EXHIBIT 10.24
FOURTH AMENDMENT AND MODIFICATION OF
REIMBURSEMENT AGREEMENTS
THIS FOURTH AMENDMENT AND MODIFICATION OF REIMBURSEMENT AGREEMENTS (the
"Fourth Amendment") entered into as of the 14th of May, 2002 by and between
ASSISTED LIVING CONCEPTS, INC., a Nevada corporation ("Borrower") and U.S. BANK
NATIONAL ASSOCIATION ("Bank") with reference to the following facts:
RECITALS
A. Pursuant to Reimbursement Agreement dated as of November 1, 1996 by and
between Borrower and Bank (the "Washington Reimbursement Agreement"), Bank
issued a letter of credit on behalf of Borrower in the total Stated Amount of
$8,677,671.20 (the "Washington Letter of Credit") to Norwest Bank Minnesota,
National Association, as Trustee under that certain Indenture of Trust dated as
of November 1, 1996, in connection with the issuance by the Washington State
Housing Finance Commission of $8,500,000 in aggregate principal amount of its
Variable Rate Demand Multifamily Revenue Bonds (Assisted Living Concepts, Inc.
Project), Series 1996 (the "Washington Bonds"). Borrower's obligations under the
Washington Reimbursement Agreement are secured, in part, by deeds of trust,
security agreements, assignments of leases and rents and fixture filings on 5
real properties located in the State of Washington legally described in Exhibit
B-1 through Exhibit B-5 to the Washington Reimbursement Agreement and by this
reference incorporated herein (collectively, "the Washington Properties") and
other security interests in other real and personal property owned by Borrower.
B. Pursuant to Reimbursement Agreement dated as of July 1, 1997 by and
between Borrower and Bank (the "Idaho Reimbursement Agreement"), Bank issued a
letter of credit on behalf of Borrower in the total Stated Amount of $7,494,987
(the "Idaho Letter of Credit") to First Security Bank, N.A., as Trustee under
that certain Indenture of Trust dated as of July 1, 1997, in connection with the
issuance by the Idaho Housing and Finance Association of $7,350,000 in aggregate
principal amount of its Variable Rate Demand Housing Revenue Bonds (Assisted
Living Concepts, Inc. Project), Series 1997 (the "Idaho Bonds"). Borrower's
obligations under the Idaho Reimbursement Agreement are secured, in part, by
deeds of trust, security agreements, assignments of leases and rents and fixture
filings on 4 real properties located in the State of Idaho legally described in
Exhibit B-1 through Exhibit B-4 to the Idaho Reimbursement Agreement and by this
reference incorporated herein (collectively, the "Idaho Properties") and other
security interests in other real and personal property owned by Borrower.
C. Pursuant to Reimbursement Agreement dated as of July 1, 1998 by and
between Borrower and Bank (the "Ohio Reimbursement Agreement"), Bank used a
letter of credit on behalf of Borrower in the total Stated Amount of $13,480,779
(the "Ohio Letter of Credit") to PNC Bank, National Association, as Trustee
under that certain Indenture of Trust dated as of July 1, 1998, in connection
with the issuance by the Ohio Housing Finance
Agency of $12,690,000 in aggregate principal amount of its Variable Rate Demand
Housing Revenue Bonds (Assisted Living Concepts, Inc., Project) 1998 Series A-1
and $530,000 in aggregate principal amount of its Taxable Variable Rate Demand
Housing Revenue Bonds (Assisted Living Concepts, Inc. Project) 1998 Series A-2
(the "Taxable Bonds") (collectively, the "Ohio Bonds"). Borrower's obligations
under the Ohio Reimbursement Agreement are secured, in part, by open-ended
mortgages, security agreements, assignment of leases and rents, and fixture
filings on 7 real properties located in the State of Ohio legally described in
Exhibit B-1 through Exhibit B-7 to the Ohio Reimbursement Agreement and by this
reference incorporated herein (collectively, the "Ohio Properties") and other
security interests in other real and personal property owned by Borrower.
