Exhibit 99.2
SECOND FORBEARANCE AGREEMENT
This Second Forbearance Agreement ("Agreement") is made as of July 6, 2001,
by and among Internet Cable Corporation, a Nevada corporation, Cable Systems
Technical Services Inc., a Delaware corporation, Cable Systems Corporation, TSi,
NA., a Delaware corporation, Internet Cable Corporation, NA., a Delaware
corporation, CAD Consultants, Inc., a New Jersey corporation (each a "Borrower",
collectively the "Borrowers") Cable Systems Technical Services, Inc., a
corporation of the province of Ontario ("Guarantor") and Progress Bank
("Lender").
BACKGROUND
A. Borrowers and Lender are parties to a certain Loan and Security
Agreement dated August 15, 2000, (the "Loan Agreement"), pursuant to which
Lender established financing arrangements for the benefit of Borrowers.
B. On or about April 12, 2001, Borrowers, Guarantor and Lender entered into
a Forbearance Agreement (the Loan Agreement, Forbearance Agreement and all
instruments, documents and agreements executed in connection therewith or
related thereto are referred to herein collectively as the "Existing Loan
Documents". All capitalized terms not otherwise defined herein shall have the
meaning ascribed thereto in the Loan Agreement.)
C. On or about April 12, 2001, Guarantor executed a General Security
Agreement in which Guarantor unconditionally guarantied the Obligations of
Borrowers to Lender and pledged its assets as security for such Guaranty. The
Security Interest in Guarantor's assets was perfected by the filing of a finance
statement with the province of Ontario.
D. Certain additional Events of Default have occurred and are continuing
under the Existing Loan Documents and Borrowers have nonetheless requested that
Lender agree, in consideration of the undertakings and obligations of Borrowers
set forth herein, to make certain accommodations, and to temporarily forbear
from the exercise of Lender's rights and remedies under the Existing Loan
Documents. Lender has agreed to make such accommodations as and only to the
extent set forth herein, and without waiving any of Lender's rights and
remedies.
E. Borrowers and Lender desire to set forth their agreements in writing.
NOW THEREFORE, with the foregoing Background deemed incorporated by
reference and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
covenant and agree as follows:
SECTION 1 - ACKNOWLEDGMENT OF INDEBTEDNESS,
EVENTS OF DEFAULT ETC.
1.1 Revolving Credit. As of July 6, 2001, the principal amount outstanding
under the Loan
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Agreement is $493,471.79, (the "Current Debt") which amount is owing without
defense, setoff, counterclaim or deduction of any nature.
SECTION 2 - AMENDMENT TO LOAN AGREEMENT
2.1 The definitions of "Borrowing Base" and "Maximum Line of Credit Amount"
contained in Section 1.1 of the Loan Agreement are hereby amended and restated
as follows:
Borrowing Base - Sixty percent (60%) of the net Qualified Accounts.
Maximum Line of Credit Amount - shall equal the Current Debt. The
Current Debt shall reduce dollar for dollar by any Mandatory Payments
received by Lender pursuant to Section 5 of this Agreement.
2.2 The definition of "Qualified Account" contained in Section 1.1 of the
Loan Agreement is hereby amended and restated as follows:
Qualified Account - An Account arising in the ordinary course of any
Borrowers' or Guarantor's business, except for Accounts of CAD
Consultants, Inc. which are expressly ineligible, and provided that no
Account shall be a Qualified Account if:
(i) it arises out of services provided by any Borrower to a
Subsidiary or an Affiliate or to a Person controlled by an
Affiliate of a Borrower; or
(ii) it is due or unpaid more than ninety (90) days after the
original invoice date; or
(iii) Fifty percent (50%) or more of the Accounts from the
Obligor are not Qualified Accounts hereunder; or
(iv) any covenant, representation or warranty contained in any
agreement with respect to such Account has been breached; or
(v) the Obligor is also a Borrower's creditor, vendor or
supplier; or
(vi) the Obligor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or
made an assignment for the benefit of creditors, or a decree
or order for relief has been entered by a court having
jurisdiction over the Obligor in an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for
relief under the federal bankruptcy laws has been filed
against the Obligor, or if the Obligor has failed, suspended
business, ceased to be Solvent, or consented to or suffered
the appointment of a receiver, trustee, liquidator or
custodian to be appointed
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for it or for all or a significant portion of its assets or
affairs, or if there is any reason known to Borrowers that
such Account is not readily collectible; or
(vii) it arises from a sale to a Obligor or the provision of
services outside the United States, provided however that
Qualified Canadian Accounts shall be eligible; or
(viii) it arises from a sale to an Obligor on a xxxx-and-hold,
guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other conditional, repurchase or return
basis; or
(ix) the Obligor is the United States of America or any
department, agency or instrumentality thereof, unless
Borrowers assign its right to payment of such Account to
Lender, for the benefit of Lender, in a manner satisfactory
to Lender, so as to comply with the Assignment of Claims Act
of 1940 (31 U.S.C.ss.203 et seq., as amended); or
(x) the Account is not at all times subject to Lender's duly
