EXHIBIT 10.31
SETTLEMENT AGREEMENT RE NHP LEASE PORTFOLIO
This "Settlement Agreement Re NHP Lease Portfolio"
("Agreement") is entered into as of June 27, 2001, by and among Mariner
Post-Acute Network, Inc. ("MPAN"), Living Centers of Texas, Inc. ("LCT"),
GranCare, Inc. ("GranCare"), GCI Palm Court, Inc. ("GCI"), Evergreen HealthCare
Ltd., L.P. ("Evergreen" and collectively with MPAN, LCT, GranCare, and GCI, the
"Debtors"), Nationwide Health Properties, Inc. ("Nationwide"), and NH Texas
Properties Limited Partnership ("NHP Texas" and collectively with Nationwide,
"NHP"), with each of the foregoing hereinafter referred to collectively as the
"Parties" and individually as a "Party", with reference to the following facts
and recitals:
RECITALS
A. Debtors are the debtors and debtors in possession in cases
pending under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"), having filed their voluntary petitions on January 18, 2000
(the "Petition Date"). The Debtors' chapter 11 cases are jointly administered
and consolidated for procedural purposes only under Case No. 00-00113 (MFW) (the
"Bankruptcy Case"). The Debtors' individual case numbers are: MPAN, Case No.
00-00113 (MFW); LCT, Case No. 00-00189 (MFW); GranCare, Case No. 00-00170 (MFW);
GCI, Case No. 00-00157 (MFW); and Evergreen, Case No. 00-00147 (MFW).
B. On the Petition Date, the Parties, in various combinations,
were parties to real property leases of certain nursing care facilities as more
fully described in this Agreement.
C. Connerwood Healthcare, Inc., debtor and debtor in possession
in Case No. 00-00139 (MFW) in the Bankruptcy Case ("Connerwood") and Nationwide
are parties to a "Settlement Agreement Re NHP Indiana Lease Portfolio" dated as
of May 11, 2001, including an "Operations Transfer Agreement" in connection
therewith among Connerwood, Nationwide, and Nationwide's new tenant, American
Lifestyles, LLC (collectively, the "NHP Indiana Agreements") providing for,
inter alia, the rejection of the leases identified on Schedule 1 hereto (the
"Rejected Indiana Leases"), the resolution of any and all claims related to
Connerwood's use, occupancy, operation or control of the facilities subject to
the Rejected Indiana Leases (the "Rejected Indiana Facilities"), and the
transition of operations at the Rejected Indiana Facilities to American
Lifestyles, LLC.
D. Pursuant to this Agreement, the Parties have agreed to (1) the
assumption of certain leases, as modified, the rejection of certain other
leases, and the rejection of the "Master Addendum to Leases" dated October 31,
1997, by and among, MPAN, LCT, GranCare, GCI, Connerwood, Evergreen and
Nationwide (the "Original
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Master Addendum"), (2) the assumption and assignment of a sublease pursuant to
section 365 of the Bankruptcy Code, (3) the transfer of certain personal
property located at facilities subject to leases to be rejected by this
Agreement free and clear of liens and encumbrances, and (4) the settlement of
claims and disputes pursuant to section 363 of the Bankruptcy Code, all as more
fully described below.
E. The Parties desire to provide for an orderly transition of the
operations of the facilities that are the subject of the leases to be rejected
by this Agreement, or, in the alternative, for their closure.
F. The Parties desire to provide for the resolution of all
outstanding claims and disputes among the parties as to the leases to be
rejected by this Agreement and to agree upon cure and adequate assurance of
future performance requirements regarding the leases to be assumed pursuant to
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
1. Rejection Of Leases And Agreements. On the Effective
Date (as defined in Paragraph 27 hereof), any and all executory rights and
obligations under the following leases and agreements shall be rejected pursuant
to section 365(a) of the Bankruptcy Code:
a. the "Lease Agreement--Beechnut Manor Nursing
Home Houston, Texas," dated as of October 1, 1990, as amended (the "Texas
Beechnut Lease"), between LCT, as successor tenant, and NHP Texas;
b. the "Master Lease Agreement" dated September
27, 1990 (the "Texas Lease"), as amended, between LCT and NHP Texas, as
successor lessor. The Texas Beechnut Lease and the Texas Lease shall be
hereinafter referred to collectively as the "Rejected Texas Leases", and the
facilities subject to the Rejected Texas Leases shall be hereinafter referred to
as the "Rejected Texas Facilities". A list of the names, locations, and Medicare
Provider Numbers for the Rejected Texas Facilities is annexed hereto as Schedule
2; and
c. The Original Master Addendum.
2. Continuation of Operations. Notwithstanding the
rejection of the Rejected Texas Leases, LCT shall continue to operate each
Rejected Texas Facility for a limited period of time as provided for herein. If
the date (the "Transition Date") upon which LCT transitions operations of a
Rejected Texas Facility to NHP Texas or its designee (the "New Operator") does
not occur on or prior to August 1, 2001, then LCT will continue to operate the
Rejected Texas Facility for a period of the later of (a) up to
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two additional months (to September 30, 2001); (b) the Effective Date; or (c)
such later date as the Parties may mutually agree in writing; provided, however,
that from and after the later of July 31, 2001, or the Effective Date, LCT shall
stop paying rent until such time that each Rejected Texas Facility is either
transferred or closed (the "Rent Abatement Period"). Within thirty days after
the end of each month during the Rent Abatement Period, LCT will submit to NHP
Texas profit and loss statements certified as true and accurate by LCT's Chief
Accounting Officer and based on the accrual method of accounting, as heretofore
prepared and used by LCT (which shall not include management fees), showing for
each Rejected Texas Facility which has not been transitioned to a new operator
the revenue and expense items arising from each such Facility's day to day
operations for the immediately preceding month (the "Profit and Loss
Statement"). Except as otherwise provided herein, within ten (10) business days
of NHP Texas' receipt of the Profit and Loss Statement, NHP Texas will pay a
management fee to LCT equal to 5% of the total revenue (the "Management Fee"),
determined in accordance with GAAP Standards, consistently applied, generated by
each Rejected Texas Facility that LCT continues to operate. In the event that
the Profit and Loss Statement for any month during the Rent Abatement Period
shows a net operating profit (i.e., earnings before interest, income taxes,
depreciation, amortization and Management Fee) ("Net Operating Profits")
determined in accordance with GAAP Standards, consistently applied, for any
Rejected Texas Facility that exceeds the amount of the Management Fee, then LCT
shall deduct the Management Fee from the Net Operating Profit and payment of the
Management Fee will be thereby satisfied. LCT will immediately pay to NHP Texas
the balance of the Net Operating Profit after deduction of the Management Fee.
To the extent that the Net Operating Profit is less than the Management Fee,
then the Net Operating Profit shall be credited against the Management Fee and
NHP Texas will pay LCT the unpaid balance of the Management Fee within the said
ten (10) day period. In the event that the Profit and Loss Statement for any
month during the Rent Abatement Period shows a negative Net Operating Profit (a
"Net Operating Loss") at any Rejected Texas Facility, NHP Texas will pay the
Management Fee and reimburse LCT for such Net Operating Loss within ten (10)
business days after NHP Texas' receipt of the Profit and Loss Statement. If the
Transition Date for a Rejected Texas Facility has not occurred by the later of
September 30, 2001, the Effective Date, or such later date as the Parties may
mutually agree in writing, then LCT may proceed to close such Rejected Texas
Facility in accordance with applicable law, and no Administrative Rent (as
defined below) or other amounts shall be payable during this period so long as
LCT is diligently pursuing closure of the Rejected Texas Facility.
3. Transition. If NHP Texas, as landlord, designates a
qualified party to become the New Operator of a Rejected Texas Facility, NHP
Texas, as landlord, and the New Operator shall, subject to the occurrence of the
Effective Date, enter into an "Operations Transfer Agreement" substantially in
the form of Exhibit "A" hereto on or before the Transition Date. In connection
therewith, LCT agrees to transfer owned personal property utilized in the
operation of the Rejected Texas Facilities, and the
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Medicare Provider Agreements related to such Facilities, on the terms and
conditions provided in the Operations Transfer Agreement.
In connection with the transition, LCT shall be responsible
for, and shall pay on a timely basis, claims or charges which are owed to third
parties arising from its ordinary use, operation or control of each Rejected
Texas Facility, including, but not limited to, payroll, insurance premiums,
utilities, amounts due under executory obligations, and similar obligations,
which claims or charges were (i) incurred in and attributable to the period from
the Petition Date to the Transition Date, and (ii) qualify as costs of
administration under section 503(b)(1) of the Bankruptcy Code.
4. Medicare Provider Agreements: LCT shall use its best
efforts to obtain a court order approving the transfer of the Medicare provider
agreements and provider numbers for the Rejected Texas Facilities, and to have
such order provide in material part as follows:
Effective on the transition date, LCT hereby assumes
conditioned upon assignment and assigns the Medicare Provider
Agreements and provider numbers applicable to the Facility to the [New
Operator]; provided, however, that nothing in this Order shall be
construed to relieve the proposed assignee from complying with all
procedures, rules, and regulations of the Medicare program, including,
but not limited to, the requirement that the assignee apply for and
obtain Health Care Finance Administration ("HCFA") approval of a change
of ownership on form 855; and provided further, that the assignee shall
inherit the quality of care history of the Facility as if the assignee
were the original owner (except that the assignee shall not be liable
to pay any civil monetary penalty accruing prior to the Transition
Date); and provided further, that notwithstanding such assumption and
assignment, any claim of Medicare, the applicable fiscal intermediary,
the Department of Health and Human Services, or any other party against
any Debtor under such assumed and assigned Provider Agreements arising
prior to the January 18, 2000, petition date shall continue to be
treated as a prepetition claim with the same rights, status, and
priority as if such Provider Agreements had been rejected and, without
limiting the foregoing, shall not become or be treated as an expense of
administration, and may not be offset against any claim of any Debtor
arising after the filing of these chapter 11 cases, except that (a) the
United States reserves all rights set forth in the stipulation between
the United States and Debtors approved by the Court on January 18, 2000
(the "HHS Stipulation"); (b) such claim (to the extent valid and
without prejudice to the Debtors' right to dispute such claim) may be
offset against any prepetition amount due to the Debtors, even if the
claim and debt are not "mutual" as ordinarily required by 11 U.S.C. ss.
553, and without further order of this Court; and (c) to the extent
such
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claim is not satisfied in full via exercise of the offset right
referred to in the proceeding clause (b), the United States shall have
an administrative expense claim pursuant to 11 U.S.C. ss. 507(b) for
any such deficiency, which claim shall in no event exceed [insert
maximum claim amount] in the chapter 11 case of LCT pending as Case No.
00-00189 (MFW); and provided further, that the rights accorded the
United States under this Order and the HHS Stipulation shall constitute
"cure" under 11 U.S.C. ss. 365 so that [New Operator] shall not have
any successor liability for any claim against the applicable Debtor
under such Provider Agreements arising prior to the effective date of
the assignment of such Provider Agreements to the Landlord.
LCT shall use its commercially reasonable good faith efforts
to proceed diligently and in good faith to assign the Medicare provider
agreements and provider numbers with respect to the Rejected Texas Facilities,
and NHP and its new operator shall use their commercially reasonable good faith
efforts to proceed diligently and in good faith to assist LCT in such efforts.
LCT shall have no obligation to assume and assign any other governmental
agreements or approvals, including Medicaid provider agreements and provider
numbers. As a result, the New Operator shall be responsible to obtain all other
necessary state and federal licenses (or, to the extent permitted by law,
interim licenses), provider agreements and other governmental approvals and
consents required in connection with the contemplated transactions.
5. Claims of NHP Related To Rejected Texas Leases. On
the earlier of the Transition Date or when due, LCT shall pay the following
amounts to NHP Texas, as landlord:
a. Administrative Rent under each Rejected
Texas Lease in accordance with the terms of the Rejected Texas Lease for the
period from the Petition Date to the earlier of the Transition Date or July 31,
2001, less any amounts heretofore or hereafter paid on account thereof. As
utilized herein, "Administrative Rent" means all "Minimum Rent", "Additional
Rent", "Renewal Term Minimum Rent", "Additional Charges", and "Late Charges", if
and as defined or otherwise expressly provided for in the applicable lease, to
the extent that each such charge or claim would be payable in accordance with
section 365(d)(3) of the Bankruptcy Code; and
b. Unpaid real and personal property taxes
payable in accordance with a Rejected Texas Lease, including penalties and
interest thereon, incurred from the Petition Date to the earlier of the
Transition Date or July 31, 2001, on a prorated basis, less any amounts
heretofore or hereafter paid on account thereof.
