Exhibit 10.9
FOURTH AMENDMENT TO LOAN AGREEMENT AND
FORBEARANCE AGREEMENT
Dated as of November 5, 2002
This FOURTH AMENDMENT TO LOAN AGREEMENT AND FORBEARANCE AGREEMENT (as the same may be modified, amended or supplemented from time to time, this "Fourth Amendment"), dated as of November 1, 2002, is by and among THE CAPITAL COMPANY OF AMERICA LLC, a Delaware limited liability company, (together with its successors and assigns, the "Lender"), ALS-VENTURE II, INC., a Delaware corporation (the "Borrower"), ALTERRA HEALTHCARE CORPORATION f/k/a ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation (the "Parent"), and ALS-CLARE BRIDGE, INC., a Delaware corporation (the "Subsidiary").
RECITALS
WHEREAS, Nomura Asset Capital Corporation, a Delaware corporation ("Nomura"), and the Borrower entered into that certain Loan Agreement made as of May 26, 1998 (the "Original Loan Agreement");
WHEREAS, pursuant to (i) that certain Assignment and Assumption Agreement dated as of July 28, 1998, and (ii) that certain Allonge and the other documents related thereto, Nomura assigned to the Lender, and the Lender assumed from Nomura, all of Nomura's right, title, interest, duties and obligations in, to and under the Original Loan Agreement and the other Loan Documents;
WHEREAS, the Lender and the Borrower have amended the Original Loan Agreement pursuant to (i) that certain First Amendment to Loan Agreement and Reaffirmation Agreement dated as of July 31, 1998, (ii) that certain Second Amendment to Loan Agreement, First Amendment to Guaranty and Suretyship Agreement and Reaffirmation Agreement dated as of September __, 1998, and (iii) that certain Third Amendment to Loan Agreement and Reaffirmation Agreement dated as of November 30, 2000 (collectively with the Original Loan Agreement, the "Loan Agreement");
WHEREAS, the Borrower has acknowledged that certain Events of Default, as more fully described onSchedule I hereto, have occurred and are continuing under the Loan Documents (the "Existing Events of Default");
WHEREAS, the Borrower has informed the Lender that during the Forbearance Period (as hereinafter defined) certain additional Events of Default, as more fully described onSchedule II hereto, will occur (the "Impending Events of Default" and collectively with the Existing Events of Default, the "Specified Events of Default"); and
WHEREAS, the Borrower has requested that the Lender forbear from exercising certain rights and remedies in respect of the Specified Events of Default, and the Lender has agreed to do so on the terms and subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing premises, the covenants set forth in this Fourth Amendment and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1 Defined Terms. Unless otherwise defined herein or the context otherwise requires, capitalized terms used in this Fourth Amendment, including its preamble and recitals, have the respective meanings given to such terms in the Loan Agreement.ARTICLE II
ACKNOWLEDGMENT OF EVENTS OF
DEFAULT; FORBEARANCE
ARTICLE III
AMENDMENTS TO CREDIT AGREEMENT
SECTION 3.1 Amendments. (a) Section 1.1 of the Loan Agreement is hereby amended by adding thereto in the appropriate alphabetical order the following definitions:AMENDMENTS TO CREDIT AGREEMENT
"Alterra's Debt" shall mean all debt, guarantees and all convertible debt issued by Parent, including zero coupon instruments and non-cash paying securities (such as convertibles and PIKs), but excluding preferred equity securities that are not convertible to debt, all of the above on a consolidated basis with Parent's subsidiaries and other affiliates, determined in accordance with generally accepted accounting principles, consistently applied.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101etseq.
"Bankruptcy Court" means the United Sates Bankruptcy Court for the District of Delaware or any other court having jurisdiction over the Conforming Bankruptcy Proceeding from time to time.
"Cash Collateral Agreement" means that certain Cash Collateral Account Agreement dated as of August 22, 2001 among LaSalle Bank, N.A., the Borrower and the Lender.
"Cash Management Agreements" means, collectively, the Cash Collateral Agreement, the Collection Account Agreement and the Disbursement Agreement.
"Collection Account Agreement" means that certain Collection Account Agreement dated as of May 22, 1998 among the Borrower, the Lender and Firstar Bank, N.A.
