Exhibit 10.2
FORBEARANCE
AGREEMENT
THIS FORBEARANCE
AGREEMENT (this “
Agreement ”), dated as of December 1, 2005, is
entered into among CURATIVE HEALTH SERVICES, INC. , a
Minnesota corporation formerly known as Curative Holding Co.
(“ Holdings ”), EBIOCARE.COM, INC. , a
Delaware corporation (“ eBioCare ”),
HEMOPHILIA ACCESS, INC. , a Tennessee corporation (“
Hemophilia Access ”), APEX THERAPEUTIC CARE,
INC. , a California corporation (“ Apex ”),
CHS SERVICES, INC. , a Delaware corporation (“
CHS ”), CURATIVE HEALTH SERVICES OF NEW YORK,
INC. , a New York corporation (“ CHSNY ”),
OPTIMAL CARE PLUS, INC. , a Delaware corporation (“
Optimal Care ”), INFINITY INFUSION, LLC ,
a Delaware limited liability company (“ Infinity
”), INFINITY INFUSION II, LLC , a Delaware limited
liability company (“ Infinity II ”), INFINITY
INFUSION CARE, LTD. , a Texas limited partnership (“
Infinity Infusion ”), MEDCARE, INC. , a
Delaware corporation (“ Medcare ”), CURATIVE
PHARMACY SERVICES, INC. , a Delaware corporation (“
CPS ”), CURATIVE HEALTH SERVICES CO. , a
Minnesota corporation formerly known as Curative Health
Services, Inc. (“ CHSC ”), CRITICAL CARE
SYSTEMS, INC. , a Delaware corporation (“ CCS
”) (Holdings, eBioCare, Hemophilia Access, Apex, CHS, CHSNY,
Optimal Care, Infinity, Infinity II, Infinity Infusion, Medcare,
CPS, CHSC and CCS are sometimes collectively referred to herein as
the “ Borrowers ” and individually as a “
Borrower ”), CURATIVE HEALTH SERVICES III CO. (
“ Guarantor ”) , a Minnesota corporation,
and GENERAL ELECTRIC CAPITAL CORPORATION , a Delaware
corporation (“ GE Capital ”), as Agent and
Lender.
RECITALS:
WHEREAS , the Borrowers and GE
Capital are parties to that certain Amended and Restated Credit
Agreement, dated April 23, 2004, as amended by (i) that
certain First Amendment to Amended and Restated Credit Agreement
and Collateral Documents dated as of May 3, 2004,
(ii) that certain Second Amendment to Amended and Restated
Credit Agreement dated as of June 30, 2004, (iii) that
certain Third Amendment to Amended and Restated Credit Agreement
dated as of October 20, 2004 and (iv) that certain Fourth
Amendment to Amended and Restated Credit Agreement dated as of
December 31, 2004 (as so amended, the “
Credit Agreement ”; capitalized terms
used but not defined in this Agreement have the meanings given in
the Credit Agreement), whereby the Lenders have made available a
revolving credit facility and other financial accommodations to the
Borrowers, subject to the terms and conditions contained in the
Credit Agreement;
WHEREAS , the Borrowers, Guarantor
and GE Capital entered into that certain Waiver Agreement dated as
of November 7, 2005, respecting the existence of certain
Events of Default under the Credit Agreement (the “
Waiver Agreement ”);
WHEREAS , the Borrowers and the
Guarantor hereby acknowledge and confirm that Events of Default
have occurred and are continuing under Section 8.1 of the
Credit Agreement including but not limited to those occurring as a
result of the expiration of the temporary waiver, the expiration of
the Waiver Period and the continued existence of the
November Note Interest Payment Default (as such terms are
defined in the Waiver Agreement (referred to as the
1
“ Existing Defaults ”). The Borrowers
and Guarantor further waive notice of default respecting the
Existing Defaults and acknowledge and confirm that none of such
Existing Defaults have been waived by Lenders or cured by the
Borrowers and that the foregoing identification of specific Events
of Default does not imply that other Events of Default do not exist
on the date hereof.
