EXHIBIT 99.3
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this “ Agreement
”), dated as of January 1, 2007, is entered into by and among
the Lenders signatory hereto, HBK INVESTMENTS L.P., a
Delaware limited partnership, as the arranger and administrative
agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “ Agent
”), PAINCARE HOLDINGS, INC., a Florida corporation
(“ Parent ”), and each of Parent’s
Subsidiaries identified on the signature pages hereof (such
Subsidiaries, together with Parent, are referred to hereinafter
each individually as a “ Loan Party ”, and
individually and collectively, jointly and severally, as the
“ Loan Parties ”). Terms used herein without
definition shall have the meanings ascribed to them in the Loan
Agreement defined below.
RECITALS
A.
The Lenders, Agent and Loan Parties have previously entered into
that certain Loan and Security Agreement dated May 10, 2005 (as
amended, modified and supplemented from time to time, the “
Loan Agreement ”), pursuant to which the Lenders have
made certain loans and financial accommodations available to the
Loan Parties.
B.
Certain Events of Default have occurred and are continuing or (in
the case of amortization payments that will be due during the
Forbearance Period) are expected to occur under the Loan Agreement
as set forth in Schedule A hereto (collectively, the “
Known Defaults ”).
C.
The Loan Parties have requested that the Agent and Lenders forbear
from exercising their rights and remedies under the Loan Agreement
and the other Loan Documents in order to provide the Loan Parties
with time to liquidate a portion of the Collateral and to prepay a
portion of the Obligations.
D.
Agent and the Lenders are willing, for a limited period of time and
on the terms and conditions set forth herein, to forbear from
exercising their rights and remedies under the Loan Agreement and
the other Loan Documents with respect to the Known
Defaults.
E.
The Loan Parties are entering into this Agreement with the
understanding and agreement that, except as expressly provided
herein, none of the Agent’s or Lenders’ rights or
remedies as set forth in the Loan Agreement or any other Loan
Document are being waived or modified by the terms of this
Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
Incorporation of Recitals . Each of the above recitals is
expressly incorporated herein and is represented by each Loan Party
to be true and correct.
2.
Acknowledgment of Events of Default . The Loan Parties
acknowledge and agree that the Known Defaults have occurred and are
continuing (except with respect to Known Defaults consisting of the
failure of Borrowers to make amortization payments, which are
anticipated to occur hereafter during the Forbearance
Period).
3.
Reaffirmation of Obligations . Each Loan Party hereby
acknowledges that the Loan Documents and the Obligations constitute
the valid and binding obligations of such Loan Party enforceable
against such Loan Party in accordance with their respective terms,
and each Loan Party hereby reaffirms its
1
obligations
under the Loan Documents. Agent’s and the Lenders’
entry into this Agreement or any of the documents referenced
herein, their negotiations with any party with respect to any Loan
Document, their conduct of any analysis or investigation of any
Collateral for the Obligations or any Loan Document, their
acceptance of any payment from any Loan Party or any other party of
any payments made prior to the date hereof, or any other action or
failure to act on the part of Agent or any Lender shall not
constitute (a) a modification of any Loan Document or (b) a waiver
of any Default or Event of Default under the Loan Agreement,
including, without limitation, the Known Defaults, or a waiver of
any term or provision of any Loan Document.
4. Agreement to Forbear . For the Forbearance Period (as defined below),
the Agent and Lenders shall not take any action or commence any
proceedings with respect to the enforcement of any of their rights
or remedies under the Loan Documents based solely on the
continuance of the Known Defaults. The parties agree that neither
the foregoing agreement by Agent and Lenders nor the acceptance by
Agent or Lenders of any of the payments provided for in the Loan
Documents, nor any payment prior to the date hereof shall, however,
(a) excuse any party from any of its obligations under the Loan
Documents (other than as set forth in Sections 9 and 10
below), or (b) toll the running of any time periods applicable to
any such rights and remedies, including, without limitation, any
grace periods with respect to Defaults under the Loan Documents or
otherwise. Each Loan Party agrees that it will not assert laches,
waiver or any other defense to the enforcement of any of the Loan
Documents based upon the foregoing agreement Agent and Lenders to
forbear or the acceptance by Agent or Lenders of any of the
payments provided for in the Loan Documents or any payment prior to
the date hereof. As used herein, “ Forbearance Period
” shall mean the period commencing upon the effectiveness of
this Agreement and continuing until the earlier to occur of: (w)
any Default or Event of Default under this Agreement or any other
Loan Document (other than any Known Default), (x) a determination
by Agent in its discretion that the nature or extent of any Known
Event of Default is materially different from the nature or extent
as disclosed to the Agent prior to the date hereof, (y) any Loan
Party makes any payment in respect of the CPM Obligations (other
than payments made with the Junior Capital Proceeds (as defined
below) which are permitted to be made by Section 6(a)
hereof) on or before the date when Agent has received a prepayment
of the Term Loans in an amount to be determined by Agent in its
discretion but which in any event shall be at least $25,000,000, or
(z) March 31, 2007.
