<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 1998
or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____ to _____.
COMMISSION FILE NUMBER: 1-13845
BALANCED CARE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 25-1761898
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5021 LOUISE DRIVE, SUITE 200, MECHANICSBURG, PA 17055
(Address of principal executive offices) (Zip Code)
(717) 796-6100
(Registrant's Telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X ____ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT NOVEMBER 10, 1998
----- --------------------------------
Common Stock, $.001 par value 16,703,970
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BALANCED CARE CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1:
FINANCIAL STATEMENTS Page
Consolidated Balance Sheets as of September 30, 3
1998 and June 30, 1998
Consolidated Statements of Operations for the 4
three months ended September 30, 1998 and 1997
Consolidated Statement of Stockholders' Equity 5
for the three months Ended September 30, 1998
Consolidated Statements of Cash Flows for the 6
three months ended September 30, 1998 and 1997
Notes to Consolidated Financial Statements 7
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 10
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT 17
MARKET RISK
PART II - OTHER INFORMATION
ITEM 6:
EXHIBITS AND REPORTS ON FORM 8-K 18
(A) Exhibits
(B) Reports on Form 8-K
2
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ITEM 1: FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BALANCED CARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30, June 30,
1998 1998
(unaudited)
------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $11,590 15,481
Accounts receivable (net of allowance for doubtful
accounts of $949 and $916, respectively) 20,630 19,630
Development contracts in process 4,149 2,534
Prepaid expenses and other current assets 1,004 1,203
Assets held for sale 2,800 2,800
------- -------
Total current assets 40,173 41,648
------- -------
Restricted investments 1,755 1,596
Property and equipment, net 27,912 27,862
Goodwill, net 13,411 13,466
Other assets 3,079 1,400
------- -------
Total assets $86,330 85,972
======= =======
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 177 177
Accounts payable 7,825 7,982
Accrued payroll 1,827 2,243
Accrued expenses 2,733 4,864
------- -------
Total current liabilities 12,562 15,266
------- -------
Deferred income taxes 1,946 638
Long-term debt, net of current portion 3,326 3,376
Straight-line lease liability 3,076 3,053
Deferred revenues and other liabilities 1,616 1,780
------- -------
Total liabilities 22,526 24,113
------- -------
Redeemable preferred stock:
Series B authorized - 5,009,750 shares, none issued
and outstanding -- --
------- -------
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued and outstanding -- --
Preferred stock, Series A authorized - 1,150,958 shares,
none issued and outstanding -- --
Common stock, $.001 par value - authorized - 50,000,000
shares; issued and outstanding - 16,697,407 shares at
September 30, 1998 and 16,695,343 shares at June 30, 1998 17 17
Additional paid-in capital 63,683 63,678
Retained earnings (deficit) 104 (1,836)
------- -------
Total stockholders' equity 63,804 61,859
------- -------
Total liabilities and stockholders' equity $86,330 85,972
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
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BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended September 30
1998 1997
(unaudited) (unaudited)
-------- --------
<S> <C> <C>
Revenues:
Patient services $ 12,365 14,496
Resident services 5,915 2,998
Development fees 5,263 1,626
Management fees 298 8
Other revenues 30 10
-------- --------
Total revenues 23,871 19,138
-------- --------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits 8,341 6,844
Other operating expenses 5,919 7,648
Development, general and administrative expense 3,642 2,679
Lease expense 2,389 2,212
Depreciation and amortization expense 506 281
-------- --------
Total operating expenses 20,797 19,664
-------- --------
Income (loss) from operations: 3,074 (526)
Other income (expense):
Interest and other income 304 113
Interest expense (105) (237)
-------- --------
Income (loss) before income taxes 3,273 (650)
Provision for income taxes 1,333 7
-------- --------
Net income (loss) $ 1,940 (657)
======== ========
Pro forma basic earnings (loss) per share $ 0.12 (0.08)
======== ========
Pro forma diluted earnings (loss) per share $ 0.11 (0.08)
======== ========
Weighted average shares - basic 16,696 8,645
======== ========
Weighted average shares - diluted 17,983 8,645
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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BALANCED CARE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three months ended
September 30, 1998 (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
PREFERRED A STOCK COMMON STOCK ADDTL. RETAINED
ISSUED PAR SUBSCR. ISSUED PAR PAID-IN EARNINGS
SHARES VALUE RIGHTS SHARES VALUE CAPITAL (DEFICIT) TOTAL
------ ----- ------ ------ ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 -- -- -- 16,695 $ 17 $63,678 $(1,836) $61,859
Exercise of options -- -- -- 2 -- 5 -- 5
Net Income -- -- -- -- -- -- 1,940 1,940
------ ----- ------ ------- ------- ------- ------- -------
Balance at September 30, 1998 -- -- -- 16,697 $ 17 $63,683 $ 104 $63,804
------ ----- ------ ------- ------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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BALANCED CARE CORPORATION
Consolidated Statement of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30
------------------------
1998 1997
-------- --------
<S> <C> <C>
Net income (loss) $ 1,940 $ (657)
Adjustments to reconcile net income (loss) to net cash used for operating
activities:
Depreciation and amortization 506 281
Deferred income taxes 1,308 --
Changes in operating assets and liabilities, excluding effects of
acquisitions:
Increase in receivables (1,000) (1,724)
Increase in development contracts in process (1,615) (599)
Decrease (increase) in prepaid expenses and other current assets 199 (123)
Decrease in accounts payable, accrued payroll and
accrued expenses (1,132) (756)
-------- --------
Net cash provided by (used for) operating activities 206 (3,578)
-------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment (456) (734)
Increase in restricted investments (159) (769)
Increase in other assets (1,679) (286)
Business acquisitions (1,617) --
-------- --------
Net cash used for investing activities (3,911) (1,789)
-------- --------
Cash Flows from Financing Activities:
Payments on long-term debt (50) (22)
Proceeds from issuance of common stock 5 --
Decrease in other liabilities (141) (157)
-------- --------
Net cash used for financing activities (186) (179)
-------- --------
Decrease in cash and cash equivalents (3,891) (5,546)
Cash and cash equivalents at beginning of period 15,481 7,908
-------- --------
Cash and cash equivalents at end of period $ 11,590 $ 2,362
======== ========
Supplemental Cash Flow Information:
Cash paid during the period for interest $ 105 $ 237
======== ========
Cash paid during the period for income taxes $ 1 $ --
======== ========
Supplemental Non-cash Investing and Financing Activities:
Assets and lease obligations capitalized $ -- $ 197
======== ========
Accretion of preferred B stock $ -- $ 626
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Balanced Care Corporation (the "Company") was incorporated in April 1995
and is engaged in the development and acquisition of assisted living facilities
and selective acquisitions of other operations which facilitate implementation
of the Company's balanced care continuum strategy, such as medical
rehabilitation, dementia and Alzheimer's services, home health care and skilled
nursing. As of September 30, 1998, the Company owned, leased or managed 45
assisted and independent living communities and 13 skilled nursing facilities.
Also at September 30, 1998, the Company had 51 assisted living communities under
development.
(b) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries from their respective acquisition
dates. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
The financial statements as of, and for the three months ended, September
30, 1998 and 1997, are unaudited, but, in the opinion of management, have been
prepared on the same basis as the audited financial statements and reflect all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the information set forth therein. The results of operations for
the three months ended September 30, 1998 are not necessarily indicative of the
operating results to be expected for the full year or any other period. These
financial statements and notes should be read in conjunction with the financial
statements and notes included in the audited consolidated financial statements
of the Company for the year ended June 30, 1998 as contained in the Company's
annual report on Form 10-K.
2. INITIAL PUBLIC OFFERING
On February 18, 1998, the Company closed its initial public offering for
7,000,000 shares of its common stock, par value $.001 per share ("Common Stock")
at a price of $6.50 per share (the "Offering"). Concurrent with the Offering,
5,009,750 shares of Series B Preferred Stock and 1,150,958 shares of Series A
Preferred Stock were converted into 4,620,532 shares of Common Stock (reflective
of the three-for-four reverse split of Common Stock effective October 14, 1997).
In connection with the Offering, the Company granted the underwriters an
option to purchase 1,050,000 additional shares of Common Stock at $6.50 per
share. The closing for this option was on March 17, 1998. After the consummation
of the Offering, the conversion of the preferred stock and the exercise of the
underwriters option, the Company had 16,695,343 shares of Common Stock
outstanding. The Company's stock is traded on the American Stock Exchange under
the symbol BAL.
3. PRO FORMA RESULTS OF OPERATIONS
The following unaudited summary, prepared on a pro forma basis, combines
the results of operations of the acquired businesses with those of the Company
as if the acquisitions and leases had been consummated as of the beginning of
the period. The acquired businesses and their respective acquisition dates were
Heavenly Health Care, Inc. d/b/a Joe Clark Residential Care Homes in August
7
<PAGE> 8
1997, Feltrop's Personal Care Home and Butler Senior Care in October 1997,
Triangle Retirement Services, Inc. d/b/a Northridge Retirement Center in
December 1997, Gethsemane Affiliates in January 1998 and Potomac Point in June
1998. There were no acquisitions during the three months ended September 30,
1998. The pro forma results include the impact of certain adjustments such as:
amortization of goodwill, depreciation of assets acquired, interest on
acquisition financing and lease payments on the leased facility (in thousands,
except for per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
1997
<S> <C>
Revenue.................................... $ 22,333
Expense.................................... (23,150)
----------
Net loss................................... $ (817)
==========
Net loss per common share - diluted ....... $ (0.09)
==========
</TABLE>
The unaudited pro forma results are not necessarily indicative of what actually
might have occurred if the acquisitions had been completed as of July 1, 1997.
In addition, they are not intended to be a projection of future results of
operations.
4. ASSETS HELD FOR SALE
In June 1997, the Company determined that the Wisconsin market did not
provide adequate opportunity to achieve the operational efficiencies necessary
to operate profitably. At June 30, 1997, the Company committed to a plan for the
disposal of its Wisconsin assisted living facilities. In September 1998, the
Company entered into an asset purchase agreement with an unrelated third party
to sell the Wisconsin assisted living facilities for $2,900,000, less closing
adjustments and transaction costs, which approximates book value. This
transaction is expected to close by November 30, 1998, and is not expected to
have a material effect on the Company's financial statements.
5. BUSINESS ACQUISITIONS - STATEMENT OF CASH FLOWS
The $1,617,000 cash used for business acquisitions in the Statement of
Cash Flows consists of the following:
<TABLE>
<CAPTION>
DATE OF DATE RECORDED DATE
ACQUISITIONS ACQUISITION DESCRIPTION AS GOODWILL PAID AMOUNT
------------ ----------- ----------- ----------- ---- ------
<S> <C> <C> <C> <C> <C>
Gethsemane Affiliates 1/98 Contingent 3/98 7/98 $1,200,000
purchase price
payment
Butler Senior Care 10/97 Contingent 6/98 7/98 372,000
purchase price
payment
Potomac Point 6/98 Additional 9/98 9/98 45,000
transaction costs ---------
$1,617,000
==========
</TABLE>
6. PRO FORMA EARNINGS PER SHARE
Pro forma earnings (loss) per share ("EPS") is computed using the weighted
average number of common shares and common equivalent shares outstanding (using
the treasury stock method) assuming the pro forma conversion of preferred shares
into common. For the period ended September 30, 1997,
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<PAGE> 9
common equivalent shares from stock options and warrants are excluded from the
computation as their effect is antidilutive.
A reconciliation of the weighted average shares used in the computation of
pro forma earnings per share follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1998 1997
------ ------
<S> <C> <C>
Weighted average common shares
outstanding 16,696 4,025
Pro forma conversion of preferred shares -- 4,620
------ ------
Shares used for pro forma basic EPS 16,696 8,645
Stock options and warrants converted
using the Treasury stock method 1,287 --
------ ------
Shares used for pro forma diluted EPS 17,983 8,645
====== ======
</TABLE>
7. RELATED PARTY TRANSACTION
The Company is a developer of assisted living facilities and receives
development fees for services provided to the owners, which are typically real
estate investment trusts ("REIT's"). In certain cases, newly formed special
purpose entities ("Operator/Lessees"), lease the facilities from the REIT, and
the Company manages each of these facilities pursuant to a management agreement.
The Company also has the option (but not the obligation) to purchase the stock
or assets of each of the Operator/Lessees pursuant to a related option
agreement.
In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by Financial Care Investors, LLC, a Delaware limited liability company
("FCI"). FCI is owned by Brad E. Hollinger, Chairman of the Board, President and
Chief Executive Officer of the Company. FCI and its six wholly owned
Operator/Lessees also entered into lease agreements with a REIT. The terms of
the agreements among the parties are similar to the terms of the agreements the
Company has entered into with independent third party Operator/Lessees. The
Company has not made any payments to the aforementioned parties in connection
with these transactions.
9
<PAGE> 10
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis addresses the Company's results of
operations on a historical basis for the three months ended September 30, 1998,
and 1997, and the Company's liquidity and capital resources. This information
should be read in conjunction with the Company's consolidated financial
statements, contained elsewhere in this report. This report contains, in
addition to historical information, forward looking statements that involve
risks and uncertainties. The Company's actual results could differ materially.
Factors that could cause or contribute to such differences include, but are not
limited to, those disclosed in "Risk Factors," in the Company's Annual Report on
Form 10-K for the year ended June 30, 1998.
OVERVIEW
The Company was formed in April 1995 to develop senior care continuums which
meet the needs of upper middle, middle and moderate income populations in
non-urban, secondary markets. The Company intends to utilize assisted living
facilities in selected markets as the primary entry point and service platform
to develop the balanced care continuums consisting of various health care and
hospitality services, including, where appropriate, rehabilitation therapies,
physical, occupational and speech therapy, home health care services on an
intermittent basis, dementia and Alzheimer's services and skilled care delivered
in a skilled nursing setting.
On February 18, 1998, the Company completed its initial public offering for
7,000,000 shares of its Common Stock, par value $.001 per share at a price of
$6.50 per share. Concurrent with the Offering, 5,009,750 shares of Series B
Preferred Stock and 1,150,958 shares of Series A Preferred Stock were converted
into 4,620,532 shares of Common Stock (reflective of the three-for-four reverse
split of Common Stock effective October 14, 1997). In connection with the
Offering, the Company granted the underwriters an option to purchase 1,050,000
additional shares of Common Stock at $6.50 per share. The closing for this
option was on March 17, 1998. After the Offering, the conversion of the
preferred stock and the exercise of the underwriters' option, the Company had
16,695,343 shares of Common Stock outstanding. The Offering, including the
exercise of the underwriters' option, generated proceeds to the Company of
approximately $46,357,000, net of costs and underwriting discounts and
commissions. The proceeds were used to repay indebtedness of approximately
$29,675,000 incurred to fund the purchase of four acquisitions (seven
facilities) completed from October 1997 through January 1998, and to pay off
indebtedness of $5,019,000 related to the Company's Wisconsin assisted living
facilities in anticipation of their sale. The balance of the Offering will be
used for general corporate purposes and possible future acquisitions.
The Company has grown primarily through acquisitions and by designing,
developing, operating and managing its Outlook Pointe(R) signature series
assisted living facilities. As of September 30, 1998, the Company had 16 Outlook
Pointe facilities in operation, of which one is leased and 15 are managed. As of
that date, the Company operated a total of 41 assisted living facilities, 13
skilled nursing facilities and four independent living facilities in
Pennsylvania, Missouri, Arkansas, North Carolina, Ohio, Virginia and Wisconsin,
as well as a home health care agency in Missouri and rehabilitation therapy
operations in Pennsylvania and Arkansas. Assuming completion of the planned
divestiture of the Company's seven owned assisted living facilities in
Wisconsin, at September 30, 1998 the Company owned nine, leased 27 and managed
15 assisted living and health care facilities with a capacity for 1,949 assisted
living residents, 1,294 skilled nursing patients and 117 independent living
residents. In addition to the 16 Outlook Pointe facilities opened as of
September 30, 1998, the Company has signed agreements to
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develop and manage 38 assisted living facilities currently under construction,
which are scheduled to open from October 1998 through December 1999.
The following table summarizes the Company's operating facilities:
<TABLE>
<CAPTION>
FACILITY COUNT SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
Developed Assisted Living Facilities...... 16 2
Acquired Assisted Living Facilities....... 25 18
Skilled Nursing Facilities ............... 13 12
Independent Living Facilities ............ 4 4
---- ----
58 36
==== ====
</TABLE>
The Company generates revenues from four primary sources: patient services,
resident services, development fees and management fees. Patient services
revenues include charges for room and board, rehabilitation therapies, pharmacy,
medical supplies, subacute care and other programs provided to patients in
skilled nursing facilities as well as rehabilitation services provided to
assisted living facility residents. Resident services include all revenues
earned from services provided to assisted living facility residents except for
therapies and home health care services provided by the Company's licensed
agencies which are included in patient services revenues. Development fees and
management fees are earned for developing and managing assisted living
facilities for real estate investment trusts ("REIT"), and other owners or
lessees. As the Company implements its business plan, management believes that
the mix of the Company's revenues will continue to change and that revenues from
assisted living resident services, development and management activities will
increase as a percentage of total revenues.
The Company classifies its operating expenses into the following categories: (i)
facility operating expenses which include labor, food, marketing, rehabilitation
therapy costs and other direct facility expenses; (ii) development, general and
administrative expenses, which primarily include corporate office expenses,
regional office expenses, development expenses and other overhead costs; (iii)
lease expense, which includes rent for the facilities operated by the Company as
well as corporate office and other rent; and (iv) depreciation and amortization.
In anticipation of its planned growth, the Company has made significant
investments in its infrastructure during fiscal 1997 and 1998. These investments
include attracting management and regional personnel and installing information
systems to support and manage growth.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain data as a
percentage of total revenue:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
STATEMENT OF OPERATIONS DATA: 1998 1997
----- -----
<S> <C> <C>
Total revenue 100.0% 100.0%
Operating expenses:
Facility operating expenses 59.7 75.7
Development, general and administrative expense 15.3 14.0
Lease expense 10.0 11.6
Depreciation and amortization 2.1 1.5
----- -----
Income (loss) from operations 12.9 (2.8)
Other income (expense) .8 (0.6)
----- -----
Income (loss) before income taxes 13.7 (3.4)
Provision for income taxes 5.6 --
----- ------
Net income (loss) 8.1 (3.4)
===== =====
</TABLE>
11
<PAGE> 12
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997
Total Revenue. Total revenue for the three months ended September 30, 1998
increased by $4,733,000 to $23,871,000 compared to $19,138,000 for the three
months ended September 30, 1997. This increase was the result of: (i) additional
resident service revenues of $2,917,000, primarily from facilities acquired or
opened during, or subsequent to, the three months ended September 30, 1997; and
(ii) increased development and management fee revenues of $3,927,000 due to the
Company's expanded development and management efforts. These increases were
partially offset by a $2,131,000 decrease in patient service revenues, which was
primarily the result of new Medicare reimbursement methodology and rates, the
Prospective Payment System ("PPS"). At June 30, 1998, the Company estimated that
PPS would reduce fiscal 1999 revenue and income before taxes, compared to fiscal
1998, by approximately $8,000,000 and $1,500,000, respectively. Actual operating
results during the three months ended September 30, 1998 were consistent with
those estimates. Patient services comprised 52% and 76% of total revenues for
the three months ended September 30, 1998 and 1997, respectively. The decrease
in this percentage of total revenues was due to the Company's implementation of
its business plan which focuses on assisted living development and operations,
and the aforementioned decrease due to PPS.
Operating Expenses. Total operating expenses increased by $1,133,000 to
$20,797,000 for the three months ended September 30, 1998 from $19,664,000 for
the three months ended September 30, 1997. The increase in total operating
expenses in 1998 is attributable primarily to increases in development, general
and administrative expenditures related to improving the Company's
infrastructure to support and manage its development and growth.
Facility operating expenses for the three months ended September 30, 1998
decreased by $232,000 to $14,260,000 from $14,492,000 for the three months ended
September 30, 1997. The decrease is the result of a cost reduction program and a
patient acuity management system put in place at the Company's skilled nursing
facilities, which resulted in a reduction in costs of approximately $1,800,000.
These cost savings at the Company's skilled nursing facilities were offset by
costs at new assisted living facilities which were developed or acquired during,
or after, the 1997 quarter. As a percentage of total revenue, facility operating
expenses were 59.7% for the three months ended September 30, 1998, and 75.7% for
the three months ended September 30, 1997. The percentage decreased due to the
change in the revenue mix including the increase in development and management
fees.
Development, general and administrative expenses increased by $963,000 to
$3,642,000 for the three months ended September 30, 1998 from $2,679,000 for the
three months ended September 30, 1997. As a percentage of total revenue, these
expenses increased to 15.3% for the three months ended September 30, 1998 from
14.0% for the three months ended September 30, 1997. Of the $963,000 increase in
1998, approximately $573,000 resulted from labor costs relating to the addition
of new corporate and regional office staff to plan and manage the Company's
actual and anticipated development and growth. The remaining $390,000 was
attributable to other marketing, consulting, development, travel and other
general expenses related to the Company's increased level of development
activities and growth.
Lease expense increased to $2,389,000 for the three months ended September 30,
1998 from $2,212,000 for the three months ended September 30, 1998, an increase
of $177,000. This increase is the result of new facilities which were acquired
during or after the 1997 quarter. As a percentage of total revenue, these
expenses totaled 10.0% for the three months ended September 30, 1998 and 11.6%
for the three months ended September 30, 1997.
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Depreciation and amortization increased by $225,000 to $506,000 for the three
months ended September 30, 1998 from $281,000 for the three months ended
September 30, 1997. This increase resulted from the additional depreciation and
amortization related to facilities acquired after September 30, 1997.
In June 1997, management determined that the Wisconsin market did not provide
adequate opportunity to achieve the operational efficiencies necessary to
operate profitably. At June 30, 1997, the Company committed to a plan for the
disposal of its Wisconsin assisted living facilities. In September 1998, the
Company entered into an asset purchase agreement with an unrelated third party
to sell the Wisconsin assisted living facilities for $2,900,000, less closing
adjustments and transaction costs, which approximates book value. This
transaction is expected to close by November 30, 1998 and is not expected to
have a material effect on the Company's financial statements.
Other Income (Expense). Interest and other income for the three months ended
September 30, 1998 increased by $191,000 to $304,000 from $113,000 in the three
months ended September 30, 1997. The increase is attributable to the higher
level of invested funds from the proceeds of the Offering in February 1998.
Interest expense for the three months ended September 30, 1998 decreased by
$132,000 to $105,000 from $237,000 for the three months ended September 30,
1997. This was primarily due to the repayment of $5,019,000 in debt on the
Company's Wisconsin assisted living facilities in June 1998 from proceeds of the
Offering.
Provision for Income Taxes. Income tax expense of $1,333,000 for the three
months ended September 30,1998 is based on the Company's estimated effective tax
rate of 40% for the 1999 fiscal year. Income tax expense of $7,000 for the three
months ended September 30, 1997 resulted from taxable income reported on
individual state corporate tax returns in states that do not permit consolidated
filings.
Net Income (Loss). The Company's net income increased to $1,940,000 for the
three months ended September 30, 1998 from a net loss of $(657,000) for the
three months ended September 30, 1997, an increase of $2,597,000. This increase
in net income resulted primarily from: (i) the pretax contribution of $2,699,000
from increased development activities; (ii) the contribution of $612,000 from
facilities acquired after September 30, 1997; (iii) improved operations at
leased assisted living facilities of $405,000; (iv) pretax profits of $390,000
on management fee contracts on facilities managed for others; and (v) improved
operating results at the Wisconsin facilities of $150,000 primarily due to
reduction of interest expense resulting from the repayment of the mortgage in
June 1998. These amounts were partially offset by reduced profitability in the
Missouri operations, therapy operations and the Pennsylvania skilled nursing
facilities of approximately $300,000, primarily due to PPS, and increased income
tax expense of $1,326,000.
The Company continues to evaluate the impact of the Balanced Budget Act of 1997
(the "Budget Act") upon future operating results. While the Budget Act was
passed in August 1997, specifics relating to each business line will continue to
be released until the year 2000. The assumptions used by the Company to evaluate
the impact of the Budget Act are based upon the most accurate information
available at this time. At present, the Company believes it is responding to all
of the known changes created by the Budget Act; however, it cannot predict the
impact of unforeseen reductions in anticipated rates issued by the government.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company has been able to achieve its development objectives in targeted
secondary markets more quickly than originally planned. The Company plans to
develop more than 40 additional Outlook Pointe
13
<PAGE> 14
facilities during the fiscal year ending June 30, 1999. The construction costs
to complete these facilities are estimated to be $350 to $400 million. At this
time the Company expects to continue its internal development program in future
years.
The Company has entered into non-binding letters of intent with certain REITs
(the "Owners"). These non-binding letters of intent represent arrangements
whereby the Owners will fund development projects to be developed by the Company
as assisted living facilities, or the Owners will acquire existing facilities
identified by the Company and lease them to the Company. Initial lease rates
under these arrangements have historically ranged from 3.2% to 3.4% over the
10-year Treasury rate. However, future projects may contain minimum rates
regardless of the Treasury rates in effect at the time of closing. The Company
expects rates to be in 9.5% range under present arrangements. Specific
development projects and acquisitions require approval of the Owners prior to
the closing of a transaction. At September 30, 1998 approximately $150 million
of the non-binding commitments had not been utilized and remained available to
fund project development. The Company estimates that its current resources and
funding commitments will be sufficient to fund its development programs for
projects scheduled to commence through March 31, 1999 and which will be
completed by approximately March 31, 2000. Volatility in capital markets and
specific transaction terms could affect the Company's ability to utilize these
non-binding commitments.
The Company's development projects generally involve, or are expected to
involve, entering into development agreements with third party owners, which
are, or are expected to be, REITs. A third party Operator/Lessee will lease the
assisted living facility from the REIT when construction has been completed and
provide funding for working capital during the initial occupancy period. The
Company expects to manage each of these assisted living facilities pursuant to a
management agreement with the Operator/Lessee which generally provides for a
term of two to nine years. Each management agreement provides, or is generally
expected to provide, for management fees approximating 6.0% of net revenue of
the facility. In exchange for option payments, the Company has the option to
purchase the stock or assets of the Operator/Lessee at an exercise price based
on a formula set forth in the agreement, exercisable at any time during the term
of the option agreement. Without the Owner's prior consent, the Operator/Lessee
may not sell their equity or leasehold interest to any other third party. During
the three months ended September 30, 1998, the Company entered into 13
agreements with three independent developers. Under these agreements, the
Company receives a fee from the independent developer for development services
already performed by the Company, including, without limitation, revisions of
plans and specifications, market feasibility and competition analysis,
architectural consultation, site adaptation, construction bids and negotiations,
and engineering and geotechnical consultation. These agreements are expected to
be assigned to a REIT in the December 1998 quarter as part of construction
financing for each of the 13 projects. The Company estimates that the planned
development projects for fiscal 1999 will require approximately $70 million of
working capital commitments from Operator/Lessees during their initial occupancy
period which is expected to occur during fiscal 2000 and 2001 (assuming a one
year construction period and a one year initial occupancy period). In addition,
the Company estimates that it will require approximately $100 - $150 million
through fiscal 2001 if it exercises its options to purchase the stock or assets
of the Operator/Lessees for all projects developed under this structure through
and including the anticipated fiscal 1999 development projects.
In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by Financial Care Investors, LLC, a Delaware limited liability company
("FCI"). FCI is owned by Brad E. Hollinger, Chairman of the Board, President and
Chief Executive Officer of the Company. FCI and its six wholly owned
Operator/Lessees also entered into lease agreements with a REIT. The terms of
the agreements among the parties are similar to the terms of the agreements the
Company has entered into with independent third party
14
<PAGE> 15
Operator/Lessees. The Company has not made any payments to the aforementioned
parties in connection with these transactions.
In order to achieve its growth plans, the Company will be required to obtain
substantial additional financing. The Company is currently exploring financing
alternatives. The Company anticipates that it will use a combination of the net
proceeds from the Offering, existing lease financing commitments, other REIT
financing arrangements, joint venture leasing arrangements, a working capital
line of credit, future equity and debt financing and cash generated from
operations to fund its development and acquisition activities. The estimated
costs over the next three years of the Company's planned development and
expansion are significantly in excess of the Company's existing financing
arrangements. Recent turmoil in capital markets has detrimentally affected the
availability of development funding from REITs. In addition, a recent revision
to an accounting pronouncement, Emerging Issues Task Force Issue 97-10, The
Effect of Lessee Involvement in Asset Construction "(EITF 97-10)", has affected
the accounting treatment of transactions under the Company's typical
Operator/Lessee development arrangement discussed above. As a result of EITF
97-10, the Company will need to modify its development structure to achieve the
same development fee revenue recognition treatment currently realized, or future
amounts of development fee revenue will be recognized over the related lease
terms. These modifications, coupled with the current capital market turmoil, may
be difficult to negotiate, or may result in less favorable terms for the Company
in future development projects. There can be no assurance that any additional
financing needed to fund the Company's growth plans will be available. The
Company's development plans may be curtailed or halted if the Company is not
successful in securing financing beyond its current resources.
Most of the facilities operated or managed by the Company are leased under
long-term operating leases. Lease obligations for the next 12 months are
approximately $9,800,000. The lease documents contain financial covenants and
other restrictions which: (i) require the Company to meet certain financial
tests and maintain certain escrow funds, (ii) limit, among other things, the
ability of the Company and certain of its subsidiaries to borrow additional
funds, dispose of assets or engage in mergers or other business combinations,
and (iii) prohibit the Company from operating competing facilities within a
designated radius of existing facilities. Management believes the Company is in
compliance with these lease covenants.
The Company's lease arrangements are generally for initial terms of nine to 15
years with aggregate renewal terms ranging from 15 to 25 years and provide for
contractually fixed rent plus additional rent, subject to certain limits. The
additional rent is capped at 2% or 3% of the prior year's total rent and is
based on either the annual increase in revenues of the facility or the increase
in the consumer price index. The Company's lease arrangements generally contain
a purchase option to purchase the facility at its fair market value at the end
of the initial lease term and each renewal term.
Management believes that its current data systems are adequate for current
operations and provide the flexibility to accommodate the planned growth of its
operations without disruption or significant modification to existing systems
through fiscal 1999. The Company plans to begin upgrading the existing financial
system during fiscal 1999 to accommodate future growth. While cost estimates
have not been finalized, the financial system upgrade will involve expansion of
the Company's systems staff and a substantial financial commitment.
Operating Activities
Cash provided by operations increased by $3,784,000 to $206,000 for the three
months ended September 30, 1998 from cash used by operations of $3,578,000 for
the three months ended September 30, 1997. The increase was primarily due to
increased profitability.
15
<PAGE> 16
Investing and Financing Activities
Cash used for investing activities increased by $2,122,000 to $3,911,000 for the
three months ended September 30, 1998 from $1,789,000 for the three months ended
September 30, 1997. The increase was primarily the result of additional purchase
price payments on fiscal 1998 acquisitions, purchases of property and equipment
and option payments to Operator/Lessees of $1,350,000, included with other
assets. Cash used for financing activities increased by $7,000 to $186,000 for
the three months ended September 30, 1998 from $179,000 for the three months
ended September 30, 1997.
YEAR 2000 DISCLOSURE
Computer software and or hardware that was designed to define the year with a
two digit date field rather than a four digit field may fail or miscalculate
data in the year 2000, causing disruption to the operations or business
activities of the Company.
State of Readiness. The Company uses high quality hardware and operating systems
from current and proven technologies to ensure reliability and optimum system
performance. In order to evaluate these systems and other electronic systems not
related to information technology ("Non-IT Systems"), the Company formed an
oversight committee comprised of information systems, operations, legal and
accounting professionals.
Phases. The committee has performed an inventory and risk assessment of the
Company's internal operating systems, as well as an inventory of third party
relationships and their impact on the Company. In response to requests, the
committee has already received certification of year 2000 readiness from key
hardware and software providers, including suppliers of critical data processing
and financial systems. Internal testing of all critical electronic systems will
begin in early 1999.
The committee will also oversee the testing of Non-IT Systems. The testing of
these systems and the timeframe for completion are in the planning stages. For
those non-critical systems, that cannot be readily tested, the Company will
inquire of third party vendors as to the status of year 2000 compliance within
these systems.
Material Third Parties. Based on the committee's review, the Company has
determined that third party relationships provide the highest risk related to
year 2000 issues. The third party relationships deemed most critical are the
Company's banking relationships and its relationships with third party
intermediaries for skilled nursing facility reimbursement under Medicare and
Medicaid programs. The Company's third party reimbursement intermediaries have
been proactive in testing for year 2000 compliance. The intermediaries are
requiring the submission of test billings that demonstrate year 2000
compatibility with their payment software. These tests are required to be
completed by December 31, 1998. The Company expects to meet the deadlines. The
committee's inquiry and testing process to assure that the Company's financial
institutions are year 2000 compliant is in the inquiry stage.
Costs. Based upon the Company's progress to date in addressing year 2000 issues,
management does not expect these issues to have a material impact on financial
position, results of operations or cash flows in future periods, including the
cost of remediation. Costs incurred to date are internal staff costs of salary,
benefits and nominal administrative expenses associated with the activities of
the oversight committee. The Company expects future costs to be of a similar
nature.
Risks and Contingency Plans. At this time the Company is unable to determine its
most reasonably likely worst case scenarios as a result of year 2000 issues. The
committee continues to analyze possible scenarios as part of its inventory and
risk assessment process, and will develop and modify its
16
<PAGE> 17
contingency plans as more information becomes available. Based on the outcomes
of inquiries and testing, the oversight committee will coordinate the
preparation of contingency plans by early 1999.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company did not have any investment securities subject to market risk as of,
or during the three months ended, September 30, 1998.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM EXHIBITS AND REPORTS ON FORM 8-K
6:
(A) Exhibits
Exhibit
Number Description
------ -----------
10.1 Form of HCRI Lease Agreement (filed herewith)
10.2 Schedule to Form of HCRI Lease Agreement (filed herewith)
10.3 Form of HCRI Construction Disbursing Agreement (filed
herewith)
10.4 Schedule to Form of HCRI Construction Disbursing Agreement
(filed herewith)
10.5 Form of HCRI Option Agreement (filed herewith)
10.6 Schedule to Form of HCRI Option Agreement (filed herewith)
10.7 Form of HCRI Shortfall Funding Agreement (filed herewith)
10.8 Schedule to Form of HCRI Shortfall Funding Agreement (filed
herewith)
10.9 Form of HCRI Working Capital Assurance Agreement (filed
herewith)
10.10 Schedule to Form of HCRI Working Capital Assurance Agreement
(filed herewith)
10.11 Form of HCRI Management Agreement (filed herewith)
10.12 Schedule to Form of HCRI Management Agreement (filed
herewith)
10.13 Form of HCRI Guaranty (filed herewith)
10.14 Schedule to Form of HCRI Guaranty (filed herewith)
10.15 Form of HCRI Loan Agreement (filed herewith)
10.16 Schedule to Form of HCRI Loan Agreeement (filed herewith)
10.17 Form of KWM Group, Inc. Pre-Development Agreement (filed
herewith)
10.18 Schedule to Form of KWM Group, Inc. Pre-Development
Agreement (filed herewith)
10.19 Form of Capital Point Pre-Development Agreement
(filed herewith)
10.20 Schedule to Form of Capital Point Pre-Development Agreement
(filed herewith)
18
<PAGE> 19
10.21 Form of Angeles Pre-Development Agreement, Type I (filed
herewith)
10.22 Schedule to Form of Angeles Pre-Development Agreement, Type
I (filed herewith)
10.23 Form of Angeles Pre-Development Agreement, Type II (filed
herewith)
10.24 Schedule to Form of Angeles Pre-Development Agreement, Type
II (filed herewith)
27.1 Financial Data Schedule
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter ended September 30, 1998.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BALANCED CARE CORPORATION
Date: November 16, 1998 By: /s/ Paul Kruis
-------------------------------
Paul Kruis
Chief Financial Officer
20
<PAGE> 21
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1 Form of HCRI Lease Agreement
10.2 Schedule to Form of HCRI Lease Agreement
10.3 Form of HCRI Construction Disbursing Agreement
10.4 Schedule to Form of HCRI Construction Disbursing Agreement
10.5 Form of HCRI Option Agreement
10.6 Schedule to Form of HCRI Option Agreement
10.7 Form of HCRI Shortfall Funding Agreement
10.8 Schedule to Form of HCRI Shortfall Funding Agreement
10.9 Form of HCRI Working Capital Assurance Agreement
10.10 Schedule to Form of HCRI Working Capital Assurance
Agreement
10.11 Form of HCRI Management Agreement
10.12 Schedule to Form of HCRI Management Agreement
10.13 Form of HCRI Guaranty
10.14 Schedule to Form of HCRI Guaranty
10.15 Form of HCRI Loan Agreement
10.16 Schedule to Form of HCRI Loan Agreeement
10.17 Form of KWM Group, Inc. Pre-Development Agreement
10.18 Schedule to Form of KWM Group, Inc. Pre-Development
Agreement
10.19 Form of Capital Point Pre-Development Agreement
10.20 Schedule to Form of Capital Point Pre-Development Agreement
10.21 Form of Angeles Pre-Development Agreement, Type I
10.22 Schedule to Form of Angeles Pre-Development Agreement, Type
I
10.23 Form of Angeles Pre-Development Agreement, Type II
21
<PAGE> 22
10.24 Schedule to Form of Angeles Pre-Development Agreement, Type
II
27.1 Financial Data Schedule
22
<PAGE> 1
Exhibit 10.1
FORM OF HCRI LEASE AGREEMENT
BETWEEN
[____________________________], INC.
