EXHIBIT 99.1
February 10, 2014
NW 61
st
Nursing, LLC, as Borrower Representative under the NW Credit Agreement, and
ADK Bonterra/Parkview, LLC,
as
Borrower Representative under the Bonterra/Parkview
Credit
Agreement
1145
Hembree Road
Roswell, Georgia 30076
Attn
:
Manager
|
Re:
|
Gemino Healthcare
Finance,
LLC- NW 6151 Nursing, LLC ("
Northwest
"),
and
ADK Bonterra/Parkview, LLC ("
Bonterra/Parkview
")
|
Ladies and Gentlemen:
Reference is hereby made to (i) that
certain Credit
Agreement dated May 30, 2013 (as
at any
time amended, restated, modified
or supplemented,
the "
NW
Credit
Agreement
"), by
and among
Northwest
and
Gemino Healthcare
Finance,
LLC, a Delaware
limited
liability company ("
Lender
"), and (ii) the
Affiliated
B
/
P
Credit
Agreement (as defined in the
NW Credit
Agreement; hereinafter referred to
as
the "
Bonterra/Parkview
Credit Agreement
"). Each
capitalized term used herein, unless otherwise defined herein,
sha
ll
have the meaning ascribed to
such
term in
the
NW
Credit
Agreement.
Events
of Default have occurred and
current
ly
exist
under the
NW Credit
Agreement as
a
result of (i)
Northwest's
breach
of
Section 6.06(a)
of the NW
Credit
Agreement, due to the failure of ADK to maintain a Fixed
Charge Coverage
Ratio (a
s
defined in the
NW
Credit Agreement)
of
at least 1.10 to 1.0
at
the
end
of the fiscal quarter
ending September
30,
20
13
, and
(ii) the occurrence of
Events of
Default (as defined in the Bonterra/Parkview
Credit
Agreement; hereinafter referred to as "
Bonterra/Parkview
Events
of Default
") under the Bonterra/Parkview
Credit
Agreement, in violation of
Section
8.01(y)
of the
NW
Credit Agreement (collectively, the "
Designated NW Defaults
"). Northwest represents
and
warrants that the Designated
NW
Defaults
are
the
on
l
y
Unmatured
Events
of Default
or Events
of Default that
exist
under the NW
Credit
Agreement
or
any other Loan Document as
of
the
date
hereof.
Bonterra/Parkview
Events
of Default have occurred
and
currently
exist
under the Bonterra/Parkview
Credit
Agreement as a result of(i) Bonterra/Parkview's breach of
Section 6.06(a)
of the Bonterra/Parkview
Credit
Agreement, due to the failure of ADK to maintain
a Fixed Charge Coverage
Ratio (as defined in the Bonterra/Parkview
Cred
i
t
Agreement) of
at
least 1.10
to
1.0
at
the
end
of the fiscal quarter
ending
September 30,
20
13
, and
(ii) the occurrence
of
the Designated NW Defaults, in violation of
Section 8.01(y)
of the Bonterra/Parkview
Credit
Agreement
(co
ll
ectively,
the "
Designated Bonterra/Parkview Defaults
"). Bonterra/Parkview represents
and
warrants that the Designated Bonterra/Parkview Defaults
are
the only
Unmatured
Events
of
Default (as defined in the Bonterra/Parkview
Credit
Agreement; hereinafter referred to
as
"
Bonterra/Parkview Unmatured
Events
of Default
") or
Bonterra/Parkview Events of
Default that exist
under the
Bonterra/Parkview Credit
Agreement or
any
other Loan Document
(as
defined in
the Bonterra/Parkview Credit Agreement;
hereinafter
referred
to as
a
"
Bonterra/Parkview
Loan
Document
")
as of
the date hereof.
NOW,
THEREFORE
,
for
and
in con
s
ideration of
Ten
Dollar
s
in hand paid
and
other
good and valuable consideration,
the receipt
and sufficiency of which are
hereby
acknowledged,
the parties hereto hereby
agree as follows:
1.