perfected, first priority security interest or is subject to
a Lien other than a Permitted Lien; or
(xi) the goods giving rise to such Account have not been
delivered to and accepted by the Obligor or the services
giving rise to such Account have not been performed by
Borrowers and accepted by the Obligor or the Account
otherwise does not represent a final sale; or
(xii) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(xiii) Borrowers have made any agreement with the Obligor for, or
the Obligor has otherwise claimed or has a right to, any
offset against, deduction therefrom or reduction thereto,
except for discounts or allowances which are made in the
ordinary course of business according to contractual
arrangements between Borrowers and Obligor and discounts
allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each
invoice or any statement (or attachment thereto) related to
such Account; or
(xiv) it represents finance charges or interest, to such extent;
or
(xv) it represents a retainer; or
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(xvi) it arises out of a sale made by Borrowers to an employee,
officer or director of Borrowers or any immediate family
member thereof; or
(xvii) it is based on an invoice without a definite due date or
is based on a pre- billed invoice; or
(xviii) it is subject to litigation or arbitration; or
(xix) it arises from a sale to an Obligor on a cash-on-delivery
or sight draft basis; or
(xx) the Account is otherwise deemed unacceptable by Lender in
its reasonable discretion.
In computing the amount of Qualified Accounts, all credit memos issued
by Borrowers shall be deducted from such amount.
2.3 Section 6.13(a) of the Loan Agreement shall be amended to add a new
subsection (v) as follows:
(v) on every business day a Borrowing Base Certificate.
SECTION 3 - FORBEARANCE
3.1 Grant of Forbearance. Subject to the terms and conditions, and
satisfaction of the Effectiveness Conditions of this Agreement, through the
Termination Date (as defined below), Lender shall forbear from taking any action
or exercising any rights or remedies under the Existing Loan Documents against
Borrowers, Borrowers' property or the Collateral, because of the Existing
Defaults as such term is defined in the Forbearance Agreement ("Existing
Defaults"). On the Termination Date, all forbearance with respect to the
Existing Defaults shall cease and, thereupon, Lender may, in its discretion, and
apart from any rights as a result of any new Event of Default, exercise rights
and remedies against Borrowers, Borrowers' property and the Collateral. The
Termination Date shall be the date that is the earlier to occur of either (i)
the occurrence of an Event of Default (other than the Existing Defaults as
defined in the ) or (ii) the occurrence of a Termination Event (as defined
below).
3.2 Preservation of Rights. Lender does not waive any of the Existing
Defaults. All Existing Defaults are preserved, pending fulfillment of Borrowers'
obligations under this Agreement and under the Existing Loan Documents. The
granting of the forbearance hereunder shall not be deemed a waiver of any of
Lender's rights and remedies or constitute a course of conduct or dealing on
behalf of Lender. Subject only to the forbearance described herein, Lender
specifically reserves all rights and remedies.
3.3 Termination Event. The occurrence of any of the following shall be
considered a termination event ("Termination Event").
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a. Failure of the Borrowers to terminate Lender's obligations to
Advance funds under the Loan Agreement and to provide a payoff of
all Obligations due Lender on or before July 20, 2001.
b. Any breach or default by Borrowers of any condition, covenant or
obligation in this Agreement.
SECTION 4 - COLLATERAL
4.1 Affirmation of Existing Collateral. Borrowers and Guarantor covenant,
confirm and agree that Lender as security for the repayment of the Obligations,
has, and shall continue to have, and is hereby granted a continuing lien on and
security interest in the Collateral including but not limited to any tax refunds
due from any taxing authorities to any Borrower, all whether now owned or
hereafter acquired, created or arising, together with all proceeds, including
insurance proceeds thereof. Borrowers and Guarantor acknowledge and agree that
nothing herein contained in any way impairs Lender's existing rights and
priority in the Collateral.
4.2 Further Assurances. Upon execution of this Agreement, and thereafter as
Lender may from time to time request, Borrowers shall further assist Lender in
effectuating the terms and intent of this Agreement and the Existing Loan
Documents and in assuring continued, effective and proper perfection of the
Lender's liens and security interests in the Collateral.
SECTION 5 - MANDATORY PAYDOWNS
5.1 Borrowers shall deliver to Lender the following monies:
a. Two-Hundred and Fifty Thousand Dollar on or before July 6, 2001
b. If Lender has not been paid in full, Borrowers shall direct that
the approximately $340,000 tax refund due Cable Systems
Corporation, TSi NA by the Internal Revenue Service relating to
the tax return filed in or about May, 2001 (the "Refund") be paid
to Lender. Borrowers shall deposit with Lender in the existing
Lock Box in kind any Refund Check from the Internal Revenue
Service.
c. Until such time as Lender has been paid in full, all proceeds of
the dispositions and/or sale of collateral of CAD Consultants,
Inc. and Cable Systems Technical Services, Inc. (Delaware).
