FORBEARANCE AGREEMENT
This Forbearance Agreement ("Agreement") is made and entered into on
October 13, 1999 by and between the entities identified on the signature page
hereof (each a "Lessee" and collectively "Lessees"); DELTA INVESTORS I, LLC , a
Michigan limited liability company, DELTA INVESTORS II, LLC, a Michigan limited
liability company, OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation and
OHI (ILLINOIS), INC., an Illinois corporation (each a "Lessor" and collectively
"Lessors"); and SUN HEALTHCARE GROUP, INC., a Delaware corporation
("Guarantor").
R E C I T A L S:
A. Lessees, each of which is a subsidiary or second tier subsidiary of
Guarantor, and Lessors are parties to the Leases and Subleases identified on
attached Exhibit A (each a "Lease" and collectively, the "Leases"). The Leases
relate to certain health care facilities also identified on Exhibit A (each a
"Facility" and collectively, the "Facilities"). The obligations of the Lessees
under the Leases are secured by the Security Agreements and other Agreements
identified on attached Exhibit B (each a "Security Agreement" and collectively,
the "Security Agreements"). Guarantor has executed the Guaranty with respect to
all of the Leases except the Complete Care Lease.
B. On or about May 28, 1999, the Lessors forwarded to the respective
Lessees and other persons required to receive notices under the applicable
Leases ("Other Persons"), and the Lessees and Other Persons received Notices of
Default pursuant to which the Lessors advised the Lessees and Other Persons that
the Lessees had failed to pay certain Minimum Rent and Additional Charges (as
defined in the Leases), and that the failure to cure these defaults within the
time set forth in the Notices of Default would constitute Events of Default
under all of the Leases, except the Complete Care Leases. The Lessees
acknowledge that on or about September 3, 1999, the Lessors forwarded to the
Lessees and to Other Persons, and the Lessees and Other Persons received,
Notices of Termination pursuant to which the Lessors advised the Lessees and
Other Persons that (I) the Lessees had not cured all of the defaults described
in the Notices of Default, and (II) pursuant to the terms of the Leases (a)
Events of Default had occurred under the Leases, other than the Complete Care
Leases, and (b) as a result of the Events of Default, the Leases, other than the
Complete Care Leases, would terminate on September 13, 1999.
C. Lessors contend that all of the Leases, except for the Complete Care
Lease, were terminated effective September 13, 1999 pursuant to the Notices of
Default and Notices of Termination identified in Recital B. Lessors further
contend that Lessors are entitled to immediate possession of the Leased
Properties. Lessees and Guarantor contend that the Notices of Default and
Notices of Termination were ineffective, and that all of the Leases continue in
full force and effect.
D. Guarantor and Lessees are currently experiencing financial
difficulties, and anticipate that they will file a Case or Cases under Chapter
11 of the United States Bankruptcy Code on or before October 15, 1999
("Filing"). The date on which Guarantor and the Lessees actually file such Case
or Cases is hereinafter referred to as the "Filing Date" and such Case or Cases
are hereinafter referred to as the "Case or Cases."
E. The parties hereto wish to set forth in writing certain agreements
which they have reached concerning (i) the continued occupancy of the Facilities
between the date hereof and the Filing Date, (ii) certain actions to be taken by
the parties after the Filing Date, (iii) certain agreements with respect to the
transition of operations of the Rejected Lease Facilities, and (iv) the
amendment and clarification of certain provisions of the Leases.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS
Terms, if not defined elsewhere herein, shall have the meanings
assigned to them in the Recitals or in this Section and include the plural as
well as the singular, all references to designated "Sections" and other
subdivisions are to the designated Sections and other subdivisions of this
Agreement and the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision:
Affiliate: Any Person which, directly or indirectly,
Controls or is Controlled by or is under common Control
with another Person.
Amended Delta I Facility Leases: The Original Delta I Facility
Leases and the February/March 1997 Leases.
Assumed Manor Care Leases: The Manor Care Leases so designated
on Exhibit A.
Assumption and Rejection Order: The Order of the Bankruptcy
Court to be entered granting the Motion to Assume and
Reject as contemplated by Sections III and V hereof. The
Assumption and Rejection Order shall be in all material
respects in the form attached hereto as Exhibit C.
Bankruptcy Court: The United States Bankruptcy Court having
jurisdiction over the Case or Cases.
Base Rent Allocable to the Assumed Manor Care Leases: The
Initial Base Rent Allocable to the Assumed Manor Care
Leases,
1. If the Effective Date is prior to January 1,
2000, prorated for the period from the
Effective Date through December 31, 1999 by
multiplying the Initial Base Rent Allocable
to the Assumed Manor Care Leases by a
fraction in which the numerator is the
number of days in such period and the
denominator is 365;
2. increased for the period commencing on the
later of (i) January 1, 2000 and (ii) the
Effective Date and ending on December 31,
2000 by the lesser of (y) one and one-half
times the increase in the Cost of Living
Index (as defined in the Qualicorp Lease)
during the preceding Lease Year and (z) two
and one-half percent (2.5%) of the Initial
Base Rent Allocable to the Assumed Manor
Care Leases (prorated for such period on a
per diem basis if such period commences
after January 1, 2000);
3. increased thereafter on each January 1
during the Fixed Term (as defined in the
Qualicorp Lease) and, if Lessee exercises
its right to renew the Term (as defined in
the Qualicorp Lease), the First Extension
Term (as defined in the Qualicorp Lease),
for the following twelve (12) month period
(or, as to the First Extension Term, pro
rata for the period between January 1 of
the last Lease Year of the First Extension
Term and the expiration of the First
Extension Term) by the lesser of (i) one
and one-half times the increase in the Cost
of Living Index during the preceding twelve
(12) month period and (ii) two and one-half
percent (2.5%) of the Base Rent Allocable
to the Assumed Manor Care Leases for the
immediately preceding twelve (12) month
period; and
4. if Lessee exercises its right to renew the
Term for the Second Extension Term (as
defined in the Qualicorp Lease), increased
on January 1 during the first Lease Year of
the Second Extension Term, for the following
twelve (12) month period (or, as to the last
Lease Year in the Second Extension Term,
pro rata for the period between January 1 of
such Lease Year (as defined in the Qualicorp
Lease) and the Expiration Date (as defined
in the Qualicorp Lease)) to the greater
of (i) the Fair Market Value Rent (as
defined in the Qualicorp Lease) for the
Elkhart, Indiana and Danville, Illinois
Leased Properties and (ii) the then current
Base Rent Allocable to the Assumed Manor
Care Leases, increased by the lesser of (x)
one and one-half times the increase in the
Cost of Living Index during the preceding
twelve (12) month period and (y) two and
one-half percent (2.5%) of the Base Rent
Allocable to the Assumed Manor Care Leases
for the immediately preceding twelve (12)
month period.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the
City of New York, New York are authorized, or obligated, by
law or executive order, to close.
Complete Care Lease: The Lease so described on Exhibit A.
Control (and its corollaries "Controlled by" and "under common
Control with"): Possession, directly or indirectly, of the
power to direct or cause the direction of the management
and policies of a Person, through the ownership of voting
securities, partnership interests or other equity interests.
Delta I: Delta Investors I, LLC, a Michigan limited liability
company, the sole member of which is Omega Healthcare
Investors, Inc.
Delta I Letter of Credit Agreement: The Amended and Restated
Letter of Credit Agreement dated as of February 28, 1997
between Omega Healthcare Investors, Inc. and Guarantor with
respect to the February/March 1997 Leases.
Delta I Master Lease: The Delta I Master Lease Agreement and
the Original Delta I Facility Leases.
Delta I Master Lease Agreement: The Master Lease Agreement
between Delta I and the Original Delta I Lessees, dated as
of October 7, 1997, as amended by the First Delta I Amendment
and the Second Delta Amendment.
Delta II: Delta Investors II, LLC, a Michigan limited
liability company, the sole member of which is Omega
Healthcare Investors, Inc.
Delta II Facility Leases: The Leases so described on Exhibit A
Delta II Master Lease: The Delta II Master Lease Agreement
and the Delta II Facility Leases.
Delta II Master Lease Agreement: The Master Lease Agreement
between Delta II and the Original Delta II Lessees, dated as
of October 7, 1997, as amended by the First Delta II
Amendment and the Second Delta Amendment.
Effective Date: The date after entry of the Assumption and
Rejection Order on which all of Lessees' Effective Date
Obligations have been satisfied.
Facility: As defined in each of the Leases.
February/March 1997 Leases: The Leases so described on
Exhibit A.
First Delta I Amendment: The First Amendment of Purchase
Agreement, Master Lease Agreement, Facility Leases and
Guaranty dated April 24, 1998, among Delta I, Guarantor and
the Original Delta I Lessees.
First Delta II Amendment: The First Amendment of Purchase
Agreement, Master Lease Agreement, Facility Leases and
Guaranty dated April 24, 1998, among Delta II, Guarantor and
the Delta II Lessees.
Forbearance Period: The period commencing on the date hereof
and ending when and if this Agreement is terminated in
accordance with its terms.
Guaranty: The Amended and Restated Guaranty executed by
Guarantor in favor of Lessors as of October 7, 1997, as
amended by the First Delta I Amendment, the First Delta II
Amendment and the Second Delta Amendment.
