Exhibit 10.7
CONFIDENTIAL: THIS DOCUMENT IS PROVIDED FOR SETTLEMENT PURPOSES ONLY AND IS
SUBJECT TO THE PROTECTIONS OF FEDERAL RULE OF EVIDENCE 408 AND ALL SIMILAR
PROVISIONS AND SUPPORTING AUTHORITIES.
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made as of this first
day of August, 2001, by and among (a) OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation ("Omega"), (b) PROFESSIONAL HEALTH CARE MANAGEMENT, INC., a
Michigan corporation ("PHCM"), (c) each of the Michigan subsidiaries of PHCM
listed on the signature page hereto (the "Michigan Subsidiaries"), (d) LIVING
CENTERS - PHCM, INC., a North Carolina corporation ("LC-PHCM"), (e) GRANCARE,
INC., a Delaware corporation formerly known as New GranCare, Inc. ("GranCare"),
and (f) MARINER POST-ACUTE NETWORK, INC., a Delaware corporation formerly known
as Paragon Health Network, Inc. ("Mariner," and, together with PHCM, the
Michigan Subsidiaries, LC-PHCM and GranCare, and New PHCM (after its formation),
collectively, the "Mariner Entities").
W I T N E S S E T H:
WHEREAS, PHCM is the owner of nine (9) skilled nursing facilities
located in the State of Michigan and identified more particularly in Part I of
Schedule A hereto attached and incorporated herein by reference (the "Michigan
Facilities"), and leases each Michigan Facility to the Michigan Subsidiary
indicated opposite the name of such Michigan Facility in Part I of Schedule A
under separate facility leases (as amended, collectively, the "Michigan Facility
Leases"); and
WHEREAS, Omega and PHCM are parties to that certain Michigan Loan
Agreement dated as of June 7, 1992 (as heretofore amended, the "Omega Loan
Agreement"), pursuant to which Omega made a loan to PHCM in the original
principal amount of $58,800,000 (the "Omega Loan"); and
WHEREAS, the Omega Loan is evidenced by that certain Mortgage Note
dated August 14, 1992 (as heretofore amended, the "Omega Note"), issued by PHCM
and payable to the order of Omega in the original principal amount of
$58,800,000; and
WHEREAS, the Omega Loan is secured by that certain Mortgage, Security
Agreement, Assignment of Rents and Leases, and Fixture Filing dated as of August
14, 1992 (as heretofore amended, the "Omega Mortgage"), executed by PHCM in
favor of Omega and encumbering, among other things, the Michigan Facilities; and
WHEREAS, the Omega Loan is further secured by that certain Security
Agreement dated as of August 14, 1992 (as heretofore amended, the "PHCM Security
Agreement"), executed by PHCM in favor of Omega; by that certain Letter of
Credit Pledge Agreement dated as of August 14, 1992 (as heretofore amended, the
"Deposit Agreement"), between Omega and PHCM; by that certain Cash Collateral
Escrow Agreement dated as of August 14, 1992 (the "Escrow Agreement") by and
among Omega, PHCM and LaSalle National Trust, N.A., as escrow agent; by that
certain Assignment of Leases dated as of August 14, 1992 (as heretofore amended,
the "Assignment of Leases") given by PHCM to Omega; and by that certain
Supplementary Letter of Credit and Cash Collateral Escrow Agreement dated as of
March __, 1996 (as heretofore amended, the "Supplementary Collateral Agreement")
by and among Omega, PHCM and GranCare; and
WHEREAS, each of the Michigan Subsidiaries has heretofore guaranteed
the obligations of PHCM in connection with the Omega Loan pursuant to that
certain Omega-PHCM Subsidiary Guaranty dated as of February 12, 1997 (as
heretofore amended, the "Subsidiary Guaranty"), and the obligations of the
Michigan Subsidiaries under the Subsidiary Guaranty are secured by that certain
Omega-PHCM Subsidiary Security Agreement dated as of February 12, 1997 (as
heretofore amended, the "Subsidiary Security Agreement"), executed by each of
the Michigan Subsidiaries in favor of Omega; and
WHEREAS, LC-PHCM is the owner of the three (3) North Carolina skilled
nursing facilities more particularly identified in Part II of Schedule A (the
"North Carolina Facilities", and together with the Michigan Facilities, the
"Facilities" and individually, a "Facility") and has leased the North Carolina
Facilities to PHCM, which operates the North Carolina Facilities under facility
leases between LC-PHCM, as lessor, and PHCM, as lessee (collectively, the "North
Carolina Facility Leases", and together with the Michigan Facility Leases, the
"Facility Leases"); and
WHEREAS, LC-PHCM has joined in the Subsidiary Guaranty and has secured
its obligations under the Subsidiary Guaranty by granting a mortgage on the
North Carolina Facilities to Omega pursuant to that certain Fee Simple Deed of
Trust, Security Agreement, and Fixture Filing dated as of July 31, 1998 (as
heretofore amended, the "LC-PHCM Mortgage") from LC-PHCM in favor of David J.
Witheft, Esq., as Trustee for the benefit of Omega, and has entered into that
certain Security Agreement dated as of July 31, 1998 (as heretofore amended, the
"LC-PHCM Security Agreement") from LC-PHCM in favor of Omega; and
WHEREAS, the Omega Loan is also secured by that certain Leasehold
Interest Deed of Trust, Security Agreement, and Fixture Filing dated as of July
31, 1998 (as heretofore amended, the "NC Leasehold Mortgage") from PHCM in favor
of David J. Witheft, Esq., as Trustee for the benefit of Omega, conveying
security title to PHCM's leasehold interest in the North Carolina Facilities;
and
WHEREAS, the Omega Loan Agreement, the Omega Note, the Omega Mortgage,
the PHCM Security Agreement, the Deposit Agreement, the Escrow Agreement, the
Assignment of Leases, the Supplementary Collateral Agreement, the Subsidiary
Guaranty, the Subsidiary Security Agreement, the LC-PHCM Mortgage, the LC-PHCM
Security Agreement, the NC Leasehold Mortgage and all UCC financing statements
filed in connection with the security interests securing the Omega Loan, are
hereinafter collectively referred to as the "Omega Loan Documents"; and
WHEREAS, the Mariner Entities have filed voluntary petitions under
chapter 11 of the United States Bankruptcy Code, 11 U.S.C. ss.ss.101 et seq., as
amended (the "Bankruptcy Code"), on January 18, 2000 (the "Petition Date"),
before the United States Bankruptcy Court for the District of Delaware (the
"Court"), bearing the case numbers set forth on Schedule B hereto attached and
incorporated herein by this reference (collectively, the "Cases"), which Cases
are currently pending and are being jointly administered; and
WHEREAS, with the consent of Omega and the approval of the Bankruptcy
Court, PHCM and the Ciena Facility Subsidiaries have previously sold the Ciena
Facilities to Midtown Real Estate Company LLC, an affiliate of Ciena Healthcare
Management, Inc, (the "Ciena Buyer") free and clear of the lien and interest of
Omega under the Omega Loan Documents (the "Ciena Transaction"), in exchange for,
among other things, the Ciena Purchase Money Financing Documents; and
WHEREAS, with the approval of the Bankruptcy Court, effective as of
February 1, 2001, PHCM assigned, transferred and set over to Omega an undivided
fifty percent (50%) interest in the Ciena Purchase Money Financing Documents in
exchange for a $4,500,000 credit against the outstanding Omega Loan Obligations;
and
WHEREAS, no payments have been made on or with respect to the Omega
Loan and applied to such obligations since the Petition Date, except by virtue
of the credit received by PHCM in connection with the Ciena Transaction; and
WHEREAS, various disputes have arisen and continue exist between Omega
and the Mariner Entities with respect to the Omega Loan, Omega's ability to
foreclose on the Facilities and related matters; and
WHEREAS, Omega and the Mariner Entities wish to resolve their remaining
disputes and, in connection therewith, to modify and restructure the obligations
of the Mariner Entities to Omega under the Omega Loan Documents; and
WHEREAS, Omega is willing to consent to the modification and
restructuring of the Omega Loan and to release the Mariner Entities from any
liability in connection with the Omega Loan, other than liabilities set forth in
the Settlement Documents, all subject to, and upon, the terms and conditions set
forth herein and therein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. The following capitalized terms shall have the meanings set forth
below:
"Agreement" shall mean this Settlement Agreement, including all
Schedules and Exhibits thereto, as it and they may be amended from time to time
as herein provided.
"Amended Facility Leases" shall mean Amended and Restated Facility
Leases in substantially the form of Exhibit W attached hereto and incorporated
herein by this reference, between, in the case of the Michigan Facilities, PHCM,
as lessor, and the respective Subsidiary Lessees, as lessees, and in the case of
the North Carolina Facilities, LC-PHCM, as lessor, and PHCM, as lessee.
"Amended Omega Note Balance" shall mean $59,688,449.83, less any
prepayments prior to Closing from insurance proceeds or condemnation awards.
"Base Management Fee" means, for any period, an amount equal to five
percent (5%) of Gross Revenues during such period, which shall be the agreed
upon base management fee payable to Manager for the operation of the Facilities.
"Business Day" shall mean any day other than a Saturday, Sunday, or any
other day on which banking institutions in the State of Georgia are authorized
by law or executive action to close.
"Catch-Up Date" shall mean the first day following the Closing on which
(1) all Past Due Interest and any accrued interest thereon shall have been paid
in full, (2) all principal of and accrued interest on the Maintenance Obligation
Note shall have been paid in full, (3) Deferred Omega Note Interest and interest
thereon shall have been paid in full, and (4) all outstanding principal and
interest on any Deferred Amendment Fee Note shall have been paid in full. If,
after giving effect to the application of all Available Closing Cash paid by
PHCM to Omega at Closing, all Post-December 31, 1999 Interest and all principal
of, and accrued interest on, the Maintenance Obligation Note shall have been
paid in full, the Closing Date shall be deemed to be the Catch-Up Date.
"Ciena Facilities" shall mean the four (4) skilled nursing facilities
located in the State of Michigan and identified more particularly in Part III of
Schedule A hereto.
"Ciena Loan Year" shall mean, so long as the Ciena Note is outstanding,
each twelve (12)-month period commencing February 1 and ending January 31 (or
for any Ciena Loan Year in which the Ciena Note ceases to be outstanding, ending
as of the date the Ciena Note ceased to be outstanding). The first Ciena Loan
Year commenced on February 1, 2001.
"Ciena Note" shall mean the $9,000,000 Promissory Note dated February
1, 2001, executed by the Ciena Buyer in favor of PHCM which is part of the Ciena
Purchase Money Financing Documents.
"Ciena Purchase Agreement" shall mean that certain Asset Purchase
Agreement dated as of December 22, 2000, by and among PHCM, the Ciena
Subsidiaries and the Ciena Buyer, pursuant to which PHCM sold the Ciena
Facilities to the Ciena Buyer on or about February 1, 2001.
"Ciena Purchase Money Financing Documents" shall mean all documents
evidencing, guaranteeing and securing the $9,000,000 purchase money financing
for the Ciena Transaction, including, but not limited to all promissory notes,
guaranties, mortgages, security agreements, pledge agreements, and UCC financing
statements.
"Ciena Restructuring Agreement" shall mean that certain Ancillary
Restructuring Agreement dated as of December 22, 2000, by and among Omega, PHCM,
the Michigan Subsidiaries party thereto, LC-PHCM, GranCare and Mariner, as
amended from time to time.
"Ciena Subsidiaries" shall mean the subsidiaries of PHCM formerly
operating the Ciena Facilities identified in Part III of Schedule A hereto.
"Contracts" shall mean, with respect to any Facility, each instrument,
contract and agreement to which the Mariner Operator of such Facility is a party
that directly benefits, relates to or affects (i) such Facility, or (ii) the
operation of or the provision of services in conjunction with such Facility.
"Deferred Amendment Fee Note" shall mean a promissory note, in
substantially the form of Exhibit A attached hereto, or in such other form as
may be acceptable to Omega and PHCM, delivered by PHCM to Omega pursuant to
Article 9 hereof, as the same may be amended from time to time.
"Event of Default" shall have the meaning given to it in the Amended
Omega Loan Agreement.
"Escrow Agent" shall mean the Title Company, its successors and
assigns, as escrow agent under the Restructuring Escrow Agreement.
"Escrow Bill of Sale" shall mean, (i) with respect to each Michigan
Facility, a limited bill of sale executed by PHCM, and a separate limited bill
of sale executed by the Operator of the Facility, and (ii) with respect to the
North Carolina Facilities, a limited bill of sale executed by a LC-PHCM, and a
separate limited bill of sale executed by PHCM, in each case to be delivered to
the Escrow Agent at Closing and to be held and delivered in accordance with the
terms of the Escrow Agreement, pursuant to Article 10 hereof, together with any
replacement bills of sale executed by New PHCM and delivered to the Escrow Agent
pursuant to Section 15.2 hereof. Each Escrow Bill of Sale shall be in favor of a
nominee of Omega to be designated by Omega prior to the Closing.
"Escrow Deed" shall mean, with respect to each Facility, a limited
warranty deed in lieu of foreclosure executed by PHCM, in the case of the
Michigan Facilities, and by LC-PHCM, in the case of the North Carolina
Facilities, to be delivered to the Escrow Agent at Closing and to be held and
delivered in accordance with the terms of the Escrow Agreement, pursuant to
Article 10 hereof, together with any replacement deeds executed by New PHCM and
delivered to the Escrow Agent pursuant to Section 15.1. Each Escrow Deed shall
be in favor of a nominee of Omega to be designated by Omega prior to the
Closing.
"Escrow Documents" shall mean, with respect to each Facility, the
Escrow Bill of Sale, the Escrow Deed and the Escrow Lease Termination Agreement.
"Escrow Lease Termination Agreement" shall mean a lease termination
agreement with respect to each of the Amended Facility Leases.
"Final Audit Report" shall mean the final audit reports issued to PHCM
by the applicable Governmental Authorities of the States of Michigan and North
Carolina, respectively, for the Facilities (including the Ciena Facilities, for
this purpose) located in those States, with respect to Medicaid cost reports for
the years 1998 and 1999.
"Governmental Authority" shall mean all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures and offices of any
nature whatsoever, of any government unit or political subdivision, whether
federal, state, county, district, municipal, city or otherwise, and whether now
or hereafter in existence.
"GranCare Keep-Well Obligation" shall mean the obligation of GranCare,
as set forth in that certain Second Amendment to Michigan Loan Agreement dated
as of February 12, 1997, by and among Omega, PHCM, GranCare and the Michigan
Subsidiaries, to provide additional capital to PHCM to the extent necessary to
enable PHCM to remain in compliance with the minimum tangible net worth test
contained in the Omega Loan Agreement.
"Gross Revenues" means all revenues received or receivable from or by
reason of the operation of the Facilities, or any other use of the Facilities,
including without limitation (but without duplication) all patient revenues
received or receivable for the use of or otherwise by reason of all rooms, beds,
and other facilities provided, meals served, services performed, space or
facilities subleased or goods sold at the Facilities and, except as provided
below, any consideration received for any sublease, license or other arrangement
with an unrelated third party in possession, or using, any portion of the
Facilities. Gross Revenues shall not, however, include:
(A) revenue from professional fees or charges by physicians
when and to the extent such charges are paid over to such physicians or
are accompanied by separate charges for use of a Facility or any
portion thereof;
(B) non-operating revenues such as interest income or
income from the sale of assets not sold in the ordinary course of
business;
(C) contractual allowances and reasonable reserves for
billings not paid by or received from the appropriate governmental
agencies, third party providers or other payors;
(D) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to
health care accounting, and
(E) federal, state or local sales or excise taxes and any tax
based upon or measured by said revenues which is added to or made a
part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated
separately.
