AMENDMENT NO.3 TO FORBEARANCE AGREEMENT
This Amendment No. 3 (the "Third Amendment") dated as of March 1,
2005 to Forbearance Agreement (the "Forbearance Agreement") dated as of November
27, 2002 by and between Gilman + Ciocia, Inc., a Delaware corporation, located
at 11 Raymond Avenue, Poughkeepsie, New York 12603 (the "Borrower"), North Ridge
Securities Corp. ("North Ridge"), Prime Capital Services, Inc. ("Prime"), the
following guarantors: Prime Financial Services, Inc., North Shore Capital
Management Corp. ("North Shore"), Asset & Financial Planning, Ltd., elO4O.com,
in G + C Schlager & Associates Inc., G + C Mortgage Line Inc. (the "Corporate
Guarantors"), Thomas Povinelli, James Ciocia and Michael Ryan (the "Individual
Guarantors" and collectively, with the Corporate Guarantors, the "Guarantors"
and individually, a "Guarantor") and Wachovia Bank, National Association,
formerly known as First Union National Bank, having an office at 190 River Road,
Summit, New Jersey 07901 (the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank, the Borrower, North Ridge, Prime and the
Guarantors entered into a certain Revolving Credit and Term Loan Agreement dated
as of December 27, 2001 ("Loan Agreement"), pursuant to which the Bank made
available certain credit facilities described therein (the Loan Agreement,
together with all of the security agreements, assignments and any other
documents given by the Borrower, Prime and/or Guarantors in favor of the Bank,
hereinafter the "Loan Documents");
WHEREAS, the Bank extended a credit facility to the Borrower for
working capital pursuant to a Revolving Credit Note dated as of December 27,
2001 in the original principal amount of $2,000,000. (the "Revolving Credit
Note");
WHEREAS, the Bank extended a term credit facility to the Borrower
pursuant to a Term Loan Note dated as of December 27, 2001 in the original
principal sum of $5,000,000. (the "Term Loan Note" and together with the
Revolving Credit Note, the "Loan");
WHEREAS, the Borrower was in default of certain financial covenants
described in that certain Notice of Default and Demand for Payment dated
September 19, 2002 from counsel to the Bank to Borrower, Prime and Guarantors;
WHEREAS, as a result of such default, the obligations under the Loan
were due and payable;
WHEREAS, Borrower and Guarantors were unable to repay the Loan which
was due and payable and requested the Bank forbear from enforcing its rights
under the Loan Documents;
WHEREAS, the Bank agreed to so forbear and as a result Borrower,
Prime and the Guarantors entered into the Forbearance Agreement;
WHEREAS, the Borrower informed the Bank that it would be unable to
repay the Loan on the Maturity Date as set forth in the Forbearance Agreement
and requested the Bank
further forbear and extend the time of payment for the Loan and as a result
Borrower, Prime, North Ridge and the Guarantors (with the exception of Thomas
Povinelli) entered into an Amendment to Forbearance Agreement, dated as of June
18, 2003 (the "First Amendment") which inter alia, extended the maturity date to
July 1, 2004 (the "First Extended Maturity Date");
WHEREAS, the Borrower informed the Bank that it would be unable to
repay the Loan on the First Extended Maturity Date as set forth in the First
Amendment and requested the Bank further forbear and extend the time of payment
for the Loan and as a result Borrower, Prime and the Guarantors (with the
exception of Thomas Povinelli) entered into an Amendment No. 2 to Forbearance
Agreement, dated as of March 4, 2004 (the "Second Amendment") which inter alia,
extended the maturity date to July 1, 2005 (the "Second Extended Maturity
Date");
WHEREAS, the Borrower informed the Bank it would be unable to repay
the Loan on the Second Extended Maturity Date and the Borrower has requested the
Bank to further forbear from enforcing its rights under the Loan Documents and
to further extend the time of payment for the Loan to and including March 10,
2008 (the "Extended Maturity Date") and the Bank has agreed to so forbear,
absent its demand, under the terms and conditions set forth herein;
WHEREAS, the Bank has informed the Borrower that it will not be
required to make the principal payments on the Loan due March 10, 2005 under the
Second Amendment, though interest will continue to accrue on the Loan and is be
paid on the next installment of principal due on April 10, 2005 under this Third
Amendment;
WHEREAS, the Borrower has advised the Bank that it will comply with
a repayment schedule to repay the Bank as set forth herein;
WHEREAS, the Borrower has informed the Bank that Thomas Povinelli
will not sign this Third Amendment.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Bank to continue the existing loan facility and extend payment of the
Loan, the Borrower and undersigned Guarantors hereby agree with the Bank as
follows:
Section 1. Confirmation of Amount Due. The Borrower, and the
undersigned Guarantors represent and warrant that as of the date hereof they are
legally, validly and enforceably indebted to the Bank under the Revolving Credit
Note in the principal amount of $1,109,893.75. and under the Term Loan Note in
the principal amount of $1,273,501.20., both of which are due and payable
without offset, claim, defense, counterclaim or right of recoupment.
