Exhibit 10.35
THIRD AMENDMENT TO OMEGA NEW MASTER LEASE
THIS THIRD AMENDMENT TO OMEGA NEW MASTER LEASE ("Third Amendment") is dated
as of March 31, 1999 and is entered into by OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation, having its principal office at 000 Xxxxxxx Xxx, Xxxxx 000,
Xxx Xxxxx, Xxxxxxxx 00000, ("Lessor"), and the entities designated Lessees on
the signature page hereof (each a "Lessee and collectively, "Lessees").
RECITALS
A. Lessor and Lessees are parties to the Omega New Master Lease dated
effective as of December 31, 1998 (the "Omega New Master Lease"), as
amended by the First Amendment to Omega New Master Lease dated as of
February 1, 1999 (the "First Amendment"), and as further amended by
the Second Amendment to Omega New Master Lease dated as of February 2,
1999 ( the "Second Amendment").
B The Omega New Master Lease, as amended by the First Amendment and the
Second Amendment, was entered into pursuant to the Plan, as defined in
the First Amendment.
C. Section 7.2.3 of the Plan and Section 8.3.1.7.1 of the Omega New
Master Lease limit the amount of debt incurred by Lessees or any one
or more of them to a lender or lenders that is secured by a security
interest in accounts receivable. Lessor and Lessees desire to set
forth in writing certain procedures for implementing the restrictions
on accounts receivable borrowing set forth in Section 7.2.3 of the
Plan and Section 8.3.1.7.1 of the Omega New Master Lease.
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessor and Lessees agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
have the respective meanings given them in the Omega New Master Lease. In
addition, the following terms mean as follows:
ACCOUNTANT: Initially, Xxxxxx Xxxxxxxx & Company; thereafter, the
accountant employed by the parties to resolve any differences as to
the Section 8.3.1.7.1 Limit as set forth in Section 5(b) hereof
LESSEES' CERTIFICATE: The certificate to be delivered to Lessor by the
Lessees each calendar quarter as set forth in Section 3 hereof.
MAXIMUM PERMITTED SECURED DEBT: The maximum permitted secured debt of
Lessees determined as set forth in Section 6 hereof.
OMEGA NOTICE: The notice to be given by Lessor to the Lessees as set
forth in Section 4 hereof
SECTION 8.3.1.7.1 LIMIT: The maximum Secured Debt permitted under the
Plan and Section 8.3.1.7.1 of the Omega New Master Lease
SECURED DEBT: Any debt of one or more of the Lessees secured by a
security interest in accounts receivable.
SECURED DEBT LENDER: Any lender to which Secured Debt is owed by one
or more of the Lessees.
TEN DAY PERIOD: The ten day period during which the Lessor and Lessees
will attempt to resolve any differences as to the Section 8.3.1.7.1
Limit as set forth in Section 5 hereof.
2. CALCULATION OF THE SECTION 8.3.1.7.1 LIMIT. Lessor and Lessees agree
that the Section 8.3.1.7.1 Limit applicable during any calendar quarter shall be
the greater of (i) $2,000,000 or (ii) an amount calculated by the following two
step process:
STEP 1: The first step in calculating the Section 8.3.1.7.1 Limit
shall be to calculate the maximum permitted debt service ("MPDS") on
Secured Debt. The MPDS shall be calculated using the following
formula:
MPDS = EBITDARM - LCFC + SDDS
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The following definitions are applicable to the foregoing formula:
EBITDARM means EBITDARM for the preceding four calendar quarters.
LCFC means Lessees Consolidated Fixed Charges for the preceding four
calendar quarters, provided, however, for any calculation that
includes any quarter ending in the calendar year 1998, the following
assumptions shall be made:
(i) the Omega New Master Lease was effective as of January 1, 1998,
(ii) that no payments were made in 1998 to Brit-Texas (as defined in
Section 1.16 of the Plan), the purpose of which was to allow
Brit-Texas to pay persons who held notes of Brit-Texas issued in
connection with the sale of certain of the Brit-Texas Facilities (as
defined in Section 1.17 of the Plan) to Brit-Texas, and
(iii) that no payments were made in 1998 with regard to the NHI
Secured Claims (as defined in Section 1.118 of the Plan).
SDDS means interest, fees, points and other similar charges with
respect to Secured Debt which are included in the LCFC for the
preceding four calendar quarters.