D. Pursuant to Amendment and Modification of Reimbursement Agreements
dated as of August 18, 1999 (the "Modification"), the Bank agreed to forbear and
waive certain defaults by Borrower under the Washington Reimbursement Agreement,
the Idaho Reimbursement Agreement and the Ohio Reimbursement Agreement and the
Related Documents (as defined in each Reimbursement Agreement) in exchange for
the modification and restructure of the Borrower's obligation to the Bank as set
forth in the Modification. The Washington Reimbursement Agreement, the Idaho
Reimbursement Agreement and the Ohio Reimbursement Agreement, each as modified
by the Modification, the Second Amendment (defined below) and the Third
Amendment (as defined below), are hereinafter referred to collectively as the
"Reimbursement Agreements." The Washington Properties, the Idaho Properties, the
Ohio Properties and all other facilities owned or leased by the Borrower that
are financed with proceeds of a Bank credit enhanced bond issue, including, but
not limited to, all facilities financed by the Washington State Housing Finance
Commission's Variable Rate Demand Multifamily Revenue Bonds (LTC Properties,
Inc. Project), Series 1995 are hereinafter referred to individually as a "Bond
Financed Property" and collectively as the "Bond Financed Properties."
E. As part of the modification and restructure of the Borrower's
obligations to the Bank under the Reimbursement Agreements set forth in the
Modification, the Borrower deposited $8,300,000 in cash collateral with the Bank
(the "Cash Collateral"), which Cash Collateral constitutes security for any and
all indebtedness of Borrower to the Bank, including, but not limited to the
Borrower's obligations under the Reimbursement Agreements and the Related
Documents. The Bank has since release $4,000,000 of the Cash Collateral to
Borrower pursuant to the terms of Section 3.B of the Modification. The Bank
continues to hold $4,3000,000 of the Cash Collateral pursuant to the terms of
Section 3.C of the Modification.
F. Pursuant to Second Amendment and Modification of Reimbursement
Agreements dated as of July 28, 2000 (the "Second Amendment"), Bank agreed to
forbear and waive certain defaults by Borrower under the Reimbursement
Agreements in exchange for the modification and restructure of Borrower's
obligations to the Bank as set forth in the Second Amendment. As part of the
Second Amendment, the Borrower granted Bank, as security for the Borrower's
obligations to the Bank under the Reimbursement Agreements and other Related
Documents, a first lien deed of trust, security agreement, assignment of
leases and rents and fixture filing on three assisted living facilities located
in the State of Washington owned and operated by Borrower and legally described
in Exhibits A through C to the Second Amendment (individually, an "Addition
Property" and collectively, the "Additional Properties") (the "Additional
Properties Deed of Trust"), a first lien assignment of leases and cash
collateral with respect to the Additional Properties (the "Additional Properties
Assignment of Leases") and other real and personal property security interests.
The Additional Properties constitute security for any and all indebtedness of
Borrower to Bank, including, but not limited to, Borrower's obligations under
the Reimbursement Agreements and the Related Documents.
G. Pursuant to Third Amendment and Modification of Reimbursement
Agreements dated as of March 12, 2002 (the "Third Amendment"), Bank agreed to
forbear and waive certain defaults by Borrower under the Reimbursement
Agreements in exchange for the modification and restructure of Borrower's
obligations to the Bank as set forth in the Third Amendment.
H. Borrower has requested that Bank waive Bank's right to declare an Event
of Default under the Reimbursement Agreements and Related Documents (as defined
in the Reimbursement Agreements) by reason of Borrower's failure to comply with
certain financial covenants and Bank is willing to waive Bank's right to declare
an event of Default under the Reimbursement Agreements on the express condition
that Borrower agree to further modify and restructure Borrower's obligations
under the Reimbursement Agreements and Related Documents on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. Incorporation of Recitals. Each recital set forth above is
incorporated into this Fourth Amendment as though fully set forth herein. Unless
the context clearly provides otherwise, all capitalized terms not otherwise
defined herein shall have the same meaning as set forth in the Modification or
if not defined herein as defined in the Second Amendment, or the Reimbursement
Agreements.
2. Waiver of Right to Declare an Event of Default. In exchange for
further modification and restructure of Borrower's obligations to Bank under the
Reimbursement Agreements on the terms and conditions hereinafter set forth, Bank
will waive Bank's right to declare an Event of Default under the Reimbursement
Agreements or any of the Related Documents (as defined in the Reimbursement
Agreements) by reason of the Borrower's failure to comply with the Tangible Net
Worth covenant set forth in Section 7.01(G)(ii), the Cash Flow Coverage covenant
set forth in Section 7.01(G)(iii) and the Minimum Cash Balances covenant set
forth in Section 7.01(G)(iv) of each of the Reimbursement Agreements, in all
cases for the quarter ending March 31, 2002. As of the date of this Fourth
Amendment, Bank has no actual knowledge of the occurrence of any other event
that would constitute an Event of Default, or of any other event that with the
giving of notice, the passage of time, or both might constitute an Event of
Default, under the Reimbursement Agreements or any of the Related Documents (as
defined in the Reimbursement Agreements).
