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EXHIBIT 99.1
FORBEARANCE AGREEMENT
THIS AGREEMENT, dated as of the 10th day of July, 1998, by and
between FINOVA CAPITAL CORPORATION, having a place of business located at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("FINOVA") and Caribbean Cigar
Company, Precision Mold, Inc., Caribbean AWC Corporation, Caribbean Cigar
Company (Cayman) Limited, having its principal place of business at 0000 X.X.
00xx Xxxxxx, Xxxxx, Xxxxxxx 00000 (collectively, the "Borrower").
WHEREAS, the Borrower and FINOVA entered into that certain Security
Agreement, dated August 28, 1997 (the "Security Agreement"); and
WHEREAS, pursuant to the Security Agreement, FINOVA agreed to provide
the Borrower with certain financing; and
WHEREAS, the Borrower remains obligated to FINOVA for the monies
borrowed under the Security Agreement and otherwise; and
WHEREAS, FINOVA continues to grant advances, loans and extensions of
credit to or for the benefit of the Borrower; and
WHEREAS, certain defaults exist under the Security Agreement; and
WHEREAS, as of June 30, 1998, the Borrower was obligated to FINOVA in
the approximate amount of $1.4 million, together with interest thereon at the
interest rate set forth in the Security Agreement plus FINOVA's costs and
expenses, including but not limited to legal fees, costs and disbursements and
any and all additional advances made by FINOVA, including advances made to
protect FINOVA's collateral (collectively, "Obligations"); and
WHEREAS, on or about February 26, 1998 and July 8, 1998, FINOVA sent
written default letters to the Borrower via certified mail, return receipt
requested and regular mail (collectively "Default Letters") which Default
Letters advised the Borrower of its defaults under the Security Agreement; and
WHEREAS, the Borrower has requested that FINOVA forbear in commencing
any action against the Borrower under or pursuant to the Security Agreement for
the Obligations owing to FINOVA under the Security Agreement and FINOVA is
willing to forbear pursuant to the terms and conditions contained in this
Agreement; and
NOW, THEREFORE, for good and valuable consideration; the receipt and
sufficiency of which are hereby acknowledged the parties agree as follows:
1. All of the above recitals are hereby incorporated by reference
and made a part of this Agreement.
2. The Borrower hereby acknowledges that it is indebted to FINOVA
under the Security Agreement in the amount of the Obligations and the Security
Agreement is in default, which defaults remain uncured and unwaived by this
Agreement.
3. Borrower agrees to retain the services of a broker acceptable to
FINOVA to assist Borrower in facilitating a sale of its assets and/or in
obtaining an investor willing to infuse sufficient additional capital into the
Borrower's business. Borrower has elected to retain the services of
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Equity Partners as its broker, which broker is acceptable to FINOVA. FINOVA
agrees to make advances (in addition to all other advances to be made under
this Agreement or the Security Agreement) to cover the costs of such broker.
4. Borrower consents and agrees to FINOVA conducting an audit of
the Borrower's inventory. The Borrower agrees to fully cooperate with FINOVA to
effect said audit.
5. Borrower hereby agrees to fully satisfy its obligations to
FINOVA by a full and complete payoff of all amounts owing to FINOVA on or
before 60 days from the date of this Agreement. In the event FINOVA has not
been fully paid in immediately available funds, by the 61st day after the date
of this Agreement, Borrower consents to any liquidation of the collateral by
FINOVA or any third party on FINOVA's behalf. In order to effect such
liquidation Borrower is herewith delivering the Peaceful Possession Letter, a
copy of which is attached hereto as Exhibit A.