Amendments
to NW
Credit Agreement
. Subject
to Lender's
receipt
of the Waiver
and
Amendment
Fee (as
hereinafter defined)
,
and a
duly
executed
counterpart
of
this letter from
Northwest,
Bonterra/Parkview
and ADK,
the NW
Credit Agreement
is hereby
amended as
follows, in
each
ca
se
effective
as of December
31, 2013:
(a) By deleting
Section 6.06(a)
of the
NW Credit
Agreement in its
entirety and
by
substituting
in lieu
thereof
the following:
(a)
Minimum
Fixed Charge Coverage
Ratio
. Borrowers
shall
cau
s
e
ADK
to maintain at
all
times
a Fixed Charge Coverage
Ratio mea
s
ured quarterly (i) at the end of the fiscal quarter
ending
March
31, 2014, of at
lea
s
t 1.00:1
,
(ii) at
the end of the
fiscal quarter
ending
June
30, 2014,
of at least 1.05:l
,
and (iii) at the end
of
each
fiscal quarter thereafter
,
of at least l.l0:1.
(b) By deleting
Section
6.06(b)
of
the
NW Credit Agreement
in its
entirety and
by
substituting in
lieu thereof th
e
following:
(b)
Maximum Loan Turn Day
s
.
Borrower
s s
hall maintain
at
all time
s
a Maximum
Loan Turn Day
s,
mea
s
ured quarterly
at the end of
th
e
fiscal quarter ending
December
31, 2013, and at
the
e
nd
of each
fi
sca
l quarter thereaft
er,
of
not
greater
than
40
day
s.
(c) By deleting
Section 6.06(c)
of the
NW Credit Agreement
in it
s
entirety
and by
s
ub
s
tituting in li
e
u
thereof
the following
:
(c)
Minimum
EBITDA
. ADK, on a
con
so
lidated ba
s
is
shall
maintain
EBITDA
at le
as
t
equal to $2,500,000,
for the period
of
three fiscal month
s
ending
December
31, 2013.
(d) By deleting
each
reference
to
"either Affiliated
Credit Agreement"
contain in
Section
2.
0l(d)
or
8.01(
y
)
of
the
NW
Credit Agreement and
by
s
ub
s
titutin
g
in
each
ca
se
in lieu thereof a reference to "the Affiliated
B
/
P Credit Agreement".
(e) By deleting
th
e
definitions of "Affiliated
Borrowers",
"Affiliated Blue Dolphin
Credit Agreement" and
"Affiliat
e
d
Credit Agreements"
se
t
forth in
Annex
A
of the NW Credit Agreement.
(f) By
deleting the definition
s
of "EBITDA",
"Fixed
Charge Coverage
Ratio" and "Maximum Loan Turn Days"
se
t
forth
in
Annex
A
of
the NW Credit Agreement and by substituting
in lieu thereof the following
,
re
s
pectively:
"
EBITDA
" mean
s
the
sum
of net income
(but, in each case to the extent and only
for
so
long
as
L
e
nder
agrees
in it
s
sole
di
sc
retion, before
giving
effect to (a) net income
or
los
s
attributable
to noncontrolling intere
s
t
s
(as set
forth in
ADK's 10
-Q
or 10
-K for the
applicable
p
e
riod)
,
and
(b) cash
preferred
stoc
k dividend
expenses)
plu
s
inter
es
t
expe
ns
e,
plus taxes
,
plus depreci
atio
n
and amortization,
non-ca
s
h
s
tock compensation
ex
p
e
nse
,
acquisition
loss
or gain and
derivative los
s
or
gain, if any, Triad and other adjustments, audit committee investigation expense and Georgia reincorporation expense, if any, but in each case only to the extent and only for
so
long as Lender agrees
in it
s so
le
discretion that
suc
h
Triad and other adjustments, audit committee
inve
stigation
and Georgia reincorporation expenses may be
excluded
from the calculation of EBITDA pursuant to this clause.
