Exhibit 10.4
September 22, 2004
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
Attention: Xxxxx X. Xxxxxxxxxx
RE: FORBEARANCE ARRANGEMENT ("FORBEARANCE AGREEMENT") DATED JULY 1, 2004,
AMONG COMERICA BANK ("BANK"), SUNSHINE STAFF LEASING, INC., SUNSHINE
COMPANIES, INC., SUNSHINE COMPANIES II, INC., SUNSHINE COMPANIES III,
INC., SUNSHINE COMPANIES IV, INC., PARADYME, INC., AND ABS IV, INC.
("BORROWERS"), XXXXX X. XXXXXXXXXX, XXXX XXXXXXX, PRESIDION SOLUTIONS,
INC. F/K/A AFFINITY BUSINESS SERVICES, INC. AND PRESIDION CORPORATION
("GUARANTORS")
Dear Xx. Xxxxxxxxxx:
Please refer to any and all documents, instruments and agreements executed in
connection with the financing arrangements from Bank to Borrowers and Guarantors
including the Forbearance Agreement (collectively, the "Loan Documents"). All
amounts due from Borrowers to Bank, whether now or in the future, contingent,
fixed, primary and/or secondary, including, but not limited to, principal,
interest, inside and outside counsel fees, audit fees, costs, expenses, and any
and all other charges provided for in the Loan Documents shall be known, in the
aggregate, as the "Liabilities". All capitalized terms not defined in this
letter agreement ("Second Agreement") shall have the meanings described in the
Loan Documents.
As of September 20, 2004 the Liabilities include:
LOANS (NOTE AMOUNT AND DATE) PRINCIPAL INTEREST
--------------------------- --------- --------
REVOLVING LOAN
($6,000,000; 09/30/03) $1,700,000.00 $9,751.39
The amounts referenced above are exclusive of interest accruing after September
20, 2004, costs and expenses (including, but not limited to, audit fees and
inside and outside counsel fees).
Without limitation we have reviewed the June 30, 2004 financial statements,
which showed substantial losses. Also, Borrowers are in default of financial
covenants under the Loan Document, including the required minimum debt service
coverage and minimum net worth. Borrowers have disclosed that Borrowers have
failed to pay Federal withholding taxes which are due and owing.
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 2
As a result of and for the reasons outlined above, Bank hereby restates its
demands payment in full of all of the Liabilities. By copy of this letter demand
is also hereby made of the Guarantors of the Liabilities.
Bank's agreement to forbear under the Forbearance Agreement terminated on July
31, 2004. On August 5, 2004, Bank notified Borrowers and Guarantors in writing
of the termination of any obligation of Bank to forbear from further action to
collect the Liabilities, and Bank reserved all rights and remedies. Borrowers
and Guarantors have requested that Bank again forbear from further action to
collect the Liabilities.
Subject to Borrowers' and Guarantors' timely, written acceptance of the
following conditions, Bank is willing to forbear until November 20, 2004,
subject to earlier termination as provided below, from further action to collect
the Liabilities:
1. Borrowers and Guarantors acknowledge the Liabilities as set out in the Loan
Documents, the amount of the Liabilities as stated above and the existence
of the defaults. Borrowers and Guarantors acknowledge and agree that Bank's
demand for repayment of the Liabilities is timely and proper.
2. Future administration of the Liabilities and financing arrangements among
Bank, Borrowers and Guarantors shall continue to be governed by the
covenants, terms and conditions of the Loan Documents, which are ratified
and confirmed and are incorporated by this reference, except to the extent
that the Loan Documents have been superseded, amended, modified or
supplemented by this Second Agreement, then this Second Agreement shall
govern.
3. Borrowers and Guarantors acknowledge Bank is under no obligation to advance
funds or extend credit to Borrowers pursuant to the Loan Documents, or
otherwise.
4. Borrowers agree to use their best efforts (i) to procure alternative
financing to repay the Liabilities in full by October 31, 2004, and (ii) to
procure by October 31, 2004 a letter of credit or other support acceptable
to Bank to further secure payment of the Liabilities. Borrowers will provide
to Bank, upon Bank's request, written evidence of those efforts.
Borrowers shall at the request of Bank execute a notification to each maker
of each note pledged to Bank advising each to pay Bank directly all future
payments under the notes.
5. Borrowers shall make the following principal payments to Bank by the due
dates indicated:
DUE DATE AMOUNT
-------- -------
September 24, 2004 $200,000
October 1, 2004 $200,000
October 8, 2004 $200,000
October 15, 2004 $200,000
October 22, 2004 $200,000
October 29, 2004 $200,000
November 5, 2004 $200,000
November 12, 2004 $200,000
November 19, 2004 $100,000
Also, concurrently with execution and delivery of this Second Agreement,
Borrowers shall reimburse Bank for attorney fees and expenses of $34,365.85.
This reimburses Bank for only a portion of the fees
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 3
and expenses included in the Liabilities. Without limitation, the
Liabilities continue to include all costs and expenses incurred by Bank
(including all attorney fees and expenses).
