Case Document 561 Filed in TXSB on 10/12/18 Page 1 of 5

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1 Case Document 561 Filed in TXSB on 10/12/18 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: Case No NEIGHBORS LEGACY HOLDINGS, INC., et al., 1 Chapter 11 Debtors. Jointly Administered MOTION TO COMPEL ASSUMPTION OR REJECTION OF EQUIPMENT LEASES THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY. Wells Fargo Equipment Finance, Inc. ( Wells Fargo ) files its Motion to Compel Assumption or Rejection of Equipment Leases, and in support thereof would respectfully state to the Court as follows: A. General Background 1. On July 12, 2018 (the Petition Date ), the Debtors each commenced a case by filing a petition for relief under Chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases ). These Chapter 11 Cases are being jointly administered pursuant to Bankruptcy Rule 1015(b) [Docket No. 10]. The Debtors continue to operate their businesses and manage their 1 Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas

2 Case Document 561 Filed in TXSB on 10/12/18 Page 2 of 5 properties as debtors and debtors in possession pursuant to Bankruptcy Code sections 1107(a) and B. Wells Fargo Leases 2. Prior to the date of the bankruptcy filing, the Debtors entered into Master Lease Agreement # ( Master Lease ) with Wells Fargo Bank Equipment Finance, Inc. dated May 8, A copy of the Master Lease is attached hereto as Exhibit A. The Lease Schedules entered into under the Master Lease include the following leases (collectively, the Leases ): EX # Lease No. Date Location Description 1 # /21/ West Wadley Midland, TX Siemens Medical Equipment: (1) New Somatom Scope CT s/n 91108; (1) Acuson P300 Ultrasound System s/n 2035; and (1) Multix Fusion - Digital X-Ray 2 # /2/ Highway 365 Port Arthur, TX 3 # /2/ North Grandview Odessa, TX # /2/ Edgemere Blvd. El Paso, TX # /13/ S. Western St. Amarillo, TX s/n Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91179; (1) Acuson P300 Ultra Sound System s/n 2130; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91178; (1) Acuson P300 Ultrasound System s/n 2129; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91191; (1) Acuson P300 Ultrasound System s/n 2114; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) Somatom Scope CT s/n 91263; (1) Acuson P300 Ultrasound System s/n 2170; and (1) Multix Fusion - Digital X-Ray Page 2

3 Case Document 561 Filed in TXSB on 10/12/18 Page 3 of 5 3. The Debtors have made some postpetition payments under the Leases. The Debtors are in possession of, and continue to use, the equipment. C. Sale of Assets 4. On August 8, 2018, an order was entered (a) authorizing and scheduling an auction for the sale of Debtors Assets and (b) approving auction bid procedures, including payment of bid protections ( Sale Order ) [Docket No. 203]. 5. On August 17, 2018, the Debtors filed an Amended Notice of Executory Contracts and Unexpired Leases Subject to Possible Assumption and Assignment and Proposed Cure Amounts ( Cure Notice ) [Docket No. 255] setting forth the executory contracts and unexpired leases that are subject to potential assumption and/or assignment to the successful bidder(s) to be identified at the conclusion of the auction of the Debtors assets. The Cure Notice also included the amounts the Debtors believe to be sufficient to cure any defaults under each potentially assumed executory contract. All of the above-referenced Wells Fargo Leases were listed among the executory contracts and unexpired leases that may be included as part of the sale of the Debtors assets. 6. The Debtors held an auction for the sale of substantially all of their assets on August 27, 2018, and concluded the auction on August 28, At the conclusion of the auction, the Debtors selected a consortium bid of five separate bidders for the sale of substantially all of the Debtors assets along with two Back-up Bidders. Each asset purchase agreement ( APA ) for the five sales includes a list of the proposed buyer s desired 365 contracts (the Desired 365 Contracts ). 7. Only one Wells Fargo Lease was designated as a Desired 365 Contract. Tenet Business Services Corporation ( Tenet ) included Wells Fargo Lease No. # (El Paso) on its list of Desired 365 Contracts. Tenet has now declined to assume the Lease, but has Page 3