"
Fixed Charge Coverage Ratio
" means the ratio of (a)
EBITDA,
to (b) the
sum
of (i)
intere
st
expense paid, plus (ii) the current portion of any long-term Indebtedness excluding payments with respect to certain temporary bridge financing from time to time obtained by ADK or certain of its
Subsidiaries,
but only to the
extent
and only for
so as
Lender
agrees
in its
sole
discretion that
such
payments may be excluded from the calculation of the Fixed
Charge
Coverage Ratio pursuant to this clause, plus (iii) the current portion of
ob
li
gations
under capitalized leases, plus (iv) cash taxes paid, plus (v) cash Distributions (including
cas
h
dividends with respect to preferred
stock),
plus (vi) the Unfinanced Cap
Ex
Formula, all as determined for ADK on a consolidated basis, in accordance with GAAP consistently
app
lied
,
on a rolling four quarter basis
;
provided
,
however
, that
such
calculation (A) as of the fiscal quarter ending March 31, 2014
shall
be for the one (1) most recent fiscal quarterly period
end
in
g
on
such
date on a cumulative,
annua
li
zed
basis, (B) as of the fiscal quarter ending
June
30, 2014
s
hall
be for the two (2) most recent fiscal quarterly periods ending on
such
date on
a cumulat
iv
e,
annualized basis,
and
(C)
as
of the fiscal quarter ending
September
30, 2014
shall
be for the three (3) most recent fiscal quarterly periods
ending
on
such
date on
a cumulative,
annualized basis.
"
Maximum Loan
Turn
Days
" means, as of
any
date of determination, (i)
the
result of (a)
the average
daily
outstanding
balance of
the
Revolving Loan
s
during the immediately preceding three (3) months, divided by (b)
the average
monthly
Collect
ion
s
in the
Commercial
Lockbox
and Government
Lockbox for the immediately preceding three (3) months, multiplied by (ii)
30
2.
Amendments to Bonterra/Parkview
Credit
Agreement
.
Subject
to Lender's receipt
of the
Waiver
and
Amendment
Fee and
a duly
executed counterpart of
this letter
from Northwest,
Bonterra/Parkview
and
ADK
,
the Bonterra/Parkview
Credit
Agreement is hereby
amended
as follows, in
each
case
effective
a
s
of December 31
,
2013:
|
(a)
|
By deleting
S
ection
6.06(a)
of the
Bonterra/Parkview
Credit
Agreement in its
entirety a
n
d
by
substituting
in
li
eu
thereof the following:
|
(a)
Minimum
Fixed
Charge
Coverage
Ratio
. Borrowers
shall
cause
ADK
to maintain
at
all times
a Fixed Charge Coverage
Ratio measured quarterly
(i) at
the end of the fiscal quarter ending March
31, 2014
,
of at
least 1.00:1
,
(ii)
at
the end
of the
fiscal quarter
e
ndin
g
June 30, 2014
,
of
at
l
ea
s
t 1.05:1,
and (iii) at
the
end
of each fiscal quarter thereafter,
of at
l
east
1.10:1.
|
(b)
|
By deleting
Sect
i
on
6.06(b)
of the
Bonterra/Parkview
Cred
it
Agreement
in its
entirety
and by
sub
s
tituting in lieu
thereof
the
fo
llo
w
in
g:
|
(b)
Maximum Loan
Turn
Days
. Borrowers
sha
ll
maintain
at a
ll
times
a
Maximum Loan Turn Days, measured quarterly
at
the end
of
the fiscal quarter
ending
December 31
,
2013, and at
the
end
of each fiscal quarter thereafter, of not
greater than
40 days.
|
(c)
|
By deleting
Sect
ion
6.06(c)
of the
Bonterra/Parkview
Cred
it
Agreement in its
entirety
and by
subst
itutin
g
in lieu thereof the following:
|
(c)
Minimum
EBITDA
.
ADK,
on a consolidated basis,
shall
maintain
E
BITDA
at
le
ast
equal to $2,500,000, for the period of three fiscal months ending
De
cembe
r
31, 2013.
(d) By deleting
the definitions of "EBITDA",
"F
ixed
Charge Coverage
Ratio"
and
"Maximum
Loan Turn
Day
s" se
t
forth
in
Annex A
of the Bonterra/Parkview Credit Agreement and
by
subst
itutin
g
in
lieu thereof the
following
,
respectively
:
"
EBITDA
"
means the
s
um
of
net income
(but,
in
each case to the extent and only for
so
lon
g
as
Lender
agrees in
it
s so
le
discretion, before
givi
n
g
effect
to
(a) net income or loss attributable to
noncontrollin
g
interests (as
se
t
forth in ADK's 10-Q or 10-K for
the
applicable period), and
(b)
cash
preferred
stock
dividend expenses)
plu
s
interest
expe
n
se,
plus taxes,
p
lu
s
depreciation and amortization,
non-ca
s
h
stock
compensation expense, acquisition
lo
ss
or
gain
and derivative loss or gain,
if
any, Triad and other adjustments, audit committee
inve
stigation
expense and Georgia reincorporation expense,
if
any,
but in
each case only to
the
extent and only for so
long
as Lender agrees
in it
s
sole
discretion that
such Triad and other adjustments, audit committee
investigation
and Georgia reincorporation expenses
may be
excluded from the calculation of EBITDA pursuant to this clause.
