EXHIBIT 10.1
BLUE II FORBEARANCE AGREEMENT
FORBEARANCE AGREEMENT
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THIS FORBEARANCE AGREEMENT ("Forbearance Agreement") is made as of
February 27, 1997, by and among BLUE II, LLC, a Maryland limited liability
company ("Blue II), FREDERICK BREWING CO., a Maryland corporation ("FBC"),
SIGNET BANK ("Bank"), and XXXXXX X. XXXXX, XXXXXX XXXXXXXXXX, XXXXXXXX X. XXXXX
and XXXXXXXXXX X. JAYANTHIMATH, jointly and severally (individually and
collectively, the "Guarantors" and each a "Guarantor").
RECITALS
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Pursuant to and in accordance with Article 83A, Title 5, Subtitle 2, of
the Annotated Code of Maryland, as amended, the Maryland Economic Development
Corporation, a body politic and corporate and a public instrumentality of the
State of Maryland (the "Issuer"), has issued and sold to Bank its Taxable
Economic Development Revenue Bond (Blue II, LLC Facility), 1996 Issue, in the
original principal amount of $3,000,000 (the "Bond"), and has agreed to loan to
Blue II the proceeds from the sale of the Bond upon the terms and conditions set
forth in the Loan and Financing Agreement dated July 19, 1996, by and among the
Issuer, Bank, FBC, and Blue II (the "Financing Agreement"). The loan by the
Issuer to Blue II of the proceeds from the sale of the Bond (the "Loan") is
evidenced by a promissory note dated July 19, 1996, in the principal amount of
$3,000,000, made by Blue II to the Issuer (the "Blue II Note"), which promissory
note has been assigned by the Issuer to Bank.
Pursuant to a certain Guaranty dated July 19, 1996, and subject to the
limitations and conditions therein contained (the "Guaranty"), the Guarantors
have guaranteed to the Issuer, its successors and assigns (including, without
limitation, Bank), all present and future obligations of Blue II under the
Financing Agreement and all other documents executed and/or delivered in
connection therewith.
By letter dated January 22, 1997, Bank advised Blue II that unadvanced
Bond proceeds were insufficient to complete the Facility and pay the remaining
Acquisition Costs, and that a condition precedent advance of Bond proceeds
remained unsatisfied. To date, Blue II has failed to cure the funding deficiency
and is in default under the provisions of Section 6.2(c) of the Financing
Agreement. As further described in that certain Forbearance Agreement of even
date herewith by and between Bank and FBC (the "FBC Forbearance Agreement"),
Events of Default have occurred under the Bridge Loan, which represent Events of
Default pursuant to Section 10.1(y) of the Financing Agreement.
Blue II and FBC have requested (a) certain forbearance on the part of
Bank in exercising its rights and remedies under the Documents, and (b) that
Bank to continue to honor requests for advances under the Financing Agreement in
accordance with the terms thereof.
As set forth in and subject to the terms of this Forbearance Agreement,
Bank has agreed to forbear in the exercise of its rights and remedies under the
Documents, and to
make advances under the Financing Agreement in accordance with the terms
thereof.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, Blue II, FBC and Bank do hereby agree as follows:
1. Defined Terms. All capitalized terms not otherwise defined herein
which are defined in the Financing Agreement shall have the same meanings
assigned to them in the Financing Agreement.
2. Acknowledgments. Blue II and FBC hereby acknowledge that (a) Blue II
is in default of its obligations under Section 6.2(c) of the Financing
Agreement, (b) an Event of Default exists under Subsection 8(k) of the Bridge
Loan Agreement (as defined in the FBC Forbearance Agreement), (b) Bank is a
fully secured creditor with valid and perfected first priority security
interests in the "Security" as defined in the Financing Agreement, (c) all
previous payments to Bank under the Financing Agreement have been made in the
ordinary course, and (d) Bank is not required to make any additional advances to
Blue II under Section 6.4(h) of the Financing Agreement.
