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EXHIBIT 10.1
SETTLEMENT AND RESTRUCTURING AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 2000, by and among
ADVOCAT INC., a Delaware corporation ("Advocat"), of 000 Xxxxxxx Xxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxx, Xxxxxxxxx 00000, DIVERSICARE LEASING CORP., a Tennessee
corporation ("DLC"), of 000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxx
00000, STERLING HEALTH CARE MANAGEMENT, INC., a Kentucky corporation ("SHCM"),
of 000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxx 00000, DIVERSICARE
MANAGEMENT SERVICES CO., a Tennessee corporation ("DMSC"), of 000 Xxxxxxx
Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxx 00000, ADVOCAT FINANCE, INC., a
Delaware corporation ("AFI"), of 000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxxx 00000, OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("Omega"), of 000 Xxxxxxx Xxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxx 00000, and
STERLING ACQUISITION CORP., a Kentucky corporation ("Acquisition"), of 000
Xxxxxxx Xxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxx 00000.
RECITALS:
A. Omega, individually and/or through its wholly-owned subsidiary
Acquisition, as lessor, and Advocat, through its wholly owned subsidiary DLC,
and/or DLC's wholly owned subsidiary SHCM, as lessees, are parties, via mesne
assignments, subleases and other agreements, to four (4) master leases
(identified on Schedule 1 hereto as the "1992 Master Lease", the "1994 Master
Lease", the "1997 Master Lease", and the "West Liberty Master Sublease", and
collectively referred to herein as the "Master Leases") covering, in the
aggregate, twenty-eight (28) nursing care facilities located variously in
Kentucky, Tennessee, West Virginia, Alabama, Arkansas and Ohio, listed by name
and location on Schedule 1 (the "Master Leased Facilities").
B. Omega is the mortgagee of three (3) nursing care facilities
located in Florida (the "Florida Mortgaged Facilities"), listed by name and
location on Schedule 2 hereto, owned by Counsel Nursing Properties, Inc., a
Delaware corporation ("CNP"), and leased by CNP to DLC, pursuant to a Mortgage
Note in the original principal amount of $7,031,250, as amended and restated
(the "CNP Note"), secured by a Mortgage and Security Agreement and Fixture
Filing of even date therewith (the "CNP Mortgage"). DLC is obligated, under the
terms of the subject lease(s), to make debt service payments under the CNP Note
directly to Omega.
C. Omega is also the mortgagee of four (4) nursing care
facilities located in Florida (the "Florida Managed Facilities"), listed by
name, location and owner on Schedule
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3 hereto, owned by various sister corporations of Emerald Healthcare, Inc., a
Florida corporation ("Emerald"), and managed by DMSC, a wholly owned subsidiary
of Advocat.
D. Counsel Corporation, an Ontario corporation ("Counsel") has
provided a financial undertaking to Omega relative to the obligations of the
lessee under the 1992 Master Lease and of CNP under the CNP Note and CNP
Mortgage.
E. Advocat and/or certain of its subsidiaries and/or affiliates
have provided guaranties pertaining to the Master Leases and the CNP Note and
CNP Mortgage (the "Advocat Guaranties"), and DMSC has (i) subordinated its
management fees with respect to the Florida Managed Facilities, and (ii)
undertaken to make certain advances to the Florida Managed Facilities, as
provided in the relevant documents.
F. Advocat and its subsidiaries have been in default of their
various obligations to Omega and its subsidiaries since March 1, 2000 by virtue
of, among other things, non-payment of rental and other obligations under the
Master Leases and debt service under the CNP Note.
G. Advocat has made partial payments to Omega since April 24,
2000, being the date of a Standstill Agreement (the "Standstill Agreement"), the
expiration date of which has been extended by the parties through September 30,
2000.
H. The parties have reached a settlement of the foregoing
defaults, and have agreed upon a restructuring of their various agreements and
undertakings with respect to the Master Leased Facilities, the Florida Mortgaged
Facilities and the Florida Managed Facilities, all as more particularly set
forth hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are acknowledged hereby, Omega, Acquisition,
Advocat, DLC, SHCM, AFI and DMSC covenant and agree as follows:
1. Acknowledgment of Default. A. Advocat, DLC, SHCM, AFI and DMSC
each acknowledges and agrees that: (i) DLC and SHCM are in material default
under the Master Leases; (ii) CNP is in material default under the CNP Note and
CNP Mortgage, and Advocat and DLC are in material default of their obligations
to Omega with respect thereto; (iii) all required notices of default under the
Master Leases, the CNP Note and CNP Mortgage, and the Advocat Guaranties have
been given or waived by all necessary parties, (iv) all grace and cure periods
relating to the aforementioned defaults under the
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Master Leases, the CNP Note and CNP Mortgage, the Advocat Guaranties, or
otherwise required by applicable law, have expired without the defaults having
been cured, and (v) the existence of the defaults now entitles Omega and its
subsidiaries to exercise (subject only to the terms of the Standstill Agreement)
all of their respective rights and remedies under the Master Leases, the CNP
Mortgage, the Advocat Guaranties and applicable law. Advocat, DLC, SHCM, AFI and
DMSC further acknowledge that none of Advocat, DLC, SHCM, AFI or DMSC has any
claim or cause of action against Omega, Acquisition, or any of their respective
subsidiaries and affiliates, nor any defense to their respective obligations
under the Master Leases or with respect to the CNP Note and CNP Mortgage or any
defense to or right of set-off against the Master Lease Arrearage, the Interest
Arrearage, and/or the CNP Principal (all as defined below). The parties hereto
acknowledge and agree that the foregoing defaults under the Master Leases and
the applicable and relevant obligations of Advocat under the Advocat Guaranties
with respect thereto will be cured and/or settled upon and by virtue of the
consummation of the transactions contemplated by this Agreement relating to the
Master Leased Facilities. Further, the parties acknowledge and agree that the
foregoing defaults under the CNP Note and CNP Mortgage, and the applicable and
relevant obligations of Advocat under the Advocat Guaranties with respect
thereto will be cured and/or settled upon consummation of the transactions
contemplated by Paragraph 3 relating to the Florida Mortgaged Facilities.
However, except as specifically provided herein, pending consummation of those
transactions, Omega retains all rights under the CNP Note and the CNP Mortgage
against CNP and Counsel and all rights under the Advocat Guaranties as they
relate to the CNP Note and CNP Mortgage.
B. The parties to this Agreement acknowledge and agree that the
unpaid balance (excluding out-of-pocket costs and expenses incurred by Omega
and/or its subsidiaries, and net of payments made pursuant to the Standstill
Agreement) for Minimum Rent, Additional Rent and franchise and similar tax
obligations of DLC and SHCM under the Master Leases as of September 30, 2000 is
$2,985,111.99 (the "Master Lease Arrearage"), and that the unpaid balance
(excluding out-of-pocket costs and expenses incurred by Omega and/or its
subsidiaries, and net of payments made pursuant to the Standstill Agreement) for
interest, accrual interest, late charges and prepayment penalty under the CNP
Note as of September 30, 2000, is $1,056,568.25 (the "Interest Arrearage"). The
parties also acknowledge that the principal balance on the CNP Note, in the
amount of $7,031,025 (the "CNP Principal") is due and owing.
2. Closings.
A. Initial Closing.
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(I) Time and Place. The consummation of the transactions
contemplated by this Agreement and pertaining to the Master Leased Facilities
and the Florida Managed Facilities (the "Initial Closing") shall take place on
or before November 15, 2000 (the "Initial Closing Date"), with an effective date
of October 1, 2000 (the "Effective Date"). The Initial Closing Date may be
extended by mutual agreement of the parties, but no such extension shall operate
to postpone the Effective Date. The Initial Closing shall be held at the offices
of Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C., 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxxxxxxx 00000-0000, or at such other place as shall be mutually
agreed upon by Omega and Advocat.