STEP 2: Divide MPDS by the Pro Forma Annual Interest Rate (as defined
below) on the Secured Debt. The resulting number will be the Section
8.3.1.7.1 Limit.
The Pro Forma Annual Interest Rate means the pro forma annual interest
rate on the Secured Debt. For purposes of computing the Pro Forma
Annual Interest Rate, the following assumptions will be made: (1) the
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entire Section 8.3.1.7.1 Limit will be outstanding for one year; (2)
if the interest rate on the Secured Debt is tied to an index, the
index will remain constant for the entire year (i.e., if the interest
rate is one percent over the prime rate, the prime rate will remain
constant) and the Pro Forma Annual Interest Rate shall be based on the
index rate in effect on the business day immediately preceding the
date of the Lessees' Certificate); and (3) fees, points and other
similar charges which will become due during the next one year period
with respect to the Secured Debt will be treated as additional
interest and included as such in calculating the Pro Forma Annual
Interest Rate.
An example of the calculation of the Section 8.3.1.7.1 Limit is set
forth on Exhibit A.
3. LESSEES' CERTIFICATE. Within forty (40) days of the end of each
calendar quarter, the Lessees will deliver to Lessor a certificate (the
"Lessees' Certificate") in a form attached to this Agreement as Exhibit B
certified by the Chief Financial Officer of RainTree Healthcare Corporation and
the Lessees. The Lessees' Certificate will set forth the following:
(a) EBITDARM for the preceding four calendar quarters;
(b) Lessees Consolidated Fixed Charges for the preceding four
calendar quarters adjusted as provided in the definition of LCFC
in Section 2 above;
(c) The interest, points, fees and other similar charges paid by the
Lessees on Secured Debt during the preceding four calendar
quarters and included in the Lessees Consolidated Fixed Charges
for the preceding four calendar quarters; (d) The Pro Forma
Annual Interest Rate;
(e) The Section 8.3.1.7.1 Limit; and
(f) A statement that all calculations of items (a) through (e) are
calculated in accordance with this Third Amendment and to the
extent applicable generally accepted accounting principles
applied on a consistent basis with past practices.
(g) A statement that the Lessees are not in default of any covenant,
representation, warranty or agreement contained in the Omega New
Master Lease, including, without limitation, the separateness
provisions of Section 8.9 of the Omega New Master Lease.
Attached to the Lessees' Certificate will be a detailed calculation of the
items identified in subparagraphs (a) through (e) above.
4. OMEGA NOTICE. Within ten (10) days of receipt of a Lessees'
Certificate setting forth the Section 8.3.1.7.1 Limit, Lessor will send a notice
(the "Omega Notice") to the Lessees doing one of the following:
(a) Agreeing with the Section 8.3.1.7.1 Limit set forth in the
Lessees' Certificate;
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(b) Stating that Lessor needs additional information, and identifying
the additional information needed, in order to determine whether
Lessor agrees or disagrees with the Section 8.3.1.7.1 Limit set
forth in the Lessees' Certificate; or
(c) Stating that Lessor disagrees with the Section 8.3.1.7.1 Limit
set forth in the Lessees' Certificate, and setting forth the
reasons for the disagreement.
If Lessor fails to send an Omega Notice within ten (10) days of receipt of the
Lessees' Certificate, Lessor will be deemed to have agreed with the Section
8.3.1.7.1 Limit set forth in the Lessees' Certificate. If Lessor sends the
notice set forth in (b) above, Lessees shall supply such information within five
(5) business days. If Lessor does not give a notice contemplated by paragraph
(c) above within five (5) days of its receipt of such additional information,
Lessor will be deemed to have agreed with the Section 8.3.1.7.1 Limit as set
forth in the Lessees Certificate. In no event will the failure to object to a
calculation at the end of one quarter prejudice the right of Lessor to object at
the end of any subsequent quarter.
5. RESOLUTION OF DISAGREEMENT.
(a) If an Omega Notice states either that Lessor disagrees with the
Section 8.3.1.7.1 Limit set forth in a Lessees' Certificate or
that Lessor needs additional information in order to determine
whether Lessor agrees or disagrees with the Section 8.3.1.7.1
Limit, Lessor and the Lessees shall attempt in good faith during
the next ten days (the "Ten Day Period") to reach agreement as to
the Section 8.3.1.7.1 Limit. As part of that process, the Lessees
shall promptly provide to Lessor any additional information which
Lessor may reasonably request relating to the calculation of the
Section 8.3.1.7.1 Limit, as set forth in paragraph 4 above.
(b) Lessor and Lessees shall forthwith enter into an agreement with
the Accountant to resolve any differences which may hereafter
arise as to the calculation of the Section 8.3.1.7.1 Limit in
accordance with the procedures set forth in this Third Amendment.
If Xxxxxx Xxxxxxxx & Company ceases to be willing or eligible to
resolve differences as to the Section 8.1.1.7.1 Limit, Lessor and
Lessees shall forthwith enter into an agreement with another
accounting firm to resolve their differences. The new accounting
firm shall be a national accounting firm or major regional
accounting firm with offices in Phoenix, Arizona, shall be
selected by Lessor within ten (10) business days, and shall be
reasonably acceptable to Lessees. If Omega does not act within
the ten (10) business days, Lessees may choose an accountant
reasonably acceptable to Omega. An accounting firm shall not be
eligible to serve as the Accountant if within the past three (3)
years it has performed material services for either Lessor or
Lessees.
(c) If within the Ten Day Period Lessor and Lessees are unable to
reach agreement as to the Section 8.3.1.7.1 Limit, then either
Lessor or Lessees may request that the Accountant promptly
determine the Section 8.3.1.7.1 Limit. The Accountant shall
determine the Section 8.3.1.7.1 Limit within fifteen (15) days of
receipt of such a request. During the fifteen (15) day period,
either Lessor or Lessees may submit written material to the
Accountant with respect to the calculation of the Section
8.3.1.7.1 Limit; copies of such materials shall be provided to
the other party. The Lessees shall promptly provide any
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information which the Accountant may request, and shall upon
request permit the Accountant to examine their books and records.
The Accountant may hold such discussions with representatives of
the Lessor and/or Lessees as the Accountant determines
appropriate. The Accountant shall not be required to audit the
books and records of Lessees or to hold any hearing in connection
with its calculation of the Section 8.3.1.7.1 Limit. The decision
of the Accountant with respect to the Section 8.3.1.7.1 Limit
shall be binding upon both Lessor and Lessees.
6. MAXIMUM PERMITTED SECURED Debt. Notwithstanding anything contained in
the Plan or in Section 8.3.1.7.1 of the Master Lease, the parties agree that the
Maximum Permitted Secured Debt shall be as follows:
(a) Except as otherwise specifically provided in subparagraphs (b)
through (e) below, the most recently determined Section 8.3.1.7.1
Limit shall be the Maximum Permitted Secured Debt, and the most
recently determined Section 8.3.1.7.1 Limit shall continue in
effect until a new Section 8.3.1.7.1 Limit is determined in
accordance with the procedures set forth in this Third Amendment.
(b) If the Lessees fail to deliver a Lessees' Certificate within
thirty (30) days of the end of a calendar quarter, and such
failure continues for ten (10) days after a written request
therefor from Lessor, then at the end of such ten (10) day
period, the Maximum Permitted Secured Debt shall be reduced to
the lesser of (i) seventy-five (75%) percent of the most recently
determined Section 8.3.1.7.1 Limit or (ii) Lessor's estimate of
the Section 8.3.1.7.1 Limit based on such information as may be
available to Lessor. For each five (5) days after the end of the
ten (10) day period that Lessees continue to fail to deliver a
Lessees' Certificate, the Maximum Permitted Secured Debt shall be
reduced by another five percent (5%) of the most recently
determined Section 8.3.1.7.1 Limit.
(c) If pursuant to Section 5 of this Third Amendment an Accountant is
employed to determine the Section 8.3.1.7.1 Limit, and the
Accountant notifies Lessor in writing that it is unable to
determine the Section 8.3.1.7.1 Limit because the Lessees will
not make available to it information needed by the Accountant or
are otherwise not cooperating with the Accountant, then the
Section 8.3.1.7.1 Limit will be reduced to the lesser of (i)
seventy-five (75%) percent of the most recently determined
Section 8.3.1.7.1 Limit or (ii) Lessor's estimate of the Section
8.3.1.7.1 Limit based on such information as may be available to
Lessor. For each five (5) days after the date of the notice from
the Accountant that Lessees fail to make information available to
the Accountant or otherwise do not cooperate with the Accountant,
as set forth in a written notice from the Accountant to Lesser,
the Maximum Permitted Secured Debt shall be reduced by another
five (5%) of the most recently determined Section 8.3.1.7.1
Limit.
(d) If the parties are unable to reach agreement as to the new
Section 8.3.1.7.1 Limit during the Ten Day Period, then the
Maximum Permitted Secured Debt shall become the lesser of (i) the
Section 8.3.1.7.1 Limit as set forth in the most recent Lessees'
Certificate, or (ii) the most recently determined Section
8.3.1.7.1 Limit increased by such amount as Lessees shall certify
is necessary only to the extent necessary to avoid immediate and
irreparable harm to the Lessees until the Section 8.3.1.7.1 Limit
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is calculated. Expenditures which meet the test set forth in the
previous sentence are referred to as "Necessary Expenditures".
The Maximum Permitted Secured Debt determined in accordance with
this subsection (d) shall cease to be applicable if the Maximum
Permitted Secured Debt is determined in accordance with
subparagraph (c) as a result of a notice from the Accountant that
it is unable to determine the Section 8.3.1.7.1 Limit because of
lack of information from Lessees or lack of cooperation from
Lessee.
(e) Notwithstanding anything to the contrary contained herein or in
the Plan, the Section 8.3.1.7.1 limit shall not be less than
$2,000,000, with no conditions on the first $1,000,000 borrowed.
The second $1,000,000 is to be used for capital improvements at
facilities owned by Omega and can be drawn by Lessees so long as
Lessees gives a designated representative of Omega at least five
(5) days prior notice of the plan to spend all or any portion of
the second $1,000,000. If Omega does not respond in five business
days or approves the expenditures in writing at any time, the
money represented by such request (not to exceed a total of
$1,000,000 for all capital expenditures) can then be borrowed.
Lessees agree that they will spend the money so borrowed for the
capital improvements approved by Omega. The initial Omega
designee is Xxx Xxxxxx.
(f) Notwithstanding anything to the contrary contained herein or in
the Plan, the maximum amount of Secured Debt that can be borrowed
by the Lessees is $7,000,000.
7. SUBORDINATION AGREEMENT Lessor currently has a first security interest
in all accounts receivable of Lessees to secure all obligations of Lessees to
Lessor. Lessor agrees from time to time to enter into an intercreditor agreement
(the "Intercreditor Agreement") with the Secured Debt Lender in form reasonably
acceptable to Lessor. The Intercreditor Agreement shall provide, among other
things, that Lessor's security interest in Lessees' accounts receivable is
subordinate to the security interest to be granted to the Secured Debt Lender to
secure repayment of Secured Debt in an amount not to exceed the sum of (i) the
maximum secured senior debt (the "Maximum Secured Senior Debt") calculated as
set forth in the next sentence, and (ii) all accrued interest thereon and costs
of collection. The Maximum Secured Senior Debt shall be the greater of the
amounts determined in accordance with subparagraphs (a) and (b) below:
(a) The Maximum Permitted Secured Debt as determined from time to
time in accordance with the procedures set forth in Section 6 of
this Third Amendment; and
(b) Upon receipt of notice that the Maximum Permitted Secured Debt
has been reduced, the amount of Secured Debt outstanding on the
close of business on the date such notice is received.
Lessor agrees from time to time at the written request of either the Lessees or
the Secured Debt Lender to provide the Secured Debt Lender with written notice
of the Maximum Permitted Secured Debt, and the Secured Debt Lender shall be
entitled to rely on any such notice. The Intercreditor Agreement shall provide
that upon default by Lessees in their obligations to the Secured Debt Lender
Lessee shall have the option, but not the obligation, to purchase the position
of the Secured Debt Lender on terms reasonably satisfactory to Lessor and the
Secured Debt Lender. The provisions of this Section 7 are intended to assist
Lessees in obtaining Secured Debt. Nothing contained in this Section 7 is
intended to be a waiver of the obligations of the Lessees to comply with the
financial covenants contained in Article 8 of the Master Lease.
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8. RATIFICATION. Except as specifically set forth herein, the Omega New
Master Lease, as amended by the First Amendment and the Second Amendment, is
hereby ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Third Amendment by their
duly authorized officers as of the date first above written.