3. Forbearance by Lender. Subject to the terms and conditions of
Paragraph 4 hereof, Bank agrees to forbear from exercising its rights and
remedies pursuant to the Documents and to fund requests for advances under the
Financing Agreement in accordance with the terms thereof; provided, however,
that Bank's agreements provided under this Agreement shall, in Bank's
discretion, terminate at any time after (a) the occurrence of any default under
or "Event of Default" as defined in the Financing Agreement subsequent to the
date of this Forbearance Agreement (other than the continuation of an Event of
Default existing on the date hereof), or (b) the breach or default by Blue II or
FBC with respect to any of their respective obligations under this Forbearance
Agreement.
4. Terms of Forbearance. Bank's agreement to forbear from exercising
its rights and remedies under the Financing Agreement and its agreement to fund
requests for advances under the Financing Agreement as provided in Paragraph 3
above is subject to each of the following conditions:
(a) On or before the funding of the next advance under the Financing
Agreement, and in no event later than March 7, 1997, Blue II shall have provided
or caused to be provided to the Bank written evidence in form and substance
acceptable to the Bank (i) as to the amount (after application of the amounts
described in clause (c) below) by which the proceeds of the Bond are
insufficient to satisfy the unpaid Acquisition Costs incurred or to be incurred
through final completion of the Facility (the "Final Net Funding Deficiency"),
and (ii) that FBC shall have sold to Xxxxxx-Xxxxxx, Inc. preferred stock of FBC
in a private placement with dividend payment terms acceptable to the Bank, with
a purchase price of not less than the Final Net Funding Deficiency, and that the
proceeds from such sale have been applied as required to fully satisfy the Final
Net Funding Deficiency. Bank agrees to advise Xxxxxx-Xxxxxx immediately prior to
Xxxxxx-Xxxxxx'x payment of the purchase price of the preferred stock referred to
in clause (ii) above whether Bank will commit to fund the remaining balance of
the Bond Loan proceeds; provided, however, that the failure of
Xxxxxx-Xxxxxx to purchase such stock as a result of Bank's failure to provide a
commitment to Xxxxxx-Xxxxxx to fund such remaining balance shall not represent
an independent default by Blue II or FBC hereunder, assuming the condition set
forth in clause (i) above has been satisfied.
(b) The "Projected Completion Date" as defined in the Financing
Agreement and in the FBC Financing Agreement shall be March 14, 1997.
(c) Subject to the satisfaction of the conditions to funding set forth
in clause (a) above, FBC and Bank hereby consent and agree to the application of
funds in Account No. 00000000 (the "Account") against current requisitions for
funding under the Financing Agreement. There is currently a balance of
$619,208.03 in the Account, with respect to which the following amounts have
been reserved against outstanding letter of credit reimbursement obligations of
FBC: (i) $12,475 (Letter of Credit Reference #18), (ii) $4,875 (Letter of Credit
Reference #26), and (iii) $3,621.89 (Letter of Credit Reference #34).
5. Fees and Expenses. FBC agrees to pay, within thirty (30) days
following Bank's demand, all expenses paid or incurred by Bank (including the
documented expenses and fees of its counsel) in connection with (a) the
administration of the credit accommodations extended to Blue II under the
Documents to the date hereof (including, without limitation, the preparation and
negotiation of this Forbearance Agreement and all documents referenced or
referred to herein), and (b) all future matters arising in connection with
Bank's credit accommodations to Blue II.
6. Confirmation, Merger, Integration and Amendment. Unless specifically
modified, consented to or suspended by this Forbearance Agreement, all of the
terms and provisions of the Documents remain in full force and effect. Blue II,
FBC and Guarantors hereby ratify and confirm all provisions of the Documents,
which Documents are incorporated herein by reference as if set forth in full,
except to the extent that they are specifically modified by, consented to or
suspended the terms of this Forbearance Agreement. This Forbearance Agreement
shall not be construed or intended as a novation of any of the Documents. In the
event of any internal inconsistency between any provisions of the Documents as a
result of the execution of this Forbearance Agreement, the provisions contained
in this Forbearance Agreement shall be controlling and the conflicting
provisions deemed amended to the extent necessary to eliminate such
inconsistency. This Forbearance Agreement, together with the Documents to the
extent not modified hereby, contain the entire agreement of the parties with
respect to the matters covered and the transactions contemplated hereby and no
other agreement, statement or promise made by any party hereto or by any
employee, officer, agent or attorney of any party hereto, which is not contained
in such documents shall be valid or binding. This Forbearance Agreement may not
be modified in any manner, except by written agreement signed by all parties.
