EXHIBIT 10.9 Forbearance Agreement ~ East Group Properties, L.P. effective July
1, 2002
FORBEARANCE AGREEMENT
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THIS FORBEARANCE AGREEMENT (this "Agreement") is entered into on the __ day
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of January, 2003 (the "Agreement Date"), and is effective as of July 1, 2002
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(the "Effective Date"), by and between BREKEL GROUP, INC., a Delaware
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corporation (the "Lessee") and EASTGROUP PROPERTIES, L.P., a Delaware limited
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partnership (the "Lessor").
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RECITALS
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WHEREAS, Lessee and Lessor are parties to that certain Lease Agreement
dated as of December 31, 2000, as amended by that certain (a) Addendum Regarding
Additional Security dated as of January 5, 2002, and (b) Addendum to Lease
executed on June 30, 2001 (and as further amended, restated, supplemented or
otherwise modified from time to time, the "Lease"); and
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WHEREAS, Lessee has defaulted in its obligation to pay rent and other
charges to Lessor under the Lease (the "Defaults"); and
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WHEREAS, Lessee has requested that (a) Lessor forbear from the exercise of
its rights and remedies as provided in the Lease and under applicable laws, (b)
Lessor accept a promissory note (as such note may be amended, replaced,
restated, supplemented or otherwise modified pursuant to the terms thereof, the
"Note") in substantially the form attached hereto as "EXHIBIT A" representing
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Lessee's payment obligations to Lessor under the Lease during Forbearance Period
(as defined below), and (c) terminate the Lease on July 1, 2004, and Lessor has
agreed to do so, upon the terms and conditions herein without waiving, curing or
ceasing the continuance of any Event of Default (as described in the Lease).
NOW THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that capitalized terms used herein
but not defined herein shall have the meaning ascribed to such terms in the
Lease, and further agree as follows:
A. FORBEARANCE.
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1. Lessor agrees to forbear from the exercise of its rights and
remedies under the Lease and under applicable law arising from the Defaults from
the Effective Date until July 1, 2004 (the "Forbearance Period"). During the
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Forbearance Period, and provided that no Forbearance Default (as defined below)
occurs and all other terms of this Agreement are satisfied, Lessor agrees that
it will not accelerate the obligations owed for the term of the Lease or the
Existing Obligations (as defined below) owed to Lessor and declare all such
obligations immediately due and payable under the Lease as a result of the
Defaults; and
2. For so long as Lessee complies with the payment and performance
obligations under this Agreement, during the Forbearance Period the Lease shall
be deemed modified as follows:
(a) The space occupied by Lessee shall be deemed to be 10,000
square feet of the original Leased Premises;
(b) From the Effective Date until the first anniversary thereof,
Lessee's monthly payments due to Lessor shall consist of the monthly amounts set
forth in "EXHIBIT B" hereto; and
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(c) After the first anniversary of the Effective Date, the
monthly payment amounts set forth in EXHIBIT B shall be recalculated (based upon
the amounts set forth in Exhibit B) as originally provided in the Lease.
3. During the Forbearance Period, Lessor may, at its sole option,
(a) require that Lessee consolidate its operations into a space that Lessor
shall designate within the Leased Premises, requiring that Lessee enter into an
amendment to the Lease for such substitute space, or (b) require that Lessee
vacate the Leased Premises upon sixty (60) days' notice to Lessee upon the
re-leasing of the Leased Premises to a replacement tenant; provided, however,
that during
Exhibit 10.9- Page 1
such sixty (60) day notice period, Lessee shall permit Lessor and Lessor's
agents and contractors to enter into the Leased Premises for the purposes of
conducting inspections or construction of the Leased Premises to the
specifications of such replacement tenant. Such relocation or termination shall
not affect the liabilities of Lessee except as set forth otherwise herein or in
the Note.
4. Lessor's forbearance provided for herein shall automatically
terminate and cease to be of force and effect, upon or after the occurrence of
the failure of Lessee to comply with any of the conditions described in this
Agreement (including defaults under the Lease after the date hereof, other than
with respect to payment of rent) or in the Note, including, without limitation,
at any time, default in any payment of the amounts set forth in Section 2(b) or
2(c) above (individually and collectively, referred to hereinafter as the
"Forbearance Defaults"), and thereafter, Lessor may exercise all rights and
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remedies under the Lease and applicable law, including, without limitation, the
right to immediately accelerate the obligations thereunder and declare all
amounts owed by Lessee to Lessor under the Lease and the Note immediately due
and payable.
5. Lessor's forbearance is subject to compliance by Lessee with all
other terms and provisions of the Lease, which terms shall continue to apply
throughout the Forbearance Period, and the failure to comply with any such terms
and provisions (other than those identified as a Default on the date hereof)
shall also be deemed to be a Forbearance Default.
