Exhibit 10.9
FORBEARANCE AGREEMENT NO.
5
THIS FORBEARANCE AGREEMENT
No. 5 (this “ Agreement ” ) is made
and entered into as of November 1, 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
been in default under the CF Documents for an extensive period of
time pursuant to Existing Defaults (as that term is defined is the
Forbearance Agreements) and other matters stated in the Forbearance
Agreements, and interest is accruing, and continues to accrue at
the Default Rate as defined in Section 1.16 of the Loan Agreement.
Borrower continues to be in the default under EF Documents on
account of Emergystat Stock Purchase.
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THIRD:
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The 2005 Tax
Default continues to exist. Schedule 1 , attached hereto and
by this reference made a part hereof, sets forth, among other
things, a current, complete, and accurate list of all 2005 Unfunded
Payroll Taxes.
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FOURTH:
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Borrower has
failed to provide GECC with written confirmation and reports, as
required by Section 3.9 of the 9/1/05 Forbearance Agreement, that
Borrower is in full compliance with the lockbox provisions of
Section 2.3 of the Loan Agreement. One hundred percent (100%) of
the Accounts Proceeds are not being deposited directly into the
Lockbox Account(s) by payors of Borrower’s Accounts, and
Borrower acknowledges that Borrower’s continuing failure to
cause such direct deposits constitutes an additional default under
CF Documents.
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FIFTH:
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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 request to forbear under the terms
and conditions of the Restructuring Agreement.
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SIXTH:
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The forbearance
period with respect to both the EF Obligations and the CF
Obligations expired on October 31, 2005.
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SEVENTH:
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In light of the
expiration of the forbearance period, the continued existence of
the Existing Defaults, and of the 2005 Tax 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
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 and the 2005 Tax Default.
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EIGHTH:
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Borrower and
Parent have represented to GECC that: (i) Parent and Tenth Street
Fund I, L.P., have executed a term sheet dated October 26, 2005,
regarding a $3,500,000.00 financing, (i) Parent continues to work
toward a transaction between Parent and Barron Partners LP
regarding an offering of equity in Parent, (ii) Parent plans to use
the proceeds of any equity offering or other financing to pay the
Unfunded Payroll Taxes, related penalties, and the 2005 Unfunded
Payroll Taxes, (iii) Borrower continues to pursue refinancing from
Meridian Commercial Healthcare Finance sufficient to pay in full
the CF Obligations and the EF Obligations, (iv) Parent plans to
cause loan proceeds received by any affiliate of Parent and
Borrower to be utilized to pay the Unfunded Payroll Taxes, related
penalties, and the 2005 Unfunded Payroll Taxes, (v) Borrower
continues to work diligently with the IRS to resolve the
Enforcement Notice, as well as the Unfunded Payroll Taxes, and (v)
relations between Borrower and Johnny Glenn Crawford continue to be
seriously strained.
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NINTH:
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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,
and (ii) the 2005 Tax Default.
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1.2 “ Forbearance
Agreements ” means all of the forbearance letter
agreements between CF and Borrower identified and set forth in
Schedule “2” attached hereto.
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. C36478(M) pending in the Law
Court for Sullivan County At Kingsport, 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.
2. Recitals . Each of
Borrower and Parent hereby acknowledges that all of the Recitals
stated above are true and accurate, and by this reference are
incorporated into and made a part of the body of this
agreement.
3. Limited Forbearance
. Subject to all of the precisions of this Agreement, GECC will
forbear from exercising its right and remedies under 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 November 1, 2005, through November 30, 2005 (the
“ Extended Forbearance Period ” ) if, and
only if, each and all of the following are satisfied timely and
continue to be satisfied:
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3.1
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Scheduled
Mandatory Payments Under Consolidation Note
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3.1.1 On or before November 30,
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. Such payment shall
permanently reduce such obligations, and upon receipt of such
payment in full CF shall have no further obligation to make
advances or otherwise extend credit to Borrower.
3.1.2 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 entrire 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 Crawford Relationship
Status Reports .
