EXHIBIT (10)(BBB)(I)
NANTUCKET INDUSTRIES, INC.
May 19, 1998
NAN Investors, L.P.
c/o Fundamental Capital Corp.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Re. Forbearance Agreement
Dear Xxxxxx:
Nantucket Industries, Inc. (the "Company") hereby confirm to you as
follows:
1. The Company is currently in default under the two Convertible
Subordinated Debentures payable to NAN investors, L.P. ("NAN"), dated August 15,
1996 (collectively: the "Debentures"), in the original principal amounts of
$1,166,150 (the "A Debenture") and $1,591,850 (the "B Debenture"), respectively,
among other things for failure by the Company to make timely payment of the
interest payments due under the Debentures on August 15, 1997 February 15, 1998
(the "Interest Payment Defaults").
2. Furthermore, the Company acknowledges that it defaulted under the
letter agreement with the Company, dated September 30, 1998, by failing to make
the August 15, 1997 interest payment, plus interest thereon at an annual rate of
12.5 accruing from the originally scheduled payment date, on or before November
30, 1997.
3. The Company acknowledges that, as of the date hereof, the principal
amount outstanding under the A Debenture is $1,168,150 and the principal amount
outstanding under the B Debenture is $884,650. In addition, the Company
acknowledges that the August 15, 1997 and February 15, 1998 interest payments,
together with interest accruing thereon at an annual rate of 12.5% accruing from
the originally scheduled payment date, is currently due and payable.
4. NAN hereby agrees to (a) extend the cure period under section
8(a)(ii) of each of the Debentures with respect to the Interest Payment Defaults
until December 31, 1998, and (b) extend until December 31, 1998 the cure period
under Section B(a)(ii) of each, of the Debentures with respect to the interest
payment due under the Debentures on or before August 15, 1998, provided,
however, that (i) each such extension shall be automatically and immediately
terminated upon the earlier to occur of any other default or Event of Default
under either of the Debentures, the Common Stock and Convertible Subordinated
Debenture Purchase Agreement, dated as of August 13, 1996 (the "Purchase
Agreement"), or this Agreement, and (ii) the interest payment due on August 15,
1998 shall bear interest from such date, calculated at an annual rate of 12.5%
per annum, from August 15, 1998 until its payment in full.
5. Within 5 days of recovery of any amounts by the Company (whether by
compromise, settlement, judgment, execution or otherwise) arising out of the
Nantucket x. Xxxx and Xxxxxxxxx litigation before the California Superior Court,
San Francisco, the Company shall offer to prepay all or any portion of the
amounts then outstanding under the Debentures at a price equal to 125% of the
aggregate principal amount thereof, together with any interest accrued and
unpaid thereon (including any interest accrued on any defaulted interest payment
in accordance with the provisions of this Agreement) up to and including the
prepayment date.
6. In consideration of NAN's aforesaid agreement, the Company agrees as
follows:
(a) The Debentures shall be secured by a first priority lien
on all of the assets of the Company, which lien shall automatically and
immediately take effect at such time as no amounts remain outstanding
under the Loan and Security Agreement, dated March 21, 1994, as
amended, among the Company and Congress Financial Corporation (the
"Congress Facility") or to the extent not otherwise prohibited under
the Congress Facility.
(b) On or before May 21, 1998, the Company shall issue to NAN
16,500,000 warrants (the "Warrants"), in form satisfactory to NAN, each
of which Warrants shall be exercisable for and convertible into one
fully-paid and nonassessable share of Common Stock of the Company, par
value $.10 per share, at any time following the date of issuance and
through the fifth anniversary thereof at an exercise price of $0.10 per
share of Common Stock. To the extent that the Company has insufficient
authorized and unissued shares of Common Stock to satisfy a notice by
NAN of the exercise of the Warrants, the Company shall use its best
efforts to promptly cause its authorized capital to be increased to the
extent necessary to satisfy NAN's conversion right in full.
7. On or before May 21, 1998, the Company shall cause its Board of
Directors to: (a) take action so that Messrs. Xxx Xxxxx, Xxxxx Xxxxx, Xxxx Xxxxx
and Xxxxxx Xxxxxxxxx shall be continuing members of the Company's Board of
Directors or nominated for reelection as director of the Company at the
forthcoming annual meeting of shareholders, (b) prior to a "Distribution Date"
occurring thereunder, repeal the Company's Share Purchase Right B Agreement,
dated as of September 6, 1988, and (c) ratify this Agreement.
8. The Company shall cause Messrs. Xxxxxxx Xxxx and Xxxxxx Xxxxx to
resign from the Company's Board of Directors on or before May 21, 1998.
9. The Company shall do all things reasonably necessary to effectuate
the provisions of this Agreement. The Company confirms that it has no claims or
rights of action of any kind against NAN, NAN (GP) Investors, L.P., Fundamental
Capital Corp. or any of their respective officers, directors, partners or
shareholders.
10. NAN agrees that the Company shall enter into the letter agreement
of even date herewith with the Samberg Group, L.L.C., in the form annexed
hereto.
11. NAN agrees that the Company shall pay to third-party vendors (other
than Xxxx Xxxxxx & Xxxxx) up to an amount of $75,000 on account of charges
incurred in connection with the litigation referred to paragraph 5 above, which
charges shall be reviewed and approved by the Board after May 21, 1998.
12. In the event the Company shall fail to comply timely with any of
the provisions of this Agreement, this Agreement shall automatically terminate,
and shall be without any further force or effect with respect to any of the
parties hereto.
If the foregoing correctly sets forth the terms of our agreement,
please so indicate by signing in the space indicated below.
Very truly yours,
Nantucket Industries, Inc.
By: /s/ Xxxxxx Xxxxxxx
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Title: President
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We agree to the foregoing.
NAN Investors, L.P.
By: NAN (GP) Investors, L.P.
General Partner
By: Fundamental Capital Corp.
General Partner
By: /s/ Xxxxxx Xxxxxx
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Title: President
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