EXHIBIT 10.11
FORBEARANCE AGREEMENT
This Forbearance Agreement ("Forbearance") is made as of November 17, 2004, by
and between ICEWEB, INC., ICEWEB ONLINE, INC, INTERLAN COMMUNICATIONS, INC.,
INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION, DEVELEMENTS, INC., and
PROPSTER, INC. (collectively, jointly and severally, as "Borrower") and COMERICA
BANK ("Bank"), in connection with that Loan and Security Agreement dated as of
July 21, 2004 (as amended from time to time, and together with any related
agreements, the "Agreement"), by and between Borrower and Bank, and contains
certain forbearances by the Bank from enforcing rights and exercising remedies
in connection with certain defaults by Borrower under the Agreement as follows:
1. Events of Default: Borrower acknowledges that the following Events of
Defaults have occurred under the Agreement:
(a) Pursuant to Section 6.7(a) of the Agreement, the
Borrower is required to maintain a Quick Ratio of
1.00 to 1.00. Borrower is in violation of this
covenant for the months ending August 31, 2004,
September 30, 2004, and October 31, 2004.
(b) Pursuant to Section 6.7(b) of the Agreement, the
Borrower is required to have a Tangible Net Worth of
not less than $190,000 through January 30, 2005.
Borrower is in violation of this covenant for the
months ending August 31, 2004, September 30, 2004,
and October 31, 2004.
2. Forbearance: As a result of the above Events of Default described
above, the Bank has certain rights and remedies, including but not
limited to the right to require immediate payment of all outstanding
principal and accrued interest and to foreclose on any collateral. The
Borrower has requested that the Bank forbear from enforcing and
exercising any such rights and remedies. The Bank hereby agrees to
forbear from enforcing its rights exercising remedies through February
28, 2005, but only subject to the following conditions:
(a) The Borrower shall comply with all the terms and
conditions contained in this Forbearance.
(b) No additional Events of Default shall occur under the
Agreement.
(c) Borrower shall timely make all scheduled payments of
monthly interest and principal on all loans from the
Bank.
(d) Borrower shall pay in full a forbearance
documentation fee in the amount of $2,350.
The forbearances contained herein are specific as to content and time,
and do not waive any rights or remedies that Bank may have as a result
of the above Events of Default or any other breaches or violations,
whether past, present, or future of the Agreement or any other
agreement between Borrower and Bank, and Bank reserves all rights,
powers and remedies available to it. Immediately upon the breach of any
of the conditions listed above, the forbearances contained herein shall
be null and void and the Bank may exercise all rights and remedies it
may have pursuant to the Agreement and the law.
3. Consent to Borrower's Acquisition of PlanGraphics.
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(a) Borrower has advised Bank of its desire to acquire
PlanGraphics, Inc., notwithstanding the provisions of
Section 7.3 of the Agreement, which prohibits
acquisitions of all or substantially all of the
capital stock or property of another Person in excess
of $50,000 in the aggregate during any fiscal year
(the "PlanGraphics Acquisition").
(b) Bank consents to the PlanGraphics Acquisition
provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the
PlanGraphics Acquisition.
(c) The above consent is specific as to content and time,
and except as set forth above, is not a waiver of any
rights or remedies that Bank may have pursuant to any
agreement or law as a result of any other violations
past, present, or future of any agreement between the
Borrower and the Bank, and the Bank reserves all
rights, powers and remedies available to it.
4. Amendments to Loan Agreement. Borrower and Bank hereby amend the
Agreement as follows:
(a) A new Section 4.4 is hereby added to the Agreement to
read as follows:
4.4 Lock Box Account. On or before December 15, 2004,
Borrower shall at all times maintain an account (the
"Lock Box Account") with Bank into which all funds
received by Borrower from any source shall
immediately be deposited. Borrower shall direct all
account debtors to mail or deliver all checks or
other forms of payment for amounts owing to Borrower
to the Lock Box Account. Borrower shall direct all
account debtors or other persons owing money to
Borrower who make payments by electronic transfer of
funds to wire such funds directly to the Lock Box
Account. Borrower shall hold in trust for Bank all
amounts that Borrower receives despite the directions
to make payments to the Lock Box Account, and
immediately deliver such payments in their original
form as received from the account debtor, with proper
endorsements for deposit into the Lock Box Account.
