FORBEARANCE AGREEMENT
Exhibit
10.12
FORBEARANCE
AGREEMENT (this “Agreement”), dated as of April 11, 2009, by and between
Envision Solar International, Inc., a California corporation (“Borrower”),
Envision Solar Construction, Inc., a California corporation, Envision Solar
Residential, Inc., a California corporation, and Envision Africa, LLC, a
Delaware limited liability company, (collectively, “the Envision Guarantors” or
“Guarantors”), and Gemini Master Fund, Ltd. (“Lender”).
W I T N E S S E T H
WHEREAS,
Lender, Borrower and the Envision Guarantors have entered into Financing
Agreements (as defined below) pursuant to which Lender has made loans to
Borrower, including, without limitation, a Secured Bridge Note, dated, November
12, 2008, in the principal amount of $591,770.83 (the “Bridge Note”)
and
WHEREAS,
Borrower anticipates defaulting on the Bridge Note and has requested that Lender
forbear from exercising its rights as a result of such events of default and
Lender is willing to agree to forbear from exercising its rights and remedies on
the terms and conditions contained herein;
NOW,
THEREFORE, in consideration of the foregoing, and the respective agreements,
warranties and covenants contained herein, the parties hereto agree, covenant
and warrant as follows:
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SECTION
1.
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DEFINITIONS.
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1.1 Additional
Definitions. As used herein, the following terms shall have
the respective meanings given to them below:
(a) “Collateral
Agent” shall mean Gemini Strategies, LLC.
(b) “Financing
Agreements” shall mean all agreements, documents and instruments at any time
executed and/or delivered in connection with or related to the Bridge Note,
including, without limitation, the Securities Purchase Agreement, Security
Agreement, and Subsidiary Guarantee, as the same now exist and as has been and
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(c) “Lien”
shall mean any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance (including, but not limited
to, easements, rights of way and the like), lien (statutory or other), security
agreement or transfer intended as security, including, without limitation, any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease or any financing lease having substantially the same
economic effect as any of the foregoing.
(d) “Obligations”
shall mean the Bridge Note, including Borrower’s obligations to pay all amounts
payable thereunder, including, without limitation, principal, interest, the
Mandatory Default Amount (as defined in the Bridge Note), fees, costs, expenses
and other charges, and any amendments, modifications, supplements, extensions,
renewals, restatements or replacements thereof.
(e) “Security
Agreement” shall mean the Security Agreement, dated as of November 12, 2008, by
and between Borrower, the Lender, the Collateral Agent, and the
Guarantors.
(f) “Termination
Date” shall have the meaning given to such term in Section 3.2
hereof.
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SECTION
2.
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ACKNOWLEDGMENT.
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2.1 Acknowledgment of
Obligations. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that as of the close of business on April 12,
2009, Borrower is indebted to Lender in respect of the Bridge Note in the amount
of $591,770.83 (the “Note Amount”). The Note Amount,is
unconditionally owing by Borrower to Lender, without offset, defense or
counterclaim of any kind, nature or description whatsoever.
2.2 Acknowledgment of Security
Interests. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that Lender has and shall continue to have valid,
enforceable and perfected Liens upon and security interests in the assets and
properties of Borrower and the Envision Guarantors heretofore granted to Lender
pursuant to, and having first priority as set forth in, the Financing Agreements
executed prior to the date of this Agreement.
2.3 Acknowledgment of Patent and
Trademark Assignments. Borrower and the Envision Guarantors
hereby acknowledge, confirm and agree that Lender has and shall continue to have
valid and enforceable assignments of the patents, trademarks and other
intellectual property and other assets assigned by Borrower and the Envision
Guarantors, including without limitation those listed on the annexes to the
Security Agreement
2.4 Binding Effect of
Documents. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that: (a) each of the Financing Agreements
to which it is a party has been duly executed and delivered to Lender by
Borrower or the Envision Guarantors and each is in full force and effect as of
the date hereof, (b) the agreements and obligations of Borrower, or the Envision
Guarantors contained in such documents and this Agreement constitute the legal,
valid and binding obligations of Borrower and the Envision Guarantors,
enforceable against it in accordance with their respective terms (subject to
bankruptcy, insolvency, creditors rights and general equitable principles), and
Borrower, and the Envision Guarantors have no valid defense to the enforcement
of such obligations, and (c) Lender is entitled to the rights, remedies and
benefits provided for in the Financing Agreements.
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SECTION
3.
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FORBEARANCE AND CHANGE
OF MATERIAL TERMS OF THE BRIDGE
NOTE.
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3.1 Forbearance.
(a) Subject
to the terms and conditions of this Agreement, including but not limited to
Lender’s receipt of a payment of all remaining amounts outstanding, including
interest, fees and expenses and any other amounts owed to the Lender from or on
behalf of the Borrower on or before December 31, 2009, Lender agrees to forbear
from exercising its rights and remedies under the Financing Agreements,
applicable law or otherwise until the earliest to occur of (a) December 31,
2009, (b) the third day following any Fundamental Transaction (as defined in the
Bridge Note), and (c) Borrower’s breach of any of the terms and provisions of
this Agreement or any Event of Default under and as defined in the Bridge Note
(other than pursuant to Section 6(a)(i) thereof) (the “Termination
Date”).
(b) Upon the
Termination Date, the agreement of Lender to forbear shall automatically and
without further action or notice terminate and be of no force and effect, it
being understood and agreed that the effect of such termination will be to
permit Lender to exercise such rights and remedies immediately, including, but
not limited to the foreclosure of all collateral as described in the Financing
Agreements; in each case without any further notice, passage of time or
forbearance of any kind.
(c) Borrower
agrees that all of the Obligations under the Bridge Note shall, if not sooner
paid, be absolutely and unconditionally due and payable in full in cash or other
immediately available funds by Borrower to Lender on the Termination
Date. No termination of any of the Financing Agreements or any
provisions thereof shall relieve or discharge Borrower, or the Envision
Guarantors, of their duties, covenants and obligations under the Financing
Agreements and this Agreement until all Obligations have been finally paid in
full in cash or other immediately available funds.
(d) If after
the date hereof the Company and/or its Subsidiaries in one or more transactions
issues any debt or equity securities or otherwise obtains a loan for borrowed
money in connection with any capital raising transaction (“Capital Raising
Transaction”) in excess of $500,000 in the aggregate for all such transactions,
the Company shall repay a portion of the outstanding principal amount, and
accrued interest thereon, hereunder at least equal to 25% of the gross proceeds
(net of broker’s commissions) received by the Company or such Subsidiary in such
transaction(s). Each such repayment shall be made with one (1)
Business Day following the date of receipt by the Company of such
proceeds.
(e) Beginning
on April 12, 2009, the Note Amount (together with any capitalized interest
thereon pursuant to the terms hereof) owed by Borrower to Lender shall bear
interest at a rate of 15% per year. Such interest shall be payable
monthly in arrears beginning on the first business day of each calendar month
commencing the first calendar month after which the Borrower raises $100,000 in
the aggregate (net of brokers’ commissions) for all Capital Raising
Transactions. Any amounts of accrued interest not paid on the first
business day for any calendar month after April 12, 2009 shall be compounded and
added to the principal amount then outstanding under the Bridge
Note.
(f) As
additional consideration for the Lender agreeing to this Agreement, the Borrower
shall issue 10,000 shares of common stock of the Borrower to the
Lender. Such shares of common stock shall be duly and validly issued,
fully paid and nonassessable, and free and clear of all Liens and shall be
delivered to the Lender within 5 business days after the signing of this
Agreement.
3.2 No Other Waivers;
Reservation of Rights.
(a) Lender
has not waived, is not by this Agreement waiving any events of default which may
be continuing on the date hereof or any events of default which may occur after
the date hereof, and except as expressly set forth in Section 3.1(a) hereof,
Lender has not agreed to forbear with respect to any of its rights or remedies
concerning any events of default, which may have occurred and are continuing as
of the date hereof or which may occur after the date hereof.
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SECTION
4.
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RELEASE.
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4.1 Release.
(a) In
consideration of the agreements of Lender contained herein and the making of the
Bridge Note and other financial accommodations by Lender to Borrower pursuant to
the Financing Agreements, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and the
Envision Guarantors on behalf of themselves and their respective successors and
assigns, hereby, jointly and severally, absolutely, unconditionally and
irrevocably release, remise and forever discharge Lender and the Collateral
Agent, their successors and assigns, and its present and former shareholders,
affiliates, subsidiaries, divisions, predecessors, directors, officers,
managers, members, partners, attorneys, employees, agents and other
representatives (Lender, Collateral Agent and all such other parties being
hereinafter referred to collectively as the “Releasees” and individually as a
“Releasee”), of and from any and all demands, actions, causes of action, suits,
covenants, contracts, controversies, agreements, promises, sums of money,
accounts, bills, reckonings, damages, claims, counterclaims, defenses, rights of
set-off, demands, obligations and liabilities whatsoever (individually, a
“Claim” and collectively, “Claims”) of every name and nature, known or unknown,
suspected or unsuspected, both at law and in equity, which Borrower or Envision
Guarantors or any of their respective successors or assigns, as the case may be,
may now or hereafter own, hold, have or claim to have against the Releasees or
any of them for, upon, or by reason of any nature, cause or thing whatsoever
which arises at any time on or prior to the day and date of this Agreement for
or on account of, or in relation to, or in any way in connection with any of the
Financing Agreements.
(b) Each of
Borrower and the Envision Guarantors understands, acknowledges and agrees that
the release set forth above may be pleaded as a full and complete defense and
may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release.
(c) Each of
Borrower and the Envision Guarantors agrees that no fact, event, circumstance,
evidence or transaction which could now be asserted or which may hereafter be
discovered shall affect in any manner the final and unconditional nature of the
release set forth above.
4.2 Covenant Not to
Xxx. Borrower and Envision Guarantors, on behalf of themselves
and their respective successors and assigns, hereby jointly and severally,
absolutely, unconditionally and irrevocably, covenant and agree with each
Releasee that they will not xxx (at law, in equity, in any regulatory proceeding
or otherwise) any Releasee on the basis of any Claim released, remised and
discharged by Borrower and Guarantors pursuant to Section 4.1
above. If Borrower or Guarantors violate the foregoing covenant,
Borrower or Guarantors, as applicable, agree to pay, in addition to such other
damages as any Releasee may sustain as a result of such violation,
all fees and costs incurred by any Releasee as a result of such
violation (including reasonable attorney’s fees).
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SECTION
5.
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REPRESENTATIONS AND
WARRANTIES.
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Borrower
hereby represents, warrants and covenants with and to Lender as
follows:
5.1 Binding Effect of
Documents. This Agreement and the other Financing Agreements
have been duly executed and delivered to Lender by Borrower and the Envision
Guarantors and are in full force and effect. The agreements and
obligations of Borrower contained in the Financing Agreements constitute legal,
valid and binding obligations of Borrower, enforceable by Lender against
Borrower in accordance with their respective terms, except to the extent that a
court of competent jurisdiction refuses to enforce such agreements due to
bankruptcy, insolvency, creditors rights, general equitable principles or
otherwise.
5.2 No Conflict,
Etc. The execution, delivery and performance of this Agreement
by Borrower and the Envision Guarantors, does not and will not violate any
agreement, instrument or undertaking to which they are a party or by which they
are bound, and do not and will not result in, or require, the creation or
imposition of any Lien on any of their properties or revenues.
5.3 Additional Events of
Default. The parties hereto acknowledge, confirm and agree
that the failure of Borrower or the Envision Guarantors to comply with the
covenants, conditions and agreements contained herein or in any other agreement,
document or instrument at any time executed and/or delivered by Borrower with,
to or in favor of Lender shall constitute an event of default under the
Financing Agreements.
5.4 Subsidiaries. The
Company has no direct or indirect subsidiaries other than the Envision
Guarantors
5.5 IP. The
Company and its Subsidiaries do not have any trademarks or patents (or filings
or applications therefor) except as set forth in the Security
Agreement.
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SECTION
6.
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CONDITIONS TO
EFFECTIVENESS OF THIS
AGREEMENT.
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The terms and provisions of Section 3.1
of this Agreement shall only be effective upon the satisfaction of Lender that
it has received, in form and substance satisfactory to Lender, an original of
this Agreement, duly authorized, executed and delivered by Borrower and the
Envision Guarantors and the shares of common stock provided for in Section
3.1(f).
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SECTION
7.
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PROVISIONS OF GENERAL
APPLICATION.
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7.1 Effect of this
Agreement. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied and
in all other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date
hereof. To the extent of conflict between the terms of this Agreement
and the Financing Agreements, the terms of this Agreement shall
control. The Financing Agreements and this Agreement shall be read
and construed as one agreement.
7.2 Costs and
Expenses. The Borrower, the Envision Guarantors and the Lender
each absolutely and unconditionally agree to pay all of their own
expenses, including all fees and disbursements of any counsel in
connection with the preparation, negotiation, execution or delivery of this
Agreement and any agreements delivered in connection with the transactions
contemplated hereby or any of its directors, officers, members, managers,
partners, employees, agents or other representatives as a consequence of or in
any way in connection with the preparation, negotiation, execution or delivery
of this Agreement and any agreements prepared, negotiated, executed or delivered
in connection with the transactions contemplated hereby.
7.3 Further
Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be reasonably
necessary or desirable to effectuate the provisions and purposes of this
Agreement.
7.4 Merger. This
Agreement and the documents executed in connection herewith represent the entire
expression of the agreement of Borrower, the Envision Guarantors and Lender
regarding the matters set forth herein. No modification, rescission,
waiver, release or amendment of any provision of this Agreement shall be made,
except by a written agreement signed by Borrower, the Envision Guarantors and
Lender, except for any extension of the Termination Date which shall only
require execution by Lender.
7.5 Governing
Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of California without regard to principle of
conflicts of laws, but excluding any rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
California.
7.6 Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns, as the case may
be.
7.7 Survival of Representations
and Warranties. All representations and warranties made in
this Agreement or any other document furnished in connection with this Agreement
shall survive the execution and delivery of this Agreement and the other
documents, and no investigation by Lender or any closing shall affect the
representations and warranties or the right of Lender to rely upon
them.
7.8 Severability. Any
determination that any provision of this Agreement or any application thereof is
invalid, illegal or unenforceable in any respect in any instance shall not
affect the validity, legality or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other provision of
this Agreement.
7.9 Reviewed by
Attorneys. Borrower and the Envision Guarantors represent and
warrant that they (a) understand fully the terms of this Agreement and the
consequences of the execution and delivery of this Agreement, (b) have been
afforded an opportunity to have this Agreement reviewed by, and to discuss
this Agreement and all documents executed in connection herewith with, such
attorneys and other persons as Borrower may wish, and (c) have entered into this
Agreement and executed and delivered all documents in connection herewith of its
own free will and accord and without threat, duress or other coercion of any
kind by any person. The parties hereto acknowledge and agree that
neither this Agreement nor the other documents executed pursuant hereto shall be
construed more favorably in favor of one than the other based upon which party
drafted the same, it being acknowledged that all parties hereto contributed
substantially to the negotiation and preparation of this Agreement and the other
documents executed pursuant hereto or in connection herewith.
7.10 Mutual Waiver of Right of
Jury Trial. BORROWER, ENVISION GUARANTORS, AND LENDER HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (A) THIS AGREEMENT, OR ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; (B) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN THEM; OR (C) ANY CONDUCT, ACTS
OR OMISSIONS OF LENDER, ENVISION GUARANTORS OR BORROWER OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, MANAGERS, MEMBERS, PARTNERS, EMPLOYEES, AGENTS,
ATTORNEYS OR AFFILIATES; IN EACH OF THE FOREGOING CASES, WHETHER IN CONTRACT OR
TORT OR OTHERWISE.
7.11 Counterparts. This
Agreement may be executed in any number of counterparts, but all of such
counterparts shall together constitute but one and the same
agreement. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto. Delivery of an executed counterpart of
this Agreement by telefacsimile or .pdf shall have the same force and effect as
delivery of an original executed counterpart of this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, this Agreement is executed and delivered as of the day and year
first above written.
| LENDER: | ||
| GEMINI MASTER FUND, LTD. | ||
| By: | GEMINI STRATEGIES, LLC, as investment manager | |
| By: | /s/ Xxxxxx Xxxxxxx | |
| Title: President | ||
| BORROWER: | |
| ENVISION SOLAR INTERNATIONAL, INC. | |
| By: /s/ Xxxxxx Xxxxx | |
| Title: CEO | |
| ENVISION GUARANTORS: | |
|
ENVISION
SOLAR CONSTRUCTION, INC.,
|
|
| By: /s/ Xxxxxx Xxxxx | |
| Title: CEO | |
| ENVISION SOLAR RESIDENTIAL, INC. | |
| By: /s/ Xxxxxx Xxxxx | |
| Title: CEO | |
| ENVISION AFRICA, LLC | |
| By: /s/ Xxxxxx Xxxxx | |
| Title: CEO | |
