THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 5 TO
FORBEARANCE AGREEMENT
THIS AMENDMENT NO. 5 TO FORBEARANCE AGREEMENT ("Amendment No.5") is
made and entered into as of August 15, 1996, by and between Delta Computec, Inc.
("DCI") and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and
National Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the "Forbearance Agreement"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties, provided that certain conditions were met as more fully provided in
the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to
Forbearance Agreement dated May 9, 1996 ( "Amendment No.1"), in which the Lender
agreed to forbear from exercising certain rights and remedies under its Loan
Documents and under applicable law against the Borrowers and their properties
and to extend the term of the Forbearance Period as more fully set forth in the
Forbearance Agreement from May 8, 1996 to May 22, 1996, provided that certain
conditions were met as more fully provided in the Amendment No.1; and
WHEREAS, Lender and Borrowers entered into Amendment No.2 to
Forbearance Agreement dated May 23, 1996 (" Amendment No.2"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from May 22, 1996 to June 14, 1996, provided
that certain conditions were met as more fully provided in the Amendment No.2;
and
WHEREAS, Lender and Borrowers entered into Amendment No. 3 to
Forbearance Agreement dated June 14, 1996, ("Amendment No. 3"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from June 14, 1996 to July 31, 1996, provided
that certain conditions were met as more fully provided in the
Page 49 of 207 Pages
Amendment No. 3; and
WHEREAS, Lender and Borrowers entered into Amendment No. 4 to
Forbearance Agreement dated July 31, 1996, ("Amendment No. 4"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from July 31, 1996 to August 15, 1996,
provided that certain conditions were met as more fully provided in the
Amendment No. 4; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance
Period as more fully set forth in the Forbearance Agreement from August 15,
1996, to September 30, 1996 provided that the Borrowers comply with all terms
and conditions of the Forbearance Agreement, Amendment No.1, Amendment No.2,
Amendment No.3, Amendment No.4, and this Amendment No. 5; and
WHEREAS, on Xxxxx 0, 0000, XXX terminated its business operations and
closed its business facility located at 000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000, which action constituted an Event of Default under
the Loan Agreements; and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for
any deficiency following the Public Auction Sale of the DDI Collateral in
accordance with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other
liabilities and obligations at any time or time owing by Borrowers to Lender,
continue to be secured by security interests granted by Borrowers to Lender in
all of Borrowers' then existing and thereafter acquired accounts, inventory,
equipment, general intangibles, chattel paper, contract rights, instruments and
balances, as more full set forth in the Loan Agreements; and
Page 50 of 207 Pages
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements;
and
WHEREAS, Borrowers desire that Lender continue to forebear from
exercising certain remedies available to Lender under the Loan Agreements, the
Forbearance Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue,
during the Forbearance Period to make Loans to DCI pursuant to the Loan
Agreements, as modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with
the terms of the Forbearance Agreement, Amendment Xx. 0, Xxxxxxxxx Xx. 0,
Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, and this Amendment No. 5. from exercising
remedies available to it as a result of the continuing defaults under the Loan
Agreements, and to continue making Loans consistent with this Amendment Xx. 0,
Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx.0, Xxxxxxxxx Xx. 0, and the
Forbearance Agreement, but only on the terms and conditions contained herein;
WHEREAS, all capitalized terms used in this Amendment No. 5, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in
consideration of the premises and the mutual covenants herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on
September 3, 1996 and ending at the close of business on September 30,
1996, provided, however, that the foregoing date may be extended to a
later date by written agreement of the Lender, in its sole and absolute
discretion.
Page 51 of 207 Pages
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on August 15, 1996, the Indebtedness
is $ 1,635,559 exclusive of interest, costs and attorneys' fees chargeable to
Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers to
Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing
under the Loan Agreements;
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following
financial covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section 6.21-Interest
Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or
unenumerated Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement, Amendment
Xx. 0, Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, and this Amendment No.