"Conforming Bankruptcy Proceeding" means a proceeding in the Bankruptcy Court (i) instituted pursuant to a voluntary petition for reorganization filed by the Parent under Chapter 11 of the Bankruptcy Code (or an involuntary petition filed by any Person that is converted by the Parent into a voluntary petition under Chapter 11 of the Bankruptcy Code within 30 days after the filing of such involuntary petition) and (ii) in which the Parent at all times during the pendency of such proceeding pursues the confirmation of a Conforming Plan.
"Conforming Plan" shall mean a plan of reorganization of the Parent that contains each of the following elements and will result upon confirmation in:
(i) the rights, remedies and claims of the Lender under the Guaranty and any of the other Loan Documents to which the Parent is a party, in each case as modified by this Fourth Amendment, shall be unimpaired under the Conforming Plan and shall be fully enforceable and shall leave unaltered and unimpaired all rights, remedies, and claims of the Lender against the Borrower and its assets in accordance with their terms; (ii) the Parent and its wholly owned subsidiaries continuing to own or operate not less than three hundred (300) assisted living residences; (iii) the ratio of Alterra's Debt to Alterra's Cash Flow not exceeding 11:1 as of the end of the fiscal quarter during which the Conforming Plan is confirmed; (iv) upon the confirmation and implementation of the Conforming Plan, at least seventy percent (70%) of the Parent's voting stock on a fully diluted basis being owned by (A) Persons who had, prior to filing of the bankruptcy petition instituting the Conforming Bankruptcy Proceeding, (1) an ownership or other interest in Parent's stock or debt (including debt of Parent's subsidiaries guaranteed by Parent) or (2) a joint venture ownership interest in Parent's assets or Parent's subsidiaries' assets, and (B) Related Persons of Persons described in the foregoingclause (A), but excluding each such Person or Related Person who: (1) held, together with all Related Persons of such Person or Related Persons, less than a Material Investment in the Parent on the Commencement Date and (2) subsequent to the Commencement Date and prior to or contemporaneously with the confirmation and implementation of such plan increases their respective investment (on a cost basis) in Parent by more than ten perc ent (10%); (v) the Parent ratifying, and assuming all of its obligations under, the Guaranty, the Manager's Subordinations, the Cash Management Agreements, this Fourth Amendment and the other Loan Documents to which it is a party (as modified by the Fourth Amendment) and the Management Agreements; and (vi) all "claims" (as such term is defined in Section 101(5) of the Bankruptcy Code) of the Parent, if any, against the Borrower being subordinated to the prior indefeasible payment in cash in full of all Indebtedness;provided, however, that the Borrower shall be permitted (A) to pay a Management Fee to the Parent during the Forbearance Period subject to and in accordance with the terms and provisions of the Fourth Amendment, and (B) to reimburse the Parent for operating expenses subject to and in accordance with the terms and provisions of the Fourth Amendment and the Cash Management Agreements.(g) The second sentence ofSection 8.6 of the Loan Agreement is hereby amended to read in its entirety as follows:
ARTICLE IV CASH MANAGEMENT
SECTION 4.1 Cash Management. Throughout the Forbearance Period and until the Indebtedness is indefeasibly repaid in full in cash, the cash management arrangements set forth under the Cash Management Agreements shall remain unmodified and in full force and effect and the forbearance hereunder shall not preclude Lender from exercising any rights or remedies under any Cash Management Agreement at any time. (b) Notwithstanding the foregoingSection 4.1(a), the Borrower shall be permitted to pay a Management Fee to the Parent beginning in April 2003 for the month of March 2003 and for each month thereafter during the Forbearance Period;provided, that as a condition to the payment of a Management Fee during any month, the Debt Service Coverage Ratio as of the most recent Quarterly Test Date occurring prior to such month shall not have been less than 1.20:1.ARTICLE V
AGREEMENT REGARDING FORECLOSURE
SECTION 5.1 Escrow Arrangements. The Borrower shall, on or prior to the Effective Date, place into escrow with an escrow agent acceptable to the Lender, such documents, instruments, stipulations or certificates required by the Lender or a Title Insurer to effect a stipulated or consensual foreclosure under the laws of the jurisdiction where each Facility is located. The Borrower further agrees that it shall, in accordance withSection 5.1(o) of the Loan Agreement , execute and deliver to the Lender such documents, instruments, certificates, assignments, releases and other writings, and do such other acts as may be required by the Lender or a Title Insurer for the issuance of a title insurance policy in respect of any such transfer. In lieu of or in addition to placing the foregoing documents into escrow with respect to each Facility, if the Lender so elects, the Borrower and the Parent agree to place into escrow a deed for each