Lender shall apply proceeds received form Borrower pursuant to this
paragraph to permanently reduce the Maximum Line of Credit Amount. Lender agrees
that to the extent that it receives any monies in excess of the Obligations,
such monies shall be promptly returned at Borrowers' direction.
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SECTION 6 - CONDITIONS TO EFFECTIVENESS
6.1 Conditions. Lender's undertakings hereunder are subject to satisfactory
completion, as determined by Lender in its sole discretion, (all documents to be
in form and substance satisfactory to Lender) of the following conditions
("Effectiveness Conditions"):
a. Borrowers' and Guarantor's execution and delivery of this
Agreement.
b. Borrower's delivery of corporate actions authorizing the
execution and delivery of this Agreement and performance of the
transactions contemplated hereby.
c. Payment of a Forbearance Fee of Three Thousand Dollars ($3,000).
d. Payment of all legal and all collateral examination fees.
e. Delivery of a Borrowing Base Certificate.
SECTION 7 - REPRESENTATIONS AND WARRANTIES
Borrowers warrant and represent to Lender that:
7.1 Prior Representations. By execution of this Agreement, Borrowers
reconfirm that all warranties and representations made to Lender under the
Existing Loan Documents and restates such warranties and representations as of
the date hereof all of which shall be deemed continuing until all of the
Obligations are paid and satisfied in full.
7.2 Authorization. The execution and delivery by Borrowers of this
Agreement and the performance by Borrowers of the transactions herein
contemplated (i) are and will be within their powers, (ii) have been authorized
by all necessary corporate action, and (iii) are not and will not be in
contravention of any order of court or other agency of government, of law or of
any indenture, agreement (except for the Existing Loan Documents) or undertaking
to which Borrowers are party or by which the property of Borrowers are bound, or
be in conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or undertaking, or
result in the imposition of any lien, charge or encumbrance of any nature on any
of the properties of Borrowers.
7.3 Valid, Binding and Enforceable. This Agreement and any assignment or
other instrument, document or agreement executed and delivered in connection
herewith, will be valid, binding and enforceable in accordance with their
respective terms.
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SECTION 8 - BORROWERS' EXISTING COVENANTS
8.1 Existing Covenants. Borrowers covenant that on and after the date of
execution of this Agreement and until the Obligations are indefeasibly paid and
satisfied in full that, except as expressly modified hereby, Borrowers shall
continue to observe and maintain compliance with all covenants, representations
and warranties arising in the Existing Loan Documents.
SECTION 9 - MISCELLANEOUS
9.1 Default.
(a) In addition to each of the Events of Default set forth in the
Existing Loan Documents, the (i) failure of Borrowers to comply with its
representations, warranties, covenants, Mandatory Paydowns or other undertakings
under this Agreement, (ii) occurrence of a Termination Event, or (iii)
occurrence or institution of any action or proceeding which may adversely affect
Borrowers' ability to perform under this Agreement (as determined by Lender in
its reasonable discretion), shall be an Event of Default under the Existing Loan
Documents and upon such failure, Lender's undertakings under this Agreement may
at Lender's discretion, and without notice to Borrowers immediately terminate
and Lender may exercise its rights and remedies as granted under the Existing
Loan Documents and under applicable law or in equity.
(b) Any Event of Default, other than the Existing Defaults, under any
of the Existing Loan Documents, shall be considered an Event of Default under
all of the Existing Loan Documents and upon such Event of Default, Lender's
undertakings under this Agreement may at Lender's discretion, and without notice
to Borrowers immediately terminate and Lender may exercise its rights and
remedies as granted under the Existing Loan Documents and under applicable law
or in equity.
9.2 Integrated Agreement. This Agreement shall be deemed incorporated into
and made a part of the Existing Loan Documents. Except as expressly set forth
herein, all of the terms, conditions and agreements of the Loan Agreement and
Existing Loan Documents are ratified and confirmed. The Existing Loan Documents
and this Agreement shall be construed as integrated and complementary of each
other, and as augmenting and not restricting Lender's rights, remedies and
security. If, after applying the foregoing, an inconsistency still exists, the
provisions of this Agreement shall control.
9.3 Non-Waiver. No omission or delay by Lender in exercising any right or
power under this Agreement, or the Existing Loan Documents or any related
agreement will impair such right or power or be construed to be a waiver of any
default or Event of Default or an acquiescence therein, and any single or
partial exercise of any such right or power will not preclude other or further
exercise thereof or the exercise of any other right, and no waiver will be valid
unless in writing and then only to the extent specified. Lender's rights and
remedies are cumulative and concurrent and may be pursued singly, successively
or together.