Initial Base Rent Allocable to the Assumed Manor Care
Leases: Nine Hundred Thirty Three Thousand Eighty Four
Dollars ($933,084.00).
Leased Property: Any and all of the property, real and
personal, tangible and intangible, leased pursuant to a
Lease; and, if defined in a Lease, with respect to such Lease
as so defined.
Lessees' Effective Date Obligations: (1) Satisfaction of
Lessees' Monetary Obligations; (2) Lessees' transfer and
relinquishment of the Rejected Lease Assets as required by
this Agreement; (3) Lessees' execution of the agreements
that it is required by this Agreement to execute; and
(4)Guarantor's and Lessees' release of Lessors as set
forth in Section XI.A. hereof.
Lessees' Monetary Obligations: (i) The obligation of the
Liberty Lessees to make an additional security deposit of
Sixty Nine Thousand Six Hundred Twenty Six and 85/100 Dollars
($69,626.85) as set forth in Section VIII.D. hereof; (ii)
the obligation of the Lessees to pay Lessors Two Hundred
Fourteen Thousand Two Hundred Fifty Eight and 42/100 Dollars
($214,258.42) to cure the monetary defaults set forth in
attached Exhibit D; (iii) the obligation of the Lessees under
the Sun Delta I Master Lease, the Sun Delta II Master Lease
and the Sun Liberty Master Lease to pay to the Lessors
thereunder the Sun Delta I Master Lease Minimum Rent
Increase, the Sun Delta II Master Lease Minimum Rent Increase
and the Sun Liberty Master Lease Minimum Rent Increase,
respectively, for the period from November 1, 1999 through
the Effective Date; and (iv) the obligation of the Lessee
under the Rejected Leases to pay Base Rent pursuant to
Section IX.B.3 if any amount thereof shall be unpaid as of
the Effective Date.
Liberty Leases: The Leases so described on Exhibit A.
Manor Care Leases: The Leases so described on Exhibit A.
Motion Filing Date: The date of filing with the Bankruptcy
Court of the Motion to Assume or Reject.
Motion to Assume and Reject: A motion to be filed by the
Lessees and Guarantor within five (5) Business Days of the
Filing Date which shall seek entry of the Assumption and
Rejection Order. The Motion to Assume and Reject shall be
prepared by counsel for the Lessees and shall be reasonably
acceptable to counsel for Lessors.
Notice: Any written notice given by any party hereto in
accordance with the notice provisions set forth in Section
XII hereof.
Operations Transfer Agreement: An agreement in all material
respects in the form attached hereto as Exhibit E which
shall, except as otherwise set forth herein, govern the
transfer of operations of a Rejected Lease Facility from
Lessee to Transferee.
Original Delta I Facility Leases: The Leases so described on
Exhibit A.
Person: Any natural person, trust, partnership, corporation,
joint venture, limited liability company or other legal
entity.
Qualicorp Lease: The Lease so described on Exhibit A.
Qualicorp Letter of Credit Agreement: The Letter of
Credit Agreement dated June 1, 1997 by and among Omega
Healthcare Investors, Inc., OHI (Illinois), Inc. and
Guarantor entered into with respect to the Qualicorp Lease.
Rejected Lease: Each Lease specified to be rejected in
Section III hereof.
Rejected Lease Assets: With respect to each Rejected Lease,
all of the real and personal property covered thereby
or by any Security Agreement executed by the Lessee
thereunder in favor of the Lessor thereunder, including
without limitation the Leased Property (with respect to the
Rejected Manor Care Leases and as defined therein) and the
Demised Premises (with respect to the Complete Care Lease
and as defined therein), all tangible personal property,
furniture, fixtures and equipment owned by a Lessee and used
or held for use in connection with or otherwise relating
to the operation of the Rejected Lease Facility or
Facilities, and all plans and specifications relating to the
buildings and improvements included in the Leased Property
or Demised Premises covered thereby, to the extent in the
possession of the Lessees; all of the books and records of a
Facility covered thereby, including patient medical and
financial records and employee records; to the extent
assignable, all intangible personal property of every type,
nature and description relating to a Facility covered
thereby, including utility deposits, warranties, consents,
authorizations, licenses and permits issued by third parties
(provided that Lessees shall retain any such licenses and
permits which they are required to maintain during the
period for which the Lessees retain operational control and
responsibility for the applicable Rejected Facility
hereunder); and all inventories of every type, nature
and description whatever (specifically including all
pharmacy supplies, kitchen supplies, linens and housekeeping
supplies, medical and nursing supplies, office supplies, and
other supplies and foodstuffs) owned by the Lessee on the
Effective Date which inventories are located at or held for
use in any of the Facilities covered by a Rejected Lease.
Notwithstanding anything to the contrary herein, all of the
following items are excluded from the term "Rejected Lease
Assets:" cash, accounts receivable, all leased equipment
and leased motor vehicles (other than equipment and motor
vehicles leased from Affiliates of Lessees and Guarantor),
the KRONOS time clock, the Omnicell medical supply dispensing
units, all computers and computer-related equipment located
at a Facility and all computer software used on such
equipment.
Rejected Lease Facility: Any Facility subject to a Rejected
Lease.
Second Delta Amendment: The First Amendment of Security
Agreements and Second Amendment of Purchase Agreement,
Master Lease Agreement, Facility Leases and Guaranty among
Omega Healthcare Investors, Inc., Delta I, Delta II and
Guarantor, dated June 15, 1998.
Sun Delta I Master Lease: The Delta I Master Lease, as amended
as provided in Section V hereof and assumed pursuant
the Assumption and Rejection Order.
Sun Delta I Master Lease Minimum Rent Increase: The accrued
and unpaid amount of the increase in the Minimum Rent
payable under the Delta I Master Lease, effective as of
November 7, 1998, for the Term thereof and any extensions
thereof, subject to annual increases and adjustments as set
forth in the Sun Delta I Master Lease, pursuant to the
Agreement Regarding Post-Closing Matters dated October 7,
1997 among the Original Delta I Lessees, Regency Health
Services, Inc., Guarantor, Delta I and Delta II, which
increase annualized for the Lease Year 1998 is Four Hundred
Thirty Nine and 04/100 Dollars ($439.04), annualized for
the Lease Year 1999 is Four Hundred Fifty and 36/10
Dollars ($450.36) and for the Lease Year 2000 shall be
adjusted in the same fashion as Base Rent is adjusted.
Sun Delta II Master Lease: The Delta II Master Lease, as
amended as provided in Section V hereof and assumed pursuant
to the Assumption and Rejection Order.
Sun Delta II Master Lease Minimum Rent Increase: The accrued
and unpaid amount of the increase in the Minimum Rent payable
under the Delta II Master Lease, effective as of November
7, 1998, for the Term thereof and any extensions thereof,
subject to annual increases and adjustments as set forth in
the Sun Delta II Master Lease, pursuant to the Agreement
Regarding Post-Closing Matters dated October 7, 1997 among
the Original Delta I Lessees, Regency Health Services, Inc.,
Guarantor, Delta I and Delta II, which increase annualized
for the Lease Year 1998 is Seventeen Thousand Sixty Seven
and 99/100 Dollars ($17,067.99), annualized for the Lease
Year 1999 is Seventeen Thousand Five Hundred Six and
68/100 Dollars ($17,506.68) and for the Lease Year 2000 shall
be adjusted in the same fashion as Base Rent is adjusted.
Sun Leases: Collectively, the Sun Delta I Master Lease, the
Sun Delta II Master Lease, the Sun Liberty Master Lease and
the Sun Qualicorp Lease.
Sun Liberty Master Lease: The Liberty Leases, as amended as
provided in Section V hereof and assumed as provided in
the Assumption and Rejection Order.
Sun Liberty Master Lease Minimum Rent Increase: The accrued
and unpaid amount of the increase in the Minimum Rent
payable under the Liberty Leases, effective as of November
7, 1998, for the Term thereof and any extensions thereof,
subject to annual increases and adjustments as set forth in
the Liberty Leases, pursuant to the Agreement Regarding
Post-Closing Matters dated October 7, 1997 among the
Original Delta I Lessees, Regency Health Services, Inc.,
Guarantor, Delta I and Delta II, which increase annualized
for the Lease Year 1998 is Eight Thousand Seven Hundred
Thirty Four and 02/100 Dollars ($8,734.02), annualized for
the Lease Year 1999 is Eight Thousand Nine Hundred Fifty
Eight and 43/100 Dollars ($8,958.43)and for the Lease
Year 2000 shall be adjusted in the same fashion as Minimum
Rent is adjusted.
Sun Qualicorp Lease: The Qualicorp Lease, amended as
provided in Section V hereof and assumed as provided in the
Assumption and Rejection Order.
Sun Transaction Documents: The documents listed on attached
Exhibit F.
Trade Name: The name or names under which a Facility is
conducting business on the date hereof.
Transferee: A person or entity designated by the Lessor (which
may be such Lessor) under a Rejected Lease to which such
Lessor wishes a Lessee under a Rejected Lease to transfer
possession of, or certain management rights with respect to,
the Rejected Lease Facility or Facilities.
