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Forbearance Agreement

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FORBEARANCE AGREEMENT


This Forbearance Agreement is made as of September 1997, by and between Seragen, LLC, a Massachusetts limited liability company ("BU"), Leon C. Hirsch, an individual residing in Norwalk, Connecticut ("Hirsch"), Turi Josefsen, an individual residing in Norwalk, Connecticut ("Josefsen"), and Gerald S.J. Cassidy and Loretta P. Cassidy, individuals residing in Great Falls, Virginia (together, the "Cassidys"; collectively with BU, Hirsch and Josefsen, the "Holders"), Seragen, Inc., a Delaware corporation ("Seragen"), and Seragen Technology, Inc., a Delaware corporation ("STI").


WHEREAS, BU is the owner, beneficially and of record, of 11,800 shares (the "BU STI Shares") of STI's Class B Common Stock, par value $.01 per share (the "Class B Common");


WHEREAS, Hirsch is the owner, beneficially and of record, of 7,000 shares (the "Hirsch STI Shares") of the Class B Common;


WHEREAS, Josefsen is the owner, beneficially and of record, of 3,000 shares (the "Josefsen STI Shares") of the Class B Common;


WHEREAS, the Cassidys are the joint owners, beneficially and of record, of 2,000 shares (the "Cassidy STI Shares"; collectively with the BU STI Shares, the Hirsch STI Shares and the Josefsen STI Shares, the "Outstanding STI Shares") of the Class B Common;


WHEREAS, STI has executed a Collateral Assignment of Patents, dated July 1, 1996 (the "Collateral Assignment"), in favor of the Holders to secure certain dividend obligations of STI with respect to the Outstanding STI Shares and has delivered the Collateral Assignment to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., as escrow agent (the "Escrow Agent"), pursuant to an Escrow Agreement, dated July 1, 1996 (the "Escrow Agreement"), among STI, the Holders and the Escrow Agent;


WHEREAS, the Escrow Agreement provides, in Section 3 thereof, that the Collateral Assignment is to be delivered by the Escrow Agent to the agent for the Holders upon the delivery by the agent for the Holders to the Escrow Agent, with a copy to STI, of a written notice (a "Default Notice") stating that a dividend payment on the Outstanding STI Shares is in arrears and is due and payable and the expiration of 60 days following the Escrow Agent's receipt of such notice without payment of the arrearage;


WHEREAS, STI has failed to pay Class B Common dividends due on January 1, 1997, April 1, 1997, and July 1, 1997, and has informed the Holders that it does not anticipate paying Class B Common dividends due on October 1, 1997, and January 1, 1998;


WHEREAS, the Holders, by virtue of STI's failure to pay dividends in respect of the Outstanding STI Shares as aforesaid, currently have the right under Section 3 of the Escrow Agreement to cause their agent to deliver a Default Notice;


WHEREAS, the Holders believe it to be in their interest that Seragen effect, at the earliest possible time, the issuance of additional shares of capital stock, authorized or to be authorized, in one or more public or private offerings (each such offering, or a related series of such offerings, a "New Offering");


WHEREAS, Seragen has been informed by its financial advisers that successful completion of a New Offering requires that the Holders agree to forbear until March 1, 1998, from causing their agent to deliver a Default Notice or otherwise exercising their rights under Section 3 of the Escrow Agreement;


WHEREAS, Seragen is therefore unable and unwilling to incur the substantial costs associated with preparation for a New Offering in the absence of an agreement by the Holders to so forbear from exercising their rights under Section 3 of the Escrow Agreement;


WHEREAS, in order to induce Seragen to proceed with preparation for a New Offering, the Holders are willing to agree to agree to forbear from exercising their rights under Section 3 of the Escrow Agreement upon the terms and conditions set forth herein; and


WHEREAS, in consideration of the agreement of the Holders to so forbear from exercising their rights under Section 3 of the Escrow Agreement, Seragen is willing to agree, upon the terms and conditions set forth herein, to proceed with preparations for a New Offering;


NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:


1. Forbearance


The Holders hereby agree to forbear until March 1, 1998 from causing or permitting their agent to deliver a Default Notice or otherwise exercising such rights as they may have pursuant to Section 3 of the Escrow Agreement to require delivery of the Collateral Assignment to them or their agent.


2. Seragen to Prepare for New Offering.


Seragen shall, from and after the date hereof, proceed in good faith to prepare for and effect a New Offering that will yield net cash proceeds to Seragen of at least $15,000,000. Notwithstanding the foregoing, Seragen may cease further efforts to prepare for and effect a New Offering at such time as Seragen's management determines in good faith that it will not be possible for Seragen to effect the contemplated New Offering on commercially reasonable terms.


3. Representations and Warranties of Seragen and STI.


Seragen and STI hereby represent and warrant to the Holders as follows:


(a) Organization and Standing. Each of Seragen and STI is a corporation, duly organized, validly existing and in good standing, under the laws of the State of Delaware and has the corporate power and authority to enter into, deliver and perform its obligations and undertakings under this Agreement.


(b) Validity. The execution, delivery and performance by each of Seragen and STI of this Agreement have been duly authorized and approved by all necessary corporate action. This Agreement has been duly executed and delivered and constitutes the valid and binding obligation of Seragen and STI, enforceable against each of them in accordance with its terms, subject to laws of general application affecting creditors' rights and the exercise of judicial discretion in accordance with general equitable principles.


(c) No Conflicts. The execution, delivery and performance of this Agreement by Seragen and STI will not (i) conflict with, or result in a breach of any of the terms of, or constitute a default under, the certificate of incorp
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