FORBEARANCE AGREEMENT
Exhibit
10.1
THIS
FORBEARANCE AGREEMENT (this “Agreement”) is entered into as of November 12, 2007
(the “Closing Date”), by and between SOLUTION
TECHNOLOGY INTERNATIONAL, INC.,
a
corporation organized and in good standing in the State of Delaware (the
“Borrower”), whose address is Xxxxxxx Information Enterprise Center, 000 Xxxxxx
Xxxx, Xxxxx 00, XxXxxxx, Xxxxxxxx 00000 and CROSSHILL
GEORGETOWN CAPITAL, L.P.,
whose
address is 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 (the
“Lender”).
RECITALS
A. The
Lender provided the Borrower with a secured line of credit in the original
maximum principal amount of Seven Hundred Fifty Thousand Dollars ($750,000)
(the
“Loan”) pursuant to the terms of that certain Loan and Security Agreement dated
January 10, 2003 between the Borrower and Lender (the Loan and Security
Agreement, as thereafter amended from time to time, is hereinafter called the
“Loan Agreement”).
B. The
Obligations under the Loan are secured by the Collateral described in the Loan
Agreement.
C. The
Loan
matured on April 30, 2007 and the Borrower has not repaid all of the Obligations
on the Revolving Maturity Date as required under the Loan Documents. The failure
to pay the Obligations in full on the Revolving Maturity Date constitutes an
Event of Default (the “Existing Default”) under the Loan Documents.
D. The
Borrower has requested
that the Lender forbear from exercising its rights and remedies as a result
of
the Existing Default and the Lender has agreed to forbear as provided in this
Agreement.
AGREEMENTS
NOW
THEREFORE, in consideration of the premises, the mutual agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. RECITALS
AND DEFINITIONS.
The
Borrower and the Lender agree that the Recitals above are a part of this
Agreement and are correct in all material respects. Unless otherwise expressly
defined in this Agreement, terms defined in the Loan Agreement shall have the
same meaning under this Agreement.
2. OUTSTANDING
LOAN AMOUNTS.
The
Borrower agrees that as of October 25, 2007, the outstanding principal balance
under the Loan is $640,000.00, interest has been paid through October 1, 2007.
The Borrower acknowledges and agrees that all principal and interest are due
without offset or defense of any kind or nature and that as of the Closing
Date,
the Borrower is unable to pay the Obligations in full. The unpaid Obligations
continue to accrue interest at the fixed rate of twelve percent (12%) per annum
(the “Interest Rate”) of which seven and a half percent (7.50%) represent
regular interest and four and a half percent (4.50%) penalty
interest.
3. NO
FURTHER ADVANCES.
From and
after the Closing Date, no further Advances will be permitted, or requested,
by
Borrower, under the Loan Agreement.
4. REPAYMENT.
During
and after the Forbearance Period (as hereinafter defined), the Borrower shall
continue to make payments of interest and principal as follows:
Principal
and Interest
Payment:
|
Payable:
|
Estimated
Payment
Periods:
|
||
$140,000
plus regular interest due
|
When
the Borrower receives the initial $500,000 in equity investment
including
regular interest due as part of a $3M equity investment under
negotiation.
|
On
or about November 15, 2007
|
||
$300,000
plus regular interest due
|
When
the Borrower receives a subsequent $1,000,000 investment as part
of a $3M
equity investment currently under negotiation.
|
On
or about December 31, 2007
|
||
$200,000
plus regular and penalty interest, and applicable forbearance
fees
|
When
the Borrower receives the final $1,500,000 investment as part of
a $3M
equity investment under negotiation.
|
On
or about March 31, 2008
|
||
Alternative
Payment Scenario:
|
||||
$640,000
plus regular & penalty interest and forbearance fees
|
If
Borrower receives the entire $3M equity investment as a single
investment
then the Borrower will pay the entire outstanding principal amount,
regular and penalty interest, and forbearance fees
|
On
or before December 31,
2007
|
2
All
unpaid Obligations, including, without limitation, all accrued and unpaid
interest, principal and all unpaid Forbearance Fees shall be due and payable
on
the termination of the Forbearance Period.