3. Modification and Restructure of Reimbursement Agreements. In
exchange for the waiver of the Bank's right to declare an Event of Default under
the Reimbursement Agreements by reason of Borrower's failure to comply with the
Tangible Net Worth covenant set forth in Section 7.01(G)(ii), the Cash Flow
Coverage covenant set forth in Section 7.01(G)(iii) and the Minimum Cash
Balances covenant set forth in Section 7.01(G)(iv) of each of the Reimbursement
Agreements, in all cases for the quarter ending March 31, 2002, Section
7.01(G)(ii), (iii) and (iv) of each of the Reimbursement Agreements is amended
to read as follows:
(ii) Tangible Net Worth shall be greater than or equal to
$27,000,000, measured quarterly for the quarters ending March 31, 2002, June 30,
2002, September 30, 2002 and December 31, 2002, and thereafter shall be greater
than or equal to $27,000,000 plus twenty-five percent (25%) of Net Income (after
taxes), measured quarterly;
(iii) The Cash Flow Coverage Ratio will be a two-tier test,
either of which if not in compliance will cause an Event of Default under the
Reimbursement Agreements:
a) The Borrower's ratio of Net Income + Interest Expenses +
Depreciation & Amortization divided by cash Interest Expense + pro-rata (for the
quarter) scheduled principal payments on all Indebtedness + pro-rata (for the
quarter) annual fees relating to the U.S. Bank Bonds and U.S. Bank Letters of
Credit shall be greater than or equal to 0.90:1.00, measured quarterly for the
quarters ending March 31, 2002, June 30, 2002, September 30, 2002 and December
31, 2002, and thereafter shall be greater than or equal to 1.25:1.00, measured
quarterly (Company - Wide Test); and
b) Each of the group of Washington Properties, Idaho
Properties and Ohio Properties shall independently maintain a financial
performance level such that the sum of their quarterly Net Income + Interest
Expense + Depreciation & Amortization shall exceed the sum of Interest Expense +
pro-rata (for the quarter) scheduled principal payments on the Washington Bonds
and/or the Ohio Bonds, as applicable + pro-rata (for the quarter) annual fees
relating to the Washington Bonds and/or Ohio Bonds, as applicable and the
Washington Letter of Credit and/or Ohio Letter of Credit by 1.25 times, measured
quarterly beginning March 31, 2002 (Individual U.S. Bank Bond Properties' Test).
(iv) Borrower shall at all times maintain minimum cash balances
(including amounts available under credit lines and excluding amounts that have
been restricted but not exceeding Regulatory Cash Collateral), which cash
balances shall be
measured at the end of each fiscal quarter, as follows:
FISCAL QUARTER ENDING MINIMUM CASH BALANCE REQUIREMENT
--------------------- --------------------------------
March 31, 2002 $4,000,000
June 30, 2002 $4,000,000
September 30, 2002 $4,000,000
December 31, 2002 $4,000,000
March 31, 2003 and quarterly thereafter $8,000,000
The Minimum Cash Balance Requirement will no longer be required when the
Ohio Housing Financing Agency, Variable Rate Demand Housing Revenue Bonds
(Assisted Living Concepts, Inc.) Series 1998 Series A-1 have been retired and
the Ohio Letter of Credit has been surrendered to the Bank.