2. AGREEMENT TO FORBEAR
1. During the Forbearance Period, the Lessors shall forbear from
commencing any judicial or other action for the purpose of
pursuing remedies, including, without limitation, the recovery
of possession of any Leased Property, on the basis of any
default prior to the date of this Agreement by any Lessee
under any Lease or any default in existence by Guarantor under
the Guaranty. This Agreement shall, at the option of the
Lessors, terminate upon:
1. The failure of any one or more of the Lessees to
commence a Case on or before October 15, 1999;
2. The failure of the Lessees to obtain the Assumption
and Rejection Order on or before the earlier of
1. 45 days after the Motion Filing Date, or
2. the entry of a final DIP Financing Order
which provides that the lender's security
interest primes any of the collateral of any
of the Lessors under the Security
Agreements; or
3. The election of Lessors to terminate this Agreement
pursuant to Section IX hereof; or
4. Lessees' failure to satisfy Lessees' Effective Date
Obligations as and when required herein.
2. Upon execution of this Agreement by all parties, Lessors
shall immediately take all steps reasonably appropriate
under applicable law to withdraw any and all notices to quit
(or the equivalent) that have been served upon Lessees on or
prior to the date hereof, and shall immediately dismiss any
and all lawsuits commenced against any Lessee or Guarantor
with respect to the Leases, and during the Forbearance Period
in addition to its agreement to forbear as set forth in
Section II.A., above, shall also forbear from causing
or permitting any notice to quit (or the equivalent) to be
served upon any Lessee, provided, however, that Guarantor and
each Lessee waives and agrees (which waiver and agreement
shall survive the termination of this Agreement
notwithstanding Section II.G, hereof) that it shall not
assert such withdrawal or any failure to serve such
notice to quit (or the equivalent) during the Forbearance
Period in any action brought by a Lessor as a defense to any
action by Lessor.
3. During the Forbearance Period, Guarantor and each Lessee
shall forbear from commencing any judicial or other actions
adverse to any Lessor with respect to any of the Leases,
other than the Filing, or, if applicable, seeking any
relief adverse to Lessor in any now pending action with
respect thereto, provided, however, that such agreement to
forbear shall not apply to (i) any default by any Lessor under
any Lease occurring after the date hereof if such default is
not cured within the applicable cure or grace period set
forth in the Lease, or (ii) any default by any Lessor under
this Agreement which is not cured within ten (10) days after
written notice thereof, each of which defaults may be the
subject of a separate legal action but shall not affect the
rights or obligations of the Lessees and Guarantor
hereunder.
4. Each party to this Agreement hereby waives and agrees
(which waiver and agreement shall survive the termination
of this Agreement notwithstanding Section II.G, hereof)
that it shall not assert at any time that the failure during
the Forbearance Period of any other party to this Agreement
to commence any action or proceed with any steps taken prior
to the Forbearance Period that are or may be required under
applicable law prior to the commencement of any action is a
defense to any claim by another party arising out of or in
connection with any or all of the Leases. The intent of the
parties is that compliance during the Forbearance Period with
the forbearance agreements set forth in Section II.A, Section
II.B and Section II.C shall not prejudice or be a waiver of
the rights or claims of any of the parties hereto should the
Forbearance Period terminate as set forth in Section II.A.
5. On the Effective Date, Lessors' agreement to forbear as
provided herein shall be absolute and unconditional and cannot
be terminated, provided, however, that except as provided in
Section XI hereof, nothing contained herein shall be construed
as limiting the rights and remedies of any of the Lessors with
respect to any default or Event of Default which occurs under
the Sun Leases or the Security Agreements, as amended, after
entry of the Assumption and Rejection Order.
6. Guarantor and Lessees agree (which agreement shall survive
the termination of this Agreement notwithstanding Section
II.G, hereof) that neither the acceptance during the
Forbearance Period by any Lessor of any rent or other payment
by any Lessee with respect to any Lease, the continued
possession during the Forbearance Period of Leased Property
covered by a Lease by the Lessee thereof, nor the performance
by a Lessee during the Forbearance Period of any of the
obligations set forth in any Lease without objection from
the Lessor thereunder, shall constitute a waiver or
otherwise prejudice either the contention of the Lessors that
such Lease has been terminated or the contention of Guarantor
and the Lessees that such Lease has not been terminated and is
in full force and effect, but the foregoing reservation shall
be null and void after the Effective Date.
7. In the event this Agreement terminates pursuant to the terms
hereof, from and after such termination no party hereto shall
have any rights or obligations arising out of or in connection
with this Agreement, and no party shall be deemed to have
waived any of its rights or been released from any of its
obligations with respect to the Leases or the Guaranty or in
any way be prejudiced by its execution of, or its performance
of any of its obligations under, this Agreement.
3. REJECTION OF LEASES
Guarantor and the Lessees shall (i) file the Motion to Assume and
Reject within five (5) Business Days of the Filing Date, and (ii) use
good faith efforts to obtain entry of the Assumption and Rejection
Order on or before the earlier of (y) forty-five (45) days after the
Motion Filing Date or (z) the entry of a final DIP Financing Order
which provides that the security interest of the lender primes the
collateral of one or more of the Lessors under a Security Agreement,
unless extended in writing by the Lessors. During the Forbearance
Period and from and after the Effective Date, Lessors shall support
entry of the Assumption and Rejection Order and shall not oppose entry
of the orders filed by Lessees and their Affiliates on the date the
Case or Cases are filed with respect to DIP financing, cash collateral
arrangements and debtors' cash management, or any orders filed by
Lessees and their Affiliates thereafter relating to the same subject
matter provided in each case such subsequent orders are not at variance
in any material respect that adversely affects Lessors, the Leases, the
Facilities covered by the Leases or the rights of the Lessors under the
Leases or this Agreement, with the orders sought on the day the Case or
Cases are filed copies of which have been provided to Lessors prior to
the date of this Agreement. The Motion to Assume and Reject shall seek,
among other things, authorization to reject the following Leases:
LESSOR LESSEE LEASE DATE
1. Omega Healthcare Investors, Inc. SunBridge Healthcare June 1, 1990
(successor by merger to Health Corporation (successor
Equity Properties, Inc.) by assignment to Complete
Care, Inc.)
2. Omega Healthcare Investors, Inc. SunBridge Healthcare February 28, 1997
(with respect to the Facility in Austin, Corporation Texas and the
Facility in Mason City, Iowa)
4. CERTAIN AGREEMENTS REGARDING REJECTED LEASE FACILITIES
1. BASE RENT WITH RESPECT TO REJECTED LEASE FACILITIES AFTER FILING OF
MOTION TO ASSUME AND REJECT.
1. Provided that the Motion to Assume and Reject is
filed within the period specified in Paragraph II.A.
hereof, for the period from and after the date on
which the Motion to Assume and Reject is filed
through the earlier of (i) the forty-fifth day
following the Motion Filing Date and (ii) the
Effective Date ("Accrual Period") the Base Rent(as
defined in each Rejected Lease) shall with respect
to the Rejected Lease Facilities accrue but except
as provided in Section IV.A.2. hereof and Section IX
hereof shall not be payable ("Accrued Rent").In the
event any Accrued Rent shall have been paid by any
Lessee on or before the date hereof, upon the
Effective Date the amount so paid shall be credited
first against any unpaid Base Rent payable with
respect to the Rejected Lease Facilities for any
period after the expiration of the Accrual Period,
if any, and then to the Lessees' Monetary
Obligations.
2. Upon the Effective Date Lessors shall have waived all
claims to the Accrued Rent, but if Lessors exercise
their right to terminate this Agreement as provided
in Section II.A., Lessors shall retain their claims
for payment of the Accrued Rent.
2. TRANSFER OF THE REJECTED LEASE ASSETS
1. On the date upon which Lessees are required to
satisfy Lessees' Effective Date Obligations as
set forth in Section IX hereof, the Lessee under each
Rejected Lease shall relinquish possession of the
Rejected Lease Assets to the Transferee under such
Rejected Lease, as is and where is, in the condition
of the Rejected Lease Assets on the date hereof,
without any representations or warranties whatsoever,
including without limitation without any
representations with respect to title or the
condition of title to the Rejected Lease Assets,
the condition of the Rejected Lease Assets or the
compliance of the Rejected Lease Facilities with
applicable laws, regulations or administrative
orders, provided that if any Rejected Lease Assets
shall be damaged or destroyed between the date
hereof and the Effective Date, the Lessee under
the applicable Rejected Lease shall undertake such
repair and restoration thereof as may be required
by the applicable Lease and be reasonably feasible
during the time period between the date of such
damage or destruction and the Effective Date and
shall deliver to the Lessor thereunder such proceeds
of insurance as such Lessee shall have received,
and assign to Lessor such additional insurance
proceeds as Lessee is entitled to receive, with
respect to such damage or destruction, minus such
portion of such proceeds as may have been paid by
such Lessee for repairs and restoration of such
damage or destruction.
2. On the date upon which Lessees are required to
satisfy Lessees' Effective Date Obligations as set
forth in Section IX hereof, (i) the Lessee and Lessor
under each Rejected Lease shall properly execute and
deliver to each other an appropriate instrument in
recordable form acknowledging termination of the
Rejected Lease and release of the obligations of the
Lessee and Lessor thereunder, (ii) the Lessee under
each Rejected Lease shall properly execute and
deliver to the Lessor thereunder a quitclaim of its
interests in and to the Rejected Lease Assets and
(iii) the Affiliates of the Lessee under each
Rejected Lease shall release any security interest
they may have in the Rejected Lease Assets.