Without limiting the foregoing, Gross Revenues include all revenues
received or receivable by the Michigan Subsidiaries from their use of the
Facilities and by PHCM from its use of the North Carolina Facilities, including
any rent or equivalent payment paid by any sublessee or licensee and received or
receivable by the Michigan Subsidiaries or PHCM (as the case may be) from such
sublessee or licensee (including, but not limited to, rent or any equivalent
payment for a sublease of space for the placement or erection of antennae or
similar device).
"Interest Rate" shall mean eleven and 57/100ths percent (11.57%) per
annum.
"Investor" shall mean any Person or Persons, other than GranCare or any
other wholly owned subsidiary of Mariner to which GranCare may assign its equity
interest in PHCM or New PHCM, as the case may be, who are unrelated to either
Omega or any of the Mariner Entities, and who own capital stock in PHCM or, if
the Merger occurs, who have a membership interest in New PHCM.
"Investor Guaranty" shall mean a guaranty agreement substantially in
the form of the Amended and Restated LC-PHCM Guaranty, to be executed and
delivered by the Investor upon consummation of the Majority Equity Sale,
pursuant to Section 15.1 hereof.
"LC-PHCM Stock Transfer" shall mean the transfer of the issued and
outstanding capital stock of LC-PHCM to PHCM (and any intermediate transfers
thereof determined to be necessary or advisable by MPAN and its advisors), in
connection with the Majority Equity Sale, as a result of which LC-PHCM would
become a wholly owned subsidiary of PHCM.
"Liquidity Deposit" shall mean the liquidity deposit required under the
Omega Loan Documents and any liquidity deposit which may, under certain
circumstances, be required under the Amended Loan Documents.
"Liquidity Deposit Installments" shall mean the installments, each in
the amount of $525,000, required to be paid by PHCM to Omega in the seventh
(7th), thirteenth (13th) and nineteenth (19th) months after Closing, pursuant to
the Amended Omega Loan Agreement.
"Maintenance Obligation Note" shall mean the promissory note of PHCM
dated February 1, 2001, in the principal amount of Seven Hundred Thousand
Dollars ($700,000), given in exchange for the assumption by Omega of the
deferred maintenance obligations of PHCM and the Ciena Facility Subsidiaries
with respect to the Ciena Facilities, as such promissory note may be amended,
extended, renewed, restated or replaced from time to time.
"Majority Equity Sale" shall mean the sale by GranCare (or any
affiliate of GranCare to which GranCare may have assigned its equity interest in
PHCM or New PHCM, as the case may be) to one or more Investors, in the
aggregate, of a majority equity interest in PHCM or, if the Merger shall have
occurred, in New PHCM.
"Manager" shall mean Mariner or any wholly owned subsidiary of Mariner
identified as "Manager" under the Mariner Management Agreements.
"Mariner Entity Released Obligations" shall mean (a) the GranCare
Keep-Well Obligation and (b) any and all other obligations and liabilities of,
and claims against, the Mariner Entities heretofore, now or hereafter arising or
existing under or in connection with the Omega Loan Documents or the Omega Loan
other than those obligations arising under the Settlement Documents, whether
known or unknown, contingent or fixed, liquidated or unliquidated, matured or
unmatured, asserted or unasserted, however arising.
"Mariner Entities Release" shall mean a release of the Mariner Entities
to be executed and delivered by Omega at the Closing, in the form of Exhibit B
hereto attached and incorporated herein by this reference.
"Mariner Management Agreement" shall mean the management agreement by
and among PHCM, LC-PHCM, the Michigan Subsidiaries and Manager in substantially
the form of Exhibit T attached hereto, relating to the Facilities, as the same
may be amended, extended, renewed, restated or replaced from time to time.
"Mariner Operator" shall mean, with respect to any Facility, the
Mariner Entity that operates such Facility and holds the Permits for such
Facility as of the Closing.
"Medicaid Overpayment Claims" shall mean all claims for overpayment
under the Medicaid programs for the States of Michigan and North Carolina
asserted in the Final Audit Report by any Governmental Authority of either State
against PHCM or the Michigan Subsidiaries, less any amount thereof which has
been waived or forgiven by the applicable Governmental Authority or repaid by
PHCM or the Michigan Subsidiaries.
"Merger" shall mean the merger of PHCM with and into New PHCM pursuant
to the Merger Agreement, with New PHCM as the survivor.
"Merger Agreement" shall mean any agreement and plan of merger between
PHCM and New PHCM, pursuant to which PHCM may merge with and into New PHCM, with
New PHCM being the surviving entity, as such agreement may be amended, extended
or restated from time to time.
"Net Fair Market Value" shall mean, with respect to any Facility, the
Escrowed Documents for which shall have been delivered to Omega or its designee
pursuant to the Escrow Agreement and Article X hereof, the greater of (a) the
value of such Facility as a going concern (based on a then current market
multiple of the average EBITDA of such Facility for the previous three years),
and (b) the liquidation value of such Facility, in either case as determined by
appraisal prepared for Omega by an appraiser or valuation firm not affiliated
with Omega and who or which has significant experience in appraising skilled
nursing facilities in the United States, and in either case reduced by (i)
amounts secured by Liens (other than Liens in favor of Omega) on such Facility
and (ii) out-of-pocket costs reasonably incurred by Omega in transitioning such
Facility to a new operator (excluding management fees, operating losses, capital
expenditures and the like).
"New PHCM" shall mean a single-purpose limited liability company to be
formed by GranCare under the laws of the State of Delaware and into which PHCM
shall be merged on the effective date of the Merger, if the Merger is
consummated.
"Omega Loan Obligations" shall mean the obligations of the Mariner
Entities to Omega under the Omega Loan Documents.
"Omega Released Obligations" shall mean any and all obligations and
liabilities of, and claims against, Omega heretofore, now or hereafter arising
or existing, under or in connection with the Omega Loan Documents, other than
those obligations arising under the Settlement Documents, whether known or
unknown, contingent or fixed, liquidated or unliquidated, matured or unmatured,
asserted or unasserted, however and whenever arising.
"Omega Release" shall mean a release of Omega to be executed and
delivered by the Mariner Entities at the Closing, in the form of Exhibit C
hereto attached and incorporated herein by this reference.
"Operators" shall mean PHCM, LC-PHCM (so long as it owns any of the
North Carolina Facilities) and the Michigan Subsidiaries.
"Permits" shall mean, with respect to any Facility, all licenses,
approvals, certificates of need, determinations of need, franchises,
accreditations, certificates, certifications, consents, permits and other
authorizations benefiting, relating to or affecting the operation of such
Facility or the operation of programs or provision of services in conjunction
with such Facility, issued by or entered into with any Governmental Authority,
Third Party Payor or accreditation body (including, without limitation, the
Provider Agreements), and all renewals, replacements and substitutions therefor.
"Permitted Encumbrances" shall mean, with respect to any Facility, all
Permitted Personal Property Encumbrances and all Permitted Real Property
Encumbrances for such Facility.
"Permitted Personal Property Encumbrances" shall mean, with respect to
any personal property present at or used in connection with the operation of any
Facility, the liens and security interests created under the Omega Loan
Documents, and any other liens, security interests or encumbrances affecting
such personal property that are permitted under the Omega Loan Documents,
including, without limitation, the Amended Facility Leases (but specifically
excluding, without limitation, any security interests and liens arising by,
through or under any Mariner Entity which secures the debtor-in-possession
financing that has been approved by order of the Court).
"Permitted Real Property Encumbrances" shall mean, with respect to any
Facility, those liens and encumbrances affecting such real property and
improvements (i) existing at the time the Omega Mortgage (in the case of the
Michigan Facilities) or the LC-PHCM Mortgage (in the case of the North Carolina
Facilities) were executed and delivered, (ii) otherwise permitted under the
Omega Loan Documents, including, without limitation, the Amended Facility Leases
(but specifically excluding, without limitation, any security interests and
liens arising by, through or under any Mariner Entity which secures the
debtor-in-possession financing that has been approved by order of the Court),
(iii) arising from the acts or omissions of Omega, (iv) the Facility Subleases,
or (v) any other matters that are otherwise acceptable to, and to which no
objection is made by, Omega.
"Person" shall mean all individuals, corporations, general and limited
partnerships, limited liability companies, stock companies or associations,
joint ventures, unincorporated associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Governmental Authorities and other
entities of every kind and nature.
"Plan Effective Date" shall mean the effective date of the Plan of
Reorganization.
"Plan of Reorganization" A plan of reorganization for the Mariner
Entities in the Cases which has been confirmed pursuant to 11 U.S.C. ss.ss.1129
and 1141, the effective date of which has occurred.
"Post-Closing Interest and Maintenance Paydowns" means, as of any date
of determination, the aggregate amount of the payments made by PHCM, if any, in
respect of Past Due Interest, and interest thereon, the Maintenance Obligation
Note and the Deferred Omega Interest Note, in excess of the aggregate amount of
the Minimum Monthly Payments made by PHCM to Omega for application to the items
for which Minimum Monthly Payments are to be applied pursuant to Section 13.6
hereof.
"Provider Agreements" shall mean, with respect to any Facility, all
participation, provider and reimbursement agreements or arrangements in effect
for the benefit of or relating to or affecting the operation of any Facility, or
the operation of programs or provision of services therein, relating to any
right of payment or other claim arising out of or in connection with such
Facility's participation in any Third Party Payor Program.
"Residual Ciena Interest" shall mean the undivided fifty percent (50%)
interest in the Ciena Purchase Money Financing Documents retained by PHCM and
pledged to Omega as additional security for the Omega Loan Obligations.
"Restructuring Escrow Agreement" shall mean that certain Escrow
Agreement to be dated as of the Closing Date, by and among Omega, PHCM, LC-PHCM
and the Escrow Agent, in substantially the form attached hereto as Exhibit D.
"Settlement Documents" shall mean, collectively, this Agreement, the
Ciena Restructuring Agreement, and each agreement, undertaking or instrument
delivered pursuant to Article 3, Article 5, Article 6 and Article 15 hereof.
"Stay" shall mean an order of a court of competent jurisdiction staying
any of the Approval Orders pending appeal.
"Subsidiary Guarantors" shall mean the Michigan Subsidiaries and
LC-PHCM, as guarantors under the Subsidiary Guaranty.
"Subsidiary Lessees" shall mean, with respect to the Michigan
Facilities, the Michigan Subsidiaries identified on Schedule A opposite the name
of the corresponding Michigan Facility, and with respect to the North Carolina
Facilities, PHCM.
"Third Party Payor Programs" shall mean all third party payor programs
in which any Facility participates, including, without limitation, Medicare,
Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, TriCare, managed care plans,
other private insurance programs, workers compensation and employee assistance
programs.
"Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, Blue Cross
and/or Blue Shield, TriCare, private insurers and any other Person which
maintains Third Party Payor Programs.
"Transition Agreement" shall mean an agreement substantially in the
form attached hereto as Exhibit E which the Operators and Omega shall enter into
at Closing and which shall govern the transition of one or more Facilities as to
which Omega, its nominee or a third party acquires title either by delivery of
the Escrow Documents or as the purchaser at a foreclosure sale.
1.2. The following terms shall have the meanings set forth in the
sections of this Agreement referred to below:
Defined Term: Defined In:
Agreement Introduction
Amended LC-PHCM Guaranty Section 5.2
Amended LC-PHCM Security Agreement Section 5.2
Amended Lease Subordination Agreement Section 5.2
Amended Omega Loan Agreement Section 5.2
Amended Omega Loan Documents Section 3.2
Amended Omega Mortgage Section 5.2
Amended Omega Note Section 5.2
Amended PHCM Security Agreement Section 5.2
Amended Subsidiary Guaranty Section 5.2
Amendment Fee Section 9.1
Annual Amendment Fee Section 9.1
Approval Motion Section 2.1
Approval Order Section 2.1
Assignment of Leases Recitals
Authorized Investor Representative Section 15.1
Available Closing Cash Section 13.4
Bankruptcy Code Recitals
Cases Recitals
Cash Collateral Order Section 13.7
Chase Section 5.9
Ciena Buyer Recitals
Ciena Transaction Recitals
Closing Section 4.1
Closing Date Section 4.1
Court Recitals Delivery Section 5.7
Deposit Agreement Recitals
Escrow Account Section 12.2
Escrow Agreement Recitals
Exchange Act Section 16.9
Excess Ciena Interest Payment Section 3.3
Excess Ciena Principal Payment Section 3.3
Facilities Recitals
Facility Leases Recitals
GranCare Introduction
LC-PHCM Introduction
LC-PHCM Security Agreement Recitals
Liquidity Deposit Agreement Section 5.2
Mariner Introduction
Mariner Entities Introduction
Mariner Liabilities Section 11.2
Michigan Facilities Recitals
Michigan Facility Leases Recitals
Michigan Subsidiaries Introduction
Minimum Monthly Payments Section 13.6
Modified Available Closing Cash Section 13.4
Monthly Amendment Fee Section 9.1
Net Condemnation Award Section 12.12
Net Income Section 9.2
Net Proceeds Section 12.2
North Carolina Facilities Recitals
North Carolina Facility Leases Recitals
North Carolina Leasehold Mortgage Recitals
NYSE Requirements Section 14.9
Omega Introduction
Omega Liabilities Section 11.1
Omega Loan Recitals
Omega Loan Agreement Recitals
Omega Loan Amount Section 13.1
Omega Loan Documents Recitals
Omega Mortgage Recitals
Omega Note Recitals
Operators'EBITDARM Section 9.2
Operators' Free Cash Flow Section 9.2
Partial Interest Repayment Amount Section 12.3
Past Due Interest Section 13.5
PHCM Security Agreement Recitals
Petition Date Recitals
Petition Date Omega Debt Section 13.1
Post-December 31, 1999 Interest Section 13.3
Subsequent Bankruptcy Case Section 10.11
Title Company Section 5.5
ARTICLE 2
PROCEDURAL MATTERS
2.1. Court Approval. Promptly following execution of this Agreement by
all parties and otherwise no later than August 2, 2001 (or such later date as
Omega may agree to in writing), the Mariner Entities will file a motion with the
Court seeking authority to proceed with the transactions and other matters
provided for in this Agreement (the "Approval Motion"), together with a proposed
form of order (the "Approval Order"). The Approval Order shall satisfy the
applicable requirements of Section 5.7 hereof, and shall otherwise be in a form,
and include such other provisions, as Omega and the Mariner Entities may deem
appropriate under the circumstances. The Mariner Entities and Omega shall
exercise good faith efforts to obtain the Approval Order from the Court.
2.2. Effectiveness. Those provisions of this Agreement which require
the exercise of good faith efforts by the Parties hereto shall be effective
immediately while all other provisions of this Agreement shall be effective upon
entry of the Approval Orders, unless implementation is stayed by appeal.
