EXHIBIT 10.1
FORBEARANCE
AGREEMENT
THIS FORBEARANCE AGREEMENT (the “
Agreement ”) is made and entered into effective as of
August 31, 2009 by and between PARLUX FRAGRANCES, INC., a Delaware
corporation and PARLUX LTD., a New York corporation (individually
and/or collectively, the “ Borrower ”) and
REGIONS BANK, an Alabama banking corporation (the “
Bank ”).
Recitals
This Agreement is made and entered
into in reliance on the accuracy of the following recitals, which
are an integral component of this Agreement and which are
acknowledged by the Borrower and the Bank to be true and
accurate:
A.
The Bank made a loan to the Borrower in
the original principal amount of $20,000,000.00 (the “
Loan ”).
B.
The Loan is evidenced by that certain
Revolving Promissory Note dated as of July 22, 2008, executed by
the Borrower in favor of the Bank in the original principal amount
of $20,000,000.00 (the “Note” ). In connection
with the execution of the Note, the Borrower and the Bank entered
into that certain Loan and Security Agreement dated as of July 22,
2008 (the “ Loan and Security Agreement
”).
C.
The obligations of the Borrower evidenced
by the Note are secured, in part, by (i) the Loan and Security
Agreement, which secures certain personal property of the Borrower,
as more particularly set forth therein (the “
Collateral ”), (ii) that certain Patent and Trademark
Security Agreement dated as of July 22, 2008, from the Borrower in
favor of the Lender, recorded with the Assignment Division of the
United States Patent and Trademark Office as Instrument No.
700389984 and as Instrument No. 70038995 (the “ Patent and
Trademark Security Agreement ”), (iii) that certain UCC
Financing Statement from PARLUX LTD., a New York corporation in
favor of Lender, filed with the New York Department of State under
File No. 200807280527145 (the “ Parlux Ltd. UCC
”), and (iv) that certain UCC Financing Statement from PARLUX
FRAGRANCES, INC., a Delaware corporation in favor of Lender, filed
with the Delaware Department of State under File No. 2008 2576369
(the “ Parlux Fragrances, Inc. UCC
”).
D.
The Note, the Loan and Security
Agreement, the Patent and Trademark Security Agreement, the Parlux
Ltd. UCC, the Parlux Fragrances, Inc. UCC and all other documents
evidencing or securing the Loan, are sometimes hereinafter
collectively referred to as the “ Loan Documents
”.
E.
The Borrower agrees and acknowledges that
pursuant to the terms of Section 2.2(c) of the Loan and Security
Agreement, the outstanding principal balance of the Note at no time
shall exceed the “Revolving Loan Availability” (as
defined in Section 1.1 of the Loan and Security Agreement).
Additionally, the Borrower agrees and acknowledges that the current
outstanding principal balance of the Note is $6,680,612.00 and the
current Revolving Loan
Availability is $208,000.00, resulting in
an excess of the Revolving Loan Availability in the amount of
$6,472,612.00. The Borrower further agrees and acknowledges that
the Borrower is in default under the terms of Section 2.2(c) of the
Loan and Security as the Borrower has failed to timely make the
mandatory principal payment required under Section 2.2(c) of the
Loan and Security Agreement to reduce the outstanding principal
balance of the Note to an amount not greater than the Revolving
Loan Availability (the “ Event of Default
”). The Borrower agrees and acknowledges that as a
result of the occurrence and continuance of the Event of Default,
the Bank (i) is under no obligation to make other loan advances or
financial accommodations available to the Borrower under the Loan
Documents or otherwise, and (ii) has the current right to exercise
any and all of its rights and remedies against the Borrower under
the Loan Documents and applicable law.
F.
The Borrower has requested that,
notwithstanding the occurrence and continuance of the Event of
Default, that the Bank forbear from exercising its rights and
remedies against the Borrower.
G.
Although the Bank is under no obligation
to do so, the Bank is willing to forbear from exercising its
default rights and remedies against the Borrower for the period set
forth herein, subject to and solely on the terms and conditions set
forth in this Agreement.
NOW, THEREFORE , in consideration of the agreement and undertakings
of the Borrower and the Bank, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1.
Incorporation of
Recitals . Each of the
above recitals is incorporated herein and deemed to be the
contractual covenants of the Borrower and the Bank and are relied
upon by each party to this Agreement in agreeing to the terms of
this Agreement.
2.
Ownership of Loan
Documents . Borrower
hereby acknowledges and stipulates that Bank is the owner and
holder of the Loan Documents, and is recognized as, and deemed to
be, a holder in due course of the Note.
