Preview
iD: NA AU OUN PK 04: DM INDEX NO. 617308/2023
NYSCEF BOC. NO. 12 RECEIVED NYSCEF: 01/16/2024
EXHIBIT A
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU
ween eee eee eee eee eee ee eee eee
THE BAY AT HIGHLANDS HEALTH AND Index No. 617308/2023
REHABILITATION CENTER, LLC and THE BAY AT
DYERSBURG HEALTH AND REHABILITATION
CENTER, LLC, AMENDED COMPLAINT
Plaintiffs,
-against-
TN MEM OP, LLC, TN DYER OP, LLC, CHAIM
LEIBOWITZ and DAVID ENGLANDER,
Defendants.
ween eee eee eee eee eee ee eee eee
Plaintiffs, The Bay at Highlands Health and Rehabilitation Center, LLC (“The Bay at
Highlands”) and The Bay at Dyersburg Health and Rehabilitation Center, LLC (“The Bay at
Dyersburg”), by their attorneys, Abrams Fensterman, LLP, as and for their Amended Complaint
against the Defendants herein, allege as follows:
AS AND FOR A FIRST CAUSE OF ACTION
(Breach of Contract)
1 At all times hereinafter mentioned, Plaintiff, The Bay at Highlands, was and still
is a Tennessee limited liability company, having offices in the County of Nassau, State of New
York.
2 At all times hereinafter mentioned, Plaintiff, The Bay at Dyersburg, was and still
is a Tennessee limited liability company, having offices in the County of Nassau, State of New
York.
3 At all times hereinafter mentioned, upon information and belief, Defendant TN
Mem Op, LLC, was and still is a Delaware limited liability company, and was the former
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operator of a certain skilled nursing facility known as The Highlands of Memphis Health &
Rehabilitation, located at 3549 Norriswood Avenue, Memphis, Tennessee (the “Memphis
Facility”).
4 At all times hereinafter mentioned, upon information and belief, Defendant TN
Dyer Op, LLC, was and still is a Delaware limited liability company, and was the former
operator of a certain skilled nursing facility known as The Highlands of Dyersburg Health &
Rehab, located at 350 East Tickle Street, Dyersburg, Tennessee (the “Dyersburg Facility”).
5 At all times hereinafter mentioned, upon information and belief, Defendant Chaim
Leibowitz a/k/a Jim Leibowitz (“Leibowitz”), was and still is a resident of the County of Nassau,
State of New York. During the relevant time period herein, Leibowitz was an Executive Vice-
President and operator of both TN Mem Op, LLC and TN Dyer Op, LLC.
6 At all times hereinafter mentioned, upon information and belief, Defendant David
Englander (“Englander”), was and still is a resident of the County of Nassau, State of New York.
During the relevant time period herein, Englander was, along with Leibowitz, an operator of both
TN Mem Op, LLC and TN Dyer Op, LLC.
7 On or about January 20, 2022, the parties entered into a certain Operations
Transfer Agreement (“OTA”), pursuant to which Plaintiffs purchased and acquired ownership of
and operational responsibility for the Memphis Facility and the Dyersburg Facility. A true and
accurate copy of the OTA is annexed hereto as Exhibit “A” and is incorporated herein by
reference.
8 Simultaneously therewith, Plaintiffs entered into a separate supplemental
Agreement (the “supplemental Agreement”) with Leibowitz and Englander, in their individual
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capacities, which supplemented certain provisions of the OTA. A true and accurate copy of the
supplemental Agreement is annexed hereto as Exhibit “B” and is incorporated herein by
reference.
9 Defendants breached the OTA and supplemental Agreement in various ways
including, but not limited to: failing to cooperate with the transition of ownership of the
Memphis Facility and the Dyersburg Facility; failing to pay bed taxes in the proper amounts as
required under State and Federal regulations, thereby causing Plaintiffs to incur such obligations;
improperly utilizing escrow funds for obligations for which such funds were not intended,
thereby causing Plaintiffs to be unable to access the escrow funds for the obligations that they
were intended for; and misappropriating and otherwise failing to remit to Plaintiffs various
recoupments, remittances and Covid-19 funding received by Defendants but which should have
been turned over to Plaintiffs, either in whole or in part.