Facility pursuant to escrow arrangements satisfactory to the Lender. The de ed for each Facility shall transfer to the Lender (or the Lender's designee), good, marketable and insurable title to the applicable Facility;provided, that the Liens evidenced by the Mortgages, the Collateral Instruments and the other Loan Documents with respect to the Facilities shall survive any transfer or recordation of such deeds and in no event shall any such Lien merge with the title evidenced by any deed. Each of the Loan Parties further covenants and agrees that it shall promptly execute and deliver to the Lender such other documents, instruments, certificates, assignments, releases and other writings, and do such other acts as may be required by the Lender in connection with the provisions of thisArticle V.AGREEMENT REGARDING FORECLOSURE
SECTION 5.2 Foreclosure. Each of the Loan Parties hereby agrees to cooperate, and to cause its respective affiliates to cooperate, with the Lender in any action after the Termination Date (i) to foreclose the Mortgages, (ii) to exercise any other rights, remedies and powers available to the Lender under the Loan Documents or under applicable law (including, without limitation, any request by the Lender for the appointment of a receiver), or (iii) to sell or cause the sale of any Facilities after a recordation of deeds or foreclosure of the Mortgages. The Borrower, the Parent and the Subsidiary agree (i) that they will not seek to restrict or limit any rights or remedies of the Lender or prevent the exercise by the Lender of any such rights or remedies after the Termination Date and (ii) that any stay imposed by operation of Section 362 in any voluntary or involuntary bankruptcy proceeding of the Parent (including a Conforming Bankruptcy Proceeding) shall be lifted, to the extent applicable, in order to permit th e Lender to exercise after the Termination Date all rights and remedies under the Loan Documents and under applicable law with respect to the Parent and its assets.
ARTICLE VI
COVENANTS OF THE LOAN PARTIES
SECTION 6.1 Cooperation. (a) If any voluntary or involuntary bankruptcy petition is filed by or against the Parent (other than a Conforming Bankruptcy Proceeding) or the Borrower, each of the Loan Parties hereby agrees to cooperate, and to cause its respective affiliates to cooperate, with the Lender in any motion seeking relief from the automatic stay and, consistent withSection 8.25 of the Loan Agreement, agree not to oppose or contest, and to cause their affiliates not to oppose or contest the enforceability of this provision orSection 8.25 of the Loan Agreement. (b) Each of the Parent and the Borrower further agree that to the extent it is not prohibited from doing so pursuant to the confidentiality agreements with its other creditors it shall promptly provide to the Lender, or cause to be promptly provided to the Lender, copies of (i) any and all plans of reorganization, lock-up agreements, financial analyses, pro forma business projections and all other notices, documents and materials issued by the Parent to its creditors, generally, at any time in connection with the proposed filing by the Parent of a voluntary petition under Chapter 11 of the Bankruptcy Code, as contemplated by the Conforming Bankruptcy Proceeding, and (ii) copies of the "Secured Financing Capitalization Overview" the "Overview of Potential Restructured Company" as and when such reports shall be updated and distributed to its other creditors from time to time and, in each case, substantially in the form delivered to the Lender on October 16, 2002. (c) If any voluntary or involuntary bankruptcy petition is filed by or against the Parent (including a Conforming Bankruptcy Proceeding), the Parent agrees that it will assume all of its obligations under the Guaranty, this Fourth Amendment, the Cash Management Agreements and the other Loan Documents to which it is a party.COVENANTS OF THE LOAN PARTIES
(d) Each of the Loan Parties further acknowledges and agrees that the foregoing provisions (i) were bargained-for by the Lender and were integral and essential to the Lender's agreement to forebear from the exercise of certain rights and remedies now available to the Lender under the Loan Documents; (ii) shall survive any subsequent breach or default by the any of the Loan Parties; and (iii) may be specifically enforced against any of the Loan Parties by the Lender.SECTION 6.2 Financial Advisor. The Borrower shall at all times retain a financial advisor reasonably acceptable to the Lender to assist it in the development of strategic alternatives for the sale of all or substantially all of the Facilities and the repayment in full of all Indebtedness.SECTION 6.3 Environmental Reports. The Borrower shall, within ten (10) days of receiving a written request from the Lender, cooperate with the Lender and initiate all necessary and appropriate action required for the preparation and delivery to the Lender of environmental reports, engineering reports, surveys or appraisals, or such other reports in respect of the Facilities as the Lender may require.SECTION 6.4 Management of the Facilities. The Parent (for itself and in its capacity as Manager) hereby covenants and agrees that:
ARTICLE VII
CONDITIONS TO EFFECTIVENESS
