EXHIBIT 10.5
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT ("Forbearance Agreement") is entered into as of
May 14, 2002, by and among PRIMESOURCE HEALTHCARE, INC. (f/k/a LUXTEC
CORPORATION), a Massachusetts corporation (the "Borrower"), each of the
Guarantors party to the Credit Agreement defined below (the "Guarantors"), and
ARK CLO 2000-1, LIMITED (the "Lender"). Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings given to them in the
Credit Agreement.
RECITALS
A. The Borrower, the Guarantors, and the Lender are parties to that certain
Amended and Restated Loan and Security Agreement dated as of March 2, 2001 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement").
B. The Guarantors have guaranteed the full and punctual payment when due,
and the performance, of all liabilities, agreements and other obligations of the
Borrower to Lender pursuant to separate Amended and Restated Unlimited
Guaranties, each dated as of March 2, 2001 (collectively, as amended,
supplemented or otherwise modified from time to time, the "Guarantee").
C. An Event of Default (as defined in the Credit Agreement) has occurred
and is continuing under the Credit Agreement that, among other things, entitle
Lender to commence immediate enforcement and collection actions (collectively,
the "Enforcement Actions").
D. The Borrower and Guarantors have requested that the Lender agree to
forbear from taking any Enforcement Actions, but only to the extent, and on the
terms set forth expressly below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Acknowledgments and Waivers.
(a) The Borrower acknowledges and confirms that, as of April 30, 2002,
the outstanding principal balance of Revolving Loans was no less than
$1,275,303, the outstanding principal balance of the Equipment Loan was no
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less than $5,858, and the outstanding principal balance of the Term Loan
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was no less than $ 160,000 (collectively, the "OUTSTANDING
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PRINCIPAL"), together with $ 13,626 accrued and unpaid interest on the
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Outstanding Principal (the "OUTSTANDING INTEREST") and all costs, fees and
expenses incurred under the Credit Agreement (the "OUTSTANDING FEES" and,
together with the Outstanding Principal and the Outstanding Interest, the
"CURRENT OUTSTANDING INDEBTEDNESS"). Borrower agrees that it owes the
Current OutstandingIndebtedness free of any offset, defense or counterclaim
and agrees that it will not assert any set off, defense or counterclaim to
the Current Outstanding Indebtedness. In addition, the Borrower
acknowledges that it remains liable for (i) all interest on the Outstanding
Principal accruing from and after the date hereof (the "CONTINUING
INTEREST") and (ii) all costs, fees and expenses incurred from and after
the date hereof, in each case, pursuant to the Credit Agreement (the
"CONTINUING FEES" and, together with the Current Outstanding Indebtedness
and the Continuing Interest, the "OUTSTANDING INDEBTEDNESS"). The Borrower
acknowledges and affirms its obligations under the Credit Agreement and any
other related document executed in connection therewith.
(b) Liens and Security Interests. The Borrower acknowledges, ratifies
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and reaffirms the validity and enforceability of the Credit Agreement and
all liens and security interests granted thereunder to Lender as collateral
security for the Outstanding Indebtedness under the Credit Agreement, and
acknowledges that all such liens and security interests and all collateral
pledged as security for the Outstanding Indebtedness continue to be and
remain collateral for the Outstanding Indebtedness from and after the date
hereof.
(c) Event of Default. The Borrower acknowledges that an Event of
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Default has occurred under Section 7.01(k) of the Credit Agreement (the
"EXISTING DEFAULT") by permitting certain Events of Default (the "CROSS
DEFAULTS") to occur and continue under the Amended and Restated Credit
Agreement dated June 14, 1999 among PrimeSource Surgical, Inc., Bimeco,
Inc., Medial Companies Alliance, Inc., Xxxxxxx Medical Inc. and State
Street Bank and Trust Company, as amended (the "SURGICAL CREDIT AGREEMENT")
and that, pursuant to Section 7.02 of the Credit Agreement, Lender is
presently entitled to declare the Outstanding Indebtedness under the Credit
Agreement due and payable.
2. Forbearance and Forbearance Termination Date. Subject to the terms and
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conditions set forth herein, the Lender will forbear from taking any Enforcement
Action in respect of the Outstanding Indebtedness as a result of the Existing
Default until the earlier of (a) July 31, 2002 or (b) the date upon which any
one of the Forbearance Conditions is not satisfied or ceases to continue to be
satisfied (the earlier of clauses (a) or (b) being referred to herein as the
"FORBEARANCE TERMINATION DATE"). For purposes of this Forbearance Agreement,
Forbearance Conditions shall mean: (i) no Event of Default (other than Existing
Defaults) shall occur under the Credit Agreement, (ii) Borrower shall perform,
as and when required, all of its agreements, covenants and obligations under
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this Forbearance Agreement and Borrower shall not have breached any
representation or warranty set forth herein and (iii) the agreement by Citizens
Bank of Massachusetts ("CITIZENS") to forbear from exercising its rights and
remedies under the Surgical Credit Agreement in respect of the Cross Defaults
shall be in effect. Nothing set forth herein or contemplated hereby is intended
to constitute an agreement by the Lender to forbear from the exercise of any of
the rights and remedies available to the Lender under the Credit Agreement and
the other related documents executed in connection therewith (all of which
rights and remedies are hereby expressly reserved by the Lender) upon and after
the occurrence of a Forbearance Termination Date.
