EXHIBIT 10.1
FORBEARANCE AGREEMENT
THIS
FORBEARANCE AGREEMENT, dated as
of June 5, 2009 (this
"FORBEARANCE"), is made by and among JACOBS FINANCIAL
GROUP, INC., a Delaware
corporation (the "COMPANY") and the holders of
the Promissory Notes (as such
term is defined below) on SCHEDULE I hereto (each, a "HOLDER"
and collectively,
the "HOLDERS"). Capitalized terms used but not
otherwise defined herein shall
have the meanings provided in the Subscription Agreements referred
to below.
W I T N E S S E T H
WHEREAS,
the Company and each Holder is a party to
a Subscription
Agreement for Promissory Note and Common Stock, dated on or
about June 10, 2008
(each, a "SUBSCRIPTION AGREEMENT"
and collectively, the
"SUBSCRIPTION
AGREEMENTS"), pursuant to which the Company issued to
each Holder a promissory
note (the "PROMISSORY NOTES");
WHEREAS, (i)
pursuant to the terms of the Promissory Notes, the first
two of 20 equal quarterly installments
of principal and interest payable
thereunder were to have been paid on December 10, 2008
and March 10, 2009 (the
"INITIAL AMORTIZATION PAYMENTS");
(ii) as the result of upheavals
and
dislocations in the capital markets, the Company was unable
to either refinance
the indebtedness evidenced by the
Promissory Notes or make the
Initial
Amortization Payments to the Holders when due; and (iii) an Event
of Default (as
such term is defined in the Promissory Notes) has occurred
under the Promissory
Notes as a result of the Company's failure to make pay the
Initial Amortization
Payments within 14 days after same became due and
payable (the "ACKNOWLEDGED
EVENTS OF DEFAULT");
WHEREAS, the
Company continues diligent efforts to obtain
permanent
financing to repay the outstanding balance due under the Promissory
Notes, while
at the same time pursuing the business plans of the
Company with the intention
of increasing the Company's
profitability and cash flow from operations to
enable it to meet its obligations to make
quarterly amortization payments in
accordance with the terms of the Promissory Notes;
WHEREAS, the
Company has asked the Holders to forbear from exercising
their rights and remedies arising from the Acknowledged
Events of Default until
the Forbearance Termination Date (as defined below); and
WHEREAS, (i)
each Holder recognizes that if such Holder exercises its
remedies under the Promissory Notes,
the Company may be forced to suspend
operations and the business and prospects of the
Company, including prospects
for full repayment of the Promissory Notes, could be
severely damaged and (ii)
accordingly, the Holders are, upon
and subject to the terms and conditions
specified in this Forbearance, willing to forbear from
exercising their rights
and remedies arising from the
Acknowledged Events of Default until
the
Forbearance Termination Date.
NOW,
THEREFORE, IN CONSIDERATION of the premises and
other good and
valuable consideration, the receipt
and sufficiency of which are
hereby
acknowledged, the parties hereto agree as follows:
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1. The Company
acknowledges, confirms and agrees that (a) the Company's
obligation to repay the outstanding principal amount of the
Promissory Notes and
all accrued and unpaid interest in respect
thereof is unconditional and not
subject to any offsets, defenses or
counterclaims, (b) the Holders have
performed fully all of their respective
obligations under the Subscription
Agreements, (c) by entering into this Forbearance, the
Holders do not waive or
release any term or condition of the Subscription
Agreements or the Promissory
Notes or any of their rights or remedies under the
Subscription Agreements or
the Promissory Notes or applicable law or any of the
obligations of the Company
thereunder and (d) the Acknowledged Events of
Default have occurred and are
continuing. The Holders (a) acknowledge receipt of
payment from the Company of
all interest payable under the Promissory Notes through
September 10, 2008 and
(b) acknowledge, confirm and agree that the Company has
performed fully all of
its obligations under the Subscription
Agreements and the Promissory Notes
(other than the Acknowledged Events of Default).