(II) Initial Closing Documents. The following documents
and instruments shall be executed and/or delivered at the Initial Closing:
(i) The Amended and Restated Master Lease (reference Paragraph
4.A);
(ii) The Amended and Restated Security Agreement (reference
Paragraph 4.B);
(iii) UCC Financing Statements (reference Paragraph 4.B);
(iv) The Amended and Restated Guaranty (reference Paragraph 4.C);
(v) The Amended and Restated Memoranda of Leases (reference
Paragraph 4.D);
(vi) The Reaffirmation of Obligations (reference Paragraph 5);
(vii) The intercreditor agreement to be executed by and between
Omega, Acquisition and AmSouth (reference Paragraphs 4 and 8);
(viii) The Subordinated Note (reference Paragraph 10);
(ix) The Stock Subscription Agreement (reference Paragraph 11);
(x) The parties shall execute a closing statement reflecting the
transactions contemplated to occur at the Initial Closing;
(xi) In addition, Advocat, DLC, SHCM, AFI and DMSC shall each
deliver to Omega and Acquisition a certificate, signed by the Secretary or
Assistant Secretary of
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each such entity, confirming the incumbency of its respective officers, and to
which are attached the following:
(aa) a copy of the articles of incorporation or certificate of
incorporation of each entity, as amended, and certified by the Secretary of
State of the jurisdiction of incorporation as of a date not more than 40 days
prior to the Initial Closing;
(bb) a true, correct and complete copy of the current bylaws of
each entity, as amended;
(cc) a true, correct and complete copy of the resolutions adopted
by the Board of Directors of each entity, authorizing the execution and delivery
of this Agreement and the consummation of the transactions contemplated herein;
(dd) a certificate of good standing for each entity, issued as of a
date not earlier than 40 days prior to the Initial Closing by the Secretary of
State of the jurisdiction of its incorporation; and
(ee) a certificate of authority issued by the relevant Secretaries
of State of the jurisdictions in which the Master Leased Facilities are located,
confirming that DLC, SHCM and DMSC, as appropriate, are authorized to transact
business as a foreign corporation in such states.
(III) Initial Closing Actions. At the Initial Closing, the
following actions shall be taken:
(i) Acquisition shall call, and AmSouth Bank shall fund,
$3,000,000 of the 1992 Letter of Credit (reference Paragraph 7), for payment to
Omega and for application against amounts owing under the CNP Note. Upon receipt
by Omega of the $3,000,000, the amount of any claim which Omega may assert on
the CNP Note shall be reduced by the amount by which the claim would have been
reduced if the $3,000,000 were applied first against the Interest Arrearage,
second against the applicable Prepayment Premium (as defined in the CNP Note),
and third against the CNP Principal.
(ii) Acquisition shall release the balance of the 1992 letter of
credit over and above the foregoing $3,000,000 and shall release the Other
Letter of Credit (as defined in Paragraph 7).
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(IV) Prorations. There will be no prorations with respect
to the Master Leased Facilities between and among the parties hereto, as DLC and
SHCM are, and DLC will remain solely responsible for all taxes, insurance,
utilities and other items typically prorated under the terms of the existing
leases thereof and continuing under the Amended and Restated Master Lease.
B. Deferred Closing.
(I) Time and Place. The consummation of the transactions
contemplated by this Agreement and pertaining to the Florida Mortgaged
Facilities and CNP/Counsel obligations (the "Deferred Closing") shall take place
on or before one hundred twenty (120) days after the Initial Closing Date (the
"Deferred Closing Date"). The parties acknowledge that Omega's limited
forbearance under Paragraph 3.D shall expire at the end of the foregoing one
hundred twenty (120) day period, unless extended by Omega in writing, at Omega's
sole election. The Deferred Closing Date may be extended by mutual agreement of
the parties, but no such extension shall operate to postpone the Effective Date.
The Deferred Closing shall be held at the offices of Xxxxxxx Xxxxxx Xxxx Xxxxxxx
& Manner, P.C., 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx
00000-0000, or at such other place as shall be mutually agreed upon by Omega and
Advocat.
(II) Deferred Closing Documents. The following documents
and instruments shall be executed and/or delivered at the Deferred Closing:
(i) All documents and instruments necessary or
appropriate to the conveyance of the Xxxxxx Manor facility from CNP to
Acquisition, and its incorporation into the Amended and Restated Master Lease
(reference Paragraph 3.A);
(ii) An escrow agreement with respect to Desoto
Manor and Leesburg, and amendment of the CNP Mortgage related thereto (reference
Paragraph 3.B);
(iii) An amendment to the Amended and Restated
Security Agreement (reference Paragraph 4.B), adding Xxxxxx Manor thereto;
(iv) UCC Financing Statements for Xxxxxx Manor
(reference Paragraph 4.B);
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(v) An Amended and Restated Memorandum of Lease
for Xxxxxx Manor (reference Paragraph 4.D);
(vi) The Mutual Release by and between Counsel
and Omega (reference Paragraph 9);
(vii) The parties shall execute a closing
statement reflecting the transactions contemplated hereby;
(III) Prorations. There will be no prorations with respect
to Xxxxxx Manor between and among the parties hereto, as DLC is and will remain
solely responsible for all taxes, insurance, utilities and other items typically
prorated under the terms of the existing leases thereof and continuing under the
Amended and Restated Master Lease.
3. Disposition of Florida Mortgaged Facilities; Forbearance. The
Florida Mortgaged Facilities shall be transferred and/or closed, in accordance
with the following and subject to the limitations contained in Paragraph 3.D:
X. Xxxxxx Manor. At or before the Deferred Closing, Advocat shall
cause CNP to convey, transfer and assign Xxxxxx Manor (including without
limitation, land, building and other improvements, all furniture, fixtures and
equipment located therein and used or usable in connection with the operation
thereof) to Acquisition, in lieu of partial foreclosure of the mortgage covering
the Florida Mortgaged Facilities. Such conveyance and assignment shall be free
and clear of the existing lease to DLC, all mortgages and other liens and/or
encumbrances whatsoever other than the existing CNP Mortgage. Upon conveyance to
Acquisition, Xxxxxx Manor shall be added to the Amended and Restated Master
Lease to be executed by Acquisition, as lessor, and DLC, as lessee, pursuant to
Paragraph 4, below. Advocat and DLC agree to promptly and timely cooperate, and
to cause CNP to cooperate, with Acquisition in connection with any necessary
certificate of need ("CON") and/or licensing transfers necessary or appropriate
to effect the conveyance of Xxxxxx Manor to Acquisition and the addition thereof
to the Amended and Restated Master Lease.
B. Desoto Manor and Leesburg. Within one hundred twenty (120)
days after the Initial Closing, Advocat shall cause CNP to place warranty deeds
and bills of sale covering Desoto Manor and Leesburg irrevocably into escrow
with a title company designated by Omega. The deeds and bills of sale shall be
in recordable form, but blank as to grantee.
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At the same time, the CNP Mortgage shall be amended to (i) discharge Xxxxxx
Manor from the lien of the CNP Mortgage; (ii) provided that the conditions of
Subparagraph 3.D and Paragraph 9 hereof have been met, release CNP, Advocat and
DLC from their respective obligations to pay the debt under the CNP Note and CNP
Mortgage; and (iii) have the CNP Mortgage continue in full force and effect for
the purpose of securing the continuing post-Closing obligations of Advocat,
DMSC, SHCM and DLC under this Agreement. DLC shall have the period of one
hundred twenty (120) days from and after the Initial Closing (the "Advocat
Option Period") during which to elect to either retain or sell Desoto Manor
and/or Leesburg. Written notice of such election shall be given by DLC to
Acquisition not later than two (2) business days following the expiration of the
Advocat Option Period. If DLC elects to retain either or both facilities,
Acquisition's name shall be inserted as grantee in the applicable warranty
deed(s) and xxxx(s) of sale, and such instruments shall be released from escrow
to Acquisition. Simultaneously, Desoto Manor and/or Leesburg, as the case may
be, shall be added to the Amended and Restated Master Lease, which shall be
amended for such purpose and to provide for rent at fair market value for the
added facility or facilities. If Acquisition and DLC cannot in good faith agree
upon fair market value rental, then such determination shall be made by an
arbitrator jointly selected by Acquisition and DLC, whose decision shall be
final. If DLC elects to sell either or both of Desoto Manor and/or Leesburg,
then in such event Omega and Acquisition shall have the period of forty-five
(45) days from and after receipt of DLC's notice to that effect (the "Omega
Option Period"), during which to elect (as to each applicable facility), by
written notice to Advocat and DLC given within two (2) business days following
expiration of the Omega Option Period, either to acquire the facility(ies) for a
purchase price of one dollar ($1.00), or to permit DLC to sell the facility(ies)
to one or more unrelated third parties. If Omega elects to acquire either or
both facilities, Acquisition's name (or such other name as Omega may designate
in writing) shall be inserted as grantee in the applicable warranty deed(s) and
xxxx(s) of sale, and such instruments shall be released from escrow to Omega. If
Omega elects not to acquire either or both facilities, DLC's name (or such other
name as Advocat may designate in writing) shall be inserted as grantee in the
applicable warranty deed(s) and xxxx(s) of sale, and such instruments shall be
released from escrow to Advocat. If Omega and Acquisition permit the sale of the
facility(ies), Advocat and DLC shall promptly commence marketing the
facility(ies). Advocat and DLC shall have the period of one hundred eighty (180)
days during which to attempt to sell the facility(ies) as operating nursing
homes. If they are unable to accomplish the sale of one or both (as applicable)
facility(ies) within such one hundred eighty (180) days, the applicable
facility(ies) shall be closed, and the real estate and other assets comprising
the facilities sold as soon as reasonably practicable. In any event, eighty
percent (80%) of the Net Sales Proceeds from the sale of either or both of
Desoto Manor and/or Leesburg shall be paid over to or at the direction of Omega.
As used herein, "Net Sale Proceeds" shall be
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the gross sale price less (i) bona fide commissions payable to third party
brokers not related to or affiliated with Advocat, DLC, CNP or any subsidiary or
affiliate thereof, and (ii) ordinary and customary closing costs and expenses,
including title insurance premiums, transfer or stamp taxes, and property tax
prorations).
C. Indemnity Obligation. Advocat, DLC and DMSC, jointly and
severally, shall defend, indemnify and hold harmless Omega, Acquisition, and
their respective officers, directors, shareholders, successors and assigns (the
"Indemnified Parties"), with respect to any of the Florida Mortgaged Facilities
conveyed to Omega, Acquisition, or designees thereof, from and against:
1. Health Care Laws.
All cost report settlements and audits arising from CNP's,
Advocat's or DLC's ownership or operation of such Florida Mortgaged Facilities
prior to the conveyance of such Facilities to the Indemnified Parties or their
designees, and any liability, including without limitation Medicare and/or
Medicaid clawback liability, pursuant to any federal, state or local laws,
rules, ordinances, regulations and all administrative and judicial
interpretations applicable to it pertaining to operation of a skilled nursing
facility prior to such conveyance, including without limitation, Title XVIII of
the Social Security Act, 42 U.S.C. Sections 1395-1395ccc (the Medicare statute);
Title XIX of the Social Security Act, 42 U.S.C. Sections 1396 et seq. (the
Medicaid statute); the Federal Programs Anti-Kickback Statute, 42 U.S.C. Section
1320a-7b(b); the Xxxxx Law, 42 U.S.C. Section 1395nn; the False Claims Act, 31
U.S.C. Sections 3729 et seq. (as amended); the Program Fraud Civil Remedies Act,
31 U.S.C. Section 3801 et seq.; the federal Anti-Kickback Act, 42 U.S.C.
Sections 52 et seq.; the Civil Monetary Penalties Law, 42 U.S.C. Section
1320a-7a; and the Criminal Penalties Law for Acts Involving Federal Health Care
Programs, 42 U.S.C. Section 1320a-7b; and all applicable implementing
regulations, rules, ordinances and orders, as well as any similar state and
local statutes and regulations relating to health care service providers and
suppliers (the "Health Care Laws").
2. Environmental.
Any claims, (including, without limitation, third party claims for
personal injury or real or personal property damage or damage to natural
resources or the environment), actions, administrative proceedings (including
formal proceedings), judgments, damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, including
reasonable attorneys' fees and expenses (including any such fees and expenses
incurred in enforcing this Agreement or collecting any sums due hereunder),
reasonable
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consultant fees, and reasonable expert fees, together with all other costs and
expenses of any kind or nature (collectively, the "Costs") that arise directly
or indirectly from or in connection with the violation of any applicable
Environmental Law (as defined below) by CNP, Advocat and/or DLC or the presence,
storage, transportation, disposal or release of any Hazardous Substance (as
defined below) in or into the structure, building, air, soil, surface water,
groundwater or soil vapor (collectively, the "Environment") at, on, under, from,
or within the Florida Mortgaged Facilities or any portion thereof, to the extent
that such Costs result from such conditions or events occurring prior to the
date of conveyance of the Facility(ies) to the Indemnified Parties, their
designees, or any of them.
As used herein, "Environmental Laws" shall mean and refer to all
federal, state and local, civil and criminal laws, regulations, rules,
ordinances, codes, decrees, judgments, directives, policies or guidance, common
law, or judicial or administrative orders relating to pollution or protection of
the environmental, natural resources or human health and safety, including,
without limitation, laws relating to releases or threatened releases of
Hazardous Substances [as defined below] (including, without limitation, releases
to ambient air, surface water, groundwater, land, surface and subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, release, transport, disposal or handling of Hazardous
Substances. "Environmental laws" includes, without limitation, CERCLA, the
Hazardous Materials Transportation Act (19 U.S.C.ss.ss.1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C.ss.ss.6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C.ss.ss.1251 et seq.), the Clean Air
Act (42 U.S.C.ss.ss.7401 et seq.), the Toxic Substances Control Act (15
U.S.C.ss.ss.2601 et seq.), the Oil Pollution Act (33 U.S.C.ss.ss.2701 et seq.),
the Emergency Planning and Community Right-to-Know Act (42 U.S.C.ss.ss.11001 et
seq.), the Occupational Safety and Health Act (29 U.S.C.ss.ss.651 et seq.), and
all other state and local laws analogous to any of the above. "Hazardous
Substances" shall mean and refer to any hazardous or toxic substance, material
or waste, pollutant or contaminant, flammable or explosive material, radioactive
material, dioxins, heavy metals, radon gas, asbestos, petroleum products or
by-products, polychlorinated biphenyls, medical or infectious waste or
materials, or any other substance, waste or material which is included under or
regulated by any Environmental Law.
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3. Other Matters.
Any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind (including, without limitation, reasonable attorney fees
and other legal costs and expenses) which the Indemnified Parties may at any
time suffer or incur, or become subject to, as a result of or in connection
with:
(a) the operation of the Florida Mortgaged
Facilities prior to the respective date(s) of conveyance thereof to the
Indemnified Parties, their designees, or any of them; or
(b) any suit, action or other proceeding brought
by any governmental authority or person arising out of, or in any way related
to, any of the matters referred to in this Paragraph 3.C.
D. Limited Forbearance; Action upon/Release of CNP Note
Indebtedness. Subject to the timely consummation of those transactions covered
by the Initial Closing, and provided that (i) DLC shall make current interest
payments, in arrears, on the CNP Note in the amount of $16,666.00 per month from
the Initial Closing Date (commencing November 15, 2000) through the Deferred
Closing Date, (ii) Advocat, DLC, SHCM and DMSC shall otherwise comply in all
respects with the terms and conditions of this Agreement, and (iii) no
Triggering Event shall have occurred as defined in Paragraph 4.G, Omega agrees
to forbear from exercising its remedies under the CNP Note and CNP Mortgage, and
based on the undertakings of Counsel and/or Advocat (including the Advocat
Guaranty) with respect thereto, for the period of one hundred twenty (120) days
following the Initial Closing. During the time, and so long as, DLC shall timely
make the interest payments under sub-subparagraph 3.D.(i), Acquisition shall
reduce the monthly Base Rent installments under the Amended and Restated Master
Lease by an equal amount. If the Deferred Closing timely occurs, including the
consummation of the transfer of Xxxxxx Manor and its incorporation into the
Amended and Restated Master Lease pursuant to and as contemplated in Paragraph
3.A, and further conditioned upon Omega's receipt at the Initial Closing of the
$3,000,000 payment in accordance with Paragraph 7, below, Omega shall release
Advocat and DLC from their obligations to pay the principal and any further
unpaid interest indebtedness (beyond that to which the $3,000,000 payment is
applied) under the CNP Note and the CNP Mortgage; provided, however, that
Advocat shall not be released from its guaranty of the CNP Mortgage to the
extent of any continuing obligations following its amendment as contemplated by
Paragraph 3.B. If the Deferred Closing does not occur within one hundred twenty
(120) days following the Initial Closing, Omega shall be free to exercise any
and all its rights and remedies under the CNP
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Note, the CNP Mortgage, the Advocat Guaranty with respect thereto, and the
undertakings of Counsel with respect thereto.
4. Amended and Restated Master Lease; Divestiture of Certain
Facilities; Cash Management System Requirements.
A. Omega shall cause title to the Master Leased Facilities to be
consolidated into Acquisition at or prior to the Initial Closing. SHCM shall
simultaneously assign its interest in the Master Leased Facilities covered by
the 1997 Master Lease to DLC. At the Initial Closing, Acquisition, as lessor,
and DLC, as lessee, shall enter into an Amended and Restated Master Lease
consolidating, amending and restating the Master Leases, and adding (or
providing for the subsequent addition, pursuant to Paragraph 3.A, of) Xxxxxx
Manor to the Master Leased Facilities, all in substantially the form attached
hereto as Exhibit "B" (the "Amended and Restated Master Lease"). In connection
therewith:
B. At Initial Closing, DLC shall enter into and execute an
Amended and Restated Security Agreement, covering all of the Master Leased
Facilities, in substantially the form attached hereto as Exhibit "C", together
with amended and restated UCC financing statements for each of the Master Leased
Facilities in form satisfactory to Acquisition.
C. Also at Initial Closing, Advocat, AFI and DMSC shall execute
an Amended and Restated Guaranty, in substantially the form attached hereto as
Exhibit "D".
D. Also at Initial Closing, Acquisition and DLC shall enter into
an Amended and Restated Memorandum of Lease for each of the jurisdictions in
which the Master Leased Facilities are located, in substantially the form
attached hereto as Exhibit "E"; provided, however, that an Amended and Restated
Memorandum of Lease for Xxxxxx Manor shall be entered into at the Deferred
Closing.
E. Also at Initial Closing, DLC and SHCM shall enter into a
sublease of the Master Leased Facilities covered by the 1997 Master Lease, in
conformity with the requirements of Paragraph 13 of this Agreement. DLC and SHCM
shall, at Initial Closing, execute and deliver to Acquisition the collateral
documents for subleases as described in Paragraph 13.
F. No later than one hundred eighty (180) days following the
Initial Closing, Advocat and DLC shall create a new wholly owned subsidiary of
DLC ("NewSub"), and shall transfer to NewSub all of DLC's ownership, tenancy
and/or operation of each facility,
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including all accounts receivable and personal property, included in the Master
Leased Facilities (including within the Master Leased Facilities for purposes of
this determination Xxxxxx Manor, Desoto Manor and Leesburg) leased by DLC under
the Amended and Restated Master Lease, so that the assets of NewSub shall be
limited to the Master Leased Facilities. NewSub shall assume all obligations of
DLC with respect to the Master Leased Facilities. NewSub shall be created as a
single purpose entity, and its articles of incorporation and bylaws (or articles
of organization and operating agreement, if NewSub is created as a limited
liability company) shall contain language reasonably satisfactory to Omega and
in compliance with its obligations, if any, to AmSouth with respect, and
limited, to potential guaranty of DLC's obligations to AmSouth and/or pledge of
its stock/membership interests to AmSouth, to effectuate such status. In
connection with the foregoing, DLC shall promptly initiate and diligently pursue
to completion all necessary and appropriate actions to make SHCM and all other
Sublessees wholly owned subsidiaries of NewSub. Upon the completion of the
requirements of this Paragraph 4.F, all references to DLC in Paragraph 4.G shall
be deemed to be requirements of NewSub.
G. Within ninety (90) days from the Initial Closing, DLC (or
NewSub, as the case may be) and its permitted sublessees (the "Sublessees")
will, as a material inducement to Omega and Acquisition to enter into this
Agreement, and as an express covenant under the Amended and Restated Master
Lease, establish a new cash management system (the "New Cash Management
System"). The new Cash Management System will include the following procedures:
(i) If a Facility is operated by a Sublessee, all receipts related
to that Facility shall be deposited daily into one or more accounts in the name
of Sublessee.
(ii) If a Facility is operated by DLC or NewSub, all receipts
related to that Facility shall be deposited daily into one or more accounts
maintained by DLC or NewSub in the name of the Facility. The accounts maintained
by each Sublessee and by DLC or NewSub in the name of Facilities into which
funds are deposited as set forth in this clause (ii) and in clause (i) are
herein referred to as the "Facility Accounts".
(iii) On a daily basis, the balance in each Facility Account may, at
DLC's (NewSub's) option, be transferred into a concentration account maintained
by Advocat (the "Advocat Concentration Account").
(iv) DLC ("NewSub") shall promptly establish, with AmSouth Bank or
another financial institution satisfactory to Omega and Acquisition, a separate
concentration
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account, unrelated to the Advocat Concentration Account, and which shall be
referred to herein as the "DLC Concentration Account". DLC (NewSub) shall make,
and thereafter maintain, a deposit or deposits in amounts sufficient to keep the
DLC Concentration Account open and operative at all times.
(v) In the absence of a Triggering Event, funds from Facility
Accounts swept into the Advocat Concentration Account may continue to be
commingled with funds from other facilities owned or operated by Advocat, DLC
and/or their respective affiliates, and utilized in accordance with existing
practices. Advocat shall maintain financial records which will make it possible
to identify (x) funds deposited into the Advocat Concentration Account from the
Facilities, and (y) expenses of the Facilities paid with funds in the Advocat
Concentration Account. For purposes hereof, "Triggering Event" shall mean any
one or more of the following:
(1) DLC (or NewSub, as the case may be) shall fail to pay the Base
Rent and/or Impositions as defined in the Amended and Restated
Master Agreement, or Advocat fails to pay any principal or
interest due under the Subordinated Note in accordance with
its terms, and Omega shall provide a copy of notice of such
default to AmSouth Bank;
(2) Acquisition gives notice of termination of the Amended and
Restated Master Lease following an Event of Default, and
provides a copy of such notice to AmSouth Bank;
(3) An involuntary bankruptcy proceeding is initiated against
Advocat, DLC (or NewSub, as the case may be), or Advocat or
DLC (or New Sub, as the case may be): (i) admits in writing
its inability to pay its debts generally as they become due,
(ii) files a petition in bankruptcy or a petition to take
advantage of any insolvency law, (iii) makes a general
assignment for the benefit of its creditors, (iv) consents to
the appointment of a receiver of itself or of the whole or any
substantial part of its property, or (v) files a petition or
answer seeking reorganization or arrangement under the Federal
bankruptcy laws or any other applicable law or statute of the
United States of America or any state thereof, subject to the
applicable provisions of the Bankruptcy Code (11 USC ss.101
et. seq.);
(4) AmSouth Bank or any successor thereto declares an event of
default, and accelerates any or all of the indebtedness, or
commences any action against DLC (or NewSub, as the case may
be) or any sublessee, or takes any action
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to realize on AmSouth's junior interest in accounts
receivable, under any document or instrument evidencing an
obligation of Advocat, DLC, NewSub or any affiliate of any of
the foregoing to AmSouth Bank; or
(5) AmSouth Bank declines, for any reason, to fund a working
capital or other advance under any line of credit or other
credit facility of Advocat, DLC or any affiliate of either.
(vi) In connection with the foregoing, and as a material inducement
to Omega and Acquisition to enter into this Agreement, Advocat and/or DLC shall
provide AmSouth written notice clearly identifying the Facility Accounts at
AmSouth and any other account at AmSouth which holds only funds of NewSub or any
of its sublessees.
(vii) From and after a Triggering Event, except for incidental
expenses paid at the Facility level, all expenses of DLC/NewSub and the
Sublessees (the "Facility Expenses") shall be paid by DLC/NewSub, either on its
own behalf or on behalf of the Sublessees, from the DLC Concentration Account.
After a Triggering Event, under no circumstances will funds of DLC/NewSub or any
Sublessee be commingled with funds belonging to Advocat or any affiliate of
Advocat (except for the Sublessees).
H. As a material inducement for Omega and Acquisition to enter
into this Agreement, and as an express covenant under the Amended and Restated
Master Lease, Advocat and DLC/New Sub shall not transfer, or permit the
transfer, of the Advocat Concentration Account or the DLC Concentration Account
to any financial institution other than AmSouth Bank, unless the new depository
institution (the "Replacement Bank") shall first execute an intercreditor
agreement with Omega and Acquisition substantially similar to the intercreditor
agreement executed with AmSouth Bank pursuant to Paragraph 8.D, below.
5. Florida Managed Facilities. All existing contractual
relationships of the parties, including without limitation for purposes hereof
the existing management agreements and subordination of management fees with and
by DMSC and the Advocat guaranties of DMSC's performance, with respect to the
Florida Managed Facilities shall remain in existence without modification.
Omega, Advocat and DMSC shall execute, at the Initial Closing, a Reaffirmation
of Obligations in substantially the form attached hereto as Exhibit "F". The
parties acknowledge that DMSC has not heretofore executed and joined in the Cash
Collateral Agreement dated as of August 1, 1998, pertaining to the Florida
Managed Facilities. Advocat and Omega shall negotiate, prior to January 31,
2001, an amendment to that instrument which will (i) resolve, in a manner
consistent with the
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intent of the Cash Collateral Agreement, DMSC's reasonable objections to the
flow of funds established thereby, and (ii) provide a consent by Advocat and
DMSC to the sale or transfer of the Florida Managed Facilities, or any of them,
to or at the direction of Omega, provided, however, that any such sale or
transfer shall be subject to the concomitant assignment of the existing DMSC
management agreement, which will remain in effect in accordance with its terms
following such sale or transfer.
6. Capital Expenditures Undertaking. As a material inducement for
Omega and Acquisition entering into this Agreement and consummating the
transactions contemplated hereby, and as an express covenant under the Amended
and Restated Master Lease, DLC (or NewSub, as applicable) agrees to undertake
special project capital expenditures ("Special Project Capital Expenditures")
with respect to the Master Leased Facilities (including, for purposes hereof,
Xxxxxx Manor if and when it is added to the Amended and Restated Master Lease
pursuant to Paragraph 3.A) in the cumulative amount of not less than One Million
and no/100 Dollars ($1,000,000.00) during the first two (2) Lease Years under
the Amended and Restated Master Lease. The Special Project Capital Expenditures
shall be for items intended to enhance the marketability and functionality of
the Master Leased Facilities, and shall be subject to the reasonable approval of
Acquisition, to be obtained in writing in advance of the expenditure. The
Special Project Capital Expenditures shall be in addition to the annual Minimum
Qualified Capital Expenditures required under Section 8.3.2 of the Amended and
Restated Master Lease. Advocat shall guaranty the performance of and payment for
the Special Project Capital Expenditures. DLC/NewSub shall in any event expend
not less than Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00) by
June 30, 2001, and shall expend (unless prevented from doing so by Force
Majeure, as defined in the Amended and Restated Master Lease) not less than Two
Hundred Fifty Thousand and no/100 Dollars ($250,000.00), on a cumulative basis,
in each subsequent six (6) month period thereafter during the two (2) year
period therefor. DLC/NewSub shall not receive a credit for expenditures on
Special Project Capital Expenditures against its annual Minimum Qualified
Capital Expenditures obligations under Section 8.3.2 of the Amended and Restated
Master Lease; provided, however, that the Special Project Capital Expenditures
shall be undertaken and performed in accordance with the requirements for
Qualified Capital Expenditures projects under the Amended and Restated Master
Lease, and that failure (i) to spend, or have plans in place reasonably
acceptable to Omega to spend, for Special Project Capital Expenditures, at least
Five Hundred Thousand and no/100 Dollars ($500,000.00), on a cumulative basis,
by September 30, 2001 or to spend, or have plans in place reasonably acceptable
to Omega to spend, for Special Project Capital Expenditures, at least One
Million and no/100 Dollars ($1,000,000.00), on a cumulative basis, by May 31,
2002, or (ii) to timely deposit the required expenditure amount into the
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Special Project Capital Expenditures Reserve described below, shall in either
such event constitute an Event of Default under the Amended and Restated Master
Lease. If and to the extent the Minimum Qualified Capital Expenditures budget of
$325 per bed per year during the first two (2) Lease Years is not sufficient to
fund all the scheduled capital expenditure items set forth on Schedule 4,
attached hereto and incorporated herein by reference, DLC/NewSub may utilize
funds from the Special Project Capital Expenditures funding to complete Schedule
4 items. Without limitation of the foregoing, if and to the extent DLC/NewSub
fails to make Special Project Capital Expenditures of Two Hundred Fifty Thousand
and no/100 Dollars ($250,000.00) by June 20, 2001 and Two Hundred Fifty Thousand
and no/100 Dollars ($250,000.00) in each six (6) month period thereafter, on a
cumulative basis in accordance with the foregoing, an amount equal to the
unexpended amount, less any funds already so deposited, shall be deposited on or
before the fifteenth (15th) day of the month following the end of such
applicable period, by DLC/NewSub into the Capital Expenditure Reserve Account
established and administered under and pursuant to the Amended and Restated
Lease. DLC/NewSub shall provide reports to Acquisition of the status of
completion and funding of Special Project Capital Expenditures, commencing on
June 30, 2001 for the prior six (6) month period, and at the end of each six (6)
month period thereafter during the first two (2) Lease years.
7. Letters of Credit/Security Deposit. The parties acknowledge
that Omega and Acquisition now hold security deposits with respect to the CNP
Note and Master Leased Facilities as follows: (i) a letter of credit in the
amount of $3,800,000 (the "1992 Letter of Credit") which secures obligations
relating to the CNP Note and the 1992 Master Lease, (ii) a second letter of
credit (the "Other Letter of Credit") in the amount of $1,150,000 which secures
obligations under all of the Master Leases other than the 1992 Master Lease, and
(iii) a cash deposit in the amount of $340,304.35, which secures obligations
under all of the Master Leases other than the 1992 Master Lease. The cash
deposit was previously applied by Omega/Acquisition against unpaid rent, but the
letters of credit have not been called, pursuant to and based on the Standstill
Agreement. The letters of credit were issued by AmSouth Bank ("AmSouth") or its
predecessors. AmSouth maintains a first priority security interest in the
accounts receivable of the Master Leased Facilities, as security for, among
other things, the letters of credit. At the Initial Closing, and in connection
with (and conditioned upon) the consummation of the restructuring of
Advocat/DLC/SHCM's debt with and by AmSouth, including without limitation the
release by AmSouth of its first priority security interest in the accounts
receivable of the Master Leased Facilities (including, for purposes hereof,
Xxxxxx Manor), Omega/Acquisition shall (x) call and retain $3,000,000 of the
1992 Letter of Credit, (y) release and relinquish the remaining $800,000 balance
of the 1992 Letter of Credit, and the $1,150,000 under the Other Letter of
Credit, and (z) reverse the prior application of the cash deposit. The
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$3,000,000 shall be applied against the balance owing on the CNP Note as set
forth in Paragraph 2B.(III). The prior cash deposit shall be held as the
security deposit under the Amended and Restated Master Lease. In connection with
the foregoing, Omega and Acquisition shall terminate and discharge the existing
Letter of Credit Agreements. The parties hereto agree that (i) Acquisition is
incurring substantial losses by the restructuring of the 1992 Master Lease into
the Amended and Restated Master Lease, and (ii) not more than $3,000,000 of the
1992 Letter of Credit is fairly allocable to the CNP Note.
8. AmSouth Restructuring. The obligation of Omega and Acquisition
to proceed to Initial Closing hereunder and to consummate the transactions
contemplated hereby is expressly conditioned on the simultaneous consummation of
a debt restructuring by and between AmSouth and Advocat/DLC (and their
respective subsidiaries and affiliates), incorporating the following:
A. AmSouth shall release and relinquish its existing $3,000,000
first priority security interest in the accounts receivable of the Master Leased
Facilities and the Florida Mortgaged Facilities. The parties acknowledge that
AmSouth will continue to have a fully subordinated security interest in the
subject accounts receivable, which shall be subject to the terms and conditions
of the intercreditor agreement referred to in subparagraph 8.D, below.
B. The $3,000,000 draw by Omega on the letters of credit shall
become a separate indebtedness of Advocat to AmSouth, in reduction of the
existing promissory note, line of credit and overline indebtedness of Advocat to
AmSouth. The new indebtedness shall be evidenced by a new promissory note (the
"Non-Accrual Note"), which shall not bear interest, and which shall be paid
solely as follows: (i) first, all net proceeds from the anticipated sale, if
any, received by Advocat or its subsidiaries/affiliates of the nursing home
facilities located in Texas and owned by Texas Diversicare Limited Partnership
("TDLP") and the Carteret nursing home facility, located in North Carolina,
shall be applied against the Non-Accrual Note; (ii) in the event the foregoing
amounts are not sufficient to liquidate the Non-Accrual Note in full, then
surplus cash flow of Advocat (to be defined in terms satisfactory to Advocat,
but in no event shall surplus cash include any amounts payable to
Omega/Acquisition under the Amended and Restated Master Lease, or required for
the operation of the Master Leased Facilities) shall be applied to the
Non-Accrual Note until it has been paid in full.
C. At the Effective Date, the interest rate on the existing
promissory note, overline and line of credit (the "AmSouth Debt") shall be
established at nine and one-half
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percent (9 1/2%) per annum. Principal payments on the AmSouth Debt shall be made
solely from surplus cash flow (defined in accordance with and subject to
subparagraph B, above) after payment in full of the Non-Accrual Note.
D. Documentation of the foregoing debt restructuring shall be in
form satisfactory to Omega, and at Initial Closing, Omega, Acquisition and
AmSouth shall enter into an intercreditor agreement in form satisfactory to
Omega, implementing both the matters set forth in this Paragraph 8 and the
matters set forth in Subparagraphs 4.F and 4.G.
9. Counsel. Upon the last to occur of (i) consummation of the
transfer of Xxxxxx Manor to Acquisition in accordance with Paragraph 3.A, (ii)
execution by CNP of all documents and instruments necessary or appropriate to
the consummation of the transactions contemplated by Paragraph 3.B, and (iii)
Advocat's certification to Omega that it has satisfactorily reached an
accommodation with Counsel with respect to Advocat's Canadian subsidiaries and
affiliates and their contractual and other relationships with Counsel, Omega
shall release Counsel and its subsidiaries, and the officers, directors,
shareholders, attorneys, successors and assigns thereof, and Counsel shall
release Omega, Acquisition and their respective subsidiaries, and the officers,
directors, shareholders, attorneys, successors and assign thereof, pursuant to a
Mutual Release in form satisfactory to the parties thereto.
10. Subordinated Note. At Initial Closing, Advocat shall execute
and deliver to Omega a Subordinated Note in the par amount of $1,700,000, in
substantially the form attached hereto as Exhibit "H".
11. Preferred Stock. At Initial Closing, Advocat shall issue to
Omega its preferred stock having a liquidation preference valued at $3,300,000
plus accrued and unpaid dividends, if any, and having conversion rights,
dividend provisions, mandatory conversion and mandatory redemption provisions
and dates, and such other terms and conditions as are set forth in the Stock
Subscription Agreement to be executed by Omega and Advocat at Initial Closing,
in substantially the form attached hereto as Exhibit "I".
12. Closing and Sale of Facilities. Omega and Advocat shall use
commercially reasonable efforts, following the Initial Closing, (i) to define an
appropriate process under which certain of the Master Leased Facilities which
are, or which may later become, no longer economically viable as skilled nursing
facilities, and approving or implementing the alternative use of such facilities
during the term of the Amended and Restated Master Lease, (ii) to work out
structural issues relating to licensure and liability
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compartmentalization by the potential use of subleases, and (iii) to work out
structural issues to minimize, to the extent practicable, the corporate state
tax in Alabama. The foregoing undertakings are independent of, and shall not
modify, impair or abrogate in any way the effectiveness of the Amended and
Restated Master Lease or any other undertakings or liabilities of
Advocat/DLC/SHCM under this Agreement or under any other document or instrument
executed in connection herewith or otherwise remaining in effect between or
among them following the Initial Closing hereunder. Any implementation of
agreement reached in connection with, or as a result of, the undertakings and
consideration by Omega and Advocat as described in this Paragraph shall be
implemented by written instrument, signed by Omega, Advocat, and any other party
to be charged therewith. Notwithstanding any of the foregoing, and in any event:
(a) none of the Master Leased Facilities listed on Schedule 5, attached hereto,
shall be subject to closure or alternative uses during the initial term of the
Amended and Restated Master Lease without the prior written consent of Omega and
any lender holding a first mortgage on the subject facilities; and (b) there
will be no adjustment in base rent under the Amended and Restated Master Lease
as a consequence of the closing or alternative use of any of the Master Leased
Facilities (provided, however, that with respect to closed facilities, the CPI
adjustments otherwise required by the Amended and Restated Master Lease shall
not apply after closure thereof).
13. Sublease of Facilities. Omega and Acquisition acknowledge
that, at or following the Initial Closing, DLC/NewSub may desire to sublease
certain of the Master Leased Facilities to wholly-owned subsidiaries of DLC,
including in particular but without limitation SHCM. Omega and Acquisition
hereby consent to such subleasing of certain of the Master Leased Facilities,
provided the following conditions are satisfied prior to any such sublease: (a)
each sublessee shall execute, as security for the Amended and Restated Master
Lease, but subject to the terms and conditions of the AmSouth intercreditor
agreement executed pursuant to Paragraph 8.D, (i) a Sublease Guaranty in the
form attached hereto as Exhibit "J" whereby each sublessee jointly and severally
guaranties Advocat's/DLC's/SHCM's obligations under the Amended and Restated
Master Lease, (ii) a Security Agreement based upon the form of the Amended and
Restated Security Agreement attached hereto as Exhibit "C", and (iii) those UCC
financing statements as deemed necessary by Acquisition to secure those
interests granted by the Security Agreement; and, (b) Advocat or DLC, as
applicable, shall execute, as security for the Amended and Restated Master
Lease, but subject to the terms and conditions of the AmSouth intercreditor
agreement executed pursuant to Paragraph 8.D, (i) a pledge of the stock (or
membership interests, if a limited liability company) of any such sublessee in
the form of the Stock Pledge Agreement attached hereto as Exhibit "K", and (ii)
a collateral assignment of the sublease.
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14. Payments Until Initial Closing; Deferred Compensation. A.
Advocat shall continue to pay Omega $209,134.62 per week during the period from
October 1, 2000 through the Initial Closing Date, which shall be credited at
Initial Closing against the accrued Base Rent otherwise due and payable at the
Initial Closing.
B. Advocat and DLC acknowledge and agree that the amount of rent
which Acquisition is forbearing from receiving as a consequence of entering into
this Agreement and the Master Lease totals at least Five Million Dollars
($5,000,000). In order to induce Omega and Acquisition to enter into this
Agreement, Advocat and DLC jointly and severally agree to pay Acquisition as
damages the amount of ($5,000,000), together with interest thereon from the
Effective Date through the date of payment at the rate of eleven percent (11%)
per annum. Such amount shall be payable at the expiration of the Term (as
defined in the Amended and Restated Master Lease) or earlier termination of the
Lease. Omega and Acquisition agree to waive and forever forgive any obligation
of either Advocat or DLC to pay such amount provided DLC/ NewSub fulfills in all
material respects its obligations under the Amended and Restated Master Lease,
to transfer the Facilities and Lessee's Personal Property (as defined in the
Amended and Restated Master Lease, subject to the excluded items therein) to
Acquisition at the expiration of the Term or earlier termination of the Amended
and Restated Master Lease. However, unless waived and forgiven as set forth in
the preceding sentence, such amount shall be immediately due and payable at the
end of the Term or earlier termination of the Master Lease. Payment of the
amount owing under this Paragraph 14.B shall be a non-recourse obligation of
Advocat and DLC secured (which security interest shall be acknowledged and
covered by the Amended and Restated Security Agreement to be executed at Initial
Closing, and by the security agreements to be executed by any sublessees of the
Facilities) solely by the Lessee's Personal Property located at the Facilities
at the expiration of the Term or earlier termination of the Amended and Restated
Master Lease. Advocat and DLC acknowledge that their obligations under this
Paragraph 14.B are independent of and do not arise under the Amended and
Restated Master Lease.
15. Survival of Provisions; Default. A. Representations made by
any party hereto, as well as the provisions hereof which contemplate or
necessarily involve actions or representations by any party hereto after the
Initial Closing and/or the Deferred Closing, shall survive the Initial Closing
and/or the Deferred Closing, as the case may be.
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B. In the event of a default by Advocat, DLC, SHCM, AFI or DMSC
in the timely performance of their respective obligations under this Agreement,
Omega and Acquisition shall have the right, upon written notice to the
defaulting party, to pursue an action for specific performance of this
Agreement, and to pursue any other remedies under applicable law. In the event
of a default by Omega or Acquisition in the timely performance of their
respective obligations under this Agreement, Advocat, DLC, SHCM , AFI and DMSC
shall have the right, upon written notice to the defaulting party, to pursue an
action for specific performance of this Agreement, and to pursue any other
remedies under applicable law.
16. Time of the Essence. Time shall be of the essence in all
respects with respect to Advocat's and DLC's performance under this Agreement.
17. Notices. All notices given pursuant to this Agreement shall be
in writing and shall be delivered by ordinary first class mail (postage
prepaid), personal delivery, overnight courier service, or confirmed fax, at the
addresses set forth below:
If to Advocat, DLC, SHCM, AFI or DMSC:
Advocat Inc.
000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Manner
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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If to Omega or Acquisition:
Omega Healthcare Investors, Inc.
000 Xxxxxxx Xxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Xxxx X. Xxxxxxxxxx
Xxxxxx Xxxxxxx PLLC
00000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
All notices given by personal delivery or confirmed fax will be conclusively
deemed given upon the date of personal delivery or faxing, as applicable; all
notices given by mail or overnight courier service will be conclusively deemed
given on the business day immediately following the date the notice is deposited
in the mail or with the overnight courier service.
18. Authority. Advocat, DLC, SHCM, AFI and DMSC jointly and
severally represent and warrant to Omega and Acquisition that the execution,
delivery and performance of this Agreement has been duly approved and authorized
by all necessary corporate action of Advocat, DLC, SHCM, AFI and DMSC (including
without limitation, all necessary action of the shareholders and directors of
Advocat, DLC, SHCM, AFI and DMSC), and that no consent or approval from any
other person or entity is required for the due and valid execution, delivery and
performance of this Agreement by Advocat, DLC, SHCM, AFI and DMSC. Omega and
Acquisition jointly and severally represent and warrant to Advocat, DLC, SHCM,
AFI and DMSC that the execution, delivery and performance of this Agreement has
been duly approved and authorized by all necessary corporate action of Omega and
Acquisition (including without limitation, all necessary action of the
shareholders and directors of Omega and Acquisition), and that no consent or
approval from any other person or entity is required for the due and valid
execution, delivery and performance of this Agreement by Omega and Acquisition.
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19. Releases. A. Subject to, and in consideration for, Omega
entering into this Agreement and consummating the transactions contemplated
hereby, Advocat, DLC, SHCM, AFI and DMSC (collectively, the "Advocat Entities",
and individually, an "Advocat Entity"), conditioned upon and effective
simultaneously with the consummation of the transactions contemplated hereby at
Initial Closing, releases and forever discharges Omega, Acquisition and their
respective successors, assigns, agents, shareholders, directors, officers,
employees, agents, parent corporations, subsidiary corporations, affiliated
corporations, affiliates, and each of them, from any and all claims, debts,
liabilities, demands, obligations, costs, expenses, actions and causes of
action, of every nature and description, whether known or unknown, absolute,
mature, or not yet due, liquidated or non-liquidated, contingent,
non-contingent, direct or indirect or otherwise, which any Advocat Entity now
has or at any time may hold, by reason of any matter, cause or thing occurred,
done, omitted or suffered to be done on or prior to the Initial Closing
(collectively, "Omega Liabilities"), other than from Omega Liabilities arising
out of this Agreement or any document or instrument executed in connection
herewith or in consummation of the transactions contemplated hereby. Each
Advocat Entity waives the benefits of any law, which may provide in substance:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor." Each
Advocat Entity understands that the facts which it believes to be true at the
time of making the release provided for herein may later turn out to be
different than it believes now or at the time of granting such release, and that
information which is not now or then known or suspected may later be discovered.
Each Advocat Entity accepts this possibility, and each Advocat Entity assumes
the risk of the facts turning out to be different and new information being
discovered; and each Advocat Entity further agrees that the release provided for
herein shall in all respects continue to be effective and not subject to
termination or rescission because of any difference in such facts or any new
information.
B. Release of Advocat Entities. Subject to, and in consideration
for, the Advocat Entities entering into this Agreement and consummating the
transactions contemplated hereby, Omega and Acquisition (together, the "Omega
Entities", and individually, an "Omega Entity"), conditioned upon and effective
simultaneously with the consummation of the respective transactions contemplated
hereby at Initial Closing or thereafter in accordance herewith, releases and
forever discharges the Advocat Entities (expressly excluding, for purposes
hereof, Counsel Corporation and CNP) and their respective successors, assigns,
agents, shareholders, directors, officers, employees, agents, parent
corporations, subsidiary corporations, affiliated corporations, affiliates, and
each of them, from any and all claims, debts, liabilities, demands, obligations,
costs, expenses, actions
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and causes of action, of every nature and description, whether known or unknown,
absolute, mature, or not yet due, liquidated or non-liquidated, contingent,
non-contingent, direct or indirect or otherwise, which any Omega Entity now has
or at any time may hold, with respect to the following obligations arising under
the Master Leases and in existence as of September 30, 2000 (but not as to any
such obligations arising from and after October 1, 2000 under the Amended and
Restated Master Lease, nor as to any other obligations under the Master Leases
not specifically included in the following listing):
(i). The payment of "Minimum Rent" and "Additional Fixed Rent" (as
defined in and to the extent applicable to the Master Leases);
(ii). The payment of any franchise tax incurred by an Omega Entity
in connection with the collection of any type of rent under the Master Leases;
(iii). The payment of any late fees or default interest incurred in
connection with the failure to pay Minimum Rent and any franchise tax; and
(iv). The payment of attorneys' fees and costs incurred by an Omega
Entity in connection with the collection of past due amounts owing under the
Master Leases.
As of the last to occur of (aa) transfer of Xxxxxx Manor to Acquisition, and
incorporation of Xxxxxx Manor into the Amended and Restated Master Lease in
accordance with Xxxxxxxxx 0.X, (xx) execution by CNP of all documents and
instruments necessary to effect the disposition of DeSoto Manor and Leesburg in
accordance with Paragraph 3.B, and (cc) receipt by Omega/Acquisition of the
$3,000,000.00 in letter of credit proceeds pursuant to Paragraph 7, the
foregoing release by the Omega Entities shall also extend to the payment of
principal under the CNP Note and the CNP Mortgage (but not any continuing
obligations under the CNP Mortgage following the amendment thereof as
contemplated in Subparagraph 3.B, above, nor Advocat's guaranty of such
continuing obligations under the CNP Mortgage, nor Advocat's and DLC's
continuing obligations under Paragraph 14.B, above).
Each Omega Entity understands that the facts which it believes to be true at the
time of making the release provided for herein may later turn out to be
different than it believes now or at the time of granting such release, and that
information which is not now or then known or suspected may later be discovered.
Each Omega Entity accepts this possibility, and each Omega Entity assumes the
risk of the facts turning out to be different and new information being
discovered; and each Omega Entity further agrees that the release
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provided for herein shall in all respects continue to be effective and not
subject to termination or rescission because of any difference in such facts or
any new information.
Notwithstanding anything to the contrary contained in this Paragraph 19
or otherwise, this release shall only be effective on and as of the Initial
Closing or such later applicable date set forth in this Paragraph 19, as the
case may be and not otherwise.
20. Non-Disclosure. A. Until Omega and Advocat mutually agree to
publicly announce this Agreement, (i) the parties hereto, and each of their
officers, directors, employees, agents, consultants and advisors, shall keep
confidential all terms hereof and information contained herein (except to the
extent required either (a) in connection with the satisfaction of the conditions
contained herein (including, without limitation, providing such information to
its creditors and their advisors), (b) by the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), or (c) reporting requirements, if any, of the New York Stock Exchange
("NYSE Requirements"), (ii) neither Advocat, DLC, SHCM, DMSC, nor any persons or
entities affiliated with any of them or their officers, directors, employees,
agents, consultants and advisors (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) shall trade in Omega's stock, and (iii)
neither Omega, Acquisition, nor any persons or entities affiliated with any of
them or their officers, directors, employees, agents, consultants and advisors
(within the meaning of Rule 405 under the Securities Act of 1933, as amended)
shall trade in Advocat's stock. Advocat, DLC, SHCM and DMSC acknowledge that
Omega may disclose the existence of this Agreement and the transactions
contemplated hereby in appropriate public filings under the Exchange Act, or
pursuant to the NYSE Requirements. Omega and Acquisition acknowledge that
Advocat may disclose the existence of this Agreement and the transactions
contemplated hereby in appropriate public filings under the Exchange Act. No
press releases with respect to this Agreement or the transactions contemplated
hereby shall be issued absent the prior mutual approval of Omega and Advocat.
B. Notwithstanding subparagraph A, above, each party hereto may
and shall give all required notices of the existence of this Agreement and the
pending consummation of the transactions contemplated hereby to any and all
appropriate governmental authorities.
C. The parties agree not to disclose or permit their respective
representatives, attorneys, auditors or agents to disclose, except as may be
required by law or performance hereunder, any confidential, non-public
information of the others which is obtained by any of them in connection with
the transactions contemplated by this Agreement.
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21. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT, OR (ii) ANY
CONDUCT, ACTS OR OMISSIONS OF ANY PARTY HERETO OR ANY OF THEIR DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
WITH THEM; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
22. Miscellaneous. The recitals to this Agreement are incorporated
into and made a part of this Agreement. This Agreement may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts taken
together shall constitute one and the same instrument. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
legatees, personal representatives, successors and permitted assigns; provided,
however, neither Advocat, DLC, SHCM, AFI nor DMSC may assign its respective
rights or duties hereunder or in connection herewith or any interest herein
(voluntarily, by operation of law, as security or otherwise) without the prior
written consent of Omega, which consent may be withheld in the sole discretion
of Omega. This Agreement shall not be construed so as to confer any right or
benefit upon any person other than the parties to this Agreement and their
respective successors and permitted assigns. This Agreement shall be governed by
and construed only in accordance with Michigan law, without regard to conflicts
of law principles; provided, however, that applicable state law shall control to
the extent necessary to effect the real property remedies of Omega and
Acquisition set forth herein. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction, which provisions
shall remain in full force and effect. This Agreement, the Schedules and
Exhibits hereto, constitute the entire agreement between the parties with
respect to the transaction herein contemplated and, except as set forth herein,
supersede all prior agreements or negotiations between the parties. Any
modification or amendment to this Agreement shall be effective only if in
writing and executed by the party against whom enforcement of the modification
or amendment is sought. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement. ADVOCAT, DLC, SHCM, AFI AND DMSC EACH HAS ENTERED INTO THIS AGREEMENT
VOLUNTARILY, WITHOUT DURESS OR INFLUENCE, WITHOUT RELYING ON ANY AGREEMENT OR
REPRESENTATION NOT SPECIFICALLY SET FORTH IN THIS AGREEMENT, AND
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AFTER HAVING AN ADEQUATE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR CHOICE.
23. Exhibits and Schedules. The following Exhibits and Schedules
are attached to, and incorporated by reference in, this Agreement:
EXHIBITS:
Exhibit "A" [Intentionally Deleted]
Exhibit "B" Amended and Restated Master Lease
Exhibit "C" Amended and Restated Security Agreement
Exhibit "D" Amended and Restated Guaranty
Exhibit "E" Amended and Restated Memorandum of Lease
Exhibit "F" Reaffirmation of Obligations (Florida Managed Facilities)
Exhibit "G" [Intentionally Deleted]
Exhibit "H" Subordinated Note
Exhibit "I" Stock Subscription Agreement
Exhibit "J" Sublease Guaranty
Exhibit "K" Stock Pledge Agreement
Exhibit "L [Intentionally Deleted]
SCHEDULES:
Schedule 1 Master Leased Facilities
Schedule 2 Florida Mortgaged Facilities
Schedule 3 Florida Managed Facilities
Schedule 4 Certain Qualified Capital Expenditures Items
Schedule 5 Master Leased Facilities Not Subject to Closure
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
[SIGNATURES ON FOLLOWING PAGE]
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ADVOCAT INC., a Delaware corporation DIVERSICARE LEASING CORP., a
Tennessee corporation
By: /s/ Xxxxx X. Xxxxx, Xx. By: /s/ Xxxxx X. Xxxxx, Xx.
--------------------------------- ---------------------------------
Xxxxx X. Xxxxx, Xx.
Its: Sr. Vice Pres. Its: Senior Vice President
--------------------------------
STERLING HEALTH CARE MANAGEMENT DIVERSICARE MANAGEMENT
INC., a Kentucky corporation SERVICES CO., a Tennessee
corporation
By: /s/ Xxxxx X. Xxxxx, Xx. By: /s/ Xxxxx X. Xxxxx, Xx.
--------------------------------- ---------------------------------
Xxxxx X. Xxxxx, Xx. Xxxxx X. Xxxxx, Xx.
Its: Senior Vice President Its: Senior Vice President
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ADVOCAT FINANCE, INC., a Delaware
corporation
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------------
Its: Sr. Vice Pres.
--------------------------------
OMEGA HEALTHCARE INVESTORS, INC., STERLING ACQUISITION CORP., a
a Maryland corporation Kentucky corporation
By: /s/ Xxxxx Xxxxxx Xxxxxx By: /s/ Xxxxx Xxxxxx Xxxxxx
--------------------------------- --------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxx Xxxxxx Xxxxxx
Vice President Vice President
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