EXHIBIT 10.3
THIRD AMENDMENT TO AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED FINANCING AND SECURITY
AGREEMENT (this "Agreement") is made as of the ____ day of November, 2001,
effective as of September 30, 2001, by and among ARC CAPITAL CORPORATION II, a
Tennessee corporation ("ARCC"), the other Borrowers, if any, listed on the
signature pages hereof (the "Additional Borrowers", collectively with the
Original Borrower, the "Borrowers") and WASHINGTON MUTUAL BANK, FA, successor by
merger to Bank United (the "Agent") as agent for itself and the other lenders
who are or shall be from time to time participating as lenders (collectively,
the "Lenders") hereunder pursuant to the Agency Agreements dated June 8, 1999
and October 1, 1999 or any amendment thereto (as amended, restated or
substituted from time to time the "Agency Agreement").
RECITALS
A. The Lenders have provided to the Borrowers a credit facility
(such credit facility, as modified, increased, extended, restated or
substituted, is referred to hereinafter as the "Credit Facility" or the "Loan")
in the maximum principal sum of up to $100,000,000 or such greater amount not to
exceed $150,000,000 as the Lenders may from time to time commit to lend pursuant
to any Agency Agreement. Advances or readvances of the Loan have been made
pursuant to, and secured by, the provisions of that certain Amended and Restated
Financing and Security Agreement dated February 11, 2000 by and between the
Agent and ARC Capital Corporation II, a Tennessee corporation, as amended by the
First Amendment to Amended and Restated Financing and Security Agreement dated
November 7, 2000 but effective as of September 30, 2000, and the Second
Amendment to Amended and Restated Financing and Security Agreement dated August
8, 2001 but effective as of June 30, 2001 (the "Financing Agreement").
B. The advances under the Loan are evidenced by promissory notes
made or to be made by one or more of the Borrowers for the benefit of each of
the Lenders in the aggregate principal sum of the then-applicable Credit
Facility Committed Amount (as amended, restated, renewed or substituted from
time to time, the "Notes"). Each of the Notes has been amended pursuant to the
terms of a First Amendment to Promissory Note dated November 7, 2000, a Second
Amendment to Promissory Note dated August 8, 2001 but effective as of June 30,
2001, and is being amended pursuant to the terms of a Third Amendment to
Promissory Note of even date herewith. The Notes are secured by, among other
things, certain Deeds of Trust (as defined in the Financing Agreement) from the
Borrowers in favor of the Agent for the benefit of the Lenders covering such
Borrowers' interest in the Land and the Improvements for the applicable Facility
(as defined in the Financing Agreement) or certain assignments to the Lenders of
Assigned Notes secured by Deeds of Trust payable to Borrowers in connection with
Synthetic Lease Transactions and Collateral Assignments and such other real and
personal property as shall be therein more particularly set forth (collectively,
the "Property"). The Credit Facility is
evidenced, secured and guaranteed by the Financing Documents (as defined in the
Financing Agreement).
C. The Borrowers obligations under the Credit Facility are
guaranteed by American Retirement Corporation, a Tennessee corporation (the
"Guarantor"), pursuant to the terms of the Amended and Restated Guaranty of
Payment Agreement dated February 11, 2000 as amended pursuant to the First
Amendment to Amended and Restated Guaranty of Payment Agreement dated November
7, 2000, a Second Amendment to Amended and Restated Guaranty of Payment
Agreement dated August 8, 2001 but effective as of June 30, 2001, and the Third
Amendment to Amended and Restated Guaranty of Payment Agreement of even date
herewith but effective as of September 30, 2001 (as amended, restated, renewed
or substituted from time to time, the "Guaranty").
D. The Borrowers have requested and the Lenders have agreed to
modify certain provisions of the Financing Agreement and the Guaranty.
E. The Lenders have required, as a condition to continuing to
make available the Credit Facility, that the Borrowers execute and deliver this
Agreement to the Agent.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers and the Agent hereby
agree as follows:
(1) The above Recitals are a part of this Agreement. Unless otherwise
expressly defined in this Agreement, terms defined in the Financing Agreement or
the Construction Agreement shall have the same meaning under this Agreement.
