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Item 2.01
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Completion of Acquisition or Disposition of Assets.
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As previously disclosed, on
September 13, 2017, AAC Healthcare Network, Inc., a Delaware corporation (“Buyer”) and wholly owned subsidiary of AAC Holdings, Inc., a Nevada corporation (“Holdings”), entered into a Securities Purchase Agreement (the
“Purchase Agreement”), by and among Buyer, Holdings, AdCare, Inc., a Massachusetts corporation (“AdCare”), and AdCare Holding Trust, a Massachusetts business trust. AdCare and its subsidiaries offer treatment of drug and alcohol
addiction and own, among other things, a 114-bed hospital and five outpatient centers in Massachusetts and a 59-bed residential treatment center and two outpatient centers in Rhode Island.
On March 1, 2018 (the “Closing Date”), Buyer and Holdings completed the acquisition of AdCare and its subsidiaries (the
“AdCare Acquisition”) for aggregate consideration of $85.0 million, subject to adjustments as set forth in the Purchase Agreement, comprised of (i) approximately $67.5 million in cash, excluding expenses and other adjustments,
(ii) approximately $4.8 million in shares of Holdings’ common stock (the “Common Shares”) (or 562,051 shares at an average closing stock price of $8.57), (iii) a promissory note in the aggregate principal amount of
approximately $9.6 million (the “Promissory Note”), and (iv) contingent consideration of up to $3.1 million based on a specified adjusted EBITDA target over the 12 months following closing.
The foregoing summary of the transactions contemplated by the Purchase Agreement does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Purchase Agreement, which was filed as Exhibit 2.1 to Holdings’ Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on September 13, 2017, which is
incorporated herein by reference.
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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The information set forth under Item 2.01 of this Current Report on Form 8-K related to the Promissory Note is incorporated by reference into
this Item 2.03.
As previously disclosed, on October 6, 2017, in conjunction with the AdCare Acquisition, Holdings secured a $65.0
million incremental term loan commitment in conjunction with its senior secured credit agreement with Credit Suisse AG, as administrative agent and collateral agent (“Credit Suisse”) and the lenders party thereto (the “2017 Credit
Facility”), subject to customary closing conditions and regulatory provisions. In connection with the financing, Holdings committed to a ticking fee that commenced on October 23, 2017, at a rate of LIBOR plus 3.375%, and increased to LIBOR
plus 6.75% for November 22, 2017 through the Closing Date.
On the Closing Date, Holdings and Credit Suisse entered into the
Incremental Loan Assumption Agreement (the “ILAA”) with the other loan parties thereto, the incremental term lenders party thereto (the “Incremental Term Lenders”) and the required lenders party thereto. Pursuant to the ILAA, the
Incremental Term Lenders extended to Holdings on the Closing Date the Incremental Term Loans (as defined in the ILAA) in the principal amount of $65.0 million for the purpose of providing financing for the AdCare Acquisition. The Incremental Term
Loans will bear interest at the same rates available to the existing Term Loans (as such term is defined in the 2017 Credit Facility) and will mature on the same date as the existing Term Loans, June 30, 2023, subject to customary events of
default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, invalidity of
loan documents and certain changes of control. The existing Term Loans and the Incremental Term Loans will require aggregate principal payments of approximately $1.7 million on quarterly repayment dates beginning March 31, 2018 and continuing
through June 30, 2019, and payments of approximately $3.4 million on quarterly repayment dates beginning September 30, 2019 and continuing through March 31, 2023.
The ILAA also amends the 2017 Credit Facility to, among other things, permit Holdings to elect for the relevant ratios and baskets applicable
upon the incurrence of indebtedness and other certain actions in connection with acquisitions not conditioned on the availability of third party financing to be determined at the time such definitive acquisition agreements are entered into rather
than at the closing of such acquisition.
Borrowings under the 2017 Credit Facility, as amended by the ILAA, are guaranteed by
Holdings’ wholly owned subsidiary, American Addiction Centers, Inc., and certain of its other subsidiaries, including AdCare and certain of its wholly owned subsidiaries, pursuant to that certain Guarantee and Collateral Agreement, dated as of
June 30, 2017, by and among Holdings, each of the subsidiary guarantors party thereto and Credit Suisse and joinders executed in connection therewith. The obligations are secured by a lien on substantially all of Holdings’ and each
subsidiary guarantor’s assets.
The foregoing summary of the transactions contemplated by the ILAA does not purport to be
complete and is subject to, and qualified in its entirety by, the full text of the ILAA, which is filed herewith Exhibit 10.1 and incorporated herein by reference.