|
Exhibit 10.6
EXECUTION COPY
FORBEARANCE AND DEBT PAYMENT AGREEMENT
This FORBEARANCE AND DEBT PAYMENT AGREEMENT (this "Agreement")
is
entered into as of the ____ day of December, 2006, by and between
Eastech
Electronics (Taiwan) Inc. ("Eastech") and SOYO Group, Inc.
("Soyo)").
RECITALS
--------
A. Soyo is indebted to Eastech for goods purchased pursuant to
purchase
orders and related documents (as amended and modified from time
to
time prior to the date hereof, the "Documents"). As of the date
of
this Agreement, the indebtedness is in the amount of US
$3,785,280.28
(the "Indebtedness"). The Indebtedness to Eastech is unsecured and
is
not evidenced by an instrument.
B. The Indebtedness was due in full prior to the date hereof and
was not
paid when due.
C. Soyo and Eastech are parties to that certain Confidentiality
and
Non-Disclosure Agreement dated as of August 28, 2006 (the
"NDA"),
which is in full force and effect.
D. Soyo has requested that Eastech agree to accept payments on
account of
the Indebtedness on the terms set forth in this Agreement and
the
Promissory Note, which payments Soyo would make in the ordinary
course
of its business. Eastech is willing to enter into such an
agreement,
on the terms and conditions set forth in this Agreement.
E. Soyo desires to obtain Eastech's agreement to forbear from
the
enforcement of remedies by reason of the Existing Defaults to
enable
Soyo to operate its business in the ordinary course until the
Maturity
Date, and Eastech is willing to agree to forbear, on the terms
and
conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and
adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Definitions
Unless otherwise defined herein, capitalized terms used in
this Agreement shall have the meanings given to them in the
Promissory
Note (as defined below).
a. "Additional Expenses" shall have the meaning given to such
term in section 11.d below.
b. "Corion" shall mean Corion Industrial Corp., USA, or any
parent, subsidiary or affiliate thereof.
c. "Documents" shall have the meaning in Recital A above.
1
<PAGE>
d. "Existing Defaults" shall mean Soyo's failure to pay the
Indebtedness when due.
e. "Event of Default" shall have the meaning in section 9
below.
f. "Forbearance Termination Event" shall mean (i) the
occurrence of any Event of Default under this Agreement,
(ii) Soyo shall make any payment to Corion on account of
Soyo's indebtedness to Corion outstanding as of the date
hereof in excess of Fifty Thousand Dollars ($50,000) per
week on account of the principal amount of such debt or make
any payment to Corion on account of interest on such debt,
prior to the satisfaction of the Indebtedness to Eastech,
(iii) Nancy Chu or Ming Chok, or any person or entity owned
or controlled by Nancy Chu or Ming Chok, and which person or
entity is an equity holder of Soyo, shall, collectively, in
one or a series of related transactions, sell or transfer
title to, or beneficial ownership or control of, voting
stock of Soyo which represents, in the aggregate, twenty
percent (20%) or more of the combined voting power of all
voting stock of Soyo, to any person or any two or more
persons acting in concert, (iv) the sale of all or
substantially all of the assets constituting the operating
business of Soyo, or (v) Soyo commences or proposes to
commence any bankruptcy, reorganization, arrangement or
adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar proceeding under any
federal, state or other law for the relief of debtors (an
"Insolvency Proceeding"), Soyo fails to obtain the
dismissal, within sixty (60) days after the commencement
thereof, of any Insolvency Proceeding instituted by one or
more third parties, fails actively to oppose any such
Insolvency Proceeding, or, in any such Insolvency
Proceeding, defaults or files an answer admitting the
material allegations upon which such Insolvency Proceeding
was based or alleges its willingness to have an order for
relief entered or any receiver, trustee or custodian is
appointed to take possession of all or any substantial
portion of the assets of Soyo.
g. "Indemnified Liabilities" shall have the meaning given to
such term in section 11.e below.
h. "Indemnitees" shall have the meaning given to such term in
section 11.e below.
i. "Insolvency Proceeding" shall have the meaning given to such
term in section 1.f above.
j. "Maturity Date" means noon (Pacific Time) October 1, 2008.
k. "NDA" shall have the meaning given to such term in Recital C
above.
l. "Promissory Note" shall have the meaning given to such term
in section 3.a(2) below.
2
<PAGE>
m. "Releasees" shall have the meaning given to such term in
section 9 hereof.
n. "Releasors" shall have the meaning given to such term in
section 9 hereof.
o. "Representatives" shall have the meaning given to such term
in section 7.d hereof.
p. "Soyo's Claims" has the meaning given to such term in
section 9 hereof.
q. "Soyo's Obligations" means all obligations of Soyo under the
Documents or related to the sale of goods, or this Agreement
or the Promissory Note, other than the obligation to pay the
Indebtedness.
r. "Termination Date" means the earlier to occur of (i) the
occurrence of a Forbearance Termination Event, and (ii) the
Maturity Date.
