Exhibit 10.5
FORBEARANCE AGREEMENT NO.
2
THIS FORBEARANCE AGREEMENT No. 2
(this “ Agreement ” ) is made and entered
into as of July 15, 2005 by and among EMERGYSTAT, INC., a
Mississippi corporation, EMERGYSTAT OF SULLIGENT, INC., an Alabama
corporation, EXTENDED EMERGENCY MEDICAL SERVICES, INC., an Alabama
corporation, MED EXPRESS OF MISSISSIPPI, LLC, a Mississippi limited
liability company (collectively, “ Borrower
” ), BAD TOYS HOLDINGS, INC., a Nevada corporation (
“ Parent ” ), GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation, aka GE COMMERCIAL FINANCE
HEALTHCARE FINANCIAL SERVICES CF ( “ CF ”
), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation, aka GE COMMERCIAL FINANCE HEALTHCARE FINANCIAL
SERVICES EF ( “ EF ” ) (collectively, CF
and EF and their successors, endorsees, transferees, affiliates,
and assigns are referred to as “ GECC ”
).
RECITALS
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FIRST:
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Borrower,
Parent, and GECC are parties to that certain Restructuring
Agreement, dated as of March 18, 2005, as amended by that certain
Amendment No. 1 To Restructuring Agreement, dated as of April 29,
2005 (as amended, the “ Restructuring Agreement
” ).
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SECOND:
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Borrower has
failed to make certain payments as required under the Restructuring
Agreement (the “ Restructuring Default ”
). Borrower has been in default under the CF Documents for an
extensive period of time pursuant to Existing Defaults (as that
term is defined in the Forbearance Agreements) and other matters
stated in the Forbearance Agreements, and CF is entitled to charge
interest at, and interest is accruing and continues to accrue, at
the Default Rate as defined in Section 1.16 of the Loan Agreement.
Borrower has been in default under the EF Documents on account of
the Emergystat Stock Purchase (as that term is defined in the
Tri-Party Agreement) (the “ Stock Purchase Default
” ).
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THIRD:
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CF has made
substantial and extensive financial accommodations to Borrower
under the terms and conditions of the Forbearance Agreements, the
Tri-Party Agreement, and the Restructuring Agreement. EF also has
accommodated Borrower’s requests to forbear under the terms
and conditions of the Restructuring Agreement and certain of the
Forbearance Agreements.
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FOURTH:
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The forbearance
period with respect to both the EF Obligations and the CF
Obligations expired on July 15, 2005.
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FIFTH:
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In light of the
expiration of the forbearance period, the continued existence of
the Existing Defaults, the Enforcement Notice Default, and
Borrower’s failure to comply with the terms and conditions of
the Forbearance Agreements and the Restructuring Agreement: (i)
GECC has no obligation of any kind to provide further funding or
financial accommodations to Borrower under the GECC Documents or
otherwise, (ii) GECC is entitled to declare the CF Obligations
and
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the EF
Obligations immediately due and payable, and (iii) GECC is entitled
to exercise immediately its rights and remedies against Borrower
and the Consolidation Note Collateral pursuant to any and all of
the GECC Documents and applicable law on account of the Existing
Defaults.
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SIXTH:
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Borrower and
Parent have represented to GECC that: (i) Borrower continues to
work diligently to resolve the Enforcement Notice, as well as the
Unfunded Payroll Taxes, with the IRS, and (ii) Parent anticipates
that proceeds from financing that it intends to obtain will be
sufficient to pay in full the CF Obligations and the EF
Obligations.
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SEVENTH:
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Borrower is
asking GECC to continue to forbear from exercising its collection
and other rights, and to continue to make advances under the CF
Documents. GECC is willing to agree to this request by Borrower but
only under the terms and conditions set forth in this
Agreement.