Except as expressly provided for in this Agreement, on the
Effective Date, NHP shall be deemed to have waived and released any and all
other claims it may have against any Debtor or its affiliates ("Affiliates," as
the term "affiliate" is defined in
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section 101(2) of the Bankruptcy Code) relating in any fashion to the Rejected
Texas Leases, LCT's use, operation or control of the Rejected Texas Facilities,
or any guaranty of LCT's obligations with respect thereto by MPAN or any other
Affiliate, including without limitation, (1) any and all administrative claims,
except for (a) administrative claims provided for in Paragraphs 5.a and 5.b
hereof, and (b) material maintenance claims first arising in and attributable
solely to the period between the date of this Agreement set forth above and the
Transition Date, or in the case of closure of a Rejected Texas Facility, the
date possession of the Rejected Texas Facility is surrendered to NHP Texas
following its closure by LCT, and (2) all pre-Petition Date claims, including
without limitation, claims for maintenance, restoration, rent, additional rent,
additional charges, impositions, property taxes, and claims arising out of LCT's
use, operation or control of a Rejected Texas Facility, rejection of the
Rejected Texas Leases, and the guaranty of MPAN or any other Affiliate of LCT of
the foregoing obligations; provided, however, that, except as limited by
Paragraph 6 hereof, NHP Texas shall retain the right to set off any claims it
may have as against any security deposit held in connection with a Rejected
Texas Lease, and shall retain such security deposits as provided in Paragraph 6
hereof. To implement the foregoing release of claims, NHP shall provide the
Debtors with withdrawals of any and all proofs of claim filed in the Bankruptcy
Case in connection with the Rejected Texas Facilities and/or the Rejected Texas
Leases in form and substance reasonably satisfactory to Debtors and shall not
file any additional proofs of claim or amendments thereto except that NHP shall
be allowed to pursue its rights and remedies with respect to its administrative
claims provided for in Paragraphs 5.a. and 5.b. hereof and any material
maintenance claims as described herein above. Further, nothing contained herein
shall be construed as a waiver or bar to NHP to pursue its rights and remedies
with respect to breach of this Agreement.
6. Security Deposits Regarding Rejected Texas Leases. On
the Effective Date:
a. NHP Texas shall retain the security deposit
(approximately $100,000) under the Texas Beechnut Lease in full and complete
satisfaction of any and all claims, including prepetition, administrative, and
rejection damage claims, it may have under the Texas Beechnut Lease, other than
for Administrative Rent claims, including real and personal property taxes, due
under Bankruptcy Code ss. 365(d)(3) under the Texas Beechnut Lease as provided
in Paragraphs 5(a) and (b) hereof; and
b. On or as soon as practicable following the
Effective Date, NHP shall make demand in the amount of $682,500 under that
certain letter of creditor in respect of which it is the beneficiary regarding
the Debtors' performance under the Texas Lease in full and complete satisfaction
of any and all claims, including prepetition, administrative, and rejection
damage claims, it may have under the Texas Lease, other than for Administrative
Rent claims, including real and personal property taxes, due under Bankruptcy
Code ss. 365(d)(3) under the Texas Lease, as provided in Paragraphs
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5(a) and (b) hereof. Following such demand and payment in full of the $682,500
under the letter of credit, NHP shall surrender for cancellation the original
letter of credit and make no further demands thereunder.
7. Assumption of Leases. On the Effective Date, any and
all executory rights and obligations under the following Leases shall be assumed
by agreement of the parties to such Leases pursuant to sections 365(a) and (b)
of the Bankruptcy Code:
a. the "Lease and Security Agreement" dated
September 26, 1991, as amended (the "California Driftwood Lease") between
GranCare, as successor tenant, and NHP, as Landlord, insofar as the California
Driftwood Lease relates to the three facilities commonly known as Driftwood
Manor--Hayward, the Alamaden Health Care Center, and the Driftwood Health Care
Center--Santa Xxxx (collectively, the "Retained California Driftwood
Facilities"), as further amended by the "Revised and Restated Master Addendum To
Leases" annexed hereto as Exhibit "B" to be executed and delivered in accordance
with Paragraph 9 hereof (the "Revised and Restated Master Addendum");
b. the "Lease and Security Agreement" dated
April 20, 1994, as amended (the "California Monterey Palms Lease"), between GCI
and GranCare, as successor tenants, and NHP, as Landlord, relating to the
facility commonly known as the Monterey Palms Healthcare Center, as further
amended by the Revised and Restated Master Addendum. The California Driftwood
Lease and the California Monterey Palms Lease, each as further amended by the
Revised and Restated Master Addendum, are hereinafter referred to as the
"Assumed California Leases";
c. the "Amended and Restated Lease of Care Inn
Convalescent Center", dated as of May 1, 1989, as amended (the "Illinois LaSalle
Lease"), between Evergreen, as successor tenant, and Nationwide, as successor
lessor, relating to the facility commonly known as the LaSalle HealthCare
Center, as further amended by the Revised and Restated Master Addendum; and
d. the "Amended and Restated Lease of
Litchfield Convalescent Center", dated as of May 1, 1989, as amended (the
"Illinois Litchfield Lease"), between Evergreen, as successor tenant, and
Nationwide, as successor lessor, relating to the facility commonly known as the
Litchfield HealthCare Center, as further amended by the Revised and Restated
Master Addendum. The Illinois LaSalle Lease, the Illinois Litchfield Lease, each
as further amended by the Revised and Restated Master Addendum, are hereinafter
referred to as the "Assumed Illinois Leases". The Assumed California Leases and
the Assumed Illinois Leases are referred to herein collectively as the "Assumed
Leases".
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8. Cure and Adequate Assurance of Future Performance Re
Assumed Leases. The payment by the Debtors of unpaid Administrative Rent and all
unpaid real and personal property taxes, including penalties and interest
thereon, arising in connection with the Assumed Leases from and after the
Petition Date through the Effective Date shall satisfy all cure and compensation
requirements arising under Bankruptcy Code ss. 365(b)(1)(A) and (B).
Notwithstanding any provision in any Assumed Lease to the contrary, Landlord
hereby agrees that the existence of any default under any of the Assumed Leases
arising prior to or during the pendency of the Bankruptcy Case that would not
require cure under section 365(b)(2) of the Bankruptcy Code shall be waived and
unenforceable against the Debtors during the pendency of the Bankruptcy Case,
notwithstanding the assumption of the Assumed Leases. The requirements for
adequate assurance of future performance under Bankruptcy Code ss. 365(b)(1)(C)
as to the Assumed Leases shall be satisfied by (a) MPAN's renewal of its
guaranty of the Assumed Leases by its execution and delivery of the guaranty
annexed as Exhibit "B" to the Revised and Restated Master Addendum, and (b) the
continuation of all security deposits to the extent presently in place under the
Assumed Leases. Except as expressly provided for herein, the Parties agree that
(x) the Assumed Leases are in full force and effect, (y) no unpaid pre- or
post-Petition Date claims or non-monetary defaults exist under the Assumed
Leases, and (z) all previously existing guaranties executed in connection with
the Assumed Leases shall be of no further force and effect. To implement the
foregoing release of claims, NHP shall provide Debtors with withdrawals of any
and all proofs of claim filed in the Bankruptcy Case in connection with the
Assumed Leases in form and substance reasonably satisfactory to Debtors and
shall not file any additional proofs of claim or amendments thereto except that
NHP shall be allowed to pursue its rights and remedies with respect to its
administrative claims provided for in Paragraphs 5.a. and 5.b. hereof and any
material maintenance claims as described herein above. Further, nothing
contained herein shall be construed as a waiver or bar to NHP to pursue its
rights and remedies with respect to breach of this Agreement.
9. Amendments To Assumed Leases. Concurrently with the
execution and delivery of this Agreement, Nationwide, MPAN, GranCare, GCI and
Evergreen shall execute and deliver the Revised and Restated Master Addendum
which shall be effective concurrently with the occurrence of the Effective Date
under this Agreement.
10. Assignment Of Assumed Leases. The Debtors' interests
in the Assumed Leases, as modified by the Revised and Restated Master Addendum,
and under this Agreement (including the Exhibits hereto) may be assigned prior
to confirmation of a plan of reorganization or pursuant to a confirmed plan of
reorganization to any party that the Bankruptcy Court determines provides
adequate assurance of future performance within the meaning of section 365 of
the Bankruptcy Code so long as such party is directly and primarily liable under
the assigned Assumed Leases and the Revised and Restated Master Addendum,
including by providing its guaranty of performance thereunder; provided,
however, that the Assumed California
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Leases must be assigned as a group to a single assignee, and the Assumed
Illinois Leases must be assigned as a group to a single assignee. Upon such
assignment, the Debtors shall be relieved of their obligations under the Assumed
Leases and Revised and Restated Master Addendum as to the Assumed Leases so
assigned, and no guaranties of the Assumed Leases so assigned will be given by,
or, if previously given, be or remain enforceable against, MPAN, the other
Debtors or any of their Affiliates. Nothing contained in the foregoing shall
operate to preclude NHP from objecting to a proposed assignment under section
365 of the Bankruptcy Code. After the effective date of any plan of
reorganization, the Debtors' interests in the Assumed Leases and the Revised and
Restated Master Addendum may be assigned as and if provided for therein.
11. Assumption and Assignment Regarding Gilroy Facility
Subleases. On the Effective Date:
a. The executory rights and obligations under the
California Driftwood Lease shall be bifurcated into two separate sets of
executory rights and obligations, one consisting of the California Driftwood
Lease, as amended, and the Revised and Restated Master Addendum, insofar as each
relates to the Retained California Driftwood Facilities, and the other
consisting of the executory rights and obligations under the original California
Driftwood Lease (without modification by the Original Master Addendum) relating
to the Facility commonly described as the Driftwood-Gilroy Facility; and
b. GranCare shall assume and assign to Nationwide (a)
its executory rights and obligations as tenant under the California Driftwood
Lease insofar as it relates to the Driftwood-Gilroy Facility, and (b) its
executory rights and obligations as sublessor under the "SubLease" (the "Gilroy
Sublease") dated as of March 31, 1993, with Pleasant Care Corporation (the
predecessor in interest to the present subtenant, Covenant Care, Inc.) relating
to the Driftwood-Gilroy Facility. Upon such assignment, Nationwide shall be
deemed to have (i) released the Debtors from any and all obligations that may
exist under the California Driftwood Lease to the extent such obligations relate
to the Driftwood-Gilroy Facility, and (ii) agreed to perform all of GranCare's
obligations as tenant under the California Driftwood Lease insofar as it relates
to the Driftwood-Gilroy Facility and as sublessor under the Gilroy Sublease. As
a result of such assumption and assignment, the rights of Nationwide, as
successor sublessor, and the rights of the sublessee under the Gilroy Sublease
shall be governed exclusively by the terms of the Gilroy Sublease and the
original California Driftwood Lease incorporated therein as it relates to the
Driftwood--Gilroy Facility. All of the Debtors' rights and obligations under the
California Driftwood Lease as to the Retained California Driftwood Facilities
shall be preserved as if the Driftwood-Gilroy Facility had never been subject to
the California Driftwood Lease, all as more fully provided in the Revised and
Restated Master Addendum.
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12. Impact Of The NHP Indiana Agreement. Neither the
rejection of the Indiana Leases, nor the failure of the Closing Date to occur
under the Operations Transfer Agreement executed in connection with the NHP
Indiana Agreement, nor the non-performance of any of tenant's duties, covenants
or obligations under the Rejected Indiana Leases, including, without limitation,
the types of obligations waived or to be waived and released or to be released
in accordance with Paragraph A.4 of the NHP Indiana Agreement, shall have any
effect on, or create a default or cross-default under or with respect to, any
other leases or obligations by and among Nationwide, NHP Texas and/or their
Affiliates and any of the Debtors and/or their Affiliates.