AND
FINANCIAL CARE INVESTORS OF [____________], LLC
SEPTEMBER 22, 1998
BALANCED CARE, [_________]
[_______________]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS......................................................... 1
1.1 Leased Property........................................................................ 1
1.2 Term................................................................................... 2
1.3 Definitions............................................................................ 2
ARTICLE 2: RENT ....................................................................................... 11
2.1 Construction Base Rent and Construction Fee............................................ 11
2.2 Construction Lease Advances............................................................ 11
2.3 Conversion to Initial Term............................................................. 11
2.4 Base Rent.............................................................................. 11
2.5 Increase of Lease Rate and Base Rent................................................... 11
2.6 Additional Rent........................................................................ 12
2.7 Place of Payment of Rent............................................................... 12
2.8 Net Lease.............................................................................. 12
2.9 No Termination, Abatement, Etc......................................................... 12
2.10 Computational Method................................................................... 13
ARTICLE 3: IMPOSITIONS AND UTILITIES.................................................................... 13
3.1 Payment of Impositions................................................................. 13
3.2 Definition of Impositions.............................................................. 14
3.3 Escrow of Impositions.................................................................. 14
3.4 Utilities.............................................................................. 14
3.5 Discontinuance of Utilities............................................................ 15
3.6 Business Expenses...................................................................... 15
3.7 Permitted Contests..................................................................... 15
ARTICLE 4: INSURANCE.................................................................................... 16
4.1 Property Insurance..................................................................... 16
4.2 Liability Insurance.................................................................... 17
4.3 Builder's Risk Insurance............................................................... 17
4.4 Insurance Requirements................................................................. 17
4.5 Replacement Value...................................................................... 18
4.6 Blanket Policy......................................................................... 18
4.7 No Separate Insurance.................................................................. 18
4.8 Waiver of Subrogation.................................................................. 19
4.9 Mortgages.............................................................................. 19
4.10 Escrows................................................................................ 19
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<TABLE>
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ARTICLE 5: INDEMNITY.................................................................................... 19
5.1 Tenant's Indemnification............................................................... 19
5.2 Environmental Indemnity; Audits........................................................ 21
5.3 Limitation of Landlord's Liability..................................................... 21
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES............................................................... 22
6.1 Use of Leased Property................................................................. 22
6.2 Acceptance of Leased Property.......................................................... 22
6.3 Conditions of Use and Occupancy........................................................ 22
ARTICLE 7: REPAIRS AND MECHANICS' LIENS................................................................. 22
7.1 Maintenance............................................................................ 22
7.2 Required Alterations................................................................... 23
7.3 Mechanic's Liens....................................................................... 23
7.4 Replacements of Fixtures and Personal Property......................................... 23
ARTICLE 8: DEFAULTS AND REMEDIES........................................................................ 24
8.1 Events of Default...................................................................... 24
8.2 Remedies............................................................................... 26
8.3 Right of Set-Off....................................................................... 29
8.4 Performance of Tenant's or Developer's Covenants....................................... 29
8.5 Late Payment Charge.................................................................... 29
8.6 Interest............................................................................... 29
8.7 Litigation; Attorneys' Fees............................................................ 29
8.8 Escrows and Application of Payments.................................................... 30
8.9 Remedies Cumulative.................................................................... 30
8.10 Limitation of Remedies During Construction Term........................................ 30
ARTICLE 9: DAMAGE AND DESTRUCTION....................................................................... 30
9.1 Notice of Casualty..................................................................... 30
9.2 Substantial Destruction................................................................ 31
9.3 Partial Destruction.................................................................... 32
9.4 Restoration............................................................................ 32
9.5 Insufficient Proceeds.................................................................. 32
9.6 Not Trust Funds........................................................................ 33
9.7 Landlord's Inspection.................................................................. 33
9.8 Landlord's Costs....................................................................... 33
9.9 No Rent Abatement...................................................................... 33
ARTICLE 10: CONDEMNATION................................................................................ 34
10.1 Total Taking........................................................................... 34
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<TABLE>
<S> <C>
10.2 Partial Taking......................................................................... 34
10.3 Condemnation Proceeds Not Trust Funds.................................................. 34
ARTICLE 11: TENANT'S PROPERTY........................................................................... 35
11.1 Tenant's Property...................................................................... 35
11.2 Requirements for Tenant's Property..................................................... 35
ARTICLE 12: RENEWAL OPTIONS.............................................................................. 36
12.1 Renewal Options........................................................................ 36
12.2 Effect of Renewal...................................................................... 36
12.3 Effect of Non-Renewal or Expiration of Lease........................................... 37
ARTICLE 13: OPTION TO PURCHASE.......................................................................... 38
13.1 Option to Purchase..................................................................... 38
13.2 Option Price........................................................................... 38
13.3 Fair Market Value...................................................................... 38
13.4 Closing................................................................................ 40
13.5 Failure to Close Option................................................................ 40
13.6 Failure to Exercise Option to Purchase and Renewal Option.............................. 40
ARTICLE 14: NEGATIVE COVENANTS.......................................................................... 40
14.1 No Debt................................................................................ 40
14.2 No Liens............................................................................... 41
14.3 No Guaranties.......................................................................... 41
14.4 No Transfer............................................................................ 41
14.5 No Dissolution......................................................................... 41
14.6 No Change in Management or Operation................................................... 41
14.7 No Investments......................................................................... 41
14.8 Contracts.............................................................................. 41
14.9 Subordination of Payments to Affiliates................................................ 41
14.10 Change of Location or Name............................................................. 42
ARTICLE 15: AFFIRMATIVE COVENANTS....................................................................... 42
15.1 Perform Obligations.................................................................... 42
15.2 Proceedings to Enjoin or Prevent Construction.......................................... 42
15.3 Documents and Information.............................................................. 42
15.4 Compliance With Laws................................................................... 43
15.5 Broker's Commission.................................................................... 44
15.6 Existence and Change in Ownership...................................................... 44
15.7 Financial Covenants.................................................................... 44
15.8 Transfer of License.................................................................... 45
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(iii)
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<TABLE>
<S> <C>
15.9 Post-Closing Obligations............................................................... 45
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS................................................ 45
16.1 Prohibition on Alterations and Improvements............................................ 45
16.2 Approval of Alterations................................................................ 45
16.3 Permitted Alterations.................................................................. 45
16.4 Requirements for Permitted Alterations................................................. 46
16.5 Ownership and Removal of Permitted Alterations......................................... 46
16.6 Signs.................................................................................. 47
ARTICLE 17: EARNOUT LEASE ADVANCE....................................................................... 47
17.1 Earnout Lease Advance.................................................................. 47
17.2 Conditions to Earnout Lease Advance.................................................... 47
17.3 Use of Earnout Lease Advance........................................................... 47
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY...................................................... 47
18.1 Prohibition on Assignment and Subletting............................................... 47
18.2 Requests for Landlord's Consent to Assignment, Sublease or Management Agreement........ 48
18.3 Agreements with Residents.............................................................. 49
18.4 Terms Applicable to all Assignments, Subleases or Management Agreements................ 49
18.5 Collateral Assignment.................................................................. 49
18.6 Effectiveness.......................................................................... 49
18.7 Sale of Leased Property................................................................ 50
18.8 Assignment by Landlord................................................................. 50
ARTICLE 19: HOLDOVER AND SURRENDER...................................................................... 50
19.1 Holding Over........................................................................... 50
19.2 Surrender.............................................................................. 50
ARTICLE 20: LETTER OF CREDIT............................................................................ 50
20.1 Terms of Letter of Credit.............................................................. 50
20.2 Replacement Letter of Credit........................................................... 50
20.3 Draws.................................................................................. 51
20.4 Partial Draws.......................................................................... 51
20.5 Substitute Letter of Credit............................................................ 52
20.6 Reduction in Letter of Credit Amount................................................... 52
20.7 Cost of Letter of Credit............................................................... 52
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND
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<TABLE>
<S> <C>
ESTOPPEL CERTIFICATES........................................................................... 52
21.1 Quiet Enjoyment........................................................................ 52
21.2 Subordination.......................................................................... 52
21.3 Attornment............................................................................. 53
21.4 Estoppel Certificates.................................................................. 53
ARTICLE 22: REPRESENTATIONS AND WARRANTIES.............................................................. 54
22.1 Organization and Good Standing......................................................... 54
22.2 Power and Authority.................................................................... 54
22.3 Enforceability......................................................................... 55
22.4 Government Authorizations.............................................................. 55
22.5 Financial Statements................................................................... 55
22.6 Condition of Facility.................................................................. 55
22.7 Compliance with Laws................................................................... 55
22.8 No Litigation.......................................................................... 55
22.9 Consents............................................................................... 56
22.10 No Violation........................................................................... 56
22.11 Reports and Statements................................................................. 56
22.12 ERISA.................................................................................. 56
22.13 Chief Executive Office................................................................. 56
22.14 Other Name or Entities................................................................. 57
22.15 Parties in Possession.................................................................. 57
22.16 Access................................................................................. 57
22.17 Utilities.............................................................................. 57
22.18 Condemnation and Assessments........................................................... 57
22.19 Zoning................................................................................. 57
22.20 Pro Forma Statement.................................................................... 57
22.21 Environmental Matters.................................................................. 57
22.22 Leases and Contracts................................................................... 58
22.23 No Default............................................................................. 58
22.24 Project Budget......................................................................... 58
22.25 Tax Status............................................................................. 58
ARTICLE 23: FUTURE PROJECTS; COTERMINOUS FINANCINGS..................................................... 58
23.1 Project Submissions.................................................................... 58
23.2 Coterminous Financings................................................................. 59
ARTICLE 24: SECURITY INTEREST........................................................................... 59
24.1 Collateral............................................................................. 59
24.2 Additional Documents................................................................... 60
24.3 Notice of Sale......................................................................... 60
24.4 Pledge of Accounts to Others........................................................... 60
24.5 Financing of Fixtures, Furniture and Equipment......................................... 60
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
ARTICLE 25: MISCELLANEOUS............................................................................... 60
25.1 Notices................................................................................ 60
25.2 Advertisement of Leased Property....................................................... 61
25.3 Entire Agreement....................................................................... 61
25.4 Severability........................................................................... 61
25.5 Captions and Headings.................................................................. 61
25.6 Governing Law.......................................................................... 61
25.7 Memorandum of Lease.................................................................... 61
25.8 Waiver................................................................................. 61
25.9 Binding Effect......................................................................... 61
25.10 Power of Attorney...................................................................... 61
25.11 No Offer............................................................................... 62
25.12 Modification........................................................................... 62
25.13 Landlord's Modification................................................................ 62
25.14 No Merger.............................................................................. 62
25.15 Laches................................................................................. 63
25.16 Limitation on Tenant's Recourse........................................................ 63
25.17 Construction of Lease.................................................................. 63
25.18 Counterparts........................................................................... 63
25.19 [Intentionally Deleted]................................................................ 63
25.20 Custody of Escrow Funds................................................................ 63
25.21 Landlord's Status as a REIT............................................................ 63
25.22 Exhibits............................................................................... 63
25.23 WAIVER OF JURY TRIAL................................................................... 64
25.24 CONSENT TO JURISDICTION................................................................ 64
25.25 Attorney's Fees and Expenses........................................................... 64
25.26 Survival............................................................................... 65
25.27 Access to Records...................................................................... 65
25.28 Granting of Easements and Rights-of-Way................................................ 65
ARTICLE 26: SUBSTITUTION OF LEASED PROPERTY............................................................. 65
26.1 Right of Substitution.................................................................. 65
26.2 Conditions to Substitution............................................................. 65
26.3 Conveyance of Existing Facility........................................................ 68
26.4 Expenses............................................................................... 69
</TABLE>
EXHIBIT A: LEGAL DESCRIPTION
EXHIBIT B: PERMITTED EXCEPTIONS
EXHIBIT C: DOCUMENTS TO BE DELIVERED
EXHIBIT D: TENANT'S CERTIFICATE AND FACILITY FINANCIAL REPORTS
(vi)
<PAGE> 8
EXHIBIT E: GOVERNMENT AUTHORIZATIONS TO BE OBTAINED; ZONING PERMITS
EXHIBIT F: PENDING LITIGATION
EXHIBIT G: LIST OF LEASES AND CONTRACTS
(vii)
<PAGE> 9
FORM OF HCRI LEASE AGREEMENT
This Lease Agreement ("Lease" or "Agreement") is made effective
as of the 22nd day of September, 1998 (the "Effective Date") between
[________________], INC., a corporation organized under the laws of the State of
Pennsylvania ("Landlord"), having its principal office located at One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio 43603, and FINANCIAL CARE INVESTORS OF
[_________], LLC, a limited liability company organized under the laws of the
State of Delaware ("Tenant"), having its chief executive office located at 5021
Louise Drive, Suite 200, Mechanicsburg, Pennsylvania 17055.
R E C I T A L S
A. As of the date hereof, Landlord acquired the land described
in Exhibit A attached hereto ("Land").
B. Landlord desires to lease the Leased Property (defined
below) to Tenant and Tenant desires to lease the Leased Property from Landlord
upon the terms set forth in this Lease.
C. Tenant desires to cause BCC Development and Management Co.
("Developer") to construct a [__]-unit personal care facility ("Facility") on
the Land. Landlord has agreed to pay for the development and construction costs
of the Facility up to a maximum amount of $[________].00 subject to the terms
and conditions of this Lease and the Construction Disbursing Agreement between
Landlord and Developer.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the following property:
(a) The land described in Exhibit A attached hereto (the
"Land").
(b) All buildings, structures, and other improvements,
including without limitation, sidewalks, alleys, utility pipes, conduits, and
lines, parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").
(c) All easements, rights and other appurtenances relating to
the Land and Improvements (the "Appurtenances").
(d) All permanently affixed equipment, machinery, fixtures,
and other items of real and personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including
<PAGE> 10
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto but specifically excluding all items included within the
category of Personal Property as defined below (collectively the "Fixtures").
(e) All machinery, equipment, furniture, furnishings, movable
walls or partitions, computers, trade fixtures, consumable inventory and
supplies, and other personal property used or useful in Tenant's business on the
Leased Property, and the replacements therefor, except items, if any, included
within the definition of Fixtures (collectively the "Personal Property").
SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof as listed on
Exhibit B attached hereto (the "Permitted Exceptions").
1.2 Term. The Construction Term of this Lease commences on the
Effective Date and expires on the Conversion Date. The initial term ("Initial
Term") of this Lease commences on the day after the Conversion Date and expires
at 12:00 Midnight Eastern Time on the thirteenth anniversary of the Term
Commencement Date (the "Expiration Date"); provided, however, that [i] Tenant
has one or more options to renew the Lease pursuant to Article 12, and [ii] the
Initial Term may be extended from time to time pursuant to Article 23.
1.3 Definitions. Except as otherwise expressly provided, [i] the
terms defined in this section have the meanings assigned to them in this section
and include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; [iii] the
words "herein", "hereof", and "hereunder" and similar words refer to this Lease
as a whole and not to any particular section; and [iv] any capitalized term not
defined in this Agreement which is defined in the Construction Agreement shall
have the meaning set forth in the Construction Agreement.
"ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C.Section 12101, et seq.
"Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Tenant. "Control"
(and the correlative meanings of the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity.
"Affiliate" includes, without limitation, Financial Care Investors, LLC.
<PAGE> 11
"Annual Facility Budget" means Tenant's projection of what the Annual
Facility Financial Statements will be for the next fiscal year.
"Annual Financial Statements" means [i] for Tenant, an unaudited
balance sheet, cash flow statements, and statement of income for the most recent
fiscal year; [ii] for the Facility, an unaudited Facility Financial Statement
for the most recent fiscal year; and [iii] for Guarantor, an audited balance
sheet and statement of income for the most recent fiscal year. Following the
closing of the Guarantor Option, the "Annual Financial Statements" shall mean an
audited balance sheet and statement of income of Guarantor for the most recent
fiscal year on an individual facility and consolidated basis.
"Asset Purchase Option" means the option of Guarantor to purchase all
of the assets of Tenant and each Phase Tenant subject to the terms and
conditions of the Shortfall Funding Agreement.
"Base Rent" has the meaning set forth in Section 2.4, as increased from
time to time pursuant to Section 2.5.
"Business Day" means any day other than a Saturday, Sunday, or national
holiday.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"Closing" means the closing of the purchase of the Leased Property by
Landlord and the lease of the Leased Property to Tenant.
"Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following the
Effective Date.
"Commitment" means the commitment letter for the Lease dated September
22, 1998.
"Construction Agreement" means the Construction Disbursing Agreement
between Developer and Landlord dated the date hereof.
"Construction Base Rent" has the meaning set forth in Section 2.1.
"Construction Fee" has the meaning set forth in Section 2.1.
"Construction Rate" means the Base Rate announced from time to time by
National City Bank (Cleveland) or the successor bank with which Landlord
maintains its primary line of credit; the Lease Rate for the Construction Term
shall be adjusted to reflect each change in the Construction Rate.
<PAGE> 12
"Construction Term" means the term of this Lease commencing on the
Effective Date and expiring on the Conversion Date.
"Conversion Date" means the date when the Facility is completed and the
final disbursement of the Lease Amount has been made pursuant to Section 3.3 of
the Construction Agreement.
"Credit Facility" means the credit facility in an amount up to
$150,000,000.00 the terms of which are set forth in the Commitment. The Credit
Facility consists of multiple phases of funding.
"Current Phase" means the phase of funding under the Credit Facility
which is applicable to this Lease. This Lease is part of the first phase.
"Earnout Lease Advance" has the meaning set forth in Section 17.1.
"Effective Date" means the date of this Lease.
"Environmental Laws" means all federal, state, and local laws,
ordinances and policies the purpose of which is to protect human health and the
environment, as amended from time to time, including but not limited to [i]
CERCLA; [ii] the Resource Conservation and Recovery Act; [iii] the Hazardous
Materials Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi]
the Toxic Substances Control Act; [vii] the Occupational Safety and Health Act;
[viii] the Safe Drinking Water Act; and [ix] analogous state laws and
regulations.
"Equity Loan" means any loan extended by Landlord to Tenant for working
capital purposes pursuant to the terms of the Equity Loan Documents.
"Equity Loan Documents" means the Loan Agreement, Note, and Security
Agreement executed by Tenant in connection with the Equity Loan.
"Equity Option" means the option of Guarantor to purchase all of the
equity in Tenant and each Phase Tenant subject to the terms and conditions of
the Option Agreement.
"Event of Default" has the meaning set forth in Section 8.1.
"Expiration Date" has the meaning set forth in Section 1.2.
"Extended Term" has the meaning set forth in Section 12.3(a).
"Facility" means the [__]-unit personal care facility to be known as
Balanced Care, [________] and located on the Leased Property.
"Facility Financial Statement" means a financial statement for the
Facility which shall include the balance sheet, statement of
<PAGE> 13
income, statement of cash flows, statement of shareholders' equity, occupancy
census data (including payor mix) and a comparison of the actual financial data
versus the Annual Facility Budget for the applicable period.
"Facility Uses" means the uses relating to the operation of the
Facility as a 60-unit personal care facility. Facility Uses may also include
Alzheimer's care and rehabilitation therapy.
"Fair Market Value" has the meaning set forth in Section 13.3.
"Financial Statements" means the annual, quarterly and year to date
financial statements of Tenant and Guarantor that were submitted to Landlord
prior to the Effective Date.
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to comply with all Legal Requirements,
including but not limited to, [i] zoning permits, variances, exceptions, special
use permits, conditional use permits, and consents; [ii] the permits, licenses,
provider agreements and approvals required for licensure and operation of a
60-unit personal care facility; [iii] environmental, ecological, coastal,
wetlands, air, and water permits, licenses, and consents; [iv] curb cut,
subdivision, land use, and planning permits, licenses, approvals and consents;
[v] building, sign, fire, health, and safety permits, licenses, approvals, and
consents; and [vi] architectural reviews, approvals, and consents required under
restrictive covenants.
"Guarantor" means Balanced Care Corporation, a corporation organized
under the laws of the State of Delaware.
"Guarantor Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Guarantor. "Control" (and the correlative meanings of the terms "controlled by"
and "under the common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such entity. "Guarantor Affiliate" includes, without limitation, BCC
Development and Management Co.
"Guarantor Option" means the Asset Purchase Option and the Equity
Option, individually and collectively.
"Guarantor Option Agreement" means individually and collectively, any
agreements setting forth the terms and conditions of the Asset Purchase Option
or the Equity Option, including but not limited to the Shortfall Funding
Agreement and the Option Agreement.
"Guaranty" means the Guaranty entered into by Guarantor and any
amendments thereto or substitutions or replacements therefor.
"Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land including
but not limited to asbestos containing materials; [ii] which requires removal or
remediation under any Environmental Law, including without limitation any
substance which is toxic, explosive, flammable, radioactive, or
<PAGE> 14
otherwise hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in Section 3.2.
"Improvements" has the meaning set forth in the Construction Agreement.
"Increaser Rate" means [i] in any Lease Year in which the nationwide
Consumer Price Index for all urban consumers increases by a percentage that is
less than 20%, 25 basis points per year for the Initial Term and 25 basis points
per year for each Renewal Term; and [ii] in all other Lease Years, 30 basis
points per year for the Initial Term and 30 basis points per year for each
Renewal Term.
"Initial Rate Index" means the yield to maturity quoted in the Wall
Street Journal on the applicable Rate Determination Date for the most actively
traded United States Treasury Notes having the nearest equivalent maturity date
to the Expiration Date.
"Initial Term" has the meaning set forth in Section 1.2.
"Issuer" means a financial institution reasonably satisfactory to
Landlord issuing the Letter of Credit and such Issuer's successors and assigns.
Any "Issuer" shall have a Lace Financial Service Rating of "C+" or higher at all
times throughout the Term.
"Landlord Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Landlord. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity. "Landlord Affiliate" includes, without limitation, HCRI Texas
Properties, Ltd., HCRI Pennsylvania Properties, Inc., HCRI Overlook Green, Inc.,
HCRI Nevada Properties, Inc., HCRI Louisiana Properties, L.P., Health Care REIT,
Inc., HCRI Tennessee Properties, Inc., HCRI Tennessee Properties, L.P., and HCN
BCC Holdings, Inc.
"Lease Advance" means any advance of funds by Landlord pursuant to the
terms of this Lease and Construction Agreement including any Earnout Lease
Advance.
"Lease Advance Amount" means the amount of any Lease Advance.
"Lease Advance Date" means the date on which Landlord makes a Lease
Advance.
"Lease Amount" is an aggregate concept and means the sum of the Lease
Advance Amounts outstanding at the applicable time.
<PAGE> 15
"Lease Documents" means [i] this Lease; [ii] the Construction
Agreement; [iii] the Collateral Assignment of Construction Contract; [iv] the
Collateral Assignment of Architect's Contract; [v] the Collateral Assignment of
Management Agreement and Consent of Manager to Collateral Assignment of
Management Agreement and Security Agreement; and [vi] all other documents and
instruments executed by Tenant, Manager or Developer and Landlord in connection
with the Lease.
"Lease Payments" means the sum of the Base Rent payments (as increased
from time to time) for the applicable period.
"Lease Rate" means the annual rate used to determine Construction Base
Rent and Base Rent for each Lease Advance. The Lease Rate for the Construction
Term is the Construction Rate, computed using the 365/360 method. The Lease Rate
for the Initial Term is the greater of [i] 10% or [ii] the sum of the Initial
Rate Index plus the Rate Spread applicable to the Initial Term, computed using
the 365/360 method. The Lease Rate for the Initial Term and any Renewal Term
includes any accrued Increaser Rate. The Lease Rate for the Initial Term and any
Renewal Term will be adjusted on each anniversary of the Term Commencement Date
as provided in Section 2.5. On each Renewal Date, the Lease Rate will be reset
for the Lease Amount as set forth in Section 12.2(c).
"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term, except the Construction Term. The first Lease Year
commences on the Term Commencement Date and expires on the day before the first
anniversary of the Term Commencement Date.
"Leased Property" means, collectively, the Land, Improvements,
Appurtenances, Fixtures and Personal Property.
"Legal Requirements" means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of the Facility by Tenant, including but
not limited to, [i] zoning, building, fire, health, safety, sign, and
subdivision regulations and codes; [ii] certificate of need laws (if
applicable); [iii] licensure to operate as a 60-unit personal care facility;
[iv] the ADA; [v] any Environmental Laws; and [vi] requirements, conditions and
standards for participation in third-party payor insurance programs.
"Letter of Credit" means an irrevocable and transferable Letter of
Credit in an amount initially equal to 5% of the Lease Amount and subject to
reduction as provided in Section 20.6, issued by Issuer in favor of Landlord as
security for the Lease and in form reasonably acceptable to Landlord, and any
amendments thereto or replacements or substitutions therefor.
"Manager" means BCC at corporation, Inc., a corporation organized under
the laws of the State of Delaware.
<PAGE> 16
"Material Obligation" means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased Property
(or any part thereof, including any Personal Property) and any agreement
relating thereto; [ii] any obligation or agreement that is material to the
construction or operation of the Facility or that is material to Tenant's
business or financial condition; [iii] any indebtedness or capital lease of
Tenant that has an outstanding principal balance of at least $50,000.00 and any
agreement relating thereto; [iv] any obligation to or agreement with the Issuer
relating to the Letter of Credit; and [v] any sublease of the Leased Property,
exclusive of occupancy agreements with residents of the Leased Property.
"Maximum Guarantied Amount" means an amount equal to [i] 89% of Project
Costs incurred at the time of the calculation of the Maximum Guarantied Amount,
minus [ii] any amounts previously paid by Guarantor, Developer or Tenant in
connection with the exercise by Landlord of its remedies under the Lease and
other Lease Documents, including but not limited to [a] indemnification payments
arising from any claim or loss asserted against Landlord resulting from the acts
or omissions of Developer, Guarantor or Tenant in connection with the
construction of the Facility including without limitation, insurance deductibles
actually paid by Guarantor, Developer or Tenant under insurance policies, [b]
amounts drawn by Landlord on the Letter of Credit, [c] amounts deposited with
Landlord under Section 2.5 of the Construction Agreement, and [d] amounts paid
by Guarantor under Section 8.2(l) of this Lease, plus [iii] 100% of all losses
suffered or incurred by Landlord exclusively in connection with the acquisition
of the Land.
"Maximum Lease Amount" means $[_________].00.
"Member" means Financial Care Investors, LLC, a limited liability
company organized under the laws of the State of Delaware.
"Option Agreement" means the Option Agreement between Member and
Guarantor dated the date hereof, and any amendments thereto or substitutions and
replacements therefor.
"Option Price" has the meaning set forth in Section 13.2.
"Option to Purchase" has the meaning set forth in Section 13.1.
"Overdue Rate" has the meaning set forth in Section 8.6.
"Periodic Financial Statements" means [i] for Tenant, an unaudited
balance sheet and statement of income of Tenant for the most recent quarter;
[ii] for the Facility, an unaudited Facility Financial Statement for the most
recent month; and [iii] for Guarantor, an unaudited balance sheet and statement
of income of Guarantor for the most recent quarter.
"Permitted Exceptions" means the exceptions to title set forth on
Exhibit B.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent including mechanic's
<PAGE> 17
liens and deposits and charges under worker's compensation laws; [iii] liens for
taxes and assessments not yet due and payable; [iv] any lien, charge, or
encumbrance which is being contested in good faith pursuant to Section 3.7 of
this Agreement; [v] the Permitted Exceptions; and [vi] purchase money financing
and capitalized equipment leases for the acquisition of personal property
provided, however, that Landlord obtains a nondisturbance agreement from the
purchase money lender or equipment lessor in form and substance as may be
reasonably satisfactory to Landlord if [a] the original cost of the equipment
exceeds $75,000.00 or [b] the equipment constitutes any part of the Start-Up
Property.
"Phase Facility" means each facility leased by Landlord or any Landlord
Affiliate to Tenant or any Affiliate pursuant to a Phase Lease, whether now or
hereafter existing.
"Phase Lease" means each lease now or hereafter made between Landlord
or any Landlord Affiliate and Tenant or any Affiliate and which is included
within the Current Phase as amended, modified, extended or renewed from time to
time.
"Phase Tenant" means Tenant or any Affiliate that is a tenant under a
Phase Lease.
"Pro Forma Statement" means a financial forecast for the Facility for
the next 5 year period commencing on the anticipated date when the Facility
commences operations prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
"Project Costs" means all costs of the Facility (exclusive of the costs
of acquisition of the Land) that are properly capitalized in accordance with
generally accepted accounting principles consistently applied.
"Purchase Notice" has the meaning set forth in Section 13.1.
"Rate Determination Date" means the date on which the value for the
Rate Index is established for computing any Lease Rate. For any Lease Advances
made during the Construction Term or Initial Term, the Rate Determination Date
is the day before the Lease Advance Date. For any Renewal Date, the Rate
Determination Date is the last Business Day of the current Term.
"Rate Index" means the rate index used from time to time to calculate
the Lease Rate during the Construction Term and the Initial Term. The Rate Index
is [i] the Construction Rate Index during the Construction Term; and [ii] the
Initial Rate Index during the Initial Term.
"Rate Spread" means the rate spread from time to time used to calculate
the Lease Rate applicable to any Lease Advance during the Initial Term. The Rate
Spread is 340 basis points for the Initial Term.
"Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services as set forth in any accounts, contract
rights, and instruments, and [ii] those documents, chattel paper, inventory
proceeds, provider agreements, participation
<PAGE> 18
agreements, ledger sheets, files, records, computer programs, tapes, and
agreements relating to Tenant's rights to receive payment for providing resident
care services.
"Renewal Date" means the first day of each Renewal Term.
"Renewal Option" has the meaning set forth in Section 12.1.
"Renewal Rate" means the Lease Rate established for any Renewal Date as
set forth in Section 12.2(c).
"Renewal Term" has the meaning set forth in Section 12.1.
"Rent" has the meaning set forth in Section 2.3.
"Secured Obligations" means all of the obligations of Tenant, Manager
or Developer under the Lease Documents.
"Shortfall Funding Agreement" means the Shortfall Funding Agreement
between Tenant, Member, and Guarantor dated the date hereof, and any amendments
thereto or substitutions and replacements therefor.
"Start-Up Property" has the meaning set forth in Section 11.1.
"State" means the State of Pennsylvania.
"Tenant's Obligations" means all payment and performance obligations of
Tenant under this Lease and all documents executed by Tenant in connection with
this Lease.
"Tenant's Organizational Documents" means [i] for a corporate Tenant,
the Articles of Incorporation of Tenant certified by the Secretary of State of
the state of organization, as amended to date and the Bylaws of Tenant certified
by Tenant, as amended to date; [ii] for a partnership Tenant, the Partnership
Agreement of Tenant certified by Tenant, as amended to date and the Partnership
Certificate, certified by the appropriate authority, as amended to date; and
[iii] for a limited liability company Tenant, the Certificate of Formation of
Tenant certified by the Secretary of State of the state of organization, as
amended to date and the Operating Agreement of Tenant certified by Tenant, as
amended to date.
"Tenant's Property" has the meaning set forth in Section 11.1.
"Term" means the Construction Term, Initial Term and each Renewal Term.
"Term Commencement Date" means the first day of the first month after
the Conversion Date.
<PAGE> 19
"Working Capital Assurance Agreement" means the agreement between
Guarantor and Landlord under which Guarantor agrees to extend loans to Tenant
for working capital purposes.
"Working Capital Documents" means [i] the Transaction Documents as
defined in Appendix 1 to that certain Shortfall Funding Agreement among
Guarantor, Tenant, and the equity owners of Tenant; and [ii] the Working Capital
Assurance Agreement.
ARTICLE 2: RENT
2.1 Construction Base Rent and Construction Fee. Tenant shall pay
Landlord construction base rent ("Construction Base Rent") and a construction
fee ("Construction Fee") in arrears in consecutive monthly installments payable
on the first day of each month during the Construction Term commencing on the
Commencement Date. Landlord is authorized to make a Lease Advance each month for
payment of the Construction Base Rent and Construction Fee. The annual
Construction Base Rent for the Construction Term will be equal to the product of
the aggregate Lease Amount times the Construction Rate (adjusted for each change
in the Construction Rate), with the Lease Rate charged for each Lease Advance
Amount from the date such amount was disbursed. The annual Construction Fee for
the Construction Term will be equal to the product of the aggregate Lease Amount
times 250 basis points, with the Construction Fee charged for each Lease Advance
from the date such amount was disbursed. The Construction Base Rent and the
Construction Fee will be computed monthly based on the actual number of days
elapsed over a 360-day year (365/360 method). The Construction Base Rent and the
Construction Fee for any partial month shall be prorated.
2.2 Construction Lease Advances. Subject to the terms and upon the
conditions set forth in this Lease and the Construction Agreement, Landlord
shall disburse Lease Advances to Developer to pay for the development and
construction costs of the Facility up to the Maximum Lease Amount.
2.3 Conversion to Initial Term. Upon the Conversion Date, Landlord is
authorized to make Lease Advances for [i] all accrued and unpaid Construction
Base Rent and Construction Fees; [ii] Base Rent in advance for the balance of
the then current month; and [iii] all costs and expenses incurred by Landlord in
connection with the conversion to the Initial Term.
2.4 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in
advance in consecutive monthly installments payable on the first day of each
month during the Initial Term commencing on the Term Commencement Date. The Base
Rent for the Initial Term will be computed monthly and will be equal to 1/12th
of the sum of the products of each Lease Advance times the Lease Rate for each
Lease Advance. The Base Rent for each Renewal Term will be computed in
accordance with Section 12.2.
2.5 Increase of Lease Rate and Base Rent. Commencing on the first
anniversary of the Term Commencement Date and on each anniversary thereafter
throughout the Term (including any Renewal Term and Extended Term), the Lease
Rate will increase by the applicable Increaser Rate. On each date that the Lease
Rate is increased, the Base Rent will be increased
<PAGE> 20
accordingly and will be equal to 1/12th of the sum of the products of each Lease
Advance times the Lease Rate (including the applicable Increaser Rate) for each
Lease Advance.
2.6 Additional Rent. In addition to Construction Base Rent or Base
Rent, Tenant shall pay all other amounts, liabilities, obligations and
Impositions which Tenant assumes or agrees to pay under this Lease and other
Lease Documents and any fine, penalty, interest, charge and cost which may be
added for nonpayment or late payment of such items (collectively the "Additional
Rent"). The Construction Base Rent, Base Rent and Additional Rent are
hereinafter referred to as "Rent". Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of nonpayment of the Rent.
2.7 Place of Payment of Rent. Tenant shall make all payments of Rent at
the Landlord's address set forth in the first paragraph of this Lease or at such
other place as Landlord may designate from time to time.
2.8 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.
2.9 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. Except
as expressly provided in this Lease, the obligations of Landlord and Tenant
shall not be affected by reason of [i] any damage to, or destruction of, the
Leased Property or any part thereof from whatever cause or any Taking (as
hereinafter defined) of the Leased Property or any part thereof; [ii] the lawful
or unlawful prohibition of, or restriction upon, Tenant's use of the Leased
Property, or any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by paramount
title; [iii] any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this Lease or
any other agreement between Landlord and Tenant, or to which Landlord and Tenant
are parties; [iv] any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceeding affecting
Landlord or any assignee or transferee of Landlord; or [v] any other cause,
whether similar or dissimilar to any of the foregoing, other than a discharge of
Tenant from any such obligations as a matter of law. Except as otherwise
specifically provided in this Lease, Tenant hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law [a] to modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof; or [b] entitling
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Tenant hereunder. The obligations of Landlord and Tenant
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
<PAGE> 21
2.10 Computational Method. Landlord and Tenant acknowledge that all
rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. During the Construction Term, Landlord is
authorized to make Lease Advances to pay all Impositions. During the Initial
Term and any Renewal Term, Tenant shall pay, as Additional Rent, all Impositions
that may be levied or become a lien on the Leased Property or any part thereof
at any time (whether prior to or during the Term), without regard to prior
ownership of said Leased Property, before any fine, penalty, interest, or cost
is incurred; provided, however, Tenant may contest any Imposition in accordance
with Section 3.7. Tenant shall deliver to Landlord [i] not more than 5 days
after the due date of each Imposition, copies of the invoice for such Imposition
and the check delivered for payment thereof; and [ii] not more than 30 days
after the due date of each Imposition, a copy of the official receipt evidencing
such payment or other proof of payment satisfactory to Landlord. Tenant's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section 8.8.
Landlord and Tenant shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. In the
event governmental authorities classify any property covered by this Lease as
personal property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Landlord, to the extent it possesses
the same, and Tenant, to the extent it possesses the same, will provide the
other party, upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property. Where
Landlord is legally required to file personal property tax returns, Tenant will
be provided with copies of assessment notices indicating a value in excess of
the reported value in sufficient time for Tenant to file a protest. Tenant may,
upon notice to Landlord, at Tenant's option and at Tenant's sole cost and
expense, protest, appeal, or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within 30
days after receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant, whether or not such Imposition is imposed before or after such
termination, and Tenant's obligation to pay its prorated share thereof shall
survive such termination.
<PAGE> 22
3.2 Definition of Impositions. "Impositions" means, collectively,
[i] taxes (including without limitation, all capital stock and franchise taxes
of Landlord imposed by the State or any governmental entity in the State due to
this lease transaction or Landlord's ownership of the Leased Property and the
income arising therefrom, or due to Landlord being considered as doing business
in the State because of Landlord's ownership of the Leased Property or lease
thereof to Tenant but only to the extent Tenant would have been obligated to pay
such taxes if Tenant rather than Landlord was the owner of the Leased Property),
all real estate and personal property ad valorem, sales and use, business or
occupation, single business, gross receipts, transaction privilege, rent or
similar taxes; [ii] assessments (including without limitation, all assessments
for public improvements or benefits, whether or not commenced or completed prior
to the date hereof and whether or not to be completed with the Term); [iii]
ground rents, water, sewer or other rents and charges, excises, tax levies, and
fees (including without limitation, license, permit, inspection, authorization
and similar fees); [iv] all taxes imposed on Tenant's operations of the Leased
Property, including without limitation, employee withholding taxes, income taxes
and intangible taxes; [v] all taxes imposed by the State or any governmental
entity in the State with respect to the conveyance of the Leased Property by
Landlord to Tenant or Tenant's designee, including without limitation,
conveyance taxes and capital gains taxes; and [vi] all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
any part thereof and/or the Rent (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time prior to, during or
in respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon [a] Landlord or Landlord's interest in the Leased Property or any
part thereof; [b] the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof. Tenant shall not, however, be required to pay any tax [y]
based on income or assets imposed on Landlord by any governmental entity other
than the capital stock and franchise taxes described in clause [i] above or [z]
based on the transfer of Landlord's interest in the Leased Property or equity of
Landlord to a party other than Guarantor or Guarantor Affiliate unless the
transfer occurs pursuant to an Event of Default.
3.3 Escrow of Impositions. If an Event of Default occurs and
while it remains uncured, Tenant shall, at Landlord's election, deposit with
Landlord on the first day of each month a sum equal to 1/12th of the Impositions
assessed against the Leased Property for the preceding tax year, which sums
shall be used by Landlord toward payment of such Impositions. Tenant, on demand,
shall pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this Section. The receipt by
Landlord of the payment of such Impositions by and from Tenant shall only be as
an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes.