(2) The Financing Agreement is hereby amended as follows:
(a) Effective as of the date of signature of this Agreement
and continuing through the Revolving Credit Termination Date, amounts repaid
under the Credit Facility may not be reborrowed (including but not limited to
any repayment arising from the Boynton Beach Facility and the Shavano Park
Facility being classified as a Pool B Project or from the sale of the Xxxxxxx
Place (Pecan Park) Facility), despite the use of the term "revolving" in the
Financing Documents and no additional advances may be made for any purpose. Any
additional Eligible Project provided as Collateral for the Credit Facility will
not create any additional availability under the Borrowing Base. No additional
availability under the Borrowing Base will be allowed from the Santa Catalina
Facility if it qualifies as a Special Eligible Project; provided, however, that
if the Santa Catalina Facility so qualifies, the higher Borrowing Base
availability for Special Eligible Projects shall be used for the sole purpose of
calculations under Section 7.2.5 (Percentage of Stabilized Projects).
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(b) The following definitions in Section 1.1 of the Financing
Agreement are amended and restated in their entirety as follows:
"Credit Facility Committed Amount" means $81,571,266.
"Revolving Credit Expiration Date" means November 2, 2002, or
any date to which it may be extended from time to time pursuant to the
terms of Section 2.6 hereof.
"Tangible Net Worth" means, at any time, the sum at such time
of Net Worth less the total of (a) all assets which would be classified
as intangible assets under GAAP, including goodwill, trademarks,
trademark applications, trade names, service marks, patent applications
and licenses, and deferred charges, (b) pre-opening costs,
organizational costs and deferred financing costs, and (c) advances or
loans made to or receivables from any unconsolidated affiliates of
which the Guarantor owns less than fifty percent (50%) or any
stockholder of the Guarantor or any affiliate. The following items (a)
through (e) will also be excluded from Tangible Net Worth: (a) non-cash
"xxxx to market" adjustments related to the Guarantor's two existing
interest rate swap instruments with X.X. Xxxxxx and SunTrust Bank,
respectively (the "X.X. Xxxxxx and SunTrust Swaps") not to exceed
$1,200,000 in the aggregate net of taxes over the life of the X. X.
Xxxxxx and SunTrust Swaps, (b) the $1,227,000 in pre-tax loss for debt
prepayment penalty and $762,000 pre-tax ordinary loss each in
connection with the sale of the Rossmoor Regency Facility, (c) the
one-time $1,200,000 expense for liability insurance "nose coverage"
paid to Technical Risk, Inc., (d) any gain or loss on the sale of the
Pecan Park Facility or any other Facility identified to be sold during
fiscal quarters ending June 30, 2001, September 30, 2001, December 31,
2001 and March 31, 2002 on the list attached hereto as Exhibit C and
(e) extraordinary losses arising from prepayments of debt in connection
with the projects listed on Exhibit C attached hereto during fiscal
quarters ending June 30, 2001, September 30, 2001, December 31, 2001
and March 31, 2002. Transaction costs associated with the sale or
refinance of assets listed on Exhibit C attached hereto during the
fiscal quarters ending June 30, 2001, September 30, 2001, December 31,
2001 and March 31, 2002 will be included as tangible assets in the
calculation of Tangible Net Worth. All assets classified in the
Guarantor's financial statements as leaseholds of Senior Living
Facilities or leasehold acquisition costs related to Senior Living
Facilities shall be included as tangible assets in the calculation of
its Tangible Net Worth with the exception of leasehold acquisition
costs, if any, for the Senior Living Facility known as "Freedom Plaza
Xxxxxx".
0
(c) Section 2.1(c) of the Financing Agreement is hereby
amended and restated in its entirety as follows:
The conditions precedent for making an advance under the Loan
shall be as set forth in this Agreement. Sums borrowed and
repaid may not be readvanced.
(d) Section 2.5 of the Financing Agreement is hereby
intentionally deleted in its entirety.
(e) Section 2.7 (Mandatory Prepayment) of the Financing
Agreement is hereby amended and restated in its entirety as follows:
Section 2.7 Mandatory Prepayment. On or before May 1, 2002,
the Principal Sum outstanding under the Credit Facility shall be
permanently reduced by not less than $10,000,000 and such reduced
Principal Sum shall then constitute the Credit Facility Committed
Amount. One or more Eligible Projects may be released from the
Borrowing Base in connection with such prepayment of the Credit
Facility subject to the Lenders' right to approve the release of an
Eligible Project pursuant to provisions of Section 4.16 (Consent to
Releases) hereof. The Lenders acknowledge that as of the date hereof
the Borrowers have permanently reduced the Principal sum by
$10,760,033.95, which amount fully satisfies the requirement of a
$10,000,000 reduction by May 10, 2002.