13. Mutual Release.
a. Mutual Release. Except as expressly provided for in
this Agreement (including the Exhibits hereto), as of the Effective Date, NHP on
the one hand and the Debtors on the other hand, hereby release and discharge the
other, and their respective successors, representatives, subsidiaries,
Affiliates, assigns, agents, officers, directors, employees, shareholders, and
attorneys, and each of them, from and waive and relinquish, any and all claims,
demands, debts, liabilities, obligations, actions, causes of action, suits, sums
of money, accounts, reckoning, covenants, contracts, complaints, objections,
controversies, agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed, liquidated or
unliquidated, matured or unmatured, in law, equity, or otherwise, which either
of them, or any person or entity claiming from, through or under either of them,
ever had, now has, or hereafter can, shall, or may have against the other by
reason of, arising from, relating to, in connection with or set forth in the
Rejected Texas Leases, or arising out of the Debtors' use, operation or control
of the Rejected Texas Facilities, and any guaranty of any Affiliate of the
Debtors of the foregoing obligations. This release does not relate to the
Assumed Leases or the Debtors' use, operation or control of any Facility subject
to an Assumed Lease.
b. California Civil Code Section 1542. EACH PARTY HERETO
EXPRESSLY UNDERSTANDS THAT Section 1542 of the Civil Code of the State of
California provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR.
c. Waiver. EACH PARTY HEREBY AGREES THAT THE PROVISIONS
OF SECTION 1542 of the Civil Code of the State of California and all similar
federal or state laws, rights, rules, or legal principles, legal or equitable,
which may be applicable hereto, to the extent that they may apply to any of the
matters released herein, ARE HEREBY KNOWINGLY AND VOLUNTARILY WAIVED AND
RELINQUISHED BY EACH
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PARTY TO THIS AGREEMENT, in each and every capacity, to the full extent that
such rights and benefits pertaining to the matters released herein may be
waived, and each Party hereby agrees and acknowledges that this waiver and
relinquishment is an essential term of this Agreement, without which the
consideration provided to it would not have been given.
d. Subsequently Discovered Claims. In connection with
such waiver and relinquishment, each Party acknowledges that it is aware that it
may hereafter discover claims presently unknown or unsuspected, or facts in
addition to or different from those which it now knows or believes to be true,
with respect to the matters released herein. Nevertheless, it is the intent of
each Party in executing this Agreement fully, finally, and forever to settle and
release all such matters, and all claims relative thereto, which exist, may
exist or might have existed (whether or not previously or currently asserted in
any action) which are the subject of the release granted under Paragraph 13.a
hereof.
e. Each Party hereto covenants and agrees that it will
not institute or prosecute any action or proceeding, in law, equity or
otherwise, to recover, enforce, or collect or pursue any claim, demand, debt,
liability, obligation, complaint, objection, action, cause of action, or other
matter which has been released pursuant to the provisions of Paragraph 13.a
hereof. Without in any manner limiting the available remedies for the breach of
this Paragraph, any Party who breaches the terms of this Paragraph shall be
liable to the other Party against whom such suit, action or other proceeding has
been brought in violation of this Paragraph for the reasonable attorneys' fees
and costs incurred by such other Party in defending against or otherwise
responding to such suit, action or proceeding.
14. Payment of Expenses. Each Party hereto shall bear its
own legal, accounting, due diligence and other expenses incurred in connection
with the preparation and negotiation of this Agreement and the consummation of
the transactions contemplated hereby, whether or not the transaction is
consummated.
15. Attorneys' Fees. In the event of any dispute or
controversy arising out of this Agreement, including in connection with the
interpretation of any term or condition of this Agreement, the enforcement of
the Agreement, damages for breach of any provision hereof, or in the situation
where any provision of this Agreement is validly asserted as a defense, the
prevailing Party shall be entitled to recover costs of suit, including
reasonable attorneys' fees, from the other Party in addition to any other
available remedy.
16. Representation By Counsel. The Parties acknowledge
that they have been represented by independent legal counsel of their choosing
throughout all of the negotiations which preceded the execution of this
Agreement, and that each Party has executed this Agreement with the consent and
on the advice of such independent
11
legal counsel. This Agreement is a negotiated document. As a result, any rule of
construction providing for any ambiguity in the terms of this Agreement to be
construed against the draftsperson of this Agreement shall be inapplicable to
the interpretation of this Agreement.
17. Due Authorization. Each Party to this Agreement
hereby represents and warrants that (a) such Party is duly authorized to enter
into this Agreement without the permission of any third party; and (b) the
person purporting to execute this Agreement on behalf of such Party has been
duly authorized to execute this Agreement on behalf of and bind such Party;
provided, however, that this representation and warranty as against Debtors
shall be of no force and effect with respect to matters that require the
approval of the Bankruptcy Court in the Bankruptcy Case unless and until such
approval is obtained.
18. Entire Agreement; Amendment; Waiver. This Agreement,
together with the other agreements which are Exhibits hereto, constitutes the
entire understanding among the Parties with respect to the subject matter
hereof, superseding all negotiations, all prior discussions, preliminary
agreements, representations, warranties, and understandings of the Parties,
whether oral, written or implied, as to the subject matter hereof. No
supplement, modification, or amendment of this Agreement (including the Exhibits
hereto) shall be binding unless executed in writing by all Parties affected
thereby. No waiver of any term, provision or condition of this Agreement
(including the Exhibits hereto), in any one or more instances, shall be deemed
to be or be construed as a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement. No failure to act shall be construed as a waiver of any term,
provision, condition or rights granted hereunder.
19. Limitation on Third-Party Beneficiaries. Except as
expressly provided in Paragraph 13(a) hereof, no provision contained in this
Agreement is intended to confer any rights or remedies under or by reason of
this Agreement on any person or entity other than the Parties hereto.
20. Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the Parties and their
respective legal representatives, successors and assigns, including, in the case
of the Debtors, any trustee appointed under chapters 11 or 7 of the Bankruptcy
Code, and any responsible officer or examiner appointed for any of the Debtors.
21. No Representations or Warranties. Except as expressly
set forth in this Agreement, none of the Parties hereto makes any representation
or warranty, written or oral, express or implied.
12
22. Admissions. Neither this Agreement, nor any of the
terms hereof, nor any negotiations or proceedings in connection herewith, shall
constitute, be construed as or be deemed to be evidence of any admission on the
part of any Party of any liability or wrongdoing whatsoever, or the truth or
untruth, or merit or lack of merit of any claim or defense of any Party; nor
shall this Agreement, any of the terms hereof, any negotiations or proceedings
in connection herewith, any pleading filed in connection with seeking its
approval from the Bankruptcy Court, or any performance or forbearance hereunder,
be offered or received in evidence or used in any proceeding against any Party,
or be used in any proceeding, or otherwise, for any purpose whatsoever except
with respect to the effectuation and enforcement of this Agreement.
23. Applicable Law. Except for issues related to the
approval of this Agreement by the Bankruptcy Court, which issues shall be
governed by the Bankruptcy Code, this Agreement shall be governed in all
respects, including the validity, interpretation and effect, by laws of the
State of California.
24. Subsequent Events. Except as provided for herein, the
terms of any plan of reorganization confirmed by the Debtors in the Bankruptcy
Case shall not alter the terms and conditions of this Agreement, any of the
Exhibits hereto or any of the Assumed Leases.
25. Cooperation of the Parties. The Debtors agree to use
their best efforts to seek Bankruptcy Court approval of this Agreement
(including the Exhibits hereto), and, in connection therewith, NHP agrees to use
its best efforts to cooperate with the Debtors in obtaining such Bankruptcy
Court approval, including, if requested, by providing testimony or written
declarations in support of the Debtors' motion to approve this Agreement.
26. Conditions Precedent To Effective Date. The
occurrence of the Effective Date shall be subject to the satisfaction of the
following conditions precedent: (a) the filing of a motion with the Bankruptcy
Court to approve this Agreement, including the Exhibits hereto, on or before
June 27, 2001, or such later date as the Parties may agree, (b) the entry of the
Approval Order (as defined in Paragraph 27 hereof) on or before July 20, 2001,
or such later date as the parties may agree, (c) the occurrence of the Effective
Date on or before July 31, 2001, or such later date as the parties may agree,
(d) the approval of the transactions contemplated by this Agreement by Chase
Manhattan Bank in its capacity as Agent for the Debtors' senior secured
pre-Petition Date lenders and as Agent for the Debtors' postpetition debtor in
possession lenders, insofar as such consent is required to release liens on all
personal property being transferred to NHP or New Operator in connection with a
Rejected Texas Facility, and (e) the consent of the Health Care Finance
Administration ("HCFA") to the assignment of the Medicare Provider Agreement and
Provider Number applicable to each Rejected Texas Facility, together with the
agreement of Debtors and HCFA as to
13
the amount of any "cap" placed on administrative claims of HCFA arising from
such assignment and limitations on HCFA's offset rights.
27. Effective Date. This Agreement (other than the
provisions of Paragraph 25 hereof, which shall take effect immediately) is
subject to the entry of an order of the Bankruptcy Court in the Bankruptcy Case,
in form and substance reasonably satisfactory to the Parties (the "Approval
Order"), approving this Agreement (including the Exhibits hereto) and
authorizing the consummation of the transactions contemplated thereby, after
notice and an opportunity for a hearing, and shall become effective and close on
the first business day which is more than ten days following the entry of the
Approval Order upon which all of the conditions set forth in Paragraph 26 have
been satisfied (the "Effective Date"); provided, however, that if the Bankruptcy
Court enters an order pursuant to Federal Rules of Bankruptcy Procedure 6004(g)
and 6006(d) so providing, the Effective Date shall occur on the first business
day following the entry of the Approval Order (or such later date as the
Bankruptcy Court may order) on which all of the conditions set forth in
Paragraph 26 have been satisfied, so long as a court of competent jurisdiction
has not issued a stay pending appeal of the Approval Order prior to the
Effective Date, in which case the Effective Date shall be the first business day
that any such stay pending appeal is dissolved, abrogated, or otherwise rendered
unenforceable by a court of competent jurisdiction. If entry of the Approval
Order is denied by the Bankruptcy Court despite the Parties' compliance with
Paragraph 25 hereof, this Agreement shall be of no further force and effect and
the Parties shall be returned to the status quo ante as if this Agreement had
not been entered into by the Parties.
28. Consent To Jurisdiction and Venue. The parties hereto
consent to the determination by the Bankruptcy Court without a jury trial and in
a contested matter as a "core proceeding" (as such term is defined in 28 U.S.C.
ss. 157 or any successor provision) of any and all disputes concerning this
Agreement, including disputes involving the validity, interpretation, effect, or
enforcement of this Agreement, and the Parties agree that the Bankruptcy Court
shall be the exclusive forum to hear, determine and enter appropriate orders and
judgments regarding all such disputes until the closing of the Bankruptcy Cases,
after which any and all disputes arising out of this Agreement shall be
adjudicated by any court of competent jurisdiction.
29. Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
do not constitute a part of this Agreement.
30. Notices. All notices to be given by either party to
this Agreement to the other party hereto shall be in writing, and shall be:
(a) sent by facsimile,
14
(b) deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested or
(c) sent by national overnight courier service, each addressed as
follows:
(i) If to a Debtor:
Mariner Post-Acute Network, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
With a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
(ii) If to NHP:
Nationwide Health Properties, Inc.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Facsimile No. 949.759.6876
With a copy to:
Xxxxxx X. Xxxxxx
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No. 212.872.1002
Any such notice delivered by facsimile shall be deemed delivered when received,
any such notice deposited in the United States mail, registered or certified,
return receipt requested, with all postage prepaid, shall be deemed to have been
given on the earlier of the date received or the date when delivery is first
refused, and any notice deposited with an overnight courier service for delivery
shall be deemed delivered on the business
15
day following such deposit. Any party to whom notices are to be sent pursuant to
this Agreement may from time to time change its address for further
communications thereunder by giving notice in the manner prescribed herein to
all other parties hereto.
31. Counterparts. This Agreement may be executed in two
or more counterparts by the Parties, and all such counterparts taken together
shall be considered as and construed to be part of a single agreement.
IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
NATIONWIDE HEALTH PROPERTIES, INC.
By
--------------------------------------
Its
-------------------------------------
NH TEXAS LIMITED PARTNERSHIP
By MLD TEXAS CORPORATION, its general
partner
By
--------------------------------------
Its
-------------------------------------
MARINER POST-ACUTE NETWORK, INC.,
DEBTOR AND DEBTOR IN POSSESSION
By
--------------------------------------
Its
-------------------------------------
LIVING CENTERS OF TEXAS, INC.,
DEBTOR AND DEBTOR IN POSSESSION
By
--------------------------------------
Its
-------------------------------------
GRANCARE, INC.,
DEBTOR AND DEBTOR IN POSSESSION
By
--------------------------------------
Its
-------------------------------------
16
GCI PALM COURT, INC.,
DEBTOR AND DEBTOR IN POSSESSION
By
--------------------------------------
Its
-------------------------------------
EVERGREEN HEALTHCARE LTD., L.P.,
DEBTOR AND DEBTOR IN POSSESSION
BY EVERGREEN HEALTHCARE, INC.,
ITS GENERAL PARTNER AND DEBTOR AND
DEBTOR IN POSSESSION
By
--------------------------------------
Its
-------------------------------------
17
SCHEDULE 1
THE REJECTED INDIANA LEASES
1. The "Amended and Restated Lease of Wabash Health Care
Center," dated as of May 1, 1989, as amended (the "Indiana Wabash Lease"),
between Connerwood, as successor tenant, and Nationwide, as successor lessor,
relating to the real property commonly known as the Wabash Healthcare Center,
and the "Master Addendum to Leases" dated October 31, 1997 (the "Master
Addendum"), insofar as it relates to the Indiana Wabash Lease;
2. The "Amended and Restated Lease of Xxxxxxxxxxx East
Living Center," dated as of May 1, 1989, as amended (the "Indiana Xxxxxxxxxxx
East Lease"), between Connerwood, as successor tenant, and Nationwide, as
successor lessor, relating to the real property commonly known as the East
Pointe Health & Rehabilitation Center, and the Master Addendum insofar as it
relates to the Indiana Xxxxxxxxxxx East Lease; and
3. The "Amended and Restated Lease of New Castle Health
Care Center," dated as of May 1, 1989, as amended (the "Indiana New Castle
Lease"), between Connerwood, as successor tenant, and Nationwide, as successor
lessor, relating to the real property commonly known as the New Castle Health
Care Center, and the Master Addendum insofar as it relates to the Indiana New
Castle Lease.