Borrower irrevocably authorizes Bank to transfer to
the Lock Box Account any funds that have been
deposited into any other accounts or that Bank has
otherwise received. Borrower shall not establish or
maintain any accounts with any person other than
Bank. Furthermore, such funds may not be withdrawn by
Borrower and (a) all collections received from any
account debtor in the Lock Box Account shall be
subject to Bank's sole and exclusive control and
withdrawals by Borrower shall not be permitted
therefrom; (b) Bank's authorized representatives will
have sole access to the Lock Box Account, and items
will be endorsed, credited to the Lock Box Account,
and presented for payment through customary
collection procedures; (c) all payments including
immediately available funds received by Bank at the
Lock Box Account will be Bank's sole property for
application to the Obligations and will be
immediately applied to conditionally reduce the
Obligations (as provided in the next sentence), but
shall not be considered a payment on account unless
such payment is of immediately available federal
funds or unless and until such check or other item of
payment is honored when presented for payment; and
(d) all payments so received by Bank shall be applied
in payment of the Obligations, first to interest,
then to principal, then to other amounts due
hereunder, and the surplus, if any, shall be paid
over to Borrower. All fees and expenses for the Lock
Box Account, and any or all expenses, fees and
charges in respect of checks, drafts or other items
returned unpaid (but not including the amount of such
unpaid item itself) shall be paid by Borrower. Bank
may deduct any such
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fees, expenses, and charges from or set off against
amounts from time to time in the Lockbox Account."
4. Release. As a material inducement to Bank's decision to grant the above
forbearances, Borrower hereby releases and forever discharges Bank, its
affiliates and their respective owners, stockholders, predecessors,
successors, assigns, agents, directors, officers, employees,
representatives, attorneys, from any and all claims, controversies,
damages, actions, causes of action, suits, rights, demands, costs,
losses, debts and expenses of any nature whatsoever, whether known or
unknown, suspected or unsuspected, which Borrower at any time may have,
own or hold, or claim resulting from any action or omission by such
person in connection with or relating to the Loans made by Bank to
Borrower prior to the acceptance of this letter.
Borrower agrees and acknowledges that it is familiar with Section 1542
of the California Civil Code which reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
Borrower hereby abandons, releases, waives and relinquishes all of the
rights and benefits which it has, or may have, under Section 1542 of
the California Civil code as well as any similar rights and benefits
which it has by virtue of any similar statute or rule of law in any
other state of the United States. The provisions of this Section 4
shall survive payment in full of Borrower's obligations to Bank, full
performance of the terms of this Forbearance and the Agreement and/or
Bank's actions to exercise any remedy available pursuant to the
Agreement or by law.
5. Consultation of Counsel. Borrower acknowledges that Borrower has had
the opportunity to be represented by legal counsel of its own choice
throughout all of the negotiations that preceded the execution of this
Forbearance. Borrower has executed this Forbearance after reviewing and
understanding each provision of this Forbearance and without reliance
upon any promise or representation of any person or persons acting for
or on behalf of Bank. Borrower further acknowledges that Borrower and
its counsel have had adequate opportunity to make whatever
investigation or inquiry they may deem necessary or desirable in
connection with the subject matter of this Forbearance prior to the
execution hereof and the delivery and acceptance of the consideration
described herein.
6. Estoppel; Definitions. Except as provided above, the Agreement remains
unchanged and in full force and effect and Bank shall have no
obligation to make any advances or other extensions of credit during
the term of this Forbearance. Any capitalized terms used herein and not
defined herein shall have the meanings defined in the Agreement.
7. Representations. Borrower represents and warrants that the
Representations and Warranties contained in the Agreement are true and
correct as of the date of this Forbearance, and that no Event of
Default, except for the Defaults associated with the Forbearance, has
occurred and is continuing.
8. Counterparts. This Forbearance may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Forbearance as of the
first date above written.
ICEWEB, INC. THE SEVEN CORPORATION
By: /s/ By: /s/
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Title: Title:
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ICEWEB ONLINE, INC. DEVELEMENETS, INC.
By: /s/ By: /s/
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Title: Title:
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INTERLAN COMMUNICATIONS, INC. PROPSTER, INC.
By: /s/ By: /s/
-------------------------------- -----------------------------
Title: Title:
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INTEGRATED POWER SOLUTIONS, INC. COMERICA BANK
By: /s/ By: /s/
-------------------------------- -----------------------------
Title: Title:
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