Case wlh Doc 564 Filed 02/25/16 Entered 02/25/16 15:52:05 Desc Main Document Page 1 of 8

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1 Document Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION IN RE: CLAYTON GENERAL, INC., f/k/a Southern Regional Health System, Inc., d/b/a Southern Regional Medical Center, et al., Debtors. CHAPTER 11 Jointly Administered Under CASE NO wlh MOTION FOR AUTHORITY TO ASSUME CONTRACTS AND UNEXPIRED LEASES COME NOW, Clayton General, Inc., f/k/a Southern Regional Health System, Inc., d/b/a Southern Regional Medical Center, Clayton General Group, Inc., f/k/a Southern Crescent Physicians Group, Inc., Clayton General Real Estate, Inc., f/k/a Southern Crescent Real Estate, Inc., Clayton General ASC, Inc., f/k/a Southern Regional Ambulatory Surgery, Inc., Southlake ASC, LLLP, f/k/a Southlake Ambulatory Surgery Center, L.L.L.P., d/b/a Mount Zion Surgery Center, a/k/a Spivey Station Surgery Center and Clayton General Services, Inc., f/k/a Southern Regional Medical Services, Inc., debtors and debtors-in-possession (collectively, the Debtors in the above-styled jointly administered case (the Case, by and through the undersigned counsel, and hereby seek entry of an order pursuant to Sections 105(a and 365(a of Title 11 of the United States Code, 11 U.S.C. 101 et seq. as amended (the Bankruptcy Code, and Rules 2002, 6006, 9006 and 9007 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules, allowing Debtors to assume certain unexpired non-residential real property leases (the Leases and to assign same to the purchaser of substantially all of the Debtors assets. In support of this Motion, the Debtors respectfully represent as follows: -1-

2 Document Page 2 of 8 Relief Requested 1. From 2008 through 2013, the Debtors, as landlords, entered into the Leases with various tenants. A list of the Leases is attached hereto as Exhibit A. The Leases may contain confidential information and are therefore not attached but are available upon request by the Committee (as defined below and other interested parties. 2. The Debtors request authority from this Court to assume the Leases and to assign same to the purchaser of substantially all of the Debtors assets, Prime Healthcare Foundation Southern Regional, LLC ( Prime effective as of the Closing Date (as defined below. Jurisdiction and Venue 3. This Court has jurisdiction of this Motion pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b(2. Venue of the Debtors Chapter 11 case and this Motion in this District are proper pursuant to 28 U.S.C and The statutory predicates for the relief sought herein are Sections 105(a and 365(a of the Bankruptcy Code and Bankruptcy Rules 2002, 6006, 9006 and Background 4. On July 30, 2015 (the Petition Date, the Debtors each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Debtors are authorized to operate their business as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. -2-

3 Document Page 3 of 8 5. On August 11, 2015, an official committee of unsecured creditors (the Committee was appointed in the Case. No other statutory committee and no trustee or examiner has been appointed. Basis for Relief 6. Since the Petition Date, the Debtors have sought and obtained authority to sell their assets to Prime (the Sale. The Sale closed on February 1, 2016 (the Closing Date. In furtherance of the Sale, Prime has identified certain executory contracts and unexpired leases which it needs to operate the business post-closing. In the exercise of their business judgment, the Debtors have determined that it is in the best interest of the Debtors, their creditors and their estates to assume the Leases and assign them to Prime. 7. Section 365(a of the Bankruptcy Code authorizes a debtor to assume or reject its executory contracts and unexpired leases subject to the approval of the bankruptcy court: (a Except as provided in subsections (b, (c and (d of this section, the trustee, subject to the court s approval, may assume or reject any executory contract or unexpired lease of the debtor. 11 U.S.C. 365(a. 8. Courts evaluate a decision to assume or reject an executory contract or unexpired lease under the business judgment standard. See In re Gardinier, Inc., 831 F.2d 974, 976 n.2 (11th Cir. 1987; In re Wells, 227 B.R. 553, 564 (Bankr. M.D. Fla. 1998; see also NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984. This standard is satisfied if the debtor determines in its business judgment that the rejection of the contract or lease would benefit the estate. See Sharon -3-