18
SCHEDULE 2
LIST OF FACILITIES SUBJECT TO REJECTED TEXAS LEASES
DEBTOR FACILITY/LOCATION PROVIDER NUMBER
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Allenbrook Health Care Center/ 67-5079
Case No. 00-00189 (MFW) Baytown, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Xxxxx Xxxxx Xxxxxxxxxxxx Xxxxxx--Xxxxxxx/ Xxxxxxx, 00-0000
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Center/ Center, 67-5398
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Humble/ Humble, 67-5127
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Huntsville/ 67-5433
Case No. 00-00189 (MFW) Huntsville, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Heritage House/ 67-5333
Case No. 00-00189 (MFW) Eagle Lake, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Castle Manor/ 67-5305
Case No. 00-00189 (MFW) Garland, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Beechnut Manor/ 67-5000
Case No. 00-00189 (MFW) Houston, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Oak Manor/ 67-5328
Case No. 00-00189 (MFW) Nacogdoches, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Broadway Lodge/ 67-5437
Case No. 00-00189 (MFW) San Antonio, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. San Antonio Convalescent Center/ 67-5339
Case No. 00-00189 (MFW) San Antonio, Texas
------------------------------------------- ---------------------------------------------------- ---------------
19
SCHEDULE OF EXHIBITS
Exhibit A Operations Transfer Agreement
Exhibit B Revised and Restated Master Addendum To Leases
20
EXHIBIT "A"
OPERATIONS TRANSFER AGREEMENT
This "OPERATIONS TRANSFER AGREEMENT" ("Agreement") by and among Living
Centers of Texas, Inc., debtor and debtor in possession ("Debtor"), NH Texas
Properties Limited Partnership ("Landlord"), and [INSERT NAME OF NEW OPERATOR]
("New Operator") is entered into as of June 27, 2001, pursuant to and as
authorized by the "Settlement Agreement Re NHP Lease Portfolio" dated as of June
27, 2001 (the "Settlement Agreement"), with reference to the following facts:
RECITALS
A. Landlord is the owner of the following nursing home: [Insert
description of Facility from Schedule "1" hereto] (the "Facility").
B. On January 18, 2000, Debtor, along with various affiliated
parent and subsidiary entities, including its parent corporation, Mariner
Post-Acute Network, Inc. ("MPAN") filed for relief under chapter 11 of title 11
of the United States Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), Case
Nos. 00-113 (MFW) through 00-214 (MFW) (the "Bankruptcy Case"), and continues to
operate its business as a debtor and debtor-in-possession under sections 1107(a)
and 1108 of the Bankruptcy Code.
C. Debtor was the lessee of the Facility from Landlord under a
lease that will be rejected in the Bankruptcy Case pursuant to the Settlement
Agreement.
D. Debtor, Landlord and New Operator desire to enter into this
Agreement in order to facilitate an orderly transition of the Facility's
operations from Debtor to New Operator.
E. New Operator is in the business of operating skilled nursing
and extended care facilities, has entered into a lease of the Facility with
Landlord, and joins in this agreement as a participant to the operations
transfer addressed herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree that:
ARTICLE 1.
THE CLOSING
1.1 Effectiveness of Closing. The closing (the "Closing") under this
Agreement shall be effective as of 12:00:01 a.m. on August 1, 2001, or such
other date as may be mutually agreed to in writing by the parties (the "Closing
Date"). The Closing shall not occur unless (a) the Approval Order as required by
Paragraph 5.12 is in effect, and (b) the Licenses required by Section 5.2 have
been obtained by the New Operator.
1.2 Debtor's Deliveries in Connection with the Closing. Debtor shall
deliver the following to Landlord and New Operator in connection with the
Closing:
(a) Executed special warranty Xxxx of Sale for Personal Property
(as hereinafter defined) pursuant to Section 2.2 hereof.
(b) Executed counterparts of a closing statement reflecting the
prorations and other payments to be made as of Closing
pursuant hereto (the "Closing Statement").
(c) Payment in immediately available funds of any amounts due to
Landlord or New Operator from Debtor with respect to the
Facility in accordance with the Settlement Agreement as
reflected in the Closing Statement.
1.3 Landlord and New Operator's Deliveries at Closing. Landlord and New
Operator shall deliver the following to Debtor at the Closing:
(a) Executed counterpart of the Closing Statement.
(b) Payment in immediately available funds of any amounts due to
Debtor from Landlord or New Operator with respect to the
Facility in accordance with the Settlement Agreement as
reflected in the Closing Statement.
1.4 Payment. Any mutual obligations owing under Sections 1.2 and 1.3 shall
be set off at Closing. To the extent a party is owed a payment after such set
off, such payment shall be made in cash at Closing via check or pursuant to the
wire instructions of such party.
ARTICLE 2.
TRANSFER OF OPERATIONS
2.1 Cooperation. Debtor agrees to cooperate with Landlord and New Operator,
and Landlord and New Operator agree to cooperate with Debtor, to effect an
orderly transfer of the operation of the Facility.
-2-
2.2 Conveyance of Supplies and Tangible Personal Property. At Closing,
Debtor hereby agrees to transfer and convey free of liens and encumbrances, (a)
to Landlord all of its right, title and interest in and to any tangible personal
property (other than consumables, inventories and supplies), including
furniture, fixtures, and equipment owned (but not leased) by Debtor and actually
used in the operation of the Facility, with the exception of motor vehicles,
computer equipment, electronic time keeping equipment, and tangible personal
property subject to purchase money liens (unless Landlord assumes such purchase
money lien obligations), and (b) to New Operator all of its right, title and
interest in and to any consumables, inventories and supplies actually used in
the operation of the Facility (collectively with the personal property
transferred to Landlord, "Personal Property"), for and in consideration of the
mutual promises contained in this Agreement and the Settlement Agreement;
provided, however, Debtor shall leave all computer equipment at the Facility for
a period of sixty (60) days following Closing as provided in Section 2.14 to
allow New Operator to transfer all relevant data and information related to the
operation of the Facility in an orderly manner. Landlord and New Operator
acknowledge that they have no ownership rights or interests in such computer
equipment, except in connection with the transfer of such data pursuant to this
Agreement. Debtor shall have no obligation to deliver the Personal Property to
any location other than that at which each item of Personal Property is
currently located, and Landlord and New Operator agree that the presence of the
Personal Property at the Facility at Closing shall be acceptable and shall
constitute delivery thereof. At Closing, Debtor shall deliver to Landlord a Xxxx
of Sale for the Personal Property. All Personal Property shall be conveyed on an
"as is", "where is" basis, without any warranty, express or implied.
2.3 Contracts. Debtor will assume and assign to New Operator only the
following contract as more fully provided in 2.16:
CONTRACT PARTY NATURE OF CONTRACT PROVIDER NUMBER
------------------------------------------ -------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement Insert from
0000 Xxxxxxxx Xxxx. Xxxxxxxx 0
Xxxxxxxxx, XX 00000
------------------------------------------ -------------------------------------------------- ---------------
In connection therewith, Debtor shall pay all costs of cure required for each
such assumption and assignment as required by Section 2.16 of this Agreement.
Landlord and New Operator shall not be obligated or entitled to assume any other
leases or executory contracts of Debtor in respect of the Facility except as
otherwise expressly agreed by the parties in writing.
2.4 Transfer of Patient Trust Funds. Within five (5) business days
following the Closing, Debtor shall provide to New Operator a true, correct and
complete accounting (properly reconciled) of any patient trust funds and an
inventory of all residents'
-3-
property held by Debtor on the Closing Date for patients at the Facility. Debtor
hereby agrees to transfer such funds and property to New Operator within twenty
(20) days of the date that New Operator notifies Debtor in writing that it
agrees with the accounting provided to it. New Operator hereby agrees that it
will accept such funds and property for the patients in accordance with
applicable statutory and regulatory requirements; however, New Operator shall
have no liability for such funds until its acceptance pursuant thereto. New
Operator will indemnify, defend and hold Debtor harmless from all liabilities,
claims, and demands including reasonable attorney's fees, in the event a claim
is made against Debtor by a patient for his or her patient trust fund where such
fund was transferred to New Operator pursuant to the terms hereof.
2.5 Cost Reports. Debtor shall prepare and file with the appropriate
Medicare and Medicaid agencies its final cost reports in respect to its
operation of the Facility as soon as practicable after the Closing Date, but in
no event later than the earlier of
(a) ninety (90) days after the Closing Date; or
(b) the period required by applicable law.
Debtor shall provide Landlord and New Operator with copies of such reports. If,
following the Closing Date, Landlord or New Operator receives payment from any
federal or state agency, which payment represents reimbursement with respect to
underpayments made to Debtor for services rendered prior to the Closing Date,
then the recipient shall receive such payment in trust for the Debtor, shall not
commingle such funds with its own funds, and shall promptly remit such payments
to Debtor.
2.6 Employees.
(a) Debtor shall terminate all of the Facility's employees
effective as of the Closing Date. Debtor shall pay all wages
due to all of the Facility's employees as of the Closing Date.
In addition, Debtor shall pay to all employees of the
Facility, within the timeframes required by applicable law,
all amounts owing as of the Closing Date for earned vacation
pay, sick pay and other earned paid time due such employees in
accordance with Debtor's applicable employment policies and
state and federal law.
(b) New Operator shall use its commercially reasonable efforts to
rehire at least two-thirds of the employees at the Facility
who, as of the Closing Date, work at the Facility and have
been employed on an average of 20 hours or more per week and
have provided services solely to the Facility. Such employees,
whose employment is continued, shall be referred to as the
"Retained Employees." Any such continued employment of a
Retained Employee by New Operator shall be on terms which
require said Retained Employees to perform comparable services
in a comparable position at
-4-
substantially the same base salary at which such Retained
Employee was employed at the Facility prior to the Closing
Date. Debtor and any of its affiliates shall have the right to
employ or offer to employ in other Facilities or corporate
offices of Debtor or its affiliates any Retained Employee who
declines to continue employment with New Operator; provided,
however, that Debtor shall not actively solicit such
employment. The Retained Employees who elect to accept
continued employment with New Operator shall hereinafter be
referred to as the "Hired Employees." Prior to the Closing
Date, Debtor shall grant New Operator reasonable access to the
Facility's Employees for purpose of carrying out this Section
2.6(b).
(c) New Operator and Debtor acknowledge and agree that the
provisions of Section 2.6(b), if applicable, are designed, in
part, to ensure that Debtor is not required to give notice to
employees of the Facility of the "closure" thereof under the
Worker Adjustment and Restraining Notification Act (the "WARN
Act") or any other comparable state law. Accordingly, New
Operator agrees to indemnify, defend and hold harmless Debtor
from any liability which it may incur under the WARN Act or
any comparable state law in the event of the violation by New
Operator of its obligations under Section 2.6(b), including a
violation which results from allegations that New Operator
constructively terminated the employees of the Facility as a
result of the terms and conditions of employment offered by
New Operator; provided, however, that nothing herein shall be
construed as imposing any obligations on New Operator to
indemnify, defend or hold harmless Debtor from any liability
which it may incur under the WARN Act as a result of the acts
or omissions of Debtor prior to the Closing date, including
any liability which may result from the aggregations of acts
of Debtor prior to the Closing Date and the acts of New
Operator after the Closing Date, it being understood and
agreed that New Operator shall only be liable for its own acts
and omissions after the Closing Date. Nothing in this Section
2.6(c) shall, however, create any rights in favor of any
person not a party hereto, including employees of the
Facility, or constitute an employment agreement or condition
of employment for any employee of Debtor or any affiliate of
Debtor who is a Retained Employee or a Hired Employee.
(d) Subject to Debtor obtaining such approval from the Bankruptcy
Court as may be required under the terms of the Bankruptcy
Code, Debtor shall offer and provide, as appropriate, group
health plan continuation coverage pursuant to COBRA to all the
employees of the Facility who are not Hired Employees and to
whom it is required to offer the same under applicable law.
