Forebearance Agreement - letter format

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This Forbearance Agreement (Letter Format) prevents a creditor from receiving immediate payment on indebtedness. This agreement sets out all relevant terms and must be signed by both creditor and debtor.

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This Forbearance Agreement in Letter Format will prevent a creditor from receiving immediate payment on indebtedness. This agreement sets out the name of both creditor and debtor, amount of debt and calculated interest and steps the debtor is taking to repay the debt. It also sets out a new repayment schedule, the balance due after all payments are made and if a subordination agreement should be entered into by any shareholders of debtor. It is imperative that this agreement be clearly understood and set out in writing. A written Forbearance Agreement - Letter Format will prove invaluable in the event there are disagreements or misunderstandings if debtor defaults on any payments under this agreement.

This Forbearance Agreement - Letter Format contains the following provisions:
  • Creditor and Debtor Information: Sets out the names of the creditor and debtor and the amount of indebtedness (including any interest);
  • Repayment: Sets out any steps which are being taken by debtor to facilitate repayment of the debt and additional capital to be injected into debtor's company;
  • Deferred Repayment: Amount of deferred repayment including the rate of interest, total amount of monthly payments and date of first payment;
  • Subordination: Sets forth if a subordination agreement should be signed by any shareholders of the debtor;
  • Additional Conditions: Sets out any additional conditions to this agreement which should be entered into;
  • Signatures: This letter must be signed by both the creditor and debtor.

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  2. Forbearance Agreement - Letter Format
State Law Compliance: This form complies with the laws of all states
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Forbearance Agreement
(Letter Format)

 

 
[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 , on the first day of each , from [Date interest begins to accrue], shall be repaid in [Total number of periodic payment]  payments of blended principal and interest of $[Amount of each periodic 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 arms 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
(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]
 
Per:
 
 
Name:   
Title:   
 
Number of Pages5
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#28667
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Forbearance Agreement
(Letter Format)

 

 
[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 , on the first day of each , from [Date interest begins to accrue], shall be repaid in [Total number of periodic payment]  payments of blended principal and interest of $[Amount of each periodic 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 arms 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
(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]
 
Per:
 
 
Name:   
Title:   
 
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