FORBEARANCE AGREEMENTDefault Notice Forbearance Agreement |
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AMERICAN WATER STAR, INC., | LAURUS MASTER FUND, LTD.,. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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Search Default Notice Forbearance Agreement by:
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT ("Agreement") dated as of July
22, 2005 by and between AMERICAN WATER STAR, INC., a Nevada
corporation ("Company") and LAURUS MASTER FUND, LTD., a Cayman
Islands company ("Laurus").
BACKGROUND
Laurus is the holder of Secured Convertible Term Note dated
as of October 26, 2004 in the original principal amount of
$5,000,000 made by Company in favor of Laurus (as amended,
supplemented, restated or modified from time to time, the "Note")
which was issued pursuant to a Securities Purchase Agreement
dated as of October 26, 2004 by and between Company and Laurus
(as amended, supplemented, restated or modified from time to
time, the "Purchase Agreement").
In connection with the Purchase Agreement, Company entered
into, among other agreements, a Registration Rights Agreement
dated as of October 26, 2004 (as amended, supplemented, restated
or modified from time to time, the "Registration Rights
Agreement" and together with the Note, the Purchase Agreement and
the other Related Agreements (as defined in the Purchase
Agreement), collectively, the "Documents").
Simultaneously with the execution of this Agreement each of
All Star Beverages, Inc., All Star Beverages Arizona, Inc., All
Star Beverages JAX, Inc., All Star Beverages Mississippi, Inc.
and Hawaiian Tropicals, Inc. (each, a "Subsidiary" and
collectively the "Subsidiaries") shall execute and deliver in
favor of Laurus a Subsidiary Guaranty and a Master Security
Agreement (collectively, the "Subsidiary Documents").
Various defaults have occurred under the Documents as listed
on Exhibit A annexed hereto ("Designated Defaults") by reason of
which Laurus has the full legal right to exercise its rights and
remedies under the Documents. Company has requested that Laurus
forbear for a period of time from exercising its rights and
remedies under the Documents. Laurus is prepared to establish a
period of forbearance on the terms and conditions set forth
below.
AGREEMENT
In consideration of the foregoing and of the mutual promises
and covenants herein contained, it is agreed:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Note.
2. Acknowledgement. Company acknowledges that the Designated
Defaults have occurred and exist as of the date hereof, that any
and all cure periods set forth in the Documents have expired, and
that Company is unconditionally obligated to pay all of its
obligations and liabilities to Laurus (collectively, the
"Obligations"), all without defense, setoff or counterclaim of
any kind or nature whatsoever.
3. Outstanding Obligations. Company hereby affirms and
acknowledges that (i) as of the date hereof, the aggregate
outstanding principal amount of the Obligations owing by the
Company to Laurus under the Documents equals $5,000,000, (ii) as
of July 31, 2005, the aggregate accrued interest and fees owing
by the Company to Laurus equals $1,286,098.61 ((i) and (ii)
collectively, the "Amount") and (iii) the Amount is a valid
obligation of Company and is due and owing without defense,
claim, setoff or counterclaim of any kind or nature whatsoever.
4. Forbearance. During the period commencing on the date
hereof and ending on the earlier to occur of (i) October 26, 2007
or (ii) the date of any Forbearance Default (as hereinafter
defined) (the "Forbearance Period"), Laurus will forbear from
exercising its rights and remedies with respect to the Designated
Defaults. Such forbearance shall not derogate from Laurus' right
to collect, receive and/or apply proceeds of Company's accounts
receivable to the Obligations. Subject to the provisions of
Section 6 hereof, all Obligations owing by the Company to Laurus
under the Documents shall be due and payable in full at the end
of the Forbearance Period, unless such payment terms are
otherwise modified by such other written agreement by and between
Company and Laurus.
5. Forbearance Defaults. Each of the following shall
constitute a Forbearance Default:
(a) the existence of any default (other than a Designated
Default) under any Document or any Subsidiary Document;
(b) Company shall fail to keep or perform any of the terms,
obligations, covenants or agreements contained herein;
(c) any representation or warranty of Company herein shall be
false, misleading or incorrect in any respect; or
(d) the occurrence of a Fraud Event or Laurus' reasonable belief
that a Fraud Event has occurred. For purposes hereof, the term
"Fraud Event" shall mean the occurrence of any of the following
events: (i) Company or any Subsidiary has misappropriated (or
any Subsidiary or Company has caused the other to misappropriate)
any proceeds of any Collateral (as defined in the Documents),
(ii) Company or any Subsidiary has embezzled funds from the
other, (iii) any Subsidiary and/or Company has converted (or
Company or any Subsidiary has caused the other to convert) any
real or personal property of Company or any Subsidiary, including
but not limited to any Collateral, (iv) any Subsidiary and/or
Company has committed (or Company or any Subsidiary has caused
the other to commit) fraud against Laurus, including any material
and willful misrepresentation made (or caused to be made) by any
Subsidiary and/or by Company with respect to any of the
representations and warranties contained in the Documents or the
accuracy of any information provided to Laurus concerning the
Collateral, or in any other document delivered to Laurus in
connection with the transactions contemplated by the Documents
or, (v) any director or shareholder of Company or of any
Subsidiary shall have taken any action referred to in any of the
foregoing clauses (i) - (iv).
6. Rights and Remedies. Upon the occurrence of a Forbearance
Default, at the option of Laurus, all Obligations shall be
immediately due and payable. Upon all Obligations becoming due
and payable, Laurus shall be immediately entitled to enforce all
of its rights and remedies under the Documents.
7. Additional Note. In consideration of the agreements set
forth herein and notwithstanding anything contained in the
Documents to the contrary, all accrued and unpaid interest and
fees owing pursuant to the Note and the other Documents through
July 31, 2005 shall be evidenced by and payable by Company in
accordance with the terms of a Secured Convertible Term Note,
dated as of the date hereof (the "Additional Note"), in the form
set forth in Exhibit B hereto. The Additional Note will be
issued in addition to, and not in replacement or satisfaction of,
the Note.
8. Covenants and Acknowledgments. The Company and All-Star
Beverages, Inc., as applicable, (a) shall register the shares of
the Company's Common Stock issuable upon the conversion of the
Additional Note in the Company's next Registration Statement (as
defined in the Registration Rights Agreement), (b) acknowledges
that the term "Note" set forth in the Registration Rights
Agreement shall mean the collective reference to the Original
Note and the Additional Note and (c) the obligations and
liabilities secured by the Master Security Agreement dated as of
October 26, 2004 shall include, without limitation, the Company's
obligations and liabilities to Laurus hereunder and under the
Additional Note.
9. Representations and Warranties. Company hereby represents
and warrants as follows:
(a) This Agreement, the Additional Note and the Documents are
and shall continue to be legal, valid and binding obligations of
Company and are enforceable against Company in accordance with
their respective terms.
(b)