2. Agreement to Forbear
a. Eastech agrees to forbear from exercising any right or
remedy available to it with respect to the collection of the
Indebtedness solely by reason of the existence and
continuation of the Existing Defaults until the Termination
Date. Effective as of the Termination Date, Eastech's
agreement to forbear from exercising any rights or remedies
by reason of the Existing Defaults shall automatically
expire and be of no further force or effect.
b. Nothing in this section 2 shall be construed to be a waiver
of the Existing Defaults. The Existing Defaults shall
continue in existence subject only to Eastech's agreement,
as set forth in this Agreement, not to enforce rights or
remedies based upon such Existing Defaults prior to the
Termination Date.
c. Eastech expressly reserves all of its rights and remedies
with respect to collection of the Indebtedness and
applicable law, except as expressly limited herein. Nothing
in this Agreement shall prejudice or limit Eastech's rights
and remedies in the event any default or Event of Default
occurs under the Promissory Note or this Agreement.
d. From and after the Termination Date, Eastech shall be
entitled to enforce the Indebtedness, and all rights and
remedies with respect to such Indebtedness, by reason of the
occurrence of any defaults or Events of Default, including
the Existing Defaults.
3. Conditions to Effectiveness of Agreement
a. The effectiveness of this Agreement shall be subject to the
satisfaction of the following conditions, all in form and
3
<PAGE>
substance reasonably satisfactory to Eastech, or the waiver
of such conditions by Eastech in its sole discretion.
(1) This Agreement shall have been executed and
delivered by Soyo and Eastech.
(2) Soyo shall have executed and delivered to Eastech
a promissory note in the form of Exhibit A
attached hereto, with all blanks filled (the
"Promissory Note").
(3) After giving effect to the transactions
contemplated by this Agreement, no Event of
Default shall exist with respect to the payment of
the Indebtedness or under the Documents, and no
event shall have occurred which, with the giving
of notice or lapse of time, or both, would become
an Event of Default, except for the Existing
Defaults.
(4) Soyo shall have delivered to Eastech a complete
copy of the debt payment agreement between Soyo
and Corion, pursuant to which Corion has agreed to
accept installment payments on account of the
indebtedness Soyo owes to Corion without the
payment of interest on a current basis, and the
terms of such agreement shall be reasonably
satisfactory to Eastech.
(5) Soyo shall have obtained a termination statement
with respect to all Uniform Commercial Code
financing statements or other notices of lien in
favor of Corion filed in the office of the
California Secretary of State, and shall have
filed all such statements and notices in the
office of the California Secretary of State to
terminate such filings.
(6) Soyo shall have delivered to Eastech such other
documents, instruments, and approvals and taken
such other actions consistent with this Agreement
as Eastech may reasonably request in order to
fulfill the obligations of Soyo under this
Agreement.
4. Conditions to Effectiveness of Agreement
a. The effectiveness of this Agreement shall be subject to the
satisfaction of the following condition, in form and
substance reasonably satisfactory to Soyo, or the waiver of
such condition by Soyo in its sole discretion.
(1) Eastech shall provide evidence that Eastech
maintains not less than US $20 million of products
liability insurance and shall name Soyo as a
Certificate Holder.
(2) Eastech shall have granted to Soyo a credit in the
amount of $330,000, which credit is reflected in
the Indebtedness.
4
<PAGE>
5. Soyo's Representations and Warranties
As a material inducement to Eastech to enter into the
transactions contemplated hereby, Soyo represents and warrants
to
Eastech that:
a. Due Authority This Agreement has been duly authorized,
executed and delivered by Soyo, is a legally valid and
binding agreement and is enforceable against Soyo in
accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors rights
generally.
b. Acknowledgment of Indebtedness The amount of its
indebtedness to Eastech under the Documents as of the date
hereof is the Indebtedness.
c. No Defenses Soyo does not have or assert any claims,
counterclaims, defenses or rights of setoff whatsoever with
respect to the Indebtedness or to any of Soyo's Obligations,
and no event has occurred and no condition exists which
would constitute an Event of Default hereunder with the
giving of notice or lapse of time or both, except the
Existing Defaults.
d. Complete Representations No representation or warranty made
by Soyo herein or in any other document delivered to Eastech
in furtherance of this Agreement on or before the date
hereof contains any materially untrue statement or omits any
material fact necessary to make such representation or
warranty not misleading.
e. Discussions with Counsel Soyo has thoroughly discussed with
its attorneys, to the full extent that it deems it necessary
to do so, all aspects of this Agreement, including the
Release granted pursuant to section 8 hereof, has been fully
advised by its attorneys as to its rights, understands that
it may be waiving significant legal rights or Soyo's Claims,
and enters into the Release with a full and complete
understanding of its terms.
f. No Transfer of Soyo's Claims Soyo has not transferred or
assigned any interest in any Soyo's Claims which it has or
may hereafter have had against the Releasees, or any of
them.
6. Eastech's Representations and Warranties
As a material inducement to Soyo to enter into the
transactions contemplated hereby, Eastech represents and warrants
to
Soyo that:
a. Due Authority This Agreement has been duly authorized,
executed and delivered by Eastech, is a legally valid and
binding agreement and is enforceable against Eastech in
accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy,
5
<PAGE>
insolvency and other similar laws affecting creditors rights
generally.
7. Covenants by Soyo
Soyo covenants and agrees that, so long as any of the
Indebtedness remains unpaid:
a. Confirmation of Obligations Soyo shall pay the Indebtedness
as provided herein and in the Promissory Note, and perform
each and all of Soyo's Obligations pursuant to the Documents
and this Agreement.
b. Payment of Indebtedness On or before the Maturity Date, Soyo
shall pay to Eastech the unpaid balance of the Indebtedness
in accordance with the terms of this Agreement and the
Promissory Note.
c. Financial Reporting Soyo shall furnish, or cause to be
furnished, the following financial information to Eastech:
(1) After the end of each calendar month and
concurrently with delivery of such information to
the senior lender to Soyo, a copy of all financial
information which Soyo is r
|