6. For so long as (a) the Leased Premises (or any part thereof) are
not (i) the subject of leasing negotiations between Lessor and a prospective
replacement tenant, or (ii) the subject of an executed lease agreement with a
replacement tenant, and (b) Lessee is not in default hereunder or under the
Note, Lessee shall have the option of re-leasing additional space within the
Leased Premises under the original terms of the Lease; provided, however, that
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(x) such additional space must be contiguous with the space then occupied by
Lessee within the Leased Premises, and (y) the re-leasing of such additional
space does not render the remainder of the Leased Premises unmarketable to other
prospective tenants; and provided, further, that at the time of any request to
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lease such additional space, Lessee shall provide Lessor with all financial
statements and other information that Lessor shall request at such time to
evidence Lessee's financial condition, and such financial statements and other
information shall be satisfactory in Lessor's sole discretion to evidence that
Lessee's financial condition meets Lessor's criteria for the leasing of such
additional space. If Lessor and Lessee agree to the re-leasing of such
additional space, any rental payments received by Lessor in respect thereof
shall reduce the corresponding amounts set forth on "Exhibit B" hereto.
B. CONDITIONS PRECEDENT. This Agreement shall only be effective when (a)
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Lessee shall have executed and delivered this Agreement to Lessor, and (b)
Lessee shall have executed and delivered the Note to Lessor.
C. MISCELLANEOUS.
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1. Lessee agrees that the forbearance outlined herein is not and
shall not be deemed to constitute an undertaking by Lessor to forbear or refrain
at any time from exercising any and all rights and remedies available to it
under the Lease or under applicable law (which rights and remedies are expressly
reserved) upon the occurrence of any Forbearance Default. Additionally, except
to the extent of Lessor's forbearance expressly set forth herein, Lessor
requires strict compliance with the Lease; provided, however, that Lessor shall
not be required to issue any notices otherwise required by the Lease with
respect to the Defaults during the term of this Agreement. It is expressly
understood and agreed that this Agreement shall not constitute a mutual
disregard of the terms and provisions of the Lease or constitute a course of
dealing at variance with the Lease. Any extension of the Forbearance Period
shall be at the sole discretion of Lessor.
2. Lessee further agrees that: (a) the Defaults have occurred and
are continuing, and shall not be deemed to have been waived, cured or
eliminated, in whole or in part, and Lessor expressly reserves all rights with
respect to the Defaults, subject only to this Agreement; and (b) the terms,
representations and warranties in the Lease are reaffirmed, including, without
limitation, unpaid rent and other charges under the Lease, which as of the date
hereof are as set
Exhibit 10.9- Page 2
forth on "EXHIBIT C" hereto (the "Existing Obligations"). Lessee expressly
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acknowledges that the amounts set forth on Exhibit C as "Tenant Improvements"
and "Leasing Commission" represent Lessor's best estimate of such charges, but
are subject to adjustment based on actual charges for such Tenant Improvements
and Leasing Commissions incurred by Lessor in respect of the Leased Premises.
3. As further consideration to induce Lessor to enter into this
Agreement, Lessee represents and warrants that there are no claims, causes of
action, suits, debts, obligations, liabilities, demands of any kind, character
or nature whatsoever, fixed or contingent, which Lessee may have, or claim to
have, against Lessor, and Lessee hereby releases, acquits and forever discharges
Lessor and its respective agents, employees, officers, directors, servants,
representatives, attorneys, affiliates, successors and assigns (collectively,
the "Released Parties") from any and all liabilities, claims, suits, debts,
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causes of action and the like of any kind, character or nature whatsoever, known
or unknown, fixed or contingent that Lessee may have, or claim to have, against
each of the such Released Parties at any time prior to the Agreement Date.
4. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
FLORIDA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. EXCLUSIVE VENUE FOR ANY
ACTION FILED UNDER THIS AGREEMENT SHALL BE IN THE APPROPRIATE COURT IN ORANGE
COUNTY, FLORIDA.
5. This Agreement, taken together with the Lease and the Note
embodies the entire agreement and understanding among the parties hereto. This
Agreement and any amendments, waivers, consents or supplements hereto may be
executed in multiple counterparts, each of which when so executed and delivered
(whether by facsimile or otherwise) shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument. Time is of
the essence for performing all matters set forth in this Agreement.
6. Except as otherwise specified herein, no amendment or waiver of
any provision of this Agreement, nor any consent to any departure by any party
from the terms hereof, shall be effective unless it shall be in writing and
signed by the parties hereto, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
7. Lessee shall be solely liable for, and shall pay immediately upon
demand, all documentary stamp taxes and/or intangible taxes which are due in
connection with this Agreement and/or the Note.