9.4 Headings. The headings of any paragraph of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.
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9.5 Survival. All warranties, representations and covenants made by
Borrowers herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by them or on their behalf under this
Agreement, shall be considered to have been relied upon by Lender. All
statements in any such certificate or other instrument shall constitute
warranties and representations by Borrowers hereunder. All warranties,
representations, and covenants made by Borrowers hereunder or under any other
agreement or instrument shall be deemed continuing until the Obligations are
indefeasibly paid and satisfied in full.
9.6 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto. No
delegation by Borrowers of any duty or obligation of performance may be made or
is intended to be made to Lender. No rights are intended to be created hereunder
or under any related instruments, documents or agreements for the benefit of any
third party donee, creditor, incidental beneficiary or affiliate of Borrowers.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania. The provisions of
this Agreement are to be deemed severable, and the invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions which shall continue in full force and effect.
9.8 WAIVER OF JURY TRIAL. BORROWERS AND LENDER EACH HEREBY WAIVE ANY AND
ALL RIGHTS EITHER MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
COMMENCED BY OR AGAINST ANY OF THE PARTIES TO THIS AGREEMENT WITH RESPECT TO
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO UNDER THIS AGREEMENT OR UNDER THE
EXISTING LOAN DOCUMENTS.
9.9 EXCLUSIVE JURISDICTION. BORROWERS AND LENDER EACH IRREVOCABLY CONSENT
TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF COMMON PLEAS LOCATED WITHIN THE
EASTERN DISTRICT OF PENNSYLVANIA OR THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER
ARISING HEREUNDER OR UNDER THE EXISTING LOAN DOCUMENTS. BORROWERS IRREVOCABLY
AGREE TO SERVICE OF PROCESS BY CERTIFIED MAIL RETURN RECEIPT REQUESTED TO THE
ADDRESS CURRENTLY CONTAINED IN LENDER'S RECORDS.
9.10 RELEASE. AS FURTHER CONSIDERATION FOR LENDER'S AGREEMENT TO GRANT THE
ACCOMMODATIONS AND FORBEARANCE SET FORTH HEREIN, BORROWERS HEREBY WAIVE AND
RELEASE AND FOREVER DISCHARGES LENDER AND ITS OFFICERS, DIRECTORS, ATTORNEYS,
AGENTS AND EMPLOYEES FROM ANY LIABILITY, DAMAGE, CLAIM, LOSS OR EXPENSE OF ANY
KIND THAT BORROWERS MAY HAVE NOW OR HEREAFTER AGAINST LENDER OR ANY OF THEM
ARISING OUT OF OR RELATING TO THE OBLIGATIONS, THIS AGREEMENT OR THE EXISTING
LOAN DOCUMENTS.
9.11 Advice of Counsel. Borrowers acknowledge that they have consulted with
independent legal counsel concerning this Agreement and specifically regarding
the effect and implications of Sections 9.8, 9.9, and 9.10 above and Borrowers
knowingly and voluntarily hereby waive the rights described therein or affected
thereby.
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9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts together, shall constitute one and the same
respective agreement.
9.13 Payment of Obligations. Upon receipt of payment in full of all
Obligations due hereunder in good funds, Lender covenants to return the
Revolving Credit Note marked "PAID" and to execute any documents reasonably
necessary to terminate its liens in the Collateral.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Forbearance Agreement as
of the day and year first above written.
PROGRESS BANK INTERNET CABLE CORPORATION
By: /s/ Xxxxxxx Xxxx By: /s/ Xxxxxx Xxxxxxxx
----------------------------- ---------------------------------
Name: Xxxxxxx Xxxx Name: Xxxxxx Xxxxxxxx
--------------------------- --------------------------------
Title: Vice President Title: CEO
-------------------------- -------------------------------
CABLE SYSTEMS TECHNICAL SERVICES, CABLE SYSTEMS CORPORATION, TSI
INC. NA.
By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxxxx Xxxxxxxx
-------------------------------- --------------------------------
Title: CEO Title: CEO
------------------------------- -------------------------------
INTERNET CABLE CORPORATION, NA. CAD CONSULTANTS, INC.
By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxxxx Xxxxxxxx
-------------------------------- --------------------------------
Title: CEO Title: CEO
------------------------------- -------------------------------
By acknowledging below, Cable Systems Technical Services, Inc. a
corporation of the province of Ontario, hereby certifies that it has read this
Second Forbearance Agreement, understands Borrowers' and Guarantor's obligations
hereunder, and agrees that its Guaranty remains in full force and effect.
CABLE SYSTEMS TECHNICAL SERVICES, INC.
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxx
--------------------------------
Title: CEO
-------------------------------
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