3.
Event of Default
. The Borrower has failed
to timely make the mandatory principal payment required under
Section 2.2(c) of the Loan and Security Agreement to reduce the
outstanding principal balance of the Note to an amount not greater
than the “Revolving Loan Availability” (as defined in
Section 1.1 of the Loan and Security Agreement). As of the
execution of this Agreement, Borrower has failed to cure such Event
of Default.
4.
Acknowledgement of Amounts
Outstanding . As of August
27, 2009, the total outstanding principal balance owed to the Bank
under the Note is $6,680,612.00, including accrued and unpaid
interest (exclusive of late fees and other charges) in the amount
of $4,199.16, together with all accruing interest, fees, costs and
expenses as provided in the Loan Documents, including without
limitation, attorneys’ fees (collectively, the “
Loan Balance ”).
5.
Acknowledgement of Liens and
Security Interests . The
Borrower agrees and acknowledges that, the liens and security
interests granted to the Bank under the Loan Documents in the
Collateral are valid, perfected and enforceable security interests,
and the
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Collateral is subject only to those
permitted liens and encumbrances identified in the Loan
Documents.
6.
Forbearance
. The Borrower acknowledges that as a
result of the Event of Default under the Loan Documents, the Bank
has the immediate legal and contractual right to demand payment
under the Note and exercise all rights and remedies available to a
secured creditor under applicable law in respect of the Collateral,
and an action against Borrower to enforce collection of all sums
due under the Loan Documents. Although Bank has no legal obligation
to do so, as an act of Bank’s good faith, Bank agrees to
forbear from such legal action until the earlier of (i) an
additional Event of Default under the Loan Documents, (ii) an Event
of Default under this Agreement, or (iii) October 28, 2009 (the
“ Forbearance Period ”), subject to
Borrower’s satisfaction of the Conditions Precedent set forth
in Paragraph 8 of this Agreement. Upon the occurrence of an
additional Event of Default under the Loan Documents or this
Agreement (other than the “Event of Default” defined in
Recital “E” of this Agreement), the Bank shall be
entitled to exercise all available rights and remedies, and all
principal and accrued interest due under the Note and Loan
Documents shall be due and payable in full. All obligations
of the Borrower hereunder and under the Loan Documents shall
survive the termination of the Forbearance Period.
7.
Forbearance Fee
. Borrower hereby agrees to pay to Bank a
forbearance fee in an amount equal to $40,000.00, payable as
follows: (i) Borrower shall pay Bank $20,000.00 upon the execution
of this Agreement, and (ii) Borrower shall pay Bank $20,000.00 on
September 30, 2009. Notwithstanding the foregoing, in the event
that Borrower refinances with another financial institution or
otherwise repays, all amounts outstanding under the Loan Documents
on or before September 30, 2009, Borrower shall not be required to
pay the $20,000.00 portion of the forbearance fee due on September
30, 2009.
8.
Conditions Precedent
. In addition to the requirements set
forth in Section 10 hereof, the Borrower agrees that Bank’s
obligations under this Agreement shall not be effective and the
Bank shall have no obligation to forbear from exercising any rights
or remedies unless and until each of the following conditions
precedent have been satisfied on or before the date required, or
waived by the Bank (in Bank’s sole discretion), for whose
sole benefit such conditions exist:
(a)
This Agreement shall have been duly and
properly authorized, executed and delivered and shall be in full
force and effect;
(b)
No change in applicable law shall have
occurred as a consequence of which it shall have become and
continue to be unlawful for the Bank to perform any of its
agreements or obligations under this Agreement, any of the Loan
Document, or for the Borrower to perform any of their agreements or
obligations under this Agreement or any of the Loan Documents,
respectively; and
(c)
The Borrower shall have obtained any and
all necessary third party consents to the execution and delivery of
this Agreement, including,
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without limitation, the consent of a
majority of the board of directors of Borrower, and the
consummation of the transactions contemplated hereby.
9.
Representations and
Warranties . To induce the
Bank to enter into this Agreement, the Borrower hereby represents
and warrants to the Bank that:
(a)
Representations and Warranties True
and Correct; Survival .
Except as relate to the Event of Default, and except as otherwise
previously disclosed to the Bank, all representations and
warranties contained in this Agreement and in any and all of the
other Loan Documents are true and correct as of the date of this
Agreement, and all such representations and warranties shall
survive the execution of this Agreement.