WHEREAS , the Borrowers and
Guarantor further acknowledge and agree that by reason of the
occurrence of the Existing Defaults, the Lenders are not required
to make any further loans or advances to the Borrowers, and the
Agent and the Lenders have the right at any time to exercise their
rights and remedies under the Credit Agreement and related Loan
Documents.
WHEREAS , the Borrowers and the
Guarantor have requested, notwithstanding that the Existing
Defaults referred to above exist under the Credit Agreement and the
November Waiver Agreement and have not been waived or cured,
that the Agent and the Lenders forbear from exercising remedies on
account of the Existing Defaults until the sooner to occur of
March 30, 2006 or the occurrence of a Terminating Event, as
such term is defined in Section 2 herein.
WHEREAS , the Guarantor acknowledges
and agrees that the Guaranty Agreement is and remains in full force
and effect on the date hereof as to all obligations of the
Borrowers to the Lenders outstanding on the date hereof and/or
accruing and incurred hereafter and the Guarantor hereby
acknowledges and confirms that its Guaranty is deemed part of the
Loan Documents in respect of the Credit Agreement referenced in
this Agreement.
WHEREAS , the Borrowers have
requested that Lenders waive the Waiver Fee as defined in
Section 5.1.(b)(ii) of the Waiver Agreement dated
August 8, 2005 (the “ August Waiver ”).
AGREEMENT:
NOW, THEREFORE, in consideration of
the mutual promises and covenants herein contained and intending to
be legally bound hereby, the parties hereto covenant and agree as
follows:
1.
Forbearance Period
.
(a)
Each of the
Borrowers and the Guarantor hereby acknowledges and confirms
(i) the occurrence and continuance of each of the Existing
Defaults, and (ii) that the Existing Defaults are material in
nature.
(b)
Subject to the
terms and conditions hereof, including, without limitation, the
satisfaction of the conditions precedent described in
Section 6 herein, each of the Lenders agrees that during the
period from the time that all conditions precedent described in
Section 6 herein are satisfied through the earlier of
(i) 2:00 p.m. (Eastern Time) on April 28, 2006, or
(ii) the occurrence of a Terminating Event (the “
Forbearance Period
”), it
will forbear from exercising remedies under the Credit Agreement
and the Loan Documents in respect of the Existing Defaults, other
than: (i) the right upon the occurrence of a Terminating Event
to collect
2
interest at the Default Rate
and (ii) the rights and remedies described herein, which
rights and remedies the Borrowers acknowledges and confirms that
the Lenders are entitled to exercise pursuant to the terms of this
Agreement.
(c)
During the
Forbearance Period, interest due under the Credit Agreement will:
(i) accrue at the Default Rate, and (ii) be paid at the
rate provided for in the Credit Agreement as if an Event of Default
had not occurred. The difference between the
interest accrued and the interest paid shall hereafter be
referred to as the “ PIK Spread ”. The PIK Spread
shall become due and payable at the expiration or termination of
the Forbearance Period. GE Capital hereby agrees to waive the
PIK Spread provided that: (I) a Terminating Event does not
occur hereunder, (II) the Debtor accepts GE Capital’s
proposal for the DIP Credit Facility as provided in
Section 7(c)(iii) hereof, and (III) GE Capital
provides the Replacement Facility (as defined in the Waiver
Agreement). The term Replacement Facility as used in the
Waiver Agreement shall mean an exit credit facility to enable
Borrowers to emerge from Chapter 11 and replace or refinance the
Credit Agreement (and such DIP facility provided by GE Capital in
the Chapter 11 case).
2.
