FORBEARANCE AGREEMENT
EXHIBIT
10-45
This
Forbearance
Agreement effective as of August 9, 2006 (this "Agreement")
is
between Satellite Asset Management, L.P. ("Satellite")
and
Ener1, Inc. (the "Company").
INTRODUCTION
A. WHEREAS,
Satellite holds certain Senior Secured Convertible Debentures issued by the
Company on January 20, 2004 (the "2004
Debentures")
and
Senior Secured Convertible Debentures issued by the Company on March 14, 2005
(the "2005
Debentures,"
and
together with the 2004 Debentures, the "Debentures").
On
September 30, 2006, the amount of interest that will be due and payable to
Satellite on account of such Debentures will be [$739,375.00] (the "Interest
Amount");
B. WHEREAS,
the Company has not complied with its obligations under the terms of the
Debentures with respect to the nonpayment by the Company of amounts required
to
be paid under Section 2(c) of the Registration Rights Agreement for the 2004
Debentures (the "2004
Registration Rights Agreement")
and
Section 2(c) of the Registration Rights Agreement for the 2005 Debentures (the
"2005
Registration Rights Agreement"
and
together with the 2004 Registration Rights Agreement, the "Registration
Rights Agreements"),
to
Satellite with respect to the unavailability for use by Satellite of resale
registration statements on Form SB-2, filed by the Company with the United
States Securities and Exchange Commission (the "SEC"),
for
the periods from November 21, 2005 through January 20, 2006 for the 2004
Debentures and from November 21, 2005 until the date when the registration
statement for the 2005 Debentures becomes available for use by the holders
of
the 2005 Debentures (the "Liquidated
Damages");
C. WHEREAS,
on June 21, 2006, the Company and Satellite entered into that certain
Forbearance Agreement (the "June
Forbearance Agreement"),
pursuant to which Satellite agreed to forbear from the exercise of certain
remedies arising under the Transaction Documents (as defined in the Debentures
subject of the Registration Rights Agreements) upon the terms and conditions
set
out therein, and such forbearance expired no later than July 15,
2006;
D. WHEREAS,
the Company acknowledged under the June Forbearance Agreement that, as of June
20, 2006, the aggregate amount of Liquidated Damages accrued under the
Registration Rights Agreements was $1,344,750;
E. WHEREAS,
the aggregate amount of Liquidated Damages that has accrued under the
Registration Rights Agreements since November 21, 2005 through and including
July 31, 2006 is $1,549,750 ("Accrued
Liquidated Damages");
F. WHEREAS,
by letter, dated August 7, 2006, Satellite provided the Company with written
notice pursuant to Section 6(d)(ii) of the 2004 Debentures and Section 6(e)(ii)
of the 2005 Debentures that the Company's failure to pay the Accrued Liquidated
Damages constituted a breach of the material terms of the Registration Rights
Agreements (the "Notice
of Breach");
G. WHEREAS,
the Company has substantially completed all necessary undertakings
required to render current the Company's filings with the SEC, and entitling
the
Company to file a registration statement or post-effective amendment to register
sales of its securities on the SEC's Form SB-2;
H. WHEREAS,
the Company and Satellite have engaged in good faith negotiations and have
come
to an understanding whereby the Company will cause to be deposited into a trust
account for the exclusive benefit of Satellite (a) an amount equal to 50% of
the
Interest Amount on the date hereof (the "Initial
Interest Payment"),
(b)
the remaining 50% of the Interest Amount on August 15, 2006, (the "Subsequent
Interest Payment",
and
together with the Initial Interest Payment, the "Interest
Payments"),
with
such
amounts to be paid and released to Satellite on September 30, 2006 as set forth
in the Interest Payment Deposit Agreement, dated August __, 2006, and attached
hereto as Appendix I (the "Trust
Agreement")
and
provided further that the Company will cause to be paid $10,000 representing
Satellite's reasonable attorney's fees and expenses (the "Fee
Amount")
to
Satellite's counsel, Xxxxxxxxx & Xxxxxxxx LLP ("B&G")
on the
date hereof;
I. WHEREAS,
the Company has issued the Promissory Note in the amount of [$750,000] on August
__, 2006 attached hereto as Appendix II to its majority shareholder, Ener1
Group, Inc. ("Ener1
Group")
the
proceeds of which Ener1 Group will use to make the Interest Payments on behalf
of the Company (the "Note");
J. WHEREAS,
the Company has requested that, in exchange for the Interest Payments, Satellite
temporarily forbear from exercising certain remedies in respect of those certain
defaults under the Debentures and the Transaction Documents (as that term is
defined in the Debentures) until November 1, 2006 (the "Forbearance
Period").