"
Fi
xe
d
Charge Coverage
Ratio
"
means
th
e
ratio of (a)
E
BI
TDA,
to
(b)
the
sum
of (i)
intere
st
expense
paid
,
plus
(ii) the current portion of any
long-term Indebtedn
ess excl
uding
(A) payments with respect
to that
certain Promissory Note made by ADK and ADK Georgia, LLC, a Georgia
limited liability company
,
on
July
31, 2010
in
the principal amount of $500,000
in
favor of Triad
Health Mana
ge
ment
of Georgia
II
,
LLC, a Georgia
limited liabili
ty
company, to the extent
suc
h
payments are not
made,
and (B)
payments
with respect
to
certain temporary bridge financing from time
to
time obtained by ADK or
certain
of its Subsidiaries
,
but only to the
exte
nt
and only for
so as
Lender
ag
rees
in
it
s
sole discretion that
suc
h
payments may be
excl
ud
ed from
the calculation
of
the
F
ixed
Charge Coverage Ratio
pursuant
to this clause (B), plus (iii) the current portion of obligations
under
ca
pitali
ze
d lea
ses,
plus (iv) cash taxes paid, plus (v) cash Distributions (including cash
divid
ends
with
respect to preferred
stock), plus
(vi) the
Unfinanced CapEx
Formu
la
,
all as
determined
for
ADK
on a consolidated
basis
,
in
acco
rdance
with GAAP consistently applied, on a rolling
four
quarter basis;
provided
,
however
,
that
such
calculation (A)
as
of the fiscal
quart
er end
in
g
March
31
,
2014
s
hall
be for the one (
1) mo
st
recent fiscal quarterly period
ending
on
such
date on a cumulative
,
annualized basis
,
(B) as of the fiscal quarter
e
ndin
g J
un
e 30, 2014 sha
ll
be for
the
two
(2)
mo
st
r
ece
nt
fiscal quarterly
p
eriods
ending on such
dat
e
on a cumulative, annualized basis, and
(C) as
of the fiscal
quarter
ending September 30, 2014
sha
ll
be for the three (3) most recent fiscal quarterly
period
s
ending on
such
date on
a
cumulative,
an
nualized ba
sis.
"
Maximum
Loan Turn
Day
s
"
means, as of any
date
of determination, (i) the
re
s
ult
of(a) the average
daily
outstanding
balance
of
the Revolvin
g
Loan
s
durin
g
the immediately preceding
three (3)
months, divided
by
(b) the
average
monthly Collections
in
the Commercial Lockbox and Government Lockbox for the
imm
e
diately
preceding three (3) months, multiplied by
(i
i)
30
3.