5 executed by Borrowers are legal, valid and binding obligations of Borrowers,
enforceable against Borrowers in accordance with their respective terms;
(f) the security interest granted by Borrowers to Lender in the
Collateral is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to
apply the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has
occurred, Lender agrees that during the Forbearance Period it will not, solely
by reason of the existence on this date of the Events of Default referenced in
Section 2 of this Amendment No. 5, exercise any default remedy available to
Lender under the Loan Agreements to enforce collection from DCI of any of the
Indebtedness or to foreclose its security interest in any of the Collateral
during
Page 52 of 207 Pages
the Forbearance Period except with regards to the Collateral owned by DDI.
Neither this Amendment No. 5 nor Lender's forbearance hereunder shall be deemed
to be a waiver of or a consent to the Events of Default referenced in Section 2
of this Amendment No. 5.
4. Termination of Forbearance. If any one or more of the Termination
Events occur, Lender's agreement to forbear as set forth in Section 3 of this
Amendment No. 5 shall, at Lender's election, upon written notice to or demand
upon Borrowers (it being agreed by the parties that such notice may be delivered
by facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and
Lender, in its sole and absolute discretion, may make Loans to DCI in an
aggregate amount (when added to all then outstanding Loans, whether made prior
to or during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on
service contracts that are based on a billing schedule of no
greater than ninety (90) days;
(2) Eighty Percent (80%) of DCI's Eligible
Receivables on service contracts which do not exceed $25,000
and that are based on a billing schedule of in excess of
ninety (90) days but no greater than one year;
(3) Eighty Percent (80%) of DDI's Eligible
Receivables on service contracts that are based on a billing
schedule of no greater than ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible
Receivables on service contracts which do not exceed $25,000
and that are based on a billing schedule of in excess of
ninety (90) days but no greater than one year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables
on service contracts which exceed $25,000 and that are based
on a billing schedule of in excess of ninety (90) days but no
greater than one hundred eighty (180) days;
(6) Twenty-five Percent (25%) of DCI's Eligible
Receivables on service contracts which exceed $25,000
Page 53 of 207 Pages
and that are based on a billing schedule of in excess of one
hundred eighty (180) days but no greater than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) Two Million Seven Hundred Thousand Dollars ($2,700,000),
including Letter of Credit Obligations, in the aggregate at
any one time outstanding, provided Lender obtains a loan
participant in an amount not less than Six Hundred Thousand
Dollars ($600,000). In the event that Lender does not obtain a
Loan participant in an amount not less than Six Hundred
Thousand Dollars ($600,000), than the Maximum Loan Amount
shall not exceed Two Million One Hundred Thousand Dollars
($2,100,000), including Letter of Credit Obligations, in the
aggregate at any one time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable
on demand, and shall be entitled to all benefits and protections and secured in
the same manner and to the same extent as Loans made prior to the date hereof.
All Loans made during the Forbearance Period shall bear interest as provided in
the Loan Agreements.
All payments of Receivables must be credited through a lock
box arrangement through Lender's offices which shall be held by Lender as
collateral for payment and/or performance of Borrowers' Obligations to Lender.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and
Page 54 of 207 Pages
agree that all of the Loan Agreements are fully enforceable and in full force
and effect and have not been waived or modified in any manner except as
expressly set forth in the Forbearance Agreement, Amendment Xx. 0, Xxxxxxxxx Xx.
0, Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, and this Amendment No. 5 and that the Loan
Agreements, as modified by this Amendment No. 5, are fully enforceable and in
full force and effect on the date of this Amendment No.5.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 5 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 5, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No.5 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 5 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 5 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 5; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the
Page 55 of 207 Pages
Lender, its agents, employees and attorneys for any actions or undertakings in
connection with the Public Auction Sale; and (h) irrespective of the fact that
the financial projections dated April 12, 1996, for the two (2) years ending
October 31, 1997, prepared by the Borrowers, indicate loans in excess of the
Maximum Loan Amount are required by the Borrowers, Borrowers acknowledge that
the Maximum Loan Amount will not be exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants
set forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
5;
(b) deliver to the Lender, each of which shall be satisfactory in form
and substance to Lender:
(I) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Xxxxxx X. Xxxxxxx, XX agreeing to
and acknowledging to the delivery and execution of Amendment No. 5 and
a Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.;
(iv) Certified copies (certified by authorized officers of
Borrowers) of a corporate resolution taken by Borrowers to authorize
the execution, delivery and performance of this Amendment No. 5;
(v) Certificates of incumbency and specimen signatures with
respect to each of the officers of Borrowers who are authorized to
execute and deliver this Amendment No. 5 and the Loan Agreements. ;
(vi) Certified Consolidated Financial Statements for the
Borrowers prepared in accordance with Generally Accepted Accounting
Principals for the fiscal year ending October 31, 1995, which shall be
delivered to Lender so as to be received no later than September 30,
1996;
Page 56 of 207 Pages
(c) have executed and delivered this Amendment No. 5;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "A", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997; and
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No.5.