Satellite has agreed, subject to the terms and conditions of this Agreement,
to
forbear the exercise of such remedies with respect to those certain defaults,
as
more fully described herein, of the Company under the Debentures and the
Transaction Documents; and
K. WHEREAS,
subject to Section 1, Satellite hereby rescinds the Notice of
Breach.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
Section
1. Reference
to and Effect on Debentures and Transaction Documents.
The
execution, delivery and effectiveness of this Agreement, or any other action
or
inaction by Satellite with respect to this Agreement, the Debentures, or the
Transaction Documents, shall not operate as a waiver or forbearance of any
right, power or remedy of Satellite under the Debentures or the Transaction
Documents, or constitute a waiver or amendment of any provision of the
Debentures or the Transaction Documents, except as expressly set forth herein.
Notwithstanding any other provision hereof, upon termination of this Agreement,
Satellite may, at its option, enforce all of their rights and remedies under
the
Debentures and the Transaction Documents, including with respect to any defaults
or Events of Default or any breach by the Company of its obligations under
the
Debentures and the Transaction Documents, as well as reissuing the Notice of
Breach.
2
Section
2. Rescission
and Forbearance.
Subject
to Section 1, Satellite hereby rescinds the Notice of Breach and agrees, subject
to the terms of this Agreement, to forbear until the earlier to occur of the
expiration of the Forbearance Period and the occurrence of a Termination Event
(as defined below), from any and all action or claims (including by way of
declaration of a default or acceleration of indebtedness) arising from the
Company's default on its obligations under (i) Section 2(c) of the 2004
Registration Rights Agreement to make payments to Satellite equal to one and
one-half percent (1.5%) of the principal amount of the 2004 Debentures then
held
by Satellite for each thirty (30) day period in which a Registration Default
(as
defined in the 2004 Registration Rights Agreement) occurs with each payment
to
be made within five (5) business days following the last day of the calendar
month in which a Registration Default occurs and (ii) Section 2(c) of the 2005
Registration Rights Agreement to make payments to Satellite equal to Satellite's
pro
rata
share
(based on the aggregate number of Registrable Securities (as defined in the
2005
Registration Rights Agreement) held by or issuable to Satellite as of the
Registration Deadline (as defined in the 2005 Registration Rights Agreement))
of
$213,375 for each thirty (30) day period in which a Registration Default (as
defined in the 2005 Registration Rights Agreement) exists (prorated for any
period of less than thirty days) with each such payment to be made within five
(5) business days following the last day of the calendar month in which a
Registration Default occurs.
Section
3. Interest
Payments.
The
Company shall issue the Note on the date hereof and caused Ener1 Group to pay
into the Interest Trust Account (as defined in the Trust Agreement) for the
exclusive benefit of Satellite (i) the Initial Interest Payment on the date
hereof, and (ii) the Subsequent Interest Payment on August 15, 2006, which
amounts shall be released and paid to Satellite on September 30, 2006 in
accordance with the Trust Agreement. The Company shall further cause Ener1
Group
to make the Fee Payment on the date hereof of $10,000 (the "Fee
Amount"),
by
wire transfer of immediately available funds to the account listed on Schedule
3
hereto (the "B&G
Account").
