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
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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.
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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.
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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
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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.
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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,
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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 required to deliver
to
its senior lender
pursuant to its agreements w
