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Exhibit 10.5
REPLACEMENT INTERCREDITOR
AGREEMENT
(Accounts Receivable)
THIS INTERCREDITOR
AGREEMENT is made as of the 4th day of August, 2006 (the "
Effective Date "), by and between AMSOUTH BANK, an Alabama
state banking corporation ("AmSouth" ), Diversicare Afton
Oaks, LLC, a Delaware limited liability company (the "Afton Oaks
Borrower"); Diversicare Pinedale, LLC, a Delaware limited liability
company (the "Newport Borrower"); Diversicare Windsor House, LLC, a
Delaware limited liability company (the "Windsor Borrower");
Diversicare Briarcliff, LLC, a Delaware limited liability company
(the "Briarcliff Borrower"); Diversicare Hartford, LLC, a Delaware
limited liability company (the "Hartford Borrower"); Diversicare
Chisolm, LLC, a Delaware limited liability company (the "Chisolm
Borrower"); Diversicare Hillcrest, LLC, a Delaware limited
liability company (the "Hillcrest Borrower"); Diversicare Yorktown,
LLC, a Delaware limited liability company (the "Yorktown
Borrower"); Diversicare Lampasas, LLC: a Delaware limited liability
company (the "Lampasas Borrower"); and Diversicare Assisted Living
Services NC I, LLC, a Delaware limited liability company (the "NC I
Borrower") and Diversicare Assisted Living Services NC II, LLC, a
Delaware limited liability company (the "NC II Borrower"; NC I
Borrower and NC II Borrower are collectively known as the "Carolina
Beach Borrower"), (Afton Oaks Borrower, Newport Borrower, Windsor
Borrower, Briarcliff Borrower, Hartford Borrower, Chisolm Borrower,
Hillcrest Borrower, Yorktown Borrower, Lampasas Borrower, and the
Carolina Beach Borrower may be referred to collectively herein as,
the " Borrower "), and CAPMARK FINANCE INC., a California
corporation (formerly known as GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation) (the "Lender" ).
R E C I T A L S
A. (i) Lender is the present
owner and holder of that certain loan (the "Note I Loan" )
in the original principal amount of $22,500,000.00 made to
Borrower, which Note I Loan is secured by, among other things, the
following (collectively, the "Note I Security" ):
(i) first lien deed of trust or mortgage (collectively, the
"Note I Mortgage" ) with respect to each Borrower’s
right, title, and interest in and to its facilities (which are more
particularly described on Schedule A attached hereto
(the " Note I Facilities "), including the underlying real
property (the " Note I Real Property "), the improvements
thereon, and all equipment, fixtures, inventory, and personal
property used in connection therewith, (ii) a first lien
security interest and an assignment of Borrower’s interest in
all general intangibles, licenses, permits, reimbursement
contracts, leases and contracts, (iii) a first lien security
interest and an assignment of Borrower’s interest in all
rents and leases relating to the Note I Facilities, (iv) an
assignment of the management contract and subordination of
management fees, and (v) a second lien security interest in
accounts receivable issuing from the Note I Facilities.
(ii) Lender is the present
owner and holder of that certain Loan (the "Note II Loan" )
in the original principal amount of $8,125,000 made to Borrower,
which Note II Loan is secured by, among other things, the following
(collectively, the "Note II Security" ):
(a) first lien deed of trust or
mortgage (collectively, the "Note II Mortgage"; the Note I
Mortgage, the Note II Mortgage, and the Second Mortgage, as defined
below, are collectively referred to herein as the "Mortgage"
) with respect to each Borrower’s right, title, and interest
in and to its facilities (which are more particularly described on
Schedule A attached hereto (the " Note II
Facilities "; the Note I Facilities and the Note II Facilities
are collectively referred to herein as the "Facilities" ),
including the underlying real property (the " Note II Real
Property "; Note I Real Property and Note II Real Property are
collectively referred to herein as the "Real Property" ),
the improvements thereon, and all equipment, fixtures, inventory,
and personal property used in connection therewith, (b) a
first lien security interest and an assignment of Borrower’s
interest in all general intangibles, licenses, permits,
reimbursement contracts, leases and contracts, (c) a first
lien security interest and an assignment of Borrower’s
interest in all rents and leases relating to the Note II
Facilities, (d) an assignment of the management contract and
subordination of management fees, (e) a second lien security
interest in accounts receivable issuing from the Note II
Facilities, (f) an assignment of the DCMS Note Receivable and
the Workers’ Comp Retro Premiums (both hereinafter defined on
Schedule B), and (g) a second lien deed of trust or
mortgage (the "Second Mortgage" ) with respect to the
Borrower’s right, title, and interest in and to the Note I
Facilities securing Note I Loan, including the Real Property.