(f) Section 4.18 (Funding of Operating Deficiencies and
Limitations on Advances) is hereby amended and restated as follows:
Section 4.18 Funding of Operating Deficiencies and
Eliminations.
(a) For all Eligible Projects in the Borrowing Base as of the
date hereof, no additional availability in the Borrowing Base or
reimbursement will be given for any purpose.
(b) On or before the last Banking Day of each fiscal quarter,
beginning with the quarter ending September 30, 2001, the Borrowers
shall submit a report projecting the aggregate dollar amount of
operating deficits of all Eligible Projects until all Eligible Projects
reach break-even operations. If necessary as a result of such report
after review and acceptance by the Lenders and based upon the aggregate
difference between projected operating deficits and the aggregate net
income from Eligible Projects which have projected positive cash flow
for the same period and (such then applicable amount being referred to
herein as an "Operating Deficiency"), the requirement for and amount of
the Operating Deficiency Reserve will be established, replenished
and/or increased (as applicable) by the Borrowers, but only upon demand
by the Agent in the discretion of the Requisite Lenders. Failure to
deliver such funds to the Agent within three (3) Banking Days of
Agent's demand shall constitute an Event of Default under the Financing
Documents.
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(c) At such time or times as an Operating Deficiency Reserve
has been posted, the Borrowers may request advances from the Operating
Reserve Deficiency Account (without eligibility for reimbursement under
the Credit Facility) until it is exhausted. The Requisite Lenders shall
determine in their sole discretion when and if such Operating Reserve
may be released to the Borrowers.
(g) The Guarantor Certificate and Attachments 1 through 6
attached to Exhibit E to the Financing Agreement are hereby replaced by the
amended and restated schedules attached hereto as Exhibit B to be completed by
the Guarantor and delivered to the Agent at the times required by the Financing
Agreement.
3. The agreements of the Agent under this Agreement are subject to the
following terms and conditions, time being of the essence:
(a) Execution and delivery by the Borrowers and/or the
Guarantor as applicable of each of the following documents (collectively the
"Modification Agreements"):
(i) This Agreement;
(ii) The Third Amendment to Amended and Restated
Guaranty of Payment Agreement;
(iii) A Third Amendment to Promissory Note for each
of the Notes.
(b) Payment by the Borrowers to the Lenders of their pro rata
share of a fee in consideration for the Modification Agreements of .125% of the
Credit Facility Committed Amount and payment to the Lenders of $750,000 in
additional proceeds from the sale of the Eligible Project known as Pecan Park
or Xxxxxxx Place.
(c) The Agent shall have received an opinion of counsel for
the Borrowers and Guarantor in form and substance satisfactory to the Agent and
all due diligence items listed on the closing checklist.
(d) The Borrowers have paid all costs and expenses of the
agent and the other Lenders, including, but not limited to, legal fees in
connection with the preparation and execution of Modification Agreements.
4. Payment for Appraisals. The Borrowers agree that they will
reimburse the Agent for the cost of appraisals recently ordered for all Eligible
Projects upon demand by the Agent and regardless of whether such appraisals are
classified by the Lenders as appraisals obtained pursuant to Section 7.27 of the
Financing Agreements.
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5. Release of Claims. The Borrowers and the Guarantor, for themselves
and for each of their respective successors and assigns, hereby release and
waive all claims and/or defenses they now or hereafter may have against the
Lenders and their successors and assigns on account of any occurrence relating
to the Credit Facility, the Financing Documents and/or the Property which
accrued prior to the date hereof, including, but not limited to, any claim that
the Lenders (a) breached any obligation to the Borrowers and/or the Guarantor in
connection with the Credit Facility, (b) was or is in any way involved with the
Borrowers and/or the Guarantor as a partner, joint venturer, or in any other
capacity whatsoever other than as a lender, (c) failed to fund any portion of
the Loan or any other sums as required under any document or agreement in
reference thereto, or (d) failed to timely respond to any offers to cure any
defaults under any document or agreement executed by the Borrowers, the
Guarantor or any third party or parties in favor of the Lenders (INCLUDING ANY
ACT OR OMISSION CONSTITUTING, CAUSED BY OR RESULTING FROM THE ORDINARY
NEGLIGENCE OF THE LENDERS). This release and waiver shall be effective as of the
date of this Agreement and shall be binding upon the Borrowers and the Guarantor
and each of their respective successors and assigns, and shall inure to the
benefit of the Lenders and their successors and assigns. The term "Lenders" as
used herein shall include, but shall not be limited to, their present and former
officers, directors, employees, agents and attorneys.
