FORBEARANCE
AGREEMENT
THIS AGREEMENT
is made and entered into as of March 31, 2009, by and between:
DERMA SCIENCES,
INC., with offices located at 214 Carnegie Center, Suite 300,
Princeton, New Jersey 08540 (hereinafter sometimes referred to as
“DERMA SCIENCES” or “Maker”), and
WESTERN MEDICAL,
LTD., with offices located at 64 North Summit Street, Tenafly, New
Jersey 07670 (hereinafter sometimes referred to as “WESTERN
MEDICAL” or “Payee”).
1.
RECITALS
WHEREAS, WESTERN
MEDICAL and DERMA SCIENCES entered into a certain Asset Purchase
Agreement dated as of January 26, 2006, whereby DERMA SCIENCES
acquired certain assets of WESTERN MEDICAL; and
WHEREAS, in
connection with the Asset Purchase Agreement, DERMA SCIENCES
executed a Promissory Note dated April 18, 2006, in favor of
WESTERN MEDICAL, which required DERMA SCIENCES to pay a portion of
the purchase price in a final payment of accrued interest and the
principal balance thereunder in the amount of $515,000.00 on April
18, 2009. A copy of said Promissory Note is attached hereto and
made a part hereof as Exhibit “A”; and
WHEREAS, DERMA
SCIENCES has advised WESTERN MEDICAL that it is unable to make the
final payment of accrued interest and the principal balance in the
amount of $515,000.00 by April 18, 2009, pursuant to the terms of
the Promissory Note, and has requested that WESTERN MEDICAL forbear
for a period of one (1) year from making efforts to collect said
payment after it becomes due; and
WHEREAS, WESTERN
MEDICAL has agreed to forbear from commencing litigation to collect
the payment due from DERMA SCIENCES on April 18, 2009, provided
that DERMA SCIENCES makes timely payments of interest and a balloon
payment, all in accordance with the Payment Schedule attached
hereto as Exhibit “B”; and
WHEREAS, DERMA
SCIENCES has reaffirmed its obligations under the aforementioned
Promissory Note dated April 18, 2006; and
WHEREAS, WESTERN
MEDICAL has preserved all of its rights and remedies as provided in
the Promissory Note dated April 18, 2006.
NOW, THEREFORE,
in reliance upon the aforesaid recitals, and in consideration of
the mutual agreements contained herein, it is agreed by and between
WESTERN MEDICAL and DERMA SCIENCES as set forth herein.
2.
AGREEMENT
WESTERN MEDICAL
shall forbear from commencing litigation to collect the payment due
under the Promissory Note on April 18, 2009, and will accept
revised payments of interest and the balloon payment, all as more
particularly described in the Payment Schedule attached hereto as
Exhibit “B”, provided DERMA SCIENCES makes all of said
payments in a timely manner. Should any payment under the Payment
Schedule attached hereto as Exhibit “B” not be made, or
should any payment not be made so as to be received by WESTERN
MEDICAL on the dates set forth on said Payment Schedule, WESTERN
MEDICAL shall have the right to pursue all of its remedies under
the Promissory Note, and at law.
Time is of the
essence with respect to all payments due under the Payment Schedule
attached hereto as Exhibit “B”. Each and every
installment due under the Payment Schedule shall be delivered to
WESTERN MEDICAL by check in good and sufficient funds made
payable
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to “WESTERN MEDICAL, LTD” at 64 North Summit Street,
Tenafly, New Jersey 07670, or at such other place as WESTERN
MEDICAL may designate, from time to time, in writing.
Should DERMA
SCIENCES fail to make any installment when due, WESTERN MEDICAL
may, at its sole option, take any and all action to enforce payment
of the full amounts due and owing under the Promissory Note dated
April 18, 2006, less credit for any payments made by DERMA SCIENCES
hereunder.
3. ADDITIONAL
CONSIDERATION AND REPRESENTATIONS
As additional
consideration for WESTERN MEDICAL’S willingness to enter into
this Forbearance Agreement, DERMA SCIENCES shall immediately
deliver to WESTERN MEDICAL 50,000 warrants of DERMA SCIENCES, at
the market price applicable on the date of execution of this
Forbearance Agreement.
DERMA SCIENCES
also agrees to forthwith use its best efforts to refinance its
existing loan obligations with GE Commercial Finance, as successor
in interest to Merrill Lynch Capital. In the event of such
refinance, the balance of all interest and principal due and owing
under this Forbearance Agreement, and underlying Promissory Note,
shall be paid in full from the proceeds of said refinance.
4. COSTS AND
ATTORNEYS’ FEES
Should WESTERN
MEDICAL be required to take steps for the purpose of enforcing or
interpreting any provision of this Agreement, or the Promissory
Note dated April 18, 2006, including, but not limited to,
instituting any action for declaration of rights or obligations
hereunder, or for any other judicial remedy, including any
proceeding in any bankruptcy court, then WESTERN MEDICAL shall be
entitled in said action or proceeding to reimbursement from
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DERMA SCIENCES for all costs and expenses incu