The Note I Security and the Note
II Security may be referred to collectively herein as the
"Security" . The Note I Loan and Note II Loan may be
referred to collectively herein as the "Mortgage Loan" . The
Note I Facilities and the Note II Facilities maybe referred to
collectively herein as the "Facilities". The loan agreement, as
defined herein, and all other documents or instruments listed on
Schedule C attached hereto and made a part hereof, and
all other documents or instruments now or hereafter executed by
Borrower evidencing, securing or relating to the Mortgage Loan, as
herein defined, and all amendments thereto and restatements or
replacements thereof, as the same may be amended from time to time,
are hereinafter referred to collectively as the " Mortgage Loan
Documents ." Capitalized terms not otherwise defined herein
shall have the same meaning as set forth in the Mortgage Loan
Documents.
B. Pursuant to the terms of
that Replacement Reduced and Modified Renewal Revolving Promissory
Note executed by Diversicare Management Services, Co., a Tennessee
corporation ("DMS") as of October 29, 2004, as amended in the
maximum principal amount of $2,500,000.00, as further amended and
decreased to the maximum principal amount of $2,300,000.00 (the
"AmSouth Priority Amount"), AmSouth will continue to provide for
the benefit of DMS, Borrower and certain entities related to
Borrower or Corporate Guarantor, as defined below, a secured
revolving credit facility, secured by, among other things, the
Accounts (as hereinafter defined) of Borrower, the guaranty of
Advocat Inc., a Delaware corporation (the " Corporate
Guarantor "), the Stock (as hereinafter defined) and other
things as set forth in that Master Amendment to Loan Documents and
Agreement executed by AmSouth, Lender and
certain Debtors as defined therein on November 8, 2000 to
be effective as of October 1, 2000, as subsequently amended
(the "Master Amendment"). (The Replacement Reduced and Modified
Renewal Revolving Promissory Note, as amended is herein referred to
as the "AmSouth Note").
C. AmSouth and Lender
executed an Intercreditor Agreement, signed by DMS, Diversicare
Leasing Corp., a Tennessee corporation ("DLC") and wholly owned
subsidiary of Advocat Finance, Inc., a Tennessee corporation
("AFI") and wholly owned subsidiary of the Corporate Guarantor, and
by Corporate Guarantor, dated as of Decmeber 27, 1996, as
subsequently amended (the "Original Intercreditor Agreement"),
which Original Intercreditor Agreement set forth certain rights and
priorities with respect to the collateral securing AmSouth’s
and Lender’s respective credit accommodations to Borrower,
and Subsidiaries as defined therein.
D. Since execution of the
Original Intercreditor Agreement, AmSouth’s and
Lender’s respective credit accommodations have changed
substantially, and the parties heretohave entered into this
Replacement Intercreditor Agreement in order to agree upon,
reaffirm and restate the relative rights and priorities with
respect to the collateral securing their credit accommodations to
Borrower.
ARTICLE I
DEFINITIONS
Section 1.1. Certain
Definitions . Words and terms defined in the Recitals of this
Agreement shall have the meanings therein ascribed to them, and, in
addition, the following words and terms when used herein shall have
the respective meanings indicated:
"
Accounts " has the meaning set forth on
Schedule B attached hereto.
"AmSouth Accounts " means certain assets of the Borrower as
set forth on attached Schedule B hereto.
"AmSouth Loan Agreement " means the Master Amendment.
"AmSouth Loan Documents " shall mean, collectively, the
Master Amendment, all Loan Documents as defined therein, all other
documents or instruments now or hereafter executed by Borrower
evidencing, securing or relating to the AmSouth Note, and all
amendments thereto and restatements or replacements thereof.
