THTH - Overadvance
January 26, 2006
Thinkpath Inc. and each of its subsidiaries
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Chief Financial Officer
Re: Overadvance Side Letter
Dear Xx. Xxxxxxxxx:
Reference is hereby made to that certain Security Agreement dated as of
June 27, 2005 by and among Thinkpath, Inc., an Ontario corporation ("THINKPATH")
and such other subsidiaries of Thinkpath named in that certain Security
Agreement or which hereafter become a party thereto (collectively, the
"COMPANY") and Laurus Master Fund, Ltd., a Cayman Islands company ("LAURUS") (as
amended, modified and/or supplemented from time to time, the "SECURITY
AGREEMENT"). Capitalized terms used but not defined herein shall have the
meanings ascribed them in the Security Agreement. Reference is made to the
letter agreement, dated as of June 27, 2005 between the Thinkpath, Thinkpath,
Inc., an Ohio corporation ("THINKPATH (OH)"), Thinkpath of Michigan Inc., a
Michigan corporation ("THINKPATH (MI)"), Thinkpath Technical Services Inc., a
Ohio corporation ("TECHNICAL SERVICES" and, together with Thinkpath, Thinkpath
(OH) and Thinkpath (MI), the "COMPANIES" and, each a "COMPANY") and Laurus (the
"FIRST OVERADVANCE WAIVER"), pursuant to which Xxxxxx agreed to fund an
Overadvance (as defined therein) to Thinkpath in the aggregate principal amount
of up to $1,000,000 (the "FIRST OVERADVANCE"). Xxxxxx is hereby notifying you of
its decision to again exercise the discretion granted to it pursuant to Section
2(a)(ii) of the Security Agreement to make a Loan to Thinkpath in excess of the
Formula Amount on the date hereof (the "SECOND OVERADVANCE", and together with
the First Overadvance, the "OVERADVANCES"). The aggregate principal amount of
the Overadvances as of the date hereof shall be $1,200,000. Thinkpath hereby
acknowledges that it is receiving $310,882 of proceeds from the Second
Overadvance as of the date hereof and is otherwise obligated to repay the
Overadvance in full (i.e. $1,200,000 together with accrued interest and fees
which remain unpaid in respect thereof) as required per the terms set forth
herein and in the Security Agreement.
In connection with making the Overadvances, for a period of 180 days from
the date hereof (the "Period"), Laurus hereby waives compliance with Section 3
of the Security Agreement, but solely as such provision relates to the immediate
repayment requirement for Overadvances. Xxxxxx further agrees that solely for
such Period (but not thereafter), (i) the Overadvances shall not trigger an
Event of Default under Section 19(a) of the Security Agreement and (ii)
notwithstanding anything set forth to the contrasry in Section 5(b)(ii) of the
Security Agreement, the rate of interest (the "OVERADVANCE RATE") applicable to
Overadvances shall be two percent (2.0%) per month (i.e. 24.0% per annum);
provided that, to the extent that (x) the Overadvance is not repaid in full on
or prior to the 180th day following the date hereof and (y) no other Event of
Default shall have occurred and be continuing, the Overadvance Rate otherwise
applicable to such Overadvances shall be increased by an additional one percent
(1.0%) per month (12.0% per annum). All other terms and provisions of the
Security Agreement and the Ancillary Agreements remain in full force and effect.
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In consideration of Xxxxxx' willingness to extend to Thinkpath the
Overadvances, Thinkpath will, on the date hereof, issue a six year warrant (the
"ADDITIONAL WARRANT") to Laurus to purchase 500,000 shares of the common stock
of Thinkpath with an exercise price of $0.01 per share, such Additional Warrant
to be in the form attached hereto as Exhibit A. The Company further agrees to
file a Registration Statement (as defined in the Registration Rights Agreement),
to register the shares of Common Stock that may be issued upon exercise of the
Additional Warrant upon the earlier to occur of (x) the 30th day following the
date upon which the SEC has declared effective each Registration Statement filed
by Thinkpath as of the date hereof for the benefit of Laurus as reseller and (y)
the 90th day following the date hereof (the "Filing Date"). For the avoidance of
date, the "Filing Date" shall be deemed a Filing Date as defined in the
Registration Rights Agreement.
The Companies hereby each acknowledge and agree that Xxxxxx' obligation to
fund and/or maintain, as the case may be, the Overadvances shall be contingent
upon the prior satisfaction (or waiver by Xxxxxx) of the following conditions:
(i) receipt by Xxxxxx of the duly authorized and executed Additional Warrant and
(ii) receipt by Xxxxxx of the duly authorized and executed Reaffirmation
Agreement in the form attached hereto as Exhibit B.
This letter may not be amended or waived except by an instrument in
writing signed by the Company and Laurus. This letter may be executed in any
number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement. Delivery of an executed
signature page of this letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof or thereof, as the case may
be. This letter shall be governed by, and construed in accordance with, the laws
of the State of New York. This letter sets forth the entire agreement between
the parties hereto as to the matters set forth herein and supersede all prior
communications, written or oral, with respect to the matters herein.
The Company understands that the Company has an affirmative obligation to
make prompt public disclosure of material agreements and material amendments to
such agreements. It is the Company's determination that neither this letter nor
the terms and provisions of this letter, (collectively, the "INFORMATION") are
material. The Company has had an opportunity to consult with counsel concerning
this determination. The Company hereby agrees that Xxxxxx shall not be in
violation of any duty to the Company or its shareholders, nor shall Laurus be
deemed to be misappropriating any information of the Company, if Xxxxxx sells
shares of common stock of the Company, or otherwise engages in transactions with
respect to securities of the Company, while in possession of the Information.
If the foregoing meets with your approval please signify your acceptance
of the terms hereof by signing below.
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxxx Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Director
-2-
Agreed and accepted on the date hereof
THINKPATH INC., an Ontario corporation
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
THINKPATH INC., an Ohio corporation
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
THINKPATH OF MICHIGAN INC., a Michigan corporation
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
THINKPATH TECHNICAL SERVICES INC., an Ohio corporation
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
-3-
EXHIBIT A
FORM OF ADDITIONAL WARRANT
-4-
EXHIBIT B
FORM OF REAFFIRMATION AND RATIFICATION AGREEMENT
-5-