6. Except as specifically set forth herein, the terms, provisions and
covenants of the Financing Agreement are hereby ratified and confirmed and
remain in full force and effect.
7. This Agreement may be executed in any number of duplicate originals
or counterparts, each of such duplicate originals or counterparts shall be
deemed to be an original and all taken together shall constitute but one and the
same instrument.
8. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, without regard to principles of
choice of law.
[SIGNATURES ON FOLLOWING PAGE]
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered under seal by their duly authorized representatives as of
the date and year first written above.
BORROWER:
WITNESS/ATTEST: ARC CAPITAL CORPORATION II
a Tennessee corporation
By:
------------------ ------------------------ (SEAL)
Name:
Title:
WITNESS/ATTEST: ARC CARRIAGE CLUB OF JACKSONVILLE,
INC, a Tennessee corporation
By:
------------------ ------------------------ (SEAL)
Name:
Title:
WITNESS/ATTEST: ARC SANTA CATALINA, INC., a Tennessee
corporation
By:
------------------ ------------------------ (SEAL)
Name:
Title:
AGENT:
WITNESS/ATTEST: WASHINGTON MUTUAL BANK, FA,
as Agent for the Lenders
By:
------------------ ------------------------ (SEAL)
Name:
Title:
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AGREEMENT OF GUARANTOR
The undersigned is the "Guarantor" under an Amended and Restated Master
Guaranty of Payment Agreement, dated February 11, 2000 as amended pursuant to
the First Amendment to Amended and Restated Guaranty of Payment Agreement dated
November 7, 2000, the Second Amendment to Amended and Restated Guaranty of
Payment Agreement dated August 8, 2001 and the Third Amendment to Amended and
Restated Guaranty of Payment Agreement of even date herewith (as amended,
modified, substituted, extended and renewed from time to time, the "Guaranty"),
in favor of the Agent on behalf of the Lenders. In order to induce the Lenders
to enter into the foregoing Agreement, the undersigned (a) consents to the
transactions contemplated by, and agreements made by the Borrower under, the
foregoing Agreement, and (b) ratifies, confirms and reissues the terms,
conditions, promises, covenants, grants, assignments, security agreements,
agreements, representations, warranties and provisions contained in the
Guaranty, and the other Financing Documents entered into by the Guarantor.
WITNESS signature and seal of the undersigned as of the date of the
Agreement.
WITNESS/ATTEST: AMERICAN RETIREMENT CORPORATION, a
Tennessee corporation
By:
------------------ ------------------------ (SEAL)
Name:
Title:
8
THIRD AMENDMENT TO AMENDED AND
RESTATED GUARANTY OF PAYMENT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED GUARANTY OF PAYMENT
AGREEMENT (this "Agreement") is made this ___ day of November, 2001, effective
as of September 30, 2001, by and between AMERICAN RETIREMENT CORPORATION, a
Tennessee corporation (the "Guarantor") and WASHINGTON MUTUAL BANK, FA,
successor by merger to Bank United (the "Agent") as agent for itself and the
other lenders who are or shall be from time to time participating as lenders
(collectively, the "Lenders") hereunder pursuant to the Agency Agreement dated
June 8, 1999 and October 1, 1999 or any amendment thereto (as amended, restated
or substituted from time to time the "Agency Agreement").