New Operator is hereby assuming Debtor's obligations to Hired
Employees:
-5-
(i) who participate as of the Closing Date in group
health insurance coverage sponsored by Debtor; and,
(ii) who remain employees of New Operator after the
Closing date and who will be eligible for
participation in a group health plan (as defined for
purposes of the Internal Revenue Code Section 4980 B)
established and maintained by New Operator for the
general benefit of its employees and their dependents
and all such employees shall be covered without a
waiting period and without regard to any preexisting
condition.
Debtor and New Operator acknowledge and agree that it is the intent of this
provision that Debtor shall not be required to provide continued health coverage
under ERISA or Section 4980 B of the Internal Revenue Code to any of such Hired
Employees or to any qualified beneficiary (as defined for purposes of Section
4980 B of the Internal Revenue Code) with respect to any such Hired Employees.
2.7 Accounts Receivable.
(a) Debtor shall retain ownership and all rights with respect to
all unpaid accounts receivable, whether or not billed prior to
or after the Closing Date, and any accounts receivable arising
from rate adjustments which relate to the period prior to the
Closing Date even if such adjustments occur after the Closing
Date, as of the close of business on the day prior to the
Closing Date with respect to the Facility, but only to the
extent that such accounts receivable relate to services
rendered prior to the Closing Date, and shall provide New
Operator with copies of Debtor's records with respect thereto.
New Operator agrees to fully cooperate with Debtor in its
collection of the private pay and private portion of Medicare
and Medcaid receivables.
(b) If at any time after the Closing Date, Landlord or New
Operator shall receive any payment from any federal or state
agency, insurance company, managed care organization, or
similar institutional payor source, which payment represents
reimbursement with respect to payments or underpayments made
to Debtor for services rendered prior to the Closing Date,
then the recipient shall receive such payments in trust for
the Debtor, shall not commingle such funds with its own funds,
and shall promptly remit such payments to Debtor; provided,
however, in the event payment is made without remittance
advice, such payment will first be applied to any pre-Closing
Date balances of Debtor if received during the first sixty
(60) days after the Closing Date. If at any time after the
Closing
-6-
Date, Debtor shall receive any payment from any federal or
state agency, insurance company, managed care organization, or
similar institutional payor source, which payment represents
reimbursement with respect to payments or underpayments made
to New Operator for services rendered after the Closing Date,
then Debtor shall remit such payments to New Operator;
provided, however, in the event payment is made without
remittance advice, such payment will first be applied to any
pre-Closing Date balances of Debtor if received during the
first sixty (60) days after the Closing Date. Thereafter, all
non-designated payments will first be applied to any
post-Closing Date balances of New Operator, with the excess if
any, applied to the extent of any balances due for services
rendered by Debtor prior to the Closing Date.
(c) Payments not covered by Section 2.7(b) and received by
Landlord or New Operator will first be applied to any
pre-Closing Date balances due the Debtor if received during
the first thirty (30) days after the Closing Date, with the
excess if any, applied to the extent of any balances due for
services rendered by New Operator after the Closing Date.
(d) To the extent either party receives any proceeds from the
accounts receivable of the other party, the parties
acknowledge that the party receiving the payment belonging to
the other party shall hold the payment in trust and shall not
commingle such funds with its own funds, that neither party
shall have any right to offset with respect to such accounts
receivable, and that the party erroneously receiving the
payment shall have no right, title or interest whatsoever in
the payment and shall remit the same to the other within ten
(10) days of receipt.
(e) For a period of six (6) months following the Closing Date,
Landlord or New Operator shall provide Debtor with an
accounting by the twentieth day of each month setting forth
all amounts received by them during the preceding month with
respect to the accounts receivable of Debtor which shall be
set forth in a schedule provided by Debtor to said parties as
soon as practicable following the Closing Date. New Operator
further agrees, upon reasonable notice, to make available to
Debtor adequate space, equipment and facilities at the
Facility to enable an employee of the Debtor to review the
accounts receivable of the Facility after the Closing Date,
and to provide such employee with full access to the
collection records with respect to patients owing such
accounts receivable.
(f) Nothing herein shall be deemed to limit in any way either
party's rights and remedies to recover accounts receivable due
and owing to it under the terms of this Agreement.
-7-
2.8 Employment Benefits. Debtor acknowledges that
(a) New Operator shall have no liability to any employees
terminated by Debtor on or prior to the Closing Date for
benefits pursuant to Section 601, et seq. of ERISA and Section
4980B of the Internal Revenue Code and any amendments or
modifications thereto ("COBRA"); and
(b) Debtor shall be solely responsible for providing required
notices to all employees of the Facility as of the Closing
Date pursuant to COBRA.
Debtor acknowledges and agrees that New Operator is not assuming any of Debtor's
obligations to its past or present employees under COBRA, and that all such
obligations arising before the Closing Date shall remain the obligations of
Debtor.
2.9 Payment of Operating Costs and Prorations. Debtor shall be responsible
for, and shall pay on a timely basis, claims or charges which are owed to third
parties arising from its ordinary use, operation or control of the Facility,
including payroll, insurance premiums, utilities, amounts due under executory
obligations, and similar obligations, which claims or charges were (i) incurred
in and attributable to the period from the Petition Date to the Closing Date,
and (ii) qualify as costs of administration under section 503(b)(1) of the
Bankruptcy Code, except for any amounts due on account of Employee Benefits,
which amounts shall be paid as provided in Paragraph 2.8. New Operator shall be
responsible for, and shall pay on a timely basis, any claims or charges which
are due to third parties arising from the use, operation or control of the
Facility from and after the Closing Date. Revenues and expenses pertaining to
utility charges for the billing period in which the Closing Date occurs, prepaid
expenses and like items of revenue or expense attributable to the Facility shall
be prorated between Debtor and New Operator as of the Closing Date. All such
prorations shall be made on the basis of actual days elapsed in the relevant
accounting or revenue period and shall be based on the most recent information
available to Debtor. Utility charges that are not metered and read on the
Closing Date shall be estimated based on prior charges, and shall be re-prorated
upon receipt of statements therefor. In general, such prorations shall be made
so as to reimburse Debtor for actual prepaid expense items, and to charge Debtor
for prepaid revenue items, to the extent that the same are attributable to
periods after the Closing Date.
2.10 Treatment of Prorations. The accounts of Debtor and New Operator
created pursuant to the prorations provided for in the preceding Section 2.9
shall be netted against each other. If:
(a) the result is a net positive balance for New Operator, Debtor
shall pay to New Operator the amount of such balance in
immediately available funds; and
-8-
(b) if the result is a net positive balance for Debtor, New
Operator shall pay to Debtor the amount of such balance in
immediately available funds.
The aforementioned accounts shall be reflected on the Closing Statement.
2.11 Future Settlement. All amounts owing from one party hereto to the other
party hereto, excluding amounts in respect of Sections 2.5 and 2.7 hereof, that
require adjustment after the date of the Closing Statement, including without
limitation, re-prorations according to Section 2.8 hereof, shall be settled
three months after the Closing Date. If, thereafter, Landlord or New Operator
determines that any further adjustment is to be made, Landlord or New Operator
shall submit a statement to Debtor setting forth any and all such items and the
calculation of the amounts due hereunder. Such statement shall be submitted with
appropriate backup materials. If amounts are owing from Landlord or New Operator
to Debtor, the party owing such payment shall tender payment to Debtor in
immediately available funds together with such statement. If amounts are
determined to be owing from Debtor to Landlord or New Operator, Debtor shall
have thirty (30) days from the date of receipt of such statement to tender
payment to the party to whom owed or to question or dispute in writing any item
thereon.
2.12 Medicare/Medicaid. Debtor and New Operator understand that
reimbursements from Medicare and/or Medicaid for items/services
provided/rendered after the Closing Date may continue to be issued to Debtor for
a period of time. Debtor agrees that, prior to the Closing Date, Debtor shall
arrange for any and all direct deposits from Medicare and Medicaid to cease and
shall request that checks be issued instead. Thereafter Debtor shall endorse and
deliver all such checks that solely include payment for periods following the
Closing Date to New Operator immediately upon receipt until such time as
reimbursements are remitted directly to New Operator by Medicare and Medicaid.
New Operator, in its sole discretion, may approve an alternative method of
receiving such funds. In any event, concurrent with its payment of the
reimbursement monies to New Operator, Debtor shall provide documentation from
Medicare and Medicaid of the amounts received by Debtor that month.
2.13 Transfer of Records; Access To Policy and Procedures Manuals. Debtor
shall transfer to New Operator all employment files, medical records, cost
reports, surveys with plans of correction, historical financial records,
electronic files, and any other operational data reasonably necessary to the
operation of the Facility as authorized by applicable law; provided, however,
that Debtor (a) shall be entitled to keep such copies of all of the foregoing as
it deems necessary, (b) New Operator shall have no claim or right of indemnity
against Debtor arising from the condition or quality of the records so
transferred, including claims based on their completeness or accuracy; and (c)
Debtor shall be under no duty to update or service the hardware, software or
data base contained in the computers remaining on the premises as provided for
in Sections 2.2 and 2.14 hereof, or otherwise.
-9-
For a period of thirty (30) days after Closing, New Operator shall have access
to any of Debtor's policy and procedures manuals located at the Facility;
provided, however, that Debtor shall have no liability whatsoever to New
Operator arising from New Operator's use or implementation of such procedures
and policies, and Operator agrees to indemnify, defend and hold harmless Debtor
from any liability which Debtor may incur to any third party as a result of New
Operator's use or implementation of such procedures and policies. At the end of
such thirty-day period, New Operator will return to Debtor any of Debtor's
policy and procedures manuals in its possession.
2.14 Computer Systems. Except as provided in Section 2.2 hereof, Landlord
and New Operator acknowledge that Debtor will not be transferring any
proprietary software or leased equipment, except as such leases are assumed and
assigned to New Operator. Debtor acknowledges and agrees that in order to assist
New Operator in assuring the continued operation of the Facility after the
Closing Date in compliance with applicable law and in a manner which does not
jeopardize the health and welfare of the residents of the Facility, Debtor will
leave such computer systems at the Facility for a period of up to sixty (60)
days after the Closing Date in order to enable New Operator to obtain the
necessary copies of such records and orders and to transition such information
to new operating systems. Following Closing, New Operator shall maintain the
modem connection with respect to such computers until transfer of data is
complete and shall notify Debtor when such data transfer is complete. New
Operator shall be responsible for all fees, costs, and expenses associated with
the utilization of such operating systems following the Closing Date.
2.15 Operations Pending Transition.
(a) Prior to the Closing Date, Debtor shall operate the Facility
in accordance with its normal and customary business
practices, including the continued marketing and admission of
residents, hiring and management of employees, and compliance
with governmental regulations. Debtor shall use its
commercially reasonable best efforts to transition the
Facility to New Operator in substantially the same condition
as exists at the Facility as of the date of the execution of
this Agreement.
(b) Debtor agrees not to actively solicit for transfer any
residents of the Facility.
2.16 Transfer of Medicare Provider Number. At or before Closing, Debtor
agrees to use its best efforts to transfer to New Operator its Medicare Provider
Number as authorized by applicable law. In connection therewith, Debtor has or
will prepare and file a motion seeking the entry by the Bankruptcy Court of an
order (the "Order") which Order shall provide, among other things, that Debtor
shall assume and assign the Medicare provider agreements and provider numbers
applicable to the Facility to New
-10-
Operator; provided, however, that nothing in the Order shall be construed to
relieve the proposed assignee from complying with all procedures, rules and
regulations of the Medicare program, including, but not limited to, the
requirement that the assignee apply for and obtain Health Care Finance
Administration ("HCFA") approval of a change of ownership on Form 855; and
provided further, that the assignee shall inherit the quality of care history of
the Facility as if the assignee were the original owner (except that the
assignee shall not be liable to pay any civil monetary penalty accruing prior to
Closing Date); and provided further, that notwithstanding such assumption and
assignment, any claim of Medicare, the applicable fiscal intermediary, HHS or
any other party against any debtor under such assumed and assigned provider
agreements arising prior to the January 18, 2000 petition date shall continue to
be treated as a prepetition claim with the same right, status and priority as if
such provider agreement was rejected, and without limiting the foregoing, shall
not become or be treated as an expense of administration, and may not be offset
against the claim of any debtor arising after the filing of the chapter 11
cases, except that (a) the United States shall reserve all rights set forth in
the stipulation between the United States and the debtors approved by the
Bankruptcy Court on January 18, 2000, (the "HHS Stipulation"); and (b) such
claim (to the extent valid and without prejudice to Debtor's right to dispute
such claim) may be offset against any prepetition amount due to debtors, even if
the claim and debt were not mutual as ordinarily required by 11 U.S.C. ss.553,
and without further order of the Bankruptcy Court; and (c) to the extent such
claim is not satisfied in full via exercise of the offset right referred to in
the preceding clause (b), the United States shall have an administrative expense
claim pursuant to 11 U.S.C. ss.507(b) for any such deficiency, which claim shall
in no event exceed the amount mutually determined by HCFA and Debtor, in the
Bankruptcy Case; and provided further, that the rights accorded the United
States under the Order and the HHS Stipulation shall constitute "cure" under 11
U.S.C. ss.365 so that New Operator shall not have any successor liability for
any claim against the applicable debtor under such provider agreement arising
prior to the Effective Date of the assignment of such provider agreements to New
Operator. The Order shall not impose any material obligations on the parities
not contemplated by this Agreement. New Operator shall use its commercially
reasonable best efforts to cooperate with and facilitate Debtor's efforts to
obtain the Order. Debtor shall use its commercially reasonable efforts to obtain
the Order. Debtor shall not be required to transfer any Medicaid agreements or
provider numbers to Landlord or New Operator.