11. Termination. In the event the Lender shall terminate this Amendment
No. 5, DCI agrees that, at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for
bankruptcy relief under 11 U.S.C. Section 101 et seq. or an involuntary petition
is filed against either of the Borrowers, then in such event, Borrowers agree
that they will consent to granting Lender relief from the automatic stay
provided for under 11 U.S.C. Section 362 and Borrowers shall not seek to
restrain, enjoin or otherwise interfere with Lender's rights pursuant to 11
U.S.C. Section 105 or any other Federal or State statute. Borrowers will consent
to any Order or execute any document necessary for Lender to obtain the relief
provided for herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in
this Amendment No. 5 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 5 intended
to change or affect in any way the relationship. This Amendment No. 5 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 5.
14. Entire Agreement; Modification of Agreement. This Amendment Xx. 0,
Xxxxxxxxx Xx. 0, Xxxxxxxxx Xx. 0, Amendment Xx. 0, Xxxxxxxxx Xx. 0, the
Forbearance Agreement and the other Loan Agreements constitute the entire
understanding of the parties with respect to the subject matter hereof and
thereof. This Amendment No. 5 may not be modified, altered or amended except by
agreement in writing signed by all the parties hereto.
Page 57 of 207 Pages
15. Governing Law. This Amendment No. 5 shall be governed by and
construed in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 5, Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 5 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 5. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 5 or the execution of this Amendment
No. 5.
17. No Novation. This Amendment No. 5 is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 5.
18. Miscellaneous. This Amendment No. 5 may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.5,
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT
NO. 5, BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND
LENDER'S OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS,
DEMANDS, ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER
ABSOLUTE OR CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR
IN EQUITY, THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER ARISING UNDER
OR IN CONNECTION WITH ANY OF THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT,
AMENDMENT NO. 1, AMENDMENT XX. 0, XXXXXXXXX XX. 0, XXXXXXXXX XX. 0, AND THIS
AMENDMENT NO. 5 THE PUBLIC AUCTION SALE OR OTHERWISE.
Page 58 of 207 Pages
20. Severability. Wherever possible, each provision of this Amendment
No.5 is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No.5 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 5.
21. Loan Agreements. This Amendment No. 5 shall be entitled to all of
the benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices,
requests and demands in accordance with the Loan Agreements and this Amendment
No.5 shall be addressed to Lender as follows:
E. Xxxx Xxxxxxx, Group V.P.
National Canada Finance Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
-- with a copy to --
Xxxxxx X. Xxxxxxxxxx, Esq.
Duane, Morris & Heckscher
The Legal Center, Suite 500
0000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 5 shall be addressed
to Borrowers as follows:
Page 59 of 207 Pages
President
Delta Computec, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telecopy No. (000) 000-0000
or
President
Delta Data Net, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telecopy No. (000) 000-0000
-- with a copy to --
Xxxxx X. Xxxxxx, Esq.
Xxxxxxx, Xxxxxxxxxxx & Mugel
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000-0000
Telecopy No. (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5
to be duly executed and delivered on the year and day first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:_______________________
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:________________________
[CORPORATE SEAL]
Page 60 of 207 Pages
(SIGNATURES CONTINUED ON NEXT PAGE)
Page 61 of 207 Pages
LENDER:
NATIONAL CANADA FINANCE CORP.
By: ______________________________
E. Xxxx Xxxxxxx, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
Page 62 of 207 Pages
