EXHIBIT 10.2
FORBEARANCE AGREEMENT
This Forbearance Agreement ("Agreement"), dated as September 30, 2001,
is between U.S. Bank National Association (the "Bank") and Geographics, Inc.
(the "Borrower").
RECITALS
A. Bank and Borrower are parties to a Loan and Security Agreement dated
December 22, 1999, as amended by the First Amendment to Loan and Security
Agreement dated April 17, 2000 and the Second Amendment to Loan and Security
Agreement dated as of June 30, 2001 (as amended, the "Loan Agreement").
B. Borrower acknowledges that defaults ("Forbearance Defaults") exist
under the Loan Agreement and Bank is entitled to exercise its rights and
remedies under the Loan Agreement, including, but not limited to, ceasing to
make advances and realizing on the Collateral.
C. Borrower has indicated that it is negotiating with another party to
either sell its business and assets or merge with another entity, and Borrower
has requested that Bank forbear until January 31, 2002 to allow Borrower to
complete either a sale or merger.
D. Borrower has agreed that on or before January 31, 2002 it will
either (i) accomplish the sale of its business and assets and pay the Bank in
full or (ii) merge with another entity and provide Bank with a commitment for
new financing in order to pay all amounts owing to the Bank in full.
E. Borrower acknowledges that the Bank does not agree to continue to
provide financing to Borrower beyond January 31, 2002.
F. Borrower further acknowledges that the Bank has not consented to a
merger, and will not provide such consent unless the terms of such merger are
acceptable to the Bank and the Borrower has a commitment for new financing with
a reasonable expectation of promptly closing on such financing and paying all
amounts owing to the Bank in full.
G. Bank is willing to enter into this Agreement and forbear exercise of
remedies until January 31, 2002, solely to allow Borrower time to either
finalize its agreement for sale of its business and assets or merge with another
entity and pay Bank in full, under the terms and conditions contained herein,
provided that (i) except as expressly provided herein, Bank does not waive any
Events of Default, and (ii) Bank does not agree to finance Borrower beyond
January 31, 2002.
AGREEMENT
NOW, THEREFORE, the Bank and Borrower hereby agree as follows:
1. Definitions.
(a) Capitalized terms used but not defined herein shall have
the meanings ascribed to such terms in this Loan Agreement.
(b) Effective as December 18, 2001, "Adjusted LIBOR Rate"
means with respect to an Interest Period for a LIBOR Rate Loan, a rate per annum
(rounded upward, if necessary, to the nearest 1/16 of 1%) determined pursuant to
the following formula: Adjusted LIBOR Rate = [LIBOR Rate / (1 - LIBOR Reserve
Requirement)] + 3.0%.
(c) Effective as of September 30, 2001, "Real Estate Sublimit"
shall mean $1,750,000.00.
2. Term and Termination. Section 10 of the Loan Agreement is hereby
amended to delete "September 30, 2001" and replace it with "January 31, 2002".
3. Subordinated Debt and Security Interest. Bank hereby consents to
Borrower's subordinated debt of $500,000.00 to Xxxxxxxx X. Xxxxx, which debt
shall be unsecured ("Miner Debt") Borrower may not repay any portion of the
Miner Debt without the prior written consent of the Bank.
4. Agreement for Sale or Merger. On or before January 2, 2002, Borrower
shall furnish to Bank either (a) a fully executed purchase agreement for the
sale of Borrower's business and assets, in form and content satisfactory to
Bank, with a closing scheduled no later than January 31, 2002, or (b) evidence
satisfactory to Bank that Borrower has agreed upon a plan of merger with another
entity to be completed no later than January 31, 2002. Borrower acknowledges
that if Borrower presents the Bank with a plan of merger, the Bank may not
consent to such merger unless the terms and conditions of such merger are
acceptable to Bank, and Borrower, on or before January 31, 2002, obtains a
commitment for new financing which will pay all amounts owing to the Bank in
full.
5. Completion of Sale or Merger. On or before January 31, 2002,
Borrower shall either (a) complete the sale of its business and assets, and pay
all amounts owing to the Bank in full, or (b) merge with another entity, on
terms and conditions acceptable to Bank, in addition to providing Bank with a
commitment for new financing which will pay all amounts owing to the Bank in
full.
6. Forbearance Defaults; No Waiver. The Forbearance Defaults are
material and include defaults under financial and other covenants. Bank has
agreed that, subject to the terms hereof, notwithstanding the Forbearance
Defaults, Bank will continue to advance funds under the
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Revolving Credit Facility, provided that Bank shall not at any time be required
to advance any amount in excess of the amount permitted to be advanced under
Section 4 of the Loan Agreement as amended hereby. The Bank does not waive any
Events of Default. The Bank's agreement to forbear under this Forbearance
Agreement shall terminate on the earliest to occur of the following (each a
"Termination Event"): (a) January 31, 2002 or (b) the occurrence of, or the
Bank's obtaining knowledge of, any Event of Default (other than a Forbearance
Default), or an increase in scope or magnitude of a Forbearance Default (in each
of the cases described in this clause (b), an "Additional Default"). Borrower
expressly acknowledges that subject to the terms of the Loan Agreement as
amended hereby, Bank has agreed to forbear exercising their rights and remedies
until January 31, 2002, but in any event, Bank has not agreed to, and is not
obligated to, continue to provide financing to Borrower beyond such date.
7. Conditions to Effectiveness of this Agreement. This Amendment shall
not be effective until this Amendment shall have been fully executed and
delivered to Bank and Bank shall have received the following in form and
substance satisfactory to Bank:
(a) Corporate Resolutions of Borrower authorizing this
Amendment accompanied by an Officer's Certificate signed by an officer of
Borrower.
8. Effective of Agreement. Except as amended hereby, the Loan Agreement
shall remain in full force and effect.
9. Attorneys' Fees. The Borrower agrees to pay all reasonable
attorneys' fees of Bank relating to this Agreement and all amendments,
modifications and supplements hereto.
10. Law Governing. This Agreement shall be governed by the laws of the
State of Wisconsin.
11. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns.
12. Release of Bank. In consideration of the accommodations by Bank
hereunder, Borrower does hereby, on behalf of itself, its agents, insurers,
successors and assigns, release, acquit and forever discharge Bank and Bank's
affiliates, together with all of their present and former directors, officers,
agents and employees, from any and all claims, demand or causes of action of any
kind, nature or description whether arising in law or equity or upon contract or
tort or under any state or federal law or otherwise, which Borrower has had, now
has or has made claim to have against any such party or by reason of any act,
omission, matter, cause or thing whatsoever from the beginning of time to and
including the date of this Agreement, whether such claims, demands and causes of
action are matured or unmatured or know or unknown, except Bank's executory
obligations under the Loan Agreement as hereby amended. Notwithstanding the
foregoing, nothing herein shall be construed as a release of Bank's liability
for gross negligence or willful misconduct.
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The parties hereto have executed this Agreement on the day and year
first above written.
BORROWER: BANK:
Geographics, Inc. U.S. Bank National Association
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
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Xxxxx X. Xxxxxx, Chief Executive Officer Xxxxxx X. Xxxxx, Vice President
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