2.17 Deposits. All deposits, if any, held by a utility or other party to an
executory contract, except for security deposits in favor of the Landlord in
connection with the Facility, shall remain the property of Debtor, and the New
Operator shall be required to post its own replacement security deposits, if
any.
-11-
ARTICLE 3.
REPRESENTATION, WARRANTIES AND AGREEMENTS OF LANDLORD AND NEW OPERATOR
Landlord and New Operator hereby represent, warrant, covenant and agree
as follows:
3.1 Authority, Validity and Binding Effect. New Operator has all necessary
power and authority to operate and lease the Facility and to carry on its
business as it is now being conducted, and shall have such authority as of the
Closing Date. Landlord and New Operator have all necessary power and authority
to enter into this Agreement and to execute all documents and instruments
referred to herein or contemplated hereby and all necessary action has been
taken to authorize the individual executing this Agreement to do so. This
Agreement has been duly and validly executed and delivered by Landlord and New
Operator and is enforceable against them in accordance with its terms.
3.2 Access to Records. Subsequent to the Closing Date, Landlord and New
Operator shall allow Debtor and its agents and representatives, at Debtor's sole
cost and expense, to have reasonable access to (upon reasonable prior notice),
and to make copies of, the books and records and supporting material of the
Facility, to the extent reasonably necessary to enable Debtor to investigate and
defend malpractice, employee or other claims, to file or defend cost reports and
tax returns, to verify accounts receivable collections due Debtor, and to
perform similar matters. Landlord and New Operator will maintain such books,
records and other material comprising records of the Facility's operations prior
to the Closing Date that have been received by Landlord and New Operator from
Debtor or otherwise, including, but not limited to, patient records and records
of patients funds, to the extent required by law, but in no event less than a
period of three (3) years.
3.3 Accuracy of Representations and Warranties. Unless otherwise indicated
in a specific representation or warranty contained herein, each representation
and warranty of Landlord and New Operator hereunder shall be true, complete and
correct in all material respects as of the Closing Date with the same force and
effect as though such representation or warranty was made on such date, and all
representations and warranties shall survive the Closing Date for a period of
one (1) year.
ARTICLE 4.
REPRESENTATION AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants as follows:
4.1 Authority, Validity and Binding Effect. Subject to the approval
required in Section 5.13 and in the Settlement Agreement executed in connection
herewith, Debtor has all
-12-
necessary power and authority to enter into this Agreement and to execute all
documents and instruments referred to herein or contemplated hereby and all
necessary action has been taken to authorize the individual executing this
Agreement to do so. This Agreement has been duly and validly executed and
delivered by Debtor and is enforceable against Debtor in accordance with its
terms.
4.2 Accuracy of Representations and Warranties. Unless otherwise indicated
in a specific representation or warranty contained herein, each representation
and warranty of Debtor hereunder shall be true, complete and correct in all
material respects as of the date hereof and as of the Closing Date with the same
force and effect as though such representation or warranty was made on such
date, and all representations and warranties shall survive the Closing Date for
a period of one (1) year.
4.3 Personal Property. Debtor has maintained Personal Property, including
inventories of supplies prior to the Closing Date, consistent with the operation
of the Facility in the ordinary course of business and the requirements of
applicable law, and the Personal Property transferred to Landlord pursuant
hereto reflects supply levels required to be maintained by Debtor in order to
operate the Facility as Medicare/Medicaid certified skilled nursing Facility.
ARTICLE 5.
MISCELLANEOUS
5.1 Further Assurances. Each of the parties hereto agrees to execute and
deliver any and all further agreements, documents or instruments necessary to
effectuate this Agreement and the transactions referred to herein, contemplated
hereby or reasonably requested by the other party to perfect or evidence their
rights hereunder.
5.2 Efforts Of New Operator to Obtain Licenses.
(a) Immediately following the execution and delivery of this
Agreement, New Operator shall use diligent and commercially
reasonable best efforts to obtain any and all required
licenses, permits, certificates and approvals, including
without limitation, approvals for Medicare and Medicaid
participation and certificates of need or comparable
authorizations required by any governmental authority with
jurisdiction over the Facility so that, upon the Closing Date,
New Operator shall have all necessary legal authority to
operate the applicable Facility as a skilled nursing facility
(the "Licenses"). New Operator shall file a complete
application package for each Facility no later than ten (10)
business days after execution of this Agreement, and, if the
applicable state has an expedited review process, New Operator
agrees to pay the requisite fee(s) to the applicable
governmental authorities in order to expedite such
applications and approval process. New Operator shall deliver
to Debtor evidence of the
-13-
submission of appropriate application materials and payment of
any available expediting fee no later than ten (10) business
days after the execution and delivery of this Agreement and
shall thereafter provide Debtor with periodic updates
regarding the status of such applications no less frequently
than weekly. If New Operator shall fail to submit said
applications or shall fail to pay said fee(s) to expedite such
applications and approval processes within said ten days, it
shall be a material breach of this Agreement entitling Debtor
to terminate this Agreement. Except as provided in Section
2.16, LCT shall have no obligation to assume and assign any
other governmental agreements or approvals, including Medicaid
provider agreements and provider numbers. As a result, the New
Operator shall be responsible to obtain all other necessary
state and federal licenses (or, to the extent permitted by
law, interim licenses), provider agreements and other
governmental approvals and consents required in connection
with the contemplated transactions; provided, however, that
the Debtor shall cooperate with the New Operator in the New
Operator's efforts to obtain the Licenses.
(b) If, notwithstanding the timely filing and diligent pursuit of
the same, New Operator has not obtained the necessary Licenses
for its acquisition and operation of the Facility on or before
July 31, 2001, then Debtor may terminate this Agreement by
giving written notice to the New Operator.
5.3 Notices. All notices to be given by either party to this Agreement to
the other party hereto shall be in writing, and shall be:
(a) sent by facsimile,
(b) deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested or
(c) sent by national overnight courier service, each addressed as
follows:
(i) If to Debtor:
Living Centers of Texas, Inc.
c/o Mariner Post-Acute Network, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
-14-
With a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
(ii) If to Landlord:
NH Texas Properties Limited Partnership
c/o Nationwide Health Properties, Inc.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Facsimile No. 949.759.6876
With a copy to:
Xxxxx X. Xxxxxxx
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
1900 Frost Bank Plaza
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile No. 512.499.6290
(iii) If to New Operator:
[ADDRESS]
Any such notice delivered by facsimile shall be deemed delivered when received,
any such notice deposited in the United States mail, registered or certified,
return receipt requested, with all postage prepaid, shall be deemed to have been
given on the earlier of the date received or the date when delivery is first
refused, and any notice deposited with an overnight courier service for delivery
shall be deemed delivered on the business day following such deposit. Any party
to whom notices are to be sent pursuant to this Agreement may from time to time
change its address for further communications thereunder by giving notice in the
manner prescribed herein to all other parties hereto.
5.4 Payment of Expenses. Each party hereto shall bear its own legal,
accounting, and other expenses incurred in connection with the preparation and
negotiation of this Agreement and the consummation of the transaction
contemplated hereby, whether or
-15-
not the transaction is consummated. In the event of any dispute or controversy
arising out of this Agreement, including in connection with the interpretation
of any term or condition of this Agreement, the prevailing party shall recover
from the non-prevailing party all costs and expenses, including attorney's fees,
incurred by the prevailing party.
5.5 Entire Agreement; Amendment; Waiver. This Agreement together with the
other agreements referred to herein, constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding all
negotiations, prior discussions and preliminary agreements. This Agreement may
not be modified or amended except in writing signed by the parties hereto. No
waiver of any term, provision or condition of this Agreement, in any one or more
instances, shall be deemed to be or be construed as a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement. No failure to act shall be
construed as a waiver of any term, provision, condition or rights granted
hereunder.
5.6 Assignment. Neither this Agreement nor the rights, duties or
obligations arising hereunder shall be assignable or delegable by either party
hereto without the express prior written consent of the other party hereto;
provided, however, that, the rights but not the obligations under this Agreement
shall be assignable in whole or in part without Debtor's prior consent (but
after notice to Debtor) to any entity that is owned or controlled directly or
indirectly by Landlord or New Operator, or any entity that controls, is
controlled by or is under common control with Landlord or New Operator,
including, without limitation, through any merger or acquisition.
5.7 Joint Venture; Third Party Beneficiaries. Nothing contained herein
shall be construed as forming a joint venture or partnership between the parties
hereto with respect to the subject matter hereof. The parties hereto do not
intend that any third party shall have any rights under this Agreement.
5.8 Representation By Counsel. The parties hereto acknowledge that they
have been represented by independent legal counsel of their choosing throughout
all of the negotiations which preceded the execution of this Agreement, and that
each party has executed this Agreement with the consent and on the advice of
such independent legal counsel. This Agreement is a negotiated document. As a
result, any rule of construction providing for any ambiguity in the terms of
this Agreement to be construed against the draftsperson of this Agreement shall
be inapplicable to the interpretation of this Agreement.
5.9 Captions. The section headings contained herein are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation.
5.10 Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts taken together shall constitute a single
original Agreement.
-16-
5.11 Governing Law. This Agreement shall be governed in accordance with the
laws of the State of Texas, without giving effect to its conflict of laws
provisions, and by the United States Bankruptcy Code.
5.12 Bankruptcy Court Approval. The form of this Agreement, the Settlement
Agreement, and any and all documents executed by Debtor in furtherance thereof,
must be approved by the Bankruptcy Court in the Bankruptcy Case by an order (the
"Approval Order") which has not been timely stayed, amended or modified (the
"Bankruptcy Court Approval").
5.13 Consent To Jurisdiction and Venue. The parties hereto consent to the
determination by the Bankruptcy Court without a jury trial and in a contested
matter as a "core proceeding" (as such term is defined in 28 U.S.C. ss. 157 or
any successor provision) of any and all disputes concerning this Agreement,
including disputes involving the validity, interpretation, effect, or
enforcement of this Agreement, and the Parties agree that the Bankruptcy Court
shall be the exclusive forum to hear, determine and enter appropriate orders and
judgments regarding all such disputes until the closing of the Bankruptcy Case,
after which any and all disputes arising out of this Agreement shall be
adjudicated in any court of competent jurisdiction.
5.14 Conditions Precedent to Closing. The occurrence of the Closing Date
shall be subject to the satisfaction of the following conditions precedent: (a)
entry of the Approval Order, the effectiveness of which has not been stayed as
of the Closing Date, (b) the approval of the transaction by the MPAN Bank Group,
which will be required to release its liens on all property affiliated with the
Facility, (c) the consent of HCFA to the assumption and assignment of the
Medicare Provider Agreements and Provider Numbers applicable to the Facility to
New Operator under the terms set forth in Section 2.16, together with Debtor's
agreement to any "cap" placed on the administrative claims of HCFA arising from
such assumption and assignment, which consent by HCFA may be evidenced by entry
of an order of the Bankruptcy Court on notice to HCFA without HCFA's objection
thereto, and (d) receipt by New Operator of the Licenses required by Section 5.2
hereof. If Closing does not occur on or before August 1, 2001, or such later
date as may be mutually agreed to in writing by the parties, then this Agreement
shall terminate without liability to any party.