(b)
No Violation
. The execution, delivery and performance
by the Borrower of this Agreement and all documents contemplated
hereunder are within its respective powers, have been duly
authorized, and are not in conflict with any applicable bylaws of
Borrower, or the terms of any other corporate document of Borrower
and all such documents constitute valid and binding obligations of
the Borrower, enforceable in accordance with their terms. In
addition, such execution, delivery and performance by the Borrower
will not, to the best of its knowledge, violate any law, rule or
order of any court or governmental agency or body to which the
Borrower is subject.
(c)
Unconditional Obligation; No
Defenses . The Loan
Documents represent unconditional, absolute, valid and enforceable
obligations against the Borrower. The Borrower does not have any
claims, counterclaims, set offs or defenses against the Bank or any
other person or entity which would or might affect (i) the
enforceability of any provision of the Loan Documents, or (ii) the
collectibility of any sums advanced by the Bank in connection with
the Loan. The Borrower understands and acknowledges that the Bank
is entering into this Agreement in reliance upon, and in partial
consideration for, this acknowledgment and representation, and
agrees that such reliance is reasonable and appropriate.
(d)
Cooperation of
Borrower . The Borrower
shall take all actions reasonably requested by the Bank in writing
necessary to prevent the Bank from suffering a loss with respect to
the Loan, or being deprived of the Collateral or of any rights or
remedies of the Bank with respect to the Loan Documents or this
Agreement in the event of a default by Borrower under this
Agreement or any other Loan Document (or the ability to exercise
any such rights or remedies).
(e)
Bank’s
Performance . The Bank has
fully complied with all obligations expressed under the Loan
Documents, or implied or
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required by law, whether or not so
expressed. The Borrower has not relied upon any warranties,
representations, terms, conditions, promises or agreements by Bank,
its officers, directors, agents, employees, attorneys, or other
representatives.
10.
Covenants/Modifications to the Loan
Documents . During the
Forbearance Period, the Borrower will take the following actions,
as indicated, and further acknowledge and agree to the
modifications to the Loan Documents set forth below:
(a)
The Borrower shall comply with all
requirements of all Loan Documents to the extent not inconsistent
with this Agreement and except to the extent to which the Event of
Default has already occurred;
(b)
The Borrower shall disclose to Bank in
writing any material agreements with any of their other creditors
that are reasonably expected to impair their respective ability to
perform under this Agreement;
(c)
The Borrower shall keep the Bank fully
informed at all times of any material adverse matters relating to
the conduct of the Borrower’s business, or the business,
including without limitation, all proceedings relating or involving
the Borrower or the Collateral;
(d)
The Borrower hereby authorizes the Bank
to execute and record at appropriate governmental offices, without
the signature of the Borrower, all financing statements necessary
under applicable law for the Bank to perfect or maintain perfection
of its security interest in any collateral, wherever located and
whenever acquired by the Borrower;
(e)
The Borrower shall not pay or declare any
dividends or make any form of distribution to its shareholders at
any time during the Forbearance Period;
(f)
The Borrower shall not repay any loans or
advances made to Borrower by any related parties until such
payments are expressly approved by Bank in writing; and
(g)
Until the expiration of the Forbearance
Period or the earlier occurrence of a Forbearance Default (as
defined in Section 11 hereof), the Loan shall continue to accrue
interest at the applicable non-default interest rate as set forth
in the Loan and Security Agreement. The Borrower agrees that, upon
the expiration of the Forbearance Period or the earlier occurrence
of a Forbearance Default under this Agreement, the Bank will have
the right to impose a default rate of interest equal to the highest
permissible rate under the laws of the State of Florida, and
interest shall thereafter accrue at the default rate on the entire
unpaid Loan Balance until paid, including after the entry of a
judgment.
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11.
Additional Events of
Default .
Upon the occurrence of any Forbearance Default after the date of
this Agreement, Bank, in its sole and absolute discretion, may
declare all obligations of the Borrower immediately due and payable
in full, all without notice or demand, all of which requirements
the Borrower hereby waives. For purposes of this Agreement a
“ Forbearance Default ” shall mean (a) any Event
of Default set forth in the Loan Documents (other than the
“Event of Default” defined in Recital “E”
of this Agreement), or (b) any of the following additional
events:
(a)
Failure to Perform.
Borrower’s failure to perform any
of the obligations set forth in this Agreement within five (5)
Business Days of written notice from Bank, provided however,
Borrower shall not be entitled to any notice or cure period for
Borrower’s failure to pay any monetary amounts due under the
Loan Documents or this Agreement;
(b)
Representations and
Warranties . If any
representation or warranty of the Borrower herein or in any other
Loan Document shall have been materially false, misleading or
incorrect when given;
(c)
Material
Adverse Changes
. If there is any
furth