10. At all times, Plaintiffs performed all obligations on their part under the OTA and
supplemental Agreement.
11. That the actions of the Defendants as aforesaid constitute multiple breaches of the
OTA and supplemental Agreement, for which Plaintiffs have been damaged in an amount to be
determined by the Court, but in any event, not less than the sum of Two Hundred Forty-Five
Thousand Fifteen and 29/100 ($245,015.29) Dollars plus interest.
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AS AND FOR A SECOND CAUSE OF ACTION
(Conversion)
12. Plaintiffs repeat and reallege each and every allegation in paragraphs “p> through
“11” of this Amended Complaint, as if more fully set forth at length hereat.
13. The recoupments, remittances and Covid-19 funding received and wrongfully
retained by Defendants constitute specific identifiable things, over which Plaintiffs had
ownership or entitlement.
14. That although Plaintiffs made demand upon the Defendants for the
return/payment of the recoupments, remittances and Covid-19 funding received and wrongfully
retained by Defendants, the Defendants have failed and otherwise refused to remit same to
Plaintiffs, and the Defendants continue to exercise unauthorized dominion and control over
same, to the exclusion and detriment of Plaintiffs’ rights.
15. That the acts of the Defendants as aforesaid constitute a conversion, for which
Plaintiffs have been damaged in an amount to be determined by the Court, but in any event, not
less than the sum of Three Hundred Fifty-Five Thousand One Hundred Thirty-Five and 15/100
Dollars ($355,135.15) plus interest.
AS AND FOR A THIRD CAUSE OF ACTION
(Unjust Enrichment)
16. Plaintiff repeats and realleges each and every allegation in paragraphs “1” through
“15” of this Amended Complaint, as if more fully set forth at length hereat.
17. The Defendants have been enriched, at Plaintiffs’ expense, by virtue of their
retention of the recoupments, remittances and Covid-19 funding aggregating the sum of
$355,135.15.
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18. That it would be against equity and good conscience to permit the Defendants to
retain the recoupments, remittances and Covid-19 funding aggregating the sum of $355,135.15.
19. That the acts of the Defendants as aforesaid constitute unjust enrichment, for
which Plaintiffs have been damaged in the amount of not less than $355,135.15 plus interest.
AS AND FOR A FOURTH CAUSE OF ACTION
(Breach of Implied Covenant of Good Faith)
20. Plaintiff repeats and realleges each and every allegation in paragraphs “1” through
“19” of this Amended Complaint, as if more fully set forth at length hereat.
21. Inherent in the OTA and supplemental Agreement is an implied covenant that the
parties will act in good faith and not undertake any actions to deprive the other party of the fruits
and benefits of the OTA and supplemental Agreement.
22. By their actions as aforesaid, Defendants have violated the implied covenant of
good faith and fair dealing, causing Plaintiffs to suffer damages in the amount of not less than
Two Hundred Forty-Five Thousand Fifteen and 29/100 ($245,015.29) Dollars plus interest.
AS AND FOR A FIFTH CAUSE OF ACTION
(Attorneys’ Fees)
23. Plaintiffs repeat and reallege each and every allegation in paragraphs “p> through
“22” of this Amended Complaint, as if more fully set forth at length hereat.
24. Paragraph “10.4” of the OTA provides for an award of reasonable attorneys’ fees
and court costs to the prevailing party, in the event suit is brought to enforce the provisions or
obligations of the OTA.
25. By virtue of the conduct of the Defendants as aforesaid, Plaintiffs are entitled to
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an award of reasonable attorneys’ fees in an amount to be determined by the Court along with
court costs.
WHEREFORE, Plaintiffs demand judgment on their First Cause of Action in the
amount of $245,015.29 plus interest; on their Second Cause of Action in the amount of
$355,135.15 plus interest; on their Third Cause of Action in the amount of $355,135.15 plus
interest; on their Fourth Cause of Action in the amount of $245,015.29 plus interest; and on their
Fifth Cause of Action awarding attorneys’ fees in an amount to be determined by the Court,
along with the costs and disbursements of this proceeding, and such other and further relief as
the Court may deem just proper and equitable.
Dated: December 11, 2023
ABRAMS FENSTERMAN, LLP
By.