SECTION 7.1 Effective Date. This Fourth Amendment shall become effective on that date (the "Effective Date") when all of the conditions set forth in thisArticle VII have been satisfied.CONDITIONS TO EFFECTIVENESS
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.1 Representations and Warranties. In order to induce the Lender to enter into this Fourth Amendment, each of the Loan Parties hereby represents and warrants as to itself and for the benefit of the Lender as follows:REPRESENTATIONS AND WARRANTIES
(d) Upon the Effective Date, this Fourth Amendment, the Guaranty, the Loan Agreement and each of the other Loan Documents to which each Loan Party is a party will constitute the legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, in each case subject, as to enforceability, to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding at law or in equity) and an implied covenant of good faith.
(e) There are no existing claims by any Loan Party against the Lender and there are no offsets or defenses by any Loan Party to the payment of any amounts required under the Loan Documents or otherwise to the enforcement by the Lender of the Loan Documents.ARTICLE IX
ACKNOWLEDGEMENT, RELEASE AND INDEMNITY
SECTION 9.1 Acknowledgement. Each of the Loan Parties: (i) hereby reconfirms, acknowledges and agrees as of the date hereof that it is validly and justly indebted to the Lender for the payment of all Indebtedness, without defense, counterclaim, offset, cross-complaint, claim or demand of any kind or nature whatsoever; and (ii) further confirms, acknowledges and agrees that the outstanding amount of the Principal Indebtedness is $72,324,656.00 as of the date hereof.ACKNOWLEDGEMENT, RELEASE AND INDEMNITY
ARTICLE X
MISCELLANEOUS
MISCELLANEOUS
SECTION 10.1 Cross-References. Any reference in this Fourth Amendment to any Section is, unless otherwise specified, to such Section of this Fourth Amendment.
SECTION 10.2 Loan Document Pursuant to Loan Agreement. This Fourth Amendment is a Loan Document executed pursuant to the Loan Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with the terms and provisions of the Loan Agreement, includingArticle VII thereof. Each of the Loan Parties hereby agrees that its failure to comply with any provision of this Fourth Amendment shall constitute an immediate Event of Default (without regard to any applicable cure period) and shall cause the forbearance granted hereunder to cease to be in effect immediately and without the requirement of any prior notice from or further action on the part of the Lender.SECTION 10.3 Counterparts, etc. This Fourth Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Fourth Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Fourth Amendment.SECTION 10.4 Governing Law. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.SECTION 10.5 Successors and Assigns. This Fourth Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.SECTION 10.6 Entire Agreement. This Fourth Amendment and the other Loan Documents set forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and thereof and supercede any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein or therein set forth shall bind any party hereto, and no one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in this Fourth Amendment, no representations, warranties or commitments, express or implied, have been made by any party to any other party with respect to the subject matter of this Fourth Amendment.SECTION 10.7 Full Force and Effect. This Fourth Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Loan Agreement, the other Loan Documents or any of the instruments or agreements referred to therein or a waiver of, or forbearance with respect to, any other Default or Event of Default (other than the Specified Events of Default) under the Loan Documents, whether or not known to the Lender or (b) to prejudice any other right or remedy which the Lender may now have or have in the future under or in connection with the Loan Agreement, the other Loan Documents or any of the instruments or agreements referred to therein. Subject to the forbearance in respect of the Specified Events of Default inSection 2.2 above, the Loan Agreement and each of the other Loan Documents shall continue in full force and effect in accordance with the provisions thereof on the Effective Date. As us ed in the Loan Agreement, the terms "Loan Agreement," "this Agreement," "herein," "hereafter," "hereto," "hereof," and words of similar import shall, unless the context otherwise requires, mean the Loan Agreement as modified by this Fourth Amendment. References to the terms "Agreement" or "Loan Agreement" appearing in the Exhibits or Schedules to the Loan Agreement or in the other Loan Documents shall, unless the context otherwise requires, mean the Loan Agreement as modified by this Fourth Amendment.SECTION 10.8 Invalidity; Severability. Whenever possible, each provision of this Fourth Amendment shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. Any provision of this Fourth Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.SECTION 10.9 Headings. The headings of this Fourth Amendment are for the purposes of reference only and shall not affect the construction of, or be taken into consideration in interpreting, this Fourth Amendment.