3.4 Utilities. Tenant shall pay, as Additional Rent, all taxes,
assessments, charges, deposits, and bills for utilities, including without
limitation charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term. During the Construction Term,
<PAGE> 23
Landlord is authorized to make Lease Advances for the charges described in the
preceding sentence. If an Event of Default occurs and while it remains uncured,
Tenant shall, at Landlord's election, deposit with Landlord on the first day of
each month a sum equal to 1/12th of the amount of the annual utility expenses
for the preceding Lease Year, which sums shall be used by Landlord to pay such
utilities. Tenant shall, on demand, pay to Landlord any additional amount needed
to pay such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees to
indemnify and hold Landlord harmless from and against any liability or damages
to the utility systems and the Leased Property that may result from Tenant's
failure to maintain sufficient heat in the Improvements.
3.5 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this Lease.
3.6 Business Expenses. Tenant shall promptly pay all expenses and
costs incurred in connection with the operation of the Facility on the Leased
Property, including without limitation, employee benefits, employee vacation and
sick pay, consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's
behalf (or in Landlord's name), but at Tenant's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition or
any Legal Requirement or insurance requirement or any lien, attachment, levy,
encumbrance, charge or claim provided that [i] in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; [ii] neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; [iii] in
the case of a Legal Requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; [iv] in the case of a Legal Requirement and/or an
Imposition, lien, encumbrance or charge in excess of $50,000.00, Tenant shall
give such reasonable security as may be demanded by Landlord to insure ultimate
payment of the same and to prevent any sale or forfeiture of the affected Leased
Property or the Rent by reason of such nonpayment or noncompliance; provided,
however, the provisions of this Section shall not be construed to permit Tenant
to contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to Landlord
hereunder; [v] in the case of an insurance requirement, the coverage required by
Article 4 shall be maintained; and [vi] if such contest be finally resolved
against Landlord or Tenant, Tenant shall, as Additional Rent due hereunder,
promptly pay the amount required to be paid, together with all interest and
penalties accrued thereon, or comply with the applicable Legal Requirement or
insurance requirement. Landlord, at Tenant's expense, shall execute and deliver
to Tenant such authorizations and other
<PAGE> 24
documents as may be reasonably required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant hereby agrees to indemnify and save Landlord harmless from and
against any liability, cost or expense of any kind that may be imposed upon
Landlord in connection with any such contest and any loss resulting therefrom.
ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall
maintain in full force and effect a property insurance policy or policies
insuring the Leased Property against the following:
(a) Loss or damage commonly covered by a "Special Form"
policy insuring against physical loss or damage to the Improvements and Personal
Property, including but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2) and sinkholes
(if usually recommended in the area of the Leased Property). The policy shall be
in the amount of the full replacement value (as defined in Section 4.5) of the
Improvements and Personal Property and shall contain a deductible amount
acceptable to Landlord. Landlord shall be named as an additional insured. The
policy shall include a stipulated value endorsement or agreed amount endorsement
and endorsements for contingent liability for operations of building laws,
demolition costs, and increased cost of construction.
(b) If applicable, loss or damage by explosion of steam
boilers, pressure vessels, or similar apparatus, now or hereafter installed on
the Leased Property, in commercially reasonable amounts acceptable to Landlord.
(c) Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the first
9 months of reconstruction, and containing an endorsement for extended period of
indemnity of at least 6 months, and shall be written with a stipulated amount of
coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in part,
in a federally designated 100-year flood plain area, flood insurance for the
Improvements in an amount equal to the lesser of [i] the full replacement value
of the Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.
(e) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, and loss of property of patients accepted by Tenant for
safekeeping, in commercially reasonable amounts acceptable to the Landlord.
<PAGE> 25
4.2 Liability Insurance. At Tenant's expense, Tenant shall
maintain liability insurance against the following:
(a) Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements for
incidental malpractice, contractual, personal injury, owner's protective
liability, voluntary medical payments, products and completed operations, broad
form property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all owned and
non-owned automobiles, with commercially reasonable amounts for bodily injury,
property damage, and for automobile medical payments acceptable to Landlord, but
with a combined single limit of not less than $5,000,000.00 per occurrence.
(c) Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to Landlord.
(d) Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Leased Property. Such
worker's compensation insurance shall be in accordance with the requirements of
all applicable local, state, and federal law.
4.3 Builder's Risk Insurance. In connection with any
construction, Tenant shall maintain in full force and effect a builder's
completed value risk policy ("Builder's Risk Policy") of insurance in a
nonreporting form insuring against all "Special Form" risk of physical loss or
damage to the Improvements, including but not limited to, risk of loss from fire
and other hazards, collapse, transit coverage, vandalism, malicious mischief,
theft, earthquake (if Leased Property is in earthquake zone 1 or 2) and
sinkholes (if usually recommended in the area of the Leased Property). The
Builder's Risk Policy shall include endorsements providing coverage for building
materials and supplies and temporary premises. The Builder's Risk Policy shall
be in the amount of the full replacement value of the Improvements and shall
contain a deductible amount acceptable to Landlord. Landlord shall be named as
an additional insured. The Builder's Risk Policy shall include an endorsement
permitting initial occupancy.
4.4 Insurance Requirements. The following provisions shall apply to
all insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject
to the approval of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating
of "A" or better and a Best's Financial Category of X or higher and shall be
authorized to do insurance business in the State.
<PAGE> 26
(c) Tenant shall be the "named insured" and Landlord shall be
an "additional insured" on each liability policy. On all property and casualty
policies, Landlord and Tenant shall be joint loss payees.
(d) Tenant shall deliver to Landlord certificates or policies
showing the required coverages and endorsements. The policies of insurance shall
provide that the policy may not be canceled or not renewed, and no material
change or reduction in coverage may be made, without at least 30 days' prior
written notice to Landlord.
(e) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions of Tenant
or Landlord will not invalidate the coverage of the other party, and provide
that Landlord shall not be responsible for payment of premiums.
(f) All loss adjustment shall require the written consent of
Landlord and Tenant, as their interests may appear.
(g) At least 10 days prior to the expiration of each
insurance policy, Tenant shall deliver to Landlord a certificate showing renewal
of such policy and payment of the annual premium therefor and a current
Certificate of Compliance (in the form delivered at the time of closing)
completed and signed by Tenant's insurance agent.
4.5 Replacement Value. The term "full replacement value" means the
actual replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this Section, Tenant may [i] carry the insurance required by this Article
under a blanket policy of insurance, provided that the coverage afforded Tenant
will not be reduced or diminished or otherwise be different from that which
would exist under a separate policy meeting all of the requirements of this
Lease; and [ii] Tenant may meet the limits of liability for insurance by
maintaining a portion thereof as "excess" insurance under an umbrella policy.
4.7 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such
<PAGE> 27
additional insurance is not prohibited by the existing policies of insurance.
Tenant shall immediately notify Landlord of the taking out of such separate
insurance or the increasing of any of the amounts of the existing insurance by
securing an additional policy or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased Property,
which loss or damage is covered by valid and collectible insurance policies, to
the extent that such loss or damage is recoverable under such policies. Said
mutual waiver shall be in addition to, and not in limitation or derogation of,
any other waiver or release contained in this Lease with respect to any loss or
damage to property of the parties hereto. Inasmuch as the said waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of said mutual waivers, and
to have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said waivers, so long as
such endorsement is available at a reasonable cost.
4.9 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of lender's loss payable clause insuring the
interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance to
such mortgagee; [iii] loss adjustment shall require the consent of the
mortgagee; and [iv] Tenant shall provide such other information and documents as
may be required by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder, Tenant shall
make such periodic payments of insurance premiums in accordance with Landlord's
requirements after receipt of notice thereof from Landlord.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord's
and such successor's and assign's directors, officers, employees and agents from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, court costs, and the costs set forth in Section 8.7) incurred
in connection with or arising from: [i] the use or occupancy of the Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind including, without limitation, any failure
to comply with any applicable requirements
<PAGE> 28
under the ADA; [v] any injury or damage to the person, property or business of
Tenant, its employees, agents, contractors, invitees, visitors, or any other
person entering upon the Leased Property; and [vi] any construction,
alterations, changes or demolition of the Facility performed by or contracted
for Tenant or its employees, agents or contractors; provided, however, in no
event shall Landlord be indemnified or held harmless if the claim or loss has
resulted from the grossly negligent or willful acts or omissions of Landlord,
its employees and agents. If any action or proceeding is brought against
Landlord, its employees, or agents by reason of any such claim, Tenant, upon
notice from Landlord, will defend the claim at Tenant's expense with counsel
reasonably satisfactory to Landlord. All amounts payable to Landlord under this
section shall be payable on written demand and any such amounts which are not
paid within 10 days after demand therefor by Landlord shall bear interest at the
Overdue Rate. In case any action, suit or proceeding is brought against Tenant
by reason of any such occurrence, Tenant shall use its best efforts to defend
such action, suit or proceeding.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any
claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes Tenant's
defense of any such action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in this
section shall remain in full force and effect after the termination of this
Agreement until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all expenses
and charges incurred by Landlord relating to the enforcement of the provisions
herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.
5.1.4 Limitation of Indemnification During Construction Term.
Notwithstanding any provision to the contrary contained in this Lease or the
other Lease Documents, in no event shall any party indemnified pursuant to
Sections 5.1 and 7.3 be entitled to indemnification or defenses (including
without limitation being held harmless) during the Construction Term which [i]
arise or are caused by the acts or omissions of parties other than Guarantor,
Developer or Tenant, or [ii] with respect to claims or other matters for which
indemnification or defenses are sought that arise as a result of the acts or
omissions of Tenant, Developer or Guarantor in connection with the completion of
construction of the Facility exceed the Maximum Guarantied Amount; provided,
however, [a] with respect to indemnification and defenses described in clause
[ii] of this section, Tenant, Developer and Guarantor may indemnify and defend
such indemnified parties up to the Maximum Guarantied Amount, [b] Guarantor,
Tenant and Developer shall indemnify and defend the indemnified parties without
regard to any limitation (except as expressly provided in Section
<PAGE> 29
5.1) for claims or losses resulting from the acts or omissions of Tenant,
Guarantor or Developer that are not related to the completion of construction of
the Facility, and [c] Guarantor, Tenant and Developer shall indemnify and defend
the indemnified parties without regard to any limitation for matters related to
fraud, willful acts, misapplication of funds or the bankruptcy of Tenant,
Guarantor or Developer.
5.2 Environmental Indemnity; Audits.
5.2.1 Indemnification. Tenant hereby indemnifies and agrees to hold
harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable consultants' and attorneys' fees) incurred by Landlord or any other
indemnitee or assessed against the Leased Property by virtue of any claim or
lien by any governmental or quasi-governmental unit, body, or agency, or any
third party, for cleanup costs or other costs pursuant to any Environmental Law.
Tenant's indemnity shall survive the termination of this Lease. Provided,
however, Tenant shall have no indemnity obligation with respect to [i] Hazardous
Materials first introduced to the Leased Property subsequent to the date that
Tenant's occupancy of the Leased Property shall have fully terminated; or [ii]
Hazardous Materials introduced to the Leased Property by Landlord, its agent,
employees, successors or assigns. If at any time during the Term of this Lease
any governmental authority notifies Landlord or Tenant of a violation of any
Environmental Law or Landlord reasonably believes that a Facility may violate
any Environmental Law, Landlord may require one or more environmental audits of
the Leased Premises, in such form, scope and substance as specified by Landlord,
at Tenant's expense. Tenant shall, within 30 days after receipt of an invoice
from Landlord, reimburse Landlord for all costs and expenses incurred in
reviewing any environmental audit, including without limitation, reasonable
attorneys' fees and costs.
5.3 Limitation of Landlord's Liability. Except for the grossly
negligent or willful acts or omissions of Landlord, its employees or agents,
Landlord, its agents, and employees, will not be liable for any loss, injury,
death, or damage (including consequential damages) to persons, property, or
Tenant's business occasioned by theft, act of God, public enemy, injunction,
riot, strike, insurrection, war, court order, requisition, order of governmental
body or authority, fire, explosion, falling objects, steam, water, rain or snow,
leak or flow of water (including water from the elevator system), rain or snow
from the Leased Property or into the Leased Property or from the roof, street,
subsurface or from any other place, or by dampness or from the breakage,
leakage, obstruction, or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, or lighting fixtures of the Leased
Property, or from construction, repair, or alteration of the Leased Property or
from any acts or omissions of any other occupant or visitor of the Leased
Property, or from any other cause beyond Landlord's control.
<PAGE> 30
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the Leased
Property exclusively for the Facility Uses and for all lawful and licensed
ancillary uses, and for no other purpose without the prior written consent of
the Landlord. Tenant shall obtain and maintain (or cause to be obtained and
maintained) all approvals, licenses, and consents needed to use and operate the
Leased Property as herein permitted. Tenant shall deliver to Landlord complete
copies of surveys, examinations, certification and licensure inspections,
compliance certificates, and other similar reports issued to Tenant by any
governmental agency within 10 days after Tenant's receipt of each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that [i] Tenant
and its agents have had an opportunity to inspect the Leased Property; [ii]
Tenant has found the Leased Property fit for Tenant's use; [iii] Landlord will
deliver the Leased Property to Tenant in "as-is" condition; [iv] Landlord is not
obligated to make any improvements or repairs to the Leased Property; and [v]
the roof, walls, foundation, heating, ventilating, air conditioning, telephone,
sewer, electrical, mechanical, elevator, utility, plumbing, and other portions
of the Leased Property are in good working order. Tenant waives any claim or
action against Landlord with respect to the condition of the Leased Property.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during the
Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the Board of Health, or other city,
state or federal authorities, free of all cost to Landlord; not permit any acts
to be done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof.
ARTICLE 7: REPAIRS AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace the Leased
Property, including without limitation, all structural and nonstructural repairs
and replacements to the roof, foundations, exterior walls, parking areas,
sidewalks, water, sewer, and gas connections, pipes, and mains. Tenant shall
pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall
<PAGE> 31
implement all reasonable suggestions of the Landlord as to the maintenance and
replacement of the Leased Property.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to the Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant's use, changes in the law,
ordinances, or governmental regulations, defects existing as of the date of this
Lease, or any other cause whatever. All such additions, changes, improvements or
alterations shall be deemed to be Permitted Alterations and shall comply with
all laws requiring such alterations and with the provisions of Section 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord's interest in the Leased Property against liens. Subject to Landlord
making Lease Advances according to the terms of the Lease Documents, Tenant
hereby agrees to defend, indemnify, and hold Landlord harmless from and against
any mechanic's liens against the Leased Property by reason of work, labor,
services or materials supplied or claimed to have been supplied on or to the
Leased Property. Subject to Tenant's right to contest such lien pursuant to
Section 3.7 of this Lease, Tenant shall remove, bond-off, or otherwise obtain
the release of any mechanic's lien filed against the Leased Property within 10
days after the filing thereof. Tenant shall pay all expenses in connection
therewith, including without limitation, damages, interest, court costs and
reasonable attorneys' fees.
7.4 Replacements of Fixtures and Personal Property. Tenant shall not
remove Fixtures and Personal Property from the Leased Property except to replace
the Fixtures and Personal Property by other similar items of equal quality and
value. Items being replaced by Tenant may be removed and shall become the
property of Tenant and items replacing the same shall be and remain the property
of Landlord. Tenant shall execute, upon written request from Landlord, any and
all documents necessary to evidence Landlord's ownership of the Personal
Property and replacements therefor. Tenant may finance replacements for the
Fixtures and Personal Property by equipment lease or by a security agreement and
financing statement if [i] Landlord has consented to the terms and conditions of
the equipment lease or security agreement; and [ii] for Fixtures and Personal
Property [a] having a cost in excess of $75,000.00 or [b] constituting any part
of the Start-Up Property, the equipment lessor or lender has entered into a
nondisturbance agreement with Landlord upon terms and conditions reasonably
acceptable to Landlord, including without limitation, the following: [a]
Landlord shall have the right (but not the obligation) to assume such security
agreement or equipment lease upon the occurrence of an Event of Default under
this Lease; [b] the equipment lessor or lender shall notify Landlord of any
default by Tenant under the equipment lease or security agreement and give
Landlord a reasonable opportunity to cure such default; and [c] Landlord shall
have the right to assign its rights under the equipment lease, security
agreement, or nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in
<PAGE> 32
reviewing and approving the equipment lease, security agreement, and
nondisturbance agreement, including without limitation, reasonable attorneys'
fees and costs.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or
any other monetary obligation payable by Tenant under this Lease (including the
Option Price), within 10 days after such payment is due.
(b) Landlord gives Tenant three or more notices of
non-payment of Rent (after expiration of the 10 day grace period) in any Lease
Year.
(c) Tenant or Guarantor (where applicable) fails to comply
with any covenant set forth in Article 14, Section 15.6, Section 15.7 or Article
20 of this Lease.
(d) Tenant fails to observe and perform any other covenant,
condition or agreement under this Lease to be performed by Tenant and [i] such
failure continues for a period of 30 days after written notice thereof is given
to Tenant by Landlord; or [ii] if, by reason of the nature of such default, the
same cannot be remedied within said 30 days, Tenant fails to proceed with
diligence reasonably satisfactory to Landlord after receipt of the notice to
cure the same or, in any event, fails to cure such default within 75 days after
receipt of the notice. The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection of
Section 8.1.
(e) Tenant abandons or vacates the Leased Property or any
material part thereof or ceases to do business or ceases to exist for any reason
for any five or more days.
(f) [i] The filing by Tenant of a petition under 11 U.S.C. or
the commencement of a bankruptcy or similar proceeding by Tenant; [ii] the
failure by Tenant within 60 days to dismiss an involuntary bankruptcy petition
or other commencement of a bankruptcy, reorganization or similar proceeding
against Tenant, or to lift or stay any execution, garnishment or attachment of
such consequence as will impair its ability to carry on its operation at the
Leased Property; [iii] the entry of an order for relief under 11 U.S.C. in
respect of Tenant; [iv] any assignment by Tenant for the benefit of its
creditors; [v] the entry by Tenant into an agreement of composition with its
creditors; [vi] the approval by a court of competent jurisdiction of a petition
applicable to Tenant in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
[vii] appointment by final order, judgment, or decree of a court of competent
jurisdiction of a receiver of a whole or any substantial part of the properties
of Tenant (provided such receiver shall not have been removed or discharged
within 60 days of the date of his qualification).
<PAGE> 33
(g) [i] Any receiver, administrator, custodian or other
person takes possession or control of any of the Leased Property and continues
in possession for 60 days; [ii] any writ against any of the Leased Property is
not released within 60 days; [iii] any final nonappealable judgment is rendered
or proceedings are instituted against the Leased Property or Tenant which affect
the Leased Property or any part thereof, which is not dismissed for 60 days
(except as otherwise provided in this Section); [iv] all or a substantial part
of the assets of Tenant or Guarantor are attached, seized, subjected to a writ
or distress warrant, or are levied upon, or come into the possession of any
receiver, trustee, custodian, or assignee for the benefit of creditors; [v]
Tenant or Guarantor is enjoined, restrained, or in any way prevented by court
order, or any proceeding is filed or commenced seeking to enjoin, restrain or in
any way prevent Tenant from conducting all or a substantial part of its business
or affairs; or [vi] except as otherwise permitted hereunder, a final notice of
lien, levy or assessment is filed of record with respect to all or any part of
the Leased Property or any property of Tenant located at the Leased Property and
is not dismissed, discharged, or bonded-off within 30 days.
(h) Any representation or warranty made by Tenant or
Guarantor in this Lease or any other document executed in connection with this
Lease, any guaranty of or other security for this Lease, or any report,
certificate, application, financial statement or other instrument furnished by
Tenant or Guarantor pursuant hereto or thereto shall prove to be false,
misleading or incorrect in any material respect as of the date made.
(i) Tenant, any Affiliate, Guarantor, or any Guarantor
Affiliate defaults on any indebtedness or obligation to Landlord or any Landlord
Affiliate or any agreement with Landlord or any Landlord Affiliate, including,
without limitation, any lease with Landlord or any Landlord Affiliate, the
Working Capital Documents, and the Equity Loan Documents, or Tenant or any
Guarantor defaults on any Material Obligation, and any applicable grace or cure
period with respect to default under such indebtedness or obligation expires
without such default having been cured. This provision applies to all such
indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time. Notwithstanding the foregoing, until
Guarantor closes the Guarantor Option, an Event of Default shall not arise as a
result of a default by Tenant, any Affiliate, Guarantor, or any Guarantor
Affiliate under other leases with Landlord or any Landlord Affiliate unless such
lease is a Phase Lease.
(j) Except pursuant to the Guarantor Option, the occurrence
of any change in Tenant's leasehold interest in the Leased Property, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.
(k) Guarantor dissolves, terminates, files a petition in
bankruptcy, or is adjudicated insolvent under 11 U.S.C. or any other insolvency
law (provided, however, in the case of an involuntary bankruptcy petition or
other commencement of bankruptcy, reorganization or similar processing against
Guarantor, Guarantor shall have 60 days to dismiss such action), or fails to
comply with any covenant or requirement of such guarantor set forth in this
Lease or in the guaranty of such guarantor.
<PAGE> 34
(l) The license for the Facility or any other Government
Authorization, is canceled, suspended or otherwise invalidated, notice of
impending revocation proceedings is received and Tenant fails to diligently
contest such proceeding, or any reduction occurs in the number of licensed beds
or units at the Facility in excess of 5%.
(m) The occurrence of an Event of Default (after expiration
of any applicable grace or cure period) under the Construction Agreement.
8.2 Remedies. Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may re-enter and take possession of the Leased
Property without terminating the Lease, and lease the Leased Property for the
account of Tenant, holding Tenant liable for all costs of the Landlord in
reletting the Leased Property and for the difference in the amount received by
such reletting and the amounts payable by Tenant under the Lease.
(b) Landlord may terminate this Lease, exclude Tenant from
possession of the Leased Property and use efforts to lease the Leased Property
to others, holding Tenant liable for the difference in the amounts received from
such reletting and the amounts payable by Tenant under the Lease.
(c) Landlord may re-enter the Leased Property and have,
repossess and enjoy the Leased Property as if the Lease had not been made, and
in such event, Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of such
repossession.
(d) Landlord may have access to and inspect, examine and make
copies of the books and records and any and all accounts, data and income tax
and other returns of Tenant insofar as they pertain to the Leased Property.
(e) If the Event of Default occurs during the Initial Term or
any Renewal Term, Landlord may accelerate all of the unpaid Rent hereunder for
the unexpired Initial Term or Renewal Term, as applicable, so that the aggregate
Rent for such unexpired period becomes immediately due and payable, subject to
Landlord's obligations under law to leave Tenant in possession of the Leased
Property.
(f) Landlord may take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts payable
under the Lease then due and thereafter to become due, or to enforce performance
and observance of any obligations, agreements or covenants of Tenant under this
Lease.
(g) With respect to the Collateral and Landlord's security
interest therein, Landlord may exercise all of its rights as secured party under
Article 9 of the Uniform Commercial Code as adopted in the State. Landlord may
sell the Collateral by public or private sale upon 10 days notice to Tenant.
Tenant agrees that a commercially reasonable manner of
<PAGE> 35
disposition of the Collateral shall include, without limitation and at the
option of Landlord, a sale of the Collateral, in whole or in part, concurrently
with the sale of the Leased Property.
(h) Landlord may obtain control over and collect the
Receivables and apply the proceeds of the collections to satisfaction of the
Secured Obligations unless prohibited by law. Tenant and Manager appoint
Landlord or its designee as attorney for Tenant and Manager with powers [i] to
receive, to endorse, to sign and/or to deliver, in Tenant's name or Landlord's
name, any and all checks, drafts, and other instruments for the payment of money
relating to the Receivables, and to waive demand, presentment, notice of
dishonor, protest, and any other notice with respect to any such instrument;
[ii] to sign Tenant's name or Manager's name on any invoice or bill of lading
relating to any Receivable, drafts against account debtors, assignments and
verifications of Receivables, and notices to account debtors; [iii] to send
verifications of Receivables to any account debtor; and [iv] to do all other
acts and things necessary to carry out this Lease. Except for willful acts or
omissions, Landlord shall not be liable for any omissions, commissions, errors
of judgment, or mistakes in fact or law made in the exercise of any such powers.
At Landlord's option, Tenant and Manager shall [i] provide Landlord a full
accounting of all amounts received on account of Receivables with such frequency
and in such form as Landlord may require, either with or without applying all
collections on Receivables in payment of the Secured Obligations or [ii] deliver
to Landlord on the day of receipt all such collections in the form received and
duly endorsed by Tenant or Manager. At Landlord's request, Tenant or Manager
shall institute any action or enter into any settlement determined by Landlord
to be necessary to obtain recovery or redress from any account debtor in default
of Receivables. Landlord may give notice of its security interest in the
Receivables to any or all account debtors with instructions to make all payments
on Receivables directly to Landlord, thereby terminating Tenant's and Manager's
authority to collect Receivables. After terminating Tenant's and Manager's
authority to enforce or collect Receivables, Landlord shall have the right to
take possession of any or all Receivables and records thereof and is hereby
authorized to do so, and only Landlord shall have the right to collect and
enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's and Manager's cost and expense, but on behalf of Landlord and for
Landlord's account, Tenant or Manager shall collect or otherwise enforce all
amounts unpaid on Receivables and hold all such collections in trust for
Landlord, but Tenant and Manager may commingle such collections with Tenant's or
Manager's own funds, until Tenant's or Manager's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Landlord does not assume any of Tenant's or
Manager's obligations under any Receivable, and Landlord shall not be
responsible in any way for the performance of any of the terms and conditions
thereof by Tenant or Manager.
(i) Without waiving any prior or subsequent Event of Default,
Landlord may waive any Event of Default or, with or without waiving any Event of
Default, remedy any default.
(j) Landlord may terminate its obligation to disburse Lease
Advances.
(k) Landlord may enter and take possession of the Land and
Facility without terminating the Lease and complete construction and renovation
of the Improvements (or
<PAGE> 36
any part thereof) and perform the obligations of Tenant or Developer under the
Lease Documents. Without limiting the generality of the foregoing and for the
purposes aforesaid, Tenant hereby appoints Landlord its lawful attorney-in-fact
with full power to do any of the following: [i] complete construction,
renovation and equipping of the Improvements in the name of Tenant; [ii] use
unadvanced funds remaining under the Maximum Lease Amount, or funds that may be
reserved, escrowed, or set aside for any purposes hereunder at any time, or to
advance funds in excess of the Maximum Lease Amount, to complete the
Improvements; [iii] make changes in the plans and specifications that shall be
necessary or desirable to complete the Improvements in substantially the manner
contemplated by the plans and specifications; [iv] retain or employ new general
contractors, subcontractors, architects, engineers, and inspectors as shall be
required for said purposes; [v] pay, settle, or compromise all existing bills
and claims, which may be liens or security interests, or to avoid such bills and
claims becoming liens against the Facility or security interest against fixtures
or equipment, or as may be necessary or desirable for the completion of the
construction and equipping of the Improvements or for the clearance of title;
[vi] execute all applications and certificates, in the name of Tenant, that may
be required in connection with any construction; [vii] do any and every act that
Tenant might do in its own behalf, to prosecute and defend all actions or
proceedings in connection with the Improvements; and [viii] to execute, deliver
and file all applications and other documents and take any and all actions
necessary to transfer the operations of the Facility to Landlord or Landlord's
designee. This power of attorney is a power coupled with an interest and cannot
be revoked.
(l) In the event that the undisbursed proceeds of the Maximum
Lease Amount are not sufficient to pay all unpaid items set forth on the Project
Budget (after adjustment for any permitted change orders), and Architect
certifies to Landlord and Developer that the Maximum Guarantied Amount (together
with the Maximum Lease Amount remaining to be advanced) will not be sufficient
to complete the Facility ("Architect's Certification"), Landlord shall have the
right to require Developer and Guarantor to pay to Landlord an amount equal to
the lesser of [i] the actual loss suffered by Landlord as a result of a failure
by Developer to complete the Facility for an amount equal to or less than the
Maximum Guarantied Amount (such loss to be the difference between [a] the Lease
Advances made as of the date of the Architect's Certification and the costs
incurred by Landlord in connection with the Facility, and [b] the fair market
value of the incomplete Facility at the time of the Architect's Certification as
determined by a MAI appraiser acceptable to Landlord and Guarantor), and [ii]
the Maximum Guarantied Amount, in which case Developer, Tenant and Guarantor
shall be dispossessed of the Facility, all rights of Developer, Tenant and any
other party (except Landlord) hereunder shall cease and terminate and all rights
of Tenant, Manager and Guarantor under the other Lease Documents shall cease and
terminate; provided, however, in such event, Guarantor shall nonetheless have
the right (exercised by written notice to Landlord given within no more than 7
days after Landlord has given notice to Guarantor of its election of remedies
provided in this subsection) to purchase the Facility in its then current
condition for an amount equal to all Lease Advances made by Landlord. In the
event Guarantor elects to so purchase the Facility, the closing shall occur on
that date which is 30 days after Guarantor's notice of its election to purchase,
and the transfer shall be accomplished in the manner provided in Article 13 of
the Lease.
<PAGE> 37
8.3 Right of Set-Off. Landlord may, and is hereby authorized by Tenant
to, at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant), set-off and apply any and all sums
held by Landlord, any indebtedness of Landlord to Tenant, and any claims by
Tenant against Landlord, against any obligations of Tenant hereunder and against
any claims by Landlord against Tenant, whether or not such obligations or claims
of Tenant are matured and whether or not Landlord has exercised any other
remedies hereunder. The rights of Landlord under this Section are in addition to
any other rights and remedies Landlord may have against Tenant.
8.4 Performance of Tenant's or Developer's Covenants. Landlord may
perform any obligation of Tenant or Developer which Tenant or Developer has
failed to perform within 5 days after Landlord has sent a written notice to
Tenant or Developer informing it of its specific failure. Tenant or Developer
shall reimburse Landlord on demand, as Additional Rent, for any expenditures
thus incurred by Landlord and shall pay interest thereon at the Overdue Rate (as
defined in Section 8.6).
8.5 Late Payment Charge. Tenant acknowledges that any default in the
payment of any installment of Rent payable hereunder will result in loss and
additional expense to Landlord in servicing any indebtedness of Landlord secured
by the Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within 10 days after the due date,
Tenant shall pay a late charge of 5% of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord. The 10 day grace period set forth in this Section shall not
extend the time for payment of Rent or the period for curing any default or
constitute a waiver of such default.
8.6 Interest. In addition to the late payment charge, any payment not
made by Tenant within 10 days after the due date shall thereafter bear interest
at the rate (the "Overdue Rate") of the greater of [i] 18.5% per annum; or [ii]
2.5% per annum above the Lease Rate then in effect; provided, however, that at
no time will Tenant be required to pay interest at a rate higher than the
maximum legal rate and, provided further, that if a court of competent
jurisdiction determines that any other charges payable under this Lease are
deemed to be interest, the Overdue Rate shall be adjusted to ensure that the
aggregate interest payable under this Lease does not accrue at a rate in excess
of the maximum legal rate. Tenant shall not be required to pay interest upon any
late payment fees assessed pursuant to Section 8.5.
8.7 Litigation; Attorneys' Fees. Within 5 days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Lease, whether or not an Event of Default has
actually occurred or has been declared and thereafter cured, including without
limitation, [i] the fees, expenses, and costs of any litigation,
<PAGE> 38
receivership, administrative, bankruptcy, insolvency or other similar
proceeding; [ii] reasonable attorney, paralegal, consulting and witness fees and
disbursements, whether in house counsel or outside counsel; and [iii] the
expenses, including without limitation, lodging, meals, and transportation, of
Landlord and its employees, agents, attorneys, and witnesses in preparing for
litigation, administrative, bankruptcy, insolvency or other similar proceedings
and attendance at hearings, depositions, and trials in connection therewith. All
such costs, charges and fees payable by Tenant shall be deemed to be Additional
Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
performance of the Secured Obligations, Tenant and Developer hereby assign to
Landlord all their respective rights, titles, and interests in and to all monies
escrowed with Landlord under this Lease and all deposits with utility companies,
taxing authorities and insurance companies; provided, however, that Landlord
shall not exercise its rights hereunder until an Event of Default has occurred.
Any payments received by Landlord under any provisions of this Lease during the
existence or continuance of an Event of Default shall be applied to the Secured
Obligations in the order which Landlord may determine.
8.9 Remedies Cumulative. Except as otherwise provided herein, the
remedies of Landlord herein are cumulative to and not in lieu of any other
remedies available to Landlord at law or in equity, and the use of any one
remedy shall not be taken to exclude or waive the right to use any other remedy.
8.10 Limitation of Remedies During Construction Term. Should an Event
of Default occur during the Construction Term, Landlord's remedies against
Tenant, Guarantor and Developer shall be limited to [i] those remedies described
in subsections (a), (b), (c), (f), (g), (h), (k), and (l) of Section 8.2, but in
no event shall the maximum amount for which Tenant, Developer and Guarantor may
be liable exceed the Maximum Guarantied Amount and [ii] subsection (d), (i), and
(j) of Section 8.2.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be destroyed, in
whole or in part, or damaged by fire, flood, windstorm or other casualty (a
"Casualty"), Tenant shall give written notice thereof to the Landlord within one
business day after the occurrence of the Casualty. Within 15 days after the
occurrence of the Casualty or as soon thereafter as such information is
reasonably available to Tenant, Tenant shall provide the following information
to Landlord: [i] the date of the Casualty; [ii] the nature of the Casualty;
[iii] a description of the damage or destruction caused by the Casualty
including the type of Leased Property damaged and the area of the Improvements
damaged; [iv] a preliminary estimate of the cost to repair, rebuild, restore or
replace the Leased Property; [v] a preliminary estimate of the schedule to
complete the repair, rebuilding, restoration or replacement of the Leased
Property; [vi] a description of the anticipated property insurance claim
including the name of the insurer, the insurance coverage limits, the deductible
amount, the expected settlement amount, and the expected settlement date; and
[vii] a description of the business interruption claim including the name of the
insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date. Within five
<PAGE> 39
days after request from Landlord, Tenant will provide Landlord with copies of
all correspondence to the insurer and any other information reasonably requested
by Landlord.
9.2 Substantial Destruction.
9.2.1 If the Improvements are substantially destroyed at any time other
than during the final 18 months of the Initial Term or any Renewal Term, Tenant
shall promptly rebuild and restore the Leased Property in accordance with
Section 9.4 and Landlord shall make the insurance proceeds available to Tenant
for such restoration. The term "substantially destroyed" means any casualty
resulting in the loss of use of 50% or more of the licensed beds at any one
Facility.
9.2.2 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term, Landlord may elect to
terminate this Lease or terminate this Lease and all Phase Leases, at Landlord's
option, and retain the insurance proceeds unless Tenant exercises its option to
renew as set forth in Section 9.2.3 or exercises its option to purchase as set
forth in Section 9.2.4. If Landlord elects to terminate, Landlord shall give
notice ("Termination Notice") of its election to terminate this Lease (or this
Lease and all Phase Leases, if elected by Landlord) within 30 days after receipt
of Tenant's notice of the damage. If Tenant does not exercise its option to
renew under Section 9.2.3 or its option to purchase under Section 9.2.4 within
15 days after delivery of the Termination Notice, this Lease (or this Lease and
all Phase Leases, if elected by Landlord) shall terminate on the 15th day after
delivery of the Termination Notice. If this Lease (or this Lease and all Phase
Leases, if elected by Landlord) is so terminated, Tenant shall be liable to
Landlord for all Rent and all other obligations accrued under this Lease through
the effective date of termination and each Phase Tenant shall be liable to
Landlord for all Rent and all other obligations accrued under its respective
Phase Lease through the effective date of termination.
9.2.3 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or the first or second Renewal Term and Landlord
gives the Termination Notice, Tenant shall have the option to renew this Lease.
Tenant shall give Landlord irrevocable notice of Tenant's election to renew, and
each Phase Tenant shall give irrevocable notice of renewal, within 15 days after
delivery of the Termination Notice. If Tenant and each Phase Tenant elect to
renew, the Renewal Term will be in effect for the balance of the then current
Term plus a 5 year period. The Renewal Term will commence on the third day
following Landlord's receipt of Tenant's and each Phase Tenant's notice of
renewal. All other terms of this Lease for the Renewal Term shall be in
accordance with Article 12. The Leased Property will be restored by Tenant in
accordance with the provisions of this Article 9 regarding partial destruction.
9.2.4 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term and Landlord gives the
Termination Notice, Tenant shall have the option to purchase the Leased
Property. Tenant shall give Landlord notice of Tenant's election to purchase,
and if required by Landlord, each Phase Tenant shall give notice of its election
to purchase its respective Phase Facility, within 15 days after delivery of the
Termination Notice. If Tenant and each Phase Tenant elect to purchase their
respective Leased Property, the Option Price will be determined in accordance
with Section 13.2 and the Fair Market Value will be determined in accordance
with Section 13.3. For purposes of determining the Fair Market Value, the Leased
Property
<PAGE> 40
will be valued as if it had been restored to be equal in value to the Leased
Property existing immediately prior to the occurrence of the damage. All other
terms of the option to purchase shall be in accordance with Article 13. Landlord
shall hold the insurance proceeds until the closing of the purchase of the
Leased Property and at closing shall deliver the proceeds to Tenant.
9.3 Partial Destruction. If the Leased Property is not substantially
destroyed, then Tenant shall comply with the provisions of Section 9.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Tenant shall promptly repair, rebuild, or restore the
Leased Property, at Tenant's expense, so as to make the Leased Property at least
equal in value to the Leased Property existing immediately prior to such
occurrence and as nearly similar to it in character as is practicable and
reasonable. Before beginning such repairs or rebuilding, or letting any
contracts in connection with such repairs or rebuilding, Tenant will submit for
Landlord's approval, which approval Landlord will not unreasonably withhold or
delay, plans and specifications meeting the requirements of Section 16.2 for
such repairs or rebuilding. Promptly after receiving Landlord's approval of the
plans and specifications and receiving the proceeds of insurance, Tenant will
begin such repairs or rebuilding and will prosecute the repairs and rebuilding
to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including attorneys' fees. Payments will be made against properly certified
vouchers of a competent architect in charge of the work and approved by
Landlord. Prior to commencing the repairing or rebuilding, Tenant shall deliver
to Landlord for Landlord's approval a schedule setting forth the estimated
monthly draws for such work. Landlord will contribute to such payments out of
the insurance proceeds an amount equal to the proportion that the total net
amount received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on account of
such work. Landlord may, however, withhold 10% from each payment until the work
is completed and proof has been furnished to Landlord that no lien or liability
has attached or will attach to the Leased Property or to Landlord in connection
with such repairing or rebuilding. Upon the completion of rebuilding and the
furnishing of such proof, the balance of the net proceeds of such insurance
payable to Tenant on account of such repairing or rebuilding will be paid to
Tenant. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the Leased Property is reoccupied for any
purpose. Tenant shall complete such repairs or rebuilding free and clear of
mechanic's or other liens, and in accordance with the building codes and all
applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating organization, or
similar body. Any remaining proceeds of insurance after such restoration will be
Tenant's property.