5. FORBEARANCE
FEE.
In
addition to all other fees payable by the Borrower under this Agreement, in
consideration of the Lender’s willingness to enter into this Agreement, the
Borrower shall pay to the Lender a non refundable fee in an amount equal to
two
percent (2.0%) of the highest unpaid balance of the Obligations during any
calendar month or any portion of a calendar month (the “Forbearance
Fee”).
The
Forbearance Fee shall be calculated on the first day of each month for the
immediately preceding calendar month and shall be added to the unpaid principal
balance of the Obligations. The Forbearance Fee is considered earned on the
first day of each month and is not refundable. The Forbearance Fee shall be
paid
in full on the termination of the Forbearance Period.
6. FORBEARANCE
PERIOD.
During
the period from the Closing Date until the earlier of (the “Forbearance
Period”)
(a)
March 31, 2008 or (b) the occurrence of a Forbearance Default (as hereinafter
defined), the Lender agrees that it will not take any further action against
Borrower or exercise or enforce any right or remedy provided for in the Loan
Documents or otherwise available to it, at law or in equity (including taking
any action against any property in which Borrower has any interest). All unpaid
Obligations shall be due and payable in full on the termination of the
Forbearance Period.
7. ADDITIONAL
FEES.
The
Borrower shall pay the Lender all out-of-pocket costs, fees and expenses
incurred by or on behalf of the Lender in connection with the preparation,
negotiation, execution and delivery of this Agreement and any and all of the
other documents related hereto, including, without limitation, the Lender’s
legal fees and expenses.
8. CONSISTENT
CHANGES.
The
Loan Documents are hereby amended wherever necessary to reflect the changes
described above.
9. CONTINUING
VALIDITY.
The
Borrower understands and agrees that in entering into this Agreement, Lender
is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Loan Documents. Except as expressly modified pursuant to this
Agreement, the terms of the Loan Documents remain unchanged and in full force
and effect. The Lender’s agreement to modifications to the existing Obligations
pursuant to this Agreement in no way shall obligate Lender to make any future
modifications to the Obligations. Nothing in this Agreement shall constitute
a
satisfaction of the Obligations. It is the intention of Lender and the Borrower
to retain as liable parties all makers and endorsers of Loan Documents, unless
the party is expressly released by Lender in writing. No maker, endorser, or
guarantor will be released by virtue of this Agreement. The terms of this
paragraph apply not only to this Agreement, but also to all subsequent
modification agreements.
3
10. REPRESENTATIONS
OF THE BORROWER.
The
Borrower warrants and represents to the Lender as follows:
(a) The
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights
of
recoupment, claims, counterclaims, actions or causes of action of any kind
or
nature whatsoever against the Lender or any past, present or future agent,
attorney, legal representative, predecessor-in-interest, affiliate, successor,
assign, employee, director or officer of the Lender, directly or indirectly,
arising out of, based upon, or in any manner connected with, any transaction,
event, circumstance, action, failure to act, or occurrence of any sort or type,
whether known or unknown, which occurred, existed, was taken, permitted, or
began prior to the execution of this Agreement and accrued, existed, was taken,
permitted or begun in accordance with, pursuant to, or by virtue of the
Obligations or any of the terms or conditions of the Loan Documents, or which
directly or indirectly relate to or arise out of or in any manner are connected
with the Obligations or any of the Loan Documents; TO THE EXTENT ANY SUCH
DEFENSES, AFFIRMATIVE OR OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT,
CLAIMS, COUNTERCLAIMS, ACTIONS OR CAUSES OF ACTION EXIST OR EXTEND, SUCH
DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS, ACTIONS AND CAUSES OF ACTION ARE HEREBY
FOREVER WAIVED, DISCHARGED AND RELEASED.
