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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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<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.
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<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.
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<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 co