Keith J. Singer
Alex Leibson
3 Dakota Drive, Suite 300
Lake Success, New York 11420
(516) 328-2300
ksinger@abramslaw.com
Attorneys for Plaintiffs
To HAHN EISENBERGER PLLC
Elliot Hahn, Esq.
969 East 27" Street
Brooklyn, New York 11210
Attorneys for Defendants
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EXHIBIT A
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Execution Version
OPERATIONS TRANSFER AGREEMENT
THIS OPERATIONS TRANSFER AGREEMENT (this “Agreement”) is made and
entered into as of January 20, 2022 (the “Effective Date”) by and between TN MEM OP, LLC, a
Delaware limited liability company (“Memphis Operator”) and TN DYER OP, LLC, a Delaware
limited liability company (“Dyersburg Operator” and, together with Memphis Operator,
collectively, “Exiting Operator”); and THE BAY AT HIGHLANDS HEALTH AND
REHABILITATION CENTER LLC, a Tennessee limited liability company (“Memphis New
Operator”) and THE BAY AT DYERSBURG HEALTH AND REHABILITATION CENTER
LLC, a Tennessee limited liability company (“Dyersburg New Operator” and, together with
Memphis New Operator, collectively, “New Operator”). New Operator and Exiting Operator are
each a “party” and, together, the “parties”.
RECITALS:
A Memphis Operator is the licensed operator of that certain skilled nursing facility
commonly known as The Highlands of Memphis Health & Rehabilitation, located at located at
3549 Norriswood Avenue, Memphis, Tennessee 38111 (the “Memphis Facility”)
B. Dyersburg Operator is the licensed operator of that certain skilled nursing facility
commonly known as The Highlands of Dyersburg Health & Rehab, located at located at 350 East
Tickle Street, Dyersburg, Tennessee 38024 (the “Dyersburg Facility” and together with the
Memphis Facility, individually and/or collectively, as the context may imply, the “Facility”).
B On the Closing Date (as defined below), pursuant to that certain Asset Purchase
Agreement, dated as of the date hereof, by and among TN DYERSBURG HOLDINGS, LLC and
TN MEMPHIS HOLDINGS, LLC, each a Delaware limited liability company (collectively,
“Seller”), Dyersburg TN Realty LLC, a Delaware limited liability company (“Dyersburg
Purchaser”) and Memphis TN Realty LLC, a Delaware limited liability company (“Memphis
Purchaser” and, together with Dyersburg Purchaser, “Purchaser”), Purchaser will purchase the
Facility and acquire ownership of the Facility from Seller (the “Purchase Agreement”). .
Cc On the Closing Date (as defined below), New Operator will lease the Facility from
Purchaser pursuant to a lease (“New Lease”).
D. Exiting Operator and New Operator desire to enter into this Agreement in order to
facilitate a transition of operational responsibility for the Facility from Exiting Operator to New
Operator.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants
of the parties set forth herein and for other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged,
IT IS HEREBY AGREED AS FOLLOWS:
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ARTICLE I
DEFINITIONS
1 Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below:
“Affiliate” means any Person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with, the Person specified.
“Agreement” has the meaning set forth in the preamble.
“Bill of Sale, Assignment and Assumption Agreement” means the document in
substantially the same form as set forth in Exhibit A attached to this Agreement.
“Closing Date” shall have the meaning set forth in the Purchase Agreement.
“COBRA” means the Consolidated Omnibus Reconciliation Act of 1986, as amended, and
all regulations promulgated thereunder, as in effect from time to time.
“Code” means the U.S. Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.
“Contracts” means all contracts and other agreements, incident to the operation of the
Facility.
“Current Employees” has the meaning set forth in Section 4.1(a).
“Effective Time” means 12:01 a.m. of the day immediately following the Closing Date.
“ERISA” means the Employee Retirement Security Act of 1974, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
“Excluded Assets” means the assets listed on Exhibit B attached to this Agreement.
“Facility” has the meaning set forth in the recitals.
“Governmental Authority” means any government or political subdivision or department
thereof, any governmental, administrative or regulatory body, commission, board, bureau, agency
or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case
whether federal, state, local or foreign.
“Health Care Authority” means any Governmental Authority having jurisdiction over the
use or operation of the Facility as a skilled nursing facility.