(b) The
Borrower has freely and voluntarily entered into this Agreement after an
adequate opportunity and sufficient period of time to review, analyze and
discuss all terms and conditions of this Agreement and all factual and legal
matters relevant hereto with counsel freely and independently chosen by it.
The
Borrower further acknowledges that it has actively and with full understanding
participated in the negotiation of this Agreement after consultation and review
with its counsel and that this Agreement has been negotiated, prepared and
executed without fraud, duress, undue influence or coercion of any kind or
nature whatsoever having been exerted by or imposed upon any party to this
Agreement.
(c) As
of the
date hereof, there are no proceedings or investigations pending or, so far
as
the Borrower knows, threatened against it, before any court or arbitrator or
any
governmental, administrative or other judicial authority or agency.
(d) There
is
no statute, rule, regulation, order or judgment, no charter, by-law or
preference stock provision with respect to the Borrower, and no provision of
any
mortgage, indenture, contact or other Agreement binding on the Borrower or
any
of its properties which would prohibit or cause a default under or in any way
prevent the execution, delivery, performance, compliance or observance of any
of
the terms or conditions of this Agreement.
(e) The
Borrower has not voluntarily or involuntarily, granted any liens or security
interests to any creditor not previously disclosed to the Lender in writing
on
or before the date of this Agreement or taken any action or failed to take
any
action which could or would impair, change, jeopardize or otherwise adversely
affect the priority, perfection, validity or enforceability of any liens or
securing interests securing all or any portion of the Obligations or the
priority or validity of the Lender’s claims with respect to the Obligations
relative to any other creditor of the Borrower.
(f) The
Borrower has the full legal right, power and authority to enter into and perform
its obligations under this Agreement, and the execution and delivery of this
Agreement and the other Forbearance Documents by The Borrower and the
consummation by the Borrower of the transactions contemplated hereby and thereby
and performance of their obligations hereunder and thereunder have been duly
authorized by all appropriate action (corporate or otherwise).
(g) This
Agreement and the Loan Documents to which it is a party constitutes the valid,
binding and enforceable Agreement of the Borrower, enforceable against the
Borrower in accordance with the terms thereof.
4
11. NO
WAIVER OF RIGHTS OR REMEDIES.
The
Borrower acknowledges and agrees that the Lender (i) shall retain all rights
and
remedies it may have with respect to the Obligations under the Loan Documents
and the Borrower’s failure to honor or otherwise comply with said Obligation
(such rights and remedies are hereinafter collectively referred to as “Default
Rights”), and (ii) shall have the right to exercise and enforce such Default
Rights immediately upon termination of the Forbearance Period. The Borrower
further agree that the exercise of any Default Rights by the Lender upon
termination of the Forbearance Period shall not be affected by reason of this
Agreement, and the Borrower shall not assert as a defense thereto the passage
of
time, estoppel, laches or any statute of limitations to the extent that the
exercise of any Default Rights was precluded by this Agreement.
12. OTHER
OBLIGATIONS.
All of
the obligations under the Loan Documents, except to the extent modified or
altered by the terms of this Agreement or waived in writing by the Lender,
shall
remain in full force and effect and unchanged.
13. TERMINATION.
(a) The
Forbearance Period shall terminate automatically and without notice to the
Borrower upon the occurrence of a Forbearance Default. The occurrence of any
Forbearance Default shall automatically and without further notice constitute
an
immediate Event of Default under the Loan Agreement and each of the Loan
Documents.
(b) For
purposes hereof, the Borrower shall be in default (each, a “Forbearance
Default”) if:
(i) the
Borrower fails to observe, perform, or comply with any of the terms, conditions
or provisions of this Agreement, as and when required;
(ii) any
additional Events of Defaults shall occur under any of the Loan Documents,
as
modified hereby;
(iii) any
recital, representation or warranty made by the Borrower herein, in any document
executed and delivered in connection herewith, or in any report, certificate,
financial statement or other instrument or document previously, now or hereafter
furnished by or on behalf of the Borrower in connection with this Agreement,
shall prove to have been false, incomplete or misleading in any material respect
on the date as of which it was made;
(iv) a
material impairment in the perfection or priority of Lender’s security interest
in the Collateral occurs; and
(v) with
respect to any evidence of indebtedness or liability of the Borrower for
borrowed money (other than the Loan) if the effect of such default is to
accelerate the maturity of such evidence of indebtedness or liability or to
permit the holder or obligee thereof to cause any indebtedness to become due
prior to its stated maturity.