3. Default Rate of Interest. The Outstanding Principal shall bear interest
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at the default rate of interest at a fluctuating rate per annum equal to seven
percent (7%) above the Prime Rate pursuant to Section 2.06 of the Credit
Agreement.
4. Deferral of Term Loan Payments. Subject to the terms and conditions set
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forth herein, the balloon payment of the Term Loan pursuant to Section 2.03(b)
of the Credit Agreement shall be deferred until July 31, 2002.
5. Conditions Precedent to Forbearance Agreement. Notwithstanding any other
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provision of this Forbearance Agreement, the obligation of the Lender to forbear
from taking any Enforcement Action in respect of the Outstanding Indebtedness is
subject to Lender's receipt of the following: (a) a copy of the Forbearance
Agreement, dated as of [Date], by and between the Borrower and Citizens showing
that the Cross Defaults have been waived by Citizens or that Citizens has agreed
to forbear from exercising its rights and remedies under the Surgical Credit
Agreement in respect of the Cross Defaults at least until July 31, 2002, (b)
copies of all written communications, received by the Borrower, to purchase the
Borrower, (c) a copy of the Limited Guarantee dated as of March 2, 2001 by the
Borrower in favor of Citizens Bank of Massachusetts, (d) a copy of the Parent
Pledge Agreement dated as of March 2, 2001 by the Borrower in favor of Citizens,
(e) the payment, or evidence of payment, of all fees and expenses of Allfirst
Bank related to the September 2001 collateral examination of Accutech, and (f)
the payment of all reasonable fees and expenses (including attorneys' fees) and
out-of-pocket expenses of the Lender that are due and payable from the Borrower
to the Lender in accordance with Section 10.04 of the Credit Agreement,
including but not limited to all such amounts incurred in connection with this
Forbearance Agreement and (c) counterparts of this Forbearance Agreement duly
executed by the Borrower and the Guarantors.
6. Release. The Borrower and Guarantors each hereby release the Lender and
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the Lender's respective subsidiaries, affiliates, members, partners, officers,
employees, representatives, agents, managers, counsel, directors, successors and
assigns, both present and former, from any and all actions, causes of action,
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claims, demands, damages and liabilities of whatever kind or nature, in law or
in equity, now known or unknown, suspected or unsuspected to the extent that any
of the foregoing arises from any action or failure to act in connection with the
Credit Agreement on or prior to the date hereof.
7. Borrower's Representations and Warranties. Borrower hereby represents
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and warrants as follows:
(a) Corporate Power and Authority. Borrower has all requisite
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corporate power and authority to enter into this Forbearance Agreement and
to carry out the transactions contemplated by, and perform its obligations
under, the Forbearance Agreement.
(b) Authorization of Agreements. The execution and delivery by
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Borrower of this Forbearance Agreement and the performance by Borrower of
the Forbearance Agreement have been duly authorized by all necessary
corporate action on the part of Borrower.
(c) No Conflict. The execution and delivery by Borrower of this
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Forbearance Agreement and the performance by Borrower of the Forbearance
Agreement do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Borrower, or any order,
judgment or decree of any court or other agency of government binding on
Borrower, (ii) violate any provision of the Certificate or Articles of
Incorporation or Bylaws of Borrower, (iii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under any contractual obligation of borrower, (iv) result in or
require the creation or imposition of any lien, other than as set forth
herein, upon any of the properties or assets of Borrower, or (v) require
any approval of members, stockholders or partners or any approval or
consent of any person under any contractual obligation of Borrower, except
for such approvals or consents which have been obtained on or before the
effective date of the Forbearance Agreement and disclosed in writing to
Lender.
(d) Governmental Consents. The execution and delivery by Borrower of
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this Forbearance Agreement and the performance by Borrower of the
Forbearance Agreement do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body.
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(e) Binding Obligation. This Forbearance Agreement has been duly
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executed and delivered by Borrower and is the legally valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(f) Absence of Default. Except for the Existing Default, no event has
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occurred and is continuing or will result from the consummation of the
transactions contemplated by this Forbearance Agreement that would
constitute an Event of Default.
8. Guarantors' Representations. Guarantors hereby represent and warrant as
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follows:
(a) Corporate Power and Authority. Guarantors have all requisite
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corporate power and authority to enter into this Forbearance Agreement.
(b) Authorization of Agreements. The execution and delivery by
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Guarantors of this Forbearance Agreement have been duly authorized by all
necessary corporate action on the part of the Guarantors.