2. Subject to the
terms and conditions of this Forbearance, the Holders
hereby agree that the Company may satisfy its
obligation to make the Initial
Amortization Payments by making 8
consecutive quarterly payments of $67,185
each, commencing September 10, 2009,
and continuing on the payment dates
prescribed by the Amortization Schedule for the
Promissory Notes and ending on
June 10, 2011 (collectively, the
"PAYMENTS"), it being understood that the
Payments shall result in the payment of the
principal of and interest on the
unpaid portion of the Initial Amortization Payments at the rate of
10% per annum
from and after the originally scheduled payment
dates. The Payments shall be
allocated among and paid to the Holders in accordance
with the balances due to
each. The Company may at any time prepay the balance
remaining due with respect
to the principal of the Initial
Amortization Payments by paying the amount
thereof, together with interest accrued through the date of such
prepayment.
3. Subject to the
terms and conditions of this Forbearance, the Holders
hereby agree to forbear the exercise of rights and remedies
otherwise available
under the Subscription Agreements and the Promissory Notes
solely on account of
the Acknowledged Events of Default from the date of this
Forbearance until the
occurrence of a Forbearance Default. Notwithstanding the
foregoing, subject to
the terms and conditions of this
Forbearance, the Holders shall be free to
exercise any or all of their rights and
remedies arising on account of the
Acknowledged Events of Default at any time after the occurrence of
a Forbearance
Default. For purposes of this Agreement, the term
"FORBEARANCE DEFAULT" means
the existence or occurrence of any or all of the
following: (a) any of Default
under the Promissory Notes (other than the Acknowledged Events of
Default), (b)
the failure of the Company to make the Payments
to the Holders in accordance
with the schedule prescribed by paragraph 2
hereof and, in all events, on or
prior to the Forbearance Termination Date, or (c) a breach by the
Company of any
other representation, covenant or condition set forth in this
Forbearance; and
the term "FORBEARANCE TERMINATION DATE" means June 24, 2011.
4. The Company
hereby represents and warrants to the Holders that there
is no indebtedness for money borrowed of the Company or any
of its subsidiaries
outstanding that is senior in right of payment to the
Promissory Notes. For so
long as the Promissory Notes shall remain outstanding,
the Company agrees that
it shall not, and shall not permit
any of its subsidiaries to, incur any
indebtedness for money borrowed that is
senior in right of payment to the
Promissory Notes, PROVIDED, that the foregoing shall not restrict
the Company or
any of its subsidiaries from incurring indebtedness for
money borrowed that is
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senior in right of payment to the Promissory Notes
issued in exchange for, or
the net proceeds of which are used to refinance or retire, the
Promissory Notes.
The provisions of this paragraph 4 shall
terminate and be of no further force
and effect upon the payment by the Company of the
Payments in full on or prior
to the Forbearance Termination Date.
5. For so long as
the Promissory Notes shall remain outstanding,
the
Company agrees that it shall not declare or pay any
cash dividend or make any
cash distribution on or with respect to any
class or series of its capital
stock. The provisions of this paragraph 5 shall
terminate and be of no further
force and effect upon the payment by the Company of the
Payments in full on or
prior to the Forbearance Termination Date.
6. The Company and
each Holder hereby acknowledge and agree that
the
obligations of the Company under the Promissory
Notes and hereunder shall be
entitled to the benefits of that
certain General Hypothecation and Pledge
Agreement, of even date herewith (the "PLEDGE
AGREEMENT"), by and between the
Company and the Collateral Agent (as
defined below). Each holder hereby
irrevocably designates and appoints
______________ as the initial collateral
agent (the "COLLATERAL AGENT") for the ratable benefit of the
Holders under the
Pledge Agreement and each Holder irrevocably authorizes the
Collateral Agent, in
such capacity, to take such action on its behalf under
the provisions of the
Pledge Agreement and to exercise such
powers and perform such duties as are
expressly delegated to the Collateral
Agent by the terms of the
Pledge
Agreement, together with such other powers as are reasonably
incidental thereto.
Each Holder further agrees that it shall
not be entitled to exercise any
remedies under the Promissory Notes and hereunder
at any time when there is a
Collateral Agent serving as such under the Pledge
Agreement. The Collateral
Agent may resign as Collateral Agent upon ten (10)
days' notice to each Holder
and the Company. If the Collateral Agent shall resign as
Collateral Agent under
the Pledge Agreement, then the
Holders representing a majority of
the
outstanding principal amount of all loans evidenced by the
Promissory Notes (the
"MAJORITY HOLDERS") shall appoint from among such Holders a
successor Collateral
Agent for the Holders, which successor agent shall be subject to
approval by the
Comp