ARTICLE 3
TRANSACTIONS TO OCCUR AT CLOSING
At the Closing, the parties hereto shall effect the following
transactions:
3.1. Amendment of Maintenance Obligation Note. The Maintenance
Obligation Note, if not then paid in full, shall be amended to (a) acknowledge
that PHCM's obligation to pay Contingent Principal (as defined therein) and
interest thereon are no longer contingent, (b) provide for mandatory prepayments
thereon out of the Minimum Monthly Payments to the extent provided in Section
13.6 hereof, (c) provide that, if not sooner paid, the Maintenance Obligation
Note will become due and payable in full at the time the Omega Note becomes due
and payable in full, whether at scheduled maturity, upon acceleration,
prepayment in full or otherwise, and (d) provide that PHCM will have the right
to prepay the Maintenance Obligation Note in whole or in part at any time,
without penalty or premium.
3.2. Amendment and Restatement of Omega Loan Documents. The Omega
Loan Documents shall be amended and restated in substantially the forms set
forth in Exhibits F through S attached hereto (collectively, the "Amended Omega
Loan Documents").
3.3. Assignment of the Residual Ciena Interest. At the Closing, PHCM
shall assign, set over and transfer to Omega (without recourse of any kind), and
Omega shall accept, the Residual Ciena Interest. In consideration therefor,
Omega shall pay to PHCM, by official bank check representing immediately
available funds, the sum of $3,500,000 multiplied by a fraction, the numerator
of which is the outstanding principal amount of the Ciena Note at the close of
business on the date preceding the Closing Date, and the denominator of which is
$9,000,000, plus (b) 50% of the accrued and unpaid interest on the Ciena Note as
of the Closing Date. At the Closing, PHCM shall represent and warrant to Omega
that it owns the Residual Ciena Interest free and clear of any claims and
security interests, except for the security interest in favor of Omega.
3.4. Delivery of Mariner Entities Release. In consideration of the
mutual covenants and agreements set forth herein, Omega agrees that, at the
Closing, it shall execute and deliver the Mariner Entities Release to the
Mariner Entities.
3.5 Delivery of Omega Release. In consideration of the mutual
covenants and agreements set forth herein, each of the Mariner Entities agrees
that, at the Closing, it shall execute and deliver the Omega Release to Omega.
3.6 Mariner Management Agreement. At the Closing, Manager, PHCM, LC-
PHCM and the Michigan Subsidiaries shall execute and deliver the Mariner
Management Agreement.
3.7 Transition Agreement. At the Closing, Omega and the Operators
shall execute and deliver the Transition Agreement.
3.8 Escrow Documents. At the Closing, PHCM, LC-PHCM and the Operators
shall execute and deliver the Escrow Documents to the Escrow Agent, to hold in
escrow pursuant to the Escrow Agreement, and the Mariner Entities, Omega and the
Escrow Agent shall execute and deliver the Escrow Agreement.
ARTICLE 4
CLOSING
4.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Powell, Goldstein,
Frazer & Murphy LLP, 16th Floor, 191 Peachtree Street, N.E., Atlanta, Georgia
30303, or at such other location as the parties may agree upon in writing, on
the first Business Day as of which all of the conditions precedent set forth in
Articles 5 and 6 hereof shall have been satisfied (the "Closing Date");
provided, however, that, in the event that either (a) the Approval Order shall
not have been entered by the Court within sixty (60) days following the filing
of the Approval Motion with the Court, or (b) the conditions set forth in
Articles 5 and 6 hereof shall not have been satisfied within ninety (90) days
following the date of execution and delivery of this Agreement, then Omega or
the Mariner Entities shall have the right, by notice in writing to the other, to
terminate this Agreement. All Settlement Documents executed and delivered at or
prior to Closing, other than (i) this Agreement (which shall be effective as
provided in Section 2.2 hereof) and (ii) the Escrow Documents, shall be deemed
to take effect as of 12:01 a.m. (Eastern time) on the Closing Date,
notwithstanding the actual time on such date at which the transactions
contemplated herein are consummated.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF
OMEGA
The obligation of Omega to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of each of the conditions
set forth in this Article 5.
5.1. Board Approval. This Agreement and each of the transactions
contemplated hereby shall have been approved by the respective Boards of
Directors of Omega and each of the Mariner Entities. Omega shall notify the
Mariner Entities if its Board of Directors does not approve this Agreement and
each of the transactions contemplated hereby before the filing of the Approval
Motion.
5.2. Documentation. All documentation evidencing or implementing the
transactions contemplated by this Agreement must be in form and substance
reasonably satisfactory to Omega and its counsel, such documentation
to include the following:
(i) a certificate signed by the Secretary or Assistant Secretary of
each Mariner Entity, confirming the incumbency of the officers of the
Mariner Entities executing the Settlement Documents to which they are a
party, and to which are attached the following:
(A) a copy of the articles of incorporation or certificate of
incorporation of each Mariner Entity, as amended, and certified by the
Secretary of State of the jurisdiction of incorporation as of a recent
date; ; (B) a true, correct and complete copy of the current bylaws of
each Mariner Entity, as amended;
(C) a true, correct and complete copy of the resolutions adopted
by the Board of Directors of each Mariner Entity, authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein;
(D) a certificate of good standing for each Mariner Entity,
issued as of a recent date by the Secretary of State of the
jurisdiction of its incorporation; and
(E) in the case of PHCM, a certificate of authority issued by the
Secretary of State of North Carolina as of a recent date, confirming
that PHCM is authorized to transact business as a foreign corporation
in the State of North Carolina;
(ii) the Amended Omega Loan Documents, executed by the appropriate
Mariner Entities and New PHCM, as follows:
(A) an amended and restated Omega Loan Agreement in substantially
the form attached hereto as Exhibit F (the "Amended Omega Loan
Agreement");
(B) an amended and restated Omega Note in substantially the form
attached hereto as Exhibit G (the "Amended Omega Note");
(C) an amendment to the Omega Mortgage for each of the
Facilities, in substantially the form attached hereto as Exhibit H
(the Omega Mortgage, as so amended, "Amended Omega Mortgage");
(D) an amendment to the LC-PHCM Mortgage for each of the North
Carolina Facilities, in substantially the form attached hereto as
Exhibit I (the LC-PHCM Mortgage, as so amended, "Amended LC-PHCM
Mortgage");
(E) an amendment to the NC Leasehold Mortgage for each of the
North Carolina Facilities, in substantially the form attached hereto
as Exhibit J (the NC Leasehold Mortgage, as so amended, "Amended NC
Leasehold Mortgage");
(F) an amendment to the Assignment of Leases for each of the
Facilities, in substantially the form attached hereto as Exhibit K
(the "Amended Assignment of Leases");
(G) an amended and restated Subsidiary Guaranty in substantially
the form attached hereto as Exhibit L (the "Amended Subsidiary
Guaranty");
(H) an amended and restated LC-PHCM Guaranty in substantially the
form attached hereto as Exhibit M (the "Amended LC-PHCM Guaranty");
(I) an amended and restated Subsidiary Security Agreement in
substantially the form attached hereto as Exhibit N (the "Amended
Subsidiary Security Agreement");
(J) an amended and restated PHCM Security Agreement in
substantially the form attached hereto as Exhibit O (the "Amended PHCM
Security Agreement");
(K) an amended and restated LC-PHCM Security Agreement in
substantially the form attached hereto as Exhibit P (the "Amended
LC-PHCM Security Agreement");
(L) an amended and restated Lease Subordination Agreement in
substantially the form attached hereto as Exhibit Q (the "Amended
Lease Subordination Agreement");
(M) an amended and restated Subordination of Management Agreement
and Incentive Management Fees in substantially the form attached
hereto as Exhibit R ; and
(N) the Cross Default Cross Collateral Agreement in substantially
the form attached hereto as Exhibit S .
(O) A Liquidity Deposit Agreement in form and substance mutually
acceptable to Omega and the PHCM Debtors (the "Liquidity Deposit
Agreement").
(iii) a pledge agreement executed by PHCM in favor of Omega in
substantially the form attached hereto as Exhibit U, pledging the capital
stock held by it in each of the Michigan Subsidiaries as security for the
payment and performance of its obligations under the Amended Omega Loan
Documents;
(iv) the original stock certificates evidencing the shares of capital
stock pledged pursuant to the pledge agreements referred to in paragraph
(iii) of this Section 5.2, together with appropriate stock powers, executed
in blank, for delivery to Omega;
(v) a pledge agreement executed by GranCare in favor of Omega in
substantially the form attached hereto as Exhibit V, pledging the capital
stock held by it in PHCM as security for the payment and performance of
PHCM's obligations under the Amended Omega Loan Documents;
(vi) the original stock certificate evidencing the shares of capital
stock pledged pursuant to the pledge agreement referred to in paragraph (v)
of this Section 5.2, together with an appropriate stock power, executed in
blank, for delivery to Omega;
(vii) the Mariner Management Agreement, executed by the parties
thereto;
(viii) the Restructuring Escrow Agreement, duly executed on behalf of
PHCM, LC-PHCM and the Escrow Agent;
(ix) Escrow Documents for each of the Facilities, to be deposited into
escrow and delivered under the circumstances provided in Article 10 hereof
and the Escrow Agreement;
(x) the Transition Agreement, executed by the parties thereto other
than Omega;
(xi) one or more instruments of assignment (including, but not limited
to UCC assignments), executed by PHCM, assigning (without recourse) the
Residual Ciena Interest to Omega, together with any additional endorsement
(without recourse) of the Ciena Note to the order of Omega that is
reasonably requested by Omega for the purpose of further evidencing such
assignment;
(xii) a certificate of an authorized officer of each of the Mariner
Entities, confirming satisfaction of the requirements Section 5.6 hereof;
(xiii) the Omega Release, executed by the Mariner Entities;
(xiv) the Amended Facility Leases, executed by the Mariner Entities
party thereto; and
(xv) such other documents, instruments and agreements as Omega may
reasonably request for the purpose of consummating the transactions
contemplated by this Agreement.
5.3. Lien Reports. With respect to each of the Facilities, Omega shall
have received a satisfactory lien report showing that such Facility is not
subject to any liens, claims or encumbrances other than the Permitted
Encumbrances.
5.4. [RESERVED]
5.5. Title Commitments. With respect to each of the Facilities, Omega
shall have received a commitment to endorse its existing mortgagee's title
insurance from Commonwealth Land Title Insurance Company or such other
nationally-recognized title insurer as may be reasonably acceptable to Omega
(the "Title Company"), subject to standard exceptions but to no special
exceptions for any liens or encumbrances other than Permitted Encumbrances,
which commitment shall have been marked to show the satisfaction of all
requirements and shall be based on an updated survey of each such Facility (but
only if obtained by Omega). Such title insurance shall be issued at prevailing
market rates, on ALTA Owner's Policy Form B (1992), and at the sole cost and
expense of Omega.
5.6. True and Complete Representation. All representations and
warranties of each of the Mariner Entities hereunder and under the Settlement
Documents shall be true, complete and correct in all material respects as of the
date hereof and as of the Closing.
5.7. Approval Orders. The Court shall have entered the Approval Orders
and no court of competent jurisdiction shall have entered a Stay of any or all
of the Approval Orders pending appeal, or, in the event a Stay of any or all of
the Approval Orders shall have been entered, then the Stay shall have been
terminated. The Approval Orders as entered by the Court shall contain no
modifications unacceptable to Omega, and the Approval Order shall include,
without limitation, provisions substantially as follows (or as otherwise agreed
in writing by Omega):
(i) Findings determining that notice of the Approval Motion and
hearing thereon have been adequate under the circumstances;
(ii) Findings that the consideration provided to the Mariner Entities
by Omega is adequate;
(iii) Findings that proceeding with those matters provided for in the
Agreement is in the best interest of the Mariner Entities and their
respective creditors;
(iv) The occurrence of a Delivery Event in accordance with the terms
and conditions of Article 10 of this Agreement and the Escrow Agreement,
but not otherwise, will be a legal, valid, and effective transfer of all of
the remaining right, title, and interest of PHCM, LC-PHCM and their
respective estates in the Facilities, and will vest in Omega or its nominee
fee simple title to the Facilities, subject to all liens, encumbrances,
covenants and restrictions of record, but free and clear of the Amended
Facility Leases.
(v) Upon the delivery of the Escrow Documents by the Escrow Agent to
Omega or its nominee as to one, more than one, or all of the Facilities (a
"Delivery"), New PHCM shall be entitled to a credit against the amount owed
by it under the Amended Omega Loan Documents in an amount equal to the fair
market value of the Facility or Facilities covered by the delivered Escrow
Documents. A Delivery shall be in satisfaction of PHCM's obligations under
the Amended Omega Loan Documents only to the extent of the fair market
value of the Facilities covered by the delivered Escrow Documents: and
following a Delivery, the Amended Omega Loan Documents shall continue in
full force and effect and Omega shall have the right to pursue collection
of the remaining balance owing to it and the enforcement of any other
rights and remedies which Omega may have thereunder. In particular, and not
in limitation of the foregoing, Omega's security interest in the accounts
and other intangible property relating to the Facilities shall continue in
full force and effect, to the extent that the Omega Loan Obligations have
not then been satisfied.
(vi) The acceptance by Omega or its nominee of the Escrow Documents as
to one, more than one, or all of the Facilities will not result in the
merger of title; and Omega shall continue to have the right to foreclose on
any liens created or continued by the Amended Omega Loan Documents.
(vi) Neither Omega nor its nominee by acceptance of one or more of the
Escrow Documents shall be deemed to have assumed or agreed to pay any of
the debts or obligations of any of the Mariner Entities.
(vii) Omega would not have entered into this Agreement and would not
have consummated the transactions contemplated herein, without the
protections and findings included within the Approval Order.
(viii) The transactions proposed under this Agreement are fair and
reasonable to the Mariner Entities. The value to be received thereunder by
the Mariner Entities for the terms and remedies of this Agreement are fair
and reasonable. The consideration provided to the Mariner Entities by Omega
is fair and adequate.
(ix) This Agreement is in the best interests of the Mariner Entities
and their respective estates, creditors and holders of equity interests.
(x) The Mariner Entities and their officers and directors are
sophisticated commercial actors, and have been represented by counsel in
negotiating this Agreement, including the provisions relating to the
escrow, and the termination of the protections of the automatic stay in
future cases under the Bankruptcy Code under certain circumstances.
(xi) Creditors and other interested parties in the present case have
had adequate notice and opportunity to object to this Agreement, including
the provisions regarding the escrow and the termination of the automatic
stay in future cases under the Bankruptcy Code under certain circumstances,
and will be bound by the terms of this Agreement, and such escrow and
termination provisions in subsequent bankruptcy cases in which the Mariner
Entities or any of them are debtors.
(xii) The Mariner Entities have articulated good and sufficient
reasons for approving this Agreement, including without limitation, (A) the
provisions regarding prospective relief from the automatic stay under
certain circumstances that may be imposed in future bankruptcy cases; (B)
the provisions relating to 11 U.S.C. ss. 108; and (C) the forum selection
or venue provision governing any future bankruptcy cases. The Court finds
that these provisions, by making the settlement possible, provide a
significant benefit to the estate, and are enforceable.
(xiii) With respect to prospective relief from the automatic stay
under certain circumstances, the Court finds good cause for this aspect of
the parties' bargain, for at least the following reasons. This aspect of
the transaction is essential to the bargain struck between the parties, as
it was in part the quid pro quo for Omega's agreement to forego seeking
such relief in this proceeding and to make the other substantial
concessions that Omega is making under this Agreement in this proceeding.