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NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in consideration of the premises and
agreements, provisions and covenants herein contained, each of
Borrower, Parent, and GECC agrees as follows:
1. Definitions. Unless
otherwise defined in this Agreement or in the above Recitals, all
capitalized terms used herein shall have the meanings ascribed to
them in the Forbearance Agreements and the Restructuring Agreement
as applicable. In addition, the following capitalized terms shall
have the meanings set forth below:
1.1 “ Existing
Defaults ” means (i) all Existing Defaults (as that
term is defined in the Forbearance Agreements) and defaults with
respect to other matters stated in the Forbearance Agreements, (ii)
the Restructuring Default, and (iii) the Stock Purchase
Default.
1.2 “ Forbearance
Agreements ” means all of the forbearance letter
agreements between CF and Borrower identified and set forth in
Schedule “1” attached hereto, and the
Forbearance Agreement dated May 31, 2005 between Borrower, Parent,
and GECC.
1.3 “ GECC Documents
” means all of the CF Documents, the EF Documents, the
Consolidation Note, the Forbearance Agreements, the Restructuring
Agreement, the Tri-Party Agreement, and all notes, loan agreements,
security agreements, guaranties, deeds of trust, and other
instruments and documents, executed and delivered in connection
therewith in favor of CF and/or EF, whether such documents and
instruments are now existing or hereafter created, as the same have
been and may be further amended, replaced, supplemented or
otherwise modified from time to time, including but not limited to
the Restructuring Agreement.
1.4 “ Pacific Capital
Lawsuit ” means Case No. 2:05CV103 pending in the
United States District Court, Eastern District at Greeneville,
Tennessee, captioned as Pacific Capital, L.P. v. Emergystat, Inc.,
et al ; and any other state or federal proceeding
based on the same or similar factual allegations.
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2. Recitals . Each of Borrower and
Parent hereby acknowledges that all of the Recitals stated above
are true and accurate.
3. Limited Forbearance
. Subject to all of the provisions of this Agreement, GECC will
forbear from exercising its rights and remedies under the GECC
Documents and otherwise with respect to the Existing Defaults and
the Enforcement Notice Default, and subject to the terms and
conditions of the CF Documents, CF will continue to make advances
to Borrower, from July 15, 2005 through August 31, 2005 (the
“ Extended Forbearance Period ” ) if, and
only if, each and all of the following are satisfied timely and
continue to be satisfied:
3.1 Scheduled Mandatory
Payments Under Consolidation Note .
3.1.1 On or before July 29, 2005,
Borrower shall pay to GECC, and Parent shall cause Borrower to pay
to GECC, and GECC shall have received payment in full, in
immediately available funds, of an amount equal to One Hundred
Thousand Dollars ($100,000.00), all of which amount shall be
applied by GECC to reduce permanently the CF
Obligations.
3.1.2 On or before August 15, 2005,
Borrower shall pay to GECC, and Parent shall cause Borrower to pay
to GECC, and GECC shall have received payment in full, in
immediately available funds, of an amount equal to One Hundred
Thousand Dollars ($100,000.00), all of which amount shall be
applied by GECC to reduce permanently the CF
Obligations.
3.1.3 On or before August 31, 2005,
Borrower shall pay to GECC, and Parent shall cause Borrower to pay
to GECC, and GECC shall have received payment in full, in
immediately available funds, of the entire amount of both the CF
Obligations and the EF Obligations, as determined by CF and EF and
in accordance with the GECC Documents.
3.1.4 Borrower shall continue to
make regularly scheduled payments when due to GECC with respect to
the EF Obligations until such time when GECC shall have received
payment in full of the entire amount of the EF Obligations, and
nothing contained in this Agreement shall be construed to excuse or
extend the time or times when such regularly scheduled payments are
due.