6. Concurrently with execution of this Second Agreement, Borrowers will pay to
Bank a fee of $25,000. The entire fee is in consideration of Bank's costs in
negotiating and structuring this Second Agreement (and not as consideration
for any specific period of forbearance). This fee is fully earned upon
acceptance of this Second Agreement by Borrowers and Guarantors and is not
refundable. If the Liabilities are paid in full by October 15, 2004, and as
of the date of such payoff Borrowers have timely made all payments required
under this Second Agreement and Bank has not terminated its forbearance
under this Second Agreement, then at the closing of the payoff of the loan,
the Borrowers shall receive a $25,000 credit against the payoff amount.
7. By October 15, 2004, Xx. Xxxxxxx shall deliver to Bank copies of all
mortgages on his residence and statements identifying the then current
balances secured by those mortgages. By October 15, 2004, Xx. Xxxxxxx shall
deliver to Bank copies of the annuity contract identified by him in his
prior personal financial statement delivered to Bank.
8. Effective as of August 1, 2004, Interest on Liabilities shall accrue at
Bank's "prime rate" (as defined in the Loan Documents) plus six percentage
points (6.0%) and shall be due and payable on the first (1st) day of each
and every month, and upon the occurrence of a default under the terms of
this Second Agreement or any further defaults under the Loan Documents, then
the Liabilities shall accrue interest at the rate otherwise provided in this
paragraph plus three percentage points (3.0%).
9. Borrowers and Guarantors acknowledge and agree the Loan Documents presently
provide for and they shall reimburse for any and all costs and expenses of
Bank, including, but not limited to, all inside and outside counsel fees of
Bank whether in relation to drafting, negotiating or enforcement or defense
of the Loan Documents or this Agreement, including any preference or
disgorgement actions as defined in this Agreement and all of Bank's audit
fees, incurred by Bank in connection with the Liabilities, Bank's
administration of the Liabilities and/or any efforts of Bank to collect or
satisfy all or any part of the Liabilities. Borrowers and Guarantors shall
immediately reimburse Bank for all of Bank's costs and expenses upon Bank's
incurrence thereof or upon demand.
10. Loan payments, interest on the Liabilities, loan administration expenses,
including, but not limited to, all inside and outside counsel fees of Bank
and Bank's audit fees, may be charged directly to Borrower's checking
account maintained with Bank.
11. In addition to all reporting currently required by the Loan Documents; (a)
Borrowers shall provide weekly to Bank updated cash flow forecasts by
Tuesday of each week for the preceding week, in form acceptable to Bank; and
(b) Borrowers shall provide weekly to Bank updated tracking of Borrower's
outstanding, unpaid withholding tax liabilities, in form acceptable to Bank;
(c) copies of month end payroll taxes reallocation forms prepared by
Borrowers for IRS as and when delivered to the IRS or by the fifteenth day
of each month for the prior month, whichever is earlier.
12. Without limitation, Borrowers shall be in default under this Second
Agreement if the IRS places a lien on the assets of any of the Borrowers for
unpaid withholding taxes.
13. Borrowers and Guarantors acknowledge and agree the Loan Documents presently
provide and they shall permit Bank to conduct such fair market value
appraisals, inspections, surveys and/or testing, whether for environmental
contamination or otherwise, that Bank deems necessary, on any and all real
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 4
property and personal property upon which Bank may possess a mortgage or
security interest securing the Liabilities, and the cost of such appraisals,
inspections, surveys and testing are part of the costs and expenses for
which the Borrowers and Guarantors must reimburse Bank.
14. To the extent any payment received by Bank is deemed a preference,
fraudulent transfer or otherwise by a court of competent jurisdiction which
requires the Bank to disgorge such payment then such payment will be deemed
to have never occurred and the Liabilities will be adjusted accordingly
15. This Second Agreement shall be governed and controlled in all respects by
the laws of the State of Michigan, without reference to its conflict of law
provisions, including interpretation, enforceability, validity and
construction.
16. Bank expressly reserves the right to exercise any or all rights and remedies
provided under the Loan Documents and applicable law except as modified
herein. Bank's failure to immediately exercise such rights and remedies
shall not be construed as a waiver or modification of those rights or an
offer of forbearance.
17. This Second Agreement will inure to the benefit of the Bank and all its
past, present and future parents, subsidiaries, affiliates, predecessors and
successor corporations and all of their subsidiaries and affiliates.
18. Borrowers and Guarantors agree to execute any and all additional and
supplemental documentation, and provide such further assistance and
assurances as Bank may require, in Bank's sole and absolute discretion, to
give full effect of the terms, conditions and intentions of this Agreement.
19. Bank anticipates that discussions addressing the Liabilities may take place
in the future. During the course of such discussions, Bank Borrowers and
Guarantors, may touch upon and possibly reach a preliminary understanding on
one or more issues prior to concluding negotiations. Notwithstanding this
fact and absent any express written waiver by Bank, Bank will not be bound
by an agreement on any individual issues unless and until an agreement is
reached on all issues and such agreement is reduced to writing and signed by
Borrowers and Guarantors, and Bank.