“Law” means any law, treaty, statute, ordinance, code, rule or regulation of a
Governmental Authority or judgment, decree, order, writ, award, injunction or determination of a
Governmental Authority.
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“Material Adverse Change” means a material event, change, development or occurrence
that has had or would reasonably be expected to have a material and adverse effect on the
operations, condition (financial or otherwise) or results of operations of Exiting Operator of the
Facility, taken as a whole, as a result of the following: (a) following the Effective Date, the loss of
any licensure or certification necessary to operate a Facility as a skilled nursing facility, including
any Facility having its operating license revoked, suspended, placed on probation, or otherwise
disciplined or limited, whether permanently or temporarily; but solely to the extent it results in a
material adverse effect on the Facility, (b) following the Effective Date, the designation of a
Facility as a Special Focus Nursing Home Facility as defined by the CMS Special Focus Nursing
Home Facility Program, but solely to the extent it results in a material adverse effect on the
Facility; (c) following the Effective Date, the decertification or other action Exiting Operator or
any Facility from or with respect to participation under Medicare, Medicaid or any other
governmental health care program, including being suspended or limited from, or otherwise
deemed ineligible for, or having any denial of payment or admissions or other limitation imposed
with respect to, whether permanently or temporarily, participation in the Medicare and/or
Medicaid reimbursement program; but solely to the extent it results in a material adverse effect on
the Facility; or (d) following the Effective Date, the issuance of a level “J” or higher survey
deficiency that is not deemed to be cured and in compliance by Closing Date; provided, however,
that in no event shall any of the following be deemed a Material Adverse Change to the extent that
Exiting Operator has corrected such condition prior to Closing and Exiting Operator shall be
entitled to cause Seller to adjourn the Closing one or more times, for an aggregate period of up to
sixty (60) days to permit Exiting Operator to effectuate such cure.
Notwithstanding the foregoing, a Material Adverse Change shall exclude: any such event,
change, development or occurrence attributable to or resulting from (i) any change in applicable
law or the interpretation thereof, (ii) any change in GAAP or the interpretation thereof, (iii) any
events, changes, developments or occurrences affecting the long term care industry generally or
the long term care industry in Tennessee generally, except to the extent such events, changes,
developments or occurrences affect the Facility in a disproportionately adverse manner relative to
other Persons engaged in such long term industry, (iv) general economic, political or market
conditions, (v) any disasters, calamities, emergencies, acts of war, sabotage or terrorism (or an
escalation or worsening of any of the foregoing), (vi) the entry into or announcement of this
Agreement or the Purchase Agreement and the transactions contemplated hereby and thereby, (vii)
any action taken or omitted to be taken by Exiting Operator pursuant to this Agreement or at the
written request or with the prior written consent of New Operator, (viii) any loss of, or change in,
the relationship of the Facility with its customers, employees or suppliers (but not any breach of
Contract by Exiting Operator) resulting from the execution, delivery or performance (in
accordance with its terms) of this Agreement, the consummation of the transactions contemplated
by this Agreement or the Purchase Agreement, or the announcement of any of the foregoing, (ix)
the failure of the Facility to achieve internal or external financial forecasts or projections, provided
that the events, changes, developments or occurrences underlying such failure shall not be
excluded as a result of this clause (ix), or (x) any breach by New Operator of this Agreement.
“Person” means any individual, corporation, company, association, partnership, limited
liability company, joint venture, trust, unincorporated organization, or Governmental Authority.
