated Debt begins to amortize), the regularly scheduled
repayments of principal of the Subordinated Debt (but not prepayments) may be
made by the Borrower in accordance with the terms of the Subordinated Agreement
as in effect on the date hereof and delivered to the Senior Bank, provided that
on the due date of any such principal payment, and after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing.

     (i) In the event that a Default or Event of Default has occurred and is
continuing under Section 6.1(i) of the Loan Agreement (a "Payment Default") and
the Subordinated Creditors shall have received notice of such Default or Event
of Default (or otherwise have actual knowledge thereof), no payments shall be
made by any Loan Party or accepted by either Subordinated Creditor until the
earlier to occur of (x) the date on which the Senior Debt is paid in full in
cash and the Loan Agreement is terminated and (y) the date, if any, on which the
Senior Bank has given written notice to the Subordinated Creditors that such
Default or Event of Default is cured or waived (a "Cure Notice"), so long as at
such date (A) the Subordinated Creditors have not been notified (or do not have
actual knowledge) of any additional Default or Event of Default under the Loan
Agreement is continuing, (B) there is not an Other Default Standstill Period
(defined below) in effect, (C) the Senior Bank has not accelerated the Revolving
Loans or commenced an action, suit, or other legal proceeding against any Loan
Party or its property, or (D) the Senior Bank shall not be prosecuting the
Senior Bank's rights under the Uniform Commercial Code or other applicable law
to foreclose and realize upon the Collateral securing the Obligations (all such
conditions being referred to herein as the "Payment Cure Conditions"; and each
period of time during which such Payments shall not be permitted to be made or
accepted as a result of a Payment Default referred to as a "Payment Standstill
Period").

     (ii) In the event that a Default or Event of Default other than a Payment
Default (an "Other Default") has occurred and is continuing, the Senior Bank may
(but shall not be obligated to) give a standstill notice to the Subordinated
Creditors (a "Standstill Notice"), and upon the giving of such Standstill
Notice, no payments on the Subordinated Debt shall be made or accepted until the
earlier to occur of (x) the date which is 180 days after the date upon which
such Standstill Notice has been given, or (y) the date, if any, on which the
Senior Bank has given a Cure Notice to the Subordinated Creditors that such

                                       -4-
<PAGE>
Other Default has been cured or waived, so long as at such date, (A) no Payment
Default has occurred and is continuing, (B) the Senior Bank has not accelerated
any of the Revolving Loans or commenced an action, suit, or other legal
proceeding against any Loan Party or its property, or (C) the Senior Bank shall
not be prosecuting the Senior Bank's rights under the Uniform Commercial Code or
other applicable law to foreclose and realize upon the Collateral securing the
Senior Debt (each period of time during which such payments shall not be
permitted to be made or accepted as a result of a Default or Event of Default
other than a Payment Default referred to as an "Other Default Standstill
Period"). At no time during the term of this Agreement shall such Other Default
Standstill Periods pursuant to this clause (ii) be in effect for more than an
aggregate of 180 days in any consecutive 360-day period. However, if (and on
each occasion that) a Subordinated Creditors Default (as hereinafter defined)
shall occur solely as a result of the breach of a financial covenant thereunder
(a "Financial Covenant Default"), and if at the time of such occurrence one or
more Other Default Standstill Periods have already been in effect for an
aggregate of 180 days, then, notwithstanding the immediately preceding sentence,
the Senior Bank shall be permitted to invoke an additional Other Default
Standstill Period of 30 days with respect to such Financial Covenant Default, by
giving a Standstill Notice to the Subordinated Creditors.

     Interest, if any, in excess of 12.50% per annum accrued on the Subordinated
Debt, or premium, if any, accrued on the Subordinated Debt, shall not be paid
until all Senior Debt has been paid in full in cash and the Loan Agreement has
been terminated (it being understood that invoking a default or overdue rate set
forth in the Subordinated Agreement shall not be restricted hereunder, provided
that its payment is subject to the terms of this Agreement).

          (d) The Subordinated Creditors shall, simultaneously with the
execution and delivery of this Agreement, (i) cause a conspicuous legend to be
placed on the Subordinated Agreement, satisfactory in all respect to the Senior
Bank, regarding the subordination reflected herein, and (ii) deliver executed
copies of the Subordinated Agreement to the Senior Bank.

     Section 3. Enforcement.