3. ECONOMIC RISK AND REWARD FROM AND AFTER THE EFFECTIVE DATE.
The Lessor of each of the Rejected Lease Facilities shall be
entitled to all revenues, and shall be liable for all expenses
and liabilities, which in each case with respect to such
Rejected Lease Facility relate to the period from and after
the Effective Date or such earlier date on which the
applicable Lessee transfers operational responsibility for
such Rejected Lease Facility to the applicable Lessor or
Transferee pursuant to the request of such Lessor and the
terms of the Operations Transfer Agreement as provided in this
Agreement.
4. INTERIM MANAGEMENT OF REJECTED LEASE FACILITIES.
1. At the request of the Lessor of a Rejected Lease
Facility, from and after the Effective Date, the
Lessee of the Rejected Lease Facility shall manage
the Rejected Lease Facility pursuant to an
interim management agreement ("Interim Management
Agreement") reasonably acceptable to the parties,
the term of which shall not exceed six (6) months,
provided, however, that if an appeal is taken from
the Assumption and Rejection Order, the term of such
Interim Management Agreement shall be extended until
the earlier of (i) the date on which this Agreement
is terminated or (ii) the date on which the
Assumption and Rejection Order becomes final and
non-appealable. Except as provided in Section
IV.D.2. below, the Lessee will be paid a
management fee equal to a percentage of the gross
revenues of the Rejected Lease Facility (net of
any recoupments or charge-backs), which percentage
has been agreed upon by the parties to this
Agreement. The Lessor shall have the right to
terminate the Interim Management Agreement at
any time upon five (5) days Notice to Lessee. The
Interim Management Agreement shall require that
Lessor provide Lessee with all working capital
required for the operation of the Rejected Lease
Facility, and shall require that the Lessor
indemnify, defend, and hold Lessee harmless from any
and all claims and expenses accruing with respect to
the Rejected Lease Facility after the Effective Date,
except for claims arising from willful misconduct or
negligence of the Lessee.
2. From and after the Effective Date, if an Interim
Management Agreement has been entered into, the
Lessee under a Rejected Lease Facility at the request
of the Lessor thereunder shall transfer operational
responsibility for such Facility to the Transferee
pursuant to a submanagement agreement
("Submanagement Agreement") with Transferee
reasonably acceptable to the parties.
The Submanagement Agreement will provide that
Transferee will manage and perform all functions
relating to the operation of the Rejected Lease
Facility, except for those functions which Lessee
is required to perform as the licensee of the
Rejected Lease Facility. If a Submanagement Agreement
is entered into, the management fee payable to Lessee
under the Interim Management Agreement shall
automatically be changed to One Hundred Dollars
($100.00) per month above the submanagementfee (which
submanagement fee will be paid to the Lessee and
passed through to the Transferee). Lessor shall
remain responsible for providing all working
capital required with respect to the Rejected Lease
Facility, and the indemnification given to Lessee
under the Interim Management Agreement shall be
expanded to include any and all acts and omissions
of the Transferee including operation of the
Rejected Lease Facility under the Lessee's licenses
and provider agreements.
3. Any Interim Management Agreement and Submanagement
Agreement entered into as set forth above shall
automatically terminate upon Transferee obtaining the
necessary licenses for the operation of the Rejected
Lease Facility, provided that notwithstanding such
termination, in accordance with the Operations
Transfer Agreement the Lessee of the Rejected Lease
Facility shall allow the Lessor or Transferee
thereof to operate under the relevant Lessees'
Medicare and Medicaid Provider numbers (the "Prior
Provider Numbers") until such time as the Lessor or
Transferee, in accordance with applicable law,
either (i) obtains a Medicare and Medicaid provider
number in its own name or (ii) is authorized by the
applicable state or federal governmental
authority to xxxx under the Prior Provider Numbers
for services rendered by it after the Effective Date,
provided that in no event shall such obligation of
the Lessee of such Rejected Lease Facility require
that such Lessee assume pursuant to Section 365 of
the Bankruptcy Code any provider agreement to
which such Lessee or any of its Affiliates may be a
party.
4. Prior to the Effective Date, the Lessee under a
Rejected Lease Facility at the request of the Lessor
thereunder shall transfer operational responsibility
for such Facility to the applicable Lessor or
Transferee pursuant to an Operations Transfer
Agreement and a management agreement between Lessee
and Transferee (the "Transferee Management
Agreement") reasonably acceptable to the parties.
The Transferee Management Agreement will provide
that Transferee will manage and perform all
functions relating to the operation of the Rejected
Lease Facility, except for those functions which
Lessee is required to perform as the licensee of the
Rejected Lease Facility. If a Transferee Management
Agreement is entered into prior to the Effective Date
hereafter, the Lessor shall bear all economic risks
of and be entitled to all economic reward from the
Rejected Lease Facility, as more particularly set
forth in Subsection 4.C. hereof. Without limiting the
foregoing, if a Transferee Management Agreement is
entered into prior to the Effective Date, thereafter
Lessor shall provide Lessee with all working capital
required for the operation of the Rejected Lease
Facility, and Lessor shall indemnify, defend and
hold Lessee harmless from any and all claims and
expenses accruing with respect to the Rejected Lease
Facility, except for claims arising from willful
misconduct or negligence of the Lessee. If a
Transferee Management Agreement is entered into,
the Lessee shall permit the Lessor to make all
decisions required of the Lessee under the Transferee
Management Agreement, except for those decisions
which Lessee is required to make as the licensee of
the Rejected Lease Facility. If from or after the
Effective Date Lessor and Lessee enter into an
Interim Management Agreement pursuant to Subsection
4.D.1., any Transferee Management Agreement shall
automatically become a Submanagement Agreement
governed by Subsections 4.D.2. and 4.D.3.
5. COOPERATION WITH RESPECT TO OPERATIONS BETWEEN LESSOR AND LESSEE PRIOR
TO EFFECTIVE DATE
Commencing with the execution of this Agreement, the Lessee,
Lessor and Transferee (when identified) of a Rejected Lease
Facility shall work cooperatively with each other to design
and implement a program
1. to insure patients and employees that the rejection of the
Rejected Lease and the resulting change in management will not
adversely affect them,
2. to encourage all patients to remain patients of the Facility, and
3. to encourage all employees of such Facility (whether
employed by the Lessee or employed under a contract
with an Affiliate of the Lessee) to remain employees
of the Facility.
Notwithstanding the foregoing, Lessee shall have no liability
to Lessor or Transferee if patients or employees leave or
operation of the Facility is otherwise adversely affected by
the Case or Cases.
6. OPERATIONS TRANSFER AGREEMENT
On the Effective Date or such earlier date upon which the
Lessor of a Rejected Lease Facility requests that the Lessee
thereunder turn over operational responsibility for such
Facility to a Transferee, such Lessee and Transferee shall
enter into an Operations Transfer Agreement. With the support
of Lessors, Guarantor and Lessees shall use good faith efforts
to obtain timely approval of the Bankruptcy Court with respect
to any provisions of the Operations Transfer Agreement as to
which such approval is required.
7. TRADE NAMES
The Lessee under a Rejected Lease shall be deemed to have
assigned to the Lessor under such Rejected Lease the exclusive
right to use without objection from any Affiliate of such
Lessee the Rejected Lease Facility or Facilities' Trade Name
or Trade Names, excluding the names "Sun" or "Mediplex" or any
derivatives or variations thereof, in perpetuity in the
markets in which such Rejected Lease Facility or Facilities
are located, but without any representation that any Lessor
shall have the right to use any such Trade Name or Trade
Names, and no Lessee shall use such Rejected Lease Facility or
Facility Trade Names in any business that competes with such
Facility or Facilities.
8. HIGHLAND HILLS (FOUR SEASONS NURSING CENTER)
Guarantor and Lessees agree that any and all fines, penalties
as of the date hereof and any interest that may be due thereon
with respect to the Manor Care Lease applicable to the Four
Seasons Nursing Center at Austin, Texas (a/k/a "Highland
Hills"), shall be paid as and when due.
5. SUN LEASES
1. INDUCEMENT FOR OMEGA CONSENTING TO ASSUMPTION OF LEASES
Lessees and Guarantor agree and acknowledge that the
willingness of the Lessors to consent to the assumption of the
Sun Leases and to waive their position that all of the Leases
have been terminated is specifically conditioned upon their
agreement, and the finding of the Bankruptcy Court in the
Assumption and Rejection Order, that, except as provided in
Section XI and Section XII hereof, a default by one or more of
the Lessees under any of the Sun Leases which is not cured
after any required notice and within any applicable cure
period shall, at Lessors' option, be an Event of Default under
each of the Sun Leases, and that the Sun Leases (i) constitute
true and bona fide leases, (ii) are each part of and subject
to one of the four (4) Master Leases, i.e., the Sun Liberty
Master Lease, Sun Qualicorp Lease, Sun Delta I Master Lease,
and Sun Delta II Master Lease, (iii) are collectively
integrated and cross-defaulted pursuant to provisions therein
specifically found to be enforceable and (iv) on and after the
Effective Date the Sun Leases will collectively be integrated
and the cross-default provisions contained therein will be
enforceable.
