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EXHIBIT 10.6
FOURTH AMENDMENT TO GUARANTY OF PAYMENT AGREEMENT
THIS FOURTH AMENDMENT TO GUARANTY OF PAYMENT AGREEMENT (herein called
the "Amendment") is made as of May 31, 2000, by and among Alterra Healthcare
Corporation, a Delaware corporation, formerly known as Alternative Living
Services, Inc. ("Guarantor"), and Bank United, individually and as agent for
itself and certain additional lenders ("Agent").
W I T N E S S E T H:
WHEREAS, ALS Holdings, Inc., a Delaware corporation, ALS Wisconsin
Holdings, Inc., a Delaware corporation and Agent entered into that certain
Amended and Restated Financing and Security Agreement dated as of February 12,
1999, as amended by that certain First Amendment to Amended and Restated
Financing and Security Agreement dated as of October 29, 1999, that certain
Suspension, Waiver and Modification Agreement dated as of March 28, 2000, that
certain Second Amendment to Amended and Restated Financing and Security
Agreement dated as of May 10, 2000 and that certain Third Amendment to Amended
and Restated Financing and Security Agreement of even date herewith (as amended,
supplemented, or restated to the date hereof, the "Financing Agreement"), for
the purpose and consideration therein expressed, whereby Lenders (as defined in
the Financing Agreement) became obligated to make loans to Borrower (as defined
in the Financing Agreement) as therein provided; and
WHEREAS, in connection with the transactions contemplated by the
Financing Agreement, Guarantor executed and delivered to Agent, for the benefit
of Lenders, that certain Guaranty of Payment Agreement dated as of February 12,
1999, as amended by that certain First Amendment to Guaranty of Payment
Agreement dated as of October 29, 1999, that certain Suspension, Waiver and
Modification Agreement dated as of March 28, 2000 and that certain Third
Amendment to Guaranty of Payment Agreement dated as of May 10, 2000 (as amended,
supplemented or restated to the date hereof, the "Original Guaranty"), pursuant
to which Guarantor guaranteed the payment and performance of all obligations of
Borrower under the Financing Agreement; and
WHEREAS, Guarantor and Agent desire to amend the Original Guaranty to
amend certain provisions thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Original Guaranty, in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
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ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Guaranty. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Guaranty shall have the same meanings whenever used in
this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise
requires, the following terms when used in this Amendment shall have the
meanings assigned to them in this Section 1.2.:
"Amendment" means this Fourth Amendment to Guaranty of Payment
Agreement.
"Guaranty" means the Original Guaranty as amended hereby.
ARTICLE II.
Amendments to Original Guaranty
Section 2.1. Financial Covenants.
(a) The opening clause of Section 3.2 and Sections 3.2.1, 3.2.2,
3.2.3 and 3.2.3A of the Original Guaranty are hereby replaced in their entirety
by the following:
Section 3.2 Financial Covenants. The Guarantor hereby
covenants and agrees that, until the Loans and all of the other Obligations have
been paid and performed in full, it will comply with the following financial
covenants:
3.2.1 Debt Service Coverage Ratio. The Debt Service Coverage
Ratio, as of the last day of each fiscal quarter of Guarantor, shall be
greater than or equal to:
------------------- ---------------- ----------------- ---------------- ------------
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------------- ---------------- ----------------- ---------------- ------------
2000 0.75 to 1.0 0.75 to 1.0 0.75 to 1.0 0.75 to 1.0
------------------- ---------------- ----------------- ---------------- ------------
2001 0.75 to 1.0 0.82 to 1.0 0.91 to 1.0
------------------- ---------------- ----------------- ---------------- ------------
3.2.2 Leverage Ratio. The Leverage Ratio, as of the last day
of each fiscal quarter of Guarantor, shall be less than or equal to
0.75 to 1.0.
3.2.3 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
Guarantor 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
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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.
3.2.4 Maintain Liquidity. Maintain Liquidity, during the term
of the Credit Facility, measured at the end of each fiscal quarter, of
not less than $15,000,000.00. For purposes of this Section 3.2.4, 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.
(b) The following Section 3.2.4A is hereby added to the Original
Guaranty:
3.2.4A Definitions. As used in this Agreement, the following
terms shall have the meanings assigned to them in this Section
3.2.4A:
(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.
(c) "Consolidated Parties" means a collective
reference to Guarantor and its Subsidiaries, and "Consolidated
Party" means any one of them.
(d) "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 Guarantor 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.
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(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 Guarantor'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 Guarantor'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 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
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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 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
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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 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 Guarantor, for the four fiscal quarter
period ending on such date with respect to the Consolidated
Parties on a consolidated basis, the ratio of (a) Funded
Indebtedness of the Consolidated Parties on a consolidated
basis on the last
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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).
(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,
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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.
(c) Section 3.2.4 of the Original Guaranty is hereby renumbered as
Section 3.2.5.
ARTICLE III.