“Records” means all of the following, regardless of where or how maintained:
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(a) financial and accounting records pertaining to the operation of the Facility;
(b) as to Hired Employees, employment records (including applications for
employment background checks, disciplinary action records, performance appraisals, informal
supervisor files or notes, in-service attendance records, orientation schedules and attendance
records, staff meeting attendance records, incident reports and correspondence);
(c) as to Hired Employees, employee rosters (including contracted services,
time sheets and/or time cards, daily assignment sheets, daily, biweekly and/or monthly staffing
schedules, in-service records, outlines and sign-in sheets, staff meeting agendas, minutes and sign-
in sheets, committee rosters, minutes and attendance records and team meeting rosters);
(dd) as to current residents at the Closing Date, or any other residents discharged
since December 31, 2020, clinical records pertaining to all patients/residents (including intake
records and assessments, progress notes from all disciplines, care plans, Minimum Data Set and
Resident Assessment Protocols, physicians orders, nursing orders, consultations, all therapies and
behavioral records, laboratory and x-ray reports, flow sheets related to any aspect of patient care,
including vital signs, weight records, and photographs of patients/residents conditions);
© as to current residents at the Closing Date, or any other residents discharged
since December 31, 2020, quality of care records (including wound care team books, notes,
minutes, consultations, treatments and photographs, the 24-hour shift reports, correspondence,
complaint forms, and medication administration records and medication administration error
reports) that are not subject to quality assurance or any similar privilege; and
policy and procedure manuals that are not proprietary to Exiting Operator,
state provider manuals and any other records which would indicate payment for care
provided to patients/residents (including billing records and remittance advice records,
correspondence, with and from the Medicare and Medicaid providers to include the dietary,
housekeeping and maintenance departments and any consultants).
“Regulatory Approvals” means all regulatory approvals necessary in connection with the
consummation of the transactions contemplated by the Transaction Documents.
“Representatives” means, with respect to any Person, such Person’s officers, directors,
employees, agents, attorneys, accountants, consultants, equity financing partners or financial
advisors or other Person associated with, or acting on behalf of, such a Person.
“Resident Care System” means the computerized medical record system required to
maintain resident and nursing center records and to produce mandated minimum data set reports.
“Taxes” means all taxes, charges, fees, duties, levies or other assessments, including
income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible
and intangible), sales, use, franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits, severance, employee’s income
withholding, other withholding, unemployment and social security taxes, which are imposed by
any Governmental Authority, and such term shall include any interest, penalties or additions to tax
attributable thereto.
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“Tax Return” means any return, declaration, report, claim for refund, information return
or statement or other document relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof, including, without limitation, W-2s, 941s, and 5500s.
“Transaction” has the meaning set forth in Section 2.1.
“Transaction Documents” means, collectively, this Agreement and all documents
required to be delivered pursuant to Sections 2.2 and 2.3.
“Transferred Assets” has the meaning set forth in Section 3.1.
“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as
amended, and all regulations promulgated thereunder, as in effect from time to time.
1.2 Rules of Construction. Unless the context clearly indicates otherwise: (a) each
definition in this Agreement includes the singular and the plural; (b) each reference in this
Agreement to any gender includes the masculine, feminine and neuter where appropriate; (c) the
words “include” and “including” and variations thereof shall not be deemed terms of limitation,
but rather shall be deemed to be followed by the words “without limitation,” (d) the words
“hereof,” “herein,” “hereto,” “hereby,” “hereunder” and derivative or similar words refer to this
Agreement as an entirety and not solely to any particular provision of this Agreement; (e) each
reference in this Agreement to a particular Article, Section, Exhibit or Schedule means an Article
or Section of, or an Exhibit or Schedule to, this Agreement, unless another agreement is specified,
and all such Schedules or Exhibits shall be incorporated into this Agreement as if made a part of
this Agreement; (f) unless otherwise specified, any definition of or reference to any agreement,
instrument, document, statute or regulation in this Agreement shall be construed as referring to
such agreement, instrument, document, statute or regulation as it may from time to time be
amended, supplemented, modified or superseded; (g) the word “o: when used in this Agreement
is disjunctive but not necessarily exclusive; (h) any accounting term not defined in this Agreement
shall have the meaning ascribed to it under GAAP; and (i) all references to “$” or “Dollars” shall
mean United States currency.
ARTICLE II
TRANSACTION; DELIVERIES AT CLOSING
2.1 The Transaction. Subject to the terms and conditions set forth herein, as of the
Effective Time, New Operator shall assume responsibility for operating the Facility and Exiting
Operator will assign and convey to New Operator and New Operator will accept and acquire the
Transferred Assets (the “Transaction”). New Operator shall use best efforts to secure the required
authorizations necessary for New Operator to close the Transaction. Within ten (10) Business Days
following the Effective Date, TIME BEING OF THE ESSENCE, New Operator shall file change
of ownership licensure applications and provide any other notices required to obtain necessary
state licenses, approvals, provider agreements or certifications required to operate each Facility as
a licensed skilled nursing facility eligible to participate in the Medicare and Medicaid
reimbursement programs in the State of Tennessee (the “Healthcare Authorizations”) with the
appropriate Healthcare Authorities, including, without limitation, the Tennessee Department of
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Health (the “TDOH”). New Operator shall diligently proceed to pursue the Healthcare
Authorizations.