SECTION 10.10 Further Assurances. Each of the Loan Parties hereby expressly acknowledges and agrees to enter into such other or further documents, and to take such other or further actions that may be necessary or, in the opinion of the Lender, desirable to perfect, preserve or protect the liens and security interests created, permitted or contemplated under any of the Loan Documents.SECTION 10.11 Consultation with Advisors. Each of the Loan Parties acknowledges that it has consulted with counsel and with such other experts and advisors as it has deemed necessary in connection with the negotiation, execution and delivery of this Fourth Amendment. This Fourth Amendment shall be deemed to have been jointly drafted and shall be construed without regard to any presumption or rule requiring that it be construed against the party causing this Fourth Amendment or any part hereof or thereof to be drafted.SECTION 10.12 Survival. All representations, warranties, covenants, agreements, undertakings, waivers and releases of each of the Loan Parties contained herein shall be deemed to have been relied upon by the Lender (notwithstanding any investigation heretofore or hereafter made by the Lender or on its behalf) and shall survive the Termination Date and the indefeasible payment in full in cash of the Indebtedness.SECTION 10.13 Amendment. No amendment, modification, rescission, waiver or release of any provision of this Fourth Amendment shall be effective unless made in accordance with the terms of the Loan Agreement.SECTION 10.14 No Duress; Jointly Drafted. Each of the Loan Parties is represented by legal counsel of itsrespective 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. This Fourth Amendment shall be deemed to be jointly drafted, and no provision of it shall be interpreted or construed for or against any party hereto because such party purportedly prepared or requested such provision, any other provision, or this Fourth Amendment as a whole.SECTION 10.15 Confidentiality. Each of the Loan Parties shall keep confidential and shall not divulge to any party, without the Lender's prior written consent, any material term of the Loan, this Fourth Amendment or any other Loan Document, instrument or agreement entered into in connection with the Loan, except: (i) to the extent that it is appropriate to do so in working with Cohen & Steers Capital Advisors, LLC and Silverman Consulting, as financial advisors to the Loan Parties, legal counsel, auditors, taxing authorities or other governmental agencies; (ii) to the extent that such information has become publicly available (other than as a direct or indirect result of such information being disclosed in breach of thisSection 10.15); (iii) as required by law or by court order; and (iv) information previously disclosed to existing lenders of the Loan Parties in the Secured Financing Capitalization Overview and the Overview of Potential Restructured Company.
SECTION 10.16 Valuation. Each of the Loan Parties expressly acknowledges and agrees that the Lender has neither participated in the preparation of, nor approved the content of, any report, projection, analysis, statement or other similar document that purports to assess, allocate, analyze or otherwise evaluate the value of any the Collateral, any of the Facilities or any other aspect of the business and operations of any of the Loan Parties.
[Signatures on Following Page]
IN WITNESS WHEREOF, the parties hereto have caused this FOURTH AMENDMENT TO LOAN AGREEMENT AND FORBEARANCE AGREEMENT to be duly executed by their duly authorized representatives, all as of the day and year first above written.
Delaware limited liability company
By: /s/ Stuart Simon
Stuart Simon
Managing Director
BORROWER:
ALS-VENTURE II, INC., a Delaware corporationBy: /s/ Mark Ohlendorf
Mark Ohlendorf
Vice President
PARENT:
ALTERRA HEALTHCARE CORPORATION f/k/a
ALTERNATIVE LIVING SERVICES, INC, a Delaware
corporation
By: /s/ Mark Ohlendorf
Mark Ohlendorf
Vice President
SUBSIDIARY:
ALS-CLARE BRIDGE, INC., a Delaware corporation
By: /s/ Mark Ohlendorf
Mark Ohlendorf
Vice President