20. As of the date of execution and delivery of this Second Agreement by
Borrowers and Guarantors, there are no offers outstanding from Bank to
Borrowers and Guarantors. Any prior offer by Bank, whether oral or written
is hereby rescinded in full. There are no oral agreements between Bank and
Borrowers and Guarantors; any agreements concerning the Liabilities are
expressed only in the existing Loan Documents. The duties and obligations of
Borrowers and Guarantors and Bank shall be only as set forth in the Loan
Documents and this Second Agreement when executed by all parties.
21. Borrowers and Guarantors acknowledge that they have reviewed (or have had
the opportunity to review) this Second Agreement with counsel of their
choice and have executed this Second Agreement of their own free will and
accord and without duress or coercion of any kind by Bank or any other
person or entity.
22. BORROWERS, GUARANTORS AND BANK ACKNOWLEDGE AND AGREE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES
ANY RIGHT TO TRIAL
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 5
BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT
OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT, THE LOAN DOCUMENTS OR
LIABILITIES.
23. DEFAULTS HAVE OCCURRED UNDER THE LOAN DOCUMENTS. BORROWERS AND GUARANTORS,
TO THE FULLEST EXTENT ALLOWED UNDER APPLICABLE LAW, WAIVE ALL NOTICES THAT
BANK MIGHT BE REQUIRED TO GIVE BUT FOR THIS WAIVER, INCLUDING ANY NOTICES
OTHERWISE REQUIRED UNDER SECTION 6 OF ARTICLE 9 OF THE UNIFORM COMMERCIAL
CODE AS ENACTED IN THE STATE OF MICHIGAN OR THE RELEVANT STATE CONCERNING
THE APPLICABLE COLLATERAL (AND UNDER ANY SIMILAR RIGHTS TO NOTICE GRANTED IN
ANY ENACTMENT OF REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE).
FURTHERMORE, BORROWERS AND GUARANTORS WAIVE (A) THE RIGHT TO NOTIFICATION OF
DISPOSITION OF THE COLLATERAL UNDER SECTION 9-611 OF THE UNIFORM COMMERCIAL
CODE, (B) THE RIGHT TO REQUIRE DISPOSITION OF THE COLLATERAL UNDER SECTION
9-620(E) OF THE UNIFORM COMMERCIAL CODE, AND (C) ALL RIGHTS TO REDEEM ANY OF
THE COLLATERAL UNDER SECTION 9-623 OF THE UNIFORM COMMERCIAL CODE.
24. BORROWERS AND GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT NOT LIMITED TO,
AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS AND/OR CREDITORS
OF BORROWERS AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM, HEREBY WAIVE,
DISCHARGE AND FOREVER RELEASE BANK, BANK'S EMPLOYEES, OFFICERS, DIRECTORS,
ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS, FROM AND OF ANY AND ALL
CLAIMS, CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS OR OFFSETS AND/OR
ALLEGATIONS BORROWERS AND/OR GUARANTORS MAY HAVE OR MAY HAVE MADE OR WHICH
ARE BASED ON FACTS OR CIRCUMSTANCES ARISING AT ANY TIME UP THROUGH AND
INCLUDING THE DATE OF THIS AGREEMENT, WHETHER KNOWN OR UNKNOWN, AGAINST ANY
OR ALL OF BANK, BANK'S EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS,
STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
25. This Second Agreement may be executed in counterparts and facsimiles and the
counterpart, when properly executed and delivered by signing deadline, will
constitute a fully executed complete agreement.
24. Borrowers and Guarantors shall properly execute this Second Agreement and
hand deliver same to the undersigned by no later than 5:00 p.m. on September
24, 2004.
Bank reserves the right to terminate its forbearance prior to November 20, 2004,
in the event of any new defaults under the Loan Documents, defaults under this
Second Agreement, in the event of further deterioration in the financial
condition of Borrowers or Guarantors or further deterioration in Banks
collateral position, and/or in the event Bank, for any reason, believes that the
prospect of payment or performance is impaired.
Very truly yours,
/s/ Xxxxx Xxxxxxxxx
-------------------
Xxxxx Xxxxxxxxx
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 6
Assistant Vice President
X.X. Xxx 00000
XX 0000
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000
fax: (000) 000-0000
[SIGNATURE PAGES TO FOLLOW]
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 7
ACKNOWLEDGED AND AGREED:
SUNSHINE STAFF LEASING, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
SUNSHINE COMPANIES, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
SUNSHINE COMPANIES II, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
SUNSHINE COMPANIES III, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
SUNSHINE COMPANIES IV, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
PARADYME, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
ABS IV, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
/s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Xxxxx X. Xxxxxxxxxx
/s/ Xxxx Xxxxxxx Date: September 22, 2004
----------------
Xxxx Xxxxxxx
Sunshine Staff Leasing, Inc.
Sunshine Companies, Inc.
Sunshine Companies II, Inc.
Sunshine Companies III, Inc.
Sunshine Companies IV, Inc.
Paradyme, Inc.
ABS IV, Inc.
September 22, 2004
Page 8
PRESIDION SOLUTIONS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
PRESIDION CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxx Date: September 22, 2004
-----------------------
Its: President
---------
