February 10, 2006
NetFabric Holdings, Inc.
Three Xxxxxxx Court
Denville, NJ 07834
Re: Overadvance Side Letter
Dear Xxx or Madame:
Reference is hereby made to that certain Security Agreement dated as of
February 10, 2006 by and among Netfabric Holdings, Inc ("Netfabric") and such
other subsidiaries of Netfabric named in that certain Security Agreement or
which hereafter become a party thereto (collectively, the "Company") and Laurus
Master Fund, Ltd. ("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. Xxxxxx
is hereby notifying you of its decision to exercise the discretion granted to it
pursuant to Section 2(a)(ii) of the Security Agreement to make a Loan to the
Company in excess of the Formula Amount in effect on the date hereof (the
"Overadvance").
1. As of the date hereof, the Overadvance is equal to an aggregate
principal amount of $1,000,000.00. In connection with making the Overadvance,
from the date hereof until July 30, 2007 (the "Period"), except as provided in
Section 3 hereof, Laurus hereby waives compliance with Section 3 of the Security
Agreement, but solely as such provision relates to the immediate repayment
requirement for Overadvances.
2. Pursuant to the terms of the Security Agreement, Xxxxxx is to receive
statements of Eligible Accounts from the Company on certain dates, including,
without limitation, July 30, 2006, September 30, 2006, December 31, 2006, March
31, 2007 and June 30, 2007 (each, a "Measurement Date"). Depending upon the
amount of the Eligible Accounts on each Measurement Date, the amount permitted
in the Overadvance shall be adjusted to the following (each, a "Permitted
Overadvance Amount"):
a. In the event that, on any Measurement Date, Eligible Accounts are
in excess of $1,800,000, then the Permitted Overadvance Amount shall remain
equal to $1,000,000;
b. In the event that, on any Measurement Date, Eligible Accounts are
equal to or greater than $1,400,000, but less than $1,800,000, then the
Permissable Overadvance Amount shall be adjusted to a total of $750,000;
c. In the event that, on any Measurement Date, Eligible Accounts are
equal to or greater than $1,000,000, but less than $1,400,000, then the
Permissible Overadvance Amount shall be adjusted to a total of $500,000;
d. In the event that, on any Measurement Date, Eligible Accounts are
equal to or greater than $600,000, but less than $1,000,000, then the
Permissible Overadvance Amount shall be adjusted to a total of $250,000;
and
e. In the event that, on any Measurement Date, Eligible Accounts are
less than $600,000, then the Permissible Overadvance Amount shall be
adjusted to a total of zero.
3. In the event that, on any given Measurement Date, there is a decrease in
the Permissible Overadvance Amount from the previous Measurement Date, the
Company shall pay the difference to Laurus (the "Return Payment") within three
(3) business days of Xxxxxx's request therefor.
4. Xxxxxx further agrees that solely for such Period (but not thereafter),
so long as no Return Payments are due, (i) the Overadvance shall not trigger an
Event of Default under Section 19(a) of the Security Agreement, and (ii) the
Overadvance rate set forth in Section 5(b)(ii) of the Security Agreement (the
"Overadvance Rate") shall be waived. However, in the event that a Return Payment
is due to Laurus and is not timely paid pursuant to Section 3 hereof, (i) the
Overadvance shall be considered an Event of Default under Section 19(a) of the
Security Agreement, and (ii) the Overadvance Rate shall no longer be waived. All
other terms and provisions of the Security Agreement and the Ancillary
Agreements remain in full force and effect.
5. 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.
If the foregoing meets with your approval please signify your acceptance of
the terms hereof by signing below.
LAURUS MASTER FUND, LTD.
By:_______________________________
Name: Xxxxx Xxxx
Title: Director
Agreed and accepted on the date hereof:
NETFABRIC HOLDINGS, INC.
By:
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Name:
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Title:
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