4. Confirmation. The Reimbursement Agreements and each of the
Related Documents (as defined in the Reimbursement Agreements) are each hereby
modified to provide that the term "Reimbursement Agreement" or "Reimbursement
Agreements" shall mean the Reimbursement Agreement or the Reimbursement
Agreements, as modified by this Fourth Amendment. Borrower hereby confirms,
subject to this Fourth Amendment, each of the covenants, agreements and
obligations of Borrower set forth in the Reimbursement Agreements or any of the
Related Documents (as defined in the Reimbursement Agreements). Borrower
acknowledges and agrees that, if and to the extent that the Bank has not
heretofore required strict compliance with the performance by Borrower of such
covenants, agreements and obligations, such action or inaction shall not
constitute a waiver of, or otherwise affect in any manner, Bank's rights and
remedies under any of the Reimbursement Agreements, as amended hereby, or any of
the Related Documents (as defined in the Reimbursement Agreements), including
the right to require performance of such covenants, agreements and obligations
strictly in accordance with the terms and provisions thereof except as waived
herein. Each Deed of Trust or, with respect to the Ohio Properties, Mortgage
which secures the Borrower's obligations under any Reimbursement Agreement is
hereby modified to provide that such Deed of Trust or Mortgage secures such
Reimbursement Agreement as modified hereby. Borrower represents and warrants
that (i) upon execution of this Fourth Amendment, and (ii) the satisfaction of
all of the terms and conditions set forth in this Fourth Amendment, including,
but not limited to, payment of the costs and expenses set forth in Section 13 of
this Fourth Amendment, Borrower will not be in default in the performance of any
of the obligations, terms, covenants, conditions representations, warranties or
other provisions set forth in the Reimbursement Agreements or any of the Related
Documents (as defined in the Reimbursement Agreements). Borrower has no
knowledge of any defenses, offsets or claims which may be asserted by Borrower,
or by anyone claiming by or through Borrower, to the indebtedness owed by
Borrower to Bank
under the Reimbursement Agreements or any of the Related Documents (as defined
in the Reimbursement Agreements) or to the performance of any of the
obligations, terms, covenants, conditions, representations, warranties or other
provisions set forth in the Reimbursement Agreements or any of the Related
Documents (as defined in the Reimbursement Agreements).
5. Validity. Except as specifically modified and amended by this
Fourth Amendment, all of the terms, covenants, conditions and provisions of the
Reimbursement Agreements and each of the Related Documents (as defined in the
Reimbursement Agreements) shall remain in full force and effect. Nothing herein
shall be deemed or construed to be an impairment of the lien or each Deed of
Trust or, with respect to the Ohio Properties, each Mortgage and lien of each
Deed of Trust or each Mortgage shall remain a first lien against the Washington
Properties, the Idaho Properties, the Ohio Properties, or the Additional
Properties as applicable, described in such Deed of Trust or, with respect to
the Ohio Properties, such Mortgage.
6. No Continuing Waiver. No waiver of any of the provisions of the
Reimbursement Agreements or any of the Related Documents (as defined in the
Reimbursement Agreements) shall be deemed, or shall constitute, a continuing
waiver of any of the provisions of the Reimbursement Agreements or any of the
Related Documents (as defined in the Reimbursement Agreements) nor shall any
provision of this Fourth Amendment be deemed, or constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver of any of the provisions of the Reimbursement
Agreements shall be binding unless executed in writing by the party making the
waiver. Nothing contained in this Fourth Amendment or in any ongoing discussions
or negotiations between Borrower or Bank shall directly or indirectly (i) create
any obligation to make any further extension of credit; (ii) create any
obligation to make any further forbearance or waiver or defer any enforcement
action by Bank as a result of the occurrence of an Event of Default under the
Reimbursement Agreements or any of the Related Documents (as defined in the
Reimbursement Agreements) which is not described in Section 2 of this Fourth
Amendment or with respect to any Event of Default which is described in Section
2 of this Fourth Amendment beyond the dates set forth in Section 2 of this
Fourth Amendment; (iii) constitute a consent or waiver of any past, present or
future Event of Default or other violation of any provision of the Reimbursement
Agreements or any of the Related Documents (as defined in the Reimbursement
Agreements) except to the extent expressly set forth in Section 2 of this Fourth
Amendment; (iv) constitute a course of dealing or other basis for altering any
of Borrower's obligations to Bank under the Reimbursement Agreements or any of
the Related Documents (as defined in the Reimbursement Agreements). Bank
expressly reserves all of its rights, powers and remedies under the
Reimbursement Agreements and each of the Related Documents (as defined in the
Reimbursement Agreements).
7. Reaffirmation of Representations and Warranties. Borrower does
hereby reaffirm to Bank each of the representations, warranties, covenants and
agreements made by Borrower set forth in each of the Reimbursement Agreements
with the same force and effect
as if each were separately stated herein and made again as of the date hereof.
This reaffirmation shall not in any way limit, derogate or abrogate the
representations, warranties, covenants and agreements made by Borrower as set
forth in the Reimbursement Agreements. Borrower further represents and warrants
to Bank that with the exception of the Events of Default as described in Section
2 of this Fourth Amendment, Borrower is in compliance with all of the terms,
covenants, representations, warranties and agreements made by Borrower in the
Reimbursement Agreements and each of the Related Documents (as defined in the
Reimbursement Agreements). There is no Event of Default under and no event that
with the giving of notice, the passage of time, or both, would constitute an
Event of Default under any of the Reimbursement Agreements, or any of the
Related Documents (as defined in the Reimbursement Agreements).