2. ASSUMPTION OF LEASES
The Motion to Assume and Reject shall seek, among other
things, authorization to assume the Sun Leases. On the date
upon which Lessees are required to satisfy Lessees' Effective
Date Obligations as set forth in Section IX hereof, Lessors
and Lessees shall execute appropriate instruments in form
reasonably acceptable to the parties pursuant to which Lessees
assume the Sun Leases and Lessors acknowledge such assumption.
3. LEASE AMENDMENTS
1. INTEGRATION OF ASSUMED MANOR CARE LEASES AND QUALICORP LEASE
The Assumption and Rejection Order shall provide that
as of the Effective Date the Leased Property under
the Assumed Manor Care Leases shall be integrated
into and become subject to the Sun Qualicorp Lease,
provided, however, that the options to purchase
contained in the Assumed Manor Care Leases shall
continue in full force and effect, and any and all
obligations and liabilities of the Lessee under the
Assumed Manor Care Leases shall become obligations
and liabilities of such Lessee under the Sun
Qualicorp Lease.
2. ADDITION OF FEBRUARY/MARCH 1997 LEASES TO DELTA I MASTER LEASE AGREEMENT
The Assumption and Rejection Order shall provide that
as of the Effective Date the February/March 1997
Leases, amended as set forth below, shall become
subject to the Sun Delta I Master Lease.
3. AMENDMENTS TO SPECIFIC LEASES
Upon the assumption thereof, pursuant to the
Assumption and Rejection Order the following Leases
shall be amended as hereinafter set forth as of the
Effective Date:
1. FEBRUARY/MARCH 1997 LEASES
(1)Each of the February/March 1997 Leases shall be amended as follows:
(1) The definition of "Related Leases" shall be changed to include all
of the Amended Delta I Facility Leases;
(2) The renewal options shall be changed to be the same as the
renewal options under the Original Delta I Facility Leases;
(3) The Standard Terms and Conditions shall be the
Standard Terms and Conditions of the Original
Delta I Facility Leases, subject to Section V.B.3.d. hereof.
2. DELTA I MASTER LEASE AGREEMENT AND DELTA II MASTER LEASE AGREEMENT
The Delta I Master Lease Agreement shall be
amended to include the February/March
Leases, as amended, as Facility Leases
thereunder, and the Delta I Master Lease
Agreement and the Delta II Master Lease
Agreement shall be amended to incorporate
the Sun Delta I Master Lease Minimum Rent
Increase and the Sun Delta II Master Lease
Minimum Rent Increase, respectively,
thereunder.
3. LIBERTY LEASES
The Liberty Leases shall be amended to
incorporate the Sun Liberty Leases Minimum Rent Increase.
4. QUALICORP LEASE
The Qualicorp Lease shall be amended as follows:
(1) The Leased Property under the Assumed Manor Care Leases shall become
subject to the Sun Qualicorp Lease;
(2) From and after the Effective Date, the Base Rent shall be the sum
of the Base Rent payable under the Qualicorp Lease prior to
amendment and the Base Rent Allocable to the Assumed Manor Care Leases.
5. ADDITIONAL AMENDMENTS
The Sun Leases shall be further amended as may reasonably be required
in order to correct and confirm inter-document, intra-document and exhibit
references and conform definitions of terms used in such Sun Leases in order
to carry out the intent of this Agreement.
6. GUARANTY; ACCOUNTS RECEIVABLE
1. Guarantor and Lessees shall use good faith efforts to seek the
restructuring of Lessees as part of the plan of reorganization
of the Lessees and Guarantor in the Case or Cases, such that:
1. The Facilities covered by the Sun Leases are leased
to one or more entities ("Sun Leases Subsidiaries")
whose only business is leasing and operating such
Facilities, the terms and conditions of such lease or
leases with respect to each Facility to be the same
as the terms and conditions of the Sun Lease
applicable to such Facility;
2. The Sun Leases Subsidiaries are owned by one or more
single-purpose entities which own only the Sun Leases
Subsidiaries (each such entity a "Parent");
3. The Parent will execute a guaranty of payment and
performance with respect to such lease or all such
leases (and if more than one Parent, the Parents will
execute a joint and several guaranty of payment and
performance with respect to all such Leases) the
terms and conditions of which in all material
respects shall be the same as the terms and
conditions of the Guaranty, except that it shall
(i) exclude the Rejected Leases, and (ii)
require compliance with the financial covenants
imposed by the principal working capital lenders upon
the ultimate parent of Lessees upon the effective
date of the plan of reorganization with respect to
the Case or Cases, as the same may be amended,
modified or restated from time to time during the
term of such guaranty, provided, however, that in
the event that during the term of the guaranty there
are no such covenants, Guarantor and Lessees shall in
good faith negotiate reasonable financial covenants
applicable to the Guarantor that shall provide
reasonable assurance to the Lessors that the
financial condition of Guarantor shall be adequate
to enable it to perform its obligations under the
guaranty; and
4. Upon completion of the restructuring described in
this Section VI.A., the Guaranty shall be released.
2. If approval of the restructuring described in Section VI.A is
denied by any regulatory agency or agencies with respect to a
Sun Lease Facility or Sun Lease Facilities over which it has
jurisdiction ("Denied Facilities"), then such restructuring
shall be completed as required herein with respect to all
Lessees under the Sun Leases, and all Sun Lease Facilities as
to which such denial of approval is inapplicable, and the
Guaranty shall be reinstated with respect to the Sun Leases
covering the Denied Facilities pursuant to the plan of
reorganization applicable to Guarantor.
3. If Guarantor and Lessees determine in good faith that the
restructuring described in Section VI.A shall not be part of
the plan of reorganization of Guarantor and Lessees, then
Guarantor and Lessees agree that the Guaranty shall be
reinstated with respect to all of the Sun Leases and amended
to require compliance with the financial covenants
imposed by the principal working capital lenders upon the
ultimate parent of Lessees upon the effective date of the
plan of reorganization with respect to the Case or Cases as
such covenants may be amended, modified or restated from
time to time during the term of such guaranty, and in the
event there are no such covenants, to provide that
Guarantor and Lessees shall in good faith negotiate reasonable
financial covenants applicable to the Guarantor that
shall provide reasonable assurance to the Lessors that the
financial condition of Guarantor shall be adequate to
enable it to perform its obligations under the Guaranty.
4. In any event, Guarantor and Lessees agree that unless the
Guarantor under the reinstated Guaranty is the ultimate
parent of all of the Lessees under the Sun Leases, if at
any time after the effective date of the plan of
reorganization applicable to a Lessee under a Sun Lease, but
only during the Term of such Sun Lease, such Lessee shall
grant a security interest in the accounts receivable of the
Facility or Facilities covered by such Sun Lease to any party
other than the Lessor under such Sun Lease ("Third Party
A/R Lien"), such Lessee shall at such time also use good
faith efforts to grant the Lessor under such Sun Lease a
security interest in the accounts receivable of such
Facility or Facilities, provided, however, that the security
interest granted to such Lessor shall be subordinate to
such Third Party A/R Lien and be subject to such subordination
and intercreditor agreements as the holder of such
Third Party A/R Lien may in its sole discretion require.
5. For purposes of this Section VI, the obligations imposed on
Lessees to act in "good faith" or to use "good faith efforts"
shall not require the Lessees to take any action or position
that they determine in their reasonable judgment would
adversely affect (i) a restructuring by the Guarantor, the
Lessees or any of their Affiliates, or (ii) the ability of
Guarantor, the Lessees or any of their Affiliates to
effectuate such a restructuring, in the Case or Cases.
7. SECURITY AGREEMENTS
On the date on which Lessees are required to satisfy Lessees' Effective
Date Obligations as set forth in Section IX hereof, (i) Lessors and
Lessees shall execute and deliver such amendments to the Security
Agreements and financing statements related thereto as may be
appropriate as a consequence of the lease amendments to be executed
pursuant to Section V hereof and the change of name of SunRise
Healthcare Corporation to SunBridge Healthcare Corporation, and (ii)
the Lessor under the Sun Manor Care Leases shall execute and deliver a
UCC termination statement releasing the Lessor's security interest in
accounts receivable under the Sun Manor Care Leases.
8. SECURITY DEPOSITS
1. Complete Care Lease. The Lessor under the Complete Care
Lease currently holds a Letter of Credit in the amount of One
Hundred Sixty Two Thousand Dollars ($162,000.00) (the
"Complete Care Letter of Credit") as security for the
performance of the obligations of the Lessees under the
Complete Care Lease (the "Complete Care Lessees"). Upon the
earlier to occur of (i) any event which entitles the Complete
Care Lessor to draw upon the Complete Care Letter of
Credit under the Complete Care Lease (other than the
Bankruptcy Related Events (as defined in Section XI hereof)or
an Event of Default arising out of a default under the
Complete Care Lease that occurred prior to the date of this
Agreement), (ii) the Effective Date, or (iii) the entry of
any other order by the Bankruptcy Court authorizing
rejection of the Complete Care Lease, the Complete Care
Lessor shall be entitled to draw upon the Complete Care
Letter of Credit, and shall be entitled to retain the entire
proceeds thereof.