5. Termination of Agreement to Forbear
. Each Loan Party acknowledges and
agrees that upon the termination of the Agent’s and
Lenders’ agreement to forbear upon the expiration of the
Forbearance Period as provided in Section 4 hereof, Agent,
on behalf of the Lenders, shall be entitled to exercise any or all
of its remedies under the Loan Documents, including, without
limitation, the appointment of a receiver, the acceleration of the
Obligations and the enforcement under the Code of any liens in
favor of Agent, as a result of the Known Defaults, and at any time
Agent and Lenders shall be entitled to exercise any or all of their
remedies under the Loan Documents as a result of any Default or
Event of Default under the Loan Documents (other than a Known
Default).
6. Covenants . Each Loan Party covenants and agrees that it
shall do the following (the failure to comply with any of the
following shall constitute an immediate Event of
Default):
(a) Junior Capital . On or before February 21, 2007, Parent shall
deliver to Agent (i) evidence satisfactory to Agent that Borrowers
shall have received cash proceeds of not less than $2,500,000 (the
“ Junior Capital Proceeds ”) from either (A)
cash equity contributions by Parent in the form of common stock
with no mandatory dividends or redemptions (including dividends or
redemptions at the request or option of the stockholder) and
otherwise on terms and conditions acceptable to Agent, or (B)
subordinated debt issued by Parent, which subordinated debt shall
not provide for (I) payments of interest in cash until after the
date when the Borrowers have received the proceeds of the sale of
the Surgical Centers, or (II) payments of principal until at least
six (6) months after the Maturity Date, shall be subject to
subordination provisions in favor of Agent which are satisfactory
to Agent, and shall otherwise be issued on terms and conditions
acceptable to Agent, and (ii) copies of each of the agreements and
other documents that are executed or delivered in connection with
the transactions described in clause (i) of this Section
6(a) which shall be in form
2
and
substance satisfactory to Agent. The Loan Parties shall not permit
the Junior Capital Proceeds to be used for any purpose other than
to satisfy the CPM Obligations that are described in Section
11(d)(i) hereof (until such time as such CPM Obligations have
repaid in full in immediately available funds).
(b) Weekly Cash Flow Forecast
. On or before January 5, 2007,
Borrowers shall deliver to Agent a rolling 13-week cash flow
forecast (in form and substance satisfactory to Agent) covering
each Loan Party’s and each of their respective
Subsidiaries’ operations during the period commencing on the
Monday of the week during which such forecast is required to be
delivered and ending on the Friday of the week that is thirteen
weeks after the commencement of such period (a “ Cash Flow
Forecast ”), together with a certificate from the chief
financial officer of Parent representing and warranting that such
13-week cash flow forecast represents management’s good faith
estimates of future financial performance during such period, based
on historical performance (the “ Officer Certificate
”). On or before the close of business on each Monday
thereafter, Agent shall have received an updated Cash Flow Forecast
together with an Officer Certificate with respect to such period;
provided , that each such updated Cash Flow Forecast shall
also set forth the variances of such updated Cash Flow Forecast
from the previous Cash Flow Forecast and the variances between the
Borrowers’ actual financial performance for all periods after
January 1, 2007, as compared against the projected financial
performance set forth in the initial Cash Flow Forecast delivered
to Agent on or before January 5, 2007.