To
the extent that the Fee Amount is insufficient to satisfy Satellite's reasonable
attorney's fees and expenses (the "Supplemental
Fees"),
Satellite will provide the Company with a copy of its invoice, and within 5
days
of receiving such invoice, the Company will cause to be deposited in the B&G
Account an amount equal to the difference between the Fee Amount and the
Supplemental Fees; provided,
further,
however,
that to
the extent that B&G's actual fees are less than the Fee Amount (the
"Unused
Fee Amount"),
Satellite will cause its counsel to refund the Unused Fee Amount to the Company
within 5 days of receiving the final invoice relating to this Agreement;
provided,
further,
however,
that
B&G shall be entitled to apply the Unused Fee Amount to any unpaid fees
incurred by B&G in connection with the June Forbearance Agreement and not
reimbursed as a Supplemental Fee in accordance with the June Forbearance
Agreement.
Section
4. Representations
and Warranties.
(a)
The
representations and warranties contained in sections 3.1, 3.2, 3.3, 3.4, 3.7,
3.8, 3.9, 3.10, 3.11, 3.12, 3.15, 3.17, 3.18, 3.19, 3.20, 3.21, 3.22, 3.23,
3.24, 3.25, 3.26, 3.27, and 3.28 of the Securities Purchase Agreement relating
to the 2005 Debentures (the "SPA")
are
(subject to any matters previously disclosed in the Schedules to the SPA) true
and correct as if made on the date hereof (and as if references contained
therein to other documents or transactions were references to this Agreement
and
the transactions contemplated hereby), except as set forth on Schedule 4;
and
3
(b)
the
Company has substantially completed all necessary undertakings required to
render current the Company's filings with the SEC, and entitling the Company
to
file a registration statement or post-effective amendment to register sales
of
its securities on the SEC's Form SB-2.
Section
5. [reserved]
Section
6. Conditions
Precedent.
This
Agreement shall become effective only upon satisfaction in full of the following
conditions precedent:
(a)
the
Company shall cause the Initial Interest Payment to be deposited in the Interest
Account (as defined in the Trust Agreement) on the date hereof; and
(b)
the
Company shall cause the Fee Amount to be paid to Xxxxxxxxx & Xxxxxxxx
LLP.
Section
7. Termination
Rights.
(a)
Upon
a Termination Event (as defined below), Satellite may immediately terminate
this
Agreement upon written notice of such termination.
(b)
A
"Termination
Event"
shall
mean any of the following:
(i)
the
Company shall, following the date hereof, fail to perform or observe any
material term or covenant set forth in the Debentures or any Transaction
Document in any material respect, except as otherwise provided
herein;
(ii)
the
Company shall fail to cause the Subsequent Interest Payment to be deposited
in
the Interest Account (as defined in the Trust Agreement) on or before August
15,
2006;
(iii)
the
Company shall fail to become current in its reporting obligations under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"),
by
filing all required public reports with the SEC on or before Friday, September
1, 2006;
(iv)
the
Company shall file a voluntary petition in bankruptcy or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Bankruptcy
Code;
(v)
an
involuntary petition shall be filed or an action or proceeding otherwise
commenced seeking reorganization, arrangement, consolidation or readjustment
of
the debts of the Company or for any other relief under the Bankruptcy Code
and
such proceeding shall not be dismissed within twenty (20) days after the filing
or commencement thereof or an order of relief shall be entered with respect
thereto;
4
(vi)
the
Company shall fail to cause the Initial Interest Payment to be deposited in
the
Interest Account on the date hereof;
(vii)
the
Company shall fail to cause the Subsequent Interest Payment to be deposited
in
the Interest Account on or before August 15, 2006;
(viii)
Satellite does not receive the Interest Payments by September 30,
2006;
(ix)
the
Company shall fail to cause the Fee Amount and the Supplemental Fees, if
applicable, to be paid to Xxxxxxxxx & Xxxxxxxx LLP; or
(x)
Except as otherwise provided in and subject to Section 4, any representation
or
warranty made by the Company contained in this Agreement, the Debentures or
the
Transaction Documents is inaccurate or misleading in any material
respect.