This Forbearance Agreement shall be one of the Documents.
7. Waivers. Without limitation of the provisions of Paragraph 6 above,
as part of the consideration of this Forbearance Agreement, Blue II, FBC and
Guarantors, for Blue II, FBC and Guarantors and for their heirs, personal
representatives, successors and assigns,
do hereby remise, release and forever discharge Issuer, Bank and the Maryland
Industrial Development Financing Authority ("MIDFA") and each of their
respective past, present and future officers, employees, agents, directors, and
stockholders, of and from all manner of actions, causes and causes of action,
suits, debts, sums of money, account reckonings, bonds, bills, specialties,
coverages, judgments, executions, claims, and demands whatsoever, at law or in
equity, and particularly, without limiting the generality of the foregoing, all
claims relating to the transactions which are the subject of the Documents and
to this Forbearance Agreement, which Blue II, FBC and/or Guarantors or their
respective heirs, personal representatives, successors and assigns ever had or
now have for, upon or by reason of any matter, cause, or thing, whatsoever. Blue
II, FBC and Guarantors further waive any and all defenses, offsets, and
counterclaims to Bank's enforcement of the Documents or any action by Bank to
foreclose any security interest, whether secured by real or personal property,
which exist as of the date hereof.
8. Non-Waiver by Bank. Except as specifically provided herein, neither
Bank's entering into this Forbearance Agreement, nor any failure on the part of
Bank in exercising any right, power, or privilege under one or more of the
Documents, shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any other right,
power or privilege. The parties agree that except as specifically provided
herein, nothing in this Forbearance Agreement or any other document to be
executed simultaneously herewith shall be deemed to be a waiver, limitation or
modification of any right or remedy of Bank provided under the Documents, by law
or otherwise. Notwithstanding the foregoing, the Bank agrees that if Blue II
complies with the terms of this Forbearance Agreement, and if FBC complies with
the terms of the FBC Forbearance Agreement, based on the facts and circumstances
presently known to Bank, those defaults or Events of Default identified in
Paragraph 2 above shall be deemed cured and/or waived.
9. Severability. Wherever possible, each provision of this Forbearance
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Forbearance Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions of this Forbearance Agreement.
10. Governing Law. This Forbearance Agreement shall be governed and
construed according to the substantive laws of the State of Maryland.
11. Counterparts. This Forbearance Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same instrument.
12. Effective Date. This Agreement shall not become effective unless
and until executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement under seal as of the date first above written.
WITNESS/ATTEST: BLUE II, LLC
By: /s/ Xxxxxx X. Xxxxx
__________________________(SEAL)
Xxxxxx X. Xxxxx
Managing Member
XXXXXXXXX BREWING CO.
By: /s/ Xxxxx Xxxxxxx
__________________________(SEAL)
Xxxxx Xxxxxxx
Chief Executive Officer
SIGNET BANK
By: /s/ Xxxxx X. Xxx
__________________________(SEAL)
Xxxxx X. Xxx
Vice President
GUARANTORS
/s/ Xxxxxx X. Xxxxx
_________________________(SEAL)
Xxxxxx X. Xxxxx
/s/ Xxxxxx Xxxxxxxxxx
_________________________(SEAL)
Xxxxxx Xxxxxxxxxx
/s/ Xxxxxxxx X. Xxxxx
_________________________(SEAL)
Xxxxxxxx X. Xxxxx
/s/ Vishnampet S. Jayanthimath
__________________________(SEAL)
Vishnampet S. Jayanthimath
The undersigned hereby acknowledges and consents to the terms of the
foregoing Forbearance Agreement as of the 27th day of February, 1997.
MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY
By: /s/ X.X. Xxxxxx Xxxxxx
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Name: X.X. Xxxxxx Xxxxxx
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Title: Executive Director
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