3.2 Forbearance Fee.
As partial consideration for GECC’s agreement to continue to
forbear from exercising its rights and remedies under the GECC
Documents and to enter into this Agreement, Borrower and Parent
shall pay GECC a forbearance fee (the “ Forbearance
Fee ”) in the total amount of Forty Thousand Dollars
($40,000.00). The Forbearance Fee is fully earned in its entire
amount upon execution of this Agreement, and is part of the
Obligations under the Loan Agreement and the other GECC Documents.
The Forbearance Fee shall be paid as follows: (a) upon execution
and delivery of this Agreement by Borrower and Parent to GECC,
Borrower shall pay to GECC, and Parent shall cause Borrower to pay
to GECC, and GECC shall have received payment in full, in
immediately available funds, of an initial payment on the
Forbearance Fee in the amount of Twenty Five Thousand Dollars
($25,000.00); and (b) on or before August 31, 2005, Borrower shall
pay to GECC, and Parent shall cause Borrower to pay to GECC, and
GECC shall have received payment in full, in immediately available
funds, of the remaining amount of the Forbearance Fee in the amount
of Fifteen Thousand Dollars ($15,000.00). Borrower
hereby
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authorizes and instructs CF to make an advance
under the Loan Agreement in order to pay the Forbearance Fee to
GECC, and such advance shall constitute a Revolving Credit Loan (as
that term is defined in the Loan Agreement).
3.3 Guarantor Consents
. Upon execution and delivery of this Agreement by Borrower to
GECC, Borrower shall deliver to GECC the Consent And Agreement Of
Guarantor forms attached this Agreement duly executed by Johnny
Glenn Crawford and Parent, respectively.
3.4 Lawsuit Status Reports
. Commencing on Monday, July 18, 2005, and continuing on each
Monday thereafter, Borrower shall deliver to GECC, in form,
content, and detail satisfactory to GECC, written reports (executed
and certified by Borrower’s authorized representatives)
describing any and all actions, communications, and negotiations
with Pacific Capital, L.P. regarding the Pacific Capital Lawsuit
during the previous week, including but not limited to, any
settlement proposals, proposed motions, dismissal discussions, and
discussions regarding GECC as a defendant in the Pacific Capital
Lawsuit.
3.5 Indemnity Agreement
Regarding Lawsuit . On or before July 29, 2005, Borrower
and Parent shall deliver to GECC an indemnity agreement (the
“ Indemnity Agreement ” ) that shall
provide, among other things, that Borrower and Parent shall
indemnify GECC from any adverse judgment or loss suffered or
incurred by GECC with respect to the Pacific Capital Lawsuit. The
Indemnity Agreement shall be in form, content, and detail
acceptable to GECC in its sole and absolute discretion.
3.6 Incorporation Of GECC
Documents . During the Extended Forbearance Period, and
unless expressly modified in this Agreement, Borrower shall comply
with and satisfy, and shall continue to comply with and satisfy,
all terms, conditions, and requirements of the GECC Documents, all
without any waiver of or other effect upon GECC’s continuing
rights thereunder and otherwise.
3.7 Resolution Of The
Enforcement Notice . With respect to the Enforcement Notice
(as defined in the Twentieth Forbearance Agreement), and in order
to confirm the status of the Enforcement Notice and that Borrower
is using its best efforts to resolve the Enforcement Notice,
Borrower agrees to do the following: (i) continue to deliver to CF
copies of any documents related to the Enforcement Notice,
including, but not limited to, all communications between Borrower
and the IRS regarding the Enforcement Notice, with such copies to
be delivered to CF simultaneously with their submission by or
delivery to Borrower, (ii) arrange for a teleconference(s) between
Borrower, an authorized representative of the IRS, and CF to be
held at such date(s) and time(s) reasonably requested by CF, to
discuss the Enforcement Notice, (iii) hereby expressly authorizes
CF to contact the IRS directly regarding the Enforcement Notice;
and (iv) commencing on Friday, July 22, 2005, and on each Friday
thereafter, to deliver to CF a detailed written report, in form,
content, and detail satisfactory to CF (executed and certified by
Borrower’s authorized representatives) describing the status
of the Enforcement Notice and the Unfunded Payroll Taxes, all
appeals, offers, or other actions Borrower has taken with respect
to such matters, and of any response(s) or other communications
Borrower has received from the IRS. Borrower understands,
acknowledges, and agrees that if the IRS takes any action against
Borrower or its assets at any time with respect to the Enforcement
Notice or
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otherwise, GECC shall have no obligation to
forbear from exercising, and GECC shall be entitled to exercise
immediately, all of its rights and remedies under the Loan
Agreement, the other GECC Documents, and this
Agreement.
