[Date]
[Name of Debtor]
[Address of Debtor]
Dear Sir or Madam:
Re: Indebtedness to [Name of Creditor]
[Name of Debtor] (the “Debtor”) is indebted to [Name of Creditor] (the “Creditor”) in the
approximate aggregate amount of $[Aggregate amount of indebtedness], inclusive of principal
and accrued interest to [Date of Calculation of Debt] (collectively the “Indebtedness”).
The Creditor understands that [Explain what positive steps are being taken by the Debtor to
facilitate repayment].
The Creditor has agreed to forbear from requiring immediate payment of the Indebtedness and
enforcing its security over certain assets of the Debtor and has further agreed to extend to the
Debtor the following repayment terms, provided that the following terms and conditions are
strictly complied with:
1. The Debtor shall provide the Creditor with evidence satisfactory to the Creditor that the
Debtor has sufficient working capital to enable it to operate it business, including but not
limited to evidence that the Debtor shall have available to it additional capital from its
shareholders in an amount not less than $[Amount of additional capital to be injected into
Debtor].
2. The Debtor shall duly and punctually repay the Indebtedness to the Creditor, together
with interest as provided below according to the following repayment schedule:
(a) The sum of $[Amount of lump sum payment, if any] shall be paid on or before
[Date of payment];
(b) The sum of $[Amount of deferred portion of repayment] together with interest
thereon at the rate of [Rate of interest charged by Creditor]% per annum
calculated and payable monthly, on the first day of each month, from [Date
interest begins to accrue], shall be repaid in [Total number of periodic payment]
monthly payments of blended principal and interest of $[Amount of each periodic
-2-
payment] each commencing on [Date of First Payment] through and including
[Date of Final Payment];
(c) The balance of $[Amount of balance owing at end of repayment term] shall be
paid on [Balance due date].
3. The following collateral security evidenced by documents, registrations, filings and
opinions of counsel satisfactory to the Creditor is to be provided to the Creditor on or
before [Date on which security is to be provided]:
(a) a first ranking general security agreement over the assets and undertaking of the
Debtor; and
(b) a subordination agreement executed by [Name of shareholder(s) of Debtor who
have injected capital into Debtor] and by the Debtor whereby [Name of
shareholder(s) of Debtor who have injected capital into Debtor] and the Debtor
subordinate in favour of the Creditor any indebtedness owing by the Debtor to
them.
(c) The foregoing security is in addition to and not in substitution for any security
now or hereafter held by the Creditor.
4. Until the Debtor has repaid the full amount of the Indebtedness and all interest thereon,
the Debtor agrees to do the following:
(a) the Debtor will deliver to the Creditor, within sixty (60) days of each fiscal year
end, a budget plan (the “Budget Plan”) for the upcoming year, including
particulars on a month to month basis, which shall be in form and substance
satisfactory to the Creditor;
(b) the Debtor will deliver to the Creditor monthly internally prepared financial
statements within fifteen (15) days of each month end and annual financial
statements, reviewed by an independent chartered accountant, within ninety (90)
days of each fiscal year end of the Debtor;
(c) the Debtor will deliver to the Creditor a monthly cash flow forecast on or before
the 5th day of each month;
(d) and the Debtor shall not, without the prior written consent of the Creditor, do any
of the following:
(i) the Debtor shall not allow or permit any distribution to any person who is
not at arm’s length with the Debtor in excess of the Budget Plan, whether
such distribution is in the form of salary, repayment of shareholder loans,
interest, dividends or any other form of payment; and
-3-
(ii) the Debtor shall not purchase capital assets exceeding, in the aggregate
$[Maximum amount of capital expenditures in each year]in any fiscal
year.
5. In the event that the Debtor fails to repay the Indebtedness according to the above
repayment schedule or defaults in any other obligation to the Creditor, howsoever arising,
the whole of the principal balance of the Indebtedness remaining unpaid together with
interest may, at the option of the Creditor, become immediately due and payable, without
prejudice to any other rights or remedies the Creditor may have.
6. All expenses of the Creditor, including legal fees and expenses, in respect of the
negotiation and preparation of this letter and the security documentation and the
enforcement of them and of security review will be for the account of the Debtor and paid
forthwith upon request.
7. Nothing contained in this letter shall be construed or interpreted as releasing the Debtor
from any obligation to the Creditor, including the obligation to repay the Indebtedness,
until the Creditor has been repaid the full amount of the Indebtedness. In the event that
the Debtor defaults in payment of any Indebtedness to the Creditor or under any
obligation to the Creditor, then the Creditor shall have the right to claim the full amount
of the Indebtedness against the Debtor and/or the Debtor.
8. [Additional conditions to forbearance]
Please signify your agreement with the above terms and conditions by signing and returning to
us the enclosed copy of this letter by [Date of Expiry of offer in letter], after which date this offer
will expire.
Yours truly,
[NAME OF CREDITOR
Per:
Name:
Title:
Agreed to and accepted this _____ day of ____________________, 20_____.
[NAME OF DEBTOR]
![[Date]
[Name of Debtor]
[Address of Debtor]
Dear Sir or Madam:
Re: Indebtedness to [Name of Creditor]
[Name of Debtor] (the](https://screenshots.scribd.com/Scribd/252_100_85/326/1041821/1.jpeg)
![- 2 -
payment] each commencing on [Date of First Payment] through and including
[Date of Final Payment];
(c)
The balance of](https://screenshots.scribd.com/Scribd/252_100_85/326/1041821/2.jpeg)