(c)
If no
Termination Event shall occur, this Agreement shall automatically terminate
and
therefore be of no further force or effect as of 5:00 p.m. (New York City time)
on the last day of the Forbearance Period.
In
the
event that this Agreement shall terminate, Satellite shall have, and shall
be
entitled to exercise, each of its rights or remedies under the Debentures and
the Transaction Documents and applicable law, as if this Agreement had never
been executed (and shall not be deemed to have waived any such rights or
remedies by virtue of executing this Agreement). Sections 5 and 8 through 14
of
this Agreement, and any related interpretative and definitional provisions,
shall survive any termination of this Agreement.
Section
8. Choice
of Law; Jurisdiction.
This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York. The parties hereto irrevocably submit to
the
jurisdiction of the courts of the State and County of New York and the Federal
courts of the United States of America located in the Southern District of
the
State of New York with respect to this Agreement and hereby waive, and agree
not
to assert, as a defense in any action, suit or proceeding that it is not subject
thereto or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be
appropriate.
Section
9. Further
Assurances.
Each of
the parties hereto shall take such further action as may be reasonably necessary
to carry out the purposes and intent of this Agreement.
Section
10. Counterparts.
This
Agreement may be signed in any number of counterparts, each of which shall
be an
original.
Section
11. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such
a manner as to be effective and valid under applicable law, but if any provision
of this 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 provision or the remaining provisions
of this Agreement.
5
Section
12. Amendments.
This
Agreement may be amended with (and only with) the written consent of the Company
and Satellite.
Section
13. Notices.
Notices
given under this Agreement shall be to the notice parties indicated on the
respective signature pages hereto.
Section
14. Entire
Agreement.
This
Agreement, the Debentures and the Transaction Documents represent the final
agreement among the parties hereto relating to the subject matter hereof and
may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of such parties. There are no unwritten oral agreements between
the
parties hereto relating to the subject matter hereof.
6
EFFECTIVE
as of the date first set forth above.
SATELLITE
ASSET MANAGEMENT, L.P.
By:
__________________________________
Name:
________________________________
Title:
_________________________________
Notice
Parties:
Xxxxx
Xxxxxxx, General Counsel
Satellite
Asset Management, L.P.
000
Xxxxx
Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
X.X. 00000
with
a
copy to:
Bracewell
& Xxxxxxxx, LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx
XX 00000
Attn:
Xxxxxxxx Xxxx
[Signature
Page to Forbearance Agreement]
ENER1,
INC.
By:
_________________________________
Name: Xxxxxx
Xxxxxxx
Title: Chief
Executive Officer
Notice
Parties:
Ener1,
Inc.
000
Xxxx
Xxxxxxx Xxxxx Xxxx
Xxxxx
000
Xxxx
Xxxxxxxxxx, XX 00000
with
a
copy to:
Xxxxxxx
X. Xxxxxx, Esq.
Xxxxxx
Xxxx & Xxxxxxxx LLP
0000
Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000-0000
Schedule
3
B&G
Account
Schedule
4
Exceptions
to Representations & Warranties
The
Company has not updated the resale registration statement on Form SB-2 for
Satellite and the other investors participating with Satellite in the purchase
of the Company's Senior Secured Convertible Debentures due 2009 issued in March
2005 (the "2005 Debentures"). The Company currently intends to make all required
updates to the resale registration statements as soon as possible following
the
Company's delivery of all required periodic reports with the SEC that as of
the
date hereof are untimely under the Exchange Act and expects that the resale
registration statement covering the 2005 Debentures will shortly be available
(subject to any potential SEC review and/or questions). As a result, the resale
registration statement covering the 2005 Debentures is not currently available
for use by the holders of the 2005 Debentures, and certain other resale
registration statements previously filed by the Company are also not available
for use by the holders of the Company's securities covered by those registration
statements.
Appendix
1
Trust
Agreement
Appendix
II
The
Note