4 Document Page 4 of 8 Steel Corp. v. Nat l Fuel Gas Distr. Corp., 872 F.2d 36, (3d Cir. 1989; In re Bicoastal Corp., 125 B.R. 658, 667 (Bankr. M.D. Fla The business judgment standard requires that the court approve the debtor s business decision unless that judgment is the product of bad faith, whim, or caprice. See Lubrizol Enter. v. Richmond Metal Finishers, Inc., 756 F.2d 1043, 1047 (4th Cir. 1985; In re Prime Motor Inns, 124 B.R. 378, 383 (S.D. Fla As noted above, the Debtors have determined, in the exercise of their business judgment, that assuming the Leases and assigning them to Prime, effective as of the Closing Date, is in the best interests of their estates and creditors. The Leases are agreements where the Debtors, as Landlords, lease certain spaces in medical office buildings to various tenants. 10. The cure cost for each of the Leases is zero, and therefore, no economic impact will be felt by the Debtors estates. Notice 11. Notice of this Motion is being provided to each of the counter-parties to the Leases, the Office of the United States Trustee, counsel for Prime, and counsel for the Committee. In light of the nature of the relief requested, the Debtors respectfully request that the Court find that no further notice is necessary. -4-

5 Document Page 5 of 8 WHEREFORE, based upon the foregoing, the Debtors respectfully request that this Court: (a grant the Motion authorizing the Debtors to assume the Leases and assign them to Prime effective as of the Closing Date; and (b grant the Debtors such other and further relief as is just and proper. This 25th day of February, Respectfully submitted, SCROGGINS & WILLIAMSON, P.C. One Riverside 4401 Northside Parkway Suite 450 Atlanta, Georgia Telephone: ( Telecopier: ( rwilliamson@swlawfirm.com aray@swlawfirm.com mlevin@swlawfirm.com /s/ Matthew W. Levin J. ROBERT WILLIAMSON Georgia Bar No ASHLEY REYNOLDS RAY Georgia Bar No MATTHEW W. LEVIN Georgia Bar No Counsel for the Debtors -5-

6 Document Page 6 of 8 EXHIBIT A Leases Counter-party Davis, Edwin Kunkes Ear, Nose & Throat, P.C. Stappenbeck, Richard A. Urology of Greater Atlanta, LLC Contract Type Physician: Real Estate Lease Physician: Real Estate Lease Physician: Real Estate Lease Physician: Rea Estate Lease Commencement Date 06/01/ /01/ /16/ /25/2009 Contract Description Lease office space in Professional Medical Bldg. Rental of Suite 10, Clayton Professional Building, 33 Upper Riverdale Road, Riverdale, GA Lease Bldg. 33, Suite 111 1,113 sq ft. Lease Medical Office Space Bldg. 29 Suite 150 2,235 sq. ft. Cure Cost $0.00 $0.00 $0.00 $

7 Document Page 7 of 8 CERTIFICATE OF SERVICE This is to certify that on this date I served a true and correct copy of the within and foregoing Motion for Authority to Assume Contracts and Unexpired Leases by causing same to be deposited in the United States Mail with adequate postage affixed thereon and addressed to the following persons: Francis J. Lawall PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, Pennsylvania Donald J. Detweiler PEPPER HAMILTON LLP Hercules Plaza, Suite N. Market Street Wilmington, DE J. Michael Lamberth LAMBERTH CIFELLI ELLIS & NASON PA 1117 Perimeter Center West Suite W212 Atlanta, GA Paul K. Ferdinands W. Austin Jowers KING & SPALDING LLP 1180 Peachtree Street, NE Atlanta, GA Thomas W. Dworschak OFFICE OF THE UNITED STATES TRUSTEE 362 Richard Russell Building 75 Ted Turner Drive, SW Atlanta, GA Davis, Edwin 33 Upper Riverdale Road, SW Suite 117 Riverdale, GA Kunkes Ear, Nose & Throat, P.C. 33 Upper Riverdale Road Suite D Riverdale, GA Stappenbeck, Richard A. 33 Upper Riverdale Road Suite 111 Riverdale, GA Urology of Greater Atlanta, LLC 29 Upper Riverdale Road, SW Suite 150 Riverdale, GA [Signature on Following Page] -7-

8 Document Page 8 of 8 This 25th day of February, Respectfully submitted, SCROGGINS & WILLIAMSON, P.C. One Riverside 4401 Northside Parkway Suite 450 Atlanta, Georgia Telephone: ( Telecopier: ( rwilliamson@swlawfirm.com aray@swlawfirm.com mlevin@swlawfirm.com /s/ Matthew W. Levin J. ROBERT WILLIAMSON Georgia Bar No ASHLEY REYNOLDS RAY Georgia Bar No MATTHEW W. LEVIN Georgia Bar No Counsel for the Debtors -8-