-17-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NH TEXAS PROPERTIES LIMITED PARTNERSHIP
BY MLD TEXAS CORPORATION, ITS
GENERAL PARTNER
By
--------------------------------------
Its:
------------------------------------
LIVING CENTERS OF TEXAS, INC.,
Debtor and Debtor in Possession
By
--------------------------------------
Its:
------------------------------------
[NEW OPERATOR]
By
--------------------------------------
Its:
------------------------------------
-18-
Schedule 1
List of Facilities
DEBTOR FACILITY/LOCATION PROVIDER NUMBER
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Allenbrook Health Care Center/ 67-5079
Case No. 00-00189 (MFW) Baytown, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Xxxxx Xxxxx Xxxxxxxxxxxx Xxxxxx--Xxxxxxx/ Xxxxxxx, 00-0000
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Center/ Center, 67-5398
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Humble/ Humble, 67-5127
Case No. 00-00189 (MFW) Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Green Acres Convalescent Center--Huntsville/ 67-5433
Case No. 00-00189 (MFW) Huntsville, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Heritage House/ 67-5333
Case No. 00-00189 (MFW) Eagle Lake, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Castle Manor/ 67-5305
Case No. 00-00189 (MFW) Garland, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Beechnut Manor/ 67-5000
Case No. 00-00189 (MFW) Houston, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Oak Manor/ 67-5328
Case No. 00-00189 (MFW) Nacogdoches, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. Broadway Lodge/ 67-5437
Case No. 00-00189 (MFW) San Antonio, Texas
------------------------------------------- ---------------------------------------------------- ---------------
Living Centers of Texas, Inc. San Antonio Convalescent Center/ 67-5339
Case No. 00-00189 (MFW) San Antonio, Texas
------------------------------------------- ---------------------------------------------------- ---------------
-19-
SCHEDULE 2
LIST OF CONTRACTS
CONTRACT PARTY FACILITY/LOCATION PROVIDER NUMBER
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5079
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5225
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5398
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5127
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5433
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5333
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5305
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5000
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5328
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5437
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
Health Care Financing Medicare Provider Agreement 67-5339
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
------------------------------------------- ---------------------------------------------------- ---------------
-20-
REVISED AND RESTATED MASTER ADDENDUM TO LEASES
This "Revised and Restated Master Addendum To Leases"
("Addendum") is executed as of June 27, 2001, by and among Nationwide Health
Properties, Inc., a Maryland corporation ("Landlord"), and GranCare, Inc., a
Delaware corporation ("GranCare"), GCI Palm Court, Inc., a California
corporation ("GCI"), and Evergreen Healthcare Ltd., L.P., an Indiana limited
partnership ("Evergreen", and collectively with GranCare and GCI, "Tenants" and
individually, a "Tenant"), but shall be effective only as of the "Effective
Date" of the "Settlement Agreement re NHP Lease Portfolio" dated as of June 27,
2001 (the "Settlement Agreement"), with all of the foregoing hereinafter
referred to collectively as the "Parties".
R E C I T A L S
A. Tenants are debtors and debtors in possession in
cases pending under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), having filed their voluntary petitions on
January 18, 2000 (the "Petition Date"). The Tenants' chapter 11 cases are
jointly administered and consolidated for procedural purposes only with the
chapter 11 case of Mariner Post-Acute Network, Inc. ("MPAN") under Case No.
00-00113 (MFW) (the "Bankruptcy Case"). The Tenants' individual case numbers
are: GranCare, Case No. 00-00170 (MFW); GCI, Case No. 00-00157 (MFW); and
Evergreen, Case No. 00-00147 (MFW). Tenants and MPAN continue to operate their
businesses as debtors and debtors in possession under sections 1107(a) and 1108
of the Bankruptcy Code.
B. Landlord and one or more of the Tenants are parties
to each of those certain leases more particularly described on Exhibit A
attached hereto and incorporated herein by reference (collectively, the "Leases"
and individually, a "Lease", which defined terms shall include modifications to
such Leases as provided for herein and in the Settlement Agreement). Pursuant to
the Settlement Agreement, if approved and authorized by the Bankruptcy Court in
the Bankruptcy Case, the Tenants and Landlord have agreed to (a) assume the
Leases as provided in the Settlement Agreement, and (b) amend the Leases as
provided in the Settlement Agreement and this Addendum executed concurrently
therewith.
C. This Addendum supersedes in its entirety the Master
Addendum To Leases executed by the Parties and Connerwood Health Care, Inc.
dated as of October 31, 1997, which prior Master Addendum shall be rejected as
provided in the Settlement Agreement and shall be of no further force or effect
upon the effectiveness of this Addendum.
AGREEMENT
NOW, THEREFORE, in exchange for the mutual covenants and
conditions set forth herein, and other good and valuable consideration as
provided under the Settlement Agreement, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenants amend the Leases as follows:
1. Defined Terms.
Except as provided below or otherwise defined herein, all
capitalized terms defined in the Leases shall have the meanings ascribed to such
terms in such Leases. As utilized herein the following terms have the following
meanings:
"Additional Rent," for purposes of each Lease, shall have the
meaning set forth in such Lease, as modified herein.
"California Leases" shall mean the California Monterey Palms
Lease and the California Driftwood Lease, collectively, as modified below and in
the Settlement Agreement.
"Illinois Leases" shall mean the Illinois Litchfield Lease and
the Illinois LaSalle Lease, collectively, as modified below and in the
Settlement Agreement.
"Minimum Rent," for purposes of each Lease, shall have the
meaning set forth in such Lease as amended herein.
"Term" shall mean the "Fixed Term" as defined in the Illinois
Leases, the "Initial Lease Term" as defined in the Driftwood Lease, and the
"Initial Term" as defined in the Monterey Palms Lease.
"Term Expiration Date" shall mean the date on which the Term
ceases.
"Total Rent," for purposes of each Lease, shall mean the sum
of the Minimum Rent and Additional Rent for such Lease.
2. Term Expiration Date; Option to Extend Term.
a. Term Expiration Date. The Term Expiration
Date of each Lease is hereby extended until June 1, 2006. All terms and
conditions of each Lease shall remain in full force and effect and shall
continuously apply until the Term Expiration Date, unless otherwise provided in
this Addendum. Any reference in any Lease to the specific date on which such
Lease expires is hereby amended to read "June 1, 2006".
b. Option to Extend Term of Illinois Leases.
Landlord hereby grants to Tenant an option to extend the Term of each of the
Illinois Leases for eight
2
(8) separate renewal terms (each being referred to as a "Renewal Term" and
collectively as the "Renewal Terms") of five (5) years each, upon the
satisfaction of all the following terms and conditions:
i) Not more than thirty (30) days
before or after the date which is fifteen (15) months prior to the end
of the Term or the then current Renewal Term, as applicable, Tenant
shall give Landlord written notice that Tenant desires to exercise its
right to extend the then current term for one (1) Renewal Term.
ii) There shall be no Event of Default
(as defined in the applicable Lease) under any of the Illinois Leases
which is continuing beyond the applicable cure period (if any), either
on the date of Tenant's notice to Landlord pursuant to Section 2(b)(i)
above, or on the last day of the then current term. Should there be an
Event of Default (as defined in the applicable Lease) under one or more
of the Illinois Leases on either of the foregoing dates, Tenant may not
exercise its right to extend the then current term of any Illinois
Lease.
iii) All other terms of the Illinois
Leases being extended shall remain in full force and effect and shall
continuously apply throughout the Renewal Terms, unless otherwise
provided in this Addendum.
c. All-Or-None Options to Extend.
i) Tenant shall not be permitted to
exercise an extension option with
respect to any of the California Leases unless Tenant simultaneously
exercises its extension option with respect to all of the California
Leases. Tenant shall not be relieved from this all-or-none requirement
because of Tenant's inability to exercise one or more of the extension
options by reason of Tenant's default under the applicable California
Lease or California Leases.
ii) Tenant shall not be permitted to
exercise an extension option with respect to any of the Illinois Leases
unless Tenant simultaneously exercises its extension option with
respect to all of the Illinois Leases. Tenant shall not be relieved
from this all-or-none requirement because of Tenant's inability to
exercise one or more of the extension options by reason of Tenant's
default under the applicable Illinois Lease or Illinois Leases.
3. Rent.
a. Current Term Rent. The existing provisions
in each Lease relating to Minimum Rent and Additional Rent shall continue in
effect until the new extended Term Expiration Date; provided, however, that
3
(i) the yearly Total Rent increase
under any Lease shall not exceed one-quarter of one percent (0.25%) of the
Original Investment, Offer Price or Minimum Purchase Price (as such terms are
defined in the applicable Lease), and
(ii) Notwithstanding any other provision
of this Addendum or the Illinois Litchfield Lease, as of the Effective Date the
base rent on the facility subject to the Illinois Litchfield Lease shall be
reduced to $150,000 per year. As a result of the foregoing, (a) Paragraph 3.1(b)
of the Illinois Litchfield Lease shall have no applicability for the remaining
term of the Illinois Litchfield Lease (through May 31, 2006), but shall again be
fully applicable during the renewal, if any, of the term of the Illinois
Litchfield Lease as provided for herein, and (b) Paragraph 3.1(a) of the
Illinois Litchfield Lease shall be amended to provide in its entirety that:
Minimum Rent: Lessee shall pay to Lessor Minimum Rent monthly in
advance on the first day of each month during the remaining term of the
Lease (through May 31, 2006) in the amount of Twelve Thousand Five
Hundred Dollars ($12,500);
and
b. Renewal Term Rent. The Minimum Rent due
under each of the Illinois Leases during any Renewal Term shall be calculated as
of the commencement of each Renewal Term and shall be an annual amount equal to
the product of: (i) the Fair Market Value (as defined in the applicable Lease)
of the facility demised by such Illinois Lease at the time of renewal,
multiplied by (ii) the sum (expressed as a percentage) of the yield on the
ten-year United States treasury rate then in effect plus three hundred fifty
(350) basis points. Notwithstanding the preceding sentence, the Minimum Rent for
the first year of any Renewal Term shall not exceed by more than fifteen percent
(15%) the Total Rent due during the year prior to the first year of such Renewal
Term. The Additional Rent due under each of the Illinois Leases during any
Renewal Term shall be computed as currently set forth in each Illinois Lease.
The yearly Total Rent increase under any Illinois Lease for any year other than
the first year of any Renewal Term shall not exceed one-quarter of one percent
(0.25%) of the Original Investment, Offer Price or Minimum Purchase Price (as
such terms are defined in the applicable Illinois Lease).
4. All-Or-None Purchase Options for California and
Illinois Leases.
a. Each of the California Leases currently
contains a provision whereby the respective Tenant has or Tenants have the
option to purchase from Landlord the premises demised by such Lease. GranCare
and GCI hereby covenant and agree that they shall not be permitted to exercise
the purchase option with respect to either of the California Leases unless they
simultaneously exercise the purchase options with respect to both of the
California Leases. GranCare and GCI shall not be relieved
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from their respective all-or-none requirements because of their inability to
exercise one of the purchase options by reason of their default under one of the
California Leases.
b. Each of the Illinois Leases currently
contains a provision whereby Evergreen has the option to purchase from Landlord
the premises demised by such Lease. Evergreen hereby covenants and agrees that
it shall not be permitted to exercise the purchase option with respect to either
of the Illinois Leases unless it simultaneously exercises the purchase option
with respect to both of the Illinois Leases. Evergreen shall not be relieved
from this all-or-none requirement because of its inability to exercise one of
the purchase options by reason of its default under one of the Illinois Leases.
c. The purchase option in the Monterey Palms
Lease shall be exercisable at any time the purchase option in the Driftwood
Lease is exercisable, and vice versa.
5. Cross-Default of Leases.
a. GranCare and GCI hereby covenant and agree
that all of the California Leases shall be cross-defaulted with one another, but
shall not be cross-defaulted to any other leases, obligations or agreements of
the Tenants or any of their "Affiliates" (as defined in section 101(2) of the
Bankruptcy Code). This cross-default provision supersedes all cross-default
provisions contained in the California Leases, which shall be of no further
force or effect. Thus, any Event of Default (as defined in the applicable
California Lease) which occurs under one California Lease shall be deemed an
Event of Default as defined in the other California Lease, but shall not
constitute an Event of Default (as defined in the applicable Illinois Leases)
under either of the Illinois Leases.
b. Evergreen hereby covenants and agrees that
all of the Illinois Leases shall be cross-defaulted with one another, but shall
not be cross-defaulted to any other leases, obligations or agreements of the
Tenants or any of their Affiliates. This cross-default provision supersedes all
cross-default provisions contained in the Illinois Leases, which shall be of no
further force or effect. Thus, any Event of Default (as defined in the
applicable Illinois Lease) which occurs under one Illinois Lease shall be deemed
an Event of Default as defined in the other Illinois Lease, but shall not
constitute an Event of Default (as defined in the applicable California Leases)
under either of the California Leases.