          (a) The Subordinated Creditors will not take or omit to take any
action or assert any claim with respect to the Subordinated Debt or otherwise
which is inconsistent with the provisions of this Agreement. Without limiting
the foregoing, until the Senior Debt has been paid in full in cash and the Loan
Agreement has been terminated, the Subordinated Creditors will not assert,
collect or enforce the Subordinated Debt or any part thereof or take any action
to foreclose or realize upon the Subordinated Debt or any part thereof or
enforce any of the Subordinated Documents except to the extent (but only to such
extent) that the commencement of a legal action may be required to toll the
running of any applicable statute of limitation. Notwithstanding the foregoing,
upon the occurrence of an event of default under the Subordinated Documents (a
"Subordinated Creditors Default"), the Subordinated Creditors may take
enforcement

                                       -5-
<PAGE>
action against the Borrowers upon the earlier to occur of (x) 15 Business Days
after the acceleration of the Senior Debt, and (y) the date which is 180 days
after the date upon which such Subordinated Creditors Default has occurred so
long as the Subordinated Creditors have provided written notice to the Senior
Bank of their intention to commence enforcement action at least 15 Business Days
(but no more than 60) days prior to such commencement; provided, however, in the
case of clauses (x) and (y) above, if any acceleration of the Senior Debt is
rescinded by the Senior Bank, then any acceleration by the Subordinated
Creditors shall be rescinded immediately and all other enforcement action, if
any, being taken by the Subordinated Creditors in connection with such
acceleration shall terminate immediately, if based solely on the acceleration of
the Senior Debt, and provided, further, that the Subordinated Creditors shall at
no time and under no circumstances whatsoever be permitted to take enforcement
action with respect to the Junior Liens (defined below). Until the Senior Debt
has been paid in full in cash and the Loan Agreement has been terminated, the
Subordinated Creditors shall not have any right of subrogation, reimbursement,
restitution, contribution or indemnity arising from any payments made by the
Subordinated Creditors or on account of the Subordinated Debt to the Senior Bank
or by virtue of this Agreement whatsoever from any assets of any Loan Party or
any guarantor of or provider of collateral security for the Senior Debt (which
right the Subordinated Creditors may assert following such payment in full).
Each Subordinated Creditor further waives any and all rights with respect to
marshaling. In case any Subordinated Debt is declared due and payable because of
the occurrence of a default under circumstances when the terms of Section 3(b)
are not applicable, the holders of such Subordinated Debt shall not be entitled
to receive any payment or distribution in respect thereof until all Senior Debt
at the time outstanding shall have been paid in full in cash and the Loan
Agreement shall been terminated. Upon the occurrence of a Subordinated Creditors
Default, the Borrower and the Subordinated Creditors will give prompt notice in
writing of such happening to the Senior Bank.

          (b) The Subordinated Creditors will not commence or join with any
other creditor or creditors of any Loan Party in commencing any bankruptcy,
reorganization, insolvency or similar proceedings against any Loan Party. In the
event of any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to any Loan Party
or its property, any proceeding for the liquidation, dissolution or other
winding-up of any Loan Party, voluntary or involuntary, and whether or not
involving insolvency or bankruptcy proceedings, any general assignment by any
Loan Party for the benefit of creditors, or any distribution, division,
marshaling or application of any of the properties or assets of any Loan Party
or the proceeds thereof to creditors, voluntary or involuntary, and whether or
not involving legal proceedings, then and in any such event:

          (i) all Senior Debt shall first be paid in full in cash (including all
     principal, premium, if any, and interest) before any payment or
     distribution of any character, whether in cash, securities or other
     property (other than securities of the Borrower or any other corporation
     provided for by a plan of reorganization or readjustment or similar plan,
     the payment of which is subordinated, at least to the

                                       -6-
<PAGE>
     extent provided in this Agreement with respect to Subordinated Debt, to the
     payment of all Senior Debt at the time outstanding and to any securities
     issued in respect thereof under any such plan), shall be made in respect of
     any Subordinated Debt;

          (ii) any payment or distribution of any character, whether in cash,
     securities or other property, which would otherwise (but for the terms
     hereof) be payable or deliverable in respect of any Subordinated Debt,
     shall be paid or delivered directly to the Senior Bank, for application to
     the payment of the Senior Debt, until all Senior Debt shall have been paid
     in full in cash and the Loan Agreement shall have been terminated, and the
     holders of the Subordinated Debt at the time outstanding irrevocably
     authorize, empower and direct all receivers, trustees, liquidators,
     conservators, fiscal agents and others having authority in the premises to
     effect all such payments and deliveries;

