1
EXHIBIT 10.8
SECOND MODIFICATION OF MASTER LOAN AGREEMENT
THIS SECOND MODIFICATION OF MASTER LOAN AGREEMENT (this "Agreement") is
made as of the 31st day of May, 2000, by and between ALS WEST, INC., a Delaware
corporation ("West"), ALTERRA HEALTHCARE CORPORATION, a Delaware corporation
formerly known as Alternative Living Services, Inc. ("Alterra"), and GUARANTY
FEDERAL BANK, F.S.B., a federal savings bank ("GFB"), as a Lender and as Agent
for the Lenders under the Master Loan Agreement.
W I T N E S S E T H:
WHEREAS, West, Alterra, and GFB have entered into that certain Master
Loan Agreement dated January 8, 1999, as modified by Modification of Master Loan
Agreement dated March 15, 2000 (such Master Loan Agreement and all supplements
thereto and amendments or modifications thereof and all agreements given in
substitution therefor or in restatement, renewal or extension thereof, in whole
or in part, being herein referred to as the "Master Loan Agreement"), which
Master Loan Agreement contemplates a loan facility in the total amount of
$50,000,000 (the "Loan Facility"); and
WHEREAS, West and Alterra have requested and Lender has agreed to
modify certain provisions of the Master Loan Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Master Loan Agreement.
2. Sections 6.17 through 6.19 of the Master Loan Agreement are deleted
and the following are substituted in lieu thereof:
Section 6.17. Company Debt Service Coverage Ratio. The Company
Debt Service Coverage Ratio, as of the last day of each fiscal quarter
of the Company, shall be greater than or equal to:
Fiscal Year ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ Quarter
------------- ------------ ------------ ------------ ------------
2000 0.75 to 1.0 0.75 to 1.0 0.75 to 1.0 0.75 to 1.0
1
2
2001 0.75 to 1.0 0.82 to 1.0 0.91 to 1.0 1.0 to 1.0
2002 1.06 to 1.0 1.13 to 1.0 1.19 to 1.0 1.25 to 1.0
Nothing contained herein shall imply an agreement on the part of Lender
to extend the maturity date of any Project Loan.
Section 6.18. Leverage Ratio. The Leverage Ratio, as of the
last day of each fiscal quarter of the Company, shall be less than or
equal to 0.75 to 1.0.
Section 6.19. Invested Equity. At all times the sum of (i) Net
Worth plus (ii) the outstanding amount of the Debentures (as defined in
the Purchase Agreement) shall be greater than or equal to $110,000,000,
increased on a cumulative basis as of the end of each fiscal quarter of
the Company commencing with the fiscal quarter ending March 31, 2000 by
(A) an amount equal to 50% of Net Income (to the extent positive) for
the fiscal quarter then ended plus (B) an amount equal to 75% of the
proceeds from any Equity Issuance subsequent to December 31, 1999, and
75% of the amount of any pay-in-kind dividends or coupons issued
subsequent to December 31, 1999.
3. The following are added as Sections 6.22 and 6.23 to the Master Loan
Agreement:
Section 6.22. Liquidity. The Company shall maintain Liquidity,
at the end of each fiscal quarter, of not less than $15,000,000.00. For
purposes of this Section 6.22, the term "Liquidity" shall mean, at any
time, the sum of (i) all cash of the Consolidated Parties at such time
plus (ii) all cash equivalents owned or held by the Consolidated
Parties at such time plus (iii) all available credit capacity to which
any Consolidated Party could have drawn upon on the last day of any
fiscal quarter.
Section 6.23. Definitions. As used in Sections 6.17 through
6.19 and in Section 6.22, the following terms shall have the meanings
assigned to them in this Section 6.23:
(a) "Capital Stock" means (i) in the case of a
corporation, capital stock, (ii) in the case of an
association or business entity, any and all shares,
interests, participations, rights or other
equivalents (however designated) of capital stock,
(iii) in the case of a limited liability company,
membership interests and (v) any other interest or
participation that confers on a Person the right to
receive a share of the profits and losses of, or
distribution of assets of, the issuing Person.
(b) "Capital Lease" means, as applied to any Person,
any lease of any Property (whether real, personal
or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for
as a capital lease on the balance sheet of that
Person.