Representations and Warranties
Section 3.1. Representations and Warranties of Guarantor. In order to
induce Agent to enter into this Amendment, Guarantor represents and warrants to
Agent that:
(a) The representations and warranties contained in Article II of
the Original Guaranty are true and correct at and as of the time of the
effectiveness hereof except in lieu of Section 2.1.6 of the Original Guaranty
and the last sentence of Section 2.1.7 of the Original Guaranty, Guarantor is
making the representations and warranties in subsection 3.1(e) below.
(b) Guarantor is duly authorized to execute and deliver this
Amendment and is and will continue to be duly authorized to perform its
obligations under the Guaranty. Guarantor has duly taken all corporate action
necessary to authorize the execution and delivery of this Amendment and to
authorize the performance of the obligations of Guarantor hereunder.
(c) The execution and delivery by Guarantor of this Amendment, the
performance by Guarantor of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not conflict with any
provision of law, statute, rule or regulation or of the articles of
incorporation and bylaws of Guarantor, or of any material agreement, judgment,
license, order or permit applicable to or binding upon Guarantor, or result in
the creation of any lien, charge or encumbrance upon any assets or properties of
Guarantor. Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third party is
required in connection with the execution and delivery by Guarantor of this
Amendment or to consummate the transactions contemplated hereby.
(d) When duly executed and delivered, each of this Amendment and
the Guaranty will be a legal and binding obligation of Guarantor, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of creditors'
rights and by equitable principles of general application.
(e) The audited annual consolidated financial statements of
Guarantor dated as of December 31, 1999 and the unaudited quarterly consolidated
financial statements of Guarantor dated as of March 31, 2000 fairly presents the
consolidated financial position at such dates and
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the consolidated statement of operations and the changes in consolidated
financial position for the periods ending on such date for Guarantor. Copies of
such financial statements have heretofore been delivered to each Lender. Since
such date no material adverse change has occurred in the financial condition or
businesses or in the consolidated financial condition or businesses of
Guarantor, except as described in the Guarantors' annual report on Form 10-K
filed with the Securities and Exchange Commission on March 30, 2000 and
Guarantor's quarterly report on Form 10-Q filed with the Securities and Exchange
Commission on May 15, 2000 and except as revealed in the notebook entitled
"Company Information" dated May 5, 2000, a copy of which was delivered to
Agent..
ARTICLE IV.
Conditions of Effectiveness
Section 4.1. Effective Date. This Amendment shall become effective upon
satisfaction of the Conditions to Effectiveness of Section V of the Third
Amendment to Amended and Restated Financing and Security Agreement dated of even
date herewith.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Guaranty as
hereby amended is hereby ratified and confirmed in all respects. Any reference
to the Guaranty in any Financing Document shall be deemed to be a reference to
the Original Guaranty as hereby amended. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lenders under the Financing
Agreement, the Guaranty, or any other Financing Document nor constitute a waiver
of any provision of the Financing Agreement, the Guaranty or any other Financing
Document.
Section 5.2. Survival of Agreements. All representations, warranties,
covenants and agreements of Guarantor herein shall survive the execution and
delivery of this Amendment and the performance hereof, and shall further survive
until all of the Obligations are paid in full.
Section 5.3. Financing Documents. This Amendment is a Financing
Document, and all provisions in the Financing Agreement pertaining to Financing
Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
construed in accordance the laws of the State of Texas and any applicable laws
of the United States of America in all respects, including construction,
validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately
executed in counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Amendment. This Amendment may be validly executed by facsimile or
other electronic transmission.
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Section 5.6 Amsouth Fee. By execution hereof, Guarantor hereby
covenants and agrees to pay to Amsouth Bank the sum of $25,000.00 on or before
the earlier of June 30, 2000 or the effective date of this Amendment and the sum
of $25,000.00 on or before December 31, 2000.
THIS AMENDMENT AND THE OTHER FINANCING 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 OF THE PARTIES.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Amendment is executed as of the date first
above written.
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
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Name: Mark W. Ohlendorf
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Title: Senior Vice President
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BANK UNITED, as Agent
By: /s/ Casey Moore
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Name: Casey Moore
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Title: Vice President
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CONSENT OF FIRSTAR BANK, N.A.
Firstar Bank, N.A., a Lender under the Financing Agreement and a party
to the Agency Agreement, for good and valuable consideration the receipt of
which is hereby acknowledged, hereby consents to the provisions of this
Amendment and the transactions contemplated herein.
FIRSTAR BANK, N.A.
By: /s/ Dale Welke
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Name: Dale Welke
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Title: Vice President
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CONSENT OF AMSOUTH BANK
Amsouth Bank, a Lender under the Financing Agreement and a party to the
Agency Agreement, for good and valuable consideration the receipt of which is
hereby acknowledged, hereby consents to the provisions of this Amendment and the
transactions contemplated herein.
AMSOUTH BANK
By: /s/ Carl M. Ferris
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Name: Carl M. Ferris
---------------------------------
Title: Vice President
--------------------------------