Limited Waiver of Default
. Subject to Lender's receipt of the Waiver and Amendment Fee and a duly executed counterpart of this letter from Northwest, Bonterra/Parkview and ADK, Lender hereby waives the Designated NW Defaults and the Designated Bonterra/Parkview Defaults. In no event shall such waiver be deemed to constitute a waiver of (a) any Unmatured Event of Default or Event of Default other
than the Designated NW Defaults in existence on the date of this agreement, (b) Northwest's obligation to comply with all of the terms and conditions of the NW Credit Agreement and the other Loan Document s from and after the date hereof, including, without limitation,
Sections 6.06(a)
and
8.01(y)
of the NW Credit Agreement, (c) any Bonterra/Parkview Unmatured Event of Default or Bonterra/Parkview Event
of
Default other than the Designated Bonterra/Parkview Default
s
in
existence on the date of this agreement
,
or
Bonterra/Parkview's
ob
li
gation
to comply with
all
of the terms and
co
ndi
tions of
the
Bonterra/Parkv
i
ew C
r
edit Agreement and the other
Bonterra/Parkview
Loan Documents from and after the date
hereof, including
,
without
limitation
,
Sections 6.06(a)
and
8.01
(y)
of
the Bont
erra/Parkview
Credit Agreement. Notwithstanding any
prior,
temporary mutual
di
s
regard
of the terms of any contracts between the parties,
(i)
Northwest
hereby
agrees that Northwest sha
ll
be
required
to
strictly comply with a
ll
of
the term
s
of
the
Loan
Documents on and after
the
date hereof
,
a
n
d (ii)
Bonterra/Parkview hereby
agrees
that
Bonterra/Parkview
s
hall
be required to strictly comp
l
y with all of the
terms
of
the
Bonterra/Parkview Loan Documents on and after the date hereof. Northwest
hereby ratifie
s
and
reaffirm
s
the
Obligations, each of the Loan Documents and all of Northwest's covenants,
dutie
s,
indebtedness and
liabilitie
s
under
the Loan
Document
s.
Bonterra/Parkview hereby ratifie
s
and
reaffirm
s
the
Obligation
s
(as
defined
in
the
Bonterr
a/Parkview
Credit
Agreement),
each of
the Bonterra/Parkview
Loan
Documents
and a
ll
of
Bonterr
a/
Parkview's
covenants
,
duties, indebtedness
and
li
abilities
under the Bonterra/Parkview
Loan Documents.
In
addition, Northwest and Bonterra/Parkview each represents and warrants that Boyd P. Gentry is president and chief executive officer of ADK and Manager of each of Northwest and
Bonterra/Parkview
,
and, as applicable, an Authorized Officer of Northwest or an Author
i
ze
d
Officer (as defined
in
the
Bonterr
a/Parkview
Credit Agreement) of
Bonterra/Parkview.
In
consideration of Lender's willingness
to
enter
into thi
s
l
etter agreement and waive the Designated NW
Default
s
and the
De
sig
nated Bonterr
a/
Parkview Defaults
as
set
forth herein
,
Northwest and Bonterra/Parkview joint
l
y and
seve
rally
agree to
pay to
Lender a waiver and amendment fee (the "
Waiver and Amendment Fee
")
in the
amount of $
1
0,000 in immediately
availab
l
e
fund
s
on the date
hereof.
Additiona
ll
y, Northwest and
Bonterra/Parkview
agree
to
pay, on
demand
,
all costs and expenses
incurred
by
Lender in
connect
i
on with the preparation, negotiation and execution of this letter
agreeme
nt,
including, without limitation, the costs and fees of Lender
'
s
legal counsel.
Nothing
herein
shall be construed to create a
novation
or accord and sat
i
sfaction,
nor
(except as otherwise expressly
provided herein) be
deemed
to
amend or
modify
any provis
i
on of the NW Credit Agreement, any of the other Loan
Document
s,
the
Bonterra/Parkview Credit Agreement, or any of the other Bonterra/Parkview Loan
Document
s,
each of which shall remain
in
full force and effect.
[Continued on following page.]
Plea
se
confirm your agreement
with
all of
the fore
go
in
g
by
s
igning
under
sea
l
i
n
the
s
pac
e
provided below and
r
e
turnin
g
a copy
of
thi
s
lett
e
r
to
u
s.
Sincerely,
[
Signa
tur
es
continue on following
pa
ge
.
]
Waiver and
A
m
en
dm
e
n
t
Le
tt
er (AdCare
-
2014)
Accepted and agreed to
:
NORTHWEST:
(as Borrower
und
er
th
e
NW
C
r
edit
Agreement and as Guarantor
under
th
e
Bonterra/Parkview Credit
Agreement)
[Signature
s
continued
on following page.
]
Waiver and Amendment Letter (AdCare – 2014)
BONTERRA/PARKVIEW:
Waiver and Amendment Letter (AdCare – 2014)
Acknowledged and agreed to
:
ADCARE HEALTH SYSTEMS, INC.
, as
Guarantor under the NW Credit Agreement and the Bonterra/Parkview Credit Agreement
By:
/s/ Ronald W. Fleming
Ronald W. Fleming
Chief Financial Officer
Waiver and Amendment Letter (AdCare – 2014)