2
3
(c) "Company Debt Service Coverage Ratio" means, (i) as
of the end of the fiscal quarter ending March 31,
2000, for the three month period ending on such
date, (ii) as of the end of the fiscal quarter
ending June 30, 2000, for the six month period
ending on such date, (iii) as of the end of the
fiscal quarter ending September 30, 2000, for the
nine month period ending on such date and (iv) as
of the end of each fiscal quarter of the Company
beginning with the fiscal quarter ending December
31, 2000, for the four fiscal quarter period ending
on such date, the ratio of (a) the sum of (I)
EBITDA for such period plus (II) Rental Expense for
such period, as determined in accordance with GAAP
to (b) the sum of (I) cash Interest net of Interest
income for such period plus (II) Rental Expense for
such period, as determined in accordance with GAAP.
(d) "Consolidated Parties" means a collective reference
to the Company and its Subsidiaries, and
"Consolidated Party" means any one of them.
(e) "EBITDA" means, for any period, with respect to the
Consolidated Parties on a consolidated basis, the
sum of (i) Net Income for such period plus (ii) the
following to the extent deducted in computing such
Net Income: (a) income tax expense, (b) interest
expense, (c) depreciation and amortization expense,
(d) non-cash non-recurring losses arising out of
the ordinary course of business (including without
limitation any adjustments to the Company's book
tax valuation allowance), (e) cash non-recurring
net losses related to the sale of assets in an
amount not to exceed $25 million and (f) cash
non-recurring losses in connection with any charges
related to the reduction or elimination of overhead
costs or restructuring of the Company's stock
option program in an amount not to exceed $10
million, all as determined in accordance with GAAP
minus (iii) the following to the extent added in
computing such Net Income: (a) income tax benefit
and (b) Interest income and (c) extraordinary or
non-recurring gains, all as determined in
accordance with GAAP.
(f) "Equity Issuance" means any issuance by a
Consolidated Party to any Person of (a) shares of
its Capital Stock or other equity interests, (b)
any shares of its Capital Stock or other equity
interests pursuant to the exercise of options
(other than Capital Stock issued to employees and
directors pursuant to employees or directors stock
option plans and Capital Stock issued to
3
4
consultants) or warrants, (c) any shares of its
Capital Stock or other equity interests pursuant to
the conversion of any debt securities to equity or
(d) any convertible debt securities evidenced by
debentures. The amount of any Equity Issuance shall
be the sum of (a) the net cash proceeds derived
from such issuance, plus (b) the amount of any
indebtedness or debentures cancelled, retired or
exchanged in connection with the issuance
(exclusive of any indebtedness or debentures
cancelled in connection with their conversion to
equity), plus (c) the amount for which any TPI-HCR
Assignee (as defined in the Purchase Agreement)
shall be given a credit against the purchase price
for such securities pursuant to Section 8.1 of the
Purchase Agreement plus (d) the amount for which
any remaining holders of the TPI-HCR Membership
Interests (as defined in the Purchase Agreement)
shall be given a credit against the purchase price
for such securities pursuant to Section 8.2 of the
Purchase Agreement or (e) the amount for which any
TPI Member (as defined in the Purchase Agreement)
shall be given a credit against the purchase price
for such securities pursuant to Section 9.1 of the
Purchase Agreement.
(g) "Funded Indebtedness" means, with respect to any
Person, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures,
notes or similar instruments, or upon which
interest payments are customarily made (expressly
excluding, however, the amount of convertible
securities of the Consolidated Parties (including
the Debentures (as defined in the Purchase
Agreement)) outstanding on such date), (c) all
obligations of such Person under conditional sale
or other title retention agreements relating to
Property purchased by such Person (other than
customary reservations or retentions of title under
agreements with suppliers entered into in the
ordinary course of business), (d) all obligations
of such Person issued or assumed as the deferred
purchase price of Property or services purchased by
such Person (other than trade debt incurred in the
ordinary course of business and due within twelve
months of the incurrence thereof) which would
appear as liabilities on a balance sheet of such
Person, (e) the principal portion of all
obligations of such Person under Capital Leases,
(f) the maximum amount of all standby letters of
credit issued or bankers' acceptances facilities
created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the
extent unreimbursed), (g) the principal portion of
all obligations of such Person under Synthetic
Leases, (h) all Indebtedness of another Person of
the type referred to in clause (a)-(g) above
secured by (or for which the holder of such Funded
Indebtedness
4
5
has an existing right, contingent or otherwise, to
be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or
acquired by such Person, whether or not the
obligations secured thereby have been assumed, (i)
all Guaranty Obligations of such Person with
respect to Indebtedness of the type referred to in
clauses (a)-(g) above of another Person and (j)
Indebtedness of the type referred to in clauses
(a)-(g) above of any partnership or unincorporated
joint venture in which such Person is legally
obligated or has a reasonable expectation of being
liable with respect thereto.