Terminating Events
. The
obligation of the Lenders to forbear from exercising remedies shall
terminate upon the occurrence of any one or more of the following
events (each, a “ Terminating Event ”):
(a)
The Borrowers
and/or Guarantor, or any of them, shall fail to execute and deliver
to the Agent any documents or instruments reasonably determined by
the Agent to be reasonably necessary or desirable to perfect or to
continue or confirm the perfection of the liens and/or the security
interests of the Agent in any Collateral within two Business
Days after any such documents or instruments are presented to the
Borrowers and/or Guarantor; and/or
(b)
Any Event of
Default (other than the Existing Defaults) occurs; provided,
however, that no Event of Default shall be deemed to occur by
reason of the filing by the Borrowers of a voluntary proceeding
under Chapter 11; and/or
(c)
The Borrowers
and/or the Guarantor, or any of them, shall have failed to comply
with any of the provisions of this Agreement, including without
limitation, the provisions of Sections 3 and 8; and/or
(d)
Failure of the
Borrowers to comply with the deadlines set forth in
Section 7(c) hereof after five (5) business days
written notice to the Borrowers and such default having not been
cured within such five (5) days; provided, however, if the
default arises under
Section 7(c) (i) (ii) (iii) or (iv), then
the Forbearance Period may not expire sooner than January 7,
2006; and/or
(e)
The filing of a
case under Chapter 11 in which debtor-in-possession financing is
provided by any person or entity other than GE Capital or a
syndicate of lenders arranged and agented by GE
Capital.
Upon the occurrence of a Terminating
Event, without further notice to the Borrowers or Guarantor or any
other action on the part of Lenders, (i) all Obligations owing
to Lenders,
3
together with interest thereon at
the Default Rate shall be immediately due and payable without
presentment, demand, protest or other notice of any kind,
(ii) Lenders shall not be obligated to make any further
advances or to permit the further use by the Borrowers of the
Collateral and (iii) Lenders may exercise any and all rights
and remedies under the Credit Agreement, the Loan Documents and
applicable law.
3.
Other Agreements
. Each of
the parties hereby agree that:
(a)
The Borrowers
shall deliver to the Agent on the first Business Day following the
fifteenth (15 th ) day of each month, a certificate
reflecting the calculation of the Borrowers’ Borrowing Base,
which shall be calculated with respect to Eligible Receivables, as
of the fifteenth (15 th ) day of such month, and which
shall be calculated with respect to Eligible Inventory, as of the
fifteenth (15 th ) day of such month, and to be in such
form satisfactory to the Agent (the “ Interim Borrowing Base Certificate
”).
The Interim Borrowing Base Certificate shall be in addition to, and
not in lieu of, the monthly Borrowing Base Certificate required to
be delivered to the Agent by the Borrowers pursuant to
Section 5.2(a) of the Credit Agreement.
(b)
Commencing on the
Effective Date (as defined below) and throughout the Forbearance
Period, all Advances shall bear interest as provided in
Section 1(c) hereof on the principal amounts due as set
forth in Section 3(c).
(c)
As of
November 29, 2005, the outstanding principal balance due under
the Credit Agreement is $27,736,367.92, the pre-payment
penalty is $1,200,000 (the “Pre-Payment Fee”) and
accrued and unpaid interest is $181,063.12 all of which, but for
this Forbearance Agreement, are now due and payable. Lenders
shall waive the Pre-Payment Fee on the same terms and conditions
that it has agreed to waive the PIK Spread as provided in
Section 1(c).
(d)
Commencing on the
Effective Date and continuing throughout the Forbearance Period,
the Borrowers shall comply with the financial covenants set forth
in the Credit Agreement as may be modified by the Waiver Agreement,
August Waiver and such other agreements entered into between
Borrowers and Lenders, provided, however, that Lenders hereby waive
the Waiver Fee due under, and defined in,
Section 5.1(b)(ii) of the August Waiver.
(e)
The Borrowers
will deliver to the Agent, on or before December 8, 2005, cash
flow projections in connection with the contemplated Chapter 11
case of the Borrowers which will reflect, among other things,
compliance with cash reserve needs to satisfy reclamation and
unsecured creditor claims pursuant to Bankruptcy Code Sections
546(c) and 503(b)(9).
4.