(c) Sale of Surgery Centers . On or before March 31, 2007, the Loan Parties
shall have completed the sale or disposition of (i) the ambulatory
surgical center located at 7597 Lake Worth Road, Lake Worth,
Florida, (ii) the surgical center located at 11921 Rockville Pike,
Ste. 505, Rockville, Maryland 20852 (the “ CPM Surgery
Center ”), and (iii) the ambulatory surgical center
located at 401 South LeJeune Road, Miami, Florida (collectively,
the “ Surgery Centers ”) on terms that are
satisfactory to Agent. Each Borrower hereby acknowledges that it is
not otherwise permitted to sell or otherwise dispose of any Stock
or other assets without the prior written consent of the Required
Lenders.
(d) Disposition Proceeds . Any proceeds from the Designated Divestiture
or the sale of the Surgery Centers shall not be used to satisfy any
Existing Seller Notes and Earn-Out Obligations or any obligations
in respect of any Earn-Out Arrangements or Seller Notes which, in
each case, are owed to The Center for Pain Management, LLC or any
of its Affiliates (collectively, the “ CPM Obliations
”) until the later to occur of (i) April 3, 2007, and (ii)
the date when Agent has received a prepayment of the Term Loans in
an amount to be determined by Agent in its discretion but which in
any event shall be at least $25,000,000.
7. Forbearance Fee . The Borrowers shall pay to Agent a forbearance
fee (the “ Forbearance Fee ”), which shall be
fully earned on the date hereof, non-refundable when paid, and due
and payable as follows: (a) $277,500 of the Forbearance Fee shall
be due and payable on the date hereof, and (b) upon the repayment
in full of the Obligations, an amount equal to the greater of (i)
$500,000, and (ii) $277,500 for each month (or portion thereof)
that has elapsed after the date hereof before the Obligations have
been repaid in full in immediately available funds, shall be due
and payable on the date of such repayment. All payments in respect
of the Forbearance Fee shall be due and payable in immediately
available funds as set forth above.
8. Release; Covenant Not to Sue
.
(a) Each Loan Party hereby absolutely and
unconditionally waives, releases, remises and forever discharges
Agent and Lenders, and any and all of their respective
participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing
(each a “ Released Party ”), from any and all
claims, suits, investigations, proceedings, demands, obligations,
liabilities, damages, losses, costs, expenses, or causes of action
of any kind, nature or description, whether based in law, equity,
contract, tort, implied or express warranty, strict liability,
criminal or civil statute, common law, or under any state or
federal law or otherwise, of any kind or character, known or
unknown, past, present or future, liquidated or unliquidated,
suspected or unsuspected, which such Loan Party has had, now
has,
3
hereafter
may have, or has made claim to have against any such person for or
by reason of any act, omission, matter, cause or thing whatsoever
arising from the beginning of the world to and including the date
of this Agreement or thereafter, whether such claims, demands and
causes of action are matured or unmatured or known or unknown. It
is the intention of each Loan Party in providing this release that
the same shall be effective as a bar to each and every claim,
demand and cause of action specified, and in furtherance of this
intention it waives and relinquishes all rights and benefits under
Section 1542 of the Civil Code of the State of California (or any
comparable provision of any other applicable law), which
provides:
“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 might have materially affected his or
her settlement with the debtor.”
Each Loan Party acknowledges that
it may hereafter discover facts different from or in addition to
those now known or believed to be true with respect to such claims,
demands, or causes of action and agrees that this instrument shall
be and remain effective in all respects notwithstanding any such
differences or additional facts. Each Loan Party understands,
acknowledges and agrees that the release set forth above may be
pleaded as a full and complete defense and may be used as a basis
for an injunction against any action, suit or other proceeding
which may be instituted, prosecuted or attempted in breach of the
provisions of such release.
(b) Each Loan Party, on behalf of itself and its
successors, assigns, and other legal representatives, hereby
absolutely, unconditionally and irrevocably, covenants and agrees
with and in favor of each Released Party above that it will not sue
(at law, in equity, in any regulatory proceeding or otherwise) any
Released Party on the basis of any claim released, remised and
discharged by such Loan Party pursuant to the above release. Each
Loan Party