"AmSouth Obligations " means the loan obligations of the
Borrower as more particularly set forth in the AmSouth Note and the
AmSouth Loan Documents.
"
Availability " means the maximum loan availability of DMS in
the amount of the AmSouth Priority Amount.
"
Business Day " means a day, other than Saturday or Sunday
and legal holidays, when AmSouth and Lender are both open for
business.
"
Ceased Funding " means, with respect to the Possession Date,
the date that AmSouth has notified Lender in writing that it has
determined to cease making further advances under the AmSouth Loan
Documents.
"
Common Collateral " has the meaning given such term in
Section 2.5 hereof.
"
Default Notice " means a notice by Lender to AmSouth that an
Event of Default (as defined in the Mortgage Loan Documents) exists
pursuant to the Mortgage Loan Documents, a copy of which notice of
Event of Default has been given to Borrower, unless Lender is
prevented from giving notice to Borrower by bankruptcy or other
applicable law.
"
Lender Accounts " has the meaning given such term in
Section 2.2 hereof.
"
Lender Obligations " means the "Loan Obligations" as defined
in the Mortgage Loan Documents.
"
Managed Health Care Plans " means, collectively, any health
maintenance organization, preferred provider organization or the
like.
"Medicaid" means that certain program of medical assistance,
funded jointly by the federal government and the States, for
impoverished individuals who are aged, blind and/or disabled,
and/or members of families with dependent children, which program
is more fully described in Title XIX of the Social Security Act (42
U.S.C. §§ 1396 et seq .) and the regulations
promulgated thereunder.
"Medicare" means that certain federal program providing
health insurance for eligible elderly and other individuals, under
which physicians, hospitals, skilled nursing homes, home health
care and other providers are reimbursed for certain covered
services they provide to the beneficiaries of such program, which
program is more fully described in Title XVIII of the Social
Security Act (42 U.S.C. §§ 1395 et seq .) and the
regulations promulgated thereunder.
"
Mortgage Loan Documents " has the meaning set forth in the
Recitals hereof.
"
Patient Agreements " means collectively any and all
contracts, authorizations, agreements or consents made by or on
behalf of any patient or resident of the Facilities, or any other
person seeking or obtaining services or Goods from Borrower,
pursuant to which a Borrower provides skilled nursing care,
intermediate care and/or assisted living facility, or any form of
patient or residential care, as well as related services at the
Facilities (as such contracts, authorizations, agreements or
consents may be amended, supplemented, renewed, replaced, extended
or modified from time to time). The Patient Agreements include
consents to treatment and assignments of payment of benefits.
"
Payors " means and includes any and all patients or
residents of the Facilities of Borrower, Managed Health Care Plans
or other Third Party Payors, and all other persons or entities
obligated on any Account, Document, Instrument, Chattel Paper or
otherwise under any agreement for the payment or reimbursement for
services rendered, Goods provided, or costs incurred by Borrower,
or otherwise obligated on any indebtedness owing to Borrower.
"
Permits " means: (a) the operating licenses for the
Facilities, any certificate of need, and any other license, permit,
approval or certificate which from time to time, may be issued or
is required to be issued by the United States, any state or local
government, or any agency or instrumentality of any of the
foregoing with respect to the construction, installation or
operation of the Facilities or any portion or component of the
Facilities, the providing of any profession or other services by
the Borrower, the purchase, sale, dispensing, storage, prescription
or use of drugs, medications or the like by Borrower, or any other
operations or businesses of Borrower; and (b) certifications
and eligibility for participation by Borrower, with respect to its
operation of the Facilities and any related businesses or
operations, in programs or arrangements with, or reimbursement from
Third Party Payors including Medicare and Medicaid; and
(c) all other licenses, permits and certificates used or
useful in connection with the ownership, operation, use or
occupancy of the Facilities.