Section 2. Article Amendments.
(a) Article II, B of the Forbearance Agreement, as amended by the First
Amendment and Second Amendment, shall be deleted in its entirety and replaced
with the following:
"B. Repayment of Loan. The Borrower shall make payments to the Bank:
(i) with respect to the Revolving Credit Note, absent
demand, accrued interest monthly as set forth below on
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the 10th day of each month beginning on April 10, 2005
and continuing on the 10th day of each month thereafter
until March 10, 2008 (the "Extended Maturity Date"),
plus principal payments in reduction of the Revolving
Credit Note, in the principal amount of $30,830.39. on
the 10th day of each month beginning April 10, 2005 and
on the 10th day of each month thereafter until the
Extended Maturity Date and the remaining principal
balance and any accrued interest on the Extended
Maturity Date; and
(ii) with respect to the Term Loan Note, absent demand,
accrued interest monthly as set forth below on the 10th
day of each month beginning on April 10, 2005 and
continuing on the 10th day of each month thereafter
until the Extended Maturity Date, plus principal
payments in reduction of the Term Loan Note in the
principal amount of $35,375.03 on the 10th day of each
month beginning April 10, 2005 and on the 10th day of
each month thereafter until the Extended Maturity Date
and the remaining principal balance and any accrued
interest on the Extended Maturity Date."
Section 3. Conditions Precedent to This Third Amendment. The
effectiveness of this Third Amendment shall be expressly subject to receipt by
the Bank of the following items:
(a) a fully executed Third Amendment;
(b) a resolution of Borrower authorizing this Third Amendment,
satisfactory in form and substance to the Bank;
(c) payment of an extension fee to the Bank in the amount of $25,000.
(d) payment of all unreimbursed fees and expenses of counsel to the Bank
incurred since the execution of the Forbearance Agreement through February 28,
2005 in the amount of $18,928.17, plus, without limitation the fees and expenses
incurred by the Bank since March 1, 2005 in connection with the negotiation and
preparation of this Third Amendment; and
(e) such other agreements and instruments as the Bank reasonably deems
necessary to carry out the terms and provisions of this Third Amendment.
Section 4. Representations True; No Default. The Borrower, Prime and
the undersigned Guarantors hereby represent and warrant that:
(a) Except as otherwise expressly disclosed to the Bank in writing by the
Borrower, any and all of the representations and warranties contained in the
Forbearance Agreement or any of the other Loan Documents are true and correct in
all material respects on and as of the date hereof as though made on and as of
such date.
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(b) Except as otherwise expressly disclosed to the Bank in writing by the
Borrower, no event has occurred and is continuing which constitutes a Default or
an Event of Default under the Forbearance Agreement or under any of the other
Loan Documents or which upon the giving of notice or the lapse of time or both
would constitute such Default or Event of Default.
(c) No material adverse change has occurred in the Borrower's financial
status since the execution of the Forbearance Agreement;
(d) There is no pending or threatened action or proceeding affecting the
Borrower before any court, governmental agency or arbiter, which may materially
affect the financial condition or operations or prospects of the Borrower or
which purports to affect the legality, validity or enforceability of this Third
Amendment, or the Forbearance Agreement, as amended by the First Amendment, the
Second Amendment and this Third Amendment, or the Loan, except as described in
Schedule 1 hereto.
(e) No UCC liens have been filed against the Borrower or Prime since the
execution of the Second Amendment except as described in Schedule 2 hereto.
(f) No judgments have been entered against either the Borrower or Prime
except as described in Schedule 3 hereto.
Section 5. Ratification. Except as expressly amended hereby, the
Forbearance Agreement, the First Amendment, the Second Amendment and the other
Loan Documents shall remain in full force and effect. The Forbearance Agreement,
First Amendment and Second Amendment, as hereby amended, and all rights and
powers created thereby or thereunder and under the other Loan Documents are in
all respects ratified and confirmed and remain in full force and effect.