6. FINOVA agrees to continue, in its reasonable discretion, to make
loans and advances to the Borrower pursuant to the advance rates set forth in
the Security Agreement, as well as, in FINOVA's discretion, make overadvances
up to the amount of $115,000 (the "Overadvance") above the advance rates set
forth in the Security Agreement, provided that: (1) Borrower complies with the
terms and conditions of this Agreement; (2) no additional Event of Default (as
such term is defined in the Security Agreement) under this Agreement or under
the Security Agreement arises; (3) the Obligations do not exceed $1,500,000;
(4) as of this date there is no material change (from counts previously
reported to FINOVA) in the count of finished goods inventory located at the
Borrower's warehouse ("Eligible Inventory"). Notwithstanding anything to the
contrary contained herein, in the event that as a result of an audit of the
Borrower's Eligible Inventory FINOVA determines the value of the Eligible
Inventory (as it exists on the date hereof) to be less than $2.27 million, the
amount of the Overadvance shall be recomputed accordingly, but shall not result
in FINOVA demanding a "paydown" of the Obligations (unless there has been a
material change in the counts as aforesaid).
7. Xxxxxx X. Xxxxxxxx, Acting President and CFO, shall execute and
deliver a Validity and Support Guaranty, a copy of which is attached hereto as
Exhibit B.
8. The Forbearance Period shall mean the period from the date of
this Agreement until the "Termination Date", which Termination Date shall be
the earlier of: (a) receipt of payment in full by FINOVA; (b) immediately upon
an Event of Default under this Agreement (as such term is hereafter defined) or
(c) sixty one (61) days after the date of this Agreement.
9. During the Forbearance Period, FINOVA agrees to forbear in
commencing any action upon the Security Agreement for the obligations owing to
FINOVA under the Security Agreement provided an Event of Default under this
Agreement has not occurred (as such term is hereafter defined) under the
Security Agreement or under this Agreement.
10. An Event of Default under this Agreement shall mean the
following: (a) the failure of the Borrower to observe, or timely comply with,
or perform any covenant or term contained in this Agreement or the Security
Agreement except for the defaults existing as of the date of this Agreement;
(b) the failure of The Borrower to pay FINOVA any sum when due under this
Agreement; (c) the occurrence of a material adverse change subsequent to the
date of this Agreement with respect to The Borrower's finances or property, it
being specifically understood and agreed that FINOVA may make such
determination in its reasonable discretion; (d) any financial statements,
affidavits of financial condition or other financial information delivered or
provided by The Borrower in connection with this Agreement or the Security
Agreement is or shall be false or misleading in any material respect; (e) any
warranty or representation made or deemed made by The Borrower in this
Agreement or the Security
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Agreement is or shall be untrue in any material respect; or (f) The Borrower:
(i) becomes a debtor for any bankruptcy proceeding; or (ii) admits in writing
its inability to pay its debts as they mature.
11. This Agreement shall be construed under and in accordance
with the laws of the State of New York.
12. This Agreement represents the entire Agreement between FINOVA
and The Borrower, all such other agreements (except the Security Agreement and
any guaranty) being merged with this Agreement and the Security Agreement and
any other guaranty remaining in full force and effect.
13. No executory agreement and no course of dealing between The
Borrower and FINOVA shall be effective to change or modify this Agreement in
whole or in part; nor shall any change, modification or waiver of any rights or
powers of FINOVA be valid or effective unless in writing or signed by an
authorized officer of FINOVA.
IN WITNESS WHEREOF, the undersigned hereby agree to the terms and
conditions set forth hereinabove.
FINOVA CAPITAL CORPORATION
By:
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Xxxxxxx Xxxxxxx, Assistant Vice President
CARIBBEAN CIGAR COMPANY, PRECISION
MOLD, INC., CARIBBEAN AWC
CORPORATION, CARIBBEAN CIGAR
COMPANY (CAYMAN) LIMITED
By: Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, Acting President
STATE OF FLORIDA )
ss:
COUNTY OF DADE )
On the 10th day of July, 1998, before me personally came Xxxxxx X.
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
resides at 0000 Xxxxx Xx., Xxxxxxx, XX 00000, Georgia, that he is the Acting
President of Caribbean Cigar Company, Precision Mold, Inc., Caribbean AWC
Corporation, Caribbean Cigar Company (Cayman) Limited, the corporation described
in and which executed the foregoing instruments and that he signed his name
thereto by order of the board of directors of said corporation.