9.5 Insufficient Proceeds. If in the case of a casualty occurring
during the Initial Term or any Renewal Term, the proceeds of any insurance
settlement are not sufficient to pay the costs of such repair, rebuilding or
restoration in full, Tenant shall deposit with Landlord at Landlord's option,
and within 10 days of Landlord's request, an amount sufficient in Landlord's
<PAGE> 41
reasonable judgment to complete such repair, rebuilding or restoration. Tenant
shall not, by reason of the deposit or payment, be entitled to any reimbursement
from Landlord or diminution in or postponement of the payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law or
equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.7 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, omissions, or such other respect. Tenant's obligations to supply
insurance, according to Article 4, will be applicable to any repairs or
rebuilding under this Section.
9.8 Landlord's Costs. Tenant shall, within 30 days after receipt of an
invoice from Landlord, pay the costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord's attorneys in connection
therewith.
9.9 No Rent Abatement. Rent will not abate pending the repairs or
rebuilding of the Leased Property, but shall be offset against any rental
insurance proceeds received by Landlord.
<PAGE> 42
ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, whether such damages shall
be awarded as compensation for diminution in value of the leasehold or the fee
of the Leased Property. If this Lease is terminated with respect to a Facility
subject to a taking as described in this section, Landlord may, at its option,
terminate each Phase Lease.
10.1.1 If the entire Leased Property is taken during the final 18
months of the Initial Term or any Renewal Term and Landlord elects to terminate
each Phase Lease, Tenant shall have the option to purchase each Phase Facility
(but not less than all Phase Facilities). Tenant shall give Landlord notice of
Tenant's election to purchase within 15 days after delivery of the notice of
Landlord's intent to terminate. If Tenant elects to purchase each Phase
Facility, the Option Price will be determined in accordance with Section 13.2
and the Fair Market Value will be determined in accordance with Section 13.3.
All other terms of the option to purchase shall be in accordance with Article
13.
10.2 Partial Taking. If, after a Taking, so much of the Leased Property
remains that the Leased Property can be used for substantially the same purposes
for which it was used immediately before the Taking, then [i] this Lease will
end as to the part taken on the earlier of the vesting of title to the Leased
Property in the condemning authority or the taking of possession of the Leased
Property by the condemning authority; [ii] at its cost, Tenant shall restore so
much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Leased Property), or Tenant's actual out-of-pocket
costs of restoring the Leased Property; and [iv] Landlord shall be entitled to
the balance of the net award. The restoration shall be completed in accordance
with Sections 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed to
apply to condemnation instead of casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in
this Lease or at law or equity to the contrary, none of the condemnation award
paid to Landlord shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 10. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Condemnation.
<PAGE> 43
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall install, place, and use on the
Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property". Those items of Tenant's Property
that are acquired as part of the initial equipping of the Facility shall be
called the "Start-Up Property".
11.2 Requirements for Tenant's Property. Tenant shall comply with all
of the following requirements in connection with Tenant's Property:
(a) Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense, keep
Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, earthquake (if Leased Property is in
earthquake zone 1 or 2), and other physical loss perils commonly covered by fire
and extended coverage, boiler and machinery, and difference in conditions
insurance in an amount not less than 90% of the then full replacement cost
thereof. Tenant shall use the proceeds from any such policy for the repair and
replacement of Tenant's Property. The insurance shall meet the requirements of
Section 4.3.
(c) Tenant shall pay all taxes applicable to Tenant's
Property.
(d) If Tenant's Property is damaged or destroyed by fire or
any other cause, Tenant shall promptly repair or replace Tenant's Property
unless Landlord elects to terminate this Lease pursuant to Section 9.2.2.
(e) Unless an Event of Default or any event which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default
has occurred, Tenant may remove Tenant's Property from the Leased Property from
time to time provided that [i] the items removed are not required to operate the
Leased Property for the Facility Uses (unless such items are being replaced by
Tenant); and [ii] Tenant repairs any damage to the Leased Property resulting
from the removal of Tenant's Property.
(f) Tenant shall not, without the prior written consent of
Landlord or as otherwise provided in this Lease, remove any Tenant's Property or
Leased Property. Tenant shall, at Landlord's option, remove Tenant's Property
upon the termination or expiration of this Lease and shall repair any damage to
the Leased Property resulting from the removal of Tenant's Property. If Tenant
fails to remove Tenant's Property within 30 days after request by Landlord, then
Tenant shall be deemed to have abandoned Tenant's Property, Tenant's Property
shall become the property of Landlord, and Landlord may remove, store and
dispose of Tenant's Property. In
<PAGE> 44
such event, Tenant shall have no claim or right against Landlord for such
property or the value thereof regardless of the disposition thereof by Landlord.
Tenant shall pay Landlord, upon demand, all expenses incurred by Landlord in
removing, storing, and disposing of Tenant's Property and repairing any damage
caused by such removal. Tenant's obligations hereunder shall survive the
termination or expiration of this Lease.
(g) Tenant shall perform its obligations under any equipment
lease or security agreement for Tenant's Property. For equipment loans or leases
for equipment having an original cost in excess of $75,000.00, and for equipment
constituting any part of the Start-Up Property, Tenant shall cause such
equipment lessor or lender to enter into a nondisturbance agreement with
Landlord upon terms and conditions acceptable to Landlord, including without
limitation, the following: [i] Landlord shall have the right (but not the
obligation) to assume such equipment lease or security agreement upon the
occurrence of an Event of Default by Tenant hereunder; [ii] such equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable opportunity
to cure such default; and [iii] Landlord shall have the right to assign its
interest in the equipment lease or security agreement and nondisturbance
agreement. Tenant shall, within 30 days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement and nondisturbance
agreement, including without limitation, reasonable attorneys' fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal Option")
this Lease for three 5-year renewal terms (each a "Renewal Term"). Tenant can
exercise the Renewal Option only upon satisfaction of the following conditions:
(a) There shall be no uncured Event of Default, or any event
which with the passage of time or giving of notice would constitute an Event of
Default, at the time Tenant exercises its Renewal Option nor on the date the
Renewal Term is to commence.
(b) Tenant shall give Landlord irrevocable written notice of
renewal no later than the date which is [i] 90 days prior to the expiration date
of the then current Term; or [ii] 15 days after Landlord's delivery of the
Termination Notice as set forth in Section 9.2.3.
(c) Each Phase Tenant shall concurrently give irrevocable
notice of renewal for each Affiliate Lease.
(d) Guarantor shall have closed the Guarantor Option.
12.2 Effect of Renewal. The following terms and conditions will be
applicable if Tenant renews the Lease:
<PAGE> 45
(a) Effective Date. Except as otherwise provided in Section
9.2.3, the effective date of any Renewal Term will be the first day after the
expiration date of the then current Term. The first day of each Renewal Term is
also referred to as the Renewal Date.
(b) Lease Amount. Effective as of the Renewal Date, a single
Lease Amount will be computed by summing all Lease Advance Amounts (including
the Acquisition Amount).
(c) Lease Rate. Effective as of the Renewal Date, a single
Lease Rate will be computed equal to the Renewal Rate. The Renewal Rate for each
Renewal Term shall be the greater of [i] the sum of [a] the Lease Rate in effect
during the then current Lease Year plus [b] the Increaser Rate, or [ii] the fair
market rental lease rate for the Facility as determined according to the
provisions of this section. Landlord and Tenant shall attempt to determine the
fair market rental lease rate for the Facility by mutual agreement 180 days
prior to the expiration date for the then current Term. If the parties do not
agree on such lease rate within a 15 day period, appraisers shall be chosen as
provided in Section 13.3.2 to determine the fair market rental lease rate. The
appraisers shall be instructed to appraise the fair market value lease rate as a
financing lease rate for a health care facility of the same type as the Facility
and shall take into account the lease rate then being charged by Landlord to
tenants of comparable creditworthiness for comparable facilities. The appraised
rates submitted by the three appraisers shall be ranked from highest to lowest,
the rate (highest or lowest) which is furthest from the middle rate shall be
discarded, and the remaining two appraised rates shall be averaged to arrive at
the fair market rental lease rate.
(d) Base Rent. Effective as of the Renewal Date, the Base Rent
will be changed to equal 1/12th of the product of [i] the Lease Amount on the
Renewal Date times [ii] the new Lease Rate equal to the Renewal Rate.
(e) Other Terms and Conditions. Except for the modifications
set forth in this Section 12.2, all other terms and conditions of the Lease will
remain the same for the Renewal Term. The Lease Rate and Base Rent will increase
annually as set forth in Section 2.5.
12.3 Effect of Non-Renewal or Expiration of Lease. The following
terms and conditions will be applicable if Tenant does not renew this Lease or
exercise its Option to Purchase by the expiration date for the then current
Term:
(a) Extension of Current Term. The current Term will be
extended (the "Extended Term") for 120 days; provided, however, that the
Extended Term will expire on such earlier date of the closing of the sale
pursuant to the Option to Purchase.
(b) Lease Payments. During the Extended Term, Tenant shall
continue to make monthly payments of Rent (including Base Rent) based upon the
then existing Lease Rate.
<PAGE> 46
ARTICLE 13: OPTION TO PURCHASE
13.1 Option to Purchase. Landlord hereby grants to Tenant an option
to purchase ("Option to Purchase") all of the Leased Property (but not any part
thereof) in accordance with the terms and conditions of this Article 13. Tenant
may exercise its Option to Purchase only by giving an irrevocable notice of
Tenant's election to purchase the Leased Property ("Purchase Notice") in
accordance with the following:
(a) During the Initial Term or any Renewal Term, Tenant and
each Phase Tenant must give a Purchase Notice no earlier than the date which is
180 days, and no later than the date which is 90 days, prior to the expiration
date of the then current Term of this Lease and each Phase Lease.
(b) If the Improvements are substantially destroyed during the
final 18 months of the Initial Term or any Renewal Term, Tenant (and each Phase
Tenant if required by Landlord) must give a Purchase Notice within 15 days after
Landlord gives the Termination Notice pursuant to Section 9.2.4.
Tenant shall have no right to exercise the Option to Purchase other than in
accordance with subparagraph [a] or [b].
13.2 Option Price. The option price ("Option Price") will be an
amount equal to the greater of [i] the Lease Amount; or [ii] the Fair Market
Value. In addition to the Option Price, Tenant shall pay all closing costs and
expenses in connection with the transfer of the Leased Property to Tenant
including but not limited to the following: [a] real property conveyance or
transfer fees or deed stamps; [b] title search fees, title insurance commitment
fees, and title insurance premiums; [c] survey fees; [d] environmental
assessment fees; [e] recording fees; [f] attorneys' fees of Landlord's counsel;
[g] fees of any escrow agent; and [h] all amounts, costs, expenses, charges,
Additional Rent and other items payable by Tenant to Landlord including but not
limited to enforcement costs as set forth in Section 8.7.
13.3 Fair Market Value. The fair market value (the "Fair Market
Value") of the Leased Property shall be determined as follows.
13.3.1 The parties shall attempt to determine the Fair Market Value
by mutual agreement within 15 days after giving the Purchase Notice. However, if
the parties do not agree on the Fair Market Value within such 15 day period, the
following provisions shall apply.
13.3.2 Landlord and Tenant shall each give the other party notice of
the name of an acceptable appraiser 15 days after giving of the Purchase Notice.
The two appraisers will then select a third appraiser within an additional 5
days. Each appraiser must demonstrate to the reasonable satisfaction of both
Landlord and Tenant that it has significant experience in appraising properties
similar to the Leased Property. Within 5 days after designation, each appraiser
shall submit a resume to Landlord and Tenant setting forth such appraiser's
qualifications including education and experience with similar properties. A
notice of objections to the qualifications of any
<PAGE> 47
appraiser shall be given within 10 days after receipt of such resume. If a party
fails to timely object to the qualifications of an appraiser, then the appraiser
shall be conclusively deemed satisfactory. If a party gives a timely notice of
objection to the qualifications of an appraiser, then the disqualified appraiser
shall be replaced by an appraiser selected by the qualified appraisers or, if
all appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.
13.3.3 The Fair Market Value shall be determined by the appraisers
within 45 days after the selection of the appraisers as follows. Each of the
appraisers shall be instructed to prepare an appraisal of the Leased Property in
accordance with the following instructions:
The Leased Property is to be valued upon the three conventional
approaches to estimate value known as the Income, Sales Comparison
and Cost Approaches. Once the approaches are completed, the
appraiser correlates the individual approaches into a final value
conclusion.
The three approaches to estimate value are summarized as follows:
INCOME APPROACH: This valuation approach recognizes that the value
of the operating tangible and intangible asset can be represented by
the expected economic viability of the business giving returns on
and of the assets.
SALES COMPARISON APPROACH: This valuation approach is based upon the
principle of substitution. When a facility is replaceable in the
market, the market approach assumes that value tends to be set at
the price of acquiring an equally desirable substitute facility.
Since healthcare market conditions change and frequently are subject
to regulatory and financing environments, adjustments need to be
considered. These adjustments also consider the operating
differences such as services and demographics.
COST APPROACH: This valuation approach estimates the value of
the tangible assets only. Value is represented by the market
value of the land plus the depreciated reproduction cost of all
improvements and equipment.
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangibles and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle
<PAGE> 48
appraised value shall be discarded, and the remaining two appraised values shall
be averaged to arrive at the Fair Market Value.
13.3.4 In the event of any condemnation, similar taking or threat
thereof with respect to any part of the Leased Property or any insured or
partially insured casualty loss to any part of the Leased Property after Tenant
has exercised an Option to Purchase, but before settlement, the Fair Market
Value of the Leased Property shall be redetermined as provided in this
Section 13.3 to give effect to such condemnation, taking or loss.
13.3.5 Tenant shall pay, or reimburse Landlord for, all costs and
expenses in connection with the appraisals.
13.4 Closing. The purchase of the Leased Property by Tenant shall
close on a date agreed to by Landlord and Tenant which shall be not less than 60
days after Landlord's receipt of the Purchase Notice and not more than 75 days
after the Fair Market Value of the Leased Property has been determined. At the
closing, Tenant shall pay the Option Price and all closing costs in immediately
available funds and Landlord shall convey title to the Leased Property to Tenant
by a transferable and recordable special warranty deed and special warranty bill
of sale.
13.5 Failure to Close Option. If Tenant for any reason fails to
purchase the Leased Property after Tenant has given the Purchase Notice, then
Tenant shall pay Landlord all costs and expenses incurred by Landlord as a
result of the failure to close including costs of unwinding swap transactions or
other interest rate protection devices and preparing for the closing. Tenant
shall continue to be obligated as lessee hereunder for the remainder of the Term
(including the Extended Term as set forth in Section 12.3).
13.6 Failure to Exercise Option to Purchase and Renewal Option. If
Tenant for any reason does not exercise its Option to Purchase or Renewal Option
in accordance with the terms and conditions of this Lease before the expiration
of the then current Term, Tenant shall be deemed to have forfeited its
contribution and all proprietary and ownership interest in the Leased Property.
ARTICLE 14: NEGATIVE COVENANTS
Until the Secured Obligations shall have been performed in full,
Tenant and Guarantor covenant and agree that Tenant (and Guarantor where
applicable) shall not do any of the following without the prior written consent
of Landlord:
14.1 No Debt. Tenant shall not create, incur, assume, or permit to
exist any indebtedness other than [i] trade debt incurred in the ordinary course
of Tenant's business; [ii] indebtedness relating to the Letter of Credit; [iii]
indebtedness that is secured by any Permitted Lien; [iv] indebtedness to
Guarantor pursuant to the Working Capital Documents; and [v] indebtedness to
Landlord pursuant to the Equity Loan Documents.
<PAGE> 49
14.2 No Liens. Tenant shall not create, incur, or permit to exist
any lien, charge, encumbrance, easement or restriction upon the Leased Property
or any lien upon or pledge of any interest in Tenant, except for Permitted Liens
and liens granted pursuant to the Working Capital Documents and the Equity Loan
Documents.
14.3 No Guaranties. Tenant shall not create, incur, assume, or
permit to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business.
14.4 No Transfer. Except pursuant to the Guarantor Option, Tenant
shall not sell, lease, sublease, mortgage, convey, assign or otherwise transfer
any legal or equitable interest in the Leased Property or any part thereof,
except for transfers made in connection with any Permitted Lien without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.
14.5 No Dissolution. Except pursuant to the Guarantor Option,
Tenant, Manager or Guarantor shall not dissolve, liquidate, merge, consolidate
or terminate its existence or sell, assign, lease, or otherwise transfer
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired). Notwithstanding the
foregoing, Guarantor may merge with another entity provided that [i] Guarantor
is the surviving corporation; and [ii] following the merger, Guarantor can
satisfy all of the obligations of Guarantor under the Lease Documents, including
but not limited to the financial covenants in Section 15.7.
14.6 No Change in Management or Operation. No material change shall
occur in the management of Tenant or Manager or in the management or licensed
operation of the Facility. Balanced Care at Loyalsock, Inc. shall remain the
Manager of the Facility, and Balanced Care at Loyalsock, Inc. shall remain the
licensed operator of the Facility. Guarantor shall not make a change in its
President, Chief Operating Officer, or Chief Development Officer without giving
Landlord prior written notice (or in the case of death, written notice within a
reasonable time thereafter).
14.7 No Investments. Tenant shall not purchase or otherwise acquire,
hold, or invest in securities (whether capital stock or instruments evidencing
indebtedness) of or make loans or advances to any person, including, without
limitation, any Guarantor, any Guarantor Affiliate, any Affiliate, or any
shareholder, member or partner of Tenant, Guarantor, any Guarantor Affiliate, or
any Affiliate, except for cash balances temporarily invested in short-term or
money market securities.
14.8 Contracts. Tenant shall not execute or modify any material
contracts or agreements with respect to the Facility except for contracts and
modifications approved by Landlord. Contracts made in the ordinary course of
business and in an amount less than $250,000.00 shall not be considered
"material" for purposes of this paragraph.
14.9 Subordination of Payments to Affiliates. After the occurrence
of an Event of Default and until such Event of Default is cured, Tenant and
Guarantor shall not make any
<PAGE> 50
payments or distributions (including, without limitation, fees, principal,
interest, dividends, liquidating distributions, management fees, cash flow
distributions or lease payments) to Guarantor, Manager, any Affiliate, or any
shareholder, member or partner of Tenant, Guarantor, Manager, or any Affiliate.
Notwithstanding the foregoing, Guarantor shall be permitted to pay dividends to
shareholders and regularly scheduled salary and bonus payments (but no
extraordinary salary, bonuses, or other compensation).
14.10 Change of Location or Name. Tenant shall not change any of the
following: [i] the location of the principal place of business or chief
executive office of Tenant, or any office where any of Tenant's books and
records are maintained; or [ii] the name under which Tenant conducts any of its
business or operations.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform or cause to be
performed all of its obligations under this Lease, the Government
Authorizations, the Permitted Exceptions, and all Legal Requirements.
15.2 Proceedings to Enjoin or Prevent Construction. If any
proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use all reasonable
commercial efforts to bring about a favorable and speedy disposition of all such
proceedings and any other proceedings.
15.3 Documents and Information.
15.3.1 Furnish Documents. Tenant shall periodically during the term
of the Lease deliver to Landlord the Annual Financial Statements, Periodic
Financial Statements and other documents described on Exhibit C within the
specified time periods. With each delivery of Annual Financial Statements and
Periodic Financial Statements (other than the monthly Facility Financial
Statement) to Landlord, Tenant shall also deliver to Landlord a certificate
signed by the Chief Financial Officer, general partner or managing member (as
applicable) of Tenant, an Annual Facility Financial Report or Quarterly Facility
Financial Report, as applicable, and a Quarterly Facility Accounts Receivable
Aging Report all in the form of Exhibit D. In addition, Tenant shall deliver to
Landlord the Annual Facility Financial Report and a Quarterly Facility Accounts
Receivable Aging Report (based upon internal financial statements) within 60
days after the end of each fiscal year.
15.3.2 Furnish Information. Tenant shall [i] promptly supply
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter,
including reporting formats used by Landlord and electronic filing and transfer;
[ii] promptly notify Landlord in writing of any condition or event that
<PAGE> 51
constitutes a breach or event of default of any term, condition, warranty,
representation, or provisions of this Agreement or any other agreement, and of
any material adverse change in its financial condition; [iii] maintain a
standard and modern system of accounting; [iv] permit Landlord or any of its
agent or representatives to have access to and to examine all of its books and
records regarding the financial condition of the Facility at any time or times
hereafter during business hours and after reasonable oral or written notice; and
[v] permit Landlord to copy and make abstracts from any and all of said books
and records.
15.3.3 Further Assurances and Information. Tenant shall, on request
of Landlord from time to time, execute, deliver, and furnish documents as may be
necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or the Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may require from time to
time, including, without limitation, a current Tenant's Certificate and Facility
Financial Report in the form of Exhibit D. Upon Landlord's request, but not more
than once every three years, Tenant shall provide to Landlord, at Tenant's
expense, an appraisal prepared by an MAI appraiser setting forth the current
fair market value of the Leased Property.
15.3.4 Material Communications. Tenant shall transmit to Landlord,
within 5 business days after receipt thereof, any material communication
affecting a Facility, this Lease, the Legal Requirements or the Government
Authorizations, and Tenant will promptly respond to Landlord's inquiry with
respect to such information. Tenant shall promptly notify Landlord in writing
after Tenant has knowledge of any potential, threatened or existing litigation
or proceeding against, or investigation of, Tenant, Guarantor, or the Facility
that may affect the right to operate the Facility or Landlord's title to the
Facility or Tenant's interest therein.
15.3.5 Requirements for Financial Statements. Tenant shall meet the
following requirements in connection with the preparation of the financial
statements: [i] all audited financial statements shall be prepared in accordance
with general accepted accounting principles consistently applied; [ii] all
unaudited financial statements shall be prepared in a manner substantially
consistent with prior audited and unaudited financial statements submitted to
Landlord; [iii] all financial statements shall fairly present the financial
condition and performance for the relevant period in all material respects; [iv]
the financial statements shall include all notes to the financial statements and
a complete schedule of contingent liabilities and transactions with Affiliates
or Guarantor Affiliates, as applicable; and [v] the audited financial statements
shall contain an unqualified opinion.
15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.
<PAGE> 52
15.5 Broker's Commission. Tenant shall indemnify Landlord from
claims of brokers arising by the execution hereof or the consummation of the
transactions contemplated hereby and from expenses incurred by Landlord in
connection with any such claims (including attorneys' fees).
15.6 Existence and Change in Ownership. Tenant, Manager and
Guarantor shall maintain its existence throughout the term of this Agreement.
Except pursuant to the Guarantor Option, any change in the ownership of Tenant
or Manager, directly or indirectly, shall require Landlord's prior written
consent. Landlord's consent to a change in ownership of Tenant shall not be
unreasonably withheld.
15.7 Financial Covenants. The defined terms used in this section are
defined in Section 15.7.1. The method of calculating Net Worth and valuing
assets shall be consistent with the Financial Statements. The following
financial covenants shall be met throughout the term of this Lease:
15.7.1 Definitions.
(a) "Cash Flow" means the net income of Tenant as reflected on
the income statement of Tenant plus [i] the amount of the provision for
depreciation and amortization; plus [ii] the amount of the provision for
management fees; plus [iii] the amount of the provision for income taxes; plus
[iv] the amount of the provision for Rent payments and interest and lease
payments, if any; minus [v] an imputed management fee equal to 5% of revenues
(net of contractual allowances); and minus [vi] an imputed replacement reserve
of $250.00 per licensed bed at the Facility, per year.
(b) "Coverage Ratio" is the ratio of [i] Cash Flow for each
applicable period; to [ii] the Rent payments due pursuant to this Lease and all
other debt service and lease payments relating to the Leased Property for the
applicable period.
(c) "Net Worth" means an amount equal to the total
consolidated fair market value of the tangible assets of the person (excluding
good will and other intangible assets) minus the total consolidated liabilities
of such person.
15.7.2 Coverage Ratio. Tenant shall maintain a Coverage Ratio with
respect to the Facility of not less than 1.25 to 1.00, measured on a monthly
basis commencing on the date of the projected stabilized occupancy as set forth
in the Pro Forma Statement.
15.7.3 Net Worth. Guarantor shall maintain for each fiscal quarter a
Net Worth of at least $55,000,000.00 with cash and cash equivalents of at least
$5,000,000.00.
15.7.4 Current Ratio. Guarantor shall maintain for each fiscal
quarter a ratio of current assets to current liabilities of not less than 1.25
to 1.00.
<PAGE> 53
15.7.5 Debt to Equity Ratio. Guarantor shall maintain for each
fiscal quarter a ratio of total indebtedness to shareholders' equity of not more
than 2.50 to 1.00. The aggregate lease amount under all capitalized and
operating leases shall be included as indebtedness and all subordinated debt
shall be included as equity.
15.8 Transfer of License. If this Lease is terminated due to
expiration of the Term, pursuant to an Event of Default or for any reason other
than Tenant's purchase of the Leased Property, or if Tenant vacates the Leased
Property without termination of this Lease, Tenant shall execute, deliver and
file all documents and statements requested by Landlord to effect the transfer
of the Facility license and Government Authorizations to an entity designated by
Landlord, subject to any required approval of governmental regulatory
authorities, and Tenant shall provide to Landlord all information and records
required by Landlord in connection with the transfer of the license and
Government Authorizations.
15.9 Post-Closing Obligations. On or before December 15, 1998, the
open water well located on the Land shall be closed in accordance with
applicable standards. Landlord shall be provided with such documentation that
Landlord reasonably requires to evidence satisfaction of this obligation.
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any Permitted
Alterations, Tenant shall deliver to Landlord plans, specifications, drawings,
and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Within 30 days
after receipt of an invoice, Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise monitoring compliance with the terms of this Article 16. Tenant shall
comply with the requirements of Section 16.4 in making any Permitted
Alterations.
16.3 Permitted Alterations. Permitted Alterations means any one of
the following: [i] Alterations approved by Landlord; [ii] Alterations required
under Section 7.2; [iii] Alterations having a total cost of less than
$250,000.00; or [iv] repairs, rebuilding and restoration required or undertaken
pursuant to Section 9.4.
<PAGE> 54
16.4 Requirements for Permitted Alterations. Tenant shall comply
with all of the following requirements in connection with any Permitted
Alterations:
(a) The Permitted Alterations shall be made in accordance with
the Plans and Specifications approved by Landlord, if applicable.
(b) The Permitted Alterations and the installation thereof
shall comply with all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and
workmanlike manner, shall not impair the value or the structural integrity of
the Leased Property, and shall be free and clear of all mechanic's liens.
(d) For any Permitted Alterations having a total cost of
$250,000.00 or more, Tenant shall deliver to Landlord a payment and performance
bond, with a surety acceptable to Landlord, in an amount equal to the estimated
cost of the Permitted Alterations, guaranteeing the completion of the work free
and clear of liens and in accordance with the approved Plans and Specifications,
and naming Landlord and any mortgagee of Landlord as joint obligees on such
bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against all risks of physical
loss, including collapse and transit coverage, in a nonreporting form, covering
the total value of the work performed, and equipment, supplies, and materials,
and insuring initial occupancy. Landlord and any mortgagee of Landlord shall be
additional insureds of such policy. Landlord shall have the right to approve the
form and substance of such policy.
(f) Tenant shall pay the premiums required to increase the
amount of the insurance coverages required by Article 4 to reflect the increased
value of the Improvements resulting from installation of the Permitted
Alterations, and shall deliver to Landlord a certificate evidencing the increase
in coverage.
(g) Tenant shall, not later than 60 days after completion of
the Permitted Alterations, deliver to Landlord a revised "as-built" survey of
the Leased Property if the Permitted Alterations altered the Land or "footprint"
of the Improvements and an "as-built" set of Plans and Specifications for the
Permitted Alterations in form and substance satisfactory to Landlord.
(h) Tenant shall, not later than 30 days after Landlord sends
an invoice, reimburse Landlord for any reasonable costs and expenses, including
attorneys' fees and architects' and engineers' fees, incurred in connection with
reviewing and approving the Permitted Alterations and ensuring Tenant's
compliance with the requirements of this Section. The daily fee for Landlord's
consulting engineer is $750.00.
16.5 Ownership and Removal of Permitted Alterations. The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant
<PAGE> 55
subject to the terms and conditions of this Lease. Tenant shall not be required
or permitted to remove any Permitted Alterations.
16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.
ARTICLE 17: EARNOUT LEASE ADVANCE
17.1 Earnout Lease Advance. Prior to the fourth anniversary of the
Effective Date, Landlord shall, at Guarantor's request, make a Lease Advance to
Tenant in an amount not to exceed ten percent (10%) of the Maximum Lease Amount
("Earnout Lease Advance") upon satisfaction of the Earnout Conditions (defined
below).
17.2 Conditions to Earnout Lease Advance. Landlord's obligation to
make a Lease Advance pursuant to Section 17.1 is subject to the following
conditions ("Earnout Conditions"): [i] the Facility achieves an Adjusted
Coverage Ratio (defined below) of 1.40 to 1.00 for four consecutive quarters
based on audited financial statements; [ii] the Lease Amount including the
Earnout Lease Advance is less than 90% of the appraised value of the Leased
Property; [iii] no Event of Default shall have occurred under any agreements
between Tenant, any Affiliate, Developer, Manager, Guarantor, or any Guarantor
Affiliate with Landlord or any Landlord Affiliate; [iv] no material adverse
change shall have occurred in the condition of Guarantor, the local market or
the assisted living industry; [v] Guarantor has exercised the Guarantor Option
in connection with the Lease and all Affiliate Leases; and [vi] to the extent
available from the title company insuring Landlord's title to the Leased
Property, Guarantor has provided, at Guarantor's expense, an endorsement to the
Title Policy increasing the amount of the coverage by the amount of the Earnout
Lease Advance. "Adjusted Coverage Ratio" means the ratio of [i] Cash Flow for
each applicable period; to [ii] rent payments due pursuant to this Lease
(assuming that the Earnout Lease Advance was made using a Blended Lease Rate
(defined below) and all other debt service and lease payments relating to the
Leased Property for the applicable period. The "Blended Lease Rate" shall mean
the rate determined by calculating the weighted average of [i] the existing
Lease Rate and [ii] the Lease Rate estimated by Landlord to be in effect at the
time that the Earnout Lease Advance is funded based upon Landlord's reasonable
estimate of the yield on comparative term United States Treasury Notes for the
remaining years left in Term at the time that funding of the Earnout Lease
Advance is anticipated.
17.3 Use of Earnout Lease Advance. If Guarantor has not previously
closed the Guarantor Option, the Earnout Lease Advance may be used only to pay
the Purchase Price or Asset Purchase Price as defined in the Guarantor Option
Agreement.
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant acknowledges
that Landlord has entered into this Lease in reliance on the personal services
and business expertise of
<PAGE> 56
Tenant and Guarantor. Except as provided in Section 18.1(a) below and except for
a leasehold mortgage lien granted by Tenant in favor of Guarantor pursuant to
the Working Capital Documents, Tenant may not assign, sublet, mortgage,
hypothecate, pledge, or transfer any interest in this Lease, or in the Leased
Property, in whole or in part, without the prior written consent of Landlord,
which Landlord may withhold in its sole and absolute discretion. The following
transactions will be deemed an assignment or sublease requiring Landlord's prior
written consent: [i] an assignment by operation of law; [ii] an imposition
(whether or not consensual) of a lien, mortgage, or encumbrance upon Tenant's
interest in the Lease; [iii] an arrangement (including but not limited to,
management agreements, concessions, licenses, and easements) which allows the
use or occupancy of all or part of the Leased Property by anyone other than
Tenant; and [iv] a change of ownership of Tenant (other than as provided in
Section 18.1(a) below). An assignment or sublease without the prior written
consent of Landlord will be void at the Landlord's option. Landlord's consent to
one assignment or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease.
(a) Notwithstanding the foregoing Section 18.1, upon
Guarantor's exercise of the Guarantor Option, Guarantor or a wholly-owned
subsidiary of Guarantor may purchase the equity or assets of Tenant and succeed
to the interest of Tenant under the Lease Documents without the prior written
consent of Landlord provided that the following conditions are satisfied:
[i] Guarantor has concurrently exercised the Guarantor
Option in connection with the equity or assets of all Phase Tenants and is
obligated to close the Guarantor Option for Tenant and all Phase Tenants within
12 months after giving notice pursuant to the Guarantor Option Agreement of its
exercise of the Guarantor Option.
[ii] If a wholly-owned subsidiary of Guarantor succeeds
to the interest of Tenant, Guarantor shall guaranty the obligations of such
subsidiary under the Lease Documents in form and substance reasonably
satisfactory to Landlord, and Tenant shall be released from all liability under
the Lease Documents.
[iii] If the assignee has acquired the equity or assets
of Tenant without payment of the Purchase Price or Asset Purchase Price (as
defined in the Guarantor Option Agreement), such assignee shall pay the Equity
Loan in full on the effective date of the acquisition.
[iv] All conditions of this Article 18 are satisfied.
18.2 Requests for Landlord's Consent to Assignment, Sublease or
Management Agreement. If Tenant is required to obtain Landlord's consent to a
specific assignment, sublease, or management agreement, Tenant shall give
Landlord [i] the name and address of the proposed assignee, subtenant or
manager; [ii] a copy of the proposed assignment, sublease or management
agreement; [iii] reasonably satisfactory information about the nature, business
and business history of the proposed assignee, subtenant, or manager and its
proposed use of the Leased Property; and [iv] banking, financial, and other
credit information, and references about the proposed assignee,
<PAGE> 57
subtenant or manager sufficient to enable Landlord to determine the financial
responsibility and character of the proposed assignee, subtenant or manager.
18.3 Agreements with Residents. Notwithstanding Section 18.1, Tenant
may enter into an occupancy agreement with residents of the Leased Property
without the prior written consent of Landlord provided that [i] the agreement
does not provide for lifecare services; [ii] Tenant may not collect rent for
more than one month in advance; and [iii] all residents of the Leased Property
are accurately shown in Tenant's accounting records.
18.4 Terms Applicable to all Assignments, Subleases or Management
Agreements. Any assignment, sublease or management agreement shall contain
provisions to the effect that [a] such assignment, sublease or management
agreement is subject and subordinate to all of the terms and provisions of this
Lease and to the rights of Landlord; [b] such assignment, sublease or management
agreement may not be modified without the prior written consent of Landlord not
to be unreasonably withheld or delayed; [c] if this Lease shall terminate before
the expiration of such assignment, sublease or management agreement, the
assignee, subtenant or manager thereunder will, at Landlord's option, attorn to
Landlord and waive any right the assignee, subtenant or manager may have to
terminate the assignment, sublease or management agreement or surrender
possession thereunder as a result of the termination of this Lease; [d] if the
assignee, subtenant or manager receives a written notice from Landlord stating
that Tenant is in default under this Lease, the assignee, subtenant or manager
shall thereafter pay all rentals or payments under the assignment, sublease or
management agreement directly to Landlord until such default has been cured, and
[e] Tenant or any guarantor shall not be released from its payment and
performance and obligations under this Lease, but rather Tenant, any guarantor,
and Tenant's assignee or sublessee will be jointly and severally liable for such
payment and performance unless Landlord agrees in writing to release such
parties from their respective obligations.
18.5 Collateral Assignment. Tenant hereby collaterally assigns to
Landlord, as security for the performance of the Secured Obligations hereunder,
and grants a security interest to Landlord in all of Tenant's right, title, and
interest in and to any assignment, sublease or management agreement now or
hereafter existing for all or part of the Leased Property. Tenant shall, at the
request of Landlord, execute such other instruments or documents as Landlord may
request to evidence this collateral assignment.
18.6 Effectiveness. Any assignment, sublease, or management
agreement shall not be effective until [i] a fully executed copy of the
instrument of assignment, sublease or management agreement has been delivered to
Landlord; [ii] in the case of an assignment, Landlord has received such
documents, instruments, affidavits, letter of credit amendments, proof of
licensure and amendments as Landlord may reasonably request in order to evidence
assignee's assumption and agreement to perform all of Tenant's obligations under
the Lease; [iii] except for an assignment pursuant to the Guarantor Option,
Tenant has paid to Landlord a fee in the amount of $2,500.00; and [iv] Landlord
has received reimbursement from Tenant or the assignee for all attorneys' fees
and expenses and all other reasonable out-of-pocket expenses incurred in
connection with determining whether to give its consent, giving its consent and
all matters relating to the assignment, sublease, or management agreement.
<PAGE> 58
18.7 Sale of Leased Property. If Landlord or any subsequent owner of
the Leased Property sells the Leased Property, its liability for the performance
of its agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. For purposes of this Section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
18.8 Assignment by Landlord. Landlord may transfer, assign,
mortgage, collaterally assign, or otherwise dispose of Landlord's interest in
this Lease or the Leased Property.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. Should Tenant, with or without the express or
implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant 10
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.
19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal
and reasonable wear and tear (subject to the obligation of Tenant to maintain
the Leased Property in good order and repair during the Term); and [iii] damage
and destruction not required to be repaired by Tenant, Tenant shall surrender
and deliver up the Leased Property at the expiration or termination of the Term
in as good order and condition as of the Commencement Date.
ARTICLE 20: LETTER OF CREDIT
20.1 Terms of Letter of Credit. As security for the performance of
the Secured Obligations hereunder, Tenant shall provide Landlord with the Letter
of Credit at the Closing. Tenant shall maintain the Letter of Credit in favor of
Landlord until the Secured Obligations are performed in full. The Letter of
Credit shall permit partial draws and shall permit drawing upon presentation of
a draft drawn on the issuer and a certificate signed by Landlord stating that an
Event of Default has occurred under this Lease. The Letter of Credit shall be
for an initial term of one year and shall be automatically renewed annually for
successive terms of at least one year unless Landlord receives notice from the
Issuer, by certified mail, at least 60 days prior to the expiry date then in
effect that the Letter of Credit will not be extended for an additional one-year
period.