These concessions provide significant benefit to the Mariner Entities,
their estates, and their creditors.
(xiv) The provisions granting prospective relief from the automatic
stay under certain circumstances do not prevent the Mariner Entities from
seeking the protection of the Bankruptcy Code, but involve only limited
aspects of that protection, namely the automatic stay only as it pertains
to the delivery of the Escrow Deeds out of escrow upon specified, limited
conditions. If injunctive relief becomes necessary to protect the Mariner
Entities in such future proceedings, the Bankruptcy Code and Rules provide
an appropriate mechanism.
(xv) Under the circumstances of this case, the Mariner Entities or
their subsequent estates should not be permitted to invoke 11
U.S.C.ss.108(b) in any subsequent bankruptcy cases in which PHCM, LC-PHCM,
or both, are debtors, with respect to PHCM's cure rights, rights of
redemption or similar rights regarding the Facilities, in those limited
circumstances where such bankruptcy cases have been filed after the
occurrence of a prepetition Delivery Event. In view of the waiver by PHCM
and LC-PHCM of redemption and related rights upon the occurrence of a
prepetition Delivery Event prior to such subsequent bankruptcy cases, the
inapplicability ofss.108(b) under such limited circumstances works no
injustice to the Mariner Entities because, upon the occurrence of a future
prepetition Delivery Event, they will have no right, title, or interest in
the Facilities. Moreover, in the limited circumstances in which a
prepetition Delivery Event has occurred and the Mariner Entities no longer
have any right, title or interest in the Facilities, the application
ofss.108(b) should not be permitted to delay the swift transfer of the
Facilities to Omega or its designee.
(xvi) The Court also finds that the provisions of the Agreement
pertaining to the venue of any subsequent bankruptcy case for PHCM, LC-PHCM
and the Michigan Subsidiaries are reasonable and enforceable. Requiring
such future cases to be conducted in the Court advances the interests of
judicial economy, because the Court has devoted substantial time to these
cases and has familiarized itself with the issues unique to these debtors
and their industry.
(xvii) Nursing home bankruptcies present extremely complex issues
affecting not only the parties before the Court, but also a particularly
vulnerable class of interested parties whose interests are not necessarily
presented to the Court, namely the residents and patients. Requiring future
cases to be conducted in this Court will likely expedite the resolution of
many issues, and also relieve some other court of the burden of
familiarizing itself with the issues and parties.
(xviii) Venue, unlike subject matter jurisdiction, may be waived by
agreement or conduct, and the "venue provisions relating to bankruptcy are
not more sacred." Hunt v. Bankers Trust Co., 799 F.2d 1060 (5th Cir. 1986)
(upholding consent order requiring debtor to file bankruptcy case in
particular district). Therefore, the provisions requiring that any future
bankruptcy case involving PHCM, LC-PHCM or the Michigan Subsidiaries as
debtors be filed in the Court are enforceable.
(xix) The use of the funds in the PHCM Debtors' Account for the
purposes contemplated herein is approved and, to the extent necessary, the
Cash Collateral Order is modified accordingly.
(xx) During the pendency of the Cases, any breach of the Settlement
Documents by the PHCM Debtors will give rise to an administrative claim in
the Cases of the PHCM Debtors (and only of the PHCM Debtors) in favor of
Omega.
5.8. Notice. Within a reasonable time following the filing with the
Court of the Approval Motions, and prior to the hearing and relevant objection
date, the Mariner Entities shall have served notice of the Approval Motions in a
form acceptable to Omega upon those persons entitled to such notice under the
terms of the notice procedures order entered by the Court on or about the
Petition Date.
5.9. Chase/Lender Approval. Omega shall have received evidence
satisfactory to it that The Chase Manhattan Bank, in its capacity as
administrative agent for the Mariner Entities' pre-petition senior secured
lenders and as administrative agent for the Mariner Entities'
debtor-in-possession lender (individually and in its capacity as agent as
aforesaid, "Chase"), has approved and consented to the transactions contemplated
under this Agreement and all related documents, and has agreed that Chase shall
not seek to set aside the contemplated transactions or any part thereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE MARINER ENTITIES
The obligation of each Mariner Entity to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Article 6.
6.1. Receipt of Certain Permits. The Mariner Entities shall have
received all Permits (if any) from, and shall have given all notices to, all
federal, state and local regulatory agencies necessary to enable them to carry
out the intents and purposes of this Agreement.
6.2. Documentation. All documentation evidencing or implementing the
transactions contemplated by this Agreement shall be in form and substance
reasonably satisfactory to the Mariner Entities and their counsel, such
documentation to include the following:
(i) a certificate signed by the Secretary or Assistant Secretary of
Omega, confirming the incumbency of the officers of Omega executing the
Settlement Documents to which it is a party, and to which are attached the
following:
(A) a copy of the articles of incorporation of Omega, as amended,
and certified by the Secretary of State of Omega's jurisdiction of
incorporation as of a recent date;
(B) a true, correct and complete copy of the current bylaws of
Omega, as amended;
(C) a true, correct and complete copy of the resolutions adopted
by the Board of Directors of Omega, authorizing the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein; and
(D) a certificate of good standing for Omega, issued as of a
recent date by the Secretary of State of the jurisdiction of its
incorporation;
(ii) the Amended Omega Loan Documents, executed by Omega;
(iii) the original Omega Note, marked "replaced by renewal note" by
Omega;
(iv) the Mariner Entities Release, executed by Omega;
(v) the Transition Agreement, executed by Omega; { and}
(vi) a certificate of an authorized officer of Omega, confirming
satisfaction of the requirements of Section 6.3 hereof; and
(vii) such other documents, instruments and agreements as the Mariner
Entities may reasonably request for the purpose of consummating the
transactions contemplated by this Agreement.
6.3. True and Complete Representations. All representations and
warranties of Omega shall be true, complete and correct in all material respects
as of the date hereof and as of the Closing.
6.4. Chase/Lender Approval. The Mariner Entities shall have received
evidence satisfactory to them that Chase has approved and consented to the
transactions contemplated under this Agreement and all related documents, and
has agreed that Chase, individually and as agent as aforesaid, shall not seek to
set aside the contemplated transactions or any part thereof.
6.5. Approval Orders. The condition set forth in Section 5.7 shall
have been satisfied.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF OMEGA
7.1. Reliance. Omega hereby makes the representations and warranties
set forth in this Article 7 as of the date of this Agreement and as of the date
of Closing. Omega expressly acknowledges and agrees that, notwithstanding any
provision to the contrary in this or in any other agreement between or among the
Parties: (i) the Mariner Entities and their affiliates are relying, may rely and
are and shall be justified in relying, on the following representations and
warranties in entering into this Agreement and the other agreements and
instruments referred to in, contemplated by, or executed in connection with this
Agreement and the other Settlement Documents; and (ii) each of the following
representations and warranties is made to induce the Mariner Entities to enter
into and consummate the transactions contemplated by this Agreement and the
other agreements referred to in or contemplated by this Agreement and the other
Settlement Documents, and the Mariner Entities and their affiliates are and
shall be beneficiaries of these representations and warranties.
7.2. Organization. Omega is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. Omega has
all requisite power and authority to carry on its business as such business is
presently being conducted and, subject to approval of its Board of Directors, to
enter into this Agreement and to consummate the transactions contemplated
hereby.
7.3. Required Consents. No material consent, approval or other
authorization of, or registration, declaration or filing with, any court or
Governmental Authority which has not been heretofore obtained or which will not
be obtained prior to the Closing is required for the due execution, delivery or
performance of this Agreement and the other Settlement Documents by Omega, for
the consummation of the transactions contemplated herein or for the validity or
enforceability thereof against Omega.
7.4. Authorization; Enforceability. The execution and delivery of this
Agreement and each other Settlement Document to which Omega is a party, and the
performance of its obligations thereunder, have been duly authorized by all
necessary corporate and stockholder action on the part of Omega. This Agreement
has been duly executed by Omega and constitutes the valid and binding obligation
of Omega, enforceable in accordance with its terms, except as enforceability
thereof may be limited by general principles of equity.
7.5. Brokerage. Omega has not used the services of any broker or finder
in connection with the transactions contemplated by this Agreement or the Ciena
Transaction, and it will indemnify and hold harmless the Mariner Entities from
and against all claims, actions, causes of action, costs, expenses, including
attorneys' fees, and liabilities arising in or out of, or related to any broker
or finder claiming any compensation or fee by reason of an alleged agreement or
understanding with Omega.
7.6. No Actions. There are no actions, proceedings, investigations or
audits pending or threatened against Omega, before or by any court, arbitrator,
administrative agency or other Governmental Authority seeking to, or which are
expected, in the reasonable judgment of the executive officers of Omega, to
enjoin, prevent or delay the consummation of the transactions contemplated in
this Agreement.
7.7. No Violations. The execution and delivery of this Agreement, the
compliance with the provisions hereof and the consummation of the transactions
herein contemplated by Omega, will not result in a breach or violation of (i)
any material law or governmental rule or regulation now in effect and applicable
to Omega, (ii) any provision of the articles of organization or by-laws of
Omega, (iii) any judgment, order or decree of any court, arbitrator,
administrative agency or other Governmental Authority binding upon Omega, or
(iv) any agreement or instrument to which Omega is a party and by which it is
bound or by which it or any of its properties is bound.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE MARINER ENTITIES
8.1. Reliance. Each of the Mariner Entities hereby makes the
representations and warranties set forth in this Article 8 as of the date of
this Agreement and as of the date of Closing. Each of the Mariner Entities
expressly acknowledges and agrees that, notwithstanding any provision to the
contrary in this or in any other agreement between or among the parties: (i)
Omega and its affiliates are relying, may rely and are and shall be justified in
relying, on the following representations and warranties in entering into this
Agreement and the other agreements and instruments referred to in, contemplated
by, or executed in connection with this Agreement and the other Settlement
Documents; and (ii) each of the following representations and warranties is made
to induce Omega to enter into and consummate the transactions contemplated by
this Agreement and the other agreements referred to in or contemplated by this
Agreement and the other Settlement Documents, and Omega and its affiliates are
and shall be beneficiaries of these representations and warranties.
8.2. Organization. Each of the Mariner Entities is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Subject to the entry of the Approval Orders,
each of the Mariner Entities has full power, authority and legal right to
execute, deliver and perform under this Agreement, to enter into the Settlement
Documents to which they are a party and to take all other actions necessary to
carry out the intents and purposes of this Agreement.
8.3. Authorization; Enforceability. The execution and delivery by the
Mariner Entities of this Agreement and each other Settlement Document to which
they are a party and which is to be delivered at or prior to Closing, and the
performance of their respective obligations thereunder, have been duly
authorized by all necessary corporate and stockholder action on the part of the
Mariner Entities. This Agreement has been duly executed by each Mariner Entity
and, subject to the entry of the Approval Orders, constitutes the valid and
binding obligation of each Mariner Entity, enforceable in accordance with its
terms, except as enforceability thereof may be limited by general principles of
equity.
8.4. Required Consents. No material consent, approval or other
authorization of, or registration, declaration or filing with, any court or
Governmental Authority which has not been heretofore obtained or which will not
be obtained prior to the Closing is required for the due execution, delivery or
performance of this Agreement and the other Settlement Documents, the
transactions contemplated herein or for the validity or enforceability thereof
against any of the Mariner Entities, except for any such consent, approval,
authorization, registration, declaration or filing required in connection with
the LC-PHCM Stock Transfer, the Merger and the Majority Equity Sale, which are
not required to be obtained until the Plan Effective Date.
8.5. No Violations. The execution and delivery of this Agreement, the
compliance with the provisions hereof and the consummation at Closing of the
transactions herein contemplated by each of the Mariner Entities, will not
result in a breach or violation of (i) any material law or governmental rule or
regulation now in effect and applicable to any of the Mariner Entities, (ii) any
provision of the articles of organization, certificate of incorporation, or
by-laws of any of the Mariner Entities, (iii) subject to the satisfaction of the
conditions described in Sections 5.7, 5.9 and 6.5 hereof, any judgment, order or
decree of any court, arbitrator, administrative agency or other Governmental
Authority binding upon any of the Mariner Entities, or (iv) subject to the
satisfaction of the conditions described in Sections 5.9 and 6.5 hereof, any
agreement or instrument to which any of the Mariner Entities is a party and by
which it is bound as a debtor in possession.
8.6. Non-Foreign Status. No Mariner Entity is a "foreign person"
within the meaning of Section 1445(f) of the Internal Revenue Code.
8.7. No Litigation. Except for the Cases, there is no suit, claim,
action, or legal, administrative, arbitration or other proceeding or
governmental investigation or audit pending, or to the best knowledge of each
Mariner Entity, threatened by or against any Mariner Entity, or any of the
Facilities, seeking to enjoin, prevent or delay the consummation of the
transactions contemplated by this Agreement.
8.8. Brokerage. Each of the Mariner Entities represents that it has not
used the services of any broker or finder in connection with the transactions
contemplated by this Agreement and each of the Mariner Entities will indemnify
and hold harmless Omega from and against all claims, actions, causes of action,
costs, expenses, including attorneys' fees, and liabilities arising in or out
of, or related to any broker or finder claiming any compensation or fee by
reason of an alleged agreement or understanding with any of the Mariner
Entities.
8.9. Payment of Taxes and Other Charges. All outstanding taxes, water,
sewer and other utility bills that would, if unpaid, become a lien on the
Facilities have been paid or will be paid at the time of Closing.
ARTICLE 9
AMENDMENT FEE
9.1 Amendment Fee. In consideration for Omega's agreeing to extend the
maturity of the Omega Loan, to lower the interest rate from pre-petition levels,
to waive claims with respect to, among other things, default interest, late
fees, and the reimbursement of costs and expenses, to accept the Residual Ciena
Interest on the terms and conditions set forth herein, and to modify certain
other provisions of the Omega loan documents, PHCM agrees to pay to Omega, in
arrears, an amendment fee (the "Amendment Fee") consisting of the Annual
Amendment Fee (as hereinafter defined) and the Monthly Amendment Fee (as
hereinafter defined), as follows. PHCM agrees to pay to Omega, (a) on the first
day of the eighth (8th) calendar month after Closing, and (b) thereafter on or
before the 90th day after the end of each of its fiscal years during the term of
the Omega Loan, an annual amendment fee (the "Annual Amendment Fee") for each
fiscal year ending after the Closing Date (or partial year with respect to the
fiscal year in which the Omega Loan is paid in full), in an amount equal to
twenty-five percent (25%) of Operators' Free Cash Flow for such fiscal year or
period; provided, however, that until the Catch-Up Date, and until all Liquidity
Deposit Installments required to have been made prior to such time pursuant to
the Liquidity Deposit Agreement and the Amended Omega Loan Agreement have been
paid, PHCM shall pay any Amendment Fee with respect to the first fiscal year for
which an Amendment Fee would otherwise be due and payable, by executing and
delivering the Deferred Amendment Fee Note to Omega, and with respect to any
subsequent fiscal year for which an Amendment Fee would otherwise be due and
payable, by executing and delivering to Omega an amendment to the Deferred
Amendment Fee Note. In addition, PHCM agrees to pay to Omega, on the first day
of each month after Closing, unless and until the Majority Equity Sale shall
have been consummated, an amount equal to 50% of the "return on equity" portion
of the Medicaid reimbursement for the North Carolina Facilities received by
PHCM, if any, during the second preceding calendar month (the "Monthly Amendment
Fee"). The Amendment Fee obligations shall be secured by the same security that
secures the Amended Omega Note.
9.2 Amendment Fee Definitions.
(i) The term "Operators' Free Cash Flow" shall mean, for any period,
Operators' EBITDARM for such period, plus any Liquidity Deposits and
Additional Liquidity Deposits refunded to PHCM during such period, less,
without duplication, the following expenditures incurred by the Operators
relating to the operation of the Facilities: (a) interest (including,
without limitation, payments in the nature of interest) added to the
Operators' Net Income in computing Operators' EBITDARM; (b) the Base
Management Fee, to the extent that the Base Management Fee has been added
back in the calculation of Operators' EBITDARM pursuant to clause (b)(6) of
the definition of that term hereinbelow; (c) all capital expenditures
(subject to a maximum amount of $600 per bed for the Facilities); (d)
income taxes (or, if greater, income tax actually paid during the period);
(e) all pre-petition real property taxes, critical vendor payments and
other expenses relating to the Facilities actually paid by or for the
account of the Operators after the Petition Date; (f) all expenses incurred
and payments made by the Mariner Entities in closing the sale of the Ciena
Facilities (whether paid prior to, at or after Closing), including, without
limitation, closing costs, and amounts paid to Ciena to cover accrued and
unpaid wages and fringe benefits; and (g) any portion of the Operators'
Free Cash Flow used to fund the Liquidity Deposit Installments and, if
applicable, any Additional Liquidity Deposits, required under the Amended
Omega Loan Documents. Payments of principal and interest on the Maintenance
Obligation Note are not related to the operation of the Facilities and
therefore shall not be deducted in determining Operators' Free Cash Flow.
Post-December 31, 1999 Interest and Past Due Interest (without duplication)
shall be added back to Operators' Net Income in computing Operators'
EBITDARM only for the fiscal years ending September 30, 2001 and September
30, 2002, and therefore shall be deducted in determining Operators' Free
Cash Flow only for those fiscal years. Interest on Past Due Interest shall
be deducted in determining Operators' Free Cash Flow for the applicable
periods during which it is deducted in computing Net Income.
(ii) The term "Operators' EBITDARM" shall mean, for any period, the
sum of (a) Net Income of the Operators for the applicable period plus (b)
the amounts deducted in computing the Operators' Net Income for the period
for (1) depreciation, (2) amortization, (3) interest expense (including,
without limitation, interest on the Amended Omega Note, the Maintenance
Obligation Note and Past Due Interest, payments in the nature of interest
under capitalized leases and interest on any purchase money financing), (4)
any rent or other amount paid to LC-PHCM and deducted from Net Income for
any fiscal period ending prior to consummation of the LC-PHCM Stock
Transfer, (5) income taxes (or, if greater, income tax actually paid during
the period) and (6) the Base Management Fee, to the extent deducted in the
calculation of Net Income, all of the foregoing (a) through (b)(6) to be
determined on a consolidated basis for the Operators (and notwithstanding
the Majority Equity Sale). For purposes of computing Operator's EBITDARM,
Post-December 31, 1999 Interest and Past Due Interest (without duplication)
shall be added back for the fiscal years ending September 30, 2001 and
September 30, 2002 (whichever is the year in which such amounts are
actually paid). Interest on Past Due Interest shall be added back for the
applicable periods during which it is deducted in computing Net Income.
(iii) The term "Net Income" means, for any period, the net income (or
loss) of the Operators arising solely from the operation of the Facilities
for such period, determined on a consolidated basis in accordance with
GAAP, provided, however, that Net Income shall not include:
(A) any after-tax gains or losses attributable to returned
surplus assets of any pension-benefit plan;
(B) any extraordinary gains or losses or nonrecurring gains or
losses;
(C) any gains or losses realized upon the sale or other
disposition of property which is not sold or otherwise disposed of in
the ordinary course of business;
(D) any gains or losses realized upon the sale or other
disposition of any capital stock of any Person;
(E) any gains or losses from the disposal of a discontinued
business;
(F) amounts included in computing such net income (or loss) in
respect of the write-up or write-down of any asset or the write-down
of any debt at less than face value after the date on which such asset
or debt was first properly included on such Operator's balance sheet;
or
(G) any non-cash income or loss resulting from "fresh-start
accounting" upon the confirmation and effective date of a Plan of
Reorganization.
For purposes of computing Net Income, Post-December 31, 1999 Interest
and Past Due Interest (without duplication) shall be a deduction for
the fiscal years ending September 30, 2001 and September 30, 2002.
Interest on Past Due Interest shall be deducted in the fiscal year
during which it accrues. Net Income shall not include any capital
contributions made to PHCM by the shareholders thereof, or to New PHCM
by the members thereof.
(iv) The term "Operators" as used in this Section 9.2 shall be deemed
to include the operators of the Ciena Facilities and the term "Facilities"
shall be deemed to include the Ciena Facilities.
9.3 The Deferred Amendment Fee Note. If a Deferred Amendment Fee Note
is executed and delivered as provided in Section 9.1, the following shall be
applicable: (i) the Deferred Amendment Fee Note shall be in the form of Exhibit
A attached hereto; (ii) the outstanding principal amount of the Deferred
Amendment Fee Note, and any accrued and unpaid interest thereon, will bear
interest at the Interest Rate; (iii) repayment of the Deferred Amendment Fee
Note shall be guaranteed by each of the Operators and secured by all collateral
securing the Amended Omega Note, (iv) the Deferred Amendment Fee Note shall be
due and payable in full on the date the Amended Omega Note becomes due and
payable in full, whether on maturity, acceleration or otherwise, (v)the Deferred
Amendment Fee Note shall be prepaid from Minimum Monthly Payments to the extent
provided in Section 13.6 hereof, and (vi) the Deferred Amendment Fee Note may be
prepaid, in whole or in part, at PHCM's option, without premium or penalty.
ARTICLE 10
SPECIAL POST-DEFAULT REMEDIES; SPECIAL PROVISIONS IN
APPROVAL ORDER
10.1 Intent of Special Remedies. The parties intend to provide Omega
with rights and remedies similar to those that Omega would have enjoyed as
lessor with respect to the Facilities if the Facilities were owned by Omega and
subject to a master lease, rather than owned by PHCM and LC-PHCM and subject to
a mortgage in favor of Omega.
10.2 Escrow Deeds. At Closing, PHCM and LC-PHCM, as applicable, will
deliver the Escrow Documents in escrow to the Escrow Agent. As provided in the
Escrow Agreement, the Escrow Documents will either be delivered to Omega only
following the occurrence of a Delivery Event, or upon repayment of the Omega
Loan in full will be returned to PHCM or LC-PHCM, as the case may be. In the
event of a conflict between the provisions of the Escrow Agreement and this
Agreement, the Escrow Agreement shall control.
10.3 Delivery Event. As used herein, the term "Delivery Event" shall
mean either of the following: (a) the expiration of ten (10) Business Days after
PHCM receives notice that an Event of Default under the Amended Omega Loan
Documents has occurred and is continuing, and that Omega intends to demand
delivery of the Escrow Documents as to one or more of the Facilities from the
Escrow Agent (a "Delivery Event Notice"); or (b) the failure of PHCM to perform
when due (after giving effect to any applicable grace or cure period) any
obligation under the Amended Omega Loan Documents first arising on or after the
filing of a future petition under the Bankruptcy Code for a bankruptcy case in
which PHCM is debtor, the performance of which would have been required under 11
U.S.C. ss.365(d)(3) if the Amended Omega Note were a lease and ss.365(d)(3)
applied, within ten (10) Business Days after the entry of an order of the
bankruptcy court in such future bankruptcy case determining that the obligation
in question arose post-petition and would have been required to be performed
under 11 U.S.C.ss.365(d)(3) if the Amended Omega Note were a lease and
ss.365(d)(3) applied.
10.4 Delivery Event Notice. The Escrow Agent shall deliver to Omega the
Escrow Documents in accordance with, and subject to the terms and conditions,
set forth in the Restructuring Escrow Agreement. Effective immediately upon the
occurrence of a Delivery Event in accordance with the terms of this Agreement,
PHCM and LC-PHCM will cease to have any right, title or interest (either legal
or equitable) in the Facilities theretofore owned by them, or in the Escrow
Documents, regardless of any subsequent bankruptcy cases in which PHCM or
LC-PHCM, is the debtor.
10.5 Waiver of Equity of Redemption. Conditioned upon and effective
only upon the occurrence of a Delivery Event in accordance with this Agreement,
PHCM and LC-PHCM hereby waive any and all rights of redemption with respect to
the Facilities, effective immediately upon the receipt by the Escrow Agent of a
Delivery Event Notice duly given, in accordance with the terms hereof and the
Escrow Agreement, and each of them acknowledges new value in exchange for this
waiver.
10.6 Credit Against Omega Loan Balance; Reservation of Remedies. Upon
the occurrence of a Delivery as to one, more than one, or all of the Facilities,
PHCM shall be entitled to a credit against the amount owed by it under the
Amended Omega Loan Documents in an amount equal to the Net Fair Market Value of
the Facility or Facilities covered by the delivered Escrow Documents. A Delivery
shall be in satisfaction of PHCM's obligations under the Amended Omega Loan
Documents only to the extent of the Net Fair Market Value of the Facilities
covered by the delivered Escrow Documents; and following a Delivery, the Omega
Amended Loan Documents shall continue in full force and effect and Omega shall
have the right to pursue collection of the remaining balance owing to it and the
enforcement of any other rights and remedies which Omega may have thereunder. In
particular, and not in limitation of the foregoing, Omega's security interest in
the accounts and other intangible property relating to the Facilities shall
continue in full force and effect.
10.7 No Merger of Title. The acceptance by Omega or its nominee of the
Escrow Documents as to one, more than one, or all of the Facilities will not
result in the merger of title; and Omega shall have the right to foreclose on
any liens created or continued by the Amended Omega Loan Documents in accordance
with the terms thereof.
10.8 No Waiver of Other Remedies. Neither the delivery of the Escrow
Documents into escrow nor a Delivery shall preclude Omega from exercising any or
all other remedies granted to it under the Amended Omega Loan Documents or by
applicable law.
10.9 No Assumption of Debt. Neither Omega nor its nominee by
acceptance of one or more of the Escrow Documents shall be deemed to have
assumed or agreed to pay any of the debts or obligations of any of the Mariner
Entities.
10.10 Delivery Event During Pendancy of Cases. In the event that a
Delivery Event occurs after Closing but while the Debtors' Cases are still
pending, then to the extent that the automatic stay provided by 11 U.S.C. ss.362
is applicable, such stay shall be deemed annulled, lifted and modified as to
Omega and the Escrow Agent with respect to the Facilities and the Escrow
Documents, upon the occurrence of a Delivery Event, for the sole purpose of
either (a) permitting Omega and the Escrow Agent to deliver any Escrow Documents
demanded by Omega in accordance with the Escrow Agreement and this Agreement, or
(b)permitting Omega to exercise its rights to foreclose its mortgages on any or
all of the Facilities, and to foreclose its security interests in related
personal property of the PHCM Debtors located at such Facilities, or any
combination of the remedies described in clauses (a) and (b), but not for any
other purpose. In such circumstances, PHCM will not oppose relief from the
automatic stay to the extent set forth above, and, if so requested in accordance
with the Escrow Agreement, the Escrow Agent will deliver the Escrow Documents to
Omega in accordance with Omega's instructions.
10.11 Subsequent Bankruptcy Case. In the event that bankruptcy cases in
which PHCM, LC-PHCM or the Operators are the debtors, are filed subsequent to
the Closing (a "Subsequent Bankruptcy Case") and subsequent to the occurrence of
a Delivery Event, and to the extent that the automatic stay provided by 11
U.S.C. ss. 362 is applicable, such stay shall be deemed annulled, lifted, and
modified in the event a prepetition Delivery Event (i.e., a Delivery Event
occurring prior to the filing of a Subsequent Bankruptcy Case) shall have
occurred, for the purposes of either (a) allowing the Escrow Agent to deliver to
Omega the Escrow Documents demanded by Omega with respect to any or all of the
Facilities, or, at Omega's sole election, (b) to permit Omega to exercise its
foreclosure rights under the Amended Omega Mortgage, the Amended LC-PHCM
Mortgage, the Amended NC Leasehold Mortgage and, in connection with such real
estate foreclosures, to exercise its foreclosure rights under the Amended PHCM
Security Agreement, the Amended Subsidiary Security Agreement and the Amended
LC-PHCM Security Agreement. In such circumstances, PHCM will not oppose relief
from the automatic stay to the extent set forth above, and the Escrow Agent will
deliver to Omega the Escrow Documents to the Facilities as provided in Section
10.4 hereof.
10.12 Venue for Subsequent Bankruptcy Case. PHCM and LC-PHCM each agree
that any Subsequent Bankruptcy Case in which either or both of them are the
debtor will be filed in the District of Delaware, and that such debtors will use
its best efforts (including moving for change of venue or supporting a motion to
change venue in the event that a petition is filed elsewhere) to ensure that
venue of any Subsequent Bankruptcy Case in which it is the debtor will be only
in the District of Delaware.
10.13 Inapplicability of Section 108(b) of Bankruptcy Code to Delivery
Event. PHCM and LC-PHCM each agree to the inclusion in the Approval Order of a
provision that 11 U.S.C. ss.108(b) shall be inapplicable in any Subsequent
Bankruptcy Case in which PHCM or LC-PHCM is the debtor which is filed after the
occurrence of a prepetition Delivery Event only with respect to PHCM's and
LC-PHCM's cure rights, rights of redemption, or similar right (to the extent not
waived) relating to the Facilities.
ARTICLE 11
DAMAGE TO PROPERTY FROM CASUALTY OR TAKING
11.1. Controlling Provisions. The provisions of this Article 11,
subject to the approval of the Bankruptcy Court, shall control over any contrary
provisions of the Omega Mortgage and the other Omega Loan Documents with respect
to any Facility that is partially or wholly damaged, destroyed or taken by
Condemnation (as that term is defined in Section 11.10 hereof) prior to the
Closing.
11.2. Net Proceeds Held in Escrow. All proceeds, net of any costs
incurred by Omega in obtaining such proceeds (collectively, the "Net Proceeds"),
payable by reason of any loss or damage to any Facility, or any portion thereof,
and insured under any policy of insurance required by Paragraph 5 of the Omega
Mortgage, shall be paid to Omega and held by Omega in escrow in an
interest-bearing account (the "Escrow Account"), subject to the terms of this
Agreement. The Net Proceeds, together with any earnings thereon while the Net
Proceeds are held in the Escrow Account, shall be made available for the
restoration or repair, as the case may be, of any damage to or destruction of
the affected Facility, or any portion thereof, as provided in Sections 11.3 and
11.5 hereof.
11.3. Total Destruction. If any Facility is totally or partially
damaged or destroyed from a risk covered by the insurance described in Paragraph
5 of the Omega Mortgage, and the Facility affected thereby is, in the sole
judgment of PHCM, rendered Unsuitable for Its Primary Intended Use (as that term
is defined in the Omega Mortgage), PHCM shall, within sixty (60) days of the
receipt of the Net Proceeds by Omega, either, after consultation with Omega (but
at PHCM's option) (a) commence the restoration of the Facility to substantially
the same (or better) condition which existed immediately prior to such damage or
destruction, or (b) make a mandatory, partial repayment under the Omega Note (or
Amended Omega Note, as applicable) equal to the amount of the Net Proceeds
applicable to such casualty, together with interest earned thereon while such
Net Proceeds are being held in the Escrow Account pending application as
provided herein (the aggregate amount of such partial repayment being herein
referred to as the "Partial Repayment Amount"). PHCM's failure to commence to
rebuild or restore within such sixty (60) day period shall be deemed to be an
automatic and irrevocable election to make a partial repayment of the Omega Note
equal to the Partial Repayment Amount. In the event PHCM makes a timely election
under clause (a) of this Section 11.3, then PHCM shall with due diligence
restore such Facility to substantially the same condition (or better) as existed
immediately before the damage or destruction. Notwithstanding the foregoing
provisions of this paragraph, as a condition to making an election under Section
11.3(a), PHCM shall deliver to Omega evidence reasonably satisfactory to Omega,
that (i) PHCM has or will be able to obtain all necessary Permits in order to be
able to perform all required repair and restoration work and operate the damaged
or destroyed Facility for its Primary Intended Use (as that term is defined in
the Omega Mortgage) in substantially the same manner as existed immediately
prior to such damage or destruction and (ii) the Net Proceeds plus any interest
earned thereon, plus any additional amounts contributed by PHCM, LC-PHCM or (if
different) the applicable Operator and deposited in the Escrow Account to defray
costs of reconstruction, will be sufficient to rebuild or restore the Facility
to the condition required hereunder. If PHCM is unable to provide such
reasonably satisfactory evidence, then the election under Section 11.3(b) shall
be mandatory. Notwithstanding Omega's receipt of the Partial Repayment Amount
with respect to the damaged or destroyed Facility, the lien of the Omega
Mortgage and the provisions thereof and of all other Omega Loan Documents as to
the affected Facility and related personal property shall remain in full force
and effect.
11.4. Partial Destruction. If any Facility is partially destroyed from
a risk covered by the insurance described in Paragraph 5 of the Omega Mortgage,
but such Facility is not thereby rendered Unsuitable for Its Primary Intended
Use, PHCM shall give Omega Notice of such damage or destruction within ten (10)
Business Days of the occurrence thereof. Within sixty (60) days of the receipt
by Omega of the Net Proceeds from such insurance, PHCM shall commence to restore
the Facility to substantially the same (or better) condition as existed
immediately before such damage or destruction. PHCM shall deliver to Omega
evidence reasonably satisfactory to Omega that PHCM has or will be able to
obtain all necessary Permits in order to be able to perform all required repair
and restoration work and operate the damaged Facility for its Primary Intended
Use in substantially the same manner as existed immediately prior to such damage
or destruction. If PHCM is unable to provide such reasonably satisfactory
evidence, then PHCM shall, within the later of (a) one hundred twenty (120) days
of the occurrence of such damage and (b) sixty (60) days after receipt of the
Net Proceeds in respect of such casualty, be obligated to make a mandatory
partial repayment of the Omega Loan equal to the Prepayment Loan Amount (as that
term is defined in the Omega Mortgage) of the applicable Facility.
11.5. Net Proceeds Available for Restoration. Absent an election by
PHCM not to repair or restore any Facility or portion thereof that is damaged or
destroyed in accordance with the provisions of this Article 11, or a requirement
herein that PHCM pay Omega the Partial Repayment Amount or the Prepayment Loan
Amount with respect to any such Facility, all Net Proceeds and earnings thereon
held from time to time by Omega in the escrow account shall be made available to
PHCM to pay the costs of repair or restoration in accordance with the provisions
of Paragraph 6(i) of the Omega Mortgage, without regard, however, for the
$250,000 minimum threshold for the applicability of such Paragraph and also
without regard for any provisions authorizing Omega not to make such Net
Proceeds available to PHCM if an Event of Default (as defined in the Omega
Mortgage) exists.
11.6. Net Proceeds Relating to Personal Property. All insurance
proceeds payable by reason of any loss of or damage to any of the personal
property located at the Facilities shall be paid directly to PHCM, and PHCM
shall hold such insurance proceeds in trust to pay the cost of repairing or
replacing such lost or damaged personal property.
11.7. Restoration of Alterations and Improvements. If PHCM is required
or elects to restore a damaged or destroyed Facility as provided in this Article
11, PHCM shall also restore all alterations and improvements made by PHCM and
all personal property.
11.8 Application to Omega Note Principal, in Certain Circumstances. In
the event that, pursuant to the terms of this Article 11, Net Proceeds (and any
earnings thereon while held in the Escrow Account) or any Prepayment Loan
Amounts are paid over to Omega, such amount (a) shall be applied by Omega
against the principal amount of the Omega Loan, and (b) shall reduce the
interest payments coming due under the Amended Omega Note by an amount equal to
the amount so paid to Omega for application against the Omega Loan, multiplied
by the Interest Rate, effective beginning with the first calendar month after
the date on which such Net Proceeds (and earnings thereon) or Prepayment Loan
Amounts are paid to Omega.
11.9. Effect of Releasing Destroyed Facility from Omega Mortgage. Upon
the release of any damaged or destroyed Facility from the lien of the Omega
Mortgage, such Facility shall cease to be a Facility for purposes of this
Agreement and shall not be subject to any of the Omega Loan Documents.
11.10. Condemnation-Related Terms. The terms "Condemnation," "Date of
Taking," "Award" and "Condemnor," as used herein, shall have the meanings
assigned to such terms in Paragraph 8(a) of the Omega Mortgage.
11.11. Condemnation Awards Held in Escrow. The total Award made with
respect to all or any portion of a Facility, or for a loss of business, shall be
payable to Omega to be held in escrow in the Escrow Account, for application as
set forth herein.
11.12. Total Taking. If title to the fee of the whole of any Facility
shall be taken by Condemnation, then PHCM shall make a partial repayment of the
Omega Loan in an amount equal to the amount of the Award received in connection
with such taking, net of costs of collecting the same (the "Net Condemnation
Award"). Upon receipt of such repayment, (i) Omega shall discharge the lien of
the Omega Mortgage and the other Omega Loan Documents as to the Facility so
taken by Condemnation, and (ii) (A) the Omega Loan shall be reduced by the
amount of the Net Condemnation Proceeds, and (B) the interest payments coming
due under the Omega Note shall be reduced by the amount of such Net Condemnation
Award and earnings thereon paid to Omega, multiplied by the Interest Rate. Each
such reduction (if any) in the outstanding principal amount of the Omega Note,
or in interest payments with respect to the Omega Loan, shall take effect
beginning with the first calendar month after the date on which such Net
Condemnation Award (and earnings thereon) are paid to Omega.
11.13 Partial Taking; Facility Unsuitable for Primary Intended Use. If
title to the fee of less than the whole of a Facility shall be so taken by
Condemnation, which nevertheless renders such Facility, in the sole judgment of
PHCM, Unsuitable for Its Primary Intended Use, then PHCM shall make a partial
repayment of the Omega Loan in an amount equal to the amount of the Award
received in connection with such taking, net of costs of collecting the same
(the "Net Condemnation Award"). Upon receipt of such repayment (i) the Omega
Loan shall be reduced by an amount equal to the amount of such Net Condemnation
Award and earnings thereon so paid to Omega, and (ii) interest payments coming
due under the Amended Omega Note shall be reduced by an amount equal to the
amount so paid to Omega for application against the Omega Loan, multiplied by
the Interest Rate. However, the lien of the Omega Mortgage and of the other
Omega Loan Documents as to the affected Facility shall remain in full force and
effect, notwithstanding such partial repayment of the Omega Loan. Each such
reduction (if any) in the interest accruing on the Omega Note shall take effect
beginning with the first calendar month after the date on which such Net
Condemnation Award (and earnings thereon) are paid to Omega.
11.14. Partial Taking; Facility Not Unsuitable for Primary Intended
Use. If title to the fee of less than the whole of a Facility shall be so taken
or condemned, and such Facility is not Unsuitable for its Primary Intended Use,
PHCM, at its own cost and expense, shall with all reasonable dispatch restore
the untaken portion of any improvements on such Facility so that such
improvements shall constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the improvements existing immediately prior to such Condemnation or Taking.
PHCM shall commence the restoration of such Facility within sixty (60) days of
the receipt of the Award, and shall complete the restoration with due diligence.
Omega shall contribute to the cost of restoration such portion of the Net
Condemnation Award as is made therefor, if any, together with severance and
other damages awarded for taken improvements. Omega shall make the Award
available to PHCM in the same manner as is provided in Section 11.5 hereof for
insurance proceeds. Omega's obligation to contribute an amount up to the Net
Condemnation Award and earnings thereon to defray the cost of such restoration
shall not be subject to the absence of an Event of Default under the Omega Loan
Documents.
11.15. Temporary Taking. The taking of any Facility, or any part
thereof, by military or other public authority will constitutes a temporary
taking by Condemnation only when the use and occupancy by the Condemnor has
continued for six (6) months or less. During such period, all provisions of the
Omega Loan Documents, as the same are modified or amended by this Agreement,
shall apply to the affected Facility. In the event of any temporary Taking as
contemplated in this Section, the entire amount of any Net Condemnation Award,
whether paid by way of damages or otherwise, plus all earnings thereon in the
Escrow Account, shall be paid to PHCM, irrespective of whether or not an Event
of Default exists under the Omega Loan Documents. PHCM covenants that, upon the
termination of any such period of temporary use or occupancy as contemplated in
this paragraph, it will, at its sole cost and expense, restore the Property
subject to such temporary Taking, as nearly as may be reasonably possible, to
the condition existing immediately prior to such temporary Taking. If any
temporary Taking continues for longer than six (6) months, such Taking shall be
considered a total Taking for purposes of this Agreement, whereupon Section
11.12 hereof shall apply.
ARTICLE 12
RELEASES
12.1. Release of Omega. Subject to, and in consideration for, Omega
entering into this Agreement and the occurrence of the Closing, each Mariner
Entity, contemporaneously with the Settlement Documents (other than this
Agreement and the Escrow Documents) becoming effective, releases and forever
discharges Omega and its successors, assigns, agents, shareholders, directors,
officers, employees, 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 Mariner 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 prior to the Closing (collectively, "Omega
Liabilities"), other than from Omega Liabilities arising out of this Agreement
or any Settlement Document. Each Mariner 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 Mariner 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 Mariner Entity accepts this possibility,
and each Mariner Entity assumes the risk of the facts turning out to be
different and new information being discovered; and each Mariner 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.
Notwithstanding anything to the contrary contained in this Section 12.1
or otherwise, this release shall only be effective on and as of the Closing and
not otherwise.
None of the Mariner Entities is releasing Omega from any Omega
Liabilities arising out of this Agreement, any other Settlement Document or the
transactions contemplated hereby, except as expressly provided herein, or
arising out of any acts, omissions or circumstances occurring from and after
Closing.
12.2. Release of Mariner Entities. Subject to, and in consideration for
each Mariner Entity entering into this Agreement and the occurrence of the
Closing, Omega, contemporaneously with the Settlement Documents (other than this
Agreement and the Escrow Documents) becoming effective, releases and forever
discharges the Mariner Entities and their respective successors, assigns,
agents, shareholders, directors, officers, employees, 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, contingent, matured or not yet due, liquidated or
unliquidated, direct or indirect, or otherwise, which Omega now has or at any
time may hold, by reason of any matter, cause or thing occurred, done, omitted
or suffered to be done prior to the Closing, including, without limitation, the
GranCare Keep-Well Obligation and all other obligations arising under or in
connection with the Omega Loan Documents, as amended (collectively, the "Mariner
Liabilities"), other than from Mariner Liabilities arising out of this Agreement
or any other Settlement Document. Omega 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." Omega 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.
Omega accepts this possibility and assumes the risk of the facts turning out to
be different and new information being discovered; and Omega 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.
Notwithstanding anything to the contrary contained in this Section 12.2
or otherwise, this release shall only be effective on and as of the Closing and
not otherwise.
Omega is not releasing any Mariner Entity from any Mariner Liabilities
arising out of this Agreement, any other Settlement Document or the transactions
contemplated hereby, except as expressly provided herein or in the Mariner
Entities Release, or arising out of any acts, omissions or circumstances
occurring from and after Closing.
12.3. No Further Commitments by Omega. Each Mariner Entity further
acknowledges that, from and after the Closing, Omega has no existing
commitments, obligations or agreements to advance credits or loans, or to lease
property, or make financial or other accommodations to any Mariner Entity,
except as may be specifically set forth in this Agreement or the Settlement
Documents. This Agreement may not be assigned by any party hereto without the
prior written consent of each of the parties hereto.
ARTICLE 13
RESTRUCTURING OF OMEGA INDEBTEDNESS
13.1 Agreements Subject to Contingency. The agreements set forth
in this Article 13 are subject to the consummation of the transactions
contemplated in this Agreement.
13.2 Agreements Regarding Indebtedness to Omega as of December 31,
1999. As of December 31, 1999, the principal balance owing to Omega under the
Omega Note, over and above all claims and setoffs, was $63,736,108.97, and the
interest owing thereon was $759,154.97.
13.3 Accrual of Interest Post-December 31, 1999. For the period from
January 1, 2000 to but not including the Closing Date, interest shall be deemed
to have accrued on the Omega Loan (a) at the compromise amount of $525,000 per
month (prorated for any partial month), irrespective of the higher rate at which
interest otherwise would have accrued under the terms of the Omega Note as in
effect on the date hereof, plus (b) an additional $300,000 (aggregate, not
monthly), representing interest at the rate of 11.25% per annum on the
$8,000,000 principal of the Omega Loan excluded in the parties' calculation of
the $525,000 compromise monthly interest amount, for the four (4)-month period
between the originally anticipated closing date of the Ciena Transaction and the
actual closing date of the Ciena Transaction. The interest which accrued on the
Omega Note as set forth in the first sentence of this Section 13.3 for the
period from January 1, 2000 to, but not but not including, the Closing Date is
herein referred to as "Post-December 31, 1999 Interest". All payments of the
Post-December 31, 1999 Interest received by Omega, whether before or after the
Closing, shall be applied to the oldest Post-December 31, 1999 Interest first.
Upon Closing, Omega shall be deemed to have waived any and all amounts owing to
it by the Mariner Debtors other than amounts expressly owing from time to time
under the Settlement Documents (including in such waiver, without limitation,
claims for late fees or default interest with respect to the period prior to and
including the Closing Date, as well as interest on the principal amount of any
credits given by Omega in connection with the assignment to Omega of an
undivided 50% interest in the Ciena Purchase Money Loan Documents from and after
January 1, 2000 through the dates of the giving of such credits, other than that
referred to in clause (b) of this Section).
13.4 Payments Received and To Be Received By Omega from January 1, 2000
through the Closing Date. This Section 13.4 sets forth the payments which Omega
has received and anticipates receiving, and the application thereof, with
respect to the Omega Loan and the Maintenance Obligation Note from January 1,
2000 through and including the Closing Date:
(i) On January 13, 2000, Omega applied the Liquidity Deposit, which
totaled $2,359,095.00, to the balance owing to Omega. Of the Liquidity
Deposit, $759,154.97 was applied to the interest owing as of December 31,
1999, thereby paying such interest in full. The remaining balance,
$1,559,940.03, was applied to the principal balance owing to Omega on the
Omega Note, thereby reducing such principal balance to $62,176,168.94.
(ii) In connection with its acquisition on February 1, 2001 of an
undivided fifty percent (50%) interest in the Ciena Purchase Money Loan
Documents, Omega gave PHCM a $4,500,000 credit against the amount owing on
the Omega Loan. This credit was applied as follows: (x) $452,340.86 was
applied against Post-December 31, 1999 Interest accruing prior to the
Petition Date, and (y) $4,047,659.14 was applied against principal, thereby
reducing the principal balance to $58,128,509.80.
(iii) Omega agrees to restore $1,559,940.03 of the Liquidity Deposit
previously applied to the principal balance owing on the Omega Note by
paying such restored amount to PHCM on the Closing Date by wire transfer of
immediately available funds. Assuming no other adjustments to the principal
balance between the date hereof and the Closing Date, such restoration will
increase the principal balance owing on the Omega Note to $59,688,449.83,
which the parties anticipate will be the Amended Omega Note Balance, in the
absence of the application of any insurance proceeds or condemnation awards
to reduce the outstanding principal amount of the Omega Loan prior to
Closing .
(iv) Omega is currently receiving payments on the Residual Ciena
Interest pledged to Omega. These amounts have not been applied, pending
completion of negotiations regarding this Agreement and entry of the
Approval Order. Omega agrees to refund such payments to PHCM on the Closing
Date by wire transfer of immediately available funds.
(v) In April, 2001, PHCM paid Omega $300,000. This amount has not been
applied, pending completion of negotiations regarding this Agreement and
entry of the Approval Order. Omega agrees to refund such payment to PHCM on
the Closing Date by wire transfer of immediately available funds.
(vi) At the Closing, PHCM shall pay to Omega, by official bank check
representing immediately available funds, all of its Available Closing
Cash, for application (1) first, against Post-December 31, 1999 Interest
(oldest interest first) to the extent accrued and unpaid as of the Closing
Date, (2) second, against any accrued and unpaid interest on the
Maintenance Obligation Note, including without limitation, interest owing
on the Contingent Principal as defined therein,, and (3) third, against the
outstanding principal of the Maintenance Obligation Note, including,
without limitation, the Contingent Principal. Any Available Closing Cash in
excess of the aggregate amounts necessary to satisfy in full the
obligations described in the foregoing clauses (1), (2) and (3) may be
retained by PHCM and used for any lawful business purpose not expressly
prohibited under the Settlement Documents.
The term "Available Closing Cash" shall mean, without duplication, all
cash held in the PHCM Debtors' Account as of the last day of the most
recently ended calendar month that is at least 30 days prior to the
Closing, plus (1) all amounts paid by Omega to PHCM at Closing for the
purchase of the Residual Ciena Interest, (2) the portion of the prepetition
liquidity deposit ($1,599,940.03) restored to PHCM at Closing pursuant to
clause (iii) of this Section 13.4, and (3) without duplication, all other
amounts paid to Omega by PHCM since the Petition Date and not yet applied
to the Omega obligations, including, without limitation, the amounts
referred to in paragraphs (iv) and (v) of this Section 13.4, minus (A) a
$500,000 retainage for working capital, (B) any portion of such cash
representing insurance proceeds or condemnation awards (such proceeds or
awards to be retained and applied for the purposes required in this
Agreement), and (C) any Medicaid Overpayment Claims.
(vii) Within 60 days after the Closing, PHCM will determine the amount
by which Modified Available Closing Cash (as hereinafter defined) exceeded
Available Closing Cash, if at all (the "Excess Cash"), and will deliver a
certificate to Omega setting forth the calculation of Modified Available
Closing Cash and Excess Cash. Unless (a) all Past Due Interest and accrued
interest thereon, plus (b) the Maintenance Obligation Note and accrued
interest thereon, plus (c) all Deferred Omega Note Interest (as that term
is defined in the Amended Omega Loan Agreement), if any, and accrued
interest thereon shall have been paid in full, PHCM shall contemporaneously
with the delivery of such certificate (but no later than 60 days after
Closing) pay to Omega an amount equal to the lesser of (i) the amount of
the Excess Cash and (ii) the sum of the amounts described in clauses (a),
(b) and (c) of this paragraph, to the extent then outstanding, for
application against the amounts described in such clauses, in that order of
priority.
The term "Modified Available Closing Cash" shall means, Available Closing
Cash plus the additional amount of cash, if any, required by the Cash
Collateral Order to be deposited in the PHCM Debtors' Account as at the end
of the calendar month preceding the calendar month in which the Closing
occurred. If the Debtors were not required to deposit any additional cash
in the PHCM Debtors' Account as of the end of such month or would have been
entitled to remove cash, Modified Available Cash shall be deemed to equal
Available Closing Cash, and Excess Cash shall be zero.
13.5 Payment of Past Due Interest. All Post-December 31, 1999 Interest
not paid on or before the Closing Date is referred to herein as the "Past Due
Interest". The following shall govern the payment of the Past Due Interest:
(i) From and after the Closing Date, the amount of the Past Due
Interest unpaid from time to time shall bear interest at the Interest Rate.
(ii) Commencing on the first day of the first month following the
Closing Date, and on the first day of each month thereafter until the Past
Due Interest and all interest thereon is paid in full, accrued interest on
Past Due Interest, then Past Due Interest itself (beginning with the oldest
Past Due Interest) shall be due and payable out of the Minimum Monthly
Payments made by PHCM pursuant to Section 13.6 hereof.
(iii) Each of the Operators shall be jointly and severally liable for
repayment of the Past Due Interest. Repayment of the Past Due interest
shall be secured by the Amended Omega Loan Documents.
(iv) In no event shall the interest rate in effect from time to time
under this Section 13.5 exceed the highest rate allowed by law. If Omega
shall reasonably determine that the interest rate under this Section 13.5
has been adjudicated to be usurious or is otherwise limited by statute,
interest in excess of the applicable legal rate paid or collected by Omega
shall be deemed to have been automatically and immediately credited by
Omega to the Past Due Interest under this Section 13.5 and shall not be
charged to interest, it being the intention of Omega and the Operators that
no interest in excess of the legal rate shall be taken or received.
13.6 Minimum Monthly Payments.
(i) Until the Catch-Up Date, PHCM shall pay to Omega on the first day
of each month an amount equal to the Minimum Monthly Payment (as
hereinafter defined). After the Catch-Up Date, PHCM shall not be obligated
to pay the Minimum Monthly Payments, but rather shall pay to Omega the
amounts which become due under the Amended Omega Loan Documents when and as
such amounts become due.
"Minimum Monthly Payment" shall mean the sum of the following:
(i) One-twelfth (1/12th) of the amount obtained by multiplying the
original Amended Omega Note Balance by the Interest Rate ;
(ii) One-twelfth (1/12th) of the amount obtained by multiplying the
Past Due Interest outstanding on the Closing Date (after the application of
Available Closing Cash) by the Interest Rate; and
(iii) One-twelfth (1/12th) of the amount obtained by multiplying the
principal amount of the Maintenance Obligation Note outstanding on the
Closing Date (after the application of Available Closing Cash) by 11.25%.
(ii) The Minimum Monthly Payments will be applied to PHCM's
obligations to Omega in the following order of priority: (1) accrued and
unpaid interest on Past Due Interest; (2) Past Due Interest (oldest
interest first); (3) accrued and unpaid interest on Deferred Omega Note
Interest; (4) Deferred Omega Note Interest; (5) other accrued and unpaid
interest on the Amended Omega Note; (6) accrued and unpaid interest on the
Maintenance Obligation Note; (7) accrued and unpaid interest on Deferred
Amendment Fee Note; (8) outstanding principal of the Maintenance Obligation
Note; (9) outstanding principal of Deferred Amendment Fee Note; and (10)
outstanding principal of Amended Omega Note. Until the Catch-Up Date, Omega
agrees to provide PHCM, within 30 days after the end of each calendar
month, a statement setting forth the amounts applied to each of the
foregoing categories of obligations and the amount of each such category of
obligation remaining outstanding.
(iii) Promptly after the Catch-Up Date, Omega shall provide PHCM with
written notice that the Catch-Up Date has occurred and specifying the
amount of the monthly payment due under the Amended Omega Note beginning on
the first day of the next calendar month. In the event Omega shall fail to
provide such notice and PHCM continues to pay the Minimum Monthly Payments,
the excess of such Minimum Monthly Payment shall not be applied to the
outstanding principal of the Amended Omega Note, but rather shall be
credited against the interest payment(s) next coming due and payable
thereunder.
(iv) As more particularly specified in the Amended Omega Loan
Documents, following the Closing Date (1) all interest on the Amended Omega
Note shall accrue until the Past Due Interest and any interest which
accrues thereon has been paid in full, (2) any installment of the Amendment
Fee which becomes due prior to the Catch-Up Date shall be paid by the
issuance of a Deferred Amendment Fee Note or an amendment thereto; and (3)
no principal shall be paid on the Maintenance Obligation Note until the
Past Due Interest and any interest thereon and all Deferred Omega Note
Interest and any interest accrued thereon have been paid in full.
(v) The Minimum Monthly Payments relate only to amounts which will
after the Closing become due to Omega under (1) this Article 13, (2) the
Amended Omega Note, (3) Article 9 hereof, and (4) the Maintenance
Obligation Note. The payment of the Minimum Monthly Payments shall not
relieve the Mariner Entities from the obligation to make other payments
(such as, without limitation, insurance or condemnation proceeds), if any,
which from time to time may become due to Omega under other provisions of
this Agreement or the Amended Omega Loan Documents. Further, nothing in
this Article 13 shall be construed as prohibiting Omega, following an Event
of Default, from accelerating any amounts due it in accordance with the
terms of the Amended Omega Loan Documents.
13.7 The Cash Collateral Order. Section 7 of the Final Order (i)
Authorizing Use of Cash Collateral of Real Estate Lenders and (ii) Granting
Adequate Protection Therefor (the "Cash Collateral Order") entered by the Court
on March 20, 2000 requires that to the extent that PHCM Debtors' Cash Flow (as
defined in the Cash Collateral Order) is positive, the cumulative amount thereof
shall be segregated in a separate account (the "PHCM Debtors' Account") for the
PHCM Debtors (as defined in the Cash Collateral Order) on a monthly basis. The
parties hereto agree that the proper amount to be deposited into the PHCM
Debtors' Account as of March 31, 2001 was $3,242,319. The Mariner Entities
represent that the foregoing amount has in fact been deposited into a segregated
account and that they continue to comply with the requirements of Section 7 of
the Cash Collateral Order. The Mariner Entities shall continue to comply with
Section 7 of the Cash Collateral Order modified, if approved by the Court, in
the following two respects:
(i) The PHCM Debtors' may use their funds, or the funds in the PHCM
Debtors' Account, to pay any amounts which are deducted in determining
Operators' Free Cash Flow as defined in Section 9.2 hereof; and
(ii) The funds in the PHCM Debtors' Account may be used to pay any
amounts which the Mariner Entities are authorized or required to pay Omega
hereunder.
ARTICLE 14
SHARING OF EXCESS CIENA NOTE PAYMENTS
14.1 Sharing of Excess Ciena Note Payments. From and after the Closing,
Omega agrees that if (a) the interest paid to Omega under the Ciena Note for any
Ciena Loan Year exceeds $960,000 (any such excess amount being an "Excess Ciena
Interest Payment"), or (b) Omega receives principal payments in excess of
$8,000,000 on the Ciena Note (any such payment being an "Excess Ciena Principal
Payment"), 50% of the amount of each Excess Ciena Interest Payment and 50% of
the amount of each Excess Ciena Principal Payment shall be deemed to have been
received by Omega on behalf of PHCM, and shall be applied, at PHCM's option, to
either (i) fund the liquidity deposit payments due in the seventh (7th),
thirteenth (13th) and nineteenth (19th) months after the Closing pursuant to the
Liquidity Deposit Agreement or (ii) pay any Past Due Interest or interest
thereon, any interest owing on the Amended Omega Note, any interest and then
principal owing on the Maintenance Obligation Note, or any interest and then
principal owing on the Deferred Amendment Fee Note, if issued. If all amounts
described in clauses (i) and (ii) of the immediately preceding sentence shall
have been paid in full, and provided that no "event of default" then exists
under the Amended Omega Loan Documents, Omega shall promptly pay to PHCM, if, as
and when received by Omega, PHCM's 50% share of Excess Ciena Interest Payments
and Excess Ciena Principal Payments, and PHCM may retain such amounts for its
own use.
14.2 Application of Proceeds of Ciena Accounts. PHCM shall utilize the
net collections from accounts receivable at the Ciena Facilities, after payment
of expenses, to either (a) make prepayments of Past Due Interest and accrued
interest thereon, (b) make prepayments on the Maintenance Obligation Note
(applied first to accrued, unpaid interest, then to principal), (c) pay interest
on the Amended Omega Note, (d) fund all or a portion of the Liquidity Deposit
Installments, (e) make prepayments on the Deferred Amendment Fee Note, if any
(applied first to accrued, unpaid interest, then to principal), or (f) reduce
the outstanding principal balance of the Omega Loan, or for a combination of
these purposes, at its option.
ARTICLE 15
ANCILLARY TRANSACTIONS
Section 15.1 Consent to Ancillary Transactions. Omega hereby consents
to the LC-PHCM Stock Transfer and the Majority Equity Sale (the consummation of
which shall be at the option of the applicable Mariner Entities), subject only
to the satisfaction of the following conditions precedent:
(i) Omega shall have received a certificate signed by the Secretary or
Assistant Secretary of LC-PHCM and of each intermediate transferee of the
LC-PHCM capital stock, setting forth the names, titles and signatures of
the officers of LC-PHCM and each such intermediate transferee after giving
effect to the LC-PHCM Stock Transfer, and to which certificate(s) are
attached a true and complete copy of the resolutions adopted by LC-PHCM and
each such intermediate transferee, and all necessary shareholder action,
authorizing the LC-PHCM Stock Transfer;
(ii) Omega shall have received a certificate signed by an authorized
officer, manager or other representative (an "Authorized Investor
Representative") of the Investor, confirming the incumbency of the
Authorized Investor Representatives and the authority of the Investor to
execute and deliver the Investor Guaranty and each of the other Settlement
Documents to which it is a party, and to which certificate are attached the
following:
(A) a copy of the articles of incorporation, partnership
certificate, articles of organization or other charter document
pursuant to which the Investor was incorporated, formed or organized,
as amended, and as certified by the Secretary of State of the
jurisdiction of its incorporation, formation or organization as of a
recent date; (B) a true, correct and complete copy of the bylaws,
partnership agreement or operating agreement of the Investor, as
amended;
(C) a true and complete copy of the resolutions or other
authorizing action adopted by all of the shareholders, partners or
members of the Investor, authorizing the transactions contemplated
herein, and the execution, delivery and performance of the Investor
Guaranty and the other Settlement Documents to which the Investor is
to be a party;
(D) a certificate of good standing for the Investor, issued as of
a recent date by the Secretary of State of the jurisdiction of its
incorporation, formation or organization; and
(E) a certificate of authority issued by the Secretary of State
of any jurisdiction in which the Investor is required to be qualified
as a foreign corporation, partnership or limited liability company, as
the case may be;
(iii) Omega shall have received a certificate signed by the Secretary
or Assistant Secretary of PHCM, setting forth the names, titles and
signatures of the officers of PHCM after giving effect to the Majority
Equity Sale, and to which certificate are attached the following:
(A) a copy of any amendments to the articles of incorporation of
PHCM adopted since the Closing Date, as certified by the Secretary of
State of the jurisdiction of its incorporation as of a recent date,
including an amendment providing that PHCM cannot file any plan of
reorganization in any future case under the Bankruptcy Code in which
PHCM is a debtor that impairs the claim of Omega as set forth in the
Settlement Documents, within the meaning of 11 U.S.C. ss. 1124,
without the approval of 100% of its shareholders; and ; (B) a true,
correct and complete copy of any amendments to the bylaws of PHCM
adopted since the Closing Date, including an amendment providing that
PHCM cannot file any plan of reorganization in any future case under
the Bankruptcy Code in which PHCM is a debtor that impairs the claim
of Omega as set forth in the Settlement Documents, within the meaning
of 11 U.S.C. ss. 1124, without the approval of 100% of its
shareholders;
(iii) Omega shall have received the Investor Guaranty, duly executed
and delivered by the Investor;
(iv) The pledge agreement executed by PHCM in favor of Omega pursuant
to Section 5.2(iii) hereof shall have been modified to include a pledge of
the shares in LC-PHCM held by PHCM, and the certificates evidencing the
shares of LC-PHCM capital stock pledged pursuant to such amendment,
together with appropriate powers, executed in blank, shall have been
delivered to Omega; and
(v) Omega shall have received a pledge agreement executed by the
Investor in favor of Omega, in substantially the form attached to the
pledge agreement from GranCare referred to in Section 5.2(v) hereof,
pledging the shares in PHCM (or the membership interests in New PHCM,
as applicable) held by the Investor as security for the payment and
performance of the Investor's obligations under the Investor Guaranty;
and
Omega shall have received the certificates evidencing the Investor's shares or
membership interests pledged pursuant to the pledge agreement referred to in
paragraph (iv) of this Section 15.1, together with appropriate powers, executed
in blank, for delivery to Omega.;
15.2 Consent Needed for Merger. PHCM shall not enter into a Merger
Agreement or consummate the Merger without the prior written consent of Omega
and the Investor, which consent shall not be unreasonably withheld, delayed or
conditioned. Omega shall have the right to condition its consent to the Merger
upon the execution and deliver of such replacement equity pledge agreements,
certificates evidencing membership interests in New PHCM, and officer's
certificates as it may reasonably request, and generally consistent with the
form and substance of comparable documents executed and delivered by the Mariner
Entities in connection with the transactions contemplated in this Agreement. If
the Merger, as so approved, is consummated, then from and after the effective
time thereof, all rights and obligations of PHCM under and in connection with
the Settlement Documents shall inure to the benefit of, and be binding on, New
PHCM.
15.3 Return of Certain Settlement Documents. Upon satisfaction of the
conditions precedent set forth in Sections 15.1 and (if applicable) 15.2, Omega
shall cause to be returned to New PHCM the Escrow Documents executed by PHCM and
delivered to the Escrow Agent at Closing, and shall cause to be returned to
GranCare the original pledge agreement from GranCare referred to in Section
5.2(v) hereof, and all stock certificates and stock powers delivered by GranCare
pursuant to Section 5.2(vi) hereof (such Settlement Documents having been
replaced as provided in Sections 15.1 or 15.2 hereof).
ARTICLE 16
GENERAL PROVISIONS
16.1. 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 ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; OR (ii) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN OR AMONG THEM; OR (iii) 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.
16.2. Survival. Except as otherwise provided by this Agreement, all
covenants, agreements, representations and warranties made by Omega or any
Mariner Entity herein and in all certificates delivered pursuant to this
Agreement shall survive the Closing of the transactions contemplated hereby for
a period of one (1) year from the date of this Agreement or of the applicable
certificate. If and to the extent the Mariner Entities shall emerge from the
Cases pursuant to a confirmed plan of reorganization prior to the expiration of
such period, then the obligations provided herein shall be a continuing
obligation of the reorganized Mariner Entities and any plan confirmed in the
Cases shall so provide.
16.3. Notices. All notices, demands and other communications
hereunder shall be in writing and delivered by nationally recognized overnight
courier service, by facsimile transmission or by first class registered or
certified U.S. Mail, (with postage or courier charges prepaid) addressed as
follows:
(a) if to Omega:
OMEGA HEALTHCARE INVESTORS, INC.
900 Victors Way, Suite 350
Ann Arbor, MI 48108
Attention: Chief Operating Officer
Fax No. (734) 887-0326
with copies to:
DYKEMA GOSSETT PLLC
39577 Woodward Avenue, Suite 300
Bloomfield Hills, MI 48304-2820
Attention: Fred J. Fechheimer, Esq.;
Fax No. (248) 203-0763; and prior to the Plan
Effective Date
CONNOLLY BOVE LODGE & HUTZ LLP
220 Market Street
Wilmington, DE 19899-2207
Attention: Jeffrey C. Wisler, Esq.
Fax No. (302) 658-5614
(b) if to any Mariner Entity:
MARINER POST-ACUTE NETWORK, INC.
One Ravinia Drive
Atlanta, GA 30346
Attention: Senior Vice President and Treasurer
Fax No. (678) 443-6874
with copies to:
MARINER POST-ACUTE NETWORK, INC.
One Ravinia Drive
Atlanta, GA 30346
Attention: Associate General Counsel
Fax No. (678) 443-6778; and
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 Peachtree Street, N.E., 16th Floor
Atlanta, GA 30303
Attention: Robert C. Lewinson, Esq.
Fax No. (404) 572-6999; and, on or prior to the
Plan Effective Date,
STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION
3699 Wilshire Boulevard, Suite 900
Los Angeles, CA 90010
Attention: Isaac M. Pachulski, Esq.
Fax No. (213) 251-5288;
or to such other address as may hereafter be designated by any party for such
other purpose, and shall be effective upon receipt if hand delivered or sent by
overnight courier service, or upon receipt of transmission confirmation if sent
by facsimile transmission, upon the expiration of the fifth Business Day after
the day of mailing by certified or registered U.S. Mail.
16.4. Governing Law. This Agreement shall be governed by, interpreted,
construed, applied and enforced in accordance with the Bankruptcy Code and the
laws of the State of Georgia applicable to contracts between residents of the
State of Georgia which are to be performed entirely within the State of Georgia,
regardless of (i) where this Agreement is executed or delivered; or (ii) where
any payment or other performance required by this Agreement is made or required
to be made; or (iii) where any breach of any provision of this Agreement occurs,
or any cause of action otherwise accrues; or (iv) where any action or other
proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of the jurisdiction other than the State of
Georgia; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement shall be brought and prosecuted in the Court. If and only if such
action cannot be brought and prosecuted in the Court, then such action may be
brought and prosecuted in such court or courts located in the State of Michigan
as is provided by law; and the parties consent to the jurisdiction of said court
or courts located in the State of Michigan and to service of process by
registered mail, return receipt requested, or by any other manner provided by
applicable law.
16.5. Successors and Assigns. This Agreement shall be binding upon each
party thereto and its successors and assigns. The rights and obligations of any
party hereto under this Agreement may not be assigned by any party hereto
without the prior written consent of each of the parties hereto. Without
limiting the generality of the foregoing, upon consummation of the Merger, New
PHCM shall succeed to the rights and obligations of PHCM hereunder. In addition,
MPAN has informed Omega that it is considering a corporate restructuring which
would, among other things, potentially involve transferring the capital stock of
GranCare to another wholly owned subsidiary of MPAN (whether now existing or to
be formed) and converting GranCare into a limited liability company, by merger.
Omega hereby consents to such transactions; in the event GranCare becomes a
limited liability company, GranCare shall cause such limited liability company
to assume in writing GranCare's obligations under the Settlement Documents to
which GranCare is a party and to execute and deliver to Omega such additional
UCC financing statements, replacement stock certificates (evidencing its equity
interest in PHCM or New PHCM, as applicable) and other documents or instruments
and agreements as Omega reasonably requests for the purpose of maintaining the
perfection of the pledge of such equity interests in PHCM or New PHCM.
16.6. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and such other documents as are referred to herein, constitute
the entire agreement of the parties in respect of the subject matter described
herein. This Agreement may not be changed or modified except by an agreement in
writing signed by the parties hereto.
16.7. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and the
Agreement shall thereupon be reformed and construed and enforced to the maximum
extent permitted by applicable law.
16.8. Attorneys' Fees. If any legal action is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable and documented attorneys' fees and other costs actually incurred in
that action in addition to any other relief to which it or they may be entitled.
16.9. Non-Disclosure. Until this Agreement is publicly announced by
Omega (i) the Mariner Entities and Omega, 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"), and (ii) no Mariner Entity 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. In addition, Omega, on
the one hand, and the Mariner Entities, on the other hand, shall obtain the
approval of each other, which approval shall not be unreasonably withheld, prior
to making any public announcements concerning this Agreement or the transactions
contemplated hereby. Each Mariner Entity, however, acknowledges 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.
16.10. Required Disclosure. Notwithstanding Section 16.9 hereof, each
party hereby 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.
16.11. Costs and Expenses. Except as expressly provided to the
contrary herein, each party to this agreement shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement
and the related documents.
16.12. Confidentiality. 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.
16.13 Reservation of Rights. Each party hereto acknowledges that it and
the other parties hereto have entered into this Agreement in order to settle and
compromise certain potential claims between them and that the execution,
delivery and performance of this Agreement by the parties hereto is not an
admission of any party's obligations or liabilities whatsoever. This document is
subject to the protections of Federal Rule of Evidence 408 and all similar
provisions and supporting authorities.
16.14 Third Party Beneficiaries. This Agreement and all other
instruments executed and delivered in connection herewith are not intended to
benefit any third parties, including, without limitation, any such parties that
may have claims against any of the Mariner Entities or Omega.
16.15 Certain Consents and Further Assurances. Omega hereby agrees to
execute and deliver such additional documents, instruments and agreements as the
Mariner Entities may reasonably request to provide further assurances of the
consents granted by Omega herein, consistent with the provisions of this
Agreement. In addition, in light of the fact that the Ciena Facilities have been
sold, Omega further consents to the liquidation and dissolution of the Ciena
Subsidiaries after the Closing and agrees to execute such releases of the Ciena
Facilities (and only the Ciena Subsidiaries) from their obligations under the
Settlement Documents in connection with such liquidation and dissolution as
Mariner or PHCM may reasonably request, it being expressly understood and
agreed, however, that any such releases shall in no way diminish or impair the
obligations of the Mariner Entities other than the Ciena Subsidiaries under the
Settlement Documents.
16.16. Ratification. Each of the Mariner Entities hereby ratifies
and approves the transactions described in the Settlement Documents and all
lawful actions previously taken by officers and representatives of the Mariner
entities in furtherance thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and their respective seals to
be hereunto affixed and attested by their respective duly authorized officers.
OMEGA: OMEGA HEALTHCARE INVESTORS, INC.
By: /s/ F. SCOTT KELLMAN
--------------------
Name: F. Scott Kellman
Title: Chief Operating Officer
PHCM: PROFESSIONAL HEALTH CARE
MANAGEMENT, INC.
By: /s/ BOYD P. GENTRY
------------------
Name: Boyd P. Gentry
Title: President
MICHIGAN SUBSIDIARIES: CAMBRIDGE BEDFORD, INC., CAMBRIDGE EAST, INC.,
CAMBRIDGE NORTH, INC., CAMBRIDGE SOUTH, INC.,
CLINTONAIRE NURSING HOME, INC., CRESTMONT HEALTH
CENTER, INC., HERITAGE NURSING HOME, INC.,
NIGHTINGALE EAST NURSING CENTER, INC., MIDDLEBELT
- HOPE NURSING HOME, INC., MADONNA NURSING HOME,
INC., FRENCHTOWN NURSING HOME, INC., ST. ANTHONY
NURSING HOME, INC. and MIDDLEBELT NURSING HOME,
INC.
By: /s/ BOYD P. GENTRY
------------------
Name: Boyd P. Gentry
Title: President
LC-PHCM: LIVING CENTERS - PHCM, INC.
By: /s/ BOYD P. GENTRY
------------------
Name: Boyd P. Gentry
Title: President
GRANCARE: GRANCARE, INC.
By: /s/ BOYD P. GENTRY
------------------
Name: Boyd P. Gentry
Title: President
MARINER: MARINER POST-ACUTE NETWORK, INC.
By: /s/ BOYD P. GENTRY
------------------
Name: Boyd P. Gentry
Title: President
SCHEDULE A
List of Facilities
I. MICHIGAN FACILITIES
Name of Facility Subsidiary Lessee/Operator
---------------- --------------------------
1. Bedford Villa Healthcare Center Cambridge Bedford, Inc.
Southfield, MI
2. Cambridge East Healthcare Center Cambridge East, Inc.
Madison Heights, MI
3. Cambridge North Healthcare Center Cambridge North, Inc.
Clawson, MI
4. Cambridge South Healthcare Center Cambridge South, Inc.
Beverly Hills, MI
5.. Clinton-Aire Healthcare Center ClintonAire Nursing Home, Clinton Township, MI
Inc.
6. Crestmont Health Care Center Crestmont Health Center, Inc.
Fenton, MI
7. Heritage Manor Nursing Center Heritage Nursing Home, Inc.
Flint, MI
8. Nightingale Healthcare Center Nightingale East Nursing Center, Inc.
Warren, MI
9. Hope Healthcare Center Middlebelt-Hope Nursing Westland, MI
Home, Inc.
II. North Carolina Facilities
Name of Facility Subsidiary Lessee/Operator
---------------- --------------------------
1. Brian Center Health and Rehabilitation
Center - Statesville PHCM
Statesville, NC
2. Brian Center Health and Rehabilitation
Center - Goldsboro PHCM
Goldsboro, NC
3. Brian Center Health and Rehabilitation
Center -Durham PHCM
Durham, NC
III. CIENA FACILITIES (all located in Michigan)
Name of Facility Subsidiary Lessee/Operator
---------------- --------------------------
1. Frenchtown Healthcare Center Frenchtown Nursing Home, Monroe, MI
Inc.
2. St. Anthony Health Care Center St. Anthony Nursing Home, Warren, MI
Inc.
3. Madonna Healthcare Center Madonna Nursing Home, Inc.
Detroit, MI
4. Middlebelt Healthcare Center Middlebelt Nursing Home, Livonia, MI
Inc.
SCHEDULE B
Cases
Name of Entity Case No.
-------------- --------
Mariner 00-00113
PHCM 00-00198
Cambridge Bedford, Inc. 00-00134
Cambridge East, Inc. 00-00135
Cambridge North, Inc. 00-00136
Cambridge South, Inc. 00-00137
ClintonAire Nursing Home, Inc. 00-00138
Crestmont Health Center, Inc. 00-00141
Heritage Nursing Home, Inc. 00-00172
Nightingale East Nursing Center, Inc. 00-00196
Middlebelt-Hope Nursing Home, Inc. 00-00193
Frenchtown Nursing Home, Inc. 00-00148
St. Anthony Nursing Home, Inc. 00-00202
Madonna Nursing Home, Inc. 00-00190
Middlebelt Nursing Home, Inc. 00-00192
LC-PHCM 00-00183