3.8 Continuing Obligations
Regarding Unfunded Payroll Taxes . Borrower’s
obligations regarding the Enforcement Notice in Section 3.7
above are in addition to Borrower’s continuing obligation to
comply with and satisfy all terms of the Forbearance Agreements
regarding the Unfunded Payroll Taxes, all of which remain in full
force and effect. In addition to the foregoing, the non-compliance
fee in the amount of $5,000 per week provided for in paragraph C.4.
of the Fourteenth Forbearance Agreement will continue to accrue
during the Extended Forbearance Period, and each such fee will be
fully earned and due and payable in full by Borrower to CF on July
18, 2005, and continuing on each Monday thereafter, so long as
Borrower has not obtained the release of any and all liens asserted
by the IRS against Borrower and delivered the same to GECC, and all
accrued and unpaid amounts of the non-compliance fee shall
constitute part of the CF Obligations owing from Borrower to CF. In
addition to all of the foregoing, Borrower will continue to comply
with all requirements of the Forbearance Agreements regarding the
Unfunded Payroll Taxes.
3.9 Lockbox Compliance
. On or before July 18, 2005, CF will receive from Borrower, in
form, content, and detail satisfactory to CF, written confirmation
from Borrower (executed and certified by Borrower’s
authorized representatives) evidencing and certifying that Borrower
is in full compliance with the lockbox provisions of Section 2.3 of
the Loan Agreement, and that all payors of Borrower’s
Accounts (including, but not limited to, any and all governmental
authorities, fiscal intermediaries, and persons or entities acting
on their behalf who are payors of Medicare or Medicaid Accounts)
are depositing, and will continue to deposit, one hundred percent
(100%) of the proceeds of any and all Accounts (the “
Accounts Proceeds ” ) directly into the Lockbox
Account(s). During the Extended Forbearance Period, i.e. ,
from July 15, 2005 through August 31, 2005, and without altering or
affecting in any way any of the foregoing duties and obligations of
Borrower, Borrower will deposit one hundred percent (100%) of the
Accounts Proceeds received by Borrower directly into the Lockbox
Account(s) within twenty-four (24) hours of their receipt by
Borrower, and on each Monday commencing on July 18, 2005, and
continuing on each Monday thereafter, Borrower will deliver to CF,
in form, content, and detail satisfactory to CF, written reports
from Borrower (executed and certified by Borrower’s
authorized representatives) evidencing and certifying that, during
each previous week, one hundred percent (100%) of the Accounts
Proceeds were deposited directly in the Lockbox Account(s) by
payors of Borrower’s Accounts.
3.10 Segregation Of
Borrower’s Accounts . To the extent Borrower has or
comes into possession of any accounts receivable, other rights to
payment, or proceeds therefrom that are not owned by Borrower
(including, but not limited to, any such property that is owned by
Southland or Quality Care as described below) ( “
Non-Borrower Funds ” ), Borrower shall strictly
segregate and keep all such Non-Borrower Funds separate from
Borrower’s Accounts and Accounts Proceeds, and all
Non-Borrower Funds shall be maintained at all times in bank or
other accounts that are separate from any bank or other accounts
which contain Accounts or Accounts Proceeds of Borrower. Without
limiting the foregoing in any way, Borrower also will deliver to CF
bank statem