          (iii) each holder of the Subordinated Debt at the time outstanding
     hereby irrevocably authorizes and empowers the Senior Bank to demand, sue
     for, collect and receive of all such payments and distributions and to
     receipt therefor; and

          (iv) the holders of the Subordinated Debt shall execute and deliver to
     the Senior Bank, when and as deemed appropriate by the Senior Bank
     hereunder, all such further instruments confirming the above authorization,
     and all such powers of attorney, proofs of claim, assignments of claim and
     other instruments, and shall take all such other action, as may be
     requested by the Senior Bank to enforce all claims upon or in respect of
     the Subordinated Debt as provided herein.

          (c) For all purposes of this Agreement, Senior Debt shall not be
deemed to have been paid in full unless (i) the holders thereof shall have
received cash equal to the amount of Senior Debt at the time outstanding and the
Loan Agreement shall have been terminated, or (ii) the holders of the Senior
Debt otherwise consent to the termination of the Loan Agreement.

          (d) No present or future holder of Senior Debt shall be prejudiced in
the right to enforce subordination of the Subordinated Obligations by any act or
failure to act on the part of any Loan Party or the Subordinated Creditor.

          (e) It is understood and agreed that the Subordinated Creditors shall
retain the right to vote all or any part of the Subordinated Debt for purposes
of (among other things) accepting or rejecting any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension, provided
that neither Subordinated Creditor shall vote with respect to any such plan or
take any other action in any way so as to (i) contest the validity of any Senior
Debt or any collateral therefor or guaranties thereof, (ii) contest the relative
rights and duties of any holders of any Senior Debt established in any
instruments or agreements creating or evidencing any of the

                                       -7-
<PAGE>
Senior Debt with respect to any of such collateral or guaranties, (iii) contest
such Subordinated Creditor's obligations and agreements set forth in this
Agreement, or (iv) accept or confirm any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension that the
Senior Bank opposes or votes against. Upon the failure of the Subordinated
Creditors to file appropriate proofs of claim, serve such proofs of claim upon
the Senior Bank or take any other appropriate action within 20 days prior to the
date (after giving effect to any extension) such proof of claim is due or other
action needs to be taken, the Subordinated Creditors each irrevocably authorize
and empower the Senior Bank to file such claims or take such actions.

          (f) It is understood and agreed that, upon commencement of enforcement
action by the Senior Bank against the Borrower under the Bank Agreements, the
Subordinated Creditors shall have the right, but not the obligation, to purchase
all, but not less than all, of the Senior Debt from the Senior Bank in cash and
assume all rights and obligations of the Senior Bank under the Bank Agreements,
provided that any such purchase must be on terms and conditions (including
amount) satisfactory in all respects to the Senior Bank.

     Section 4. Payments Held in Trust.

          (a) Each Subordinated Creditor will hold in trust and immediately pay
over to the Senior Bank, in the same form of payment received, with appropriate
endorsements, for application to the Senior Debt, any cash amount that any Loan
Party pays to such Subordinated Creditor with respect to the Subordinated Debt
(except for those payments expressly permitted to be made pursuant to Section
2(c) above), and will hold in trust as collateral for the Senior Debt any other
assets of any Loan Party that either Subordinated Creditor may receive with
respect to Subordinated Debt. Any such payments or distributions so paid over to
the Senior Bank by the Subordinated Creditors in accordance with this clause (a)
shall not constitute payments with respect to the Subordinated Debt and as such
will not reduce the outstanding amount of the Subordinated Debt.

          (b) If any payment or distribution of any character (whether in cash,
securities or other property) or any security shall be received by any holder of
any of the Subordinated Debt in contravention of any of the terms of this
Agreement, such payment or distribution or security shall be held in trust for
the benefit of, and shall be paid over or delivered and transferred to the
Senior Bank, for application to the payment of all Senior Debt remaining unpaid,
to the extent necessary to pay all such Senior Debt in full. In the event of the
failure of any holder of any of the Subordinated Debt to endorse or assign any
such payment, distribution or security, the Senior Bank is hereby irrevocably
authorized to endorse or assign the same. Any such payments or distributions so
paid over to the Senior Bank by the Subordinated Creditors in accordance with
this clause (b) shall not constitute payments with respect to the Subordinated
Debt and as such will not reduce the outstanding amount of the Subordinated
Debt.

                                      -8-
<PAGE>
     Section 5. Defense to Enforcement. If the Subordinated Creditors, in
contravention of the terms of this Agreement, shall commence, prosecute or
participate in any suit, action or proceeding against any Loan Party, then the
Senior Bank may intervene and interpose such defense or plea in its name or in
the name of such Loan Party. If either Subordinated Creditor, in contravention
of the terms of this Agreement, shall attempt to collect any of the Subordinated
Debt or enforce any of the Subordinated Documents, then the Senior Bank may, by
virtue of this Agreement, restrain the enforcement thereof in the name of the
Senior Bank or in the name of the Loan Parties. If either Subordinated Creditor,
in contravention of the terms of this Agreement, obtains any cash or other
assets of any Loan Party as a result of any administrative, legal or equitable
actions, or otherwise, the Subordinated Creditors jointly and severally agree
forthwith to pay, deliver and assign to the Senior Bank, with appropriate
endorsements, any such cash for application to the Senior Debt and any such
other assets as collateral for the Senior Debt. Any such payments or
distributions so paid over to the Senior Bank by the Subordinated Creditors in
accordance with this Section 5 shall not constitute payments with respect to the
Subordinated Debt and as such will not reduce the outstanding amount of the
Subordinated Debt.

     Section 6. Liens. (a) Neither Subordinated Creditor shall have or claim any
security interest, lien, claim, right or other Encumbrance in or on any property
of any Loan Party, other than the Subordinated Creditors may be named as loss
payees on up to $2,000,000 of key man life insurance held by the Loan Parties
(whereupon Citizens Capital, Inc. shall cease to be a loss payee thereunder) and
as expressly permitted by Section 5.6 of the Loan Agreement (the "Junior
Liens"). The Senior Debt, and all obligations of the Loan Parties under the Loan
Agreement and the other Bank Agreements and any and all other documents and
instruments evidencing or creating the Senior Debt, and all guaranties,
mortgages, security agreements, pledges and other collateral guarantying or
securing the Senior Debt or any part thereof shall be senior to the Subordinated
Debt, the Junior Liens and all obligations of the Loan Parties under all of the
Subordinated Documents irrespective of the time of the execution, delivery or
issuance of any thereof or the filing or recording for perfection of any thereof
or the filing of any financing statements of continuation statement relating to
any thereof or the time, order or method of attachment, perfection, filing or
recording of any Encumbrance. In addition, each Subordinated Creditor hereby
agrees that, unless and until all Senior Debt shall have been paid in full in
cash and the Loan Agreement shall have been terminated, it shall not at any time
enforce or realize upon the Junior Liens. Each Subordinated Creditor hereby
agrees, upon request of the Senior Bank at any time and from time to time, to
execute such other documents or instruments as may be reasonably requested by
the Senior Bank further to evidence of public record or otherwise the senior
priority of the Senior Debt as contemplated by this Agreement, and further
agrees that the Senior Bank shall have the right to control the filing of all
financing statements naming the Subordinated Creditors (or either of them) as a
secured party. Each Subordinated Creditor further agrees to maintain on its
books and records such notations as the Senior Bank may reasonably request to
reflect the subordination contemplated by this Agreement and to perfect or
preserve the rights of the

                                       -9-
<PAGE>
Senior Bank hereunder. A copy of this Agreement may be filed as a financing
statement in any Uniform Commercial Code recording office.

     (b) Without limiting any of the rights of the Senior Bank under the Loan
Agreement, the other Bank Agreements or applicable law, in the event that the
Senior Bank releases any collateral for the Senior Debt in connection with a
sale, transfer or other disposition of same, which collateral also is subject to
the Junior Lien, such collateral shall thereupon be deemed to have been
automatically released from the Subordinated Agreement and Junior Lien in favor
of the Subordinated Creditor, provided that any net proceeds of any sale or
disposition of collateral in connection with such release shall be applied to
the Obligations.

     Section 7. Senior Bank's Freedom of Dealing. Each Subordinated Creditor
agrees, with respect to the Senior Debt and any and all collateral therefor and
guaranties thereof, that the Borrower and the Senior Bank may agree to increase
the amount of the Obligations under (and as defined in) the Bank Agreements
(subject to the Maximum Senior Debt limitations set forth in the definition of
Senior Debt contained in Section 1 hereof), and that the Borrower and the Senior
Bank may otherwise modify the terms of any of the Senior Debt, and the Senior
Bank may grant extensions of the time of payment or performance to and make
compromises, including releases of collateral or guaranties, and settlements
with the Borrower and all other persons, in each case without the consent of the
Subordinated Creditors or the Borrower and without affecting the agreements of
the Subordinated Creditors or the Loan Parties contained in this Agreement. The
terms of this Agreement, the subordination effected hereby and the rights of the
holders of the Senior Debt shall not be affected by any amendment of or addition
or supplement to any Senior Debt or any instrument or agreement relating
thereto, any exercise or non-exercise of any right, power or remedy under or in
respect of any Senior Debt or any instrument or agreement relating thereto, or
any waiver, consent, release indulgence, extension, renewal, modification, delay
or other action, inaction or omission, in respect of any Senior Debt or any
instrument or agreement relating thereto or any security therefor or guaranty
thereof, whether or not any holder of any Subordinated Debt shall have had
notice or knowledge of any of the foregoing. Notwithstanding the foregoing, the
Senior Bank shall not (i) increase the interest margin with respect to the
Senior Debt by more than 200 basis points above the highest margin specified in
the pricing grid, except in connection with the imposition of a default rate of
interest in accordance with the terms of the Loan Agreement, or (ii) extend the
final maturity of the Senior Debt by more than 60 days without the consent of
the Subordinated Creditors, such consent not to be unreasonably withheld or
delayed.

     Section 8. Modification or Sale of the Subordinated Debt. The Subordinated
Agreement may be amended or modified without the consent of the Senior Bank,
except for any of the following amendments or modifications, which will require
the Senior Bank's prior written consent:

     (i)  any increase in the principal amount of the Subordinated Debt;

                                      -10-
<PAGE>
     (ii) any shortening of the maturity of the Subordinated Debt (including by
          way of acceleration, except as otherwise provided herein) or any
          change in any of the prepayment or repurchase provisions, if any, or
          any other alteration of the repayment provisions of the Subordinated
          Debt in any respect;

     (iii) any increase in the interest rate, default rate, fees or premium
          applicable to the Subordinated Debt;

     (iv) any amendment to any covenants or events of default contained in the
          Subordinated Documents so as to make them more restrictive;

     (v)  the addition of any covenants or events of default to the Subordinated
          Debt Documents (including the addition of a cross-default of the
          Subordinated Debt to a Default or Event of Default under the Senior
          Debt, which such cross-default shall not be permitted);

     (vi) the requirement of any lien or other security for the Subordinated
          Debt (other than the Junior Liens expressly permitted hereunder and
          subject to the limitations contained herein); and

     (vii) any change in any Subordinated Agreement that could reasonably be
          expected to materially increase either Subordinated Creditor's rights
          in relation to those of the Senior Bank or could reasonably be
          expected to adversely affect the Senior Bank or its rights and
          remedies against any Loan Party or the Senior Bank.

     Further, neither Subordinated Creditor will sell, transfer, pledge, assign,
hypothecate or otherwise dispose of any or all of the Subordinated Debt to any
person other than to the other Subordinated Creditor or to a person (i) that is
a legal entity that controls, or is controlled by, or is under common control
with, such Subordinated Creditor, (ii) iStar Financial, Inc., as lender to the
Subordinated Purchaser, or (iii) who is reasonably satisfactory to the Senior
Bank, such approval not to be unreasonably withheld or delayed, provided that,
in each case, such assignee shall agree in a writing, satisfactory in form and
substance to the Senior Bank, to become a party hereto and to succeed to the
rights and to bound by all of the obligations of the Subordinated Creditors
hereunder. Except with respect to dispositions to iStar Financial, Inc. by the
Subordinated Creditors (which notice shall be provided by the Subordinated
Creditors with reasonable promptness not later than the closing of such
disposition), in the case of any such disposition by either Subordinated
Creditor, such Subordinated Creditor will notify the Senior Bank at least 20
days prior to the date of any of such intended disposition.

     Section 9. Borrower's Obligations Absolute. Nothing contained in this
Agreement shall impair, as between the Borrower and the Subordinated Creditors,
the obligation of the Borrower to pay to the Subordinated Creditors all amounts
payable in respect of

                                      -11-
<PAGE>
the Subordinated Debt as and when the same shall become due and payable in
accordance with the terms thereof, all, however, subject to the rights of the
Senior Bank and the restrictions on the Subordinated Creditors as set forth in
this Agreement.

     Section 10. Termination of Subordination. This agreement shall continue in
full force and effect, and the obligations and agreements of the Subordinated
Creditors and the Loan Parties hereunder shall continue to be fully operative,
until all of the Senior Debt shall have been paid and satisfied in full in cash
and such full payment and satisfaction shall be final and not voidable. To the
extent that any Loan Party or any guarantor of or provider of collateral for the
Senior Debt makes any payment on the Senior Debt that is subsequently
invalidated, declared to be fraudulent or preferential or set aside or is
required to be repaid to a trustee, receiver or any other party under any
Bankruptcy, insolvency or reorganization act, state or federal law, common law
or equitable cause, except to the extent that any such payment is found by a
final, non-appealable judgment of a court to arise from the willful misconduct
of the Senior Bank (such payment being hereinafter referred to as a "Voided
Payment"), then to the extent of such Voided Payment, that portion of the Senior
Debt that had been previously satisfied by such Voided Payment shall be revived
and continue in full force and effect as if such Voided Payment had never been
made. In the event that a Voided Payment is recovered from the Senior Bank, an
Event of Default shall be deemed to have existed and to be continuing under the
Loan Agreement from the date of the Senior Bank's initial receipt of such Voided
Payment until the full amount of such Voided Payment is restored to the Senior
Bank. During any continuance of any such Event of Default, this Agreement shall
be in full force and effect with respect to the Subordinated Debt. To the extent
that either Subordinated Creditor has received any payments with respect to the
Subordinated Debt subsequent to the date of the Senior Bank's initial receipt of
such Voided Payment and such payments have not been invalidated, declared to be
fraudulent or preferential or set aside or are required to be repaid to a
trustee, receiver, or any other party under any Bankruptcy act, state or federal
law, common law or equitable cause, the Subordinated Creditors shall be
obligated and hereby agree that any such payment so made or received shall be
deemed to have been received in trust for the benefit of the Senior Bank, and
the Subordinated Creditors hereby agree to pay to the Senior Bank, upon demand,
the full amount so received by such Subordinated Creditor during such period of
time to the extent necessary fully to restore to the Senior Bank the amount of
such Voided Payment. Upon the payment and satisfaction in full in cash of all of
the Senior Debt, which payment shall be final and not voidable, this Agreement
will automatically terminate without any additional action by any party hereto.

     Section 11. Waivers, etc. Except as expressly provided herein, the
provisions contained herein and the undertakings and agreements hereunder shall
not be affected by: (a) any rescission, waiver, amendment or modification of any
agreement referred to herein; (b) any exercise or nonexercise of any right,
remedy, power or privilege (including, without limitation, any sale, release or
exchange of any security) under in respect of any such agreement or applicable
law, including, without limitation, any

                                      -12-
<PAGE>
waiver, consent, extension, indulgence or other action or inaction in respect of
any thereof; or (c) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding of or affecting any
Loan Party. Except as required hereby, proceeds from any collateral held by or
for the benefit of the Senior Bank may be applied to payment of any liabilities
under the Bank Agreements, as the Senior Bank shall determine in its sole
discretion.

     Section 12. Notices. All notices and other communications which are
required and may be given pursuant to the terms of this Agreement shall be in
writing and shall be sufficient and effective in all respects if telecopied or
delivered (including by any commercial delivery service) or mailed by registered
or certified mail, postage prepaid, as follows:

     (a)  If to the Senior Bank, to it at: Fleet National Bank, One Hundred
          Federal Street, Boston, Massachusetts 02110, Attention: John F. Lynch,
          with a copy to Philip A. Herman, Esq., Goulston & Storrs, 400 Atlantic
          Avenue, Boston, Massachusetts 02110-3333;

     (b)  If to the Borrower, to it at: Dover Saddlery, Inc., 525 Great Road,
          Littleton, Massachusetts 01460, Attention: Stephen L. Day, with a copy
          to Preti, Flaherty, Beliveau, Pachios & Haley, LLC, 57 North Main
          Street, Concord, New Hampshire 03302; and

     (c)  If to the Subordinated Creditors, to them at: c/o Patriot Capital
          Funding, Inc., Sixty One Wilton Road, Westport, Connecticut 06880,
          Attention: Timothy W. Hassler, with a copy to Edwards & Angell, LLP,
          Three Stamford Plaza, 301 Tresser Boulevard, Stamford, Connecticut
          06901, Attention: Thomas J. Freed, Esq.;

or such other address or addresses as any party hereto shall have designated
have designated by written notice to the other parties hereto. Notices shall be
deemed given and effective upon the earlier to occur of (i) the fifth day
following deposit thereof in the U.S. mail or (ii) receipt by the party to whom
such notice is directed.

     Section 13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
(without giving effect to provisions relating to conflicts of law). Any legal
action or proceeding arising out of or relating to this Agreement or any
Obligation may be instituted in the courts of the Commonwealth of Massachusetts
or of the United States of America for the District of Massachusetts, and each
of the Senior Bank, the Borrower and the Subordinated Creditors hereby
irrevocably submits to the jurisdiction of each such court in any such action or
proceeding, provided, however, that the foregoing shall not limit the Senior
Bank's rights to bring any legal action or proceeding in any other appropriate
jurisdiction in which event, at the Senior Bank's option, the laws of such
jurisdiction or of the Commonwealth of Massachusetts shall apply. Personal
jurisdiction over each of the

                                      -13-
<PAGE>
Senior Bank, the Borrower and the Subordinated Creditors may be obtained by the
mailing (postage prepaid) of a summons or similar legal document to each of the
Senior Bank, the Borrower and the Subordinated Creditors at their respective
addresses for notices under this Agreement.

     Section 14. Waiver of Jury Trial. EACH OF THE SENIOR BANK, THE SUBORDINATED
CREDITORS AND THE LOAN PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER WRITTEN OR VERBAL) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER
INTO THIS AGREEMENT AND FOR THE SENIOR BANK TO MAKE LOANS AND EXTEND CREDIT TO
THE BORROWER. EXCEPT AS PROHIBITED BY LAW, THE SENIOR BANK, THE SUBORDINATED
CREDITORS AND THE LOAN PARTIES EACH HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES. THE SENIOR BANK, THE SUBORDINATED CREDITORS
AND THE BORROWER EACH (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(B) ACKNOWLEDGES THAT EACH OTHER PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.

     Section 15. Further Assurances. The parties agree to do, make, execute and
deliver all such additional and further acts, things, assurances and instruments
as any party may reasonably require to carry into effect the provisions and
intent of this Agreement, including such documents as may be reasonably
requested by any bank or banks which re-fund or refinance any of the Senior
Debt.

     Section 16. Miscellaneous. This Agreement may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement, it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against which enforcement is sought. The Senior Bank may, in its sole and
absolute discretion, waive any provisions of this Agreement benefiting the
Senior Bank; provided, however, that such waiver shall be effective only if in
writing and signed by the Senior Bank and shall be limited to the specific
provision or provisions expressly so waived. This Agreement shall be binding

                                      -14-
<PAGE>
upon the respective successors and assigns of the Subordinated Creditors and the
Borrower and shall inure to the benefit of the Senior Bank, the Senior Bank's
respective successors and assigns, any bank refunding or refinancing any of the
Senior Debt and their respective successors and assigns, but shall not otherwise
create any rights or benefits for any third party. In the event that any lender
or lenders refund or refinance any of the Senior Debt, the terms "Loan
Agreement", "Bank Agreements", "Event of Default" and the like shall refer
mutatis mutandis to the agreements and instruments in favor of such lender or
lenders and to the related definitions contained therein.

                      [Signatures appear on following page]

                                      -15-
<PAGE>
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                        The Senior Bank:

                                        FLEET NATIONAL BANK

                                        By: /s/ Illegible
                                            ------------------------------------
                                        Title: SENIOR VICE PRESIDENT

                                        The Subordinated Creditors:

                                        PATRIOT CAPITAL FUNDING, INC.

                                        By: /s/ Illegible
                                            ------------------------------------
                                        Title: Managing Director

                                        WILTON FUNDING LLC

                                        By: /s/ Illegible
                                            ------------------------------------
                                        Title: Manager

                                        The Borrower:

                                        DOVER SADDLERY, INC.

                                        By: /s/ Illegible
                                            ------------------------------------
                                        Title: President

                                        [Signatures continue on next page]

                                      -16-
<PAGE>
Acknowledged and Agreed:

DOVER SADDLERY, INC. (a Delaware
corporation)

By: /s/ Stephen L. Day
    ---------------------------------
Title: President

SMITH BROTHERS, INC.

By: /s/ Stephen L. Day
    ---------------------------------
Title: President

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