6. Modification of California Driftwood Lease.
The California Driftwood Lease shall be amended as follows:
a. Any and all references to, and/or payment
obligations in respect of, the Driftwood-Gilroy Facility under the California
Driftwood Lease shall be deleted from the California Driftwood Lease, with the
effect that California Driftwood Lease shall
5
relate only to the three Facilities commonly described as the Driftwood
Manor--Xxxxxxx Facility, the Almaden Health Care Center, and the Driftwood
Health Care Center--Santa Xxxx. As a result of the foregoing, the following
terms related to the payment obligations under the California Driftwood Lease
shall be amended as follows:
i) "Minimum Rent" means $1,196,088;
ii) "Break Point" means $11,328,945;
and
iii) "Base Year Gross Revenues" means
$7,907,728, as such sum may be adjusted during any renewal term; and
b. Paragraph 19.1(a) shall be amended to delete
any reference therein to "Guarantor."
c. Paragraphs 4.3 through 4.5 of the California
Driftwood Lease are deleted in their entirety and replaced by the following:
4.3 Additional Rent. Commencing with the Lease Year
immediately following the Base Year and in addition to the Minimum
Rent, during the Initial Lease Term Tenant shall pay to Landlord
additional rent (the "Initial Term Additional Rent") which shall be an
amount equal to five and three-quarters percent (5.75%) of the amount
by which the Gross Revenues for the applicable quarter of the Lease
Year exceed the Gross Revenues for the corresponding quarter of the
Base Year up to and including one quarter of the amount of the Break
Point, plus five and one-half percent (5.5%) of the amount by which the
Gross Revenues for the applicable quarter of the Lease Year exceed the
Gross Revenues for the corresponding quarter of the Base Year in excess
of one quarter of the Break Point. During any Renewal Term and in
addition to the Renewal Term Minimum Rent, Tenant shall pay to Landlord
additional rent (the "Renewal Term Additional Rent") which shall be an
amount equal to five and one-half percent (5.5%) of the amount by which
the Gross Revenues for the applicable quarter of the Lease Year exceed
the Gross Revenues for the corresponding quarter of the Base Year. As
used in the Lease, "Additional Rent" shall mean the Initial Term
Additional Rent or the Renewal Term Additional Rent, as applicable.
4.4 Payment of Additional Rent. Tenant shall calculate
and pay Additional Rent on a quarterly basis in arrears no more than
forty-five (45) days after the end of each calendar quarter. Each
payment of Additional Rent shall be accompanied by a certificate
similar in form to that attached hereto as Exhibit B setting forth the
calculation of the Additional Rent.
4.5 [Intentionally Blank]
6
7. Modification of California Monterey Palms Lease.
The California Monterey Palms Lease shall be amended in its
entirety to delete GranCare as a co-tenant thereunder, with the result that GCI
shall be the sole tenant under the California Monterey Palms Lease and GranCare
shall have no further liability of any type under the California Monterey Palms
Lease.
8. Uniform Financial Reporting Requirement. The
financial reporting requirements of the California and Illinois Leases shall be
modified, amended as superseded as set forth below:
a. Paragraph 9 of the California Monterey Palms
Lease shall be deleted in its entirety, shall be of no further force and effect,
and shall be replaced by the following:
9. Financial, Management and Regulatory Reports.
9.1 Monthly Facility Reports. Within thirty (30) days
after the end of each calendar month during the Term, Tenant shall
prepare and deliver to Landlord monthly financial reports consisting of
a reasonably detailed income statement, total patient days, occupancy
and payor mix concerning the business conducted at the Premises.
9.2 Quarterly Financial Statements. Within forty-five
(45) days of the end of each of the first three fiscal quarters of the
fiscal year of the Guarantor, Tenant shall deliver to Landlord
unaudited quarterly consolidated financial statements of Guarantor
consisting of a balance sheet, income statement and statement of cash
flows.
9.3 Annual Financial Statements. Within one hundred
twenty (120) days of the fiscal year end of the Guarantor, Tenant shall
deliver to Landlord the annual consolidated financial statements of
Guarantor consisting of a balance sheet, income statement and statement
of cash flow, audited by a reputable certified public accounting firm.
9.4 Securities and Exchange Filings. Within fifteen (15)
days of filing with the Securities and Exchange Commission, Tenant
shall deliver to Landlord Guarantor's annual report on form 10-K, any
final prospectus with respect to the public offering of debt or equity
securities of Guarantor or a subsidiary of Guarantor, and any final
prospectus and proxy statement with respect to a business combination
involving the Guarantor.
7
9.5 Accounting Principles. All of the reports and
statements required hereby shall be prepared in conformity with GAAP
(and with respect to annual financial statements, in accordance with
GAAP), with Guarantor's accounting principles consistently applied.
9.6 Regulatory Reports. In addition, Tenant shall deliver
to Landlord:
9.6.1 Within thirty (30) days of receipt thereof,
copies of surveys performed by the appropriate governmental agencies
for licensing or certification purposes, and any plan of correction
related thereto, including state department of health licensing
surveys, Medicare certification surveys and life safety code reports;
and
9.6.2 Within five (5) days of receipt, copies of
any notice of intent (or similar document) to revoke or suspend any
material license, certification, certificate of need or similar item
relating to the Facility or its operation, as well as any notice of a
termination or restriction on the admission of patients to the facility
operated at the Premises.
b. Article XXIII of each of the California Driftwood
Lease shall be deleted in its entirety, shall be of no further force and effect,
and shall be replaced by the following:
23.1 Monthly Facility Reports. Within thirty (30) days
after the end of each calendar month during the Term, Tenant shall
prepare and deliver to Landlord monthly financial reports consisting of
a reasonably detailed income statement, total patient days, occupancy
and payor mix concerning the business conducted at the Premises.
23.2 Quarterly Financial Statements. Within forty-five
(45) days of the end of each of the first three fiscal quarters of the
fiscal year of the Guarantor, Tenant shall deliver to Landlord
unaudited quarterly consolidated financial statements of Guarantor
consisting of a balance sheet, income statement and statement of cash
flows.
23.3 Annual Financial Statements. Within one hundred
twenty (120) days of the fiscal year end of the Guarantor, Tenant shall
deliver to Landlord the annual consolidated financial statements of
Guarantor consisting of a balance sheet, income statement and statement
of cash flow, audited by a reputable certified public accounting firm.
8
23.4 Securities and Exchange Filings. Within fifteen (15)
days of filing with the Securities and Exchange Commission, Tenant
shall deliver to Landlord Guarantor's annual report on form 10-K, any
final prospectus with respect to the public offering of debt or equity
securities of Guarantor or a subsidiary of Guarantor, and any final
prospectus and proxy statement with respect to a business combination
involving the Guarantor.
23.5 Accounting Principles. All of the reports and
statements required hereby shall be prepared in conformity with GAAP
(and with respect to annual financial statements, in accordance with
GAAP), with Guarantor's accounting principles consistently applied.
23.6 Regulatory Reports. In addition, Tenant shall deliver
to Landlord:
23.6.1 Within thirty (30) days of receipt thereof,
copies of surveys performed by the appropriate governmental agencies
for licensing or certification purposes, and any plan of correction
related thereto, including state department of health licensing
surveys, Medicare certification surveys and life safety code reports;
and
23.6.2 Within five (5) days of receipt, copies of
any notice of intent (or similar document) to revoke or suspend any
material license, certification, certificate of need or similar item
relating to the Facility or its operation, as well as any notice of a
termination or restriction on the admission of patients to the
Facility.
c. Article XXV of each of the Illinois Leases shall be
deleted in its entirety, be of no further force and effect, and shall be
replaced by the following:
25.1 Monthly Facility Reports. Within thirty (30) days
after the end of each calendar month during the Term, Tenant shall
prepare and deliver to Landlord monthly financial reports consisting of
a reasonably detailed income statement, total patient days, occupancy
and payor mix concerning the business conducted at the Premises.
25.2 Quarterly Financial Statements. Within forty-five
(45) days of the end of each of the first three fiscal quarters of the
fiscal year of the Guarantor, Tenant shall deliver to Landlord
unaudited quarterly
9
consolidated financial statements of Guarantor consisting of a balance
sheet, income statement and statement of cash flows.
25.3 Annual Financial Statements. Within one hundred
twenty (120) days of the fiscal year end of the Guarantor, Tenant shall
deliver to Landlord the annual consolidated financial statements of
Guarantor consisting of a balance sheet, income statement and statement
of cash flow, audited by a reputable certified public accounting firm.
25.4 Securities and Exchange Filings. Within fifteen (15)
days of filing with the Securities and Exchange Commission, Tenant
shall deliver to Landlord Guarantor's annual report on form 10-K, any
final prospectus with respect to the public offering of debt or equity
securities of Guarantor or a subsidiary of Guarantor, and any final
prospectus and proxy statement with respect to a business combination
involving the Guarantor.
25.5 Accounting Principles. All of the reports and
statements required hereby shall be prepared in conformity with GAAP
(and with respect to annual financial statements, in accordance with
GAAP), with Guarantor's accounting principles consistently applied.
25.6 Regulatory Reports. In addition, Tenant shall deliver
to Landlord:
25.6.1 Within thirty (30) days of receipt thereof,
copies of surveys performed by the appropriate governmental agencies
for licensing or certification purposes, and any plan of correction
related thereto, including state department of health licensing
surveys, Medicare certification surveys and life safety code reports;
and
25.6.2 Within five (5) days of receipt, copies of
any notice of intent (or similar document) to revoke or suspend any
material license, certification, certificate of need or similar item
relating to the Facility or its operation, as well as any notice of a
termination or restriction on the admission of patients to the
Facility.
In addition to the reporting requirements delineated above for
the California Leases and the Illinois Leases, Tenants for each facility shall
provide within thirty (30) days of Landlord's written request such other
financial, physical, operational and regulatory information that Landlord may
reasonably request. Notwithstanding the foregoing, all information requested by
Landlord pursuant to this paragraph that is not otherwise available to Landlord
under the preceding paragraphs and that is considered by Tenants to be
non-public information, shall be
10
delivered to Landlord only following execution of a confidentiality agreement
that is acceptable to Landlord and Tenants.
9. Guaranty. Concurrently with the execution of this
Addendum, MPAN shall execute a guaranty in favor of Landlord in the form annexed
hereto as Exhibit B, thereby guarantying the full and faithful performance of
each and every obligation of each Tenant under each Lease.
10. Controlling Documents. In the event of any
inconsistency among the terms of this Addendum, the terms of the Settlement
Agreement, and the terms of any Lease, the terms of the Settlement Agreement
shall control over the terms of this Addendum and the terms of any Lease, and
the terms of this Addendum shall control over the terms of any Lease. Except to
the extent expressly amended pursuant to the Settlement Agreement or this
Addendum, the terms and provisions of each Lease shall remain in full force and
effect without modification.
11. Attorneys' Fees. If either party commences an action
against the other to interpret or enforce any of the terms of this Addendum or
because of the breach by the other party of any of the terms hereof, the losing
party shall pay to the prevailing party reasonable attorneys' fees, costs and
expenses and court costs and other costs of action incurred in connection with
the prosecution or defense of such action, whether or not the action is
prosecuted to final judgment.
12. Governing Law. This Addendum shall be construed and
enforced in accordance with internal laws of the State of California (without
regard to conflicts of law principles).
13. Recordation. Tenants shall be entitled at Tenants'
sole cost to record a memorandum of this Addendum in the real property records
in each county where the facilities subject to the Leases are located.
14. Counterparts. This Addendum may be executed in
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
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IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date first written above.
LANDLORD: NATIONWIDE HEALTH PROPERTIES, INC.,
A MARYLAND CORPORATION
By
-----------------------------------------
Its
--------------------------------
TENANTS: GRANCARE, INC., A DELAWARE CORPORATION,
DEBTOR AND DEBTOR IN POSSESSION
By
-----------------------------------------
Its
--------------------------------
GCI PALM COURT, INC., A CALIFORNIA
CORPORATION, DEBTOR AND DEBTOR IN
POSSESSION
By
-----------------------------------------
Its
--------------------------------
EVERGREEN HEALTHCARE LTD., L.P.,
AN INDIANA LIMITED PARTNERSHIP,
DEBTOR AND DEBTOR IN POSSESSION
BY EVERGREEN HEALTHCARE, INC.,
AN INDIANA CORPORATION, GENERAL PARTNER AND
DEBTOR AND DEBTOR IN POSSESSION
By
-----------------------------------------
Its
--------------------------------
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EXHIBIT A
DESCRIPTION OF LEASES
1. Lease and Security Agreement dated September 26, 1991 with respect to
Driftwood Manor (Hayward), Driftwood San Xxxx (Almaden Health and
Rehabilitation Center), and Driftwood Santa Xxxx, as amended
("California Driftwood Lease");
2. Lease dated April 20, 1994 with respect to Monterey Palms Health Care
Center, Palm Desert, California, as amended (the "California Monterey
Palms Lease" and with the California Driftwood Lease, the "California
Leases");
3. Lease dated May 1, 1989 with respect to Care Inn Convalescent Center,
LaSalle, Illinois, as amended (the "Illinois LaSalle Lease"); and
4. Lease dated May 1, 1989 with respect to Litchfield Convalescent Center,
Litchfield, Illinois, as amended (the "Illinois Litchfield Lease" and
with the Illinois LaSalle Lease, the "Illinois Leases").
13
