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EXHIBIT 10.7
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "Agreement") is dated as of October
28,1999, by and between MAI SYSTEMS CORPORATION., a Delaware corporation ("MAI")
on the one hand and CPI SECURITIES LP, a California limited liability company,
THE VALUE REALIZATION FUND, L.P., a Delaware limited partnership, THE CANYON
VALUE REALIZATION FUND (CAYMAN), LTD., a Cayman Islands corporation, and GRS
PARTNERS II (collectively, the "Lenders") on the other hand.
R E C I T A L S
WHEREAS, MAI and Lenders are party to that certain Note Purchase
Agreement dated as of March 3, 1997 (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the "Note Purchase Agreement") pursuant to which MAI has
issued to individual Lenders certain 11% Subordinated Notes due 2004 in the
aggregate principal amount of $6,000,000.00 (the "Notes");
WHEREAS, MAI has failed to make certain interest payments (the
"Interest Payments") as required by the Notes and the Note Purchase Agreement
such that, pursuant to Article IV of the Note Purchase Agreement, an Event of
Default (the "Specified Event of Default") has occurred and is continuing which,
in the absence of this Agreement, would cause the principal and all accrued
interest under the Notes to become automatically and immediately due and
payable;
WHEREAS, MAI has requested that Lenders enter into this Agreement in
order to provide MAI with additional time to make the Interest Payments which,
in the absence of this Agreement, would be currently due and payable; and
WHEREAS, concurrently with the execution of this Agreement and in
consideration of Lenders' agreement to enter into this Agreement, MAI is
entering into a Security Agreement with Lenders (the "Security Agreement")
pursuant to which MAI is granting to Lenders a lien on substantially all of
MAI's assets to secure MAI's obligations under the Notes;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
A G R E E M E N T
1. Incorporation of Recitals; Acknowledgments. The recitals set forth
above by this reference thereto are hereby incorporated into this Agreement.
Without limiting the foregoing, MAI and Lenders hereby acknowledge and agree
that (a) the Specified Event of
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Default has occurred and is continuing under the terms of the Note Purchase
Agreement and (b) absent the effectiveness of this Agreement, Lenders have the
right to immediately enforce payment of all of MAI's obligations under the Notes
and the Note Purchase Agreement (the "Obligations").
2. Agreement to Forbear.
2.1 For the period (the "Forbearance Period") commencing on the
Forbearance Effective Date (as defined in Section 5 below) and ending on
the earlier to occur of (i) the date of the termination of the Forbearance
Period by Lenders or otherwise pursuant to Section 2.2 below and (ii)
December 31, 1999, Lenders hereby agree that they will not exercise those
rights and remedies available to Lenders under the Note Purchase Agreement
and the Notes to accelerate and/or immediately enforce payment in full of
the Obligations or enforce payment of any part of the Obligations in
advance of the date such Obligations shall be due and payable in accordance
with the terms of the Note Purchase Agreement or the Notes.
2.2 Upon the occurrence of any Event of Default under the Note Purchase
Agreement other than the Specified Event of Default, the Forbearance Period
shall immediately terminate without notice or demand of any kind. Upon the
termination or expiration of the Forbearance Period, if at such time the
outstanding amount of the Interest Payments (and interest accrued thereon
at the interest rate designated in the Notes) is not paid in full, Lenders
shall be entitled to exercise all of their rights and remedies under the
Note Purchase Agreement, the Notes, the Security Agreement, and applicable
law, including, without limitation, the right to declare all of the
Obligations to be immediately due and payable and to enforce, pursuant to
the Security Agreement, its liens on, and security interests in, the
Collateral (as defined in the Security Agreement).
3. Covenants. In consideration for Lenders' execution of this
Agreement, MAI agrees (i) to execute the Security Agreement and (ii) to pay, on
or before the Forbearance Effective Date, Lenders' actual attorney's fees
related in any way to the Specified Event of Default (including, without
limitation, those attorney's fees incurred in the preparation, negotiation and
execution of this Agreement and the Security Agreement) (the "Fees"). If MAI
fails to comply with the foregoing covenants, such failure shall constitute an
Event of Default under the Note Purchase Agreement, separate from the Specified
Event of Default.
4. Representations and Warranties. MAI hereby represents and warrants
to Lenders that, as of the Forbearance Effective Date:
4.1 All of MAI's representations and warranties contained in
this Agreement and the Note Purchase Agreement are true and correct on
and as of the Forbearance Effective Date, as if then made (other than
representations and warranties which expressly related to an earlier
date);
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4.2 Except for the Specified Event of Default, no Default or
Event of Default (as such terms are defined in the Note Purchase
Agreement) has occurred or is continuing.
4.3 The execution and delivery of this Agreement and the
Security Agreement by MAI and the performance of the transactions
contemplated thereby, (a) are within MAI's corporate power, (b) have
been duly authorized by all necessary or proper corporate and
shareholder action, (c) when duly executed and delivered by MAI, this
Agreement shall constitute a legal, valid and binding obligation of MAI
enforceable against MAI in accordance with its terms, and (d) have been
consented to by Coast Business Credit, a division of Southern Pacific
Bank.
4.4 If any of the foregoing representations are untrue or
incorrect in any material respect, such untruthfulness or inaccuracy
shall constitute an Event of Default under the Note Purchase Agreement.
5. Effective Date. This Agreement shall become effective as of the date
first written above (the "Forbearance Effective Date") upon Lender's receipt of
(i) counterparts hereof executed by MAI and Lenders, (ii) indefeasible payment
of the Fees, (iii) MAI's execution and delivery of the Security Agreement and
the exhibits and schedules thereto, and (iv) MAI's execution and delivery of all
financing statements and other documents related to or required by the Security
Agreement.
6. Reference to and Effect on the Loan Documents.
6.1 Upon the Forbearance Effective Date, each reference in the
Note Purchase Agreement to "this Agreement", "hereunder", "hereof" or
words of like import, and each reference in the Security Agreement or
the Notes to the Note Purchase Agreement, shall mean and be a reference
to the Note Purchase Agreement as supplemented hereby.
6.2 This Agreement shall be limited solely to the matters
expressly set forth herein and shall not (i) constitute an amendment or
waiver of any term or condition of the Note Purchase Agreement, the
Notes or the Security Agreement, (ii) prejudice any right or rights
which Lenders may now have or may have in the future under or in
connection with the Note Purchase Agreement, the Notes or the Security
Agreement, (iii) require Lenders to agree to a similar transaction on a
future occasion or (iv) create any rights herein to another person,
entity or other beneficiary or otherwise, except to the extent
specifically provided herein.
6.3 Except to the extent specifically provided in Section 2.1
above, the respective provisions of the Note Purchase Agreement and the
Notes shall not be amended, modified, waived, impaired or otherwise
affected hereby, and such documents
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and the Obligations under each of them are hereby confirmed as being in
full force and effect.
7. Release.
7.1 MAI acknowledges that Lenders would not enter into this
Agreement without MAI's assurance that MAI has no claim against any of
Lenders, their parents companies, subsidiaries, affiliates, officers,
directors, shareholders, employees, attorneys, agents, professionals
and servants, or any of their respective predecessors, successors,
heirs and assigns (collectively, the "Lender Parties" and each, a
"Lender Party") MAI, for itself and on behalf of its officers and
directors, and its respective predecessors, successors and assigns
(collectively, the "Releasors") releases each Lender Party from any
known or unknown claims which MAI now has against any Lender Party of
any nature, including any claims that any Releasor, or any Releasor's
successors, counsel and advisors may in the future discover they would
have had now if they had known facts not now known to them, whether
founded in contract, in tort or pursuant to any other theory of
liability, including but not limited to any claims arising out of or
related to the Loan Documents or the transactions contemplated thereby.
MAI, FOR ITSELF AND ON BEHALF OF EACH RELEASOR, WAIVES THE PROVISIONS
OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH STATE:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
7.2 The provisions, waivers and releases set forth in this
section are binding upon each Releasor. The provisions, waivers and
releases of this section shall inure to the benefit of each Lender
Party.
7.3 The provisions of this section shall survive payment in
full of the Obligations, full performance of all of the terms of this
Agreement, the Note Purchase Agreement, the Notes, and the Security
Agreement and/or any action by Lenders to exercise any remedy available
under such documents, applicable law or otherwise.
7.4 MAI warrants and represents that it is the sole and lawful
owner of all right, title and interest in and to all of the claims
released hereby and MAI has not heretofore voluntarily, by operation of
law or otherwise, assigned or transferred or purported to assign or
transfer to any person any such claim or any portion thereof. MAI shall
indemnify and hold harmless each Lender Party from and against any
claim, demand, damage, debt, liability (including payment of reasonable
attorneys' fees and costs actually incurred whether or not litigation
is commenced) based on or arising out of any such
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assignment or transfer.
8. Miscellaneous. The headings herein are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof. No amendment,
modification, termination or waiver of any provision of this Agreement, or any
consent to any departure by MAI therefrom, shall in any event be effective
unless the same shall be in writing and signed by all of the Lenders. Any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
9. Sole Benefit of Parties. This Agreement is solely for the benefit of
the parties hereto and their respective successors and assigns, and no other
person or entity shall have any right, benefit or interest under or because of
the existence of this Agreement.
10. Further Assurances. MAI and Lenders shall execute such documents and
perform such further acts as may be reasonably required or desirable to carry
out the provisions of this Agreement and the Security Agreement.
11. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
12. GOVERNING LAW. THIS AGREEMENT, AND ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MAI SYSTEMS CORPORATION
By: /s/ Xxxxxxx Xxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxx Xxxxxxxx
Title: CEO/CFO
GRS PARTNERS II
By: Grosvenor Capital Management, L.P.,
its Administrator
By: GCM, L.L.C.,
its general partner
By: Grosvenor Holdings, L.L.C.
By:
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Name:
Title:
THE VALUE REALIZATION FUND, L.P.
By: Canpartners Investments III, L.P.,
its general partner
By: Canyon Capital Advisors LLC,
its general partner
By:
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Name:
Title: Managing Director
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THE CANYON VALUE REALIZATION FUND (CAYMAN), LTD.
By: MeesPierson (Cayman) Limited,
its Administrator
By:
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Name:
Title:
CPI SECURITIES LP
By: Canpartners Incorporated,
its general partner
By:
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Name:
Title:
