EXHIBIT 10.1
FORBEARANCE AGREEMENT
This Forbearance
Agreement (the "Agreement") is entered into as of this
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30th day of March, 2009 by
and among Ronson Corporation, a New
Jersey
Corporation ("Parent"), Ronson Consumer
Products Corporation, a New Jersey
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corporation ("RCPC"), Ronson Aviation, Inc., a
New Jersey Corporation ("RAI")
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and Ronson Corporation of Canada Ltd., an Ontario corporation
("Ronson Canada")
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(RCPC and RAI are collectively and
individually referred to as the "Domestic
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Borrower" or "Domestic Borrowers"; the Domestic
Borrower and Ronson Canada are
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collectively and individually referred to as the "Borrower" or
"Borrowers", and
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the Borrowers, together with Parent are collectively and
individually referred
to as the "Obligors") and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Lender"),
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acting through its Wells Fargo Business Credit operating
division.
RECITALS:
Borrowers
and Lender are parties to a certain Credit
and Security
Agreement dated as of May 30,
2008 (as same may be amended,
modified,
supplemented or restated from time to time, the "Credit
Agreement"), relating to
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financing by Lender to Borrowers (capitalized terms
used but not specifically
defined herein shall have the meanings
provided for such terms in the Credit
Agreement).
Parent has
guaranteed payment and performance of the
Indebtedness of
Borrowers to Lender, pursuant to a certain Guaranty Agreement dated
May 30, 2008
(the "Guaranty").
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The
following Events of Default have occurred and are continuing
under
the Credit Agreement (the "Existing Events of Default"):
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(a) Borrowers
breached the terms of that certain Post-Closing Agreement
dated as of May 30, 2008, by and among
Borrowers and Lender by failing to
deliver all open items as required therein;
(b) Borrowers
failed to maintain Tangible Net Worth as of September 30,
2008 of not less than <$1,500,000>, as required by
Section 6.2(a) of the Credit
Agreement;
(c)
Borrowers failed to achieve Net Income as of September 30,
2008 of
not less than <$437,000>, as required by Section 6.2(b) of
the Credit Agreement;
(d)
Borrowers failed to achieve Net Cash Flow as of September 30,
2008
of not less than <$280,000>, as
required by Section 6.2(c) of the
Credit
Agreement;
(e)
Borrowers failed to deliver their quarterly
financial statements
for the fiscal quarter ending December 31, 2008,
within 45 days of the end of
such fiscal quarter as required by Section 6.1(b) of the Credit
Agreement;
(f) Borrowers
failed to deliver their monthly financial statements for
the month ending December 31, 2008 and January
31, 2009 within 30 days of the
end of such months as required by Section 6.1(c) of the Credit
Agreement;
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(g) Obligors
provided inaccurate exhibits to each of the Trademark and
Patent Security Agreements and an
inaccurate Schedule 5.11 to the Credit
Agreement; and
(h) Any other
Event of Default consisting of a cross-default
arising
under other indebtedness of the Obligors
resulting from any Existing Event of
Default.
Lender has
recently been advised that Parent and the
stockholders of
Parent are actively pursuing either a sale of all of the capital
stock of RAI or
of all or substantially all of the assets of RAI or financing
to be provided by
another lender (each a "Liquidity
Transaction"), in either case in an amount
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sufficient to enable the Obligors to fully pay and satisfy the
Indebtedness. As
a result, Obligors have requested that Lender forbear from
exercising its rights
and remedies under the Loan Documents as a result
of the Existing Events of
Default and amend certain terms of the Credit Agreement.
Lender has
reviewed this request and, in an effort to continue to
work
with the Obligors, Lender has agreed to forbear from
exercising certain of its
rights and remedies and to amend certain terms of the
Credit Agreement as set
forth herein.
NOW,
THEREFORE, for and in consideration of the
foregoing and other
good and valuable consideration, the receipt and sufficiency
of which is hereby
acknowledged, the parties agree as follows:
1. Acknowledgments
of Obligors. Obligors acknowledge and agree that:
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(a) The
recital of facts set forth in this
Agreement is true and
correct in all material respects.
(b) Lender has a
valid and perfected security interest in and to
the
Collateral.
(c) The Existing
Events of Default have occurred and are continuing.
(d)
Lender's rights and remedies contained in
the Loan Documents,
including without limitation the right to charge
and collect interest at the
Default Rate pursuant to Section 2.8(b) of the Credit Agreement,
effective as of
July 1, 2008, have vested.
(e) Lender's
agreement to forbear as provided in this Agreement shall
not invalidate, impair, negate, or otherwise affect Lender's
ability to exercise
its rights and remedies under the Loan Documents and otherwise.
2.
Forbearance.
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(a) In
consideration for, and subject to, compliance by the
Obligors
with the terms and conditions of this Agreement, Lender hereby
agrees to forbear
from exercising its rights and remedies under the Loan
Documents (except as set
forth in Paragraph 7 below) and applicable law as a result of
the occurrence of
the Existing Events of Default until the occurrence of a
Termination Event (as
such term is defined below).