/s/ Xxxxxx X. Xxxx
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Notary Public
[SEAL]
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Exhibit A
Caribbean Cigar Company
Precision Mold, Inc.
Caribbean AWC Corporation
Caribbean Cigar Company (Cayman) Limited
0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
September 9, 1998
FINOVA Capital Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, X.X. 00000
RE: FINOVA Capital Corporation ("FINOVA") with
Caribbean Cigar Company, Precision Mold, Inc.,
Caribbean AWC Corporation and Caribbean Cigar
Company (Cayman) Limited (collectively the "Debtor")
Gentlemen:
The undersigned acknowledge that events of default exist under the
security agreements by and between FINOVA and the Debtor, and that the Debtor is
unable to cure such defaults. The undersigned believe that the maximum
realization on the collateral securing the Debtor's obligations to FINOVA (the
"Collateral") can best be obtained by an orderly liquidation of the Collateral.
The Collateral includes, but is not limited to, the Debtor's accounts
receivable, inventory, furniture, choses in action, trademarks and tradenames,
machinery and equipment. The Debtor, therefore, herewith agrees to turn over to
FINOVA possession of the Collateral. The Debtor requests that FINOVA provide the
Debtor with copies of statements of account reflecting the progress of the
liquidation which statements of account once accepted without protest by the
Debtor pursuant to the loan agreements shall be binding upon the undersigned.
The undersigned acknowledge that as of June 30, 1998 the Debtor was obligated to
FINOVA in the approximate amount of $1.4 million plus interest, fees and costs.
This will confirm that the undersigned consents in all respects to any
sale of the Collateral, or any of it, which the Debtor and/or FINOVA Capital
Corporation may effect. The undersigned waive their rights, if any, to
notification under the Uniform Commercial Code ss. 9-504(3)
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as adopted by the State of New York, the Bankruptcy Code or any other
applicable statute. In addition, the undersigned reaffirm and restate all of
the terms and conditions contained in each guaranty executed by them or any of
them and delivered to FINOVA and specifically waive all defenses (including but
not limited to the defense of commercial unreasonable disposition of
collateral), counterclaims and any right of setoff in any action which may be
brought under any guaranty or any participation agreement.
FINOVA is hereby granted a license to enter the Debtor's premises to
remove all collateral. FINOVA may use any means necessary to remove and gain
access to the collateral, including the use of a locksmith and/or any other
contractor.
Very truly yours,
CARIBBEAN CIGAR COMPANY
PRECISION MOLD, INC.
CARIBBEAN AWC CORPORATION
CARIBBEAN CIGAR COMPANY
(CAYMAN) LIMITED
By:
---------------------------------
Xxxxxx X. Xxxxxxxx, Acting President
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EXHIBIT B
July 10, 1998
FINOVA Capital Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
I, Xxxxxx X. Xxxxxxxx, do hereby certify that I am the Acting President
and CFO for Caribbean ("Borrower"). In order to induce FINOVA Capital
Corporation ("FINOVA"), its successors, endorsees or assigns to grant and
continue to grant such advances, loans or extensions of credit, directly or
indirectly to Borrower. I do hereby warrant, covenant and represent to FINOVA
as follows:
1. Each and every account receivable which shall be assigned to FINOVA by
Borrower and when created, will represent a bona fide existing obligation of a
customer of Borrower owing to it and arising out of the sale and completed
delivery of merchandise and/or services made by it to such customer, arising
out of and acquired in the ordinary course of the business of Borrower
conforming in all respects to an order received from the customer and which
merchandise and/or services, to the best of my knowledge, shall have been
accepted by said customer without defense, offset or counterclaim and without
dispute as to price, terms, quality or in any other respect unless I have given
FINOVA prior notice to the contrary. All remittances received by the Borrower
on account of receivables assigned to FINOVA will be held by the Borrower as
FINOVA's property and that the Borrower will immediately deliver, to FINOVA,
the identical checks, monies or other forms of payment received.