(h) "Guaranty Obligations" means, with respect to any
Person, without duplication, any obligations of
such Person (other than endorsements in the
ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing
or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or
indirect, and including without limitation any
obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property
constituting security therefor, (ii) to advance or
provide funds or other support for the payment or
purchase of any such Indebtedness or to maintain
working capital, solvency or other balance sheet
condition of such other Person (including without
limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements
or arrangements) for the benefit of any holder of
Indebtedness of such other person, (iii) to lease
or purchase property, securities or services
primarily for the purpose of assuring the holder of
such Indebtedness, or (iv) to otherwise assure or
hold harmless the holder of such Indebtedness
against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any
limitations set forth therein) be deemed to be an
amount equal to the outstanding principal amount
(or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty
Obligation is made.
(i) "Indebtedness" means, with respect to any Person,
without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes
or similar instruments, or upon which interest
payments are customarily made, (c) all obligations
of such Person under conditional sale or other
title retention agreements relating to Property
purchased by such Person (other than customary
reservations or retentions of title under
agreements with suppliers
5
6
entered into in the ordinary course of business),
(d) all obligations of such Person issued or
assumed as the deferred purchase price of Property
or services purchased by such Person (other than
trade debt incurred in the ordinary course of
business and due within six months of the
incurrence thereof or such longer period, if the
payment of which is being contested in good faith)
which would appear as liabilities on a balance
sheet of such person, (e) all obligations of such
Person under take-or-pay or similar arrangements or
under commodities agreements, (f) all Indebtedness
of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from,
Property owned or acquired by such Person, whether
or not the obligations secured thereby have been
assumed, (g) all Guaranty Obligations of such
person, (h) the principal portion of all
obligations of such Person under Capital Leases,
(i) all obligations of such Person under Hedging
Agreements, (j) all obligations of such Person to
repurchase any securities which repurchase
obligation is related to the issuance thereof, (k)
the maximum amount of all standby letters of credit
issued or bankers' acceptances facilities created
for the account of such Person and, without
duplication, all drafts drawn thereunder (to the
extent unreimbursed), (l) all preferred Capital
Stock issued by such Person and required by the
terms thereof to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed
date, (m) all other obligations of such person
under any arrangement or financing structure
classified as debt (for tax purposes) by any
nationally recognized rating agency, (n) the
principal portion of all obligations of such Person
under Synthetic Leases and (o) the Indebtedness of
any partnership or unincorporated joint venture in
which such Person is a general partner or a joint
venturer.
(j) "Interest" means, for any period, with respect to
the Consolidated Parties on a consolidated basis,
interest expense net of interest income (including
the amortization of debt discount and premium and
the interest component under Capital Leases and the
implied interest component under Synthetic Leases
but excluding the amortization of deferred
financing costs, amendment fees paid and bridge
loan fees paid), as determined in accordance with
GAAP.
(k) "Leverage Ratio" means, as of the end of any fiscal
quarter of the Company, for the four fiscal quarter
period ending on such date with respect to the
Consolidated Parties on a consolidated basis,
6
7
the ratio of (a) Funded Indebtedness of the
Consolidated Parties on a consolidated basis on the
last day of such period to (b) the sum of (i)
Funded Indebtedness plus (ii) Net Worth as of such
date plus (iii) the amount of convertible
securities of the Consolidated Parties (including
the Debentures (as defined in the Purchase
Agreement)) outstanding on such date plus (iv) book
equity which exists in entities for which
guaranties are included in the definition of Funded
Indebtedness.
(l) "Net Income" means, for any period, with respect to
the Consolidated Parties on a consolidated basis,
net income (excluding extraordinary items) after
Interest expense, income taxes and depreciation and
amortization, all as determined in accordance with
GAAP (net of sublease income with respect to such
Operating Leases) occurring after December 31,
1999.
(m) "Net Worth" means, as of any date with respect to
the Consolidated Parties on a consolidated basis,
shareholder's equity or net worth, as determined in
accordance with GAAP excluding the impact of net
non-recurring losses.
(n) "Operating Leases" means, as applied to any Person,
any lease (including, without limitation, leases
which may be terminated by the lessee at any time)
of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such
lease in which that Person is the lessor.
(o) "Purchase Agreement" means that certain Purchase
Agreement dated as of April 26, 2000 by and among
Alterra, as seller, and RDVEPCO, L.L.C., a Michigan
limited liability company, Group One Investors,
L.L.C., a Michigan limited liability company and
Holiday Retirement 2000, LLC, as purchasers, as
amended pursuant to First Amendment of even date.
(p) "Property" means, any interest in any kind of
property or asset, whether real, personal or mixed,
or tangible or intangible.