RECITALS
A. The Lenders have provided to ARC Capital Corporation II, a
Tennessee corporation, and the other Borrowers a credit facility (such credit
facility, as modified, increased, extended, restated or substituted, is referred
to hereinafter as the "Credit Facility" or the "Loan") in the maximum principal
sum of up to $100,000,000 or such greater amount not to exceed $150,000,000 as
the Lenders may from time to time commit to lend pursuant to any Agency
Agreement. Advances or readvances of the Loan have been made pursuant to, and
secured by, the provisions of that certain Amended and Restated Financing and
Security Agreement dated February 11, 2000 by and between the Agent and the
Borrowers, as amended pursuant to the First Amendment to Amended and Restated
Financing and Security Agreement dated November 7, 2001 and the Second Amendment
to Amended and Restated Financing and Security Agreement of even date herewith
(as further amended, restated, renewed or substituted from time to time, the
"Financing Agreement").
B. The advances under the Loan are evidenced by promissory notes
made by one or more of the Borrowers for the benefit of each of the Lenders in
the aggregate principal sum of the then-applicable Credit Facility Committed
Amount (as amended, restated, renewed or substituted from time to time, the
"Notes"). Each of the Notes has been amended pursuant to the terms of a First
Amendment to Promissory Note dated November 7, 2000 and is being amended
pursuant to the terms of a Second Amendment to Promissory Note of even date
herewith. The Notes are secured by, among other things, certain Deeds of Trust
(as defined in the Financing Agreement) from the Borrowers in favor of the Agent
for the benefit of the Lenders covering such Borrowers' interest in the Land and
the Improvements for the applicable Facility (as defined in the Financing
Agreement) or certain assignments to the Lenders of Assigned Notes secured by
Deeds of Trust payable to Borrowers in connection with Synthetic Lease
Transactions and Collateral Assignments and such other real and personal
property as shall be therein more particularly set forth (collectively, the
"Property"). The Credit Facility is evidenced, secured and guaranteed by the
Financing Documents (as defined in the Financing Agreement).
C. The Borrowers obligations under the Credit Facility are
guaranteed by the Guarantor pursuant to the terms of the Amended and Restated
Guaranty of Payment Agreement
1
dated February 11, 2000 as amended pursuant to the First Amendment to Amended
and Restated Guaranty of Payment Agreement dated November 7, 2000 and the Second
Amendment to Amended and Restated Guaranty (the "Guaranty").
D. The Borrowers have requested and the Lenders have agreed to
modify certain provisions of the Financing Agreement and the Guaranty.
E. The Lenders have required, as a condition to continuing to
make available the Credit Facility, that the Guarantor execute and deliver this
Agreement to the Agent.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor and the Agent hereby
agree as follows:
1. The above Recitals are a part of this Agreement. Unless
otherwise expressly defined in this Agreement, terms defined in the Financing
Agreement or the Guaranty shall have the same meaning under this Agreement.
2. The Guaranty is hereby amended as follows: Subsections (a),
(d), (f) and (g) of Section 3.2 of the Guaranty are hereby amended and restated
in their entirety as follows:
(a) Minimum Tangible Net Worth. Maintain, on a
consolidated basis with all subsidiaries, at all times during
the term of the Credit Facility measured quarterly, a minimum
Tangible Net Worth of not less than $85,000,000 as of
September 30, 2001 and beginning with the quarter ending
December 31, 2001 a minimum Tangible Net Worth of not less
than the sum of $85,000,000 plus fifty percent (50%) of the
Guarantor's net income (if positive) for each subsequent
quarter plus seventy-five (75%) of the net cash proceeds to
the Guarantor of any equity capital (or equity equivalent)
securities offering received during such quarter, excluding
the dollar amount of any such equity offering issued in
connection with any acquisition, merger or business
combination which is attributed to the purchase of the
goodwill of the acquired entity. "Tangible Net Worth" means,
at any time, the sum at such time of Net Worth less the total
of (a) all assets which would be classified as intangible
assets under GAAP, including goodwill, trademarks, trademark
applications, trade names, service marks, patent applications
and licenses, and deferred charges, (b) pre-opening costs,
organizational costs and deferred financing costs, and (c)
advances or loans made to or receivables from any
unconsolidated affiliates of which the Guarantor owns less
than fifty percent (50%) or any stockholder of the Guarantor
or any affiliate. The following items (a) through (e) will
also be excluded from Tangible Net Worth (provided, however,
that after deduction therefor, Tangible Net Worth shall not be