2. Delta I Master Lease
1. Delta I currently holds no security deposit with
respect to the Delta I Master Lease; following the
entry of the Assumption and Rejection Order, no
security deposit shall be required with respect to
the Original Delta I Facility Leases, except if and
to the extent required under the terms of those
Leases.
2. Delta I currently holds Letters of Credit totaling
Six Hundred Sixty Nine Thousand Three Hundred Seventy
Five Dollars ($669,375.00) (the "February /March 1997
Letters of Credit") pursuant to the Delta I Letter of
Credit Agreement. These Letters of Credit relate to
the February/March 1997 Leases which are being
incorporated into the Sun Delta I Master Lease.
Following the Effective Date, Delta I shall continue
to hold the February/March 1997 Letters of Credit in
accordance with the terms of the Delta I Letter of
Credit Agreement.
3. Delta II Master Lease.
Delta II currently holds no security deposit with respect to
the Delta II Master Lease; following the entry of the
Assumption and Rejection Order, no security deposit shall be
required with respect to the Sun Delta II Facility Leases,
except if and to the extent required under the terms of those
Leases.
4. Liberty Leases.
The Lessors under the Liberty Leases (the "Liberty Lessors")
currently hold cash security deposits (the "Liberty Cash
Deposits") pursuant to the terms of the Cash Deposit
Agreements identified on Exhibit B (the "Liberty Cash Deposit
Agreements") in the amount of Six Hundred Four Thousand Five
Hundred Forty Six and 15/100 Dollars ( $604,546.15). The
Liberty Cash Deposit Agreements require a total deposit of Six
Hundred Seventy Four Thousand One Hundred Seventy Three
Dollars ($674,173.00), and on the Effective Date, the Liberty
Cash Deposit shall be restored to the required amount by the
Lessees under the Liberty Leases. Thereafter, the Liberty
Lessors shall continue to hold the Liberty Cash Deposit in
accordance with the Liberty Cash Deposit Agreements.
5. Manor Care Leases.
The Lessors under the Manor Care Leases (the "Manor Care
Lessors") currently hold a Letter of Credit in the amount of
Four Hundred Sixty Four Thousand Six Hundred Seventy Five
Dollars ($464,675.00) (the "Manor Care Letter of Credit") as
security for the performance of the obligations of the Lessees
under the Manor Care Leases (the "Manor Care Lessees"). Upon
the earlier to occur of (i) any event which entitles the Manor
Care Lessors to draw upon the Manor Care Letter of Credit
under the existing Security Agreements (other than the
Bankruptcy Related Events (as defined in Section XI hereof) or
an Event of Default arising out of a default under the Manor
Care Leases that occurred prior to the date of this
Agreement), (ii) the Effective Date, or (iii) the entry of any
other Order by the Bankruptcy Court authorizing the rejection
of one or more of the Manor Care Leases, the Manor Care
Lessors shall be entitled to draw upon the Manor Care Letter
of Credit, and shall be entitled to retain the entire proceeds
thereof. The Manor Care Lessees shall not be obligated to make
any new security deposit in connection with the Assumed Manor
Care Leases.
6. Qualicorp Lease.
The Lessors under the Qualicorp Lease currently hold a Letter
of Credit in the amount of One Million Four Hundred Forty
Three Thousand Seven Hundred Fifty Dollars ($1,443,750.00)
(the "Qualicorp Letter of Credit") pursuant to the Qualicorp
Letter of Credit Agreement. The Qualicorp Lessors shall
continue to hold the Qualicorp Letter of Credit in accordance
with the terms of the Qualicorp Letter of Credit Agreement.
Lessors acknowledge and agree that the amounts received pursuant to
Paragraphs VIII(A) and (E) above and the relinquishment of the Rejected Lease
Assets as provided herein are the only damages Lessors will be entitled to
receive as a result of the rejection of the Rejected Leases if the Effective
Date shall have occurred.
9. SATISFACTION OF LESSEES' EFFECTIVE DATE OBLIGATIONS; STAY
1. ENTRY OF ASSUMPTION AND REJECTION ORDER WITHOUT STAY
If (i) the Assumption and Rejection Order is entered prior to
Lessor's termination of the Forbearance Agreement pursuant to
Sections II.A. 1 or Section II.A.2 hereof, and (ii)
implementation of the Assumption and Rejection Order is not
stayed by an appeal from the Assumption and Rejection Order or
a motion to reconsider entry of the Assumption and Rejection
Order, then Lessees shall satisfy Lessees' Effective Date
Obligations on the second Business Day following the tenth
(10th) day after the date on which the Assumption and
Rejection Order is entered or such earlier date on which the
parties may agree in writing, notwithstanding that an appeal
of the Assumption and Rejection Order or a motion to
reconsider the same may have been filed.
2. EFFECT OF STAY
1. If (i) the Assumption and Rejection Order is entered
prior to Lessor's termination of the Forbearance
Agreement pursuant to Sections II.A. 1 or Section
II.A.2 hereof and (ii) implementation of the
Assumption and Rejection Order is stayed upon appeal
of the Assumption and Rejection Order or the filing
of a motion to reconsider entry of the Assumption and
Rejection Order ("Stay"):
1. Any party to this Agreement may by Notice to
the other parties to this Agreement given on
or before the tenth (10th) day after the
effective date of the Stay ("10 Day Period")
terminate this Agreement, effective upon the
giving of such Notice;
2. If this Agreement is not terminated within
the 10 Day Period pursuant to Section
IX.B.1.a. above, and if the Stay is not
lifted on or before the one hundred and
twentieth (120th) day after the effective
date of the Stay ("120 Day Period"), then
any party to this Agreement may by Notice to
the other parties to this Agreement given
within ten (10) days after the expiration of
the 120 Day Period (the "Second 10 Day
Period") terminate this Agreement, effective
upon the giving of such Notice;
3. If this Agreement is not terminated within
the 10 Day Period or the Second 10 Day
Period pursuant to Section IX.B.1.a or
Section IX.B.1.b. above, respectively, then
any party to this Agreement may by Notice to
all other parties to this Agreement
terminate this Agreement (effective upon the
giving of such Notice) if
(1) the District Court which considered
the appeal remands the proceeding
back to the Bankruptcy Court for
further non-ministerial proceedings
or vacates the Assumption and
Rejection Order, or
(2) the District Court denies the
appeal, the District Court's ruling
is appealed to the Appellate Court
for the Third Circuit and a stay is
entered with respect to that appeal;
4. If this Agreement is not terminated within
the 10 Day Period or the Second 10 Day
Period pursuant to Section IX.B.1.a or
Section IX.B.1.b. above, respectively, or
pursuant to Section IX.B.1.C. above:
(1) This Agreement shall terminate at the option
of Lessors, effective upon the giving of
Notice to all other parties, if
(1) The Stay is lifted, and Lessees
fail to satisfy Lessees' Effective
Date Obligations within the time
and as required by Section IX.B.2.,
hereof;
(2) Guarantor and Lessees
propose or support any plan
of reorganization which if
confirmed would (a) require
rejection of any of the Sun
Leases or (b) materially
and adversely affect (i)
any of the Facilities
leased under the Sun Leases
or (ii) the ability of a
Lessee under a Sun Lease to
perform its obligations
under such Lease;
(3) Any Facility covered by a
Sun Lease suffers (i) loss
of licensure or (ii)
decertification from
participation in the
Medicare and/or Medicaid
programs.
(2) Without the termination of the Agreement, the
obligation of a Lessor to forbear, as set
forth in Section II hereof, shall
terminate at the option of Lessors,
effective upon the giving of Notice to all
other parties:
(1) With respect to any Facility
covered by a Sun Lease to which
such Lessor is a party as to
which any Regulatory Agency (as
defined in Section XII hereof)
sets forth in writing a failure
of such Facility or the Lessee
thereof to comply with an
applicable law, regulation or
administrative order with respect
to which the scope and severity
of the potential penalty for
such non-compliance is one or
more of (i) loss of licensure,
(ii) decertification of the
Facility from participation in
the Medicare and/or Medicaid
programs, (iii) appointment of
a temporary manager or (iv)
denial of payment for new
admissions (such Facility a
"Threatened Facility" and such
failure a "Regulatory Failure"),
and the Lessee of the Threatened
Facility fails to cure the
Regulatory Failure within the
period of time required by such
Regulatory Agency or, if longer,
the period of time set forth in
a Plan of Correction accepted by
such Regulatory Agency, and
(2) With respect to the Sun Lease
under which the Threatened
Facility is leased, but only
as to the Threatened Facility,
provided, however, that
notwithstanding the termination
of such forbearance, no Event of
Default under such Sun Lease that
exists because of, or arises or
may arise out of, the Regulatory
Failure shall constitute an Event
of Default with respect to any
other Facility under such Sun
Lease or under any other Sun
Lease.