8. Release. The Borrower, for and on behalf of itself and its legal
representatives, heirs, successors and assigns, does herby waive, release,
relinquish and forever discharge the Bank and its past and present directors,
officers, agents, employees, parents, subsidiaries, affiliates, insurers,
attorneys, representatives and assigns, and each and all thereof (collectively,
the "Released Parties"), of and from any and all manner of action and causes of
action, suits, claims, demands, judgments, damages, levies, and the execution of
whatsoever kind, nature and/or description arising on or before the date first
above written, including, without limitation, any claims, losses, costs or
damages, including compensatory and punitive damages, in each case whether know
or unknown, liquidated or unliquidated, fixed or contingent, direct or indirect,
with the Borrower, or its legal representatives, heirs, successors or assigns,
ever had or now has claim to have against any of the Released Parties, with
respect to any matter whatsoever arising on or the date hereof.
9. Time is of the Essence. Time is of the essence of this Fourth
Amendment.
10. Binding Effect. This Fourth Amendment shall be binding upon
Borrower and its successors and permitted assigns and shall inure to the benefit
of Bank and its successors and assigns.
11. Prior Agreements. The Reimbursement Agreements and each of the
Related Documents (as defined in the Reimbursement Agreements), including this
Fourth Amendment and the documents attached as exhibits to or referred to in
this Fourth Amendment (i) integrate all the terms and conditions mentioned in or
incidental to the Reimbursement Agreements and each of the Related Documents (as
defined in the Reimbursement Agreements), (ii) supersede all oral negotiations
and prior and other writings with respect to the subject matter thereof, and
(iii) are intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Fourth Amendment modifying
and restructuring the Reimbursement Agreements and each of the Related Documents
(as defined in the Reimbursement Agreements) and as the complete and exclusive
statement of the terms agreed to by the parties. If there is any conflict
between the terms, conditions and provisions of this Fourth Amendment and those
of any of the Reimbursement Agreements or any of the Related Documents (as
defined in the
Reimbursement Agreements), the terms, conditions and provisions of this Fourth
Amendment shall prevail.
12. No Rights conferred on Others. Nothing contained in this Fourth
Amendment, the Reimbursement Agreements or any of the Related Documents (as
defined in the Reimbursement Agreements) shall be construed as giving any
person, other than the parties hereto, any right, remedy or claim under or in
respect of this Fourth Amendment.
13. Costs and Expenses. Borrower shall reimburse Bank for all actual
costs and expenses incurred by Bank in the negotiation, preparation and
administration of the modification and restructuring of the Reimbursement
Agreements and other Related Documents contemplated by this Fourth Amendment.
Such costs include, but are not limited to, attorney fees and costs, inspection
fees, UCC searches, filing and recording fees, and the costs incurred to satisfy
all terms of this Fourth Amendment. All such costs and expenses shall be paid
upon execution of this Fourth Amendment.
14. Governing Law. This Fourth Amendment and the rights and
obligations of the parties hereunder shall in all respects be governed by, and
construed and enforced in accordance with the laws of the Sate of Washington. If
any court of competent jurisdiction determines any provision of this Fourth
Amendment or any of the Reimbursement Agreements or any of the Related Documents
(as defined in the Reimbursement Agreements) to be invalid, illegal or
unenforceable, that portion shall be deemed severed from the rest, which shall
remain in full force and effect as though the invalid, illegal or unenforceable
portion had never been a part hereof or of the Reimbursement Agreements or any
of the Related Documents (as defined in the Reimbursement Agreements).
15. Voluntary Agreement. The Borrower acknowledges that the Borrower
is represented by legal counsel of the Borrower's choice, is fully aware of the
terms contained in this Fourth Amendment, and has voluntarily and without
coercion or duress of any kind entered into this Fourth Amendment and the
documents executed in connection with this Fourth Amendment.
16. Counterparts. This Fourth Amendment may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
17. NOTICE OF ORAL COMMITMENTS. ORAL AGREEMENTS OR ORAL COMMITMENTS
TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
"Bank" "Borrower"
U.S. BANK NATIONAL ASSOCIATION ASSISTED LIVING CONCEPTS, INC., a
Nevada corporation
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxx Name: Xxxxxxx X. Xxxxxxx
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Title: Vice President Title: Sr. VP, CFO and Treasurer
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