(c) No Conflict. The execution and delivery by Guarantors of this
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Forbearance Agreement do not and will not (i) violate any provision of any
law or any governmental rule or regulation applicable to Guarantors, or any
order, judgment or decree of any court or other agency of government
binding on Guarantors, (ii) violate any provision of the Certificate or
Articles of Incorporation or Bylaws of or any other restriction binding on
Guarantors, (iii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any contractual
obligation of Guarantors, (iv) result in or require the creation or
imposition of any lien upon any of the properties or assets of the
Guarantors, or (v) require any approval of members, stockholders or
partners or any approval or consent of any person under any contractual
obligation of Guarantors.
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(d) Governmental Consents. The execution and delivery by Guarantors of
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this Forbearance Agreement and the performance by Guarantors of this
Forbearance Agreement do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body.
(e) Binding Obligation. This Forbearance Agreement has been duly
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executed and delivered by Guarantors and is the legally valid and binding
obligation of Guarantors, enforceable against Guarantors in accordance with
its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
(f) Continuing Guaranty. Each Guarantor hereby acknowledges that it
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has reviewed the terms and provisions of this Forbearance Agreement and
consents to the provisions of this Forbearance Agreement. Each Guarantor
hereby confirms that the Guarantee will continue to guaranty or secure, as
the case may be, to the fullest extent possible the payment and performance
of all obligations of such Guarantor in respect of the obligations of
Borrower now or hereafter existing under or in respect of the Credit
Agreement and other related documents executed in connection therewith.
9. Miscellaneous.
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(a) No Waiver. The execution, delivery and performance of this
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Forbearance Agreement shall not constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of Lender under the
Credit Agreement or any other related agreement executed in connection
therewith, except as specifically provided in this Forbearance Agreement
and, except as expressly set forth herein, all of the provisions of the
Credit Agreement shall remain in full force and effect regardless of any
forbearance by the Lender of its rights and remedies hereunder.
(b) Exercise of Remedies. Borrower agrees that, at any time on or
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after the Forbearance Termination Date, Lender shall be entitled to
exercise all rights and remedies available, whether under the Credit
Agreement or at law or in equity, without further notice or demand.
(c) No Reliance. Each of the Borrower and Lender understands that this
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is a legally binding Agreement that may affect its rights. Each represents
to the other that it has received legal advice from counsel of its choice
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in connection with the negotiation, drafting, meaning and legal
significance of this Forbearance Agreement and that it is satisfied with
its legal counsel and the advice received from it. The Borrower has entered
into this agreement freely and voluntarily, without coercion, duress,
distress or undue influence by Lender or any other person or entity
affiliated with Lender or any of their respective directors, officers,
partners, agents or employees.
(d) Interpretation. Should any provision of this Forbearance Agreement
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require judicial interpretation, it is agreed that a court interpreting or
construing the same shall not apply a presumption that the terms hereof
shall be more strictly construed against any party by reason of the rule of
construction that a document is to be construed more strictly against the
party who itself or through its agent prepared the same.
(e) Entire Agreement; Severability. This Forbearance Agreement
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constitutes the entire agreement of the Borrower and Lender concerning the
subject matter hereof, and all prior or contemporaneous understandings,
oral representations or agreements had among the parties with respect to
the subject matter hereof are merged in, and are contained in, this
Forbearance Agreement. This Agreement shall be governed by, and interpreted
in accordance with the laws of the State of New York without regard to
principles of conflict of law. If any provision of this agreement shall be
unenforceable under applicable law, such provision shall be ineffective
without invalidating the remaining provisions of this Forbearance
Agreement.
(f) Submission to Jurisdiction. The parties agree that any federal or
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state court sitting in the State of New York shall have exclusive
jurisdiction to hear and determine any suit, action or proceeding, and to
settle any disputes, which may arise under and/or out of and/or relating to
and/or in connection with this Forbearance Agreement and for such purposes
irrevocably submits to the jurisdiction of such courts.
(g) Headings. Section and subsection headings in this Forbearance
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Agreement are included herein for convenience of reference only and shall
not constitute a part of this Forbearance Agreement for any other purpose
or be given any substantive effect.
(h) Counterparts; Effectiveness. This Forbearance Agreement may be
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executed by telecopy in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute
one and the same document. Transmission by telecopier of an executed
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counterpart of this Forbearance Agreement shall be deemed to constitute due
and sufficient delivery of such counterpart. Each fully executed
counterpart of this Forbearance Agreement shall be deemed to be a duplicate
original.
(i) Successors and Assigns. The terms of this Agreement shall be
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binding upon and shall inure to the benefit of the parties and their
respective successors and assigns, participants and transferees. All
representations and warranties made herein shall survive the execution and
delivery of this Forbearance Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this
Forbearance Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: PRIMESOURCE HEALTHCARE, INC.,
-------- f/k/a Luxtec Corporation
a Massachusetts corporation
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: President
GUARANTOR: FIBER IMAGING TECHNOLOGIES, INC.,
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a Massachusetts corporation
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: President
CATHTEC INCORPORATED,
a Massachusetts corporation
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: President
CARDIODYNE, INC.,
a Massachusetts corporation
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: President
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LENDER: ARK CLO 2000-1, LIMITED
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By: Patriarch Partners, LLC,
its Collateral Manager
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Authorized Signatory
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