FIRST AMENDMENT
TO LEASE
Regency Park Assisted Living
This First Amendment (this "First Amendment") to the Lease Agreement (the
"Lease") between Regent Assisted Living, Inc. ("Tenant") and Regency Park
Apartments Limited Partnership ("Landlord"), dated December 31, 1995, is
effective as of December 12, 1996.
Recitals
A. Tenant proposes to obtain financing for its business through a sale of
preferred stock ("Preferred Stock") to Prudential Equity Investors III, L.P., a
Delaware corporation ("Prudential") pursuant to the Preferred Stock and Warrant
Purchase Agreement dated December 12, 1996 between Tenant and Prudential (the
"Purchase Agreement").
B. To facilitate the sale of Preferred Stock, Tenant and Landlord wish to
modify the terms of the Lease to defer a portion of lease payments in the event
Tenant is in default on certain of its monetary obligations, and to subordinate
such deferred payments to the Preferred Stock in certain circumstances, in
accordance with the provisions set forth in this First Amendment.
Agreement
---------
Tenant and Landlord hereby agree as follows:
1. Deferral of Lease Payments. If Tenant is (a) in monetary default with
respect to (i) any of its leases of assisted living facilities, or (ii) any
Indebtedness of Tenant having a principal amount in excess of $500,000, or (b)
fails to pay on any Dividend Payment Date (as defined in Tenant's Restated
Articles of Incorporation, as amended) the full amount of dividends then accrued
on the Preferred Stock (a "Subordination Event"), then the monthly lease
payments under the Lease will, thereafter and until all Subordination Events
have been cured, be reduced to equal the monthly principal and interest payments
on the loans held by Landlord to finance the facility subject to the Lease plus
reserves for taxes, insurance and replacement and repairs as then in existence
or as required from time-to-time by the lender. The difference between lease
payments due pursuant to the Lease and any reduced lease payments made pursuant
to the preceding sentence will accrue as "Deferred Rent" until all such
Subordination Events have been cured, with interest accruing on such Deferred
Rent at a per annum rate of the greater of (i) twelve percent, or (ii) the prime
rate announced from time to time by U.S. Bank of Oregon plus 300 basis points.
2. Subordination of Deferred Rent. In connection with any liquidation,
winding up, dissolution or reorganization of Tenant (whether or not in any
bankruptcy, insolvency, reorganization, receivership or other proceeding) or any
other transaction determined to be treated as a liquidation by the holders of
the Preferred Stock pursuant to the provisions of Article II.D, Section 2 of
Tenant's of Tenant's Restated Articles of Incorporation, as amended (a
"Liquidation"), the rights of Landlord to receive the Deferred Rent (including
accrued interest thereon) shall be subordinated to the rights of the holders of
the Preferred Stock to receive the Liquidation Value (as defined in Tenant's
Restated Articles of Amendment, as amended) of the Preferred Stock plus all
accrued and unpaid dividends thereon upon such Liquidation. If in connection
with any Liquidation Landlord receives any portion of the Deferred Rent
(including any accrued interest thereon) prior to the holders of the Preferred
Stock receiving the aggregate Liquidation Value and accrued dividends with
respect to the Preferred Stock, Landlord shall receive such payments in trust
for the benefit of the holders of the Preferred Stock and shall promptly pay
over such amounts to the holders of the Preferred Stock (pro rata among such
holders based upon the number of shares held) until the holders of the Preferred
Stock have received an amount equal to the aggregate Liquidation Value plus all
accrued dividends thereon.
3. Expiration. This First Amendment shall terminate upon the first to occur
of (a) there shall be no shares of Preferred Stock outstanding (except to the
extent the provisions of paragraph 2 above are in effect with respect to any
sale, merger or liquidation of Tenant), or (b) there shall be no Subordination
Event that is continuing and Tenant's financial statements delivered pursuant to
the Purchase Agreement show positive EBITDA for two consecutive fiscal quarters
after Tenant has opened 1,000 additional units after the date of this First
Amendment as determined in accordance with Article II.D, Section 4K of Tenant's
Restated Articles of Incorporation, as amended.
4. Third Party Beneficiary. Tenant and Landlord acknowledge and agree that
Prudential and the holders of the Preferred Stock are third party beneficiaries
of this First Amendment and that no term of this First Amendment may be amended
or waived without the prior written consent of the holders of a majority of the
outstanding shares of Preferred Stock and that the holders of outstanding shares
of Preferred Stock shall be entitled to enforce the provisions of this First
Amendment at law or in equity.
5. Definitions. For the Purposes of this First Amendment:
"EBITDA" means Tenant's net income for any period, plus the amount of
interest expense, income taxes, depreciation and amortization deducted in
determining such net income, all determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Indebtedness" means indebtedness for borrowed money, indebtedness
evidenced by a note or other instrument, indebtedness for the deferred purchase
price of
property or services (other than trade payables in the ordinary course of
business), obligations under capitalized leases and indebtedness secured by a
lien on property.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
as of the date written above.
LANDLORD: REGENCY PARK APARTMENTS, LIMITED PARTNERSHIP
By: XXXXXX X. XXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------------
Title: General Partner
-------------------------------------
TENANT: REGENT ASSISTED LIVING, INC.
By: XXXXXX X. XXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------------
Title: President
-------------------------------------