2. If a Stay is issued and this Agreement is not
terminated pursuant to Section IX.B.I, the date on or
before which Lessees shall satisfy Lessees' Effective
Date Obligations shall be the second Business Day
following the date on which the Stay is lifted. For
purposes of this Section IX, if a Stay is issued and
lifted, and a new Stay is issued on or prior to the
earlier of the (i) Effective Date, or (ii) the second
Business Day after the day on which the original Stay
is lifted, a Stay shall be deemed to have been
continuously in effect.
3. Notwithstanding the provisions of Section IV.A, if a
Stay is issued and this Agreement is not terminated
pursuant to Section IX.B.1, Base Rent with respect to
the Rejected Lease Facilities for the period from and
after the end of the Accrual Period through the
earlier of (i) the termination of this Agreement or
(ii) the Effective Date shall be payable, as and when
due according to the terms of such Rejected Leases,
at the rate of fifty percent (50%) of the Base Rent
with respect to the Rejected Lease Facilities, and
the remaining fifty percent (50%) of such Base Rent
shall be waived by the Lessors of such Rejected
Leases for such period.
3. Guarantor and Lessees shall (i) oppose any motion to
reconsider the Assumption and Rejection Order and (ii) seek
affirmation of the Assumption and Rejection Order upon any
appeal thereof.
10. RIGHT OF FIRST OFFER
Provided that (1) the Sun Leases are assumed pursuant to a final and
non-appealable Assumption and Rejection Order, (2) a plan of
reorganization is confirmed with respect to each of the Lessees and
Guarantor and (3) no uncured material Event of Default exists under the
applicable Sun Lease (s), the Lessees of the Sun Leases shall have a
right of first offer on the following terms and conditions:
1. In the event any Lessor or Lessors (such Lessor, or
collectively, such Lessors "Seller") shall wish to sell a
Facility or Facilities then subject to an Sun Lease or Sun
Leases ("Designated Assets") at any time during the Fixed
Term of such Sun Lease, it shall first in writing offer to
enter into negotiations for such sale with the Lessee or
Lessees thereof or any Affiliate of such Lessee or Lessees
("Seller's Notice"). If such Lessee or Lessees or an
Affiliate thereof ("Buyer") shall within ten (10) days from
receipt of Seller's Notice give Seller Notice (as defined in
the applicable Lease)("Buyer's Notice") that it wishes to
enter into good faith negotiations for the purchase of the
Designated Assets ("Notice of Interest") within the specified
time period, Seller and Buyer shall enter into good
faith negotiations for a period of thirty (30) days from
Lessor's receipt of the Notice of Interest ("Negotiation
Period") for the sale and purchase of the Designated Assets.
If during the Negotiation Period a written agreement
with respect to the purchase and sale of the Designated Assets
("Purchase Agreement") is executed by Seller and Buyer, Seller
shall sell and Buyer shall purchase the Designated Assets on
the terms and conditions set forth in the Purchase Agreement.
If (i) a Notice of Interest is not given as set forth above,
for a period of one (1) year after the expiration of the time
within which a Notice of Interest was required to be given,
or (ii) a Notice of Interest is given but Seller and Buyer do
not execute a Purchase Agreement during the Negotiation
Period, for a period of one (1) year from the expiration of
the Negotiation Period, if Seller in its sole discretion
continues to desire to sell the Designated Assets, Seller
shall be free to sell the Designated Assets to any third
party for a Cash Price that is not less than ninety eight
percent (98%) of a Cash Price offered unconditionally by
written notice to Seller by Buyer during the Negotiation
Period, free from any claim of any right to purchase the
Designated Assets by Buyer, Guarantor or any Affiliate of
Buyer or Guarantor. For purposes of the preceding sentence,
a "Cash Price" shall be the amount to be received by Seller
in cash or equivalent upon the closing of the sale net of
prorations and expenses to be borne by Seller. If the
Designated Assets are not sold within such one (1) year
period, before entering into negotiations with any third
party for the sale of the Designated Assets Seller shall
first offer to enter into negotiations for the sale thereof
to Buyer pursuant to the process described above. Any sale to
a third party shall be subject to the leasehold rights of the
applicable Lessee(s).
2. The foregoing right of first offer is not assignable by the
Lessee to which it is given hereunder except to an Affiliate
of such Lessee.
3. The foregoing right of first offer shall simultaneously and
automatically terminate as to any Sun Lease with respect to
which the right of first offer would otherwise be applicable,
upon termination of such Sun Lease, and the foregoing right of
first offer shall not under any circumstances be extended,
modified or in any way altered except by a writing executed by
the Lessor of the Sun Lease to which such right applies.
11. RELEASES AND WAIVERS
1. Upon the Effective Date, Guarantor and each Lessee does for
itself and its successors and assigns forever release and
discharge each Lessor and its current and former officers,
directors, partners, shareholders, attorneys, agents, parents,
Affiliates, employees, successors and assigns from any and all
actions, causes of action, claims, debts, demands, duties,
expenses, judgments, liabilities and obligations whatever,
whether known or unknown, which the releasing party has, has
had or may have against any or all Lessors and the above
described persons and entities, whether presently known or
unknown, whether from contract or tort, from the beginning of
time to the Effective Date, arising out of or connected with,
directly or indirectly, any of the Leases.
2. Except for the Lessees' Monetary Obligations, Lessors
acknowledge and agree that the Lessees have paid Lessors
all Base Rent, Minimum Rent and other monetary amounts owing
to Lessors under the Leases through the date hereof. Upon the
Effective Date, other than with respect to amounts owing
under the Rejected Leases which shall be handled as set
forth in Section IV hereof and amounts owing for the period
between the date of this Agreement and the Effective
Date under the Leases that pursuant to Section V hereof are to
be assumed, each Lessor for itself and its successors
and assigns shall forever release and discharge each Lessee
and Guarantor and their current and former officers,
directors, partners, shareholders, attorneys, agents,
parents, Affiliates, employees, successors and assigns, from
any and all actions, claims, debts, demands, duties, expenses,
judgments, liabilities and obligations whatever,whether known
or unknown, whether from contract or tort, from the beginning
of time to the Effective Date, arising out of or connected
with, directly or indirectly, any of the Leases or the
Guaranty, including without limitation amounts owing under
the Leases by Lessees to Lessors through the Effective Date,
provided, however, that except as provided in Section XII
hereof, the foregoing release of each Lessee and Guarantor
with respect to non-monetary obligations shall apply only to
non-monetary obligations of the Lessees under the Leases on
or before the date of this Agreement, and as to non-monetary
defaults that are subject to the provisions of Section XII
hereof there is no release. In addition, upon the Effective
Date, Lessors shall have waived (i) their claims that all of
the Leases, other than the Complete Care Leases (as to which
no claim of termination has been made by the applicable
Lessor), have been terminated (and shall have withdrawn all
issued notices of termination with respect to the Leases),
(ii)any and all damage claims relative to the Rejected Leases,
(iii) any and all liens against the accounts receivable
related to the Facilities governed by the Sun Leases or
Rejected Leases and (iv), notwithstanding any provision of
any Lease to the contrary, the right to claim that any of the
following conditions concerning, actions taken by or against,
or transactions entered into by, any Lessee, Guarantor or
Affiliate thereof that exist or occur during the Cases or
pursuant to a plan of reorganization in the Cases requires
the consent of any Lessor, or constitutes, or gives rise to,
a default or an Event of Default under any of the Leases:
(a) the insolvency or financial condition of any of the
foregoing, the commencement of a case under Xxxxx 00, Xxxxxx
Xxxxxx Code, the appointment of or taking possession by a
trustee, custodian or receiver, or any other act of
insolvency, (b) the liquidation, dissolution, merger,
consolidation or sale of substantially all assets, or the
beginning of any process related thereto, (c) the assignment,
pledge or encumbrance of any property, (d) the sale, pledge,
hypothecation or transfer of any stock, (e) the acceleration
of any obligation for borrowed money as a result of the
commencement of any case under Xxxxx 00, Xxxxxx Xxxxxx Code,
(f) the entry into any financing transaction, including
without limitation exit financing under any plan of
reorganization or debtor in possession financing or (g)
any restructuring, whether pursuant to a plan of
reorganization or otherwise, of the corporate or capital
structure, or ownership, of such entities, including
without limitation transfers of ownership of the stock
or assets of any of the foregoing (as to such matters in
clause (iv), "Bankruptcy Related Events").
12. PHYSICAL PLANT REQUIREMENTS
1. As used in this Section, the following terms shall
mean as follows:
Actual Knowledge: The actual knowledge of the administrator of
the Facility in question or, if at the applicable time there is no administrator
of such Facility, the person then acting in such capacity.
Citation: Any physical plant deficiency set forth in writing
with respect to any Facility by any Regulatory Agency with respect to which the
scope and severity of the potential penalty for such deficiency is one or more
of the following: loss of licensure, decertification of the Facility from
participation in the Medicare and/or Medicaid programs, appointment of a
temporary manager or denial of payment for new admissions, provided the Lessee
of such Facility has Actual Knowledge thereof.
Pendency of the Case: With respect to each Case, the period
beginning on the date hereof and continuing through the earliest of (i) any
party obtaining a post-confirmation judgment against the Lessee or Lessees to
which such Case pertains; (ii) the "Effective Date" as defined in the confirmed
plan of reorganization with respect to such Case; (iii) dismissal of such Case;
and (iv) conversion of such Case to a Chapter 7.
Physical Plant Abeyance Period: The Forbearance Period,
or if the Assumption and Rejection Order is entered, with respect to each
Case, the Pendency of the Case.
Physical Plant Requirements: All obligations of Lessees
under the Sun Leases relating to the maintenance, repair and improvement of
the Facilities covered thereby.
Regulatory Agency: Any governmental body or agency, or
Medicare intermediary, having regulatory oversight over a Facility or a
Lessee.
Tier A Improvements: The physical plant improvements set
forth on attached Exhibit G.
2. The obligations imposed on the Lessee in each Sun Lease
relating to Physical Plant Requirements shall continue in full
force and effect throughout the Pendency of the Case with
respect to the Lessee thereunder.
3. Notwithstanding any provisions to the contrary in the Sun
Leases, the Lessees under the Sun Leases shall make the Tier A
improvements within six (6) months from the Effective Date,
subject to delays beyond the reasonable control of such
Lessees.
4. During the Physical Plant Abeyance Period, notwithstanding any
provisions of any Sun Lease to the contrary, the rights of the
Lessors of the Sun Leases with respect to the following
matters shall be as follows:
1. In the event any Facility covered by a Sun Lease has
prior to the date hereof received, or shall during
the period from the date hereof to the Effective Date
receive, a Citation, the obligations imposed on the
Lessee in each Sun Lease relating thereto shall
continue in full force and effect throughout the
Pendency of the Case with respect to the Lessee
thereunder, but the Lessor's rights during the
Pendency of the Case in the event of a breach thereof
shall be subject to the limitations set forth in
Section XI.D.3
2. In the event that any Facility covered by a Sun
Lease shall receive a Citation with respect to such
Facility during the Pendency of the Case but after
the Effective Date, the failure of the Lessee under
such Sun Lease to cure the condition that is the
subject of the Citation within the period of time
required by the issuer of the Citation or, if longer,
the period of time set forth in a Plan of Correction
accepted by the issuer of the Citation, shall
constitute an Event of Default under such Sun Lease,
and in the event such Event of Default is not cured
within thirty (30) days following Notice of such
Event of Default from the Lessor under such
Sun Lease to the Lessee thereunder, the Lessor
thereunder shall have the right to terminate such Sun
Lease with respect to the cited Facility, which right
shall be exercisable upon ten (10) days' prior
Notice to such Lessee, provided, however, that an
Event of Default described in this Section XI.D.2.
shall not constitute an Event of Default with
respect to any other Facility under such Sun Lease
or under any other Sun Lease.
3. In the event that any Facility covered by a Sun
Lease shall receive a Citation during the Pendency
of the Case and prior to the Effective Date, the
Lessor under such Sun Lease shall not have the
right to (Y) declare an Event of Default with respect
to such default, or (Z) take any other action with
respect to terminating the Lease as a consequence
of such default until the expiration of the Physical
Plant Abeyance Period, provided, however, that
nothing herein contained shall prevent or restrict
a Lessor from seeking an order of the Bankruptcy
Court compelling Lessee to cure the condition that
is the subject of the Citation with respect to any
such default within the period of time required by
the issuer of the Citation or, if longer, the
period of time set forth in a Plan of Correction
accepted by the issuer of the Citation
5. Upon expiration of the Physical Plant Abeyance Period, if
(i) a default with respect to a Physical Plant Requirement
shall exist or thereafter occur, (ii) Notice of such default
is given to the applicable Lessee after expiration of the
Physical Plant Abeyance Period and (iii) such default is not
cured within the applicable cure period provided in
such Sun Lease (which cure period shall run from the date of
the Notice given after the expiration of the Physical
Plan Abeyance Period whether or not a Notice of default has
been given to such Lessee prior to the expiration of the
Physical Plant Abeyance Period), the Lessor under the Lease
as to which such default exists shall have the right to
declare the same to be an Event of Default thereunder, and
upon such declaration such Lessor and the Lessors of all
other Sun Leases shall have the rights and remedies provided
in the Sun Leases and by law with respect to such Event
of Default.
13. NOTICES
All notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed given upon confirmed receipt or refusal
of receipt if sent by certified mail, return receipt requested, postage prepaid,
overnight delivery or facsimile transmission, with proper address as indicated
below. Any of the parties hereto may, by written notice given to each of the
other parties, designate any address or addresses to which notices, certificates
or other communications shall be sent when required as contemplated by this
Agreement. Until otherwise provided by the respective parties, all notices,
certificates and communications to each of them shall be addressed as follows:
(a) if to Guarantor and Lessees:
Sun Healthcare Group, Inc.
000 Xxx Xxxxxx XX
Xxxxxxxxxxx, XX 00000
Attn: President
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With copy to: Sun Healthcare Group, Inc.
000 Xxx Xxxxxx XX
Xxxxxxxxxxx, XX 00000
Attn: General Counsel and Xxxxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
And a copy to: The Xxxxxxxxx Group PLLC
(which shall not 0000 Xxxxxx Xxxxxx, Xxxxx 000
constitute notice): Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) If to Lessors:
Omega Healthcare Investors, Inc.
000 Xxxxxxx Xxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attn: F. Xxxxx Xxxxxxx and Xxxxx Xxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With copy to Xxxxxx Xxxxxxx PLLC
(which shall not 0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
constitute notice): Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
And copy to
(which shall not
constitute notice): Xxxxxxxxx Traurig
000 X. Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
14. INTENTIONALLY DELETED
15. MISCELLANEOUS
1. Entire Agreement. There are no oral or written agreements or
representations between the parties hereto affecting this
Agreement. Except as elsewhere expressly provided to the
contrary herein, this Agreement supersedes any and all
previous negotiations, arrangements, representations,
agreements and understandings, if any, between Lessors,
Guarantor and Lessees with respect to the subject matter of
this Agreement.
2. Amendments in Writing. No provision of this Agreement may be
amended except by an agreement in writing signed by Lessors,
Guarantor and Lessees.
3. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be considered an original
when each party has executed and delivered to the other one or
more copies of this Agreement.
4. Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the
meaning hereof.
5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of
Michigan, except as to matters which, under applicable
procedural conflicts of laws rules require the application of
laws of another state.
SIGNATURE PAGES FOLLOW
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the __ day of October, 1999.
DELTA INVESTORS I, LLC
By: OMEGA HEALTHCARE INVESTORS, INC.
Its Sole Member
By: /s/ F. XXXXX XXXXXXX
----------------------------
F. Xxxxx Xxxxxxx
Its: Chief Operating Officer
DELTA INVESTORS II, LLC
By: OMEGA HEALTHCARE INVESTORS, INC.
Its Sole Member
By: /s/ F. XXXXX XXXXXXX
-----------------------------
F. Xxxxx Xxxxxxx
Its: Chief Operating Officer
OMEGA HEALTHCARE INVESTORS, INC.
By: /s/ F. XXXXX XXXXXXX
----------------------------
F. Xxxxx Xxxxxxx
Its: Chief Operating Officer
OHI (ILLINOIS), INC.
By: /s/ F. XXXXX XXXXXXX
------------------------------
F. Xxxxx Xxxxxxx
Its: Chief Operating Officer
SUN HEALTHCARE GROUP, INC.,
a Delaware corporation
By: /s/ XXXXXXX XXXXXXX
------------------------------
Xxxxxxx Xxxxxxx
Its: Vice President and Treasurer
SIGNATURES OF LESSEES ON FOLLOWING PAGE
LESSEES:
Care Enterprises, Inc., a
Delaware corporation Care
Enterprises West, a Utah
corporation Circleville
Health Care Corp., an Ohio
corporation Xxxxxxx Health
Care Corp., a West Virginia
corporation Xxxxxxxx
Enterprises, Inc., a
California corporation
Coalinga Rehabilitation
Center, a Delaware
corporation Xxxxxx Health
Care Corp., a Delaware
corporation Fullerton
Rehabilitation Center, a
California corporation
Xxxxxx Health Care Corp., a
Delaware corporation
Meadowbrook Rehabilitation
Center, a California
corporation Mediplex
Management of Palm Beach
County, Inc., a Florida
corporation Newport Beach
Rehabilitation Center, a
California corporation
Xxxxxx Health Care Corp., a
West Virginia corporation
Regency Rehab Hospitals,
Inc., a California
corporation Regency-North
Carolina, Inc., a North
Carolina corporation
Regency-Tennessee, Inc., a
Tennessee corporation San
Bernardino Rehabilitation
Hospital, Inc., a
California corporation
Salem Health Care Corp., a
West Virginia corporation
Shandin Hills
Rehabilitation Center, a
California corporation
SunBridge Healthcare
Corporation, a New Mexico
corporation Vista Xxxxx
Rehabilitation Center,
Inc., a California
corporation
By: /s/ Xxxxxxx Xxxxxxx
---------------------
Their: Agent
LIST OF EXHIBITS
EXHIBIT A - Leases and Subleases and Names of Health Care Facilities
EXHIBIT B - Security Agreements
EXHIBIT C - Assumption and Rejection Order
EXHIBIT D - Schedule of Amounts Owed
EXHIBIT E - Operations Transfer Agreement
EXHIBIT F - Sun Transaction Documents
EXHIBIT G - Tier A Improvements