20.2 Replacement Letter of Credit. Tenant shall provide a
replacement Letter of Credit which satisfies the requirements of Section 20.1
from an Issuer acceptable to Landlord within 30 days after the occurrence of any
of the following: [i] Landlord's receipt of notice from the Issuer that the
Letter of Credit will not be extended for an additional one-year period; [ii]
Landlord gives notice to Tenant that the Lace Financial Service Rating of the
Issuer is less than a "C+"; or
<PAGE> 59
[iii] Landlord gives notice to Tenant of the admission by Issuer in writing of
its inability to pay its debts generally as they become due, or Issuer's filing
of a petition in bankruptcy or petitions to take advantage of any insolvency
act, making an assignment for the benefit of its creditors, consenting to the
appointment of a receiver of itself or of the whole or any substantial part of
its property, or filing a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof. Tenant's failure
to comply with the requirements of this Section shall be an immediate Event of
Default without any notice (other than as provided for in the section), cure or
grace period.
20.3 Draws. Landlord may draw under the Letter of Credit upon the
occurrence of an Event of Default hereunder. Any such draw shall not cure an
Event of Default. Landlord shall have the right, but not the obligation, to
apply all or any portion of the proceeds from the Letter of Credit to pay all or
any portion of [i] all Rent and other charges and expenses payable by Tenant
under this Lease; plus [ii] all expenses and costs incurred by Landlord in
enforcing or preserving Landlord's rights under this Lease or any security for
the Lease, including without limitation, [a] the fees, expenses, and costs of
any litigation, receivership, administrative, bankruptcy, insolvency, or other
similar proceeding; [b] attorney, paralegal, consulting and witness fees and
disbursements; and [c] the expenses, including without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith.
With respect to any portion of the Letter of Credit proceeds that is
not applied to payment of the Secured Obligations, Landlord shall have the
option to either [i] deposit the proceeds into an interest-bearing account with
a financial institution chosen by Landlord ("LC Account"); or [ii] require
Tenant to obtain a replacement Letter of Credit satisfactory to Landlord, with
the Letter of Credit proceeds made available to Tenant to secure Tenant's
reimbursement obligation for the Letter of Credit. All interest accruing on the
LC Account shall be paid to Landlord and may, from time to time, be withdrawn
from the LC Account by Landlord. At any time and from time to time until the
Secured Obligations are performed in full, Landlord may apply all or any portion
of the funds held in the LC Account to payment of all or any portion of the
Secured Obligations. Within 10 days after any such payment from the LC Account,
Landlord shall give written notice to Tenant describing the amount of such
payment and how it was applied to the Secured Obligations.
Upon the occurrence of either [i] Landlord's receipt of a
replacement Letter of Credit that satisfies the requirements of Section 20.1 and
is issued by an Issuer acceptable to Landlord; or [ii] the date on which all of
the Secured Obligations are performed in full, Landlord shall pay the principal
balance of the LC Account (but not any accrued interest) to Tenant.
20.4 Partial Draws. Upon the occurrence of a monetary Event of
Default under this Lease, Landlord may, at its option, make a partial draw on
the Letter of Credit in an amount not to exceed the amount of Tenant's monetary
obligations under this Lease then past due. If Landlord then applies the
proceeds from such partial draw on the Letter of Credit to payment of all or any
portion of Tenant's monetary obligations then past due, Tenant shall, within 10
days after notice
<PAGE> 60
from Landlord of such partial draw and payment, cause the amount of the Letter
of Credit to be reinstated to the amount in effect prior to such partial draw.
Tenant's failure to comply with the requirements of this section shall be an
immediate Event of Default under the Lease Documents without any notice (other
than as provided for in this section), cure or grace period. Landlord's rights
under this Section 20.4 are in addition to, and not in limitation of, Landlord's
rights under Section 20.3.
20.5 Substitute Letter of Credit. Tenant may, from time to time,
deliver to Landlord a substitute Letter of Credit meeting the requirements of
this Agreement and issued by an Issuer acceptable to Landlord. Upon Landlord's
approval of the substitute Letter of Credit, Landlord shall release the previous
Letter of Credit to the Tenant.
20.6 Reduction in Letter of Credit Amount. The amount of the Letter
of Credit may be reduced by Tenant from 5% of the Maximum Lease Amount to 2.5%
of the Maximum Lease Amount after all of the following conditions have been met:
[i] the Earnout Conditions have been satisfied; [ii] Guarantor has closed the
Guarantor Option; and [iii] no Events of Default has occurred and is continuing
under this Lease.
20.7 Cost of Letter of Credit. Tenant may at Tenant's option,
utilize funds allocated in the Project Budget from Lease Advances to [i] pay all
costs and expenses associated with the placement of the Letter of Credit; and
[ii] pledge as collateral with the Issuer sufficient funds to enable the Issuer
to so issue the Letter of Credit.
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND
ESTOPPEL CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Lease, Tenant's possession of the Leased Property will
not be disturbed by Landlord.
21.2 Subordination. Subject to the terms and conditions of this
section, this Lease and Tenant's rights under this Lease are subordinate to any
ground lease or underlying lease, first mortgage, first deed of trust, or other
first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant's possession, use and occupancy of the
Leased Property or Tenant's enjoyment of its rights under this Lease unless and
until an Event of Default occurs hereunder. Any foreclosure action or proceeding
by any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this Section, to confirm or effect any such
<PAGE> 61
subordination, provided that any such document shall include a non-disturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the non-disturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture, deed of
trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased Property, Tenant will pay to such holder all
Rent subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by [i] any payment of Rent for more than one month
in advance; [ii] any amendment or modification of this Lease thereafter made
without its consent as provided in this Lease; [iii] any claim against Landlord
arising prior to the date on which the successor succeeded to Landlord's
interest; or [iv] any claim or offset of Rent against the Landlord. Upon request
by Landlord or such successor in interest and without cost to Landlord or such
successor in interest, Tenant will execute, acknowledge and deliver an
instrument or instruments confirming the attornment. If Tenant fails or refuses
to execute, acknowledge, and deliver any such instrument within 30 days after
written demand, then Landlord or such successor in interest will be entitled to
execute, acknowledge, and deliver any document on behalf of Tenant as Tenant's
attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying, to
Tenant's knowledge, the following: [i] that the Lease is unmodified and in full
force and effect, or if there have been modifications that the same is in full
force and effect as modified and stating the modifications; [ii] the date to
which Rent and other charges have been paid; [iii] whether Tenant or Landlord is
in default or whether there is any fact or condition which, with notice or lapse
of time, or both, would constitute a default, and specifying any existing
default, if any; [iv] that Tenant has accepted and occupies the Leased Property;
[v] that Tenant has no defenses, set-offs, deductions, credits, or counterclaims
against Landlord, if that be the case, or specifying such that exist; and [vi]
such other information as may reasonably be requested by Landlord or any
mortgagee or purchaser. Any purchaser or mortgagee may rely on this estoppel
certificate. If Tenant fails to deliver the estoppel certificates to Landlord
within 20 days after the request of the Landlord, then Tenant shall be deemed to
have certified that to Tenant's knowledge, [a] the Lease is in full force and
effect and has not been modified, or that the Lease has been modified as set
forth in the certificate delivered to Tenant; [b] Tenant has not prepaid any
Rent or other charges except for the current month; [c] Tenant has accepted and
occupies the Leased
<PAGE> 62
Property; [d] neither Tenant nor Landlord is in default nor is there any fact or
condition which, with notice or lapse of time, or both, would constitute a
default; and [e] Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord. Tenant hereby irrevocably appoints Landlord as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on Tenant's
behalf any estoppel certificate to which Tenant does not object within 20 days
after Landlord sends the certificate to Tenant. This power of attorney is
coupled with an interest and is irrevocable. At the request of Tenant, Landlord
shall execute, acknowledge, and deliver an estoppel certificate, in recordable
form, in favor of Tenant certifying, to Landlord's knowledge, the following: [i]
that the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; [ii] the date to which Rent and other charges have been
received by Landlord; [iii] whether Tenant or Landlord is in default or whether
there is any fact or condition which, with notice or lapse of time, or both,
would constitute a default, and specifying any existing default, if any; [iv]
that Landlord has no defenses, set-offs, deductions, credits, or counterclaims
against Tenant, if that be the case, or specifying such that exist; and [vi]
such other information as may reasonably be requested by Tenant. If Landlord
fails to deliver the estoppel certificate to Tenant within 20 days after the
request of the Tenant, then Landlord shall be deemed to have certified that to
Landlord's knowledge, [a] the Lease is in full force and effect and has not been
modified, or that the Lease has been modified as set forth in the certificate
delivered to Landlord; [b] Landlord has not received any prepaid Rent or other
charges except for the current month; [c] neither Tenant nor Landlord is in
default nor is there any fact or condition which, with notice or lapse of time,
or both, would constitute a default; and [d] Landlord has no defenses, set-offs,
deductions, credits, or counterclaims against Tenant. Landlord hereby
irrevocably appoints Tenant as Landlord's attorney-in-fact to execute,
acknowledge, and deliver on Landlord's behalf any estoppel certificate to which
Landlord does not object within 20 days after Tenant sends the certificate to
Landlord. This power of attorney is coupled with an interest and is irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and warranties, as
of the Effective Date, to Landlord and acknowledges that Landlord is granting
the Lease in reliance upon such representations and warranties. Tenant's
representations and warranties shall survive the Closing and, except to the
extent made as of a specific date, shall continue in full force and effect until
the Secured Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware and is qualified to do business in and is in good standing
under the laws of the State.
22.2 Power and Authority. Tenant has the power and authority to
execute, deliver and perform this Lease. Tenant has taken all requisite action
necessary to authorize the execution, delivery and performance of Tenant's
Obligations under this Lease.
<PAGE> 63
22.3 Enforceability. This Lease constitutes a legal, valid,
and binding obligation of Tenant enforceable in accordance with its terms,
except as enforceability may be limited by creditor's rights laws, equitable
principles, and the effect of judicial discretion.
22.4 Government Authorizations. The Land and the Plans and
Specifications conform in all material respects with all Legal Requirements for
the construction and development of the Facility. Upon completion of the
Facility in accordance with the Plans and Specifications, the Facility will
conform in all material respects to all Legal Requirements. All Government
Authorizations required to commence construction of the Facility have been
obtained.
22.5 Financial Statements. Tenant has furnished Landlord with
true, correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant and Guarantor as
applicable, as of the respective dates and the results of operations for the
periods then ended in conformance with generally accepted accounting principles
applied on a basis consistent with prior periods. The Financial Statements and
other information furnished to Landlord are true, complete and correct and, as
of the Effective Date, no material adverse change has occurred since the
furnishing of such statements and information. As of the Effective Date, the
Financial Statements and other information do not contain any untrue statement
or omission of a material fact and are not misleading in any material respect.
Tenant and Guarantor are solvent, and no bankruptcy, insolvency, or similar
proceeding is pending or contemplated by or, to the knowledge of Tenant, against
Tenant or Guarantor.
22.6 Condition of Facility. To Tenant's knowledge, upon
completion of the Facility in accordance with the Plans and Specifications, all
of the mechanical and electrical systems, heating and air-conditioning systems,
plumbing, water and sewer systems, and all other items of mechanical equipment
or appliances will be in good working order, condition and repair, will be of
sufficient size and capacity to service the Facility for the Facility Uses, and
will conform with all applicable ordinances and regulations, and with all
building, zoning, fire, safety, and other codes, laws and orders. The
Improvements, including the roof and foundation, will be structurally sound and
free from leaks and other defects.
22.7 Compliance with Laws. To Tenant's knowledge, there is no
violation of, or noncompliance with, [i] any laws, orders, rules or regulations,
ordinances or codes of any kind or nature whatsoever relating to the Facility or
the ownership or operation thereof (including without limitation, building,
fire, health, occupational safety and health, zoning and land use, planning and
environmental laws, orders, rules and regulations); [ii] any covenants,
conditions, restrictions or agreements affecting or relating to the ownership,
use or occupancy of the Facility; or [iii] any order, writ, regulation or decree
relating to any matter referred to in [i] or [ii] above.
22.8 No Litigation. As of the Effective Date and except as
disclosed on Exhibit F, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant, Guarantor or the Facility; [ii] Tenant has not received notice of any
threatened actions, suits, proceedings or investigations against Tenant or the
Facility at law or in equity, or before any governmental board, agency or
authority which, if determined adversely to Tenant would materially and
adversely affect the
<PAGE> 64
Facility or title to the Facility (or any part thereof), the right to operate
the Facility as presently operated, or the financial condition of Tenant or
Guarantor; [iii] there are no unsatisfied or outstanding judgments against
Tenant or the Facility; [iv] there is no labor dispute materially and adversely
affecting the operation or business conducted by Tenant, Guarantor, or the
Facility; and [v] Tenant does not have knowledge of any facts or circumstances
which might reasonably form the basis for any such action, suit, or proceeding.
22.9 Consents. The execution, delivery and performance of this
Lease will not require any consent, approval, authorization, order, or
declaration of, or any filing or registration with, any court, any federal,
state, or local governmental or regulatory authority, or any other person or
entity, the absence of which would materially impair the ability of Tenant to
operate the Facility for the Facility Uses except for the post-acquisition
filing for licensure of the Facility.
22.10 No Violation. The execution, delivery and performance of
this Lease [i] do not and will not conflict with, and do not and will not result
in a breach of Tenant's Organizational Documents; [ii] do not and will not
conflict with, and do not and will not result in a breach of, and do not and
will not constitute a default under (or an event which, with or without notice
or lapse of time, or both, would constitute a default under), any of the terms,
conditions or provisions of any agreement or other instrument or obligation to
which Tenant is a party or by which its assets are bound; and [iii] do not and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Tenant or the Facility.
22.11 Reports and Statements. All reports, statements,
certificates and other data furnished by or on behalf of Tenant or Guarantor to
Landlord in connection with this Lease, and all representations and warranties
made herein or in any certificate or other instrument delivered in connection
herewith and therewith, are true and correct in all material respects and do not
omit to state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data. The copies of all agreements and instruments submitted to Landlord,
including, without limitation, all agreements relating to management of the
Facility, the Letter of Credit, and Tenant's working capital are true, correct
and complete copies and include all amendments and modifications of such
agreements.
22.12 ERISA. All plans (as defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time ("ERISA")) for which Tenant is an "employer" or a "substantial
employer" (as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively)
are in compliance with ERISA and the regulations and published interpretations
thereunder. To the extent Tenant maintains a qualified defined benefit pension
plan: [i] there exists no accumulated funding deficiency; [ii] no reportable
event and no prohibited transaction has occurred; [iii] no lien has been filed
or threatened to be filed by the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA; and [iv] Tenant has not
been deemed to be a substantial employer.
22.13 Chief Executive Office. Tenant maintains its chief
executive office and its books and records at the address set forth in the
introductory paragraph of this Agreement.
<PAGE> 65
22.14 Other Name or Entities. Except as disclosed herein, none
of Tenant's business is conducted through any corporate subsidiary,
unincorporated association or other entity and Tenant has not, within the six
years preceding the date of this Agreement [i] changed its name, [ii] used any
name other than the name stated at the beginning of this agreement, or [iii]
merged or consolidated with, or acquired any of the assets of, any corporation
or other business.
22.15 Parties in Possession. Except as disclosed on Exhibit B,
there are no parties in possession of any Leased Property or any portion thereof
as managers, lessees, tenants at sufferance, or trespassers.
22.16 Access. Except as disclosed in writing to Landlord,
access to the Land is directly from a dedicated public right-of-way without any
easement. To the knowledge of Tenant, there is no fact or condition which would
result in the termination or reduction of the current access to and from the
Land to such right-of-way.
22.17 Utilities. Except as disclosed in writing to Landlord,
there are available at the Land gas, municipal water, and sanitary sewer lines,
storm sewers, electrical and telephone services in operating condition which are
adequate for the operation of the Facility at a reasonable cost. Except as
disclosed in writing to Landlord, the Land has direct access to utility lines
located in a dedicated public right-of-way without any easement. As of the
Effective Date, there is no pending or, to the knowledge of Tenant, threatened
governmental or third party proceeding which would impair or result in the
termination of such utility availability.
22.18 Condemnation and Assessments. As of the Effective Date,
Tenant has not received notice of, and there are no pending or, to Tenant's
knowledge, threatened, condemnation, assessment or similar proceedings affecting
or relating to the Facility, or any portion thereof, or any utilities, sewers,
roadways or other public improvements serving the Facility.
22.19 Zoning. As of the Effective Date, [i] except as
disclosed in writing to Landlord, the use and operation of the Facility for the
Facility Uses is a permitted use under the applicable zoning code; [ii] except
as disclosed on Exhibit E hereto, no special use permits, conditional use
permits, variances, or exceptions have been granted or are needed for such use
of the Facility; [iii] the Land is not located in any special districts such as
historical districts or overlay districts; and [iv] the Facility once
constructed according to the Plans and Specifications will comply with all
applicable zoning laws, including but not limited to, dimensional, parking,
setback, screening, landscaping, sign and curb cut requirements.
22.20 Pro Forma Statement. Tenant has delivered to Landlord a
true, correct and complete copy of the Pro Forma Statement. The Pro Forma
Statement shows Tenant's reasonable expectation of the most likely results of
Facility operations for the next 5 year period commencing on the anticipated
date when the Facility commences operations.
22.21 Environmental Matters. During the period of Tenant's
ownership or possession of the Leased Property and, to Tenant's knowledge after
diligent inquiry, for the period
<PAGE> 66
prior to Tenant's ownership or possession of the Leased Property, [i] the Leased
Property is in compliance with all Environmental Laws; [ii] there were no
releases or threatened releases of Hazardous Materials on, from, or under the
Leased Property, except in compliance with all Environmental Laws; [iii] no
Hazardous Materials have been, are or will be used, generated, stored, or
disposed of at the Leased Property, except in compliance with all Environmental
Laws; [iv] asbestos has not been and will not be used in the construction of any
Improvements; [v] no permit is or has been required from the Environmental
Protection Agency or any similar agency or department of any state or local
government for the use or maintenance of any Improvements; [vi] underground
storage tanks on or under the Land, if any, have been and currently are being
operated in compliance with all applicable Environmental Laws; [vii] any
closure, abandonment in place or removal of an underground storage tank on or
from the Land was performed in compliance with applicable Environmental Laws and
any such tank had no release contaminating the Leased Property or, if there had
been a release, the release was remediated in compliance with applicable
Environmental Laws to the satisfaction of regulatory authorities; [viii] no
summons, citation or inquiry has been made by any such environmental unit, body
or agency or a third party demanding any right of recovery for payment or
reimbursement for costs incurred under CERCLA or any other Environmental Laws
and the Land is not subject to the lien of any such agency; and [ix] to the best
of Tenant's knowledge, the Environmental Assessment is true, complete and
accurate. "Disposal" and "release" shall have the meanings set forth in CERCLA.
22.22 Leases and Contracts. As of the Effective Date and
except as disclosed on Exhibit G, there are no leases or contracts (including
but not limited to, insurance contracts, maintenance contracts, construction
contracts, employee benefit plans, employment contracts, equipment leases,
security agreements, architect agreements, and management contracts) to which
Tenant or Guarantor is a party relating to any part of the ownership, operation,
possession, construction, management or administration of the Land or the
Facility.
22.23 No Default. As of the Effective Date, [i] there is no
existing Event of Default under this Lease; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default.
22.24 Project Budget. The Project Budget sets forth all
anticipated costs, direct and indirect, of developing and constructing the
Facility.
22.25 Tax Status. If Tenant is a partnership or limited
liability company, Tenant is taxable as a partnership under the Internal Revenue
Code and all applicable state tax laws.
ARTICLE 23: FUTURE PROJECTS; COTERMINOUS FINANCINGS
23.1 Project Submissions. If Tenant, Guarantor or any
Guarantor Affiliate chooses to submit certain future acquisition and development
projects to Landlord as provided in the Commitment, Tenant, Guarantor or any
Guarantor Affiliate shall comply with the terms of the Commitment.
<PAGE> 67
23.2 Coterminous Financings. All Phase Leases will be
coterminous and will have identical renewal dates and option exercise periods.
Accordingly, as each Phase Lease is closed, the current, Term, Expiration Date,
Renewal Date, and option exercise periods under this Lease will be extended to
be coterminous with the most recently closed Phase Lease.
ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord a security
interest in the following described property, whether now owned or hereafter
acquired by Tenant (the "Collateral"), to secure the payment and performance of
the Secured Obligations:
(a) All machinery, furniture, equipment, trade fixtures,
appliances, inventory and all other goods (as "equipment," "inventory" and
"goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) and any leasehold interest of Tenant in
any of the foregoing, now or hereafter located in or on or used or usable in
connection with the Land, Improvements, or Fixtures and replacements, additions,
and accessions thereto, including without limitation those items which are to
become fixtures or which are building supplies and materials to be incorporated
into an Improvement or Fixture.
(b) All accounts, contract rights, general intangibles,
instruments, documents, and chattel paper [as "accounts", "contract rights",
"general intangibles", "instruments", "documents", and "chattel paper", are
defined for purposes of Article 9] now or hereafter arising in connection with
the business located in or on or used or usable in connection with the Land,
Improvements, or Fixtures, and replacements, additions, and accessions thereto.
(c) All franchises, permits, licenses, operating rights,
certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof, all
contracts, agreements, contract rights and materials relating to the design,
construction, operation or management of the Improvements, including but not
limited to, plans, specifications, drawings, blueprints, models, mock-ups,
brochures, flyers, advertising and promotional materials and mailing lists.
(e) All ledger sheets, files, records, computer programs,
tapes, other electronic data processing materials, and other documentation
relating to the preceding listed property or otherwise used or usable in
connection with the Land and Improvements.
(f) The products and proceeds of the preceding listed
property, including without limitation cash and non-cash proceeds, proceeds of
proceeds, and insurance proceeds.
<PAGE> 68
24.2 Additional Documents. At the request of Landlord, Tenant
shall execute additional security agreements, financing statements, and such
other documents as may be requested by Landlord to maintain and perfect such
security interest.
24.3 Notice of Sale. With respect to any sale or other
disposition of any of the Collateral after the occurrence of an Event of
Default, Landlord and Tenant agree that the giving of 5 days notice by Landlord,
sent by overnight delivery, postage prepaid, to Tenant's notice address
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of such Collateral is to be made,
shall be deemed to be reasonable notice thereof and Tenant waives any other
notice with respect thereto.
24.4 Pledge of Accounts to Others. Notwithstanding any
provision to the contrary contained herein or in the other Lease Documents,
after the closing of the Guarantor Option, the then current Tenant shall be
permitted to pledge to a lender providing one or more loans to Guarantor or any
Guarantor Affiliate all accounts and receivables from the Facility on a first
priority lien basis, in which case Landlord shall execute and deliver to such
lender a subordination or similar agreement in which [i] Landlord agrees to
subordinate its security interest in such accounts and receivables to such
lender; and [ii] Landlord agrees to such further provisions as may be reasonably
required by the lender and acceptable to Landlord. Landlord's obligation to
provide the subordination is subject to [i] Landlord's receipt and reasonable
approval of all financing documents; [ii] execution by Landlord and the lender
of an intercreditor agreement on reasonable terms acceptable to Landlord, and
[iii] Tenant's payment of all costs and expenses incurred by Landlord in
connection with the subordination including, without limitation, reasonable
attorney's fees and expenses.
24.5 Financing of Fixtures, Furniture and Equipment. In the
event that furniture, fixtures and equipment for the Facility are not included
in the Project Budget (as the same may be amended from time to time), then [i]
Tenant, Guarantor or Developer may finance the same using third party lease
and/or debt financing, and [ii] the security interests hereby granted to
Landlord in such furniture, fixtures and equipment shall be junior and
subordinate in all respects to such third party financing source subject to the
provisions of Section 11.2(g).
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all
notices, demands, requests, and consents (hereinafter "notices") required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] certified mail, return
receipt requested, postage prepaid; or [iii] nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or 3 days after mailing, or one business day after deposit with the
overnight courier. Any notices meeting the requirements of this Section shall be
effective, regardless of whether or not actually received. Landlord or Tenant
may change its notice address at any time by giving the other party notice of
such change.
<PAGE> 69
25.2 Advertisement of Leased Property. In the event the
parties hereto have not executed a renewal Lease within 120 days prior to the
expiration of this Lease, or Tenant has not exercised its Option to Purchase,
then Landlord or its agent shall have the right to enter the Leased Property at
all reasonable times for the purpose of exhibiting the Leased Property to others
and to place upon the Leased Property for and during the period commencing 120
days prior to the expiration of this Lease, "for sale" or "for rent" notices or
signs.
25.3 Entire Agreement. This Lease and the Construction
Agreement contains the entire agreement between Landlord and Tenant with respect
to the subject matter hereof. No representations, warranties, and agreements
have been made by Landlord except as set forth in this Lease.
25.4 Severability. If any term or provision of this Lease is
held or deemed by Landlord to be invalid or unenforceable, such holding shall
not affect the remainder of this Lease and the same shall remain in full force
and effect, unless such holding substantially deprives Tenant of the use of the
Leased Property or Landlord of the rents herein reserved, in which event this
Lease shall forthwith terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be construed under the
laws of the State.
25.7 Memorandum of Lease. Tenant shall not record this Lease.
Tenant may, however, record a memorandum of lease approved by Landlord, in its
reasonable discretion.
25.8 Waiver. No waiver by Landlord of any condition or
covenant herein contained, or of any breach of any such condition or covenant,
shall be held or taken to be a waiver of any subsequent breach of such covenant
or condition, or to permit or excuse its continuance or any future breach
thereof or of any condition or covenant, nor shall the acceptance of Rent by
Landlord at any time when Tenant is in default in the performance or observance
of any condition or covenant herein be construed as a waiver of such default, or
of Landlord's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure
to the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 Power of Attorney. Effective upon [i] the occurrence and
during the continuance of an Event of Default, or [ii] termination of this Lease
for any reason other than Tenant's purchase of the Leased Property, Tenant
hereby irrevocably and unconditionally appoints Landlord, or Landlord's
authorized officer, agent, employee or designee, as Tenant's true and lawful
attorney-in-fact, to act for Tenant in Tenant's name, place, and stead, to
execute, deliver and file all applications and any and all other necessary
documents and statements to effect the issuance, transfer, reinstatement,
renewal and/or extension of the Facility license and all
<PAGE> 70
Governmental Authorizations issued to Tenant or applied for by Tenant in
connection with Tenant's operation of the Facility, to permit any designee of
Landlord or any other transferee to operate the Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to Tenant's purchase of the
Leased Property. Except in the case of an emergency, Landlord shall give Tenant
three business days prior written notice before acting on behalf of Tenant
pursuant to this power of attorney.
25.11 No Offer. Landlord's submission of this Lease to Tenant
is not an offer to lease the Leased Property, or an agreement by Landlord to
reserve the Leased Property for Tenant. Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.
25.12 Modification. This Lease may only be modified by a
writing signed by Landlord, Tenant and Guarantor. All references to this Lease,
whether in this Lease or in any other document or instrument, shall be deemed to
incorporate all amendments, modifications and renewals of this Lease, made after
the date hereof. If Tenant requests Landlord's consent to any change in
ownership, merger or consolidation of Tenant or Guarantor, any assumption of the
Lease, or any modification of the Lease, Tenant shall provide Landlord all
relevant information and documents sufficient to enable Landlord to evaluate the
request. In connection with any such request, Tenant shall pay to Landlord a fee
in the amount of $2,500.00 (except as provided in Section 8.11 of the Loan
Agreement between Landlord and Member) and shall pay all of Landlord's
reasonable attorney's fees and expenses and other reasonable out-of-pocket
expenses incurred in connection with Landlord's evaluation of Tenant's request,
the preparation of any documents and amendments, the subsequent amendment of any
documents between Landlord and its collateral pool lenders (if applicable), and
all related matters.
25.13 Landlord's Modification. Tenant acknowledges that
Landlord may, subject to Article 21, mortgage the Leased Property or use the
Leased Property as collateral for a collateralized mortgage obligations or Real
Estate Mortgage Investment Companies (REMICS). If any mortgage lender of
Landlord desires any modification of this Lease, Tenant agrees to consider such
modification in good faith and to execute an amendment of this Lease if Tenant
finds such modification acceptable.
25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
<PAGE> 71
25.15 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
25.16 Limitation on Tenant's Recourse. Tenant's sole recourse
against Landlord, and any successor to the interest of Landlord in the Leased
Property, is to the interest of Landlord, and any such successor, in the Leased
Property. Tenant will not have any right to satisfy any judgment which it may
have against the Landlord, or any such successor, from any other assets of
Landlord, or any such successor. In this Section, the terms "Landlord" and
"successor" include the shareholders, venturers, and partners of "Landlord" and
"successor" and the officers, directors, and employees of the same. The
provisions of this Section are not intended to limit Tenant's right to seek
injunctive relief or specific performance.
25.17 Construction of Lease. This Lease has been prepared by
Landlord and its professional advisors and reviewed by Tenant and its
professional advisors. Landlord, Tenant, and their advisors believe that this
Lease is the product of all their efforts, that it expresses their agreement,
and agree that it shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing it.
25.18 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
25.19 [Intentionally Deleted]
25.20 Custody of Escrow Funds. Any funds paid to Landlord in
escrow hereunder may be held by Landlord or, at Landlord's election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency. The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.
25.21 Landlord's Status as a REIT. Tenant acknowledges that
Landlord (or a Landlord Affiliate) has now and may hereafter elect to be taxed
as a real estate investment trust ("REIT") under the Internal Revenue Code.
25.22 Exhibits. The following exhibits are attached hereto and
incorporated herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Documents to be Delivered
Exhibit D: Certificate and Facility Financial Reports
Exhibit E: Government Authorizations to be Obtained; Zoning Permits
Exhibit F: Pending Litigation
Exhibit G: List of Leases and Contracts
<PAGE> 72
25.23 WAIVER OF JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY ONE OF THEM
AGAINST ONE OR BOTH OF THE OTHERS ON ALL MATTERS ARISING OUT OF THIS LEASE OR
THE USE AND OCCUPANCY OF THE LEASED PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY
OR PROPERTY DAMAGE). IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT
OF RENT, TENANT WILL NOT INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY
COUNTERCLAIM IN ANY SUCH PROCEEDING.
25.24 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY
SUBMITS AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR
FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO OR
[____________________] FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR [III]
ANY DOCUMENT EXECUTED BY TENANT IN CONNECTION WITH THIS LEASE. TENANT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT TENANT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING. TENANT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF
LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT,
THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO OR
[______________________________].
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN
ANY MANNER AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT
OR IMPAIR LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW, OR LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.
25.25 Attorney's Fees and Expenses. Tenant shall pay to
Landlord all reasonable costs and expenses incurred by Landlord in administering
this Lease and the security for this Lease, enforcing or preserving Landlord's
rights under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings,
<PAGE> 73
depositions, and trials; and [e] consulting and witness fees incurred by
Landlord in connection with any litigation or other proceeding.
25.26 Survival. The following provisions shall survive
termination of the Lease: Article 9 (Damage and Destruction), Article 10
(Condemnation); Article 16 (Alterations); and Section 25.26 (Survival).
25.27 Access to Records. To the extent required by law,
Landlord shall (and, if Landlord carries out any of the duties under this Lease,
whether on Landlord's or Tenant's behalf, through a subcontract with a related
organization and such subcontract has a value or cost of Ten Thousand Dollars
($10,000) or more during any twelve (12) month period, such subcontract shall
contain a clause to the effect that the subcontractor shall) until the
expiration of four (4) years after the furnishing of services pursuant to this
Lease, make available, upon request by the Secretary of Health and Human
Services or upon the request by the U.S. Comptroller General, or any duly
authorized representative of either of them, the books, documents and records of
Landlord (or such subcontractor) that are necessary to verify the nature and
extent of such costs in connection with said services.
25.28 Granting of Easements and Rights-of-Way. From time to
time at the request of Tenant or Developer (but at no cost to Landlord),
Landlord shall execute and deliver, in recordable form, such easements,
rights-of-way and similar agreements as may be necessary or desirable for the
provision of utility and other services to the Facility.
ARTICLE 26: SUBSTITUTION OF LEASED PROPERTY
26.1 Right of Substitution. Subject to the conditions set
forth in this Article 26, Tenant will have the right to substitute one or more
comparable health care facilities (individually and collectively called a
"Substitute Facility") for the Facility ("Existing Facility").
26.2 Conditions to Substitution. The following are the
"Substitution Conditions":
<PAGE> 74
(a) Guarantor Option. Guarantor shall have closed the
Guarantor Option.
(b) Substitution Notice. Landlord must receive from
Tenant a written notice ("Substitution Notice") of the intent to exercise the
right of substitution at least 90 days prior to the proposed date of
substitution. The Substitution Notice shall include all material information
concerning the substitution including, but not limited to, the following: [i]
the reason for the proposed substitution; [ii] the proposed date of the
substitution; [iii] information regarding the proposed Substitute Facility
("Proposed Facility") including name, address, city, state, type, units, beds,
current owner, current operator, historical financial statements, proforma
financial statements, Medicaid and Medicare cost reports, and rate letters; [iv]
copy of acquisition documents, if any; and [v] the proposed Tenant.
(c) Commitment Fee. Tenant shall pay Landlord a
commitment fee in an amount equal to 1% of the acquisition amount for the
Substitute Facility.
(d) No Defaults. As of the applicable substitution date,
no Event of Default shall have occurred (excluding any default which has been
cured in accordance with the terms of this Lease or which has been waived, in
writing, by Landlord), nor any event which with the giving of notice or the
passage of time or both, would constitute such a default.
(e) Engineering and Inspection Reports. Landlord shall
have received engineering and inspection reports relating to the Proposed
Facility, reasonably satisfactory in all respects to Landlord.
(f) MAI Appraisal. Tenant shall have delivered to
Landlord an MAI appraisal of the Proposed Facility prepared by an appraiser
selected by Tenant and approved by Landlord, in form and substance reasonably
satisfactory to Landlord.
(g) Survey. Tenant shall have delivered to Landlord an
ALTA survey of the premises upon which the Proposed Facility is located
acceptable to Landlord and the Title Company.
(h) Compliance with Laws. Landlord shall be satisfied as
to compliance with [i] all applicable land use, zoning, subdivision and
environmental laws and regulations, [ii] all applicable health care licensure
laws and regulations and [iii] such other matters as Landlord reasonably deems
relevant (including, without limitation, whether the conveyance of the Proposed
Facility to Landlord may be avoided under the Bankruptcy Code).
(i) Title Commitment. Tenant shall have delivered to
Landlord a valid and binding owner's title insurance commitment issued by
Lawyers Title Insurance Corporation through its agent, Saunie Risinger in
Mansfield, Ohio ("Title Company"), in an amount equal to the acquisition amount
for the Proposed Facility, with such endorsements and affirmative coverages, and
in such form, as Landlord may reasonably require insuring Landlord's fee title
to the Proposed Facility, subject to no encumbrances except those approved or
assumed by Landlord.
<PAGE> 75
Arrangements satisfactory to Landlord shall have been made for the issuance of a
title insurance policy as of the substitution closing date.
(j) Environmental Assessment. Tenant shall have delivered
an environmental site assessment report for the Proposed Facility, in form and
substance reasonably acceptable to Landlord and prepared by an environmental
consultant reasonably acceptable to Landlord.
(k) Tax Opinion. Landlord shall have obtained, at
Tenant's cost, an opinion of Landlord's counsel, in form and substance
acceptable to Landlord, confirming that [i] the substitution of the Proposed
Facility for the Existing Facility will qualify as an exchange solely of
property of a like-kind under Section 1031 of the Internal Revenue Code
("Code"), in which, generally, except for "boot" such as cash needed to equalize
values or discharge indebtedness, no gain or loss is recognized to Landlord;
[ii] the substitution or sale will not result in ordinary recapture income to
Landlord pursuant to Code Section 1250(d)(4) or any other Code provision; [iii]
the substitution or sale will result in income, if any, to Landlord of a type
described in Code Section 856(c)(2) or (3) and will not result in income of the
types described in Code Section 856(c)(4) or result in the tax imposed under
Code Section 857(b)(6); and [iv] the substitution or sale, together with all
other substitutions and sales made or requested by Tenant, pursuant to any other
leases with Landlord or a Landlord Affiliate during the relevant time period,
will not jeopardize the qualification of Landlord as a real estate investment
trust under Code Section 856-860.
(l) Legal Opinion. Landlord shall have received opinions
of Tenant's counsel as to [i] the compliance of the Proposed Facility with land
use, zoning, subdivision and environmental laws and regulations; [ii] the
compliance of Tenant, the proposed substitution and the Proposed Facility with
applicable health care laws and regulations; [iii] the due authorization,
execution and enforceability of the Substitution Documents; and [iv] such other
matters are reasonably requested, in form and substance reasonably acceptable to
Landlord.
(m) Substitution Documents. Tenant and Guarantor shall
have executed and delivered, or caused to be executed and delivered, such
documents as are reasonably required by Landlord to effectuate the substitution
(collectively, the "Substitution Documents"), including, without limitation, [i]
a deed and bill of sale with full warranties (or such other deed form as is
customary in such geographic area) conveying to Landlord title to the Proposed
Facility free and clear of all liens and encumbrances, except those approved or
assumed by Landlord; [ii] a Lease ("Substitute Lease") duly executed,
acknowledged and delivered by Tenant, containing the same terms and conditions
as are contained in the Lease for the Existing Facility except that [a] the
legal description of the land shall refer to the Proposed Facility, [b] the
acquisition amount for the Proposed Facility shall be an amount equal to the
Lease Amount for the Existing Facility increased or decreased by any adjustments
agreed to by Landlord and Tenant ("Cash Adjustment"), [c] the rent inflation
adjustment (Increaser Rate) under the Substitute Lease in all respects shall
provide Landlord with a substantially equivalent yield at the time of the
substitution to that received from the Existing Facility, taking into account
the Cash Adjustment, if any, and any other relevant factors, and [d] such other
changes therein as may be necessary or appropriate under the
<PAGE> 76
circumstances shall be made; and [iii] UCC financing statements. The
Substitution Documents shall be based upon and contain the same terms and
conditions as are set forth in the Lease Documents in effect prior to the
substitution, except that such changes shall be made as may be necessary or
reasonably appropriate under the circumstances to effectuate the substitution
and secure the protection and priority of the property and security interests
conveyed and/or granted to Landlord.
