Exhibit 10.1
FIFTH THIRD BANK
Canadian Branch
20 Bay Street, 12th Floor Toronto, Ontario
M5J 2N8
January 13, 2011

     
Catalytic Solutions, Inc.
  Engine Control Systems Limited
4587 Telephone Road, Suite 206
  83 Commerce Valley Drive East
Ventura, California
  Thornhill, Ontario
93003-5665 USA
  L3T 7T3
 
   
Attention: Nikhil A. Mehta
  Attention: Donald A. Andrews
Chief Financial Officer
  President

Re: Forbearance
Dear Sirs:
We refer to the Second Amended and Restated Loan Agreement dated as of June 27,
2008 between Engine Control Systems Limited, Catalytic Solutions, Inc. and
Engine Control Systems Europe AB as Borrowers, together with ECS Holdings, Inc.,
Engine Control Systems Ltd., Unikat Acquisition Co. AB, Catalytic Solutions
Holdings, Inc., successor by merger with CDTI Merger Sub, Inc. (“CSI”) Catalytic
Solutions Holdings International, Applied Utility Systems, Inc. (now CSI Aliso,
Inc.) and Catalytic Solutions South Africa (Proprietary) Limited as Supporting
Subsidiaries and Fifth Third Bank as the Bank (as amended to the date hereof,
the “Loan Agreement”). We also refer to the Forbearance and Reaffirmation
Agreement date as of September 17, 2009 between the parties to the Loan
Agreement other than Catalytic Solutions Holdings International, Catalytic
Solutions South Africa (Proprietary) Limited and Unikat Acquisition Co. AB, all
of which have ceased to exist or be maintained as separate corporate entities
(the “Forbearance Agreement”). Capitalized terms used but not defined in this
letter have the meanings assigned in the Loan Agreement or the Forbearance
Agreement (as amended in both cases by the various Forbearance Period extension
agreements described below), as appropriate, unless otherwise provided.
We also refer to the agreements between the Loan Parties and the Bank dated
December 1, 2009, January 31, 2010, April 30, 2010 and August 31, 2010 pursuant
to which the Bank consented to the extension of the Forbearance Period to,
ultimately, January 13, 2011, subject to certain terms and conditions.
Under the fourth Forbearance Period extension of August 31, 2010, the
Forbearance Period was extended to January 13, 2011. Te effect of the ending of
the Forbearance Period is that all amounts outstanding under the Loan Agreement
become due and payable on January 13, 2011.
The Loan Parties have requested that the Bank extend the Forbearance Period
notwithstanding the various outstanding Forbearance Defaults and Events of
Default that continue to exist as of the date of this letter (the “Existing
Defaults”) by a period of up to 60 days to March 14, 2011 in order to give the
Loan Parties to repay the Obligations in full.

 

 

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In order to induce the Bank to agree to the foregoing requests and for other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:

1)  
CSI shall continue to actively pursue its recapitalization plans and keep the
Bank informed of its progress.

2)  
The Forbearance Agreement is hereby amended to change the date referenced in
Section 2.1(a) from “January 13, 2011” to “February 14, 2011”. Demand under the
Loan Agreement or breach or default under the Loan Agreement by any Loan Party
shall be a “Forbearance Default” under the Forbearance Agreement.
  3)  
The Bank will extend the Forbearance Period to March 14, 2011 if:

  a)  
no Default, Forbearance Default or Event of Default occurs after the date of
this letter,
    b)  
a commitment letter in form and substance acceptable to the Bank, providing for
a financing commitment in amounts sufficient to pay all Obligations in full, is
delivered to the Bank; and
    c)  
the Loan Parties pay a further fee of USD50,000 or the Canadian equivalent
thereof.

4)  
The Borrower shall pay the Bank a forbearance and amendment fee of USD50,000 or
the Canadian equivalent thereof immediately upon acceptance of this letter
agreement and shall pay all outstanding fees and expenses of the Bank’s counsel
at that time.

5)  
The Loan Parties shall cooperate with the Bank in refreshing the Bank’s security
over the property, assets and undertaking of the Loan Parties.

6)  
All amounts outstanding under the Loan Agreement are due and payable on
February 14, 2011 unless the further Forbearance Period extension contemplated
in paragraph 2 above is invoked, in which case all amounts outstanding under the
Loan Agreement shall be due and payable on March 14, 2011.

The effectiveness of this Forbearance Agreement is subject to and conditional
upon receipt by the Bank of an executed copy of this fifth Forbearance Period
extension agreement and the forbearance amendment fee of USD50,000 or the
Canadian equivalent thereof set out in paragraph 4.
Except as expressly stated in this letter agreement, the Forbearance Agreement,
the Loan Agreement and the other Facility Documents remain in full force and
effect, unamended except as necessary to give effect to this letter agreement.
Each Loan Party repeats and confirms the ratifications, reaffirmations,
representations and covenants given in Sections 1.3, 4, and 5 of the Forbearance
Agreement with effect as of January 13, 2011 and acknowledge that the Existing
Defaults remain in effect and are uncured and unwaived. In addition, CSI, as the
successor by merger with CDTI Merger Sub, Inc., acknowledges, confirms and
agrees that it is liable for, and it promises to pay, perform, and observe, all
of the terms, covenants, conditions, obligations, liabilities, indebtedness, and
other Obligations of CSI to the Bank. All costs and expenses of the Bank under
or in respect of this letter agreement are for the account of CSI and ECS.