Borrower, Prime and the undersigned Guarantors hereby acknowledge and affirm:
(i) the continuing validity of the Forbearance Agreement, First Amendment and
Second Amendment; (ii) all of the terms, conditions and obligations contained in
the Forbearance Agreement, First Amendment and Second Amendment are and shall
remain in full force and effect, except as hereby amended; (iii) that the
Forbearance Agreement, as amended, is a legal, valid and binding obligation of
Borrower, Prime and Guarantors, and the obligations and liabilities thereunder
shall not be diminished by the execution of this Third Amendment or by any of
the terms, provisions or conditions of this Third Amendment; (iv) all
appropriate corporate authorizations have been obtained for this execution of
this Third Amendment; and (v) that this Third Amendment is executed by Borrower
as an inducement to the Bank to enter into this Third Amendment, and with the
knowledge that the Bank shall rely on the statements made herein when executing
this Third Amendment. The failure of Thomas Povinelli to execute this Third
Amendment shall not, and is not intended to, in any way whatsoever release or
discharge Thomas Povinelli from his obligations and liabilities to the Bank
pursuant to that certain Joint and Several Guaranty of Payment dated as of
December 27, 2001.
Section 6. Definitions and References. Capitalized terms not
otherwise defined in this Third Amendment and used herein and which are defined
in the Loan Agreement or in the other Loan Documents shall have the meanings
herein as therein ascribed to them. The term "Agreement" as used in the other
Loan Documents or any other instrument, document or writing furnished to the
Bank by Borrower shall mean the Loan Agreement as hereby amended.
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Section 7. Expenses; Additional Information. The Borrower shall pay
to the Bank all reasonable and actual expenses incurred by the Bank since the
execution of the Forbearance Agreement and in connection with the preparation,
negotiation and execution of this Third Amendment and authorizes the Bank to
deduct such expenses from its account at the Bank.
Section 8. Notices. All Notices and other communications provided
for hereunder shall be delivered in accordance with the terms of the Forbearance
Agreement.
Section 9. Successors and Assigns. This Third Amendment shall be
binding upon and inure to the benefit of the Bank and the Borrowers, Prime or
Guarantors and their respective successors and assigns, except that the
Borrowers, Prime and Guarantors may not assign or transfer any of its rights
under the Loan Documents, Forbearance Agreement, or this Third Amendment,
without the prior written consent of the Bank.
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Section 19. Miscellaneous. This Third Amendment (a) shall be binding
upon and inure to the benefit of Borrower and the Bank and their respective
successors, assigns, receivers and trustees (provided, however, that Borrower
shall not assign its rights and obligations hereunder without the prior written
consent of the Bank); (b) can be modified or amended only by a writing signed by
each party; (c) shall be governed by and construed in accordance with the laws
of the State of New York and the United States of America; (d) may be executed
in several counterparts, and by the parties hereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same agreement; and (e) together with the Forbearance Agreement, First
Amendment, Second Amendment and Loan Documents, embodies the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes all prior agreements, consents and understandings relating to
such subject matter. The headings herein shall be accorded no significance in
interpreting this Third Amendment. Borrower, Prime and Guarantors hereby
acknowledge and agree that the Bank has not made any representations to induce
them to enter into this Third Amendment except as expressly set forth herein and
even if any such representations other than those expressly set forth herein
were made they were not relied on in entering into this Third Amendment.
IN WITNESS WHEREOF, the undersigned, if a corporation, has caused
this Agreement to be executed by its respective officer thereunto duly
authorized, as of the date first above written.
Gilman + Ciocia, Inc., as Borrower
By: /s/ Michael Ryan
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Michael Ryan
President
Wachovia Bank, National Association,
f/k/a First Union National Bank, as Bank
By /s/ Joseph P. Hanley
------------------------------------
Joseph P. Hanley
Vice President
AGREED AND ACCEPTED:
/s/ Michael Ryan
- ------------------------------------
Michael Ryan, Individual Guarantor
/s/ James Ciocia
- ------------------------------------
James Ciocia, Individual Guarantor
Prime Capital Services, Inc.
By: /s/ Michael Ryan
------------------------------------
Michael Ryan
Prime Financial Services, Inc.
By: /s/ Michael Ryan
------------------------------------
Michael Ryan
Asset & Financial Planning, Ltd.
By: /s/ Michael Ryan
------------------------------------
Michael Ryan
el040.com, Inc.
By: /s/ Michael Ryan
------------------------------------
Michael Ryan
G + C Schlager & Associates Inc.,
By: /s/ Michael Ryan
------------------------------------
Michael Ryan
G + C Mortgage Line Inc.
By: /s/ Michael Ryan
------------------------------------
Michael Ryan