(n) Other Information. Without limiting any other
provision contained herein, Tenant shall have delivered to Landlord such other
information and materials relating to Tenant and the Proposed Facility as
Landlord may reasonably request, including, without limitation, leases,
receipted bills, management agreements and other contracts, provider agreements,
cost reports, permits, evidence of legal and actual access to the Proposed
Facility, evidence of the availability and sufficiency of utilities servicing
the Proposed Facility, historical and current operating statements, detailed
budgets and financial statements and Landlord shall have found the same to be
satisfactory in all respects.
(o) Tenant. The Proposed Facility shall be leased by
Tenant or an Affiliate that is acceptable to Landlord; provided, however, that
in the event that the Proposed Facility is leased by any such Affiliate, [i]
said Affiliate shall execute and deliver to Landlord such Substitution Documents
as may be reasonably required by Landlord; and [ii] Landlord shall be provided
with such evidence as it may reasonably require to determine that the conveyance
of the Proposed Facility to Landlord does not constitute a fraudulent conveyance
under applicable federal or state law.
(p) Insurance Certificates. Tenant shall have delivered
to Landlord insurance certificates evidencing compliance with all of the
insurance requirements set forth in this Lease.
(q) Rent. Landlord shall have received all Rent due and
payable under the Existing Lease through the substitution closing date.
(r) Valuation. The acquisition amount for the Proposed
Facility shall not exceed 90% of the appraised value of the Proposed Facility.
If the equity value of the Existing Facility exceeds the equity value of the
Proposed Facility, then an adjustment will be made in the option price set forth
in the Substitute Lease so that Landlord will receive its bargained-for share of
appreciation in the value of the Existing Facility.
(s) Landlord's Approval. Landlord shall have determined
that the Proposed Facility satisfies all of Landlord's customary due diligence
and underwriting requirements based upon the standards then being applied to
similar customers and facilities.
26.3 Conveyance of Existing Facility. Upon satisfaction of the
Substitution Conditions and concurrently with the closing of the substitution
transaction, Landlord will convey the Existing Facility to the respective Tenant
or Tenant's designee by quitclaim deed and quitclaim bill of sale. The date that
the Existing Facility is conveyed by Landlord is referred to herein as the
<PAGE> 77
"Conveyance Date." In the event that [i] Tenant is contractually obligated to
convey the Existing Facility to an unrelated purchaser ("Purchaser") by a
specified closing date ("Contract Date"); [ii] the Substitution Conditions have
not been fully satisfied by the Contract Date; and [iii] Tenant has used its
best efforts to extend the Contract Date, including an offer to pay a reasonable
extension fee, but the Contract Date has not been extended to a date by which
the Substitution Conditions are fully satisfied, Tenant shall have the right to
require Landlord to convey the Existing Facility to the Purchaser subject to the
following terms and conditions:
(a) Tenant shall irrevocably identify the Substitute
Facility and notify Landlord thereof within 35 days after the Conveyance Date.
Tenant shall satisfy all Substitution Conditions and cause the Substitute
Facility to be conveyed to Landlord within 180 days after the Conveyance Date.
(b) Tenant acknowledges that Landlord intends to qualify
the sale of the Existing Facility as a like-kind exchange pursuant to Code
Section 1031. Tenant shall cooperate with Landlord in effectuating a qualifying
deferred like-kind exchange and shall require the Purchaser, pursuant to the
terms of the Purchase and Sale Agreement with Purchaser, to so cooperate and to
execute all documents reasonably requested by Landlord to effectuate a
qualifying deferred like-kind exchange.
(c) All proceeds from the sale of the Existing Facility
("Sale Proceeds") shall be deposited with a qualified intermediary specified by
Landlord to facilitate the accomplishment of the deferred like-kind exchange.
Upon conveyance of the Substitute Facility to Landlord, the Sale Proceeds shall
be disbursed for payment of the Substitute Facility purchase price with the
balance, if any, disbursed in accordance with the Cash Adjustment made pursuant
to Section 26.2(m).
(d) To compensate Landlord for the lost Rent during the
period from the Conveyance Date to the date that the Substitute Facility is
conveyed to Landlord ("Deferred Period"), Tenant shall pay to the qualified
intermediary, on a monthly basis, an amount equal to the Base Rent for the
Existing Facility that would otherwise be payable during the Deferred Period.
(e) If Tenant does not comply with the deadlines set
forth in Section 26.3(a), Tenant shall pay Landlord an early termination fee
equal to 10% of the Lease Amount for the Existing Facility that was conveyed by
Landlord, payable within ten days following the missed deadline date.
26.4 Expenses. Whether or not any proposed substitution is
consummated, Tenant shall pay all of the out-of-pocket expenses and other costs
incurred or expended by Landlord in connection with any proposed substitution
(collectively the "Substitution Expenses"), including, without limitation,
Landlord's reasonable attorneys' fees and expenses, appraisal costs,
out-of-pocket travel expenses, inspection fees, title insurance premiums and
other title fees, survey expenses, mortgage taxes, transfer, documentary stamp
and other taxes, search charges of any nature, recording, registration and
filing costs, brokers' fees and commissions, if any, escrow fees, fees and
expenses, if any, incurred in qualifying Landlord and maintaining its right to
do business
<PAGE> 78
in the state where the Proposed Facility is located, the cost of obtaining,
preparing and recording a release of the Existing Facility from the lien of any
mortgage (other than the amount necessary to payoff such mortgage) and any other
costs expended or incurred by Landlord in connection with the preparation,
documentation and closing of the proposed substitution.
<PAGE> 79
All Substitution Expenses due and payable at the time of the closing of the
substitution transaction shall be paid by Tenant at closing. Any Substitution
Expenses that are not paid at closing shall be a demand obligation of Tenant to
Landlord and, if not paid within 15 days after demand, shall thereafter (to the
extent permitted by applicable law) bear interest at the Overdue Rate until the
date of payment.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
<TABLE>
<S> <C>
Signed and acknowledged
in the presence of LANDLORD:
Signature [ ]
------------------------------ ----------------------------
Print Name
------------------------------
By:
-------------------------------------
Signature
------------------------------ Title:
Print Name ------------------------------
------------------------------
TENANT:
Signature FINANCIAL CARE INVESTORS OF
------------------------------ [_____________], LLC
Print Name
------------------------------
By: Financial Care Investors, LLC, Member
Signature
------------------------------
Print Name By:
------------------------------ ---------------------------------
Title:
--------------------------
Tax I.D. No.:
---------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.2
SCHEDULE TO FORM OF HCRI LEASE AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
NUMBER MAXIMUM FACILITY CONSENT TO
LANDLORD TENANT OF UNITS LEASE AMOUNT JURISDICTION IN
<S> <C> <C> <C> <C> <C> <C>
LEBANON, Pennsylvania Financial Care 60 $4,181,799.00 Balanced Care, Lebanon
PENNSYLVANIA BCC Investors of Lebanon County,
Properties,Inc. Lebanon, LLC Pennsylvania
LOYALSOCK, Pennsylvania Financial Care 60 $4,440,815.00 Balanced Care, Lycoming
PENNSYLVANIA BCC Investors of Loyalsock County,
Properties, Inc. Loyalsock, LLC Pennsylvania
WESTERVILLE, HCN BCC Financial Care 106 $9,026,982.00 Balanced Care, Franklin
OHIO Holdings, Inc. Investors of Westerville County, Ohio
Westerville,
LLC
MORRISTOWN, HCN BCC Financial Care 60 $4,191,291.00 Balanced Care, Hamblen
TENNESSEE Holdings, Inc. Investors of Morristown County,
Morristown, Tennessee
LLC
OAK RIDGE, HCN BCC Financial Care 60 $4,498,968.00 Balanced Care, Anderson
TENNESSEE Holdings, Inc. Investors of Oak Ridge County,
Oak Ridge, Tennessee
LLC
SAGAMORE HCN BCC Financial Care 103 $8,315,468.00 Balanced Care, Summit
HILLS, OHIO Holdings, Inc. Investors of Sagamore Hills County, Ohio
Sagamore Hills,
LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.3
FORM OF HCRI CONSTRUCTION DISBURSING AGREEMENT
THIS CONSTRUCTION DISBURSING AGREEMENT ("Agreement") is made and
entered into effective as of September 22, 1998 (the "Effective Date") between
BCC DEVELOPMENT AND MANAGEMENT CO., a corporation organized under the laws of
the State of Delaware ("Developer"), having its chief executive office at 5021
Louise Drive, Suite 200, Mechanicsburg, Pennsylvania 17055, and [_____________],
a corporation organized under the laws of the State of Pennsylvania
("Landlord"), having an address of One SeaGate, Suite 1500, P.O. Box 1475,
Toledo, Ohio 43603.
RECITALS:
A. As of the date hereof, Landlord acquired and leased to
Financial Care Investors of [__________], LLC, a limited liability company
organized under the laws of the State of Delaware ("Tenant") the Land (defined
below) located in Lebanon, Pennsylvania pursuant to a Lease Agreement between
Landlord and Tenant ("Lease").
B. Tenant desires to cause Developer to construct a [__]-unit
personal care facility ("Facility") on the Land. Landlord has agreed to pay for
the development and construction costs of the Facility up to a maximum amount of
$[_______________], subject to the terms and conditions of the Lease and this
Agreement.
C. All Improvements constructed on the Land and all Fixtures
installed into the Improvements shall be the property of Landlord and shall be
part of the "Leased Property" under the Lease.
NOW, THEREFORE, in consideration of the mutual covenants and the
premises contained herein, and intending to be legally bound hereby, the parties
agree as follows:
ARTICLE 1: PURPOSE AND DEFINITIONS
1.1 Purpose. The purpose of this Agreement is to establish the terms and
conditions for disbursing Lease Advances under the Lease.
1.2 Definitions. Except as otherwise expressly provided, [i] the terms
defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; [iii] the
words "herein", "hereof", and "hereunder" and similar words refer to this
Agreement as a whole and not to any particular section; and [iv] any capitalized
term not defined in this Agreement which is defined in the Lease shall have the
meaning set forth in the Lease.
<PAGE> 2
"Appraisal" means an "as-built" appraisal setting forth the fair market
value of the Facility upon completion thereof in accordance with the Plans and
Specifications.
"Architect" means Bink Architectural Partnership, the architect for the
design of the Improvements.
"Architect's Certificate" means a certificate of the Architect in favor
of Landlord in form and substance satisfactory to Landlord.
"Architect's Contract" means the contract between the Architect and
Developer for the design of the Improvements, as it may be amended from time to
time, and any other material agreements entered into between Developer and
design professionals.
"Bonds" means a labor and material payment bond and a performance bond
issued by the Surety with a dual obligee rider naming Landlord and Developer as
joint and several obligees. The Bonds shall each be in an amount not less than
the amount payable under the Construction Contract.
"Business Day" means any day which is not a Saturday or Sunday or a
public holiday under the laws of the United States of America or the State of
Ohio.
"Closing" means the closing of the Lease.
"Collateral Assignment of Architect's Contract" means the Collateral
Assignment of Architect's Contract between Landlord and Developer and the
Consent of Architect attached thereto.
"Collateral Assignment of Construction Contract" means the Collateral
Assignment of Construction Contract by Developer in favor of Landlord and the
Consent of Contractor attached thereto.
"Commitment" means the commitment letter for the Lease dated September
22, 1998.
"Commitment Fee" means the commitment fee for the Lease payable to
Landlord by Tenant in an amount equal to 2% of the Maximum Lease Amount.
"Construction Contract" means the construction contract between
Developer and the General Contractor for the construction of the Improvements,
as it may be amended from time to time, and any other contracts entered into
between Developer and any contractors for the construction of the Improvements.
"Construction Documents" means the Architect's Contract, the
Construction Contract and any other material contracts entered into by Developer
relating to the development, design or construction of the Improvements.
<PAGE> 3
"Construction Term" means the term of the Lease commencing on the
Effective Date and expiring on the Conversion Date.
"Conversion Date" means the date on which the final Lease Advance is
disbursed to Developer.
"Developer Documents" means [i] this Agreement; [ii] the Collateral
Assignment of Construction Contract; [iii] the Collateral Assignment of
Architect's Contract; and [iv] all other documents executed by Developer and
Landlord in connection with the Lease.
"Developer's Obligations" means all payment and performance obligations
of Developer under this Agreement.
"Developer's Organizational Documents" means the Articles of
Incorporation of Developer certified by the Secretary of State of the state of
organization, as amended to date, and the Bylaws of Developer certified by
Developer, as amended to date.
"Development Fees" means the fees paid to Developer not to exceed
$[__________], for services rendered in connection with the acquisition and
development of the Facility, payable as follows: 1/2 at Closing and 1/2 upon
completion of construction of the Facility and issuance of a certificate of
occupancy for the Facility.
"Disbursement Schedule" means the Disbursement Schedule attached hereto
as Exhibit C setting forth Developer's estimate of the dates and amounts of the
disbursements required hereunder.
"Disbursement Voucher" means Developer's written request for a
disbursement set forth on a form satisfactory to Landlord.
"Environmental Assessment" means an environmental assessment of the
Land meeting the Landlord's Requirements for Environmental Assessments,
including all agreements, contracts, reports, sampling results, amendments and
addenda relating thereto.
"Environmental Consultant" means a registered engineer in the State or
other consultant approved by Landlord.
"Event of Default" has the meaning set forth in Section 4.1.
"Facility" means the Real Property and Personal Property comprising
each facility located on any of the Leased Property.
"Facility Costs" means the following: [i] the organizational,
acquisition and construction costs for the Facility; [ii] all costs and expenses
in connection with the Lease; [iii] Development Fees; and [iv] other Facility
costs and expenses, direct and indirect, as set forth in the Project Budget.
<PAGE> 4
"Financial Statements" has the meaning set forth in the Lease.
"Fixtures" means all fixtures now or hereafter installed or located in,
on or about the Land or the Improvements and any replacements, substitutions and
additions thereto.
"Force Majeure" means any delay due to strikes, riots, acts of God,
shortages of labor or materials, governmental law, regulations or restrictions
or other similar cause which is beyond the control of Developer.
"General Contractor" means [____________________], the general
contractor for the construction of the Improvements.
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to be obtained by Tenant, Manager or
Developer to comply with all Legal Requirements, including but not limited to,
[i] zoning permits, variances, exceptions, special use permits, conditional use
permits, and consents; [ii] environmental, ecological, coastal, wetlands, air,
and water permits, licenses, and consents; [iii] curb cut, subdivision, land
use, and planning permits, licenses, approvals and consents; [iv] building,
sign, fire, health, and safety permits, licenses, approvals, and consents; and
[v] architectural reviews, approvals, and consents required under restrictive
covenants.
"Guarantor" means Balanced Care Corporation, a corporation organized
under the laws of the State of Delaware.
"Guaranty" means the Guaranty entered into by the Guarantor, and any
amendments thereto or substitutions or replacements therefor.
"Guaranty Documents" means the Guaranty, the Working Capital Documents
(as defined in the Lease), and any other agreement or instrument to be executed
by Guarantor in accordance with the requirements of any Lease Document or the
Commitment.
"Improvements" means all buildings, structures, additions, renovations
and improvements now or hereafter erected or placed upon the Land and the
offsite improvements, if any, necessary for the operation of the Facility.
"Initial Term" has the meaning set forth in Section 1.2 of the Lease.
"Insurance Requirements" means [i] all terms of any insurance policy
required by the Lease; [ii] all requirements of the issuer of any such policy;
and [iii] the requirements of any Board of Insurance Underwriters or similar
organization.
"Intangible Personal Property" means Tenant's, Manager's or Developer's
rights in the following: [i] all accounts, contract rights, general intangibles,
instruments, documents, Receivables, and chattel paper (as "accounts", "contract
rights", "general intangibles",
<PAGE> 5
"instruments", "documents", and "chattel paper" are defined for purposes of
Article 9) now or hereafter arising in connection with the business located in
or on or used or usable in connection with the Real Property and replacements,
additions, and accessions thereto; [ii] unless prohibited by law, all
franchises, permits, licenses and rights therein regarding the use, occupancy or
operation of the Improvements, or any part thereof; [iii] unless expressly
prohibited by the terms thereof, all contracts, agreements, contract rights and
materials relating to the design, construction or operation of the Improvements,
including but not limited to, plans, specifications, drawings, blueprints,
models and mock-ups, and all brochures, flyers, advertising and promotional
materials and mailing lists; and [iv] all ledger sheets, files, records,
computer programs, tapes, other electronic data processing materials, and other
documentation relating to the preceding listed property.
"Issuer" means a financial institution satisfactory to Landlord issuing
the Letter of Credit and such Issuer's successors and assigns. Any "Issuer"
shall have a Lace Financial Service Rating of "C+" or higher at all times
throughout the term of the Lease.
"Land" means the land described on Exhibit A.
"Landlord's Inspector" means the consulting inspector designated by
Landlord to inspect the Facility and review documentation in connection with the
Facility on behalf of Landlord.
"Lease" means the Lease Agreement between Landlord and Tenant dated the
date hereof, as amended from time to time.
"Lease Advance" means each advance of funds by Landlord pursuant to the
Lease and this Agreement but excluding any Earnout Lease Advance that may be
made by Landlord pursuant to the Lease.
"Lease Documents" means [i] this Agreement; [ii] the Lease; [iii] the
Collateral Assignment of Construction Contract; [iv] the Collateral Assignment
of Architect's Contract; [v] the Collateral Assignment of Management Agreement
and Consent of Manager to Collateral Assignment of Management Agreement and
Security Agreement; and [vi] all other documents and instruments executed by
Tenant, Manager or Developer and Landlord in connection with the Lease.
"Lease Expenses" means all reasonable costs and expenses incurred by
Landlord in investigating, making and administering the Lease, including but not
limited to, [i] attorneys' and paralegals' fees and costs; [ii] the fees of the
Landlord's Inspector; and [iii] travel, transportation, food, and lodging costs
and expenses incurred by Landlord, the Landlord's Inspector and Landlord's
attorneys and paralegals.
"Legal Requirements" means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, material requirements, material agreements,
conditions of participation and standards of any federal, state, county,
municipal or other governmental entity, administrative agency, insurance
underwriting board, architectural control board, and any restrictive covenants
applicable to the development, construction, renovation and operation of each
Facility as an assisted living facility,
<PAGE> 6
including but not limited to, [i] zoning, building, fire, health, safety, sign,
and subdivision regulations and codes; and [ii] the Environmental Laws.
"Letter of Credit" means an irrevocable and transferable Letter of
Credit in the aggregate amount equal to 5% of the Maximum Lease Amount issued by
Issuer in favor of Landlord as security for the Lease and in form acceptable to
Landlord, and any amendments thereto or replacements or substitutions therefor.
"List of Leases and Contracts" means the List of Leases and Contracts
set forth on Exhibit G of the Lease.
"Mandatory Completion Date" means the earlier of [i] the date which is
18 months after the Effective Date, provided that such date shall be extended by
the number of days' delay caused by Force Majeure to the extent permitted under
Section 5.2; or [ii] the completion date required by the Department of Health or
any other governmental authority.
"Maximum Guarantied Amount" means an amount equal to [i] 89% of Project
Costs incurred at the time of the calculation of the Maximum Guarantied Amount,
minus [ii] any amounts previously paid by Guarantor, Developer or Tenant in
connection with the exercise by Landlord of its remedies under the Lease and
other Lease Documents, including but not limited to [a] indemnification payments
arising from any claim or loss asserted against Landlord resulting from the acts
or omissions of Developer, Guarantor or Tenant in connection with the
construction of the Facility including without limitation, insurance deductibles
actually paid by Guarantor, Developer or Tenant under insurance policies, [b]
amounts drawn by Landlord on the Letter of Credit, [c] amounts deposited with
Landlord under Section 2.5 of this Agreement, and [d] amounts paid by Guarantor
under Section 8.2(l) of the Lease plus [iii] 100% of all losses suffered or
incurred by Landlord exclusively in connection with the acquisition of the Land.
"Maximum Lease Amount" means $[_______________].
"Permitted Exceptions" means the exceptions to title set forth on
Exhibit B of the Lease.
"Personal Property" means the Tangible Personal Property and Intangible
Personal Property.
"Plans and Specifications" means the plans and specifications for the
Facility approved by Landlord, including but not limited to, plans, drawings,
specifications, details, models and mock-ups for the Improvements.
"Pro Forma Statement" means a financial forecast for the Facility for
the five year period commencing on the anticipated date when the Facility
commences operations prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
<PAGE> 7
"Project Budget" means the budget of the total costs of acquiring,
developing, constructing, furnishing and equipping the Facility prepared by
Tenant and Developer and approved by Landlord, as the same may be modified from
time to time as provided herein. The initial Project Budget is attached hereto
as Exhibit B.
"Project Costs" means all costs of the Facility (exclusive of the costs
of acquisition of the Land) that are properly capitalized in accordance with
generally accepted accounting principles consistently applied.
"Real Property" means, collectively, the Land, Improvements and
Fixtures.
"Reserves" has the meaning set forth in Section 2.5.3.
"Secured Obligations" means all of the obligations of Tenant, Manager
or Developer under the Lease Documents.
"State" means the State of [___________].
"Surety" means the issuer of the Bonds, and it shall have a Best's
Rating of B+ or better and a Best's Financial Category of XII or larger.
"Survey" means a survey of the Land prepared in accordance with the
Minimum Detail Requirements for Land Title Surveys jointly adopted by ALTA/ACSM
in 1992 and such other requirements as may be required by Landlord or Title
Company.
"Tangible Personal Property" means all machinery, furniture, equipment,
trade fixtures, appliances, inventory, and other goods (as "equipment",
"inventory", and "goods" are defined for purposes of Article 9) now or hereafter
located in or on or used or usable in connection with the Real Property and
replacements, additions, and accessions thereto, including without limitation
those items which are to become Fixtures or which are building supplies and
materials to be incorporated into an Improvement or Fixture, but excluding any
equipment, furniture, and trade fixtures leased under the equipment financing
permitted under the Lease.
"Tenant's Equity" means Tenant's cash and other liquid assets dedicated
for payment of Working Capital in an amount not less than $[_____________].
"Tenant's Organizational Documents" means [i] for a corporate Tenant,
the Articles of Incorporation of Tenant certified by the Secretary of State of
the state of organization, as amended to date, and the Bylaws of Tenant
certified by Tenant, as amended to date; [ii] for a partnership Tenant, the
Partnership Agreement of Tenant certified by Tenant, as amended to date and the
Partnership Certificate, certified by the appropriate authority, as amended to
date; and [iii] for a limited liability company Tenant, the Certificate of
Formation of Tenant certified by the Secretary of State of the state of
organization, as amended to date and the Operating Agreement of Tenant certified
by Tenant, as amended to date.
<PAGE> 8
"Title Commitment" means an ALTA Form B Commitment, 1970 form as
revised 10-17-84, for owner's title insurance issued by the Title Company for
the Facility.
"Title Company" means Lawyers Title Insurance Corporation.
"Title Policy" means the final title policy issued by the Title Company
to Landlord pursuant to the Title Commitment for the Facility.
"Working Capital" means the capital to be invested by Tenant to be used
for pre-opening, pre-marketing, opening, start-up, and other similar costs and
expenses in connection with the Facility.
1.3 Incorporation of Amendments. The definition of any agreement, document,
or instrument set forth in this Agreement or in any other Lease Document shall
be deemed to incorporate all amendments, modifications, and renewals thereof and
all substitutions and replacements therefor.
1.4 Exhibits. The following exhibits are attached hereto and incorporated
herein:
Exhibit A: Legal Description
Exhibit B: Project Budget
Exhibit C: Disbursement Schedule
Exhibit D: Litigation
ARTICLE 2: LEASE ADVANCES
2.1 Obligation to Advance Funds. Subject to the terms and upon the
conditions set forth in the Lease Documents, Landlord shall make Lease Advances
up to the Maximum Lease Amount.
2.2 Use of Proceeds. Developer shall use the proceeds of the Lease Advances
solely for the following purposes: [i] pay or reimburse Developer for the
acquisition cost of the Land; [ii] pay or reimburse Developer for all hard and
soft expenses and costs of the design, development and construction of the
Improvements; [iii] pay for the costs of the Tangible Personal Property not to
exceed 10% of the Maximum Lease Amount; [iv] the closing costs for the Lease
(including without limitation the Commitment Fee and any other fees payable to
Landlord under the Commitment); [v] the Development Fee, and [vi] all items
specified in the Project Budget.
2.3 Commitment Fee. The Commitment Fee shall be paid at Closing as a Lease
Advance.
2.4 Lease Expenses. At the Closing, Landlord shall make a Lease Advance for
any Lease Expenses incurred up to the Effective Date. Within 30 days after
receipt of an invoice therefor, Landlord shall make a Lease Advance for any
Lease Expenses incurred by Landlord. Landlord shall apply proceeds of the Lease
Advances to pay the Commitment Fee, Development Fee, and Lease Expenses.
<PAGE> 9
2.5 Disbursements. Upon satisfaction of all conditions precedent, Landlord
shall make the initial Lease Advance and continue to disburse the Lease Advances
in accordance with the terms and conditions of this Agreement. Landlord may make
disbursements from time to time as construction progresses, but shall not be
obligated to disburse more frequently than once in each calendar month and shall
not be obligated to disburse until at least eight Business Days following
receipt of all documentation required for such disbursement. As of the Effective
Date, Developer estimates that the disbursements will be in accordance with the
Disbursement Schedule. In the event that the undisbursed proceeds of the Maximum
Lease Amount are not sufficient to pay all unpaid items set forth on the Project
Budget (after adjustment for any permitted change orders), Landlord may require
Developer to deposit with Landlord a sum sufficient so that the deposit,
together with the remaining Maximum Lease Amount to be advanced, will be
sufficient to complete the Facility in accordance with the Plans and
Specifications, all as certified by the Architect; provided, however, Developer
and Guarantor shall never be required to deposit with Landlord a sum in excess
of the Maximum Guarantied Amount. Developer and Landlord each acknowledge that
the deposit is in no manner a loan to Landlord or an investment in the Leased
Property and instead is Additional Rent that will not be returned or reimbursed.
If, during the Construction Term, Developer has not made a disbursement request
and Rent remains unpaid under the Lease for more than a one month period,
Landlord shall make a Lease Advance to pay unpaid Rent and Landlord shall give
Tenant prompt notice of such disbursement.
2.5.1 Amount of Periodic Disbursements. Disbursement of the available
proceeds of the Maximum Lease Amount (after deduction for Reserves and after
payment of the Commitment Fee, Development Fee, and Lease Expenses) shall not
exceed [i] the amount due under the Construction Contract at the time of the
disbursement after deduction for 10% retainage (whether or not such retainage is
required under the Construction Contract); plus [ii] 100% of the amounts
previously paid by Tenant or currently due and payable for architectural fees,
permits and other development soft costs; plus [iii] 100% of the Rent payable
during the Construction Term.
2.5.2 Amount of Final Disbursement. The final Lease Advance made on the
Conversion Date shall not exceed the lesser of [i] the balance of the amount due
under the Construction Documents plus all other Facility Costs; or [ii] the
undisbursed balance of the Maximum Lease Amount.
2.5.3 Reserves. After the occurrence and during the continuance of an Event
of Default, Landlord may set aside reserves (the "Reserves") from the Lease
Advances for the Commitment Fee, Lease Expenses or any of the following: [i]
Rent during the estimated construction period; [ii] real estate taxes accrued
and accruing during the estimated construction period; and [iii] premiums on
insurance policies required to be furnished by Tenant hereunder, accruing during
the estimated construction period. Landlord shall disburse the Reserves, for the
purpose for which they have been set aside, from time to time, either by paying
for the items for which the Reserve has been established or reimbursing Tenant
for payments so made by Tenant. No Reserve held by Landlord shall be considered
a Lease Advance until disbursement thereof, whereupon such disbursement shall be
deemed to be a Lease Advance.
2.5.4 Disbursing Agent. Landlord may elect to have the Lease Advances
disbursed by the Title Company or a disbursing agent pursuant to the provisions
of a disbursing agreement. If Landlord
<PAGE> 10
so elects, Tenant and Developer each shall join as a party to such agreement and
shall comply with its requirements (which shall be in addition to and not in
substitution for the requirements of this Agreement) and shall pay the fees and
expenses of the disbursing agent. If Developer is required to join as a party to
such agreement, the agreement shall be in a form acceptable to Developer, Tenant
and Landlord.
2.5.5 Direct Payments. After the occurrence and during the continuance of an
Event of Default, Landlord may, but shall have no obligation to do so, make
payments for the cost of construction directly to any contractor, subcontractor,
materialmen, vendor, or supplier.
2.6 Closing. The Closing shall occur at a time and place mutually agreed
upon by Landlord, Developer, and Tenant. Landlord may elect to close by
exchanging executed counterparts of one or more of the Lease Documents and other
closing documents by mail or a national courier service, or by telecopier
followed by exchanging documents by mail or national courier service.
ARTICLE 3: CONDITIONS PRECEDENT TO DISBURSEMENT
3.1 Conditions Precedent to Initial Disbursement. Developer shall comply
with, and Landlord's obligation to make the initial Lease Advance shall be
conditioned upon Developer's performance of the following conditions precedent:
3.1.1 Title Commitment. Developer shall have delivered to Landlord the Title
Commitment issued by the Title Company committing to insure Landlord's fee
simple interest in the Land subject only to Permitted Exceptions. The Title
Commitment shall be in form and substance satisfactory to Landlord.
3.1.2 Survey. Developer shall have delivered to Landlord the Survey. The
Survey shall be in form and substance satisfactory to Landlord and shall satisfy
the requirements of the Title Company to delete the survey exception from the
Title Policy.
3.1.3 Environmental Assessment. Developer shall have delivered to Landlord
the Environmental Assessment prepared by the Environmental Consultant, in form,
scope and substance reasonably satisfactory to Landlord.
3.1.4 Legal Opinion. Developer shall have delivered to Landlord one or more
opinions of counsel, in form and substance reasonably satisfactory to Landlord,
covering the law of the State and such other federal and state laws as Landlord
may reasonably require.
3.1.5 Appraisal. Developer shall have delivered to Landlord the Appraisal
prepared by an MAI appraiser, addressed to Landlord, and in form and substance
satisfactory to Landlord.
3.1.6 Insurance. Developer shall have delivered to Landlord satisfactory
evidence of the builder's risk and liability insurance coverage reasonably
required by Landlord.
<PAGE> 11
3.1.7 Lease Documents; Deed. Tenant and Developer shall have delivered to
Landlord fully executed originals of the Lease Documents and Guaranty Documents.
The deed conveying the Land to Landlord shall have been recorded in the
appropriate recorder's office.
3.1.8 Organizational Documents; Resolutions. Tenant, Manager, and Developer
shall have delivered to Landlord copies of Tenant's, Manager's, and Developer's
Organizational Documents. Tenant, Manager, Guarantor, and Developer shall have
delivered to Landlord copies of resolutions authorizing the Lease Documents and
Guaranty Documents, certified by Tenant, Manager, Guarantor, and Developer,
respectively. All of the foregoing shall be certified to be true and complete
and not revoked or amended since the respective dates thereof.
3.1.9 Flood Plain. Developer shall have delivered evidence satisfactory to
Landlord that the Land is not located in a flood-prone area as defined by the
United States Department of Housing and Urban Development in the Flood Disaster
Protection Act of 1973, as amended, or if the Land is located in a flood-prone
area, that appropriate flood insurance is in effect for the Facility.
3.1.10 Zoning. Developer shall have delivered to Landlord a certificate of the
zoning official having jurisdiction over the Facility in form and substance
satisfactory to Landlord and such other evidence as may be reasonably required
by Landlord to show that the Facility complies with applicable zoning, land use
and subdivision laws, rules and regulations.
3.1.11 Soil Report. Developer shall have delivered to Landlord's Inspector a
soil report or other evidence satisfactory to Landlord that the Land is suitable
for the construction of the Facility.
3.1.12 List of Leases and Contracts. Developer shall have delivered to
Landlord the List of Leases and Contracts.
3.1.13 Licenses and Permits. Tenant and Developer shall have delivered to
Landlord copies of all required licenses, permits, consents, and approvals, and
other Government Authorizations as may be needed for Tenant or Developer or
Manager to comply with all Legal Requirements as of the Effective Date and such
items shall be in full force and effect.
3.1.14 Eminent Domain. No eminent domain proceedings shall have been
threatened or be pending with respect to a substantial or material part of the
Land.
3.1.15 Plans and Specifications. Developer shall have delivered to Landlord's
Inspector a duplicate set of the Plans and Specifications.
3.1.16 Financial Statements. Tenant shall have delivered to Landlord the
Financial Statements and the Pro Forma Statement.
3.1.17 Architect's Certificate. Developer shall have delivered to Landlord the
Architect's Certificate.
<PAGE> 12
3.1.18 Construction Documents. Developer shall have delivered to Landlord and
Landlord shall have approved all contracts and agreements entered into by
Developer and the form of all contracts and agreements entered into by the
General Contractor on behalf of Developer in connection with the design and
construction of the Facility, including, without limitation, the Architect's
Contract, the Construction Contract and the form of subcontractor contracts. The
Construction Contract shall provide for retainage of at least 10%.
3.1.19 Consents. Developer shall have delivered to Landlord executed originals
of the Consent of Contractor to the Collateral Assignment of Construction
Contract, the Consent of Architect to the Collateral Assignment of Architect's
Contract, and the Consent of Manager to the Collateral Assignment of Management
Agreement.
3.1.20 Disbursement Voucher. Developer shall have delivered a Disbursement
Voucher to Landlord.
3.1.21 Budget and Schedule. Developer shall have delivered to Landlord the
Project Budget and the Disbursement Schedule in form and substance satisfactory
to Landlord.
3.1.22 Bonds. Developer shall have delivered to Landlord the Bonds in form and
substance satisfactory to Landlord.
3.1.23 Equity. Developer shall have delivered evidence reasonably satisfactory
to Landlord of Tenant's ability to fund Tenant's Equity.
3.1.24 Letter of Credit. Tenant shall have delivered to Landlord the original
Letter of Credit.
3.1.25 No Event of Default. There shall be no uncured Event of Default under
this Agreement or the Lease.
3.1.26 Other Closing Requirements. Tenant and Developer shall have satisfied
all other closing requirements of the Lease Documents and the Commitment.
3.2 Conditions Precedent to All Disbursements. Tenant and Developer shall
perform, and Landlord's obligation to make subsequent Lease Advances shall be
conditioned upon Tenant's and Developer's performance of, the following
conditions precedent:
3.2.1 Title Endorsement. Landlord shall have received an endorsement to the
Title Policy that brings forward the effective date of the Title Policy with no
change in the status of title, insuring that there are no mechanics' liens and
increasing the coverage by an amount equal to the disbursement then being made.
3.2.2 Foundation Survey. After the foundation is installed, Developer shall
have delivered to Landlord an updated Survey showing the foundation and
certifying that the foundation is located on the Land and does not encroach on
any easements, building lines, setbacks, or other restrictions.
<PAGE> 13
3.2.3 Disbursement Voucher. Developer shall have delivered a Disbursement
Voucher to Landlord.
3.2.4 Lien Waivers. Developer shall have delivered to Landlord sworn
statements, waivers of lien, or such other documents as may be required to
insure Landlord that there are no mechanics' liens.
3.2.5 Inspector's Report. Landlord shall have received a satisfactory report
from Landlord's Inspector describing the construction that has been completed
since the last inspection, stating that the construction has been in accordance
with the Plans and Specifications, indicating the percentage of completion of
construction, stating that the construction can be completed by the Mandatory
Completion Date, that the costs of the Facility are not, and are not expected to
be, in excess of the costs set forth on the Project Budget and that the
undisbursed balance of the Maximum Lease Amount is sufficient to pay the costs
to complete construction of the Facility.
3.2.6 Updated List and Schedule. Developer shall have delivered to Landlord
an update of the List of Contracts and the Disbursement Schedule.
3.2.7 Licenses and Permits. Tenant, Manager, and Developer shall have
delivered to Landlord copies of all required licenses, permits, consents, and
approvals, and other Government Authorizations as may be needed to comply with
all Legal Requirements at the time of such disbursement and such items shall be
in full force and effect.
3.2.8 No Damage. The Facility shall not have been substantially or materially
damaged or destroyed, in whole or in part, by fire or other casualty which is
not covered by insurance nor shall eminent domain proceedings have been
threatened or be pending with respect to a substantial or material part of the
Facility.
3.2.9 No Event of Default. There shall be no uncured Event of Default under
this Agreement or the Lease.
3.3 Conditions Precedent to Final Disbursement. Tenant, Manager or
Developer shall perform, and Landlord's obligation to make the final Lease
Advance, shall be conditioned upon the performance of the following conditions
precedent:
3.3.1 Final Title Policy. Developer shall have delivered to Landlord the
Title Policy and [i] an endorsement which brings forward the effective date of
the Title Policy with no change in the status of title and insuring that there
are no mechanics' liens; and [ii] if available, an updated zoning endorsement on
the ALTA 3.1 form and in substance satisfactory to Landlord.
3.3.2 As-Built Survey. Developer shall have delivered to Landlord an updated
"As-Built" Survey, in form and substance satisfactory to Landlord and the Title
Company, showing the location of all Improvements, including the driveways and
parking lot and the number of spaces thereon, and certifying that the
Improvements do not encroach on adjoining property, streets, alleys, or
easements, and do not violate any building line, setback, or other title or
zoning restrictions.
<PAGE> 14
3.3.3 Other Conditions. The conditions set forth in Section 3.2 shall have
been fulfilled.
3.3.4 Completion Certificate. Developer shall have delivered to Landlord the
AIA form of Certificate of Substantial Completion from Developer, the Architect
and the General Contractor certifying that the Facility has been completed in
accordance with the Plans and Specifications, except as otherwise noted thereon.
3.3.5 Certificate of Occupancy. Developer shall have delivered to Landlord an
unconditional, permanent and final certificate of occupancy and certified copies
of all other Government Authorizations with respect to the occupancy and
operation of the Facility.
3.3.6 Legal Opinion. Developer shall have delivered to Landlord an opinion of
counsel, in form and substance satisfactory to Landlord, with the following
opinions: [i] to counsel's knowledge, the Facility has been constructed in
accordance with and complies with all Legal Requirements relating to licensure
of the Facility; and [ii] to counsel's knowledge, all applicable Government
Authorizations required for the occupancy and operation of the Facility have
been procured and are in full force and effect.
3.3.7 License. Tenant, Manager or Developer shall have delivered to Landlord,
if applicable, a copy of the license to operate the Facility as a [__]-unit
personal care facility or, if such a license has not yet been issued, evidence
satisfactory to Landlord that the Facility meets all requirements for the
issuance of such a license.