LESSOR:
Omega Healthcare Investors, Inc., a Maryland
corporation
By: /s/ F. XXXXX XXXXXXX
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Name: F. Xxxxx Xxxxxxx
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Title: COO
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LESSEES:
BritWill Indiana Partnership, an Arizona
general partnership
By: BritWill Investments-I, Inc., a Delaware
corporation, its General Partner
By: /s/ XXXXX X. XXXXXX
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Name: Xxxxx X. Xxxxxx
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Title: VP
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BritWill Investments-II, Inc., a Delaware
corporation
By: /s/ XXXXX X. XXXXXX
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Name: Xxxxx X. Xxxxxx
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Title: VP
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Amberwood Court, Inc., a Colorado
corporation
By: /s/ XXXXX X. XXXXXX
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Name: Xxxxx X. Xxxxxx
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Title: VP
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The Arbors Health Care Center, Inc., an
Arizona corporation
By: /s/ XXXXX X. XXXXXX
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Name: Xxxxx X. Xxxxxx
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Title: VP
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Xxxxxxxxxx House, Inc., a Colorado
corporation
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
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Title: VP
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Xxxxxxxxxxx Nursing Center, Inc., a Colorado
corporation
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------------
Title: VP
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Los Xxxxx, Inc., a Colorado corporation
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
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Title: VP
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Pueblo Norte, Inc., a Colorado corporation
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------------
Title: VP
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Rio Verde Nursing Center, Inc., a Colorado
corporation
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------------
Title: VP
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EXHIBIT A
EXAMPLE OF CALCULATION OF THE SECTION 8.3.1.7.1 LIMIT
The following is an example of the calculation of the Section 8.3.1.7.1
Limit. For purposes of this example, assume the following:
1. EBITDARM for the four quarters ending June 30, 1999 is $13,000,000.00.
2. LCFC for the four quarters ending June 30, 1999 is $8,000,000.00.
3. SDDS for the four quarters ending June 30, 1999 is $125,000.00.
4. The interest rate with respect to the Secured Debt will be fifty basis
points over prime rate as published in the Wall Street Journal. The prime rate
as published in the Wall Street Journal on the business day immediately
preceding the date of Lessees' Certificate is eight percent. The Lessees will be
required to pay a one percent fee during the next one (1) year period in
connection with the Secured Debt.
Utilizing the above assumptions, the Section 8.3.1.7.1 Limit for the
calendar quarter beginning July 1, 1999 will be calculated by the following
two-step process:
Step 1. MPDS = 13,000,000 - 8,000,000 + 125,000 = 512,096.77
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Step 2.
Section 8.3.1.7.1 Limit = 512,096.77 = $5,390,492.32
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.095
A-1
EXHIBIT B
FORM OF LESSEES' CERTIFICATE
This Certificate is given on ____________ pursuant to Section 3 of the
Third Amendment to Omega New Master Lease dated as of March __, 1999.
Capitalized terms used and not otherwise defined in this Certificate have the
respective meanings given to them in the Third Amendment to Omega New Master
Lease and in the Omega New Master Lease.
The undersigned, being the Chief Financial Officer of RainTree Healthcare
Corporation and of the Lessees, certifies as follows:
(1) EBITDARM of the Lessees for the preceding four calendar quarters
ending ____________________ was $__________. Exhibit A to this
Certificate is a detailed calculation of EBITDARM for that period.
(2) Lessees Consolidated Fixed Charges for the preceding four calendar
quarters ending _____________________ was $__________________. Exhibit
B to this Certificate is a detailed calculation of Lessees
Consolidated Fixed Charges for that period.
(3) Lessees interest, fees, points and similar charges on Secured Debt for
the four calendar quarters ending ______________ was $____________.
Exhibit C to this Certificate is a detailed calculation of that amount
for that period.
(4) The Pro Forma Annual Interest Rate with respect to Secured Debt,
determined as of the business day immediately preceding the date of
this Certificate, is ___ percent. Exhibit D to this Certificate is a
detailed calculation of the Pro Forma Annual Interest Rate as of the
business day immediately preceding the date of this Certificate.
(5) The Section 8.3.1.7.1 Limit commencing as of _____________is
$_______________. Exhibit E to this Certificate is a detailed
calculation of Section 8.3.1.7.1 done in accordance with Section 1 of
the Third Amendment to the Omega Master Lease.
(6) [Check one of the following boxes]
[ ] Attached hereto is a true and complete set of the loan documents
applicable to the Secured Debt.
[ ] The loan documents previously delivered to Omega with respect to
the Secured Debt remain in full force and effect.
[ ] The calculations above are made in accordance with generally
accepted accounting principles, applied on a basis consistent
with past practices.
B-1