8. Lessee understands and agrees that Lessor shall be entitled to
collect, in any action filed to enforce, or cause the interpretation of, the
terms of this Agreement, all attorneys' fees and cost incurred by Lessor at or
before the trial level and in any bankruptcy or appellate proceedings.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Exhibit 10.9- Page 3
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized signatories as of the Agreement date first written
above.
Signed, sealed and delivered LESSOR
in the presence of:
EASTGROUP PROPERTIES L.P., a
Delaware limited partnership
_____________________________ By: _____________________________
Print Name:__________________ Name:____________________________
_____________________________ Title:___________________________
Print Name:__________________
LESSEE
BREKEL GROUP, INC., a Delaware
corporation
_____________________________ By: _____________________________
Print Name:__________________ Name:____________________________
_____________________________ Title:___________________________
Print Name:__________________
Exhibit 10.9- Page 4
EXHIBIT A
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FORM OF PROMISSORY NOTE
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Exhibit 10.9- Page 5
PROMISSORY NOTE
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$980,545.00 January __, 2003
For value received the undersigned ("Lessee") promises to pay to the order
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of EASTGROUP PROPERTIES, L.P., a Delaware limited partnership ("Lessor"), at its
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principal office at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000,
the principal sum of NINE HUNDRED EIGHTY THOUSAND, FIVE HUNDRED FORTY-FIVE
DOLLARS ($980,545.00), together with interest thereon at a simple interest rate
equal to six percent (6%) per annum.
Reference is hereby made to that certain (a) Lease Agreement dated as of
December 31, 2000, by and between Lessee and Lessor, as amended by that certain
(i) Addendum Regarding Additional Security dated as of January 5, 2002, and (ii)
Addendum to Lease executed on June 30, 2001 (as further amended, restated,
supplemented or otherwise modified from time to time, the "Lease"), and (b)
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Forbearance Agreement of even date herewith, by and between Lessee and Lessor to
which this Note relates (as amended, restated, supplemented or otherwise
modified from time to time, the "Forbearance Agreement").
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Lessee shall pay principal and interest payments to Lessor as follows:
(a) Monthly Payments. Subject to adjustment as provided in clauses (b),
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(c), (e) and (f) below, commencing on July 1, 2004 and continuing on
the first (1st) day of each month thereafter through and including
June 1, 2010, Borrower shall pay to Lender payments consisting of
principal and interest equal to seventy-two (72) monthly installments
of $16,250.47 per month, with a final installment payment as set forth
in clause (d) below;
(b) Adjustment on July 1, 2003. Provided the Forbearance Agreement is in
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effect on such date, on July 1, 2003, Lessor shall calculate all
payments of rent and other charges Lessor has received from Lessee
from July 1, 2002 through and including June 30, 2003 (the "2003
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Payments"), and the principal balance owing hereunder shall be reduced
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by an amount equal to the 2003 Payments. On such date, Lessee shall
execute a replacement note (the "2003 Note") in favor of Lessor in an
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amount equal to the sum of (i) $1,939,710.00, minus, (ii) the 2003
Payments, minus (iii) any Reduction Amount pursuant to clause (e)
below, (iv) (X) plus, to the extent positive, or (Y) minus, to the
extent negative, the Estimated Amount pursuant to clause (f) below.
All payments of principal and interest owing by Lessee to Lessor
pursuant to the 2003 Note shall be re-amortized over seventy-two (72)
months, with the first payment beginning on July 1, 2004;
(c) Adjustment on July 1, 2004. Provided the Forbearance Agreement is in
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effect on such date, on July 1, 2004, Lessor shall calculate all
payments of rent and other charges Lessor has received from Lessee
from July 1, 2003 through and including June 30, 2004 (the "2004
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Payments"), and the principal balance owing pursuant to the 2003 Note
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shall be reduced by an amount equal to the 2004 Payments. On such
date, Lessee shall execute a replacement note (the "2004 Note") in
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favor of Lessor in an amount equal to the sum of (i) the 2003 Note,
minus, (ii) the 2004 Payments, minus (iii) any Reduction Amount
pursuant to clause (e) below, (iv) (X) plus, to the extent positive,
or (Y) minus, to the extent negative, the Estimated Amount pursuant to
clause (f) below. All payments of
Exhibit 10.9- Page 6
principal and interest owing by Lessee to Lessor pursuant to the 2004
Note shall be re-amortized over seventy-two (72) months, with the
first payment beginning on July 1, 2004;
(d) Maturity Date. Unless the indebtedness evidenced by this Note is
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accelerated as provided herein, on June 1, 2010, (herein referred to
as the "Maturity Date"), all unpaid principal and interest, together
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with any other sums due hereunder shall be due and payable by Lessee
to Lessor; and
(e) Reduction Amount. Any rental payments and other charges in respect of
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the Lease actually received by Lessor prior to July 1, 2004 from
sources other than Lessee, including, without limitation, any
replacement tenant for all or part of the Leased Premises (as defined
in the Lease) (the "Third Party Payments"), shall be credited to
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Lessee as a reduction of principal owing hereunder, under the 2003
Note, or under the 2004 Note, as applicable, in an amount equal to the
sum of (X) the aggregate amount of such Third Party Payments received
during the applicable period, multiplied by (Y) seventy-five percent
(75%) (the "Reduction Amount").