3.3.8 Facility Equipped. Developer shall have delivered to Landlord a
certificate from Tenant that the Facility is fully equipped and ready to
operate.
3.3.9 Consent of Surety. Developer shall have delivered to Landlord the
consent of the Surety to final payment, if required under the Bonds.
3.3.10 Insurance. Developer shall have delivered to Landlord satisfactory
evidence of the property and liability insurance coverage required by Landlord.
3.3.11 Bill of Sale. Tenant and Developer, as applicable, shall have delivered
to Landlord a bill of sale conveying all of the Tangible Personal Property and a
schedule thereof.
3.3.12 Expenses. Landlord shall make a Lease Advance to pay such additional
Lease Expenses incurred by Landlord in connection with the conversion to the
Initial Term and the disbursement of the Lease Advances.
ARTICLE 4: DEFAULT AND REMEDIES
4.1 Event of Default. Any one or more of the following events shall
constitute an "Event of Default" hereunder:
<PAGE> 15
4.1.1 The occurrence of an Event of Default (after expiration of any
applicable grace or cure period) under the Lease.
4.1.2 The disapproval by Landlord or Landlord's Inspector at any time of any
construction work and Developer's failure to cause the same to be corrected to
the satisfaction of Landlord and Landlord's Inspector within 30 days, or if by
reason of the nature of the problem the same cannot be corrected within 30 days,
Developer's failure to proceed with reasonable diligence (satisfactory to
Landlord) to correct the same or, in any event, failure to correct the same
within 90 days after receipt of the notice.
4.1.3 [i] An unreasonable delay in the construction of the Improvements or a
discontinuance of construction for a period of 45 days unless Developer, in
Landlord's reasonable judgment, is proceeding diligently and in good faith to
resume construction, or [ii] a delay in construction of the Improvements so that
the same may not, in Landlord's and Architect's judgment, be completed on or
before the Mandatory Completion Date (which shall be extended due to Force
Majeure to the extent permitted under Section 5.1).
4.1.4 Developer's failure to complete construction of the Improvements and to
satisfy all of the conditions precedent to final disbursement set forth in
Section 3.3 no later than the Mandatory Completion Date (which shall be extended
due to Force Majeure to the extent permitted under Section 5.1).
4.1.5 The bankruptcy or insolvency of the General Contractor and the failure
of Developer to procure a contract with a new contractor satisfactory to
Landlord within 45 days from the occurrence of such bankruptcy or insolvency.
4.1.6 Any Government Authorization for the Facility, is canceled, suspended
or otherwise invalidated and not reinstated or reissued within 30 days.
4.2 Remedies. Upon the occurrence of an Event of Default, Landlord may
exercise any one or more of the remedies provided in Section 8.2 of the Lease
subject to the limitations specified in Section 8.10 of the Lease.
ARTICLE 5: CONSTRUCTION
5.1 Construction of Improvements. Developer shall commence construction of
the Improvements within 30 days after the Effective Date. Developer shall
construct the Improvements in a good and workmanlike manner with materials of
high quality, in accordance with the Plans and Specifications (or in accordance
with any changes permitted under Section 5.3), and all Legal Requirements.
Developer shall complete construction of the Facility and satisfy all of the
conditions precedent to final disbursement set forth in Section 3.3 not later
than the Mandatory Completion Date. If all such conditions are not satisfied by
the date the Facility opens for business and first accepts residents, at
Landlord's option [i] the undisbursed balance of the Maximum Lease Amount may be
disbursed into an escrow account in the name of Tenant; [ii] the Initial Term of
the Lease shall commence on the date the funds are disbursed into an escrow
account, which date shall be deemed the Conversion Date; and [iii] Tenant shall
pay Base Rent based upon the Maximum
<PAGE> 16
Lease Amount in accordance with Section 2.4 of the Lease. The interest earned on
the escrow funds shall belong to Tenant. The escrow funds shall be disbursed to
Tenant upon satisfaction of all of the conditions set forth in Section 3.3 of
this Agreement.
5.2 Force Majeure. The Mandatory Completion Date may be extended due to
Force Majeure on the following conditions:
(a) Developer gives Landlord written notice of the Force Majeure event
within 5 days of Developer's knowledge of its occurrence;
(b) Developer complies with all requirements under the certificate of
need laws (if applicable) and all other applicable laws and regulations,
including, without limitation, the filing of all required notices, reports, and
certificates with respect to a work stoppage; and
(c) In Landlord's reasonable judgment, Developer diligently works to
minimize the delay caused by Force Majeure and to resume construction.
The extension of time shall be equal to the period of delay caused
by Force Majeure provided, however, that in no event shall the extension of time
[i] exceed 60 days; or [ii] cause the construction completion date to be later
than the completion date required by the Department of Health or any other
governmental authority.
5.3 Modifications. Developer shall not materially change the Plans and
Specifications, Architect's Contract, Construction Contract or any other
Construction Document without the prior written consent of Landlord. A material
change shall include an increase in the amount payable under such contract of
more than 1% in any one instance or of more than 3% in the aggregate or a change
in the scope of work or services. Developer will furnish Landlord with copies of
all proposed material contracts between Developer and architects, engineers, and
contractors, and all of the contracts shall be subject to Landlord's approval as
to form, amount and the contractor employed. Developer will promptly furnish to
Landlord true and complete copies of all such contracts as executed.
5.4 Inspections. Developer shall cooperate with Landlord in arranging for
inspections by Landlord, Landlord's Inspector, and their representatives of the
progress of construction from time to time. Developer shall promptly correct any
defects or nonconforming construction. During the course of construction,
Landlord's Inspector will visit the Facility monthly, or more often as Landlord
reasonably deems necessary to review the progress of the construction. Landlord
shall make a Lease Advance to pay the $750.00 per day plus out-of-pocket
expenses for travel, lodging, food and transportation for Landlord's Inspector.
<PAGE> 17
ARTICLE 6: MISCELLANEOUS
6.1 Advances by Landlord. At any time and from time to time, Landlord may
incur and/or pay and/or advance costs or expenses: [i] incurred or advanced by
Landlord which Landlord is authorized or has the right (but not necessarily the
obligation) to incur or may incur under any Lease Document or any law; [ii] of
whatever nature incurred or advanced by Landlord in exercising any right or
remedy provided under any Lease Document or in taking any action which Landlord
is authorized to take under any Lease Document; [iii] required to be paid by
Tenant or Developer under any Lease Document, but which Tenant or Developer
fails to pay within the time period required; or [iv] any and all costs and
expenses from which Tenant or Developer is required to hold Landlord harmless
under any Lease Document, but from which Tenant fails to hold Landlord harmless.
Any costs, expenses, or advances incurred or paid by Landlord shall, upon
demand, be paid to Landlord together with interest thereon at the Overdue Rate
from the date of disbursement by Landlord. Payment of such costs, expenses, or
advances shall be secured by the security interest granted to Landlord in the
Lease Documents.
6.2 Entire Agreement. The Commitment, this Agreement and the other Lease
Documents, the Working Capital Documents, the Equity Loan Documents, and the
Guaranty Documents constitute the entire agreement between Developer, Guarantor,
Tenant, any Affiliate, and Landlord with respect to the subject matter hereof.
No representations, warranties, and agreements have been made by Landlord except
as set forth in the Commitment, this Agreement and the Lease. If there is any
direct conflict between the terms and provisions of the Commitment and the terms
of this Agreement, this Agreement shall govern. Tenant and Developer hereby
reaffirm the Commitment and all provisions thereof. The Commitment shall survive
the execution of this Agreement.
6.3 Severability. If any term or provision of this Agreement is held or
deemed by Landlord to be invalid or unenforceable, such holding shall not affect
the remainder of this Agreement and the same shall remain in full force and
effect.
6.4 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Agreement or the intent of any provision thereof.
6.5 Governing Law. This Agreement shall be governed by and construed under
the laws of the State.
6.6 Binding Effect. This Agreement will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Developer.
6.7 Modification. This Agreement may only be modified by a writing signed
by both Landlord and Developer. All references to this Agreement, whether in
this Agreement or in any other document or instrument, shall be deemed to
incorporate all amendments, modifications, and renewals of this Agreement made
after the date hereof.
<PAGE> 18
6.8 Construction of Agreement. This Agreement has been prepared by Landlord
and its professional advisors and reviewed by Developer and its professional
advisors. Landlord, Developer and their advisors believe that this Agreement is
the product of all their efforts, it expresses their agreement, and that it
shall not be interpreted in favor of either Landlord or Developer or against
either Landlord or Developer merely because of their efforts in preparing it.
6.9 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original hereof.
6.10 No Third-Party Beneficiary Rights. No person not a party to this
Agreement shall have or enjoy any rights hereunder and all third-party
beneficiary rights are expressly negated. Without limiting the generality of the
foregoing, no one other than Developer shall have any rights to obtain or compel
a disbursement of a Lease Advance.
6.11 No Obligations of Landlord.
6.11.1 No agency. Landlord is not and will not be in any way the agent for or
trustee of developer. Landlord does not intend to act in any way for or on
behalf of developer in disbursing the lease advances. Landlord's purpose in
making the requirements set forth in this agreement is to protect landlord's
interest in the facility. Except as expressly provided in this agreement and the
other lease documents, landlord does not intend to be and is not and will not be
responsible for the completion of any improvements erected or to be erected upon
the land; the payment of bills or any other details in connection with the land
and improvements; any plans and specifications prepared in connection with the
land and improvements; or developer's relations and contracts with any
contractors, subcontractors, materialmen, or laborers performing work or
supplying materials for the land and improvements.
6.11.2 No obligation to pay. Except as expressly provided herein or in the
other lease documents, the lease and this agreement are not to be construed by
tenant or developer or anyone furnishing labor, materials, or any other work or
product for improving the land as an agreement upon the part of landlord to
assure that anyone will be paid for furnishing such labor, materials, or any
other work or product. Landlord will not be responsible for such payments.
6.11.3 No responsibility for construction. Landlord is not responsible for
construction of the improvements. Notwithstanding inspection of the land and the
improvements, landlord and landlord's inspector assume no responsibility for the
quality of construction or workmanship or for the architectural or structural
soundness of any improvements or for the adherence to or approval of any plans
and specifications in connection therewith or for any improvements.
6.11.4 No reliance on landlord's inspector. Tenant hereby acknowledges that
the architect and the general contractor are solely responsible for the quality
of construction and workmanship and the architectural and structural soundness
of the improvements and for
<PAGE> 19
the adherence to the plans and specifications in the construction of the
improvements. All actions, inspections and reports of landlord's inspector are
solely for the benefit of landlord. Developer, tenant, architect and general
contractor shall not be entitled to rely upon any action, inspection or report
of landlord's inspector.
6.12 Miscellaneous Provisions.
6.12.1 Confidentiality. Landlord shall use reasonable efforts not to disclose
the information provided by Developer, Manager, Guarantor or Tenant to Landlord
pursuant to the Lease Documents; provided, however, that Landlord may disclose
such information to any person or entity to whom Landlord is required to make
such disclosure; to governmental authorities; and to any other person or entity
having a legitimate business interest in Landlord, including, but not limited
to, regulators, auditors, accountants, attorneys, investors, underwriters,
rating agencies, bond or surety companies, and lenders of Landlord (including,
but not limited to, collateral pool lenders and line of credit lenders).
6.12.2 Plans and Specifications. The Plans and Specifications shall at all
times remain the property of Developer, and neither Landlord nor Tenant nor any
other party shall acquire any ownership interest in the Plans and
Specifications. Landlord shall not utilize the Plans and Specifications for any
purpose whatsoever in connection with any development other than a development
in which Developer acts as developer for such development. Notwithstanding the
foregoing, Landlord shall have the right to utilize the Plans and Specifications
for all purposes related to the Facility, including without limitation the
making of alterations and repairs thereto.
6.12.3 Project Budget. Developer and Landlord have agreed to an initial
Project Budget, as described on Exhibit B attached hereto and made a part
hereof. Should Developer and Landlord determine that the contingencies set forth
in the Project Budget will not be needed for the completion of the Facility in
accordance with the Plans and Specifications, Developer and Landlord shall
negotiate in good faith to amend the Project Budget to provide for the funding
by Landlord of furniture, fixtures and equipment not originally included in the
Project Budget, but which are otherwise desirable for the Facility.
ARTICLE 7: REPRESENTATIONS
AND WARRANTIES
Developer hereby makes the following representations and
warranties, as of the Effective Date, to Landlord and acknowledges that Landlord
is entering into this Agreement and the Lease in reliance upon such
representations and warranties. Developer representations and warranties shall
survive the Closing and, except to the extent made as of a specific date, shall
continue in full force and effect until Developer's Obligations have been
performed in full.
7.1 Organization and Good Standing. Developer is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in and is in good standing
under the laws of the State.
<PAGE> 20
7.2 Power and Authority. Developer has the power and authority to
execute, deliver and perform the Developer Documents. Developer has taken all
requisite action necessary to authorize the execution, delivery and performance
of Developer's obligations under the Developer Documents.
7.3 Enforceability. The Developer Documents constitute the legal,
valid, and binding obligations of Developer enforceable in accordance with their
respective terms, except as enforceability may be limited by creditor's rights
laws, equitable principles, and the effect of judicial discretion.
7.4 Government Authorizations. The Land and the Plans and
Specifications conform in all material respects with all Legal Requirements for
the construction and development of the Facility. Upon completion of the
Facility in accordance with the Plans and Specifications, the Facility will
conform in all material respects to all Legal Requirements. Except as otherwise
noted in Exhibit E, Developer holds all Government Authorizations required to
commence construction of the Facility.
7.5 Condition of Facility. To Developer's knowledge, upon
completion of the Facility in accordance with the Plans and Specifications, all
of the mechanical and electrical systems, heating and air-conditioning systems,
plumbing, water and sewer systems, and all other items of mechanical equipment
or appliances will be in good working order, condition and repair, will be of
sufficient size and capacity to service the Facility for the Facility Uses, and
will conform with all applicable ordinances and regulations, and with all
building, zoning, fire, safety, and other codes, laws and orders. The
Improvements, including the roof and foundation, will be structurally sound and
free from leaks and other defects.
7.6 Compliance with Laws. To Developer's knowledge, there is no
violation of, or noncompliance with, [i] any laws, orders, rules or regulations,
ordinances or codes of any kind or nature whatsoever relating to the Facility or
the ownership or operation thereof (including without limitation, building,
fire, health, occupational safety and health, zoning and land use, planning and
environmental laws, orders, rules and regulations); [ii] any covenants,
conditions, restrictions or agreements affecting or relating to the ownership,
use or occupancy of the Facility; or [iii] any order, writ, regulation or decree
relating to any matter referred to in [i] or [ii] above.
7.7 No Litigation. As of the Effective Date and except as
disclosed on Exhibit D, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Developer or the Facility; [ii] Developer has not received notice of any
threatened actions, suits, proceedings or investigations against Developer or
the Facility at law or in equity, or before any governmental board, agency or
authority which, if determined adversely to Developer, would materially and
adversely affect Developer's performance of the Developer's Obligations; [iii]
there are no unsatisfied or outstanding judgments against Developer (that are
not being contested in good faith) or the Facility; [iv] there is no labor
dispute materially and adversely affecting the operation or business conducted
by Developer or the Facility; and [v] Developer does not have knowledge of any
facts or circumstances which might reasonably form the basis for any such
action, suit, or proceeding.
<PAGE> 21
7.8 Consents. The execution, delivery and performance of the
Developer Documents will not require any consent, approval, authorization,
order, or declaration of, or any filing or registration with, any court, any
federal, state, or local governmental or regulatory authority, or any other
person or entity, the absence of which would materially impair the ability of
Developer to perform the Developer's Obligations.
7.9 No Violation. The execution, delivery and performance of the
Developer Documents [i] do not and will not conflict with, and do not and will
not result in a breach of Developer's Organizational Documents; [ii] do not and
will not conflict with, and do not and will not result in a breach of, and do
not and will not constitute a default under (or an event which, with or without
notice or lapse of time, or both, would constitute a default under), any of the
terms, conditions or provisions of any agreement or other instrument or
obligation to which Developer is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Developer or the Facility.
7.10 Reports and Statements. All reports, statements, certificates
and other data furnished by or on behalf of Developer to Landlord in connection
with the Developer Documents, and all representations and warranties made herein
or in any certificate or other instrument delivered in connection herewith and
therewith, are true and correct in all material respects and do not omit to
state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data. The copies of all agreements and instruments submitted to Landlord
are true, correct and complete copies and include all amendments and
modifications of such agreements.
7.11 ERISA. All plans (as defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time ("ERISA")) for which Developer is an "employer" or a "substantial
employer" (as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively) are in compliance with ERISA and the regulations and published
interpretations thereunder. To the extent Developer maintains a qualified
defined benefit pension plan: [i] there exists no accumulated funding
deficiency; [ii] no reportable event and no prohibited transaction has occurred;
[iii] no lien has been filed or threatened to be filed by the Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA;
and [iv] Developer has not been deemed to be a substantial employer.
7.12 Chief Executive Office. Developer maintains its chief
executive office and its books and records at the address set forth in the
introductory paragraph of this Agreement.
7.13 Access. Except as otherwise disclosed in writing to Landlord,
access to the Land is directly from a dedicated public right-of-way without any
easement. To the knowledge of Developer, there is no fact or condition which
would result in the termination or reduction of the current access to and from
the Land to such right-of-way.
<PAGE> 22
7.14 Utilities. Except as otherwise disclosed in writing to
Landlord, there are available at the Land gas, municipal water, and sanitary
sewer lines, storm sewers, electrical and telephone services in operating
condition which are adequate for the operation of the Facility at a reasonable
cost. The Land has direct access to utility lines located in a dedicated public
right-of-way without any easement. As of the Effective Date, there is no pending
or, to the knowledge of Developer, threatened governmental or third party
proceeding which would impair or result in the termination of such utility
availability.
7.15 Condemnation and Assessments. As of the Effective Date,
Developer has not received notice of, and there are no pending or, to
Developer's knowledge, threatened, condemnation, assessment or similar
proceedings affecting or relating to the Facility, or any portion thereof, or
any utilities, sewers, roadways or other public improvements serving the
Facility.
7.16 Zoning. As of the Effective Date, [i] except as otherwise
disclosed in writing to Landlord, the use and operation of the Facility for the
Facility Uses is a permitted use under the applicable zoning code; [ii] except
as disclosed on Exhibit E of the Lease, no special use permits, conditional use
permits, variances, or exceptions have been granted or are needed for such use
of the Facility; [iii] the Land is not located in any special districts such as
historical districts or overlay districts; and [iv] the Facility once
constructed according to the Plans and Specifications will comply with all
applicable zoning laws, including but not limited to, dimensional, parking,
setback, screening, landscaping, sign and curb cut requirements.
7.17 Pro Forma Statement. Developer has delivered to Landlord a
true, correct and complete copy of the Pro Forma Statement. The Pro Forma
Statement shows Developer's reasonable expectation of the most likely results of
Facility operations for the next 5 year period commencing on the anticipated
date when the Facility commences operations.
7.18 Environmental Matters. To Developer's knowledge, [i] the
Leased Property is in compliance with all Environmental Laws; [ii] there were no
releases or threatened releases of Hazardous Materials on, from, or under the
Leased Property, except in compliance with all Environmental Laws; [iii] no
Hazardous Materials have been, are or will be used, generated, stored, or
disposed of at the Leased Property, except in compliance with all Environmental
Laws; [iv] asbestos has not been and will not be used in the construction of any
Improvements; [v] no permit is or has been required from the Environmental
Protection Agency or any similar agency or department of any state or local
government for the use or maintenance of any Improvements; [vi] underground
storage tanks on or under the Land, if any, have been and currently are being
operated in compliance with all applicable Environmental Laws; [vii] any
closure, abandonment in place or removal of an underground storage tank on or
from the Land was performed in compliance with applicable Environmental Laws and
any such tank had no release contaminating the Leased Property or, if there had
been a release, the release was remediated in compliance with applicable
Environmental Laws to the satisfaction of regulatory authorities; [viii] no
summons, citation or inquiry has been made by any such environmental unit, body
or agency or a third party demanding any right of recovery for payment or
reimbursement for costs incurred under CERCLA or any other Environmental Laws
and the Land is not subject to the lien of any such agency; and [ix] to Tenant's
<PAGE> 23
knowledge, the Environmental Assessment is true, complete and accurate.
"Disposal" and "release" shall have the meanings set forth in CERCLA.
7.19 Leases and Contracts. As of the Effective Date and except for
the Working Capital Documents and as disclosed on Exhibit G of the Lease, there
are no leases or contracts (including but not limited to, insurance contracts,
maintenance contracts, construction contracts, employee benefit plans,
employment contracts, equipment leases, security agreements, architect
agreements, and management contracts) to which Developer is a party relating to
any part of the ownership, operation, possession, construction, management or
administration of the Land or the Facility.
7.20 No Default. As of the Effective Date, [i] there is no
existing Event of Default under this Agreement; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default.
7.21 Project Budget. The Project Budget sets forth all anticipated
costs, direct and indirect, of developing and constructing the Facility.
7.22 Lease Covenants. Throughout the term of the Lease, Developer
shall comply with the provisions of the Lease applicable to Developer.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 24
IN WITNESS WHEREOF, Landlord and Developer have executed and
delivered this Agreement effective as of the Effective Date.
LANDLORD: [_________________________]
By:_________________________________
Title:_________________________
DEVELOPER: BCC DEVELOPMENT AND
MANAGEMENT CO.
By:_________________________________
Title:_________________________
CONSENT AND AGREEMENT OF TENANT
Tenant consents to the foregoing Agreement and agrees to be bound
by the provisions therein applicable to Tenant as of the Effective Date.
TENANT: FINANCIAL CARE INVESTORS OF
[___________], LLC
By: Financial Care Investors, LLC, Member
By:_________________________________
Title:_________________________
<PAGE> 1
EXHIBIT 10.4
SCHEDULE TO FORM OF HCRI CONSTRUCTION DISBURSING AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LANDLORD TENANT LOCATION NUMBER MAXIMUM DEVELOPMENT
OF UNITS LEASE AMOUNT FEES
<S> <C> <C> <C> <C> <C> <C>
LEBANON, Pennsylvania Financial Lebanon, 60 $4,181,799.00 $325,000
PENNSYLVANIA BCC Care Pennsylvania
Properties, Investors of
Inc. Lebanon, LLC
LOYALSOCK, Pennsylvania Financial Williamsport, 60 $4,440,815.00 $325,000
PENNSYLVANIA BCC Care Pennsylvania
Properties, Investors of
Inc. Loyalsock,
LLC
WESTERVILLE, HCN BCC Financial Westerville, 106 $9,026,982.00 $475,000
OHIO Holdings, Care Ohio
Inc. Investors of
Westerville,
LLC
MORRISTOWN, HCN BCC Financial Morristown, 60 $4,191,291.00 $325,000
TENNESSEE Holdings, Care Tennessee
Inc. Investors of
Morristown,
LLC
OAK RIDGE, HCN BCC Financial Oak Ridge, 60 $4,498,968.00 $325,000
TENNESSEE Holdings, Care Tennessee
Inc. Investors of
Oak Ridge,
LLC
SAGAMORE HCN BCC Financial Sagamore 103 $8,315,468.00 $475,000
HILLS, OHIO Holdings, Care Hills, Ohio
Inc. Investors of
Sagamore
Hills, LLC
</TABLE>
<TABLE>
<CAPTION>
GENERAL STATE TENANT'S EQUITY
CONTRACTOR DEFINITION
REFERS TO
STATE OF
<S> <C> <C> <C>
LEBANON, Consolidated Pennsylvania $808,000.00
PENNSYLVANIA Construction
Company
LOYALSOCK, The Milnes Pennsylvania $793,000.00
PENNSYLVANIA Company, Inc.
WESTERVILLE, CCI Ohio $1,545,500.00
OHIO Construction
Co., Inc.
MORRISTOWN, The Milnes Tennessee $814,118.00
TENNESSEE Company, Inc.
OAK RIDGE, Weis Builders, Tennessee $821,115.00
TENNESSEE Inc.
SAGAMORE HILLS, Adena Ohio $1,463,000.00
OHIO Corporation
</TABLE>
<PAGE> 1
EXHIBIT 10.5
FORM OF HCRI OPTION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of September 22, 1998
between Financial Care Investors, LLC, a Delaware limited liability company (the
"OPTIONOR") and Balanced Care Corporation, a Delaware corporation, or its
successors and assigns ("BCC").
WITNESSETH
WHEREAS, Optionor is the owner of 100% of the membership interests
(the "EQUITY INTERESTS") in Financial Care Investors of [__________], LLC, a
Delaware limited liability company (the "COMPANY"), which Equity Interests are
evidenced by certificate number 1 of the Company, and represent 100% of the
equity interests in the Company; and
WHEREAS, the Company executed and delivered that certain Lease
Agreement dated as of the Documentation Date (the "LEASE") whereby the Company
leased from [__________________], Inc., a [_____________] corporation (the
"LESSOR") property, together with all improvements built or to be built thereon,
located in [________________________], as more fully described in the Lease (the
"PROPERTY"); and
WHEREAS, the Company and Balanced Care at [___________], Inc., a
Delaware corporation (the "MANAGEMENT FIRM") have entered into that certain
Management Agreement dated as of the Documentation Date (the "MANAGEMENT
AGREEMENT") whereby the Company has appointed the Management Firm as the
exclusive manager and operator of the Facility; and
WHEREAS, BCC, Optionor and the Company have entered into that
certain Shortfall Funding Agreement dated as of the Documentation Date (the
"SHORTFALL AGREEMENT") whereby, among other matters, BCC has agreed to fund
certain Shortfalls by making loans to the Company, as more fully provided in the
Shortfall Agreement; and
WHEREAS, BCC is willing to enter into the Shortfall Agreement, and
all other Transaction Documents of which BCC is a party, only if Optionor
executes and delivers an option agreement whereby BCC or its successors and
assigns may acquire all of the Equity Interests of the Optionor, on the terms
and conditions provided herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. GRANT OF OPTION/CONSIDERATION. (a) Optionor hereby grants to BCC an
option (the "OPTION") to purchase all of Optionor's right, title and interest in
and to the Equity Interests on the terms and conditions provided herein. The
Purchase Price for the Equity Interests shall be paid to Optionor on the Closing
Date in immediately available funds. The Option shall be exercisable by
providing written notice to Optionor on or before the ninth anniversary after
the date of this Agreement (the "OPTION TERM").
(b) In consideration of the grant of the Option to BCC, BCC shall make
the following payments (the "OPTION PAYMENTS") to Optionor: (1) on the earlier
of one day after the
<PAGE> 2
second annual anniversary of (A) the issuance of the certificate of occupancy
for the Facility or (B) the opening for business and acceptance of residents
into the Facility (the "First Payment Date"), an amount equal to the Current
Yield (as hereinafter defined) on the Working Capital Reserve actually funded
from time to time into the Collateral Account through such date, compounded on
an annual basis, payable in arrears, (2) on that date which is 12 months after
the First Payment Date (the "Second Payment Date"), an amount equal to the
Current Yield on the Working Capital Reserve actually funded from time to time
into the Collateral Account through such date, compounded on an annual basis,
representing the payment of the annual Current Yield for the previous 12 month
period, payable in arrears, and (3) thereafter, on that date which is 12 months
after the Second Payment Date, and annually thereafter for so long as this
Agreement is in effect (but ending in all events at the time of exercise of the
Option), an amount equal to the Current Yield on the Working Capital Reserve
actually funded from time to time into the Collateral Account, compounded on an
annual basis, representing payment of the annual Current Yield, payable in
arrears. "Current Yield" as used in this Agreement means an annual internal rate
of return (based on revenues derived from the Facility and Option Payments
actually made) equal to (A) 14% of the Senior Loan Capital Portion of the
Working Capital Reserve actually funded from time to time into the Collateral
Account through the date of calculation and (B) 20% of the Equity Capital
Portion of the Working Capital Reserve actually funded from time to time into
the Collateral Account through the date of such calculation. Notwithstanding
anything to the contrary contained herein, if the Option is exercised, BCC's
obligation to make Option Payments thereafter shall cease. Option Payments shall
be made to Optionors without demand or notice, except as expressly provided
herein.
(c) Until BCC provides written notice of its exercise of the Option,
BCC shall be under no obligation whatsoever to purchase the Equity Interests or
exercise the Option, except as otherwise provided in Section 10 below, and shall
not otherwise have any liability whatsoever hereunder in connection with Option
Payments (except as expressly provided in Section 7(c) below) or the purchase of
the Equity Interests.
(d) The "PURCHASE PRICE" as used herein shall mean (i) an amount equal
to the Working Capital Reserve actually funded into the Collateral Account under
the Shortfall Agreement (including all amounts contributed to the Working
Capital Reserve from proceeds received in connection with the Senior Credit
Documents), plus (ii) an amount calculated as the Current Yield on the Working
Capital Reserve actually funded into the Collateral Account under the Shortfall
Agreement compounded annually through the Closing Date (as defined below), plus
(iii) the aggregate amount of all Advances and all other obligations due and
payable by the Company or the Optionor to BCC or a BCC Affiliate under the
Transaction Documents through the Closing Date (exclusive of the Management Fee
under the Management Agreement), minus (iv) any Option Payments actually made
prior to the Closing Date. The aggregate amount of all Advances and all other
obligations due and payable by the Company or the Optionor through the Closing
Date to BCC or a BCC Affiliate under the Transaction Documents as provided in
Subsection (iii) of this Section 1(d), shall be paid to BCC or the BCC Affiliate
(as appropriate) on the Closing Date from the Purchase Price. To avoid any
doubt, BCC shall receive a credit against the Purchase Price for Option Payments
paid as Current Yield in advance, to the extent that such advanced Option
Payments are attributable to Current Yield accruing after the Closing Date. All
Senior Loan Obligations shall be paid in full to the Lessor on the Closing Date
from the Purchase Price.
2. CLOSING. (a) The closing of the purchase of the Equity Interests
(the "CLOSING"), pursuant to the exercise of the Option, shall take place at
such time and location in
2
<PAGE> 3
Pennsylvania as shall be designated by BCC upon three (3) days prior written
notice to Optionor (the "CLOSING DATE"). At the Closing (i) BCC shall deliver
the Purchase Price and (ii) Optionor shall deliver to BCC (A) the certificates
representing the original Equity Interests duly endorsed to the purchaser,
together with such powers and other instruments as BCC may request and (B) the
certificate of an appropriate officer of the Company stating that the transfer
of the Equity Interests to BCC has been recorded on the books and records of the
Company, and affirming to BCC such additional matters as BCC may reasonably
request (including the correctness as of the Closing Date of the representations
and warranties of Optionor provided in this Agreement). Additionally, both BCC
and Optionor shall take such further actions and execute and deliver such
further documents and instruments as either party may reasonably request. The
Equity Interests shall be transferred to BCC free and clear of all Liens and
restrictions of any kind or nature, except for Liens in favor of BCC as
expressly provided herein.
(b) Notwithstanding anything to the contrary contained herein or in the
other Transaction Documents, if and to the extent that the funding of the
Working Capital Reserve is advanced in the form of a loan to the Optionor, the
proceeds of which are contributed to the Company to fund the Working Capital
Reserve, including loans made under the Senior Credit Documents (such advances,
together with all interest, penalties and other costs and fees assessed or
incurred in connection therewith, are referred to herein as the "BORROWINGS"),
the Borrowings shall be repaid in full from the Purchase Price at the Closing.
Except for Borrowings in connection with the Senior Credit Documents requested
by BCC pursuant to the Shortfall Agreement, Optionor shall give BCC prior
written notice before making any Borrowings, detailing the amount thereof, and
shall make no Borrowings without the prior written consent of BCC. BCC shall
have the right at the Closing to pay to the holder of any note evidencing
Borrowings from the Purchase Price the total amount outstanding with respect to
the Borrowings.
3. COVENANTS OF OPTIONOR/LEGEND/PLEDGE. (a) Optionor shall not (i)
sell, assign, convey, pledge (except as expressly provided herein), encumber or
otherwise transfer (by operation of law or otherwise) any of Optionor's rights,
title or interest under, in or to the Equity Interests, (ii) cause or permit the
Company to merge, consolidate, dissolve, liquidate, change its capital
structure, issue new or substitute Equity Interests (including the issuance of
warrants) or sell, convey, assign or otherwise transfer all or any portion of
the Company's assets or (iii) cause or permit the Company to otherwise take any
action that with the passage of time and/or the giving of notice would
constitute a default under or a breach of any covenant or provision of the
Shortfall Agreement or the other Transaction Documents.
(b) All Equity Interests shall be represented by certificates issued by
the Company. Optionor shall cause the Company to place the following legend on
all certificates representing Equity Interests:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE (i) SECURITIES WITHIN
THE MEANING OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY STATE (INCLUDING WITHOUT LIMITATION DIVISION 8 OF THE PENNSYLVANIA
UNIFORM COMMERCIAL CODE) AND INVESTMENT PROPERTY WITHIN THE MEANING OF
ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY STATE
(INCLUDING WITHOUT
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<PAGE> 4
LIMITATION DIVISION 9 OF THE PENNSYLVANIA UNIFORM COMMERCIAL CODE) AND
(ii) SUBJECT TO AN OPTION TO PURCHASE IN FAVOR OF BALANCED CARE
CORPORATION AND ITS SUCCESSORS AND ASSIGNS, AS MORE FULLY SET FORTH IN
THAT CERTAIN OPTION AGREEMENT DATED AS OF SEPTEMBER 22, 1998.
The Operating Agreement and other organizational documents of the Company shall
at all times contain provisions requiring and recognizing the matters set forth
in this section 3(b) in form and substance satisfactory to BCC.
(c) To secure the obligations of the Optionor hereunder, Optionor shall
grant and pledge to BCC a first priority lien and security interest in the
Equity Interests. Such pledge shall be memorialized by the Pledge Agreement. For
purposes of perfecting the security interest in the Equity Interests, Optionor
shall deliver to BCC possession of all certificates, instruments, documents and
other evidence of Optionor's ownership of the Equity Interests accompanied by
undated powers of attorney or other appropriate duly executed blank transfer
powers. Optionor shall take such further actions, and execute such further
documents, as may be requested by BCC to effect the pledge and grant of a
security interest in the Equity Interests, including causing the Company to
issue certificates evidencing the Equity Interests, which certificates shall
state that they are intended to constitute securities within the meaning of
Division 8 of the Pennsylvania Uniform Commercial Code and Investment Property
within the meaning of Division 9 of the Pennsylvania Uniform Commercial Code.
(d) In addition to the other covenants stated herein, Optionor
covenants and agrees that Optionor shall not, and shall not cause the Company
to, without the prior written consent of BCC: (i) except as otherwise expressly
permitted under the Transaction Documents with respect to Advances, the Senior
Loan Documents or the Lease Documents, create or suffer to exist any Lien or any
other type of preferential arrangement, upon or with respect to any of the
properties of Optionor or the Company, whether now owned or hereafter acquired,
or assign any right to receive income, (ii) make any distribution of cash or
other property or declare or pay any dividend or distribution on any securities
issued by the Company or Optionor (provided, however, this restrictions shall
not be construed to prohibit (A) Optionor's Members from receiving Option
Payments in accordance with the terms and conditions of this Agreement or (B)
the payment of Net Cash Flow as defined in the Senior Credit Documents, to
Lessor), (iii) engage in any business venture or enter into any agreement with
respect to any business venture, except as expressly provided in the Transaction
Documents and the Lease Documents with respect to the Facility or any other
Phase Facility, (iv) except as otherwise expressly permitted under the
Transaction Documents and the Lease Documents, convey, transfer, lease,
sublease, assign or otherwise dispose of (whether in one transaction or in a
series of transactions) any of the assets of Optionor or the Company (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or Entity, (v) create, assume, guaranty or otherwise
become or remain obligated in respect of, or permit or suffer to exist or to be
created, assumed or incurred or to be outstanding, any Indebtedness, except as
expressly provided in the Lease Documents, the Senior Credit Documents or the
Transaction Documents, (vi) except for Entities formed in connection with the
Current Phase (as defined in the Lease), form, organize or participate in the
formation or organization of any Entity, or make any investment in any newly
formed or existing Entity, (vii) amend, supplement or otherwise modify the terms
of the Articles of Organization or the Operating Agreement of Optionor or the
Company in any way, (viii) enter
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<PAGE> 5
into any transaction with Lessor or any affiliate or related party to or with
Lessor, other than pursuant to the Transaction Documents and the Lease
Documents, (ix) merge or consolidate with, purchase all or any substantial part
of the assets of, or otherwise acquire any Entity, (x) issue any equity
interests in the Company or options, warrants or other rights to purchase any
equity interests in the Company or any securities convertible or exchangeable
for equity interests in the Company, or commit to do any of the foregoing, other
than in favor of BCC in accordance with the Transaction Documents or (xi) except
as expressly permitted pursuant to the Transaction Documents, enter into any
administrative or other similar agreement with any party relating to the
provision of administrative or management service for the benefit of either
Optionor or the Company.
4. REPRESENTATIONS AND WARRANTIES. Optionor represents and warrants to
BCC that (i) Optionor is the sole and exclusive owner of the Equity Interests
free and clear of all Liens and restrictions (except Permitted Liens), and
Optionor's ownership interest in the Equity Interests is appropriately noted and
documented on the books and records of the Company, (ii) (A) Optionor is validly
organized and in good standing under the jurisdiction of its formation, (B) this
Agreement and the other Transaction Documents to which Optionor is a party have
been duly authorized by all requisite action, (C) this Agreement and the other
Transaction Documents to which Optionor is a party constitutes the legal, valid
and binding obligation of Optionor, subject only to bankruptcy and creditor's
rights laws, and (D) no event has occurred which, with the passage of time
and/or the giving of notice, would constitute an Event of Default or a Default
hereunder or under any other Transaction Document, (iii) no Person or Entity
holds any Equity Interests in the Company, other than the Optionor, (iv) the
Equity Interests have been duly issued to Optionor, are fully paid and
nonassessable, (v) Optionor has the full right and power to transfer and convey
the Equity Interests, enter into this Option Agreement and sell the Equity
Interests to BCC without the need to obtain the consent or joinder of any Person
or Entity, (vi) Optionor (and each person or Entity that has an ownership in
Optionor) has had the opportunity to ask all questions of BCC, the Company and
any other person or entity necessary or desirable concerning Optionor's
investment in the Equity Interests, (vii) Optionor (and each person or Entity
that has an ownership interest in Optionor) has the requisite knowledge and
sophistication to make informed decisions regarding the risks and merits of an
investment in the Company, and has not relied on any oral or written statements
of BCC or any BCC Affiliate in connection with Optionor's investment in the
Company and (viii) Optionor (and each person or Entity that has an ownership
interest in Optionor) understands that the Equity Interests will be deemed
restricted securities within the meaning of the 1933 Act (and state securities
laws), the Equity Interests are non-transferable and Optionor (and each person
or Entity that has an ownership interest in Optionor) must be able to bear the
economic risks of ownership of the Equity Interests for an indefinite period of
time. The provisions of this Section shall survive the Closing and purchase of
the Equity Interests.