2.2 Deliveries at Closing.
(@ On the Closing Date, Exiting Operator shall make the following deliveries
to the New Operator:
i) All documents required to be delivered pursuant to this Agreement;
(ii) The Bill of Sale, Assignment and Assumption Agreement duly
executed by the Exiting Operator and dated as of the Closing Date conveying to New
Operator the Transferred Assets; and
(b) On the Closing Date, the New Operator will make the following deliveries
to Exiting Operator:
@) Proof of receipt of all Regulatory Approvals required prior to such
transfer or reasonable assurances that the Regulatory Approvals will be issued in the
ordinary course of business after Closing;
ii) The Bill of Sale, Assignment and Assumption Agreement duly
executed by the New Operator and dated as of the Closing Date; and
(iii) Any and all documents reasonably requested by Exiting Operator or
required by this Agreement to confirm that this Transaction is an authorized action of
New Operator and that the parties executing the Transaction Documents are fully
authorized and empowered to do so.
2.3 Closing. The Closing of the transactions set forth in this Agreement shall be
contingent upon, and shall occur only upon, the closing of the transactions set forth in the Purchase
Agreement. In the event the Purchase Agreement is terminated, for any reason whatsoever, this
Agreement shall immediately terminate and be of no further force and effect with no action
required of either party.
ARTICLE TI
TRANSFERS
3.1 Asset Transfers. For the consideration set forth herein, and subject to the terms and
conditions contained herein, Exiting Operator hereby agrees to transfer and convey, by execution
of the Bill of Sale, Assignment and Assumption Agreement, the following described assets relating
to the Facility (the “Transferred Assets”) to New Operator and/or its designee as of the Effective
Time:
(a) All inventory and supplies of every kind and nature whatsoever relating
to the operation of the Facility including, but not limited to, all food, pharmacy, medical, office,
maintenance and other inventory and supplies owned by Exiting Operator and located at the
Facility as of the Closing Date (collectively, the “Inventory”);
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(b) To the extent Exiting Operator’s interests are assignable pursuant to Law,
and to the extent New Operator in its sole discretion elects to assume the same, all of Exiting
Operator’s interests, if any, in all licenses, permits, variances, and approvals held or maintained
by Exiting Operator in connection with the operation of the Facility;
() All intangible personal property, including all goodwill, intellectual
property, trade secrets, proprietary or confidential information, trade names, trademarks, service
marks, logos, doing business as names, copyrights, patents and patent applications, domain
names, websites and web pages, social media and network profiles and pages (including for
Facebook®, Yelp® and Twitter®), e-mail addresses, telephone numbers, software and all
documentary evidence thereof maintained at or used in the operation of the Facility (“Intangible
Property”);
() Except for the Excluded Assets, all other personal property and equipment
owned by Exiting Operator relating to and located at the Facility except for leased equipment,
unless New Operator expressly assumes the lease and all obligations related to the lease arising
subsequent to the Closing Date in writing; and
(©) Any other assets to be transferred to New Operator pursuant to the terms
of this Agreement.
Ste Patient Census, Patient Trust Funds and Patient Inventory. The following will apply
in respect of the Facility:
(a) Exiting Operator shall prepare and deliver to New Operator a true, correct
and complete census report ofpatients at its Facility as of ten (10) days prior to the Closing Date,
to be updated as of the Effective Time (the “Patient Census”).
(b) Exiting Operator shall prepare and deliver to New Operator a true, correct
and complete accounting, properly reconciled, of any patient trust funds then held by Exiting
Operator for patients at the Facility as of ten (10) days prior to the Closing Date, to be updated
within 24 hours after the Effective Time (the “Patient Trust Funds”). Within 24 hours after the
Effective Time, Exiting Operator shall transfer the Patient Trust Funds to New Operator.