(q) "Rental Expense" means, for any period, with
respect to the Consolidated Parties on a
consolidated basis, rental expense under Operating
Leases, as determined in accordance with GAAP (net
of sublease income with respect to such Operating
Leases).
7
8
(r) "Subsidiary" means, as to any Person at any time,
(a) any corporation more than 50% of whose Capital
Stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective
of whether or not at such time, any class or
classes of such corporation shall have or might
have voting power by reason of the happening of any
contingency) is at such time owned by such Person
directly or indirectly through subsidiaries, and
(b) any partnership, association, joint venture or
other entity of which such Person directly or
indirectly through subsidiaries owns at such time
more than 50% of the Capital Stock.
(s) "Synthetic Lease" means any synthetic lease, tax
retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product
where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as
an Operating Lease for purposes of GAAP.
4. Section 8.1(h) of the Master Loan Agreement is deleted and the
following is substituted in lieu thereof:
(h) A default occurs under any of Sections 6.16 through 6.19, 6.21
or 6.22; or
5. In consideration of the execution hereof, Alterra shall pay Lender
an extension fee of $125,000 on or before May 31, 2000.
6. Alterra hereby ratifies and confirms its obligations under each
Guaranty delivered by Alterra in connection with a Project Loan.
7. West and Alterra each hereby respectively represents and warrants
that (i) it is duly incorporated and legally existing under the laws of the
state of its incorporation; (c) the execution and delivery of, and performance
under this Agreement are within its power and authority without the joinder or
consent of any other party and have been duly authorized by all requisite action
and are not in contravention of law or the powers of its charter, by-laws or
other corporate papers; (d) this Agreement constitutes its legal, valid and
binding obligations, enforceable in accordance with its terms; (e) the execution
and delivery of this Agreement do not contravene, result in a breach of or
constitute a default under any deed of trust, loan agreement, indenture or other
contract, agreement or undertaking to which it is a party or by which it or any
of its properties may be bound (nor would such execution and delivery constitute
such a default with the passage of time or the giving of notice or both) and do
not violate or contravene any law, order, decree, rule or regulation to which it
is subject; and (f) to the best of its knowledge, there exists no uncured
default under the Loan Documents, as modified hereby.
8
9
8. This Agreement constitutes a Loan Document.
9. West hereby acknowledges that the liens, security interests and
assignments created and evidenced by the Project Loan Documents and other Loan
Documents are valid and subsisting and further acknowledges and agrees that
there are no offsets, claims or defenses to the Notes, the Project Loan
Documents or any other Loan Documents.
10. Contemporaneously with the execution and delivery hereof, West
shall pay, or cause to be paid, all costs and expenses incident to the
preparation hereof and the consummation of the transactions specified herein,
including without limitation fees and expenses of legal counsel to GFB.
11. West and Alterra each hereby releases, remises, acquits and forever
discharges GFB, together with its employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, whether heretofore
or hereafter accruing, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the
date hereof, and in any way directly or indirectly arising out of or in any way
connected to this Agreement, the Master Loan Agreement, the Notes, the Project
Loan Documents or any other Loan Document, or any of the transactions associated
therewith, or the Collateral, including specifically but not limited to claims
of usury.
12. The parties acknowledge and confirm that each of their respective
attorneys have participated jointly in the review and revision of this Agreement
and that it has not been written solely by counsel for one party. The parties
hereto therefore stipulate and agree that the rule of construction to the effect
that any ambiguities are to or may be resolved against the drafting party shall
not be employed in the interpretation of this Agreement to favor either party
against the other.
13. This Agreement and the rights and duties of the parties hereunder
shall be governed for all purposes by the law of the State of Texas and the law
of the United States applicable to transactions within said State.
14. The terms and provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
15. All references in the Loan Documents to the Master Loan Agreement
shall hereafter mean the Master Loan Agreement as modified hereby. Except to the
extent specifically amended and modified by the terms and provisions of this
Agreement, all of the
9
10
terms and provisions of the Master Loan Agreement, as hereby amended, shall
remain in full force and effect and the parties hereto hereby ratify and confirm
all of the terms and provisions of the Master Loan Agreement, as hereby amended.
16. This Agreement may be executed in any number of counterparts, each
of which when executed and delivered shall be deemed an original, and all of
which, when taken together, shall be deemed to be one document. All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.
17. THIS AGREEMENT, THE MASTER LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
10
11
This Agreement is executed as of the date first written above.
ALS WEST, INC., a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: Vice President
----------------------------------
ALTERRA HEALTHCARE CORPORATION, a
Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: Senior Vice President
----------------------------------
GUARANTY FEDERAL BANK, F.S.B., a federal
savings bank, as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Vice President
----------------------------------
11