less than $75,000,000): (a) non-cash "xxxx to market"
adjustments related to the Guarantor's two existing interest
rate swap instruments obtained from X.X. Xxxxxx and SunTrust
Bank, respectively (the "X.X. Xxxxxx and SunTrust Swaps") not
to exceed $1,200,000 in the aggregate, net of taxes, over the
life of the X. X. Xxxxxx and SunTrust Swaps, (b) the
$1,227,000 in pre-tax loss for debt
2
prepayment penalty and $762,000 pre-tax ordinary loss each in
connection with the sale of the Rossmoor Regency Facility, (c)
the one-time $1,200,000 expense for liability insurance "nose
coverage" paid to Technical Risk, Inc., (d) any gain or loss
on the sale of the Pecan Park Facility or any other Facility
as listed on Exhibit A attached hereto during fiscal quarters
ending June 30, 2001, September 30, 2001, December 31, 2001 or
March 31, 2002 and (e) extraordinary losses arising from
prepayments of debt during fiscal quarters ending June 30,
2001, September 30, 2001, December 31, 2001 or March 31, 2002
as listed on Exhibit A attached hereto. Transaction costs
associated with the sale or refinance of assets listed on
Exhibit A attached hereto during the fiscal quarters ending
June 30, 2001, September 30, 2001, December 31, 2001 and March
31, 2002 will be included as tangible assets in the
calculation of Tangible Net Worth. All assets classified in
the Guarantor's financial statements as leaseholds of Senior
Living Facilities or leasehold acquisition costs related to
Senior Living Facilities shall be included as tangible assets
in the calculation of its Tangible Net Worth except leasehold
acquisition costs, if any, for the Senior Living Facility
known as "Freedom Plaza Peoria".
(d) Ratio of EBITDAR to Interest and Rent. Maintain
on a consolidated basis a minimum ratio of EBITDAR to the sum
of Interest plus Rent as shown below for the period or periods
indicated; provided, however, that any calculation of such
ratio shall at all times (i) exclude non-cash reserves for
general and/or professional liability claims and the costs
associated therewith, (ii) exclude all non-cash income arising
from the contribution of assets to a joint venture, (iii)
except as provided in (vi) hereafter, include cash payments
made for general and/or professional liability claims and the
costs associated therewith, (iv) exclude non-cash "xxxx to
market" adjustments related to the X.X. Xxxxxx and SunTrust
Swaps not to exceed $1,200,000 in the aggregate, net of taxes,
over the life of the X.X. Xxxxxx and SunTrust Swaps, (v)
exclude the $1,227,000 in pre-tax loss for debt prepayment
penalty and $762,000 pre-tax ordinary loss each in connection
with the sale of the Rossmoor Regency Facility, (vi) exclude
the one-time $1,200,000 expense for liability insurance "nose
coverage" paid to Technical Risk, Inc., (vii) exclude any gain
or loss on the sale of the Pecan Park Facility or any other
Facility identified to be sold as listed on Exhibit A attached
hereto during fiscal quarters ending June 30, 2001, September
30, 2001, December 31, 2001 or March 31, 2002 as listed on
Exhibit A attached hereto and (viii) exclude extraordinary
losses arising from prepayments of debt during fiscal quarters
ending June 30, 2001 or September 30, 2001 as listed on
Exhibit A attached hereto.
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(i) Measured on a rolling four (4) fiscal quarter basis as
follows:
Period Ending Ratio
------------- -----
September 30, 2001 1.05 to 1.00
December 31, 2001 1.05 to 1.00
March 31, 2002 1.05 to 1.00
June 30, 2002 1.10 to 1.00
September 30, 2002 1.10 to 1.00
(ii) Measured on a single fiscal quarter basis as follows:
Period Ending Ratio
------------- -----
September 30, 2001 1.00 to 1.00
December 31, 2001 1.05 to 1.00
March 31, 2002 1.05 to 1.00
June 30, 2002 1.10 to 1.00
September 30, 2002 1.10 to 1.00
(f) Minimum Liquidity. Maintain on a consolidated
basis Liquid Assets of not less than the greater of (i) (aa)
ten percent (10%) of its Tangible Net Worth or (bb)
$13,514,000 as of June 30, 2001, measured quarterly plus (ii)
$.50 for every $1.00 (the "Additional Required Liquidity") of
net equity capital that is invested after the date hereof by
the Guarantor or its Subsidiaries in any of the new
investments described in subparts (i) through (v) below
(individually, a "New Investment" or, collectively, the "New
Investments"):
(i) acquisition of Guarantor's convertible
subordinated debentures,
(ii) voluntary prepayments of debt balances, other
than payments currently scheduled or required pursuant to the
terms of the documents evidencing such indebtedness
(including, without limitation, prepayments associated with
the sale or refinancing of assets),
(iii) acquisitions of Senior Living Facilities;
(iv) the dollar amount spent on new (i.e., first
initiated after September 30, 2000) construction either for
expansion of existing or development of new Senior Living
Facilities; and
(v) the dollar amount of cash spent to acquire the
ownership of "black box" Synthetic Lessees.