5. BINDING EFFECT. The rights and obligations of the parties hereunder
shall be binding upon and inure to the benefit of the parties hereto and their
heirs, personal representatives, successors and assigns.
6. ASSIGNMENT. Optionor may not assign, pledge, hypothecate or
otherwise transfer its rights, obligations and duties hereunder without the
prior written consent of BCC. BCC shall have the right to transfer and assign
its rights, obligations and duties hereunder to any affiliate or third party
without the consent of the Optionor; provided, however, no such transfer or
assignment shall relieve BCC of its obligations hereunder.
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<PAGE> 6
7. DEFAULT. (a) In the case of default by Optionor hereunder, BCC
shall be entitled, after ten (10) days prior written notice to Optionor, to (a)
seek an action in specific performance, (b) seek all remedies available under
the Transaction Documents and/or (c) seek such other relief, including without
limitation an action at law for damages, as may be available. Optionor shall pay
all reasonable counsel fees of BCC in connection with enforcing any rights or
benefits of BCC hereunder or under the other Transaction Documents. The rights
and remedies of BCC under this Option Agreement are cumulative and not exclusive
of any rights or remedies which it may otherwise have.
(b) In the case of default by BCC hereunder, Optionor shall be
entitled, after ten (10) days prior written notice to BCC, to seek such relief,
including without limitation an action at law for damages, as may be available
to Optionors. BCC shall pay all reasonable counsel fees of Optionor in
connection with enforcing any rights or benefits of Optionor hereunder. The
rights and remedies of Optionor under this Option Agreement are cumulative and
not exclusive of any rights or remedies which they may otherwise have.
(c) Notwithstanding the provisions of Section 7(b) and so long as
neither a Default nor an Event of Default has occurred under any Transaction
Document or Lease Document which was caused by either Optionor or the Company,
in the event that BCC fails to make Option Payments as provided hereunder, after
ten (10) days prior written notice of such failure sent by Optionor to BCC,
Optionor shall have the following remedies and rights, which remedies and rights
shall be the sole and exclusive remedies and rights of Optionor in the case of
such failure: (i) BCC shall no longer have any right to exercise any Option or
any Asset Purchase Option granted by Optionor to BCC relating to the Company,
the Property, any Phase Tenant or any Phase Facility (as defined in the Lease),
(ii) the lien encumbering the Equity Interests and other assets in favor of BCC
arising hereunder and under any Pledge Agreement and any Leasehold Mortgage
granted in connection with any Phase Facility shall automatically be released
and terminated and (iii) the Leasehold Tenant shall be permitted to terminate
all Management Agreements related to a Phase Facility in accordance with the
last paragraph of Section 6(a) thereof. BCC agrees, after the failure to make
Option Payments and an opportunity to cure as provided herein, to execute such
documents and instruments, as Optionor may reasonably request to effect the
provisions of Subsections (c)(i), (c)(ii) and (c)(iii) above.
8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered in person,
Federal Express or other recognized overnight courier or sent by registered or
certified U.S. mail, return receipt requested or sent by facsimile or telecopy
transmission and addressed:
(i) If to the Optionor, at:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attention: Mr. Brian Barth
Fax No. (717) 796-6150
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<PAGE> 7
(ii) If to BCC at
c/o BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Fax No. (717) 796-6150
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
9. DEFINITIONS; INTERPRETATION; MISCELLANEOUS. Capitalized terms used
but not otherwise defined in this Agreement have the respective meanings
specified in Appendix 1 hereto; the rules of interpretation and other provisions
set forth in Appendix 1 hereto shall apply to this Agreement.
10. BUNDLING CONDITION. Lessor as Third Party Beneficiary, BCC and
Optionor intend that Optionor and BCC Affiliates will be developing six (6)
Phase Facilities (as that term is defined in the Lease). Each Phase Facility to
be developed is referred to herein as a "Project" and are collectively referred
to herein as the "Projects". It is further intended that, during the start-up
period for each Project, a party affiliated with Optionor will lease each
Project, and that BCC will have an option to acquire all of the equity interests
of each such lessee (each a "Phase Option") pursuant to each Option Agreement
executed and delivered in connection with the development of each Project and an
option to purchase all of the assets of such lessee pursuant to each Shortfall
Funding Agreement delivered in connection with each Project (each a "Phase Asset
Purchase Option"). BCC covenants and agrees, that (so long as no Default or
Event of Default has occurred by the Company, the Optionor or either of their
respective affiliates under the Transaction Documents or the transaction
documents related to the other Projects) upon the exercise of the Option or the
Asset Purchase Option (the "Exercise Date"), BCC shall concurrently exercise the
Phase Option or the Phase Asset Purchase Option with respect to each Project and
shall be irrevocably and unconditionally obligated to acquire (for the price and
on the terms contained in each related option agreement or shortfall funding
agreement) either the assets of each Phase Tenant or the equity interests of
each Phase Tenant holding all remaining Projects within twelve (12) months after
the Exercise Date. The foregoing provisions of this Section 10 are collectively
referred to as the "Bundling Condition." BCC and Optionor expressly agree that
the Lessor (its successors and assigns) is an intended third party beneficiary
of all covenants made by BCC in the Bundling Condition, and that the Bundling
Condition may be enforced by Lessor (its successors and assigns) to the same
extent as the Bundling Condition may be enforced by the Optionor.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first above written.
WITNESS: FINANCIAL CARE INVESTORS OF
[_____________], LLC
a Delaware Limited Liability Company
____________________________________ By: _____________________________________
Title: __________________________________
ATTEST/WITNESS: BALANCED CARE CORPORATION
By: ________________________________ By: _____________________________________
Title: _____________________________ Title: __________________________________
S - 1
[Option Agreement]
<PAGE> 1
EXHIBIT 10.6
SCHEDULE TO FORM OF HCRI OPTION AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
COMPANY LESSOR LESSOR'S LOCATION MANAGEMENT
STATE OF FIRM
INCORPORATION
<S> <C> <C> <C> <C> <C>
LEBANON, Financial Pennsylvania Pennsylvania Lebanon Balanced
PENNSYLVANIA Care BCC County, Care at
Investors of Properties, Pennsylvania Lebanon, Inc.
Lebanon, LLC Inc.
LOYALSOCK, Financial Pennsylvania Pennsylvania Lycoming Balanced
PENNSYLVANIA Care BCC County, Care at
Investors of Properties, Pennsylvania Loyalsock,
Loyalsock, Inc. Inc.
LLC
WESTERVILLE, Financial HCN BCC Delaware Franklin Balanced
OHIO Care Holdings, Inc. County, Ohio Care at
Investors of Westerville,
Westerville, Inc.
LLC
MORRISTOWN, Financial HCN BCC Delaware Hamblen Balanced
TENNESSEE Care Holdings, Inc. County, Care at
Investors of Tennessee Morristown,
Morristown, Inc.
LLC
OAK RIDGE, Financial HCN BCC Delaware Anderson Balanced
TENNESSEE Care Holdings, Inc. County, Care at Oak
Investors of Tennessee Ridge, Inc.
Oak Ridge,
LLC
SAGAMORE Financial HCN BCC Delaware Summit Balanced
HILLS, OHIO Care Holdings, Inc. County, Ohio Care at
Investors of Sagamore
Sagamore Hills, Inc.
Hills, LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.7
FORM OF HCRI SHORTFALL FUNDING AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of the Documentation Date
by and among Financial Care Investors of [____________], LLC, a Delaware limited
liability company (the "LESSEE"), the member of Lessee listed on Schedule A
attached hereto (collectively, and jointly and severally, the "MEMBER") and
Balanced Care Corporation, a Delaware corporation ("BCC").
WITNESSETH
WHEREAS, the Member constitutes the holder of all equity interests
in the Lessee; and
WHEREAS, Lessee executed and delivered the Lease Agreement dated
as of the Documentation Date (the "LEASE") between Lessee and [____________],
Inc., a [____________] corporation (the "LESSOR"), whereby Lessee leased from
Lessor property, together with all improvements built or to be built thereon,
located in [__________________] as more fully described in the Lease (the
"PROPERTY"); and
WHEREAS, the Lessee and Balanced Care at [_____________], Inc., a
Delaware corporation (the "MANAGEMENT FIRM") have entered into that certain
Management Agreement dated as of the Documentation Date (the "MANAGEMENT
AGREEMENT") whereby Lessee has appointed the Management Firm as the exclusive
manager and operator of the Facility; and
WHEREAS, Lessor and BCC Development and Management Co., a Delaware
corporation ("Developer") have entered into a Construction Disbursing Agreement
dated as of the Documentation Date (the "Development Agreement") for the purpose
of developing the Facility; and
WHEREAS, the Developer and the Management Firm are wholly-owned
subsidiaries of BCC; and
WHEREAS, the Member, pursuant to the Senior Credit Documents, will
borrow certain funds from Lessor, which funds will be contributed to Lessee to
be used exclusively to fund 85% of the Working Capital Reserve; and
WHEREAS, Lessee and the Member will deposit the Equity Capital
Portion, and cause to be contributed the Senior Loan Capital Portion, of the
Working Capital Reserve into the Collateral Account as specifically provided in
this Agreement to fund the Working Capital Reserve (to be used to fund
Shortfalls); and
WHEREAS, upon depletion of the Working Capital Reserve, BCC
intends to make Advances to the Lessee, on the terms and conditions herein
stated, to fund continuing Shortfalls; and
WHEREAS, BCC is willing to fund Advances to Lessee covering
Shortfalls upon depletion of the Working Capital Reserve only on the terms and
conditions provided in this Agreement.
<PAGE> 2
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
FUNDING SHORTFALLS
SECTION 1.01 FUNDING; CAPITALIZATION OF LESSEE; WORKING CAPITAL
RESERVE. (a) The Member hereby agrees to contribute capital to the Lessee to
fund the working capital needs of the Lessee. Such funds shall be contributed as
follows: (i) 85% of the working capital needs of Lessee shall be provided from
the proceeds of loans made to the Member under the Senior Credit Documents
(which proceeds shall be contributed as equity by the Member to the capital of
Lessee and deposited in the Collateral Account as provided herein and in the
Deposit Agreement) (the "Senior Loan Capital Portion") and (ii) 15% of the
working capital needs of the Lessee shall be provided as equity contributions of
the Member to the Lessee, without the Member or its equity owner(s) in any
manner borrowing or otherwise incurring any Indebtedness to fund such portion of
the working capital (the "Equity Capital Portion"). The Equity Capital Portion
of the working capital shall be contributed by the Member to the Lessee, and the
Lessee to the Collateral Account, on a pro rata basis with the contribution of
the Senior Loan Capital Portion by the Member to the Lessee and the Lessee to
the Collateral Account. In no event shall the Equity Capital Portion and the
Senior Loan Capital Portion exceed in the aggregate $[__________]. Upon demand
and from time to time, the Member shall provide to the Lessor and BCC evidence
in reasonable form that the Member has sufficient capital to fund the Equity
Capital Portion as required in this Agreement.
In order for the foregoing to occur, BCC or the Management Firm
will from time to time request by written notice to the Member and the Lessor
that the foregoing Fundings be made into the Collateral Account to fund the
Working Capital Reserve. No Fundings may be made into the Collateral Account
until such time as BCC or the Management Firm so requests; provided, however,
such request shall be made no less than seven (7) business days prior to the
required time of making the Funding into the Collateral Account. Any notice of a
Funding requested pursuant to this subsection shall state the total amount of
the Funding being requested at that time, the date on which such Funding is to
be made, wiring instructions for placement of the Funding into the Collateral
Account, the total amount of Fundings that the Member may in the future be
required to make into the Collateral Account pursuant to this Agreement for the
Equity Capital Portion and the total amount of Fundings the Lessor may in the
future be required to make into the Collateral Account under the Senior Credit
Documents for the Senior Loan Capital Portion. The Funding request notice shall
also state in reasonable detail the uses for the Funding, which may only include
uses for the working capital needs for the Facility, including pre-opening
costs, marketing costs, rental payments, employee costs, training costs and all
other costs and expenses customarily incurred in connection with the start-up of
the operation of an assisted care facility. If the Member has an objection to
the Funding request, the Member shall inform BCC in writing of such objection,
providing reasonable detail. Such objection must be received by BCC within four
(4) business days after receipt by Member of the Funding request and all
information required to be provided. Failure by the Member to timely object to
the Funding request shall constitute a waiver on the part of the Member of any
right to object to such request, and the Member will thereafter timely make
Fundings into the Collateral Account as provided in this Agreement and the other
Transaction Documents. In no event shall the Member
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<PAGE> 3
or the Lessee be liable, and no Event of Default will occur hereunder or under
the other Transaction Documents, if Lessor fails to fund loans under the Senior
Credit Documents, so long as the Member has otherwise deposited the Equity
Capital portion into the Collateral Account; and has caused to be deposited into
the Collateral Account all proceeds of loans actually funded by the Lessor
pursuant to the Senior Credit Documents.
Time is of the essence with respect to each contribution of the Equity Capital
Portion and the Senior Loan Capital Portion described in this Section 1.01(a).
(b) The contributions described in Section 1.01 (a) shall be made
directly into the Collateral Account. Each contribution of funds into the
Collateral Account as provided in this Section 1.01 (both the Equity Capital
Portion and the Senior Loan Capital Portion) is referred to herein as a
"FUNDING", and the aggregate of all Fundings required to be made hereunder is
collectively referred to as the "WORKING CAPITAL RESERVE").
(c) In the event that the Member defaults in the timely payment of
Fundings for the Equity Capital Portion into the Working Capital Reserve as
provided in Section 1.01 (a), BCC shall have the right (in addition to all other
rights hereunder and under the other Transaction Documents in the case of a
Default or Event of Default) at any time thereafter, but not the obligation, to
require that the Member sell all of the Equity Interests to BCC or its designee
in the manner provided for in the Option Agreement; provided, however, the
purchase price for the Equity Interests shall be the amount of Fundings actually
deposited by the Member into the Collateral Account, plus the Current Yield (as
defined in the Option Agreement) calculated on a pro-rata basis on the amount of
funds actually contributed into the Senior Loan Capital Portion or the Equity
Capital Portion of the Working Capital Reserve, as the case may be, from the
date of deposit through the date of Closing. In such event, all terms and
conditions of the sale applicable to the Option, including concurrent compliance
with Article 18 of the Lease, (provided that BCC or a BCC Affiliate acquires the
equity or assets of the Lessee) shall be equally applicable to the sale under
this Section 1.01(c), and the failure by the Member to close on such sale within
3 days after written notice from BCC (time being of the essence) shall
constitute an Event of Default. All amounts borrowed by the Member under the
Senior Credit Documents shall be repaid to the Lessor from the proceeds of the
purchase described in this subsection (c).
(d) The Member and the Lessee acknowledge and agree that (i) each
Funding constitutes the capital contribution of the Member to the Lessee
(provided, that BCC acknowledges that the Senior Loan Capital Portion of such
Funding constitutes Indebtedness of the Member pursuant to the Senior Credit
Documents), (ii) each Funding is not in any way to be construed as Indebtedness
of Lessee nor to be construed as evidence of a loan from any Member to the
Lessee, (iii) Lessor, BCC, and the Management Firm may (without notice to Lessee
or Member, and whether acting alone or together) withdraw funds from the Working
Capital Reserve in the Collateral Account to fund Shortfalls with respect to the
Facility in accordance with the Transaction Documents and the Lease Documents
and (iv) the Working Capital Reserve may be used only for the funding of
Shortfalls.
SECTION 1.02 ADVANCES. Upon complete depletion of the Working
Capital Reserve, and to the extent thereafter of any Shortfall, BCC hereby
agrees to advance from time to time funds to the Lessee upon no less than three
(3) days prior written notice, upon the terms and conditions provided herein
(each advance being an "ADVANCE" and collectively, the
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<PAGE> 4
"ADVANCES"). Advances shall be evidenced by one or more promissory notes issued
by the Lessee in the form attached hereto as Exhibit A (the "NOTES"). The Notes
shall mature on the Maturity Date. Interest shall accrue on the Notes at the
Prime Rate as announced from time to time in the Wall Street Journal (or, in the
event of the discontinuance of the publishing of the Prime Rate in the Wall
Street Journal, such other source as the parties may agree), and shall be
payable on the Maturity Date. All sums owed under the Notes and hereunder to
BCC, and all other obligations and covenants under the Transaction Documents
applicable to Lessee and the Member (including the obligations of the Member
under the Option Agreement), together with all interest payable under the
Transaction Documents and all other costs and expenses payable by Lessee or any
Member to or for the benefit of BCC or any BCC Affiliate (including
indemnification and defense obligations) are referred to herein as the
"OBLIGATIONS".
SECTION 1.03 ASSET PURCHASE OPTION. The Lessee and the Member
hereby grant to BCC an option (the "ASSET PURCHASE OPTION") to purchase all of
the assets of the Lessee (including the option to take an assignment of the
Lease) for the Asset Purchase Price. The Asset Purchase Option may be exercised
by BCC by providing written notice to the Lessee at any time during the term of
the Lease. The closing of the purchase of the assets of the Lessee shall take
place within 30 days after BCC exercises the Asset Purchase Option at such
location in Pennsylvania as BCC may designate. At the closing of the asset
purchase, the Lessee shall transfer, assign and convey to BCC (or its designee)
all assets of Lessee, free and clear of all Liens and restrictions of any kind
or nature, except for Liens or restrictions in favor of the Lessor pursuant to
the Lease Documents or in favor of BCC pursuant to the Transaction Documents
(provided, however, Liens in favor of BCC securing Advances or other Obligations
shall be paid in full by Lessee and the Member at the closing of the asset
purchase). The Lessee (and the Member if requested by BCC) shall execute and
deliver at the closing of the asset purchase an assignment of lease (assigning
the Lease to the purchaser), a bill of sale conveying all other assets of the
Lessee and such other documents and instruments as BCC may reasonably request,
all in form and substance reasonably satisfactory to BCC. The "ASSET PURCHASE
PRICE" as used herein shall mean (i) all amounts actually funded into the
Working Capital Reserve (including amounts funded with borrowings by the Member
under the Senior Credit Documents), plus (ii) an amount (calculated as a yearly
return) equal to the Current Yield, calculated pro-rata, of the Working Capital
Reserve actually funded through Fundings, compounded annually through the
closing date, plus (iii) the aggregate amount of all Advances and all other
Obligations due and payable by Lessee or the Member to BCC or a BCC Affiliate
through the closing date (exclusive of the Management Fee), minus (iv) any
payments made to the Member under the Option Agreement through the closing date
of the asset purchase. All Senior Loan Obligations shall be paid in full from
the Asset Purchase Price on the closing date. All Advances and all other
Obligations due and payable by Lessee or the Member to BCC or a BCC Affiliate
through the closing date of the asset purchase shall be payable from the Asset
Purchase Price to BCC or the BCC Affiliate, as appropriate. The right of BCC to
exercise the Asset Purchase Option is subject in every case to full compliance
with the provisions of Section 10 of the Option Agreement and Article 18 of the
Lease. Notwithstanding any provision to the contrary contained in the
Transaction Documents, the provisions of this Section 1.03 shall be subject in
all respects to the terms and conditions of Section 7(c) of the Option
Agreement.
SECTION 1.04 TRANSACTION DOCUMENTS. In addition to the Notes, and
to better secure the performance of Lessee hereunder and under the other
Transaction Documents, Lessee and the Member (as applicable) have executed and
delivered to Lessor or BCC (as applicable) the following:
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<PAGE> 5
(i) the Lease and the other Lease Documents to which it is
a party;
(ii) {REVOLVING CREDIT/FUTURE ADVANCES LEASEHOLD MORTGAGE}
{OPEN END LEASEHOLD MORTGAGE}in the form attached hereto as
Exhibit B encumbering the Property in favor of BCC (the "LEASEHOLD
MORTGAGE");
(iii) the Deposit Pledge Agreement and the Pledge Agreement;
and
(iv) such other documents, certificates, powers, affidavits
and instrument as BCC may reasonably request.
In addition to the foregoing documents, the Member has executed
and delivered to BCC the Option Agreement (the "OPTION AGREEMENT")
substantially in the form attached hereto as Exhibit C, whereby
each Member has agreed that BCC shall have an option to purchase
the equity interest of each Member in Lessee, on the terms and
conditions provided therein.
SECTION 1.05 INTEREST PAYMENTS. In no event shall the amount of
interest due or payable pursuant to any Transaction Document exceed the maximum
rate of interest allowed by Law and, in the event any such payment is
inadvertently paid by the Lessee or the Member or inadvertently received by BCC
or any BCC Affiliate, then such excess sum shall be credited as a payment of
principal due to BCC or any BCC Affiliate. It is the express intention of the
parties hereto that neither the Lessee nor the Member pay to BCC, directly or
indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Lessee.
SECTION 1.06 INTENTION. It is the intention of BCC, the Member and
Lessee that (i) the Management Firm operate the Facility pursuant to the
Management Agreement and that Lessee act as a passive investor with respect to
the Facility (provided, however, nothing contained herein or in any other
Transaction Document shall limit the Member from taking a position that, for
purposes of Federal and State income taxes, the Member is actively participating
in the operations of the Facility such that taxable income and losses arising in
connection with the Member's participation in the operations of the Facility,
together with the Member's participation in the operations of other facilities
that are similar to the Facility, will qualify as non-passive taxable income or
loss for purposes of Section 469 of the Internal Revenue Code of 1986, as
amended, and any corresponding State tax Law), (ii) Lessee include on its
financial statements all revenue and losses with respect to the Facility during
the term of this Agreement for financial accounting purposes, and (iii) Advances
made hereunder and all other obligations of Lessee and the Member under the
Transaction Documents be secured by the Leasehold Mortgage and Pledge Agreement,
but subject to the rights of Lessor under the Lease, regardless of any
bankruptcy, insolvency, receivership or similar proceedings instituted by or
against Lessee. BCC, each Member and Lessee agree to take no position
inconsistent with the intention of the parties as herein stated.
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ARTICLE II
CONDITIONS TO ADVANCES
SECTION 2.01 CONDITIONS PRECEDENT TO ADVANCES. The obligations of
BCC to accept delivery of the Transaction Documents and make Advances are
subject to the condition precedent that BCC receives the following five days
prior to the making of any Advance, in form and substance satisfactory to BCC:
(a) the Note(s);
(b) the Working Capital Assurance Agreement;
(c) the Leasehold Mortgage;
(d) the Option Agreement;
(e) the Management Agreement;
(f) a certificate of the Secretary of State of the State of
Delaware stating that the Lessee is duly organized, validly existing and in good
standing in such state; and a certificate of the Secretary of State of the
jurisdiction in which the Facility is located stating that Lessee has duly
qualified to conduct business and is in good standing in such state;
(g) a certified copy of the Operating Agreement of the Lessee and
the Member, together with certified resolutions or authorizations of the Lessee
and the Member granting the power to Lessee and the Member to enter into and
perform the Transaction Documents;
(h) all other Transaction Documents;
(i) the Lease and all other Lease Documents; and
(i) such other affidavits, documents, certificates, statements and
instruments as BCC may reasonably request.
SECTION 2.02 ADDITIONAL CONDITIONS PRECEDENT TO ADVANCES. The
obligation of BCC to accept delivery of the Transaction Documents and consummate
this transaction, and to make any Advance, shall be further subject to the
condition precedent that:
The following statements shall be true and correct (and the
delivery by the Lessee and the Member of the Transaction Documents shall be
deemed to constitute a representation and warranty by the Lessee and the Member
that such statements are true on such date):
(i) The representations and warranties contained in Article
III of this Agreement and the other Transaction Documents are true
and correct in all material respects on and as of date of the
execution and delivery of this Agreement, at the time of each
Advance, and as of each date until the Obligations are satisfied
in full; and
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(ii) No event has occurred and is continuing which
constitutes a Default or an Event of Default under any of the
Transaction Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE LESSEE. The
Lessee and the Member represent and warrant as follows:
(a) ORGANIZATION; QUALIFICATION. The Lessee is a limited liability
company, duly formed, validly existing and in good standing under the laws of
State of Delaware, has qualified to do business in the State in which the
Facility is located, and has the power and authority to own its properties and
to carry on its business as now being and hereafter proposed to be conducted.
(b) POWER; AUTHORITY. The execution, delivery and performance by
the Lessee of this Agreement and the other Transaction Documents to which it is
a party are within the Lessee's power and have been duly authorized by all
necessary action, and this Agreement and the other Transaction Documents to
which Lessee is a party have been duly executed and delivered by the duly
authorized Manager of the Lessee.
(c) APPROVAL OR CONSENTS. No approval or consent of any foreign,
domestic, federal, state or local authority is required for the due execution,
delivery and performance by each of Lessee and the Member of this Agreement or
any other Transaction Document to which it is a party and the execution,
delivery and performance by each of Lessee and the Member of this Agreement and
the other Transaction Documents to which it is a party do not conflict with, and
will not result in the breach of or default under, any contract, agreement or
other document or instrument to which the Lessee or the Member are a party or by
which their properties are bound.
(d) BINDING OBLIGATIONS. This Agreement and the other Transaction
Documents to which each of Lessee and the Member is a party are legal, valid and
binding obligations of the Lessee and the Member enforceable against each of
Lessee and the Member in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting generally the enforcement of creditors' rights.
(e) LITIGATION. To Lessee's and the Member's knowledge, there is
no pending or threatened action, suit or proceeding against or affecting the
Lessee before any court, governmental agency or arbitrator.
(f) APPLICABLE LAW. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Lessee is a
party, and the borrowings hereunder, do not and will not, by the passage of
time, the giving of notice or otherwise, violate any Law applicable to the
Lessee.
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(g) TITLE AND CONDITION OF ASSETS. Except for Lessee's leasehold
interest in the Lease and except as otherwise provided in the Senior Credit
Documents, the Lessee has good, marketable and legal title to its properties and
assets. The Lessee has a good and valid leasehold interest in the Lease.
(h) LIENS. None of the properties and assets of the Lessee are
subject to any Lien or other charge other than Liens in favor of Lessor pursuant
to the Lease and the Senior Loan Documents, BCC as provided herein, or a BCC
Affiliate ("PERMITTED LIENS"), and the execution, delivery and performance by
the Lessee of this Agreement and the other Transaction Documents to which it is
a party will neither result in the creation of any Lien or other charge upon any
of the Lessee's properties or assets, nor cause a default under any agreements
to which Lessee is a party.
(i) SECURITY. Upon the consummation of this transaction, BCC will
have a valid and perfected mortgage lien in the Lease, and a valid and perfect
security interest in the Equity Interest.
(j) TAX RETURNS AND PAYMENTS. All federal, state and other tax
returns of the Lessee required by Law to be filed have been duly filed, and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Lessee and its properties, income, profits and assets which are
due and payable have been paid.
(k) NO EMPLOYEES. The Lessee has no employees for which it is
required to comply with the Employment Retirement Income Security Act of 1974.
(l) ABSENCE OF DEFAULTS. To the knowledge of the Lessee and
Member, no event has occurred, which has not been remedied, cured or waived,
which constitutes, or with the passage of time or giving of notice or both would
constitute, a Default or an Event of Default under any Transaction Document or
Lease Document or which constitutes or which with the passage of time or giving
of notice or both would constitute a default or event of default by the Lessee
under any agreement or judgment, decree or order, to which the Lessee is a party
or by which the Lessee or any of its properties may be bound.
(m) SUBSIDIARIES. The Lessee does not own, directly or indirectly,
of record or beneficially, any of the voting stock of any class or classes of,
or any other voting interests of, any Entity.
(n) INVESTMENT COMPANY. Neither the Lessee nor the Member is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
(o) PUBLIC UTILITY COMPANY. Neither the Lessee nor the Member is a
"holding company" or a "subsidiary company", or an "affiliate" of a "holding
company", within the meaning of the Public Holding Company Act of 1935, as
amended.
(o) SECURITIES REPRESENTATIONS. Neither the Lessee, the Member nor
any agent, broker, dealer or other person or entity has offered or sold any
equity interests in Lessee or the Member in violation of the 1933 Act or any
state securities laws.
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(q) CAPITAL CONTRIBUTIONS. All Indebtedness (if any) incurred by
any Member or equity owner of any Member to fund the capital contributions to
Lessee or any Member (including Indebtedness used to make Fundings) constitutes
full recourse Indebtedness against such Member or equity owners (as
appropriate), and such Indebtedness is not limited in collection to any
particular asset of the person or Entity incurring such Indebtedness.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF BCC. BCC represents
and warrants as follows: (i) this Agreement and all other Transaction Documents
to which BCC is a party constitute legal, valid and binding obligations of BCC,
were duly authorized, executed and delivered by BCC, and are fully enforceable
against BCC in accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors' rights, (ii) BCC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly authorized and qualified to do all things required of it
under this Agreement and the other Transaction Documents to which BCC is a
party; (iii) neither this Agreement nor any agreement, document or instrument
executed or to be executed in connection herewith, violates the terms of any
other agreement to which BCC is a party, (iv) no approval or consent of any
foreign, domestic, federal, state or local authority is required for the due
execution, delivery and performance by BCC of this Agreement or any other
Transaction Document to which BCC is a party and the execution, delivery and
performance by BCC of this Agreement and the other Transaction Documents to
which BCC is a party do not conflict with, and will not result in the breach of
or default under, any contract, agreement or other document or instrument to
which BCC is a party or by which its properties are bound, (v) there is no
pending or (to BCC's knowledge) threatened action, suit or proceeding against or
affecting BCC before any court, governmental agency or arbitrator that would
materially and adversely affect BCC's ability to perform its obligations
hereunder or under the other Transaction Documents to which BCC is a party and
(vi) the execution, delivery and performance of this Agreement and the other
Transaction Documents to which BCC is a party do not and will not, by the
passage of time, the giving of notice or otherwise, violate any Law applicable
to BCC.
ARTICLE IV
COVENANTS OF THE LESSEE
SECTION 4.01 AFFIRMATIVE COVENANTS. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation owed to it hereunder or under
the other Transaction Documents, the Lessee will and the Member shall cause the
Lessee to:
(a) COMPLIANCE WITH LAWS; ETC. {INTENTIONALLY OMITTED}
(b) MAINTENANCE OF INSURANCE. {INTENTIONALLY OMITTED}
(c) NOTICE OF LITIGATION AND OTHER MATTERS. Promptly give notice
to BCC of the following: (i) any actions, suits or proceedings instituted
against the Lessee or the Member; (ii) any change in the chief executive office,
principal place of business or location of the books and records of the Lessee
or the Member and (iii) the occurrence of a Default or an Event of Default.
(d) MAINTENANCE OF PROPERTY. {INTENTIONALLY OMITTED}
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<PAGE> 10
(e) PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Preserve and
maintain Lessee's and Member's existence under the Laws of the state of
formation, and preserve and maintain Lessee's and Member's rights, franchises,
licenses and privileges in such state as a limited liability company, and
qualify and remain qualified and authorized to do business in such state.
(f) BUSINESS. {INTENTIONALLY OMITTED}
(g) FURTHER ASSURANCES. At BCC's request, from time to time,
execute, acknowledge or take such further action as BCC may reasonably require
to effectuate the purposes of this Agreement and the purposes of the other
Transaction Documents.
Provided, however, notwithstanding any provision to the contrary contained in
this Section 4.01, Lessee shall not be in Default hereunder to the extent that
the obligations described in this Section 4.01 are required to be performed by
the Management Firm under the Management Agreement.
SECTION 4.02 NEGATIVE COVENANTS. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation owed to it hereunder or under
the other Transaction Documents, the Lessee will not, and no Member will cause
the Lessee to, without the prior written consent of BCC:
(a) LIENS CREATED BY LESSEE. Create or suffer to exist any Lien or
any other type of preferential arrangement, upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, other than Permitted Liens.
(b) DISTRIBUTIONS. Until the Senior Loan Obligations are paid in
full, make any distribution of cash or other property to the Member or declare
or pay any dividend or distribution on any securities of Lessee.
(c) OTHER BUSINESS. Engage in any business venture or enter into
any agreement with respect to any business venture, except as expressly provided
in the Transaction Documents with respect to the Facility.
(d) TRANSFER OF ASSETS. Except as expressly contemplated in the
Transaction Documents to BCC or an Entity designated by BCC or otherwise as
expressly permitted in Section 18.3 of the Lease, convey, transfer, lease,
sublease, assign or otherwise dispose of (whether in one transaction or in a
series of transactions) any of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any person
or Entity. The restrictions of this Subsection shall include a prohibition on
any assignment, pledge, hypothecation or other transfer of the Lease (including
by operation of Law) or sublease or license of the Facility, except to BCC or a
BCC Affiliate in accordance with the terms and conditions of the Lease or
otherwise as expressly permitted in Section 18.3 of the Lease.
(e) INDEBTEDNESS FOR BORROWED MONEY. Create, assume, guaranty or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding, any Indebtedness,
except Indebtedness incurred to
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BCC or a BCC Affiliate under the Transaction Documents or Indebtedness incurred
to Lessor as expressly provided in the Lease Documents and the Senior Credit
Documents.
(f) CREATION OF AFFILIATES. Form, organize or participate in the
formation or organization of any Entity, or make any investment in any newly
formed or existing Entity.
(g) LOANS. Extend credit to or make any advance, loan,
contribution or payment of money or goods to any person or Entity.
(h) GOVERNANCE DOCUMENTS. Amend, supplement or otherwise modify
the terms of the Articles of Organization or the Operating Agreement of the
Lessee in any way.
(i) OTHER TRANSACTIONS WITH LESSOR. Enter into any transaction
with Lessor or any affiliate or related party to or with Lessor, other than
pursuant to the Transaction Documents.
(j) TRANSFERS OF EQUITY INTERESTS. Other than pursuant to the
Option Agreement, permit the Member to transfer all or any portion of the
Member's Equity Interest in Lessee to a party that does not as of the date
hereof hold an equity interest in the Lessee.
(k) AMEND TRANSACTION DOCUMENTS. (i) Amend, terminate, supplement
or otherwise modify any Lease Document or Senior Credit Document, (ii) waive any
default or potential event of default by Lessor under any Lease Document, (iii)
declare a default or event of default under any Lease Document, (iv) exercise
any right to extend the term of the Lease, (v) exercise any right to purchase
the Facility or exercise a right of refusal with respect thereto or (vi)
exercise any right to cancel the Lease as a result of a casualty or condemnation
with respect to the Facility, or otherwise.
(l) MERGERS AND CONSOLIDATIONS. Merger or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire any
Entity.
(m) ISSUANCE OF SECURITIES. Except for the Equity Interests of the
Lessee that have been issued to the Member and are outstanding as of the date
hereof, issue any equity interests or options, warrants or other rights to
purchase any equity interests or any securities convertible or exchangeable for
equity interests, or commit to do any of the foregoing.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 EVENTS OF DEFAULT. Each of the following events shall
constitute an event of default hereunder ("SHORTFALL EVENT OF DEFAULT"),
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
nongovernmental body:
(a) The Lessee shall fail to make any payment of principal or
interest, as stated in the Notes, when due, or the Member shall fail to make
payments in connection with
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Fundings (as provided in Section 1.01 hereof) when due or the Member or Lessee
shall fail to contribute Fundings when due into the Collateral Account (each a
"MONETARY DEFAULT"); or
(b) Any representation or warranty made by the Lessee or the
Member under or in connection with any Transaction Document shall prove to have
been incorrect or misleading in any material respect when made; or
(c) The Lessee or the Member shall fail to perform or observe any
material term, covenant or agreement contained in this Agreement, or in any
other Transaction Document, on its or their part to be performed or observed
beyond the express applicable cure period, if any; or
(d) The Lessee or any Member shall generally not pay its debts
when due; or
(e) The Lessee or any Member shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Lessee or
any Member seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of the Lessee or any Member of any of its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for the Lessee or any Member or for any
substantial part of its property; or the Lessee or any Member shall take any
action to authorize any of the actions set forth above in this subsection; or
(f) Any material provision of any Transaction Document to which
the Lessee or the Member is a party shall for any reason cease to be valid and
binding on the Lessee or the Member, or the Lessee or the Member shall so state
in writing; or
(g) The Leasehold Mortgage shall for any reason cease to create a
valid and perfected security interest in any of the collateral covered thereby,
subject in priority only to the Permitted Liens; or
(h) an Option Agreement Event of Default, a Mortgage Event of
Default, a Lease Event of Default, a Deposit Pledge Event of Default, a Phase
Lease Event of Default, a Management Agreement Event of Default or any other
default or event of default within the meaning of the definition of Event of
Default shall occur and be continuing beyond the express applicable cure period,
if any.
ARTICLE VI
REMEDIES
SECTION 6.01 APPLICABLE PROVISIONS UPON OCCURRENCE OF AN EVENT OF
DEFAULT. Upon the occurrence of a Shortfall Event of Default, the following
provisions shall apply:
(a) ACCELERATOR AND TERMINATION:
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(i) Automatic. Upon the occurrence of a Shortfall Event of
Default specified in Section 5.01(e), the principal of, and the
interest on, the Notes at the time outstanding, and all other
amounts owed to BCC under this Agreement and any of the other
Transaction Documents, shall become automatically due and payable
without presentment, demand, dishonor, protest, or any notice of
any kind all of which are expressly waived, anything in this
Agreement or the other Transaction Documents to the contrary
notwithstanding.
(ii) Optional. If any other Shortfall Event of Default shall
have occurred, and in every such event, BCC may do the following:
declare the principal of, and interest on, the Notes at the time
outstanding, and all other amounts owed to BCC under this
Agreement and the other Transaction Documents, to be forthwith due
and payable, whereupon the same shall immediately become due and
payable without presentment, demand, dishonor, protest or notice
of any kind, all of which are expressly waived, anything in this
Agreement or the other Transaction Documents to the contrary
notwithstanding.
(b) BCC'S RIGHT TO ENTER PROPERTY. BCC may enter upon the Property
and any premises on which collateral may be located and, without resistance or
interference by the Lessee, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part thereof
to such other place or places as BCC shall choose, without being liable to the
Lessee on account of any loss, damage or depreciation that may occur as a result
thