Document:

NAVB 06.30.2014 EX10-5

Exhibit 10.5
Execution Version

SUBORDINATION AGREEMENT
This Subordination Agreement (the “Agreement”) is made as of July 15, 2014, by and between R-NAV, LLC (“Creditor”) and OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314, in its capacity as Collateral Agent (as hereinafter defined) for the Lenders (as hereinafter defined).
Recitals
A.    Pursuant to a Loan and Security Agreement (such agreement as it may be amended from time to time, the “Loan Agreement”), dated as of March 4, 2014, among OXFORD FINANCE LLC (“Oxford;” in its capacity as Collateral Agent for the Lenders, the “Collateral Agent”), the lenders from time to time a party thereto (the “Lenders”), including, without limitation, Oxford, NAVIDEA BIOPHARMACEUTICALS, INC. (“Borrower”) has requested and/or obtained certain loans or other credit accommodations from Lenders to Borrower which are or may be from time to time secured by assets and property of Borrower.
B.    Creditor has extended loans or other credit accommodations to Borrower, and/or may extend loans or other credit accommodations to Borrower from time to time.
C.    In order to induce Lenders to extend credit to Borrower and, at any time or from time to time, at Lenders’ option, to make such further loans, extensions of credit, or other accommodations to or for the account of Borrower, or to purchase or extend credit upon any instrument or writing in respect of which Borrower may be liable in any capacity, or to grant such renewals or extension of any such loan, extension of credit, purchase, or other accommodation as Lenders may deem advisable, Creditor is willing to subordinate:  (i) all of Borrower’s indebtedness to Creditor (including, without limitation, principal, premium (if any), interest, fees, charges, expenses, costs, professional fees and expenses, and reimbursement obligations), whether presently existing or arising in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and obligations to the Collateral Agent and/or the Lenders; and (ii) all of Creditor’s security interests, if any, to all security interests in the Borrower’s property in favor of the Collateral Agent and/or the Lenders.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1.Creditor hereby acknowledges and agrees that (i) Creditor does not have any lien on or security interest in any property of Borrower, whether now owned or hereafter acquired, including, without limitation, the “Collateral” as defined in the Loan Agreement, (ii) Borrower is prohibited from granting to the Creditor any lien on, security interest in, or negative pledge with respect to, any property of Borrower, whether now owned or hereafter acquired, including, without limitation, the Collateral and (iii) the Creditor shall not take any lien on, security interest in, or negative pledge with respect to, any property of Borrower, whether now owned or hereafter acquired, including, without limitation, the Collateral.  In furtherance of the foregoing, Creditor hereby subordinates to the Collateral Agent and the Lenders any security interest or lien that Creditor may have in any property of Borrower, including without limitation, the Collateral as defined in the Loan Agreement.  Notwithstanding the respective dates of attachment or perfection of any security interest of Creditor and the security interest of the Collateral Agent and the Lenders, the lien and security interest of the Collateral Agent and the Lenders in the property of Borrower, whether now owned or hereafter acquired, including, without limitation, the Collateral, shall at all times be senior to the lien and security interest of Creditor.
2.    All Subordinated Debt is subordinated in right of payment to all obligations of Borrower to the Collateral Agent and the Lenders now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding, and all obligations under the Loan Agreement (the “Senior Debt”).
3.    Creditor will not demand or receive from Borrower (and Borrower will not pay to Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the Subordinated Debt or any property of the Borrower, whether now owned or hereafter acquired, including, without limitation, the Collateral, nor will Creditor accelerate the Subordinated Debt, or commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower, until such time as (i) the Senior Debt is indefeasibly paid in full in cash, and (ii) the Lenders have no commitment or obligation to lend any further funds to Borrower, and (iii) all financing agreements among the Collateral Agent and the Lenders and Borrower are terminated.  The foregoing notwithstanding, provided that an Event of Default (as defined in the Loan Agreement) has not occurred and is not continuing and would not exist immediately after such payment, Creditor shall be entitled to receive each regularly scheduled, non-accelerated (i) payment of non-default interest plus (ii) payment of principal, provided that the aggregate amount of principal payments shall not exceed Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars ($666,666), as and when due and payable in accordance with the terms of that certain Promissory Note in the principal amount of Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars ($666,666) dated as of July __, 2014 granted by Borrower in favor of R-NAV, LLC, as in effect on the date hereof or as modified with the written consent of the Collateral Agent and the Lenders.  Nothing in the foregoing paragraph shall prohibit Creditor from converting all or any part of the Subordinated Debt into equity securities of Borrower which do not have any call, put or other conversion features that would obligate Borrower to pay any money (including the payment of any dividends or other distributions for so long as the Senior Debt remains outstanding) or deliver any other securities or consideration to the holder. 
4.    Creditor shall hold in trust for the Collateral Agent and the Lenders and promptly deliver to the Collateral Agent in the form received (except for endorsement or assignment by Creditor where required by the Collateral Agent), for application to the Senior Debt, any payment, distribution, security or proceeds received by Creditor with respect to the Subordinated Debt other than in accordance with this Agreement.
5.    In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and the Collateral Agent’s and the Lenders’ claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to Creditor.
6.    Until the Senior Debt is indefeasibly paid in full in cash and Lenders’ arrangements to lend any funds to Borrower have been terminated, Creditor irrevocably appoints the Collateral Agent as Creditor’s attorney-in-fact, and grants to the Collateral Agent a power of attorney with full power of substitution, in the name of Creditor or in the name of the Collateral Agent and/or the Lenders, for the use and benefit of the Collateral Agent and the Lenders, without notice to Creditor, to perform at the Collateral Agent’s  option the following acts in any bankruptcy, insolvency or similar proceeding involving Borrower:
(i)    To file the appropriate claim or claims in respect of the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 30 days before the expiration of the time to file claims in such proceeding and if the Collateral Agent elects, in its sole discretion, to file such claim or claims;
(ii)    To accept or reject any plan of reorganization or arrangement on behalf of Creditor and to otherwise vote Creditor’s claims in respect of any Subordinated Debt in any manner that the Collateral Agent deems appropriate for the enforcement of its rights hereunder.
7.    Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement, in substantially the form attached hereto as Annex I.  By the execution of this Agreement, Creditor hereby authorizes the Collateral Agent and the Lenders to amend any financing statements filed by Creditor against Borrower as follows: “In accordance with a certain Subordination Agreement by and among the Secured Party, the Debtor and Oxford Finance LLC, in its capacity as Collateral Agent, the Secured Party has subordinated any security interest or lien that Secured Party may have in any property of the Debtor to the security interest of Oxford Finance LLC and the Lenders identified therein in all assets of the Debtor, notwithstanding the respective dates of attachment or perfection of the security interest of the Secured Party and Oxford Finance LLC and the Lenders.”
8.    Neither the Borrower nor the Creditor may amend the terms of any Subordinated Debt without the prior written consent of the Collateral Agent and the Lenders.  Without limiting the foregoing, no amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of any security interest or lien that Creditor may have in any property of Borrower.  By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.  The Collateral Agent and the Lenders shall have the sole and exclusive right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of any of the property or assets of the Borrower, including, without limitation, the Collateral, except in accordance with the terms of the Senior Debt. Upon written notice from the Collateral Agent of the Collateral Agent’s and the Lenders’ agreement to release its lien on all or any portion of the Collateral in connection with the sale, transfer or other disposition thereof by the Collateral Agent and the Lenders (or by Borrower with consent of the Collateral Agent and the Lenders),  Creditor shall be deemed to have also, automatically and simultaneously, released any lien or security interest on such Collateral, and Creditor shall upon written request by the Collateral Agent, immediately take such action as shall be necessary or appropriate to evidence and confirm such release.  All proceeds resulting from any such sale, transfer or other disposition shall be applied first to the Senior Debt until payment in full thereof, with the balance, if any, to the Subordinated Debt, or to any other entitled party.  If Creditor fails to release any lien or security interest as required hereunder, Creditor hereby appoints the Collateral Agent as attorney in fact for Creditor with full power of substitution to release Creditor’s liens and security interests as provided hereunder.  Such power of attorney being coupled with an interest shall be irrevocable. 
9.    All necessary action on the part of the Creditor, its officers, directors, partners, members and shareholders, as applicable, necessary for the authorization of this Agreement and the performance of all obligations of Creditor hereunder has been taken.  This Agreement constitutes the legal, valid and binding obligation of Creditor, enforceable against Creditor in accordance with its terms.  The execution, delivery and performance of and compliance with this Agreement by Creditor will not (i) result in any material violation or default of any term of any of the Creditor’s charter, formation or other organizational documents (such as Articles or Certificate of Incorporation, bylaws, partnership agreement, operating agreement, etc.) or (ii) violate any material applicable law, rule or regulation.  
10.    If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by the Collateral Agent or the Lenders for any reason (including, without limitation, the bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Creditor shall immediately pay over to the Collateral Agent all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.  At any time and from time to time, without notice to Creditor, the Collateral Agent and the Lenders may take such actions with respect to the Senior Debt as the Collateral Agent and the Lenders, in their sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person.  No such action or inaction shall impair or otherwise affect the Collateral Agent’s and the Lenders’ rights hereunder.  
11.    This Agreement shall bind any successors or assignees of Creditor and shall benefit any successors or assigns of the Collateral Agent and the Lenders.  This Agreement shall remain effective until terminated in writing by the Collateral Agent. This Agreement is solely for the benefit of Creditor and the Collateral Agent and the Lenders and not for the benefit of Borrower or any other party.  Creditor further agrees that if Borrower is in the process of refinancing any portion of the Senior Debt with a new lender, and if the Collateral Agent and/or the Lenders makes a request of Creditor, Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.
12.    Creditor hereby agrees to execute such documents and/or take such further action as the Collateral Agent and the Lenders may at any time or times reasonably request in order to carry out the provisions and intent of this Agreement, including, without limitation, ratifications and confirmations of this Agreement from time to time hereafter, as and when requested by the Collateral Agent.
13.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
14.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws principles.  Creditor and the Collateral Agent submit to the exclusive jurisdiction of the state and federal courts located in New York, New York in any action, suit, or proceeding of any kind, against it which arises out of or by reason of this Agreement.  CREDITOR AND COLLATERAL AGENT WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
15.    This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments.  Creditor is not relying on any representations by the Collateral Agent, the Lenders or Borrower in entering into this Agreement and Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower.  This Agreement may be amended only by written instrument signed by Creditor and the Collateral Agent.

[Balance of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
OXFORD FINANCE LLC, as 
Collateral Agent

By:   /s/ Mark Davis                    
Name:       Mark Davis                    
Title:   Vice President of Finance            

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

CREDITOR:

R-NAV, LLC

By:   /s/ Gilbert Gonzales                    
Name:       Gilbert Gonzales                
Title:   Chief Executive Officer                    

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

The undersigned approves of the terms of this Agreement.

BORROWER:

NAVIDEA BIOPHARMACEUTICALS, INC.

By:   /s/ Brent L. Larson                        
Name:       Brent L. Larson                
Title:   EVP & CFO                        

Annex I
Legend to be added to Subordinated Debt instruments

“THIS UNSECURED PROMISSORY NOTE (AND ALL PAYMENT AND ENFORCEMENT PROVISIONS HEREIN) (THE “NOTE”) IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF JULY __, 2014, BY AND AMONG THE HOLDER (AS DEFINED HEREIN), THE COMPANY (AS DEFINED HEREIN) AND OXFORD FINANCE LLC (THE “SUBORDINATION AGREEMENT”).  IN THE EVENT OF ANY INCONSISTENCY BETWEEN THIS NOTE AND THE SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.”

1
108501504 v7NAVB 06.30.2014 EX10-6

Exhibit 10.6

July 28, 2014

Montaur Capital Partners LLC
Englewood, NJ
Attn:  Luc Maasdorp

Gentlemen:

This letter (“Agreement”) is to confirm our mutual understanding with respect to the terms and conditions under which Montaur Capital Partners LLC (“Consultant”) agrees to provide Navidea Biopharmaceuticals, Inc. ( “Navidea”) with Consulting Services during the period from July 1, 2014 until the termination of this Agreement as provided below (the “Consulting Period”). 

As used herein, the term “Consulting Services” means the services of Consultant’s principal, Michael M. Goldberg, M. D. (“Dr. Goldberg”) as interim chief executive officer of Navidea, and that this agreement is for the personal services of Dr. Goldberg.

In exchange for performing the Consulting Services, regardless of the amount of time devoted by Consultant or Dr. Goldberg to the performance thereof, Navidea agrees to pay Consultant a flat monthly fee of $15,000, payable in arrears.  The parties acknowledge that no compensation will be paid by Navidea to Consultant or to Dr. Goldberg for Dr. Goldberg’s services as interim chief executive officer, and that the monthly fee payable to Consultant under this Agreement is intended only to compensate Consultant for additional costs and resources Consultant will be required to incur or redirect due to the diversion of Dr. Goldberg from the management and other services he provides to Consultant occasioned by his service as Navidea’s interim chief executive officer. 

During the Consulting Period, either through the performance of Consulting Services or otherwise, Consultant may acquire proprietary and confidential information (herein “Information”) with respect to the business and research activities of Navidea.  Consultant agrees to keep confidential such Information and not to divulge any such Information to others.  Specifically, Consultant agrees that it will not directly or indirectly, publish or disclose to others, except with the written consent of Navidea, any Information, data or methods of manufacture received or obtained from Navidea, nor use such Information in any way, commercially or otherwise, except in performing the Consulting Services.  This obligation of confidentiality and non-use shall continue until three (3) years after the termination of this Agreement, but shall not apply to Information which (i) becomes a matter of public knowledge through no fault of Consultant; (ii) is rightfully received by Consultant from a third party without restriction on disclosure; (iii) is independently developed by Consultant without the use of Information; or (iv) is rightfully in Consultant’s possession prior to its disclosure to Consultant by Navidea.

Consultant hereby irrevocably transfer and assign to Navidea without further compensation, any and all of its right, title and interest in and to all designs, ideas, discoveries, inventions, products, computer programs, source code, procedures, improvements, documents, information and materials made, 

Montaur Capital Partners LLC
July 28, 2014
Page 2 of 2

conceived or developed by Consultant alone or with others, which result from or relate to the Consulting Services (“Work Product”), including, but not limited to, all copyrightable works and copyrights, patent rights, trade secrets and trademarks, any right to claim authorship of Work Product, or any right to object to any distortion or other modification of Work Product by Navidea. Notwithstanding this assignment and transfer, if any Work Product incorporates or relies upon works developed by Consultant prior to the effective date of this Agreement, Consultant shall continue to retain ownership of thereof, but Consultant hereby licenses Navidea to use, or have third parties use on Navidea’s behalf, such preexisting works as is reasonably required to fully exploit the Consulting Services performed hereunder. Consultant agrees, during and for one year following the term of the Agreement to: (i) disclose promptly in writing to Navidea all Work Product; and (ii) to sign and provide any and all documents and render any assistance that is reasonably necessary for Navidea to obtain any patent, copyright, trademark or other protection for Work Product. In case any invention is described in a patent application or is disclosed to third parties by Consultant within one (1) year after the Consulting Services have been completed, it shall be presumed that the invention was conceived or made during the period in which the Consulting Services were rendered, and the invention will be assigned to Navidea as set forth in this Agreement, provided that the invention results from or relates to the Consulting Services. If the invention was made by Consultant prior to any association with Navidea or was made without the Information or resources of Navidea, then Consultant need not assign the invention to the Company as set forth herein.

At the expiration of this Agreement, Consultant agrees to promptly deliver to Navidea all documents, notes, or other papers supplied to it by Navidea in connection with the Consulting Services, which were in Consultant’s possession and under its control during the time Consultant provided the Consulting Services to Navidea.  Consultant agrees that it will not make or retain or give away any copies of such documents.

Either party may terminate this Agreement with ten (10) business days’ prior written notice to the other.  Early termination of this Agreement by Navidea shall not relieve Navidea of any liability for payment of consulting fees that accrued prior to the date of termination of the Agreement, nor relieve Consultant of any obligations with respect to the confidentiality and non-use of Information, the transfer of rights in any Work Product, or the return to Navidea of any documents, notes or other papers.

It is understood and agreed that the status of Consultant and Dr. Goldberg shall be that of an independent contractor and not that of an employee of Navidea, and neither will be entitled to any of the benefits available to employees of Navidea.  It is further understood and agreed that no representations have been made to Consultant or Dr. Goldberg by Navidea that performance of the Consulting Services described herein will lead to an offer of permanent employment with Navidea.

This Agreement shall be construed and governed by the laws of the State of Ohio and adjudicated within the exclusive jurisdiction of the courts having jurisdiction over Franklin County, Ohio.

If the foregoing terms and conditions meet with your understanding and approval, please show your acceptance and agreement by executing this letter in duplicate at the place indicated below and returning one of the executed duplicates to us, whereupon this letter shall constitute the agreement between Consultant and Navidea with respect to the Consulting Services.

Montaur Capital Partners LLC
July 28, 2014
Page 3 of 3

Very truly yours,

Navidea Biopharmaceuticals, Inc.

By:   /s/ Brent L. Larson                    
        Brent L. Larson        
        Executive Vice President and CFO

Accepted and agreed to:

Montaur Capital Partners LLC

By:  /s/ Luc Maasdorp                    
         Luc Maasdorp, Associate

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