3.2.1 Lease . Within
three (3) days of execution and delivery of this Agreement,
Borrower shall deliver to GECC: (i) a true and complete
(including all exhibits, schedules, and other attachments) copy of
the fully executed lease between Borrower, as lessee, and
Johnny
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Glenn Crawford ( “ Crawford
” ) or an entity controlled by Crawford, as lessor, of
Borrower’s corporate headquarters located at 126 Emergystat
Loop, Vernon, Alabama 35592 (the “ Headquarters
Lease ” ), and (ii) all amendments,
modifications, replacements, extensions and other agreements in any
way affecting the Headquarters Lease. Borrower has delivered to
GECC a copy of an unsigned lease between Crawford and Emergystat,
Inc., but Borrower acknowledges and agrees that Borrower is still
obligated to provide GECC with a true and complete copy of the
fully executed Headquarters Lease.
3.2.2 Intercompany Loans
. On or before Monday, November 7, 2005, Borrower shall
deliver to GECC true and complete (including exhibits, schedules,
and other attachments) copies of all documentation, including, but
not limited to, all promissory notes, loan agreements, other type
agreements, ledger entries, and other documents, evidencing each
and every intercompany loan or other transaction, financial or
otherwise, between Borrower and Crawford.
3.2.3 Status Reports .
Upon execution and delivery of this Agreement and continuing on
each Monday thereafter, Borrower shall deliver to GECC, in form,
content, and detail satisfactory to GECC, (i) a written report
(executed and certified by Borrower’s authorized
representatives) describing any and all actions, communications
(both verbal and written), negotiations with Crawford during the
previous week regarding the Headquarters Lease and the overall
relationship between Borrower and Crawford, and (ii) true and
complete copies (executed and certified by Borrower’s
authorized representatives) of all correspondence and other
documentation exchanged between Borrower and Crawford including,
but not limited to, all eviction notices, threats of eviction, and
alll other legal actions commenced or threatened by Crawford,
Borrower, or Parent.
3.3 Guarantor Consent
. Upon execution and delivery of this Agreement by Borrower to
GECC, Borrower shall deliver to GECC the Consent And Agreement Of
Guarantor form attached this Agreement duly executed by
Parent.
3.4 Lawsuit Status Reports
. Commencing on Monday, November 7, 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, 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 Current Payroll Taxes
. Commencing on November 1, 2005, and continuing
thereafter: (i) without exception Borrower shall pay timely
and in full each and every payroll tax amount when due, and
(ii) within one (1) Business Day of each such payroll tax
payment made, shall deliver to CF written confirmation (in form,
substance, and detail satisfactory to CF, and executed and
certified by authorized representatives of Borrower) of each such
payroll tax payment made, including, but not limited to, the
amount, date paid, and taxing authority. Each of Borrower and
Parent hereby acknowledges and agrees that any failure by Borrower
to perform fully and continuously under this
Section 3.5 shall constitute an automatic Event of
Default hereunder and under the CF Documents and shall
automatically terminate the Extended Forbearance Period, all
without the need for any further notice or declaration of any kind
by CF.
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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 Tuesday, November 1, 2005,
and on each Monday 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 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 November 7, 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 November 7, 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
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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 November 1, 2005
through November 30, 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 November 7, 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 statements from any accounts controlled or administered by
Borrower into which proceeds of any accounts receivable or other
rights to payment of Quality Care and or Southland are deposited (
“ Quality Care/Southland Bank Accounts ”
), so that CF can confirm that all such property of Quality
Care/Southland is strictly segregated from Borrower’s
Accounts and Accounts Proceeds. On each Monday commencing on
November 7, 2005, and continuing on each Monday thereafter,
Borrower will deliver to CF written confirmation, in form, content,
and detail satisfactory to CF (executed and certified by
Borrower’s authorized representatives) evidencing and
certifying that Borrower has fully satisfied all requirements of
this Section 3.10 (including, but not limited to, the
delivery to CF of bank statements regarding Quality Care/Southland
as provided above). Any failure by Borrower to comply with the
terms of this Section 3.10 shall constitute an Event of
Default under the Loan Agreement. The requirements of this
Section 3.10 do not alter or affect in any way
Borrower’s obligation to comply with the lockbox and other
provisions of the Loan Agreement, the other GECC Documents, and
this Agreement, regarding Accounts and Accounts Proceeds of
Borrower.
3.11 Weekly Reports .
On each Monday commencing on November 7, 2005, and continuing
on each Monday there