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(f) Estimated Amount. To the extent that Lessor's expenses in respect of
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either "Tenant Improvements" or "Leasing Commissions" (as set forth on
Exhibit C to the Forbearance Agreement) are greater than or less than
the amounts estimated by Lessor on Exhibit C to the Forbearance
Agreement, such amount of Tenant Improvements or Leasing Commissions
shall be, during the applicable period for which such charges were
actually incurred by Lessor, as applicable, added to, or subtracted
from, the principal payable by Lessee hereunder.
The maker liable for the payment of any sum or sums due or to become
due under the terms of this Note waives the right of exemption under the laws of
the State of Florida and waives presentment, protest and demand, notice of
protest, demand and of dishonor and nonpayment of this Note, and consents that
the owner hereof shall have the right, without notice, to deal in any way at any
time with any party hereto, or to grant any extension or extensions of time for
payment of any said indebtedness or any other indulgences or forbearances
whatsoever, or may release any of the security for this Note or guarantors of
this Note without in any way affecting the liability of any other party for the
payment of this Note.
The maker further agrees to pay all costs of collection, including
reasonable attorneys' fees and costs incurred at or before the trial level and
in any appellate or bankruptcy proceedings.
The principal, or any installment of principal, unless paid when due
shall bear interest after maturity at the maximum rate permitted by the laws of
the State of Florida.
The Lender may, at its option, collect a late charge not to exceed
five percent (5%) of any payment not timely paid, to reimburse Lender for
expenses of servicing the delinquent payment.
THIS NOTE IS TO BE CONSTRUED AND ENFORCED ACCORDING TO THE LAWS OF THE
STATE OF FLORIDA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. EXCLUSIVE VENUE FOR
ANY ACTION FILED UNDER THIS NOTE SHALL BE IN THE APPROPRIATE COURT IN ORANGE
COUNTY, FLORIDA.
Exhibit 10.9- Page 7
Time is of the essence of this Note. Notwithstanding anything
contained herein to the contrary, upon default in payment of the principal
and/or interest due hereunder, under any other notes issued by the Lessee in
favor of the Lessor, or upon any payment or performance default under the
Forbearance Agreement or performance default under the Lease, all obligations of
Lessee to Lessor hereunder, and under the Lease, may be accelerated and all
amounts owed by Lessee to Lessor may, at the option of Lessor, be declared
immediately due and payable.
It is understood and agreed that the fact that this Note and the 2003
Note, do not reflect all of the obligations of Lessee as described in the
estimated figures set forth in Exhibit "C" to the Forbearance Agreement, and
shall not serve to act as a waiver of the right of Lessor to collect same from
Lessee. Any right on the part of Lessor to accelerate the obligations described
in the Note shall also give rise on the part of Lessor to accelerate the
remainder of the obligations set forth in said Exhibit "C" as soon as such
amounts are determinable.
Lessee's Address: Lessee:
BREKEL GROUP, INC., a Delaware corporation
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000 By:
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Name:
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Title:
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Exhibit 10.9- Page 8
EXHIBIT B
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LESSEE'S MONTHLY PAYMENTS DURING FORBEARANCE PERIOD
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Rent ($8.50/SF) $ 8,500.00 (plus applicable sales tax)
Common Area Maintenance $ 1,133.33 (plus applicable sales tax)
Tenant Improvement Amortization $ 3,303.77 (plus applicable sales tax)
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Total $ 12,937.10 (plus applicable sales tax)
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Exhibit 10.9- Page 9
EXHIBIT C
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EXISTING OBLIGATIONS
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Rent balance due as of June 30, 2002 $ (1,326.00)
Rent thru July 01, 2004 (includes CAM and sales tax) $ 1,135,546.00
Tenant Improvements
Current obligation $ 414,098.00
Future retrofit @ $5/SF (estimate) $ 301,070.00
Leasing Commission (estimate) $ 90,321.00
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Total $ 1,939,710.00
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Exhibit 10.9- Page 10