2. Each such assigned account receivable will be due and owing to Borrower
and the merchandise and/or services represented thereby shall have been the
sole and absolute property of Borrower and, when assigned, will be free and
clear of all liens and security interests other than FINOVA's. FINOVA will be
notified of any counter claims, disputes, returns, offsets, or potential
offsets to an account receivable immediately upon Borrower having knowledge of
same.
3. The correct maturities of each of said account receivable will have been
set forth thereon and to the best of my knowledge, proper entries will have
been made on the books of Borrower disclosing the assignment thereof to FINOVA.
4. All goods, merchandise and warehouse receipts, if any, from time to time
consigned to or pledged with FINOVA by the Borrower shall be properly and
correctly designated as to description, quantity, quality and unit value in
each schedule, warehouse receipt and consignment relating to the same tendered
to FINOVA by the Borrower; and that the same shall actually be, at the time of
such tender, at the location described in such schedules and consignments. All
information furnished to FINOVA in the normal course by Borrower with respect
to its financial condition or other pertinent matters, will be true, correct
and complete in all material respects.
5. I hereby undertake to indemnify and save FINOVA free and harmless from any
damage or loss, which FINOVA may sustain as a result of any fraud, deceit or
criminal act on my part. I hereby represent and warrant to FINOVA that I shall
use my best efforts to insure that FINOVA shall not sustain any damage or loss
as a result of any fraud, deceit or criminal act on the part of any other
officer, employee or agent of Borrower.
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6. My liability hereunder shall be direct and unconditional and may be
enforced without requiring FINOVA first to resort to any other right, remedy or
security. It is not necessary for FINOVA to give me notice of any changes in the
financing agreement or any amendments thereof, or in any other of FINOVA's
financing arrangements with Borrower to all of which I now hereby grant my
consent. I hereby waive notice of acceptance hereof and of all notices of any
kind to which they may be entitled and further waive notice of and hereby
consents to any agreement or arrangements whatever with the Borrower or anyone
else including, without being limited to, agreements and arrangements for
payment, extension, subordination, composition, arrangement, compromise,
discharge or release of the whole or any part of any indebtedness or for the
change or surrender of any and all such goods, merchandise and warehouse
receipts, and same shall in no way impair my liability hereunder. I hereby waive
the benefits of any provision of the United States Bankruptcy Code and of any
similar or other legislation as now or hereafter enacted, amended or added to,
which may extend the time for payment of, or impair any of my obligations
hereunder.
7. My liability hereunder may not be modified, terminated or released orally,
but only by a written agreement signed by FINOVA.
8. This Agreement shall be binding upon my heirs, personal representatives,
successors and assigns and the benefits thereof shall extend to and include the
successors and assigns of FINOVA CAPITAL CORPORATION. My death shall not
release my estate from any liability accruing prior to my death. This Agreement
shall be subject to the laws of the State of New York.
9. In any litigation brought by FINOVA, Borrower waives personal service of
any summons, complaint or other process and agrees that service thereof may be
made by certified or registered mail directed to Borrower at borrower's address
set forth below and service so made shall be complete two (2) days after the
same shall have been posted. Within twenty (20) days after such mailing.
Borrower shall appear and answer such summons, complaint or other process,
failing which Borrower shall be deemed in default and judgment may be entered
by FINOVA against Borrower for the amount of the claim and for any other relief
requested therein.
Very truly yours,
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Xxxxxx X. xxxxxxxx
Address:
SS No:
STATE OF FLORIDA)
ss.:
COUNTY OF DADE)
On this 10th day of July, in the year 1998, before me, the undersigned, a
Notary Public in and for said state, personally appeared Xxxxxx X. Xxxxxxxx,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies) and that by his/her/their signature(s) on the instrument, the
person(s) or the entity upon behalf of which the person(s) acted, executed the
instrument.
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Notary Public