 

 

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Each Loan Party, on such Loan Party’s behalf and, as applicable, on behalf of
such Loan Party’s officers, directors, members, managers, shareholders,
administrators, heirs, beneficiaries, affiliates, subsidiaries, successors and
assigns, hereby represents and warrants that such Loan Party has no claims,
counterclaims, setoffs, actions or causes of action, damages or liabilities of
any kind or nature whatsoever, whether in law or in equity, in contract or in
tort, whether now accrued or hereafter maturing (collectively, “Claims”) against
the Bank, its direct or indirect parent corporation or any direct or indirect
affiliates of such parent corporation, or any of the foregoing’s respective
directors, officers, employees, attorneys and legal representatives, or the
heirs, administrators, successors or assigns of any of them (collectively, “Bank
Parties”) that directly or indirectly arise out of, are based upon or are in any
manner connected with any Prior Related Event. Each Loan Party, on such Loan
Party’s behalf and, as applicable, on behalf of such Loan Party’s officers,
directors, members, managers, shareholders, administrators, affiliates,
subsidiaries, successors and assigns, voluntarily releases and forever
discharges and indemnifies and holds harmless all Bank Parties from any and all
Claims and other third-party claims that may be asserted against the Bank
Parties, whether known or unknown, that directly or indirectly arise out of, are
based upon or are in any manner connected with any Prior Related Event. “Prior
Related Event” means any transaction, event, circumstance, action, failure to
act, occurrence of any type or sort, whether known or unknown, which occurred,
existed, was taken, was permitted or begun in accordance with, pursuant to or by
virtue of (a) any of the terms of this letter agreement or any other Facility
Document, (b) any actions, transactions, matters or circumstances related hereto
or thereto, (c) the conduct of the relationship between any Bank Party and any
Loan Party, or (d) any other actions or inactions by any Bank Party, all on or
prior to the date such party executes this letter agreement.
Each Loan Party hereby waives (a) any and all rights under any theory of
marshaling or ordering of the disposition of collateral; (b) any claim that the
Bank has impaired any subrogation rights of any Loan Party against any other
obligor or endorser of the Obligations; (c) any claim that any Loan Party’s
obligations under this letter agreement or any of the other Facility Document
are released, discharged, affected, modified or impaired by any event except
payment in full of the Obligations; and (d) any claim against the Bank on any
theory of liability for consequential, special, indirect or punitive damages.
The Bank may apply any and all proceeds of the Loan Collateral to the
Obligations in any order or method elected by the Bank in its discretion, and
the Bank will not be obligated to sell or otherwise dispose of any of the Loan
Collateral in any particular order or by any particular method.
This letter agreement shall be governed by and construed in accordance with the
laws of Ontario and the federal laws of Canada applicable thereto. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the courts of
Ontario, sitting in Toronto, in any action or proceeding arising out of or
relating to this letter agreement, the Loan Agreement, the Forbearance Agreement
and each other Facility Document, and agrees that all claims in respect of such
suit, action or proceeding may be heard and determined in any such court and
waives any objection it may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum.
[Signature Pages Follow]

 

 

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Please acknowledge your understanding of and agreement to the foregoing by
signing the attached copy of this letter agreement and returning it to the
undersigned. This letter agreement may be signed in counterparts each of which
shall be deemed to be an original and all of which, when taken together, shall
constitute one and the same document. This letter agreement may be delivered by
facsimile or other electronic transmission capable of printing and such delivery
shall have the same force and effect as the delivery of originally signed
documents. This letter agreement shall be effective as of the date first above
written.

            Very truly yours;

FIFTH THIRD BANK
      By:   /s/ Charles J. Miller         Charles J. Miller, Vice President   

Acknowledged and agreed as of the date first above written:

                      CATALYTIC SOLUTIONS, INC.       CSI ALISO, INC.    
 
                   
By:
  /s/ Nikhil A. Mehta       By:   /s/ Nikhil A. Mehta    
 
 
 
Nikhil A. Mehta, Chief Financial Officer          
 
Nikhil A. Mehta, Chief Financial Officer    
 
                   
By:
  /s/ Charles F. Call       By:   /s/ Charles F. Call    
 
 
 
Charles F. Call, Chief Executive Officer          
 
Charles F. Call, President    
 
                    ECS HOLDINGS, INC.       ENGINE CONTROL SYSTEMS LTD.    
 
                   
By:
  /s/ Nikhil A. Mehta       By:   /s/ Nikhil A. Mehta    
 
 
 
Nikhil A. Mehta, Chief Financial Officer          
 
Nikhil A. Mehta, Chief Financial Officer    
 
                   
By:
  /s/ Charles F. Call       By:   /s/ Christopher J. Harris    
 
 
 
Charles F. Call, President          
 
Christopher J. Harris, President    

 

 

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                      CATALYTIC SOLUTIONS HOLDINGS, INC.       ENGINE CONTROL
SYSTEMS EUROPE AB    
 
                   
By:
  /s/ Nikhil A. Mehta       By:   /s/ Lars Hergart    
 
 
 
Nikhil A. Mehta, Chief Financial Officer          
 
Lars Hegart, Director    
 
                   
By:
  /s/ Charles F. Call       By:   /s/ Christopher J. Harris    
 
 
 
Charles F. Call, President          
 
Christopher J. Harris, Director    
 
                    ENGINE CONTROL SYSTEMS LIMITED                
 
                   
By:
  /s/ Nikhil A. Mehta                
 
 
 
Nikhil A. Mehta, Chief Financial Officer                
 
                   
By:
  /s/ Christopher J. Harris                
 
 
 
Christopher J. Harris, President