Advances . During the
Forbearance Period, each of the parties hereby agree that provided
that no Default or Event of Default (other than the Existing
Defaults) shall have occurred and be continuing the Agent and the
Lenders shall continue to make Revolving Advances to the Borrowers
as provided by Section 2.1 of the Credit
Agreement.
5.
Blocked Accounts; Depository
Accounts .
(a)
In accordance
with the terms of the Credit Agreement, certain Blocked Accounts
and/or Depository Accounts have been established by the Borrowers
in which the proceeds of the Collateral are deposited by the
Borrowers and each of its Subsidiaries. Each
4
Blocked Account and/or
Depository Account shall be and remain under the sole dominion and
control of the Agent.
(b)
The Borrowers and
Guarantor acknowledge and agree that they have no right of
withdrawal from the Blocked Accounts and/or the Depository Accounts
except for uses permitted by this Agreement and the Credit
Agreement, and that the funds on deposit in such accounts shall
continue to be collateral security for the Obligations.
6.
Conditions Precedent
. This
Agreement and the agreements of the Lenders described herein will
not be effective unless and until each of the following has
occurred or been satisfied, or waived in writing by the Agent and
the Lenders, by (i) the close of business on December 2,
2005 or (ii) such later time as the Agent and the Lenders may
agree in their sole discretion (the “ Effective Date ”):
(a)
The Borrowers and
Guarantor will have executed and delivered this Agreement;
and
(b)
The Agent shall
have received, in immediately available funds, an amount equal to
all Documentation Fees (as defined below) arising in connection
with the negotiation and execution of this Agreement plus the Agent
Fee (as defined below).
7.
Representations and
Warranties .
(a)
Each of the
Borrowers and the Guarantor hereby acknowledges and confirms that
(i) all of the Recitals set forth above are true and correct;
(ii) the Agent has informed the Borrowers and the Borrowers
agree that as of the close of business on November 29, 2005,
there remain outstanding Letters of Credit issued by Lender for
Borrowers’ account in the face amount of $225,000, and in
addition, the Borrowers are liable to the Lenders under the Credit
Agreement and the Loan Documents in an aggregate principal amount
of $27,511,367.92 in Revolving Advances, plus accrued but unpaid
interest thereon, plus the costs and expenses of the Agent and the
Lenders incurred in connection with the Obligations and
reimbursable under the Credit Agreement, including, without
limitation, reasonable attorneys’ fees and expenses incurred
by the Agent and Lenders (or any of them) in the negotiation,
preparation or enforcement of this Agreement, and any documents,
agreements or instruments referred to herein, plus the Pre-Payment
Fee, all without offsets, counterclaims or defenses of any kind or
nature whatsoever; (iii) the acknowledgment of the Existing
Defaults does not imply that other Events of Default do not exist
as of the date hereof; (iv) the Credit Agreement and the Loan
Documents are in full force and effect as to the Borrowers and the
Guarantor and are enforceable against Borrowers and Guarantor in
accordance with their respective terms; (v) all intercompany
accounts receivable and intercompany accounts payable among
Borrowers and the Guarantor are the result of arm’s length
transactions entered into in good faith in the ordinary course of
business; (vi) the Borrowers and Guarantor do not have any
claims, defenses, causes of action, counterclaims or offsets
against the Agent or any Lender or their respective officers,
employees, agents, directors, subsidiaries, affiliates or attorneys
of any kind or nature whatsoever; and (vii) as of the date
hereof, all liens, security interests, assignments and pledges
encumbering the Collateral, created pursuant to and/or referred to
in the Credit Agreement or the Loan Documents, are first priority
liens, security interests, assignments and pledges subject only
to
5
Permitted Encumbrances,
continue unimpaired, are in full force and effect and secure and
shall continue to secure all of the obligations described in the
respective instruments in which such interests were
granted;
(b)
The Borrowers and
Guarantor hereby further represent and warrant that:
(i)
After giving effect to this
Agreement, and except for those matters constituting Existing
Defaults, all of the representations and warranties of the
Borrowers and the Guarantor in the Credit Agreement and the Loan
Documents (except those made as of and
|