(©) Exiting Operator shall prepare and deliver to New Operator a true, correct
and complete inventory of all patients’ property then held on behalf of patients of the Facility as
of ten (10) days prior to the Closing Date, to be updated 5:00 pm on the Closing Date (the
“Patient Property”). On the Closing Date, Exiting Operator shall transfer the Patient Property
to New Operator.
3.3 Accounts Receivable. The following will apply in respect ofthe Facility:
(a) New Operator shall not assume or acquire any accounts receivable of
Exiting Operator.
(b) Payments received by Exiting Operator or New Operator after the Closing
Date with respect to the Facility from any payor shall be handled as follows:
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(i) if the accompanying remittance advice indicates, or if the parties
agree, that the payments relate solely to periods prior to the Closing Date, then: (A) in
the event that such payments are received by New Operator, New Operator shall
promptly send such payment to Exiting Operator; and (B) in the event that such payments
are received by Exiting Operator, Exiting Operator shall retain the payments;
(ii) if the accompanying remittance advice indicates, or if the parties
agree, that the payments relate solely to periods after the Effective Time, then: (A) in the
event that such payments are received by New Operator, New Operator shall retain the
payments; and (B) in the event that such payments are received by Exiting Operator,
Exiting Operator shall promptly forward such payments to New Operator;
(iii) if the accompanying remittance advice indicates, or if the parties
agree, that the payments relate to periods both prior to and on or after Closing Date, New
Operator shall promptly forward to Exiting Operator the amount of such payment relating
to periods preceding the Closing Date, and Exiting Operator shall promptly forward to
New Operator the amount of such payment relating to periods on or after the Closing
Date; and
(iv) for the first sixty (60) days after the Closing Date, if the
accompanying remittance advice does not indicate the period to which a payment relates
or if there is no accompanying remittance advice and if the parties do not otherwise agree
as to how to apply such payment, the payment shall be deemed first to apply against the
outstanding account receivable due from such payor to Exiting Operator and the balance,
if any, shall be paid to or retained by New Operator. Thereafter, any such payment shall
first apply to New Operator’s account receivable.
©) Either party shall have the right to audit the other’s accounts receivable
receipts, postings, and remittances for a period of two (2) years after the Closing Date to confirm
compliance with this Section 3.3. In the event the parties mutually determine that any payment
hereunder was misapplied by the parties, the party which erroneously received said payment
shall remit the same to the other within ten (10) days after said determination is made
3.4 Records. The following will apply in respect of the Facility:
(a) The parties shall reasonably cooperate with each other and use
commercially reasonably efforts to transfer the Records electronically from Exiting Operator’s
system to New Operator’s system as of the Closing Date. If the two systems are not compatible
with one another and the Records cannot be transferred electronically, the parties will cooperate
with each other to reasonably transfer the Records, and, if necessary to accomplish such transfer,
at no cost to Exiting Operator, and provided New Operator pays in advance the costs and
expenses required to maintain access to Exiting Operator’s electronic Records, Exiting Operator
shall provide New Operator with access to Exiting Operator’s electronic Records for a period
not to exceed ninety (90) days following the Closing Date so that New Operator will have
uninterrupted access to the Records and data of the Facility. New Operator’s use of any of Exiting
INDEX NO. 617308/2023
NYSCEF DOC.
. NO. &2 RECEIVED NYSCEF 02/16/2023
Operator’s software shall be subject to the confidentiality provisions in this Agreement and the
applicable software licenses.
(b) Exiting Operator shall retain the Records pertaining to the operations of
the Facility prior to the Effective Time for a period of no less than three (3) years after the Closing
Date.
() Subsequent to the Closing Date, the New Operator shall allow, upon
reasonable prior notice and during normal business hours, Exiting Operator to have reasonable
access to, and to make copies of, at Exiting Operator’s expense, the Records, to the extent
reasonably necessary to enable Exiting Operator to investigate and defend malpractice,
employee, regulatory, administrative or other claims, or to file or defend cost reports, Medicare
and Medicaid appeals, and tax returns.
@) Exiting Operator shall maintain all Records not delivered to New
Operator for the amount of time required for cost report audits, but no less than three (3) years
after the filing of all cost reports covering the period up to the Closing Date.
3.5 Contracts. Exiting Operator has provided to New Operator copies of the Contracts