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The foregoing notwithstanding, the following
limitations shall apply to the Additional Required Liquidity:
(1) New Investments must exceed $500,000 in a fiscal quarter
in order to give rise to commensurate Additional Required
Liquidity and thereafter, the Additional Required Liquidity
shall be calculated on the amount of New Investments in excess
of $500,000 in such quarter; and (2) in all events, the
minimum Liquid Assets requirement shall not exceed $25,000,000
(except to the extent 10% of the Guarantor's Tangible Net
Worth exceeds $25,000,000).
Notwithstanding the foregoing, the following New
Investments shall not give rise to any Additional Required
Liquidity: (1) the acquisition by the Guarantor or any
Subsidiary of any Senior Living Facility which is currently a
leasehold (except as provided in Section 3.2(f)(v)); or (2)
the cost of proposed expansion of the Senior Living Facility
knows as "Park Regency".
In addition, with regard to the sale of an asset the
proceeds of which are invested in a new asset pursuant to a
1031 exchange transaction, only 50% of the net capital in
excess of the 1031 sale proceeds included in the New
Investment will be subject to the Additional Required
Liquidity.
(g) Fixed Charge Coverage Ratio. Maintain on a
consolidated basis a minimum ratio of EBITDAR (as defined in
the Financing Agreement as modified pursuant to Subsection (d)
of this Section 3.2) to Interest plus Rent plus current of
principal amortization of debt 1.00 to 1.00, measured
quarterly on a rolling four (4) quarters basis. In determining
the amount of principal amortization of any debt any balloon
or bullet payment shall be excluded.
3. Except as specifically set forth herein, the terms, provisions
and covenants of the Guaranty are hereby ratified and confirmed and remain in
full force and effect.
4. This Agreement may be executed in any number of duplicate
originals or counterparts, each of such duplicate originals or counterparts
shall be deemed to be an original and all taken together shall constitute but
one and the same instrument.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
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WITNESS the signatures and seals of the Guarantor and the Agent on
behalf of the Lenders under seal by their duly authorized representatives as of
the day and year first above written.
WITNESS OR ATTEST: AMERICAN RETIREMENT CORPORATION,
a Tennessee corporation
By:
------------------ ------------------------ (SEAL)
Name:
Title:
STATE/COMMONWEALTH OF _______________
COUNTY/CITY OF ______________, TO WIT:
I HEREBY CERTIFY, that on this ___ day of November, 2001, before me,
the undersigned Notary Public of said State/Commonwealth, personally appeared
______________, who acknowledged himself to be the ___________________ of
American Retirement Corporation, known to me (or satisfactorily proven) to be
the person whose name is subscribed to the within instrument, and acknowledged
that he executed the same for the purposes therein contained as the duly
authorized officer of said corporation by signing the name of the corporation by
himself as __________________.
WITNESS my hand and Notarial Seal.
------------------------------
Notary Public
My Commission Expires:
6
WITNESS: WASHINGTON MUTUAL BANK, FA,
as Agent on behalf of the Lenders
By:
------------------ ------------------------ (SEAL)
Name:
Title:
STATE/COMMONWEALTH OF _______________
COUNTY/CITY OF ______________, TO WIT:
I HEREBY CERTIFY, that on this ___ day of November, 2001, before me,
the undersigned Notary Public of said State/Commonwealth, personally appeared
____________________, who acknowledged himself to be the
__________________________ of Washington Mutual Bank, FA, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the within
instrument, and acknowledged that he executed the same for the purposes therein
contained as the duly authorized officer of said bank by signing the name of the
bank by himself as ______________________.
WITNESS my hand and Notarial Seal.
------------------------------
Notary Public
7