This forbearance is given as a
one time
accommodation by Lender to the Obligors and
nothing contained herein shall
require Lender to waive any Default
or Event of Default or forbear from
exercising any of its rights or remedies
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with respect to the occurrence of any other Default or Event of
Default existing
on the effective date of this Agreement or occurring after the
effective date of
this Agreement.
(b) For purposes
of this Agreement, a "Termination Event" shall
mean
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the earliest to occur of (i) four weeks
from the Accommodation Overadvance
Funding Date, (ii) April 24, 2009, and (iii) any one or more of the
following:
(A) the failure of the Obligors to
comply with the terms,
covenants, agreements and
conditions of this
Agreement;
(B) any representation or
warranty made herein shall be
incorrect in any material respect;
(C) the occurrence of
any Event of Default under the
Credit Agreement, other than (i) the Existing Events
of Default or (ii) breach by
Obligors of their
obligation pursuant to Section 6.1(a) of the Credit
Agreement to deliver
audited year end annual
financial statements for the fiscal
year ending
December
31, 2008 within 90 days of the end of such
fiscal year;
(D) Obligors shall fail
to employ a CRO (as defined
below) throughout the Forbearance Period;
(E) in the Lender's discretion, it
determines that Parent
is no longer actively
pursuing a Liquidity
Transaction;
(F) Obligors shall
fail to deliver their quarterly
financial statements for the fiscal quarter
ending
December 31, 2008 required by Section 6.1(b) of the
Credit Agreement on or before April 1, 2009;
(G) Obligors shall
fail to deliver their
monthly
financial statements for the months ending
January
31, 2009 and February 28, 2009,
as required by
Section 6.1(c) of the Credit Agreement, on or before
April 15, 2009; and
(H) Any Person, other
than Lender, shall exercise its
rights and remedies against the Obligors as a result
of defaults or events of defaults arising under any
agreement between Obligors and such Person
due to
cross-defaults arising from the Existing Events
of
Default.
(c) Upon the
occurrence of a Termination Event, Lender's agreement
to
forbear from exercising its rights and remedies
under the Loan Documents and
applicable law shall automatically
terminate, with or without notice to the
Obligors.
(d) Nothing
in this paragraph 2 shall be deemed a waiver by Lender of
the Existing Events of Default or of future compliance by the
Obligors with the
covenants set forth above or otherwise set forth in the Loan
Documents.
(e) This
Agreement is written without prejudice as to the
rights of
Lender to pursue any and all remedies available to
Lender pursuant to the Loan
Documents, at law and in equity, upon the
occurrence of a Termination Event.
This Agreement shall not constitute a waiver or
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modification of any of Lender's rights and
remedies, the Existing Events of
Default, any other Default or Event of Default under the Loan
Documents, or any
of the terms, conditions, warranties, representations or
covenants contained in
the Loan Documents.
3. Conditions.
Lender's agreement to forbear from exercising its rights
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and remedies pursuant to this Agreement is conditioned upon:
(a)
execution and delivery by the
Obligors and Lender of this
Agreement;
(b) Obligors'
agreement to cooperate with Hilco Appraisal Services, LLC
in its efforts to cause an updated appraisal
of Borrowers' Inventory to be
delivered to Lender on or before March 25,
2009, which appraisal shall be
acceptable to Lender in form and substance;
(c)
execution and delivery by the Obligors of Amended
and Restated
Patent and Trademark Security Agreements, in form and
substance acceptable to
Lender;
(d)
execution and delivery by Parent of
an Amended and Restated
Security Agreement, in form and substance acceptable to Lender;
(e) receipt by
Lender of evidence that Obligors have engaged a
Chief
Restructuring Officer ("CRO"), on terms and conditions set forth
below; and
(f) such other
matters as Lender may require.
4.
Chief Restructuring Officer. Obligors
shall deliver to Lender
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evidence establishing that the Obligors
have engaged a Chief Restructuring
Officer ("CRO"), including, without limitation, copies of any
engagement letter
executed by the Obligors with a CRO and a certified copy of
the resolutions of
the Board of Directors of the Obligors approving the engagement of
a CRO, all of
which shall be in form and substance
acceptable to Lender. The CRO shall be
selected by Obligors and acceptable to Lender. At all
times during the term of
this Agreement, Obligors will continue to employ
the CRO with such duties and
responsibilities as shall be approved by the Board of
Directors of the Obligors
and acceptable to the Lender. Obligors consent to
Lender having access to the
CRO and Obligors hereby agree and consent to Lender meeting with
the CRO without
Obligors present and Obligors hereby
release and agree to hold the CRO and
Lender harmless from any information or
discussions held between the CRO and
Lender.
5. Forbearance
Fee. In consideration for Lender's agreement to
enter
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into this Agreement, Obligors shall pay to Lender a forbearance fee
in an amount
equal to Four Hundred Fifty Thousand Dollars
($450,000), which shall be fully
earned and non-refundable upon execution and delivery of this
Agreement, shall
be included as part of the Indebtedn