"
Possession Date " means, with respect to the Facilities, the
earlier to occur of the date upon which (a) Lender, or its
nominee, has taken actual physical possession and control of such
Facility, whether by foreclosure, deed in lieu of foreclosure,
appointment of a receiver or other legal process and AmSouth has
received five (5) Business Days notice thereof in accordance
with Section 3.1 hereof, (b) Lender, or its nominee, has
begun the operation and management of such Facility to the
exclusion of the direct or indirect operation or management of such
Facility by the Borrower and/or its agents and AmSouth has received
five (5) Business Days notice thereof in accordance with
Section 3.1 hereof, (c) sixty (60) days after Lender
has given AmSouth a Default Notice with respect to an Event of
Default (as defined in the Mortgage Loan Documents) which was not
cured within such sixty (60) day period and AmSouth has
received notice thereof in accordance with Section 3.1 hereof,
(d) the date upon which all of the AmSouth Obligations have
been indefeasibly paid in full and the AmSouth Loan Agreement has
been terminated, or (e) the date upon which AmSouth has Ceased
Funding.
"
Proceeds " means all proceeds (but specifically excluding
all proceeds of insurance and condemnation) from the sale,
exchange, transfer, collection, loss, damage, disposition,
substitution or replacement of any of the Accounts.
"
Secured Lenders " shall mean, collectively, Lender and
AmSouth.
"
Stock " shall mean, collectively, all stock of the Corporate
Guarantor, and all stock, membership or partnership interests of
the Subsidiaries.
"
Subsidiaries " shall mean, collectively, DMS, the Corporate
Guarantor, AFI, DLC, Advocat Ancillary Services, Inc . , a
Tennessee corporation ("AAS")and wholly-owned subsidiary of DMS,
Diversicare General Partner, Inc., a Texas corporation ("DGP") and
wholly-owned subsidiary of DLC, First American Health Care, Inc.,
an Alabama corporation ("FAHC") and wholly-owned subsidiary of DLC,
Diversicare Leasing Corp. of Alabama, an Alabama corporation
("DLCA") and wholly-owned subsidiary of DLC, Advocat Distribution
Services, Inc.., a Tennessee corporation ("ADS") and wholly-owned
subsidiary of DMS, Diversicare Assisted Living Services, Inc., a
Tennessee corporation ("DALS") and a wholly-owned subsidiary of
AFI, Diversicare Assisted Living Services, NC, LLC, a Tennessee
limited liability company formed by DMS and DALS ("DALS-NC"),
Sterling Health Care Management, Inc., a Kentucky corporation
("SHCM") and wholly-owned subsidiary of DLC, and any and all
other
entities subsidiaries of the Borrower, DMS, DLC or any entity
herein named, formed subsequent to the execution of this
Agreement.
"
Third Party Payors " means any and all Managed Health Care
Plans, private insurers, Blue Cross and/or Blue Shield plans,
employee medical expense assistance programs, programs established,
maintained and/or administered by any federal, state or local
governmental authority (including, without limitation, Medicare and
Medicaid programs), and other similar third party payors.
The following terms shall have the
same respective meanings as are given to those terms in the Uniform
Commercial Code of the State of California, as amended: "
Chattel Paper ", " Contracts ", " Contract
Rights ", " Documents ", " General Intangibles ",
" Goods ", " Instruments ." Without limiting the
foregoing, the following kinds and types of property to the extent
related to the Facilities shall be included within the definition
of " General Intangibles ":
(a) Permits, Patient Agreements,
Provider Agreements and all other agreements (whether now existing
or hereafter made) between any of the Borrower and any Third Party
Payor relating to any rights of any Borrower or to payment and/or
reimbursement from, or claims of Borrower against, any Third Party
Payor;
(b) All franchises, sub
franchises, rights to distribute, sales agencies, licenses,
permits, leases, rights to indemnification, rights as insured,
including the right to be provided a defense, warranty rights,
concessions and concession rights, customer lists, yellow page or
trade journal listing, telephone numbers, and any and all other
property or rights necessary, convenient, or proper with respect to
the continued operation of the business of Borrower as now or
hereafter conducted by any of the Borrower with respect to the
operation or use of the Facilities;
(c) All patents and patent
applications, together with the right to sue for past, present, and
future infringements, all rights corresponding thereto throughout
the world and all reissues, divisions, continuations, renewals,
extensions, and continuations-in-part thereof and all improvements
thereon;
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