Upon
termination of the Forbearance Period,
should the Obligations not be paid and satisfied in full, the Lender shall
without further notice of any kind be entitled to immediately pursue its various
rights and remedies in accordance with the Loan Documents, including the Default
Rights, against the Borrower, all Collateral given to secure the Obligations
or
any other Person liable therefor.
5
14. HEADINGS.
Descriptive headings are for convenience only and will not control or affect
the
meaning or construction of any provision of this Agreement.
15. SUCCESSORS
AND ASSIGNS.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and each of their respective heirs, personal representatives, successors and
assigns.
16. TIME
OF ESSENCE.
Time is
of the essence of this Agreement.
17. COUNTERPARTS.
This
Agreement may be executed in any number of duplicate originals or counterparts,
each of such duplicate originals or counterparts shall be deemed to be an
original and all taken together shall constitute but one and the same
instrument. The parties further agree that facsimile signatures shall be binding
on all parties and have the same force and effect as original
signatures.
18. GOVERNING
LAW.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the Commonwealth of Virginia. The parties agree that any cause of action
pertaining to this agreement shall be heard in the federal or state courts
of
the Commonwealth of Virginia.
19. SEVERABILITY.
In case
one or more provisions contained in this Agreement shall be invalid, illegal,
or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein shall remain
effective and binding and shall not be affected or impaired
thereby.
20. AMENDMENTS.
This
Agreement may be amended, modified or supplemented only by written agreement
signed by all parties hereto. No provision of this Agreement may be waived
except in writing signed by the party against whom such waiver is sought to
be
enforced.
21. ENTIRE
AGREEMENT.
This
Agreement and the Loan Documents set forth the entire agreement and
understanding of the parties hereto with respect to payment of the Obligations
and performance of the obligations, superseding all prior representations,
understandings and agreements, whether written or oral.
22. EFFECTIVE
DATE.
This
Agreement shall be effective immediately upon the execution and delivery of
this
Agreement by all Persons who are parties hereto. If this Agreement is not
executed by the Borrower and returned to the Lender by Noon on May __, 2007,
this offer to forbear set forth in this Agreement shall automatically and
without further notice be terminated and the Lender may exercise any and all
of
its rights under the Loan Documents.
6
23. EXPENSES.
The
Borrower agrees to pay to the Lender on demand all out-of-pocket costs, fees
and
expenses incurred by or on behalf of the Lender in connection with the
preparation, negotiation, execution and delivery of this Agreement and any
and
all of the other Documents related hereto and all other reasonable out-of-pocket
costs, fees and expenses, incurred by, or on behalf of the Lender in connection
with the enforcement, preservation, or collection of the Obligation and/or
this
Agreement, including, without limitation, reasonable attorneys fees and
expenses, and recordation and filing fees and taxes (collectively, the
“Enforcement Costs”). Such Enforcement Costs shall be deemed to be part of the
Obligations and shall be payable upon demand.
[SIGNATURES
BEGIN ON THE FOLLOWING PAGE]
7
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered under seal by the duly authorized representatives as of the date
and
year first written above.
BORROWER:
|
|||
SOLUTION
TECHNOLOGY INTERNATIONAL, INC.
|
|||
|
By:
|
||
(SEAL)
|
|||
Name:
|
Xxx
Xxxxxx
|
||
Title:
|
President
|
||
LENDER:
|
|||
CROSSHILL
GEORGETOWN CAPITAL, L.P.
|
|||
|
By:
|
||
(SEAL)
|
|||
Name:
|
|||
Title:
|
|||
8