4 Case Document 561 Filed in TXSB on 10/12/18 Page 4 of 5 expressed an interest in purchasing the leased equipment. However, Wells Fargo cannot sell the equipment prior to the lease being rejected and the stay lifted. 8. According to the Debtors pleadings filed regarding the sale of assets, it is anticipated that the remaining Wells Fargo Leases will not be assumed, and are not otherwise included in the proposed sale. 9. Pursuant to 11 U.S.C. 365(a), the Debtors interests in the Leases should either be assumed or rejected. D. Debtors should be Compelled to Assume or Reject the Leases 10. The Leased Equipment consists of depreciating assets being used in the daily operation of the Debtors businesses. This, combined with the fact that medical equipment is constantly evolving and rapidly improving in the technologically advanced medical field, is resulting in a rapid depreciation in the value of the medical equipment. Therefore, Wells Fargo s risk of loss increases with each day that passes. 11. A reasonable time has passed to allow the Debtors to immediately determine whether the Leases should be assumed or rejected. The potential purchasers have been allowed to determine whether or not they want to assume the Wells Fargo Leases. There is no reason for the equipment to remain in the Debtors possession. 12. The Debtors are continuing to enjoy the full and uninterrupted use of the subject medical equipment. In the meantime, the medical equipment is depreciating in value, to Wells Fargo s detriment. Therefore, pursuant to Section 365(d)(2), Wells Fargo respectfully requests that the Court enter an Order setting a date certain by which Debtor must reject the Leases. Additionally, if the Debtors decide to reject the Leases, Wells Fargo is entitled to relief from the automatic stay to recover its property. Page 4

5 Case Document 561 Filed in TXSB on 10/12/18 Page 5 of Wells Fargo reserves the right to assert administrative and rejection damages claims against the Debtors. WHEREFORE, Wells Fargo respectfully requests that this Court enter an order compelling the Debtors to assume or reject the Leases within ten (10) days from the date of the Order and, if the Debtor rejects the Leases, allowing Wells Fargo immediate relief from the automatic stay to retrieve its equipment; and grant it such other relief as is just and proper. Respectfully submitted, LEYH PAYNE & MALLIA, PLLC By: /s/ Steven A. Leyh Steven A. Leyh Texas Bar No Katy Freeway, Suite 200 Houston, Texas (713) (Telephone) (713) (Facsimile) sleyh@lpmfirm.com Attorneys for Wells Fargo Equipment Finance, Inc. CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of this Motion was served electronically upon each of the parties listed on the Court s ECF Service List for this case on October 12, /s/ Steven A. Leyh Steven A. Leyh Page 5

6 Case Document Filed in TXSB on 10/12/18 Page 1 of 52 EXHIBIT "A"

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29 Case Document Filed in TXSB on 10/12/18 Page 24 of 52 EXHIBIT "2"

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58 Case Document Filed in TXSB on 10/12/18 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: Case No NEIGHBORS LEGACY HOLDINGS, INC., et al., 1 Chapter 11 Debtors. Jointly Administered ORDER GRANTING MOTION TO COMPEL ASSUMPTION OR REJECTION OF EQUIPMENT LEASES [Related to Docket No. ] Came on for consideration the Motion to Compel Assumption or Rejection of Equipment Leases ( Motion ) filed by Wells Fargo Equipment Finance, Inc. ( Wells Fargo ), and the Court, having reviewed the Motion and any response thereto, and finding that proper notice to all parties in interest has been given, determines that the Motion has merit and should be granted; accordingly, it is therefore ORDERED that the Motion to Compel Assumption or Rejection of Equipment Leases filed by Wells Fargo Equipment Finance, Inc. be, and hereby is, granted; and it is further ORDERED that within ten (10) days after the entry of this Order, the Debtors shall file a motion to assume or reject the following equipment leases with Wells Fargo: Lease No. Date Location Description # /21/ West Wadley Midland, TX Siemens Medical Equipment: (1) New Somatom Scope CT s/n 91108; (1) Acuson P300 Ultrasound System s/n 2035; and (1) Multix Fusion - Digital X-Ray s/n Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas

59 Case Document Filed in TXSB on 10/12/18 Page 2 of 2 # /2/ Highway 365 Port Arthur, TX # /2/ North Grandview Odessa, TX # /2/ Edgemere Blvd. El Paso, TX # /13/ S. Western St. Amarillo, TX Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91179; (1) Acuson P300 Ultra Sound System s/n 2130; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91178; (1) Acuson P300 Ultrasound System s/n 2129; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) New Somatom Scope Scanner s/n 91191; (1) Acuson P300 Ultrasound System s/n 2114; and (1) Multix Fusion - Digital X-Ray s/n Siemens Medical Equipment: (1) Somatom Scope CT s/n 91263; (1) Acuson P300 Ultrasound System s/n 2170; and (1) Multix Fusion - Digital X-Ray and it is further ORDERED that if a motion to assume a lease agreement is not filed, then the lease shall be deemed rejected and the automatic stay will lift in order to permit Wells Fargo to terminate the lease agreement with the Debtors, to take possession of the equipment, and to exercise any and all acts it has under state or federal law, including selling the equipment. Signed, MARVIN ISGUR UNITED STATES BANKRUPTCY JUDGE Page 2