WAIVER AND FORBEARANCE AGREEMENT
Exhibit
4.2
THIS
WAIVER AND FORBEARANCE AGREEMENT is made on May 24, 2010 (this “Agreement”),
by and between Bison Capital Equity Partners II-A, L.P., a Delaware limited
partnership, and Bison Capital Equity Partners II-B, L.P., a Delaware limited
partnership (collectively, “Purchaser”),
on the one hand, and The Center for Wound Healing, Inc., a Nevada corporation
(the “Company”),
on the other hand. Any capitalized term used but not otherwise
defined herein shall have the same meaning as set forth in the Securities
Purchase Agreement dated as of March 31, 2008 by and between Purchaser and the
Company, as amended by the First Amendment to Securities Purchase Agreement
dated as of April 16, 2009 and the Second Amendment to Securities Purchase
Agreement dated February 12, 2010 (as otherwise amended, the “Securities
Purchase Agreement”).
WHEREAS,
the Company is in Default under the Securities Purchase Agreement for violation
of the covenant set forth in Section 9.3(a) of the
Securities Purchase Agreement by reason of the consummation of the mergers among
certain of the Credit Parties as more fully described on Exhibit A (the “Merger
Default”); and
WHEREAS,
the Company is in Default under the Securities Purchase Agreement for violation
of the covenant set forth in Section 9.4 of the
Securities Purchase Agreement by reason of the change by certain of the Credit
Parties by reason of the changes by certain of the Credit Parties of their names
as more fully described on Exhibit A (the “Name Change
Default”);
WHEREAS,
the Company is in Default under the Securities Purchase Agreement for violation
of the financial covenant set forth in Section 9.18(a) of
the Securities Purchase Agreement (the “EBITDA
Covenant”) for the twelve-month period ending on March 31, 2010, as more
fully described on Exhibit B (the “EBITDA Covenant
Default”);
WHEREAS,
the Company is in Default under the Securities Purchase Agreement for violation
of the financial covenant set forth in Section 9.18(b) of
the Securities Purchase Agreement (the “Consolidated
Leverage Ratio Covenant”)
for the twelve-month period ending on March 31, 2010, as more fully described on
Exhibit C (the
“Consolidated
Leverage Ratio Covenant
Default”);
WHEREAS,
the parties desire to waive certain provisions of the Securities Purchase
Agreement subject to the terms and conditions set forth herein; and
WHEREAS,
the parties desire that Purchaser forbear from enforcing certain rights of
Purchaser under the Transaction Documents subject to the terms and conditions
set forth herein.
NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Subject
to the effectiveness of this Agreement, Purchaser hereby waives the Merger
Default and the Name Change Default. The Company hereby acknowledges and agrees
that the waiver given by Purchaser pursuant to the foregoing sentence (a) does
not constitute a waiver of any other Default or Event of Default under the
Transaction Documents, and (b) is not, and is not intended as, a waiver by
Purchaser of or in respect of any breach, Default or Event of Default under the
Transaction Documents occurring from and after the date hereof except as
expressly provided herein. In connection with the foregoing, the Company agrees
to cause the Credit Parties agree to execute and deliver such documents as
Purchaser may reasonably request in connection with the mergers that are the
subject of the Merger Default and the changes of name that are the subject of
the Name Change Default.
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2. Subject
to the effectiveness of this Agreement, Purchaser hereby waives the EBITDA
Covenant Default and Consolidated Leverage Ratio Covenant Default effective as
of March 31, 2010 and waives any failure of the Company to comply with the
EBITDA Covenant and Consolidated Leverage Ratio Covenant for the measuring
period ended June 30, 2010. The Company hereby acknowledges and
agrees that the waiver given by Purchaser pursuant to the foregoing sentence (a)
does not constitute a waiver of any other Default or Event of Default under the
Transaction Documents, and (b) is not, and is not intended as, a waiver by
Purchaser of or in respect of any breach, Default or Event of Default under the
Transaction Documents occurring from and after the date hereof except as
expressly provided herein.
3. Effective
as of March 31, 2010, Purchaser agrees to forbear from accelerating the
Obligations as a result of a breach of the EBITDA Covenant and Consolidated
Leverage Ratio Covenant until the earliest of (a) Xxxxx 0, 0000, (x) the
issuance of a notice of default, event of default or breach by the Senior
Lender, (c) the occurrence of a Default or Event of Default other than with
respect to a breach of the EBITDA Covenant or Consolidated Leverage Ratio
Covenant, (d) the issuance of a “going concern” opinion by the Company’s
auditors, (e) the Consolidated Adjusted EBITDA for the trailing twelve months
ending on any fiscal quarter being less than $3,500,000, and (f) the date that
written notice from the Company is delivered to Purchaser stating that the
Company no longer requires Purchaser to forbear from accelerating the
Obligations as set forth in this Section 3) (such
period of time from March 31, 2010 through the earliest of the foregoing to
occur, the “Forbearance
Period”).
4. In
partial consideration of Purchaser’s agreement to enter into this Agreement, the
Company shall pay to Purchaser the following amounts:
(a) on
each fiscal quarter end during the Forbearance Period (including the fiscal
quarter ended March 31, 2010), at the Company’s election: (i)
Purchaser shall receive $150,000 in cash or (ii) $150,000 shall be added to the
outstanding principal amount under the Note; provided, however, that if the
Forbearance Period terminates as a result of Section 3(e), then
solely for purposes of this Section 4(a) the
Forbearance Period shall be deemed to end on and include the fiscal quarter end
that follows the date of delivery of written notice from the
Company;
(b) prior
to the effectiveness of this Agreement, all attorneys’ fees and other
Purchaser’s Expenses incurred by or on behalf of Purchaser pursuant to, in
respect of or otherwise in connection with this Agreement or the Existing
Default; and
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(c) Notwithstanding
anything in any Transaction Document to the contrary (including, without
limitation, the Second Amendment to Securities Purchase Agreement dated February
12, 2010 by and between Purchaser and the Company (the “Second
Amendment”)) and irrespective of whether any default under the Note,
Default or Event of Default exists, the Note shall bear interest for each day
during the Forbearance Period at a rate equal to 16.5% per annum (and the
Scheduled Cash Interest Rate shall be twelve percent (12%) per annum, and the
Scheduled PIK Interest Rate shall be four and a half percent (4.5%) per
annum). Following the end of the Forbearance Period, the Note shall bear
interest at the Scheduled Interest Rate in accordance with the Second
Amendment.
The
payment of all such fees and other amounts described in Sections 4(a)(i),
(b) and (c) shall be made by
wire transfer of immediately available funds to an account designated by
Purchaser. Such fees and other amounts shall be fully earned upon
becoming due and payable in accordance with the terms hereof, shall be
nonrefundable for any reason whatsoever and shall be in addition to any other
fees, costs and expenses payable pursuant to the Transaction
Documents. For the avoidance of doubt, the obligations set forth in
this Agreement are also part of “Obligations” as defined in the Securities
Purchase Agreement.
5. Each
of the Company, its subsidiaries, affiliates, officers, directors and
representatives (together, the “Releasing
Parties”) fully releases and discharges forever Purchaser and its current
and former agents, employees, officers, directors, owners, partners,
shareholders, trustees, representatives, attorneys, subsidiaries, divisions,
related corporations, assigns, successors, and affiliated organizations
(hereafter referred to collectively as the “Released
Parties”), and each and all of them, from any and all liabilities,
claims, causes of action, charges, complaints, obligations, costs, losses,
damages, injuries, attorneys’ fees, and other legal responsibilities, of any
form whatsoever, whether known or unknown, unforeseen, unanticipated,
unsuspected or latent, which the Releasing Parties have incurred or expect to
incur, or now own or hold, or have at any time heretofore owned or held, or may
at any time own, hold, or claim to hold by reason of any matter or thing arising
from any cause whatsoever prior to the date of this Agreement. This
Agreement does not purport to release claims that cannot be released as a matter
of law.
Each
Releasing Party acknowledges and intends that the Released Parties are being
released from unknown and unforeseen claims to the fullest extent permitted by
law and each Releasing Party waives any defenses based thereon. Each
Releasing Party expressly waives and relinquishes all rights and benefits that
the Releasing Party may have under any statute or other applicable law
comparable to Section 1542 of the California Civil Code, which Section 1542 is
intended to protect against an inadvertent release of unknown or unsuspected
claims, and reads as follows:
“Section
1542. [General Release; extent.] A general release does not extend to claims
which the creditor does not know or suspect to exist in his or her favor at the
time of executing the release, which if known by him or her must have materially
affected his or her settlement with the debtor.”
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Each
Releasing Party, being aware of said Section 1542, hereby expressly waives any
rights the Releasing Party may have under any statutes, other applicable law or
common law principles of similar effect, with respect to the claims purported to
be released hereby.
Each
Releasing Party covenants and agrees never to commence, prosecute or assist in
any way, or cause, permit or advise to be commenced or prosecuted, any action,
proceeding, or discovery against any Released Party based on any released
claim.
Each
Releasing Party agrees to indemnify and hold Purchaser and the other persons and
entities released by this Agreement harmless from and against any and all claims
arising from or in connection with any action or proceeding brought by it or for
its benefit or on its initiative contrary to the provisions of this
Agreement. This Agreement shall be deemed breached and a cause of
action shall accrue immediately upon the commencement of any action or
proceeding contrary to this Agreement, and in any such action or proceeding this
Agreement may be pleaded as a defense by any person or entity released by this
Agreement, or may be asserted by way of cross-complaint, counterclaim or
cross-claim in any such action or proceeding.
6. This
Agreement shall not be effective until the date upon which Purchaser receives
each of the following (in each case in form and substance satisfactory
to Purchaser):
(a) counterparts
of this Agreement, duly executed by the Company;
(b) the
Consent of Guarantors, in the form attached hereto as Exhibit D, duly
executed by each of Guarantor listed on the signature pages
thereto;
(c) a
consent with respect to the execution, delivery and performance of this
Agreement, duly executed by Senior Lender; and
(d) the
fees and expenses described in Section
4.
7. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original as against any party whose signature appears hereon,
and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories.
8. Sections 14.5, 14.6, 14.7 and 14.8 of the
Securities Purchase Agreement are hereby incorporated by reference and made a
part of this Agreement mutatis
mutandis, except that the references therein to “this Agreement” shall
include this Agreement.
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9. The
Company confirms and agrees that this Agreement shall constitute a Transaction
Document under the Securities Purchase Agreement. Accordingly, it
shall be an Event of Default under the Securities Purchase Agreement if any
representation or warranty made or deemed made by the Company under or in
connection with this Agreement shall have been incorrect in any material respect
when made or deemed made or if the Company fails to perform or comply with any
covenant or agreement contained herein.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly
signed as of the date first above written.
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BISON
CAPITAL EQUITY PARTNERS II-A, L.P.
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By:
BISON CAPITAL PARTNERS II, LLC, its general partner
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By:
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/s/ Xxxxxxx X . Xxxxxxxx | ||
| Name: Xxxxxxx X. Xxxxxxxx | |||
| Title: Managing Member | |||
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BISON
CAPITAL EQUITY PARTNERS II-B, L.P.
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By:
BISON CAPITAL PARTNERS II, LLC, its general partner
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By:
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/s/ Xxxxxxx X . Xxxxxxxx | ||
| Name: Xxxxxxx X. Xxxxxxxx | |||
| Title: Managing Member | |||
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By:
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/s/
Xxxxxx X. Xxxxxxx
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||
| Name: Xxxxxx X. Xxxxxxx | |||
| Title: Chief Executive Officer | |||
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Exhibit
A
Merger Default and Name
Change Default
Credit
Parties Organized under the laws of the State of Delaware
Credit
Party merged into Atlantic Associates LLC:
New York Hyperbaric & Wound Care
Centers LLC
Atlantic
Associates LLC has been renamed CFWH (Delaware), LLC
Credit
Parties Organized under the laws of the State of Massachusetts
Credit
Party merged into Massachusetts Hyperbaric, LLC:
Lowell Hyperbaric, LLC
Massachusetts
Hyperbaric, LLC has been renamed CFWH (Massachusetts), LLC
Credit
Parties Organized under the laws of the State of New Jersey
Credit
Parties merged into NJ Hyperbaric LLC:
JFK Hyperbaric LLC
Muhlenberg Hyperbaric LLC
South Ocean County Hyperbaric
LLC
Trenton Hyperbaric LLC
NJ
Hyperbaric LLC has been renamed CFWH (New Jersey) LLC
Credit
Parties Organized under the laws of the State of New York
Credit
Parties merged into Atlantic Hyperbaric LLC
CEF Products LLC
South Nassau Hyperbaric,
LLC
South N Hyperbaric LLC
Maimonides Hyperbaric LLC
Atlantic
Hyperbaric LLC has been renamed CFWH (New York) LLC
Credit
Parties Organized under the laws of the State of Pennsylvania
Credit
Party merged into CMC Hyperbaric LLC:
Scranton Hyperbaric, LLC
CMC
Hyperbaric LLC has been renamed CFWH (Pennsylvania), LLC
Exhibit
B
EBITDA Covenant
Default
The
Company’s Consolidated Adjusted EBITDA for the trailing twelve months
ended March 31, 2010 was $$4,473,577, which failed to comply with the minimum
requirement of $7,000,000 for such period.
Exhibit
C
Consolidated Leverage Ratio
Covenant Default
The
Company’s Consolidated Leverage Ratio for the trailing twelve months ended
March 31, 2010 was 6.21, which failed to comply with the maximum permitted
Consolidated Leverage Ratio of 4.50 for such period.
Exhibit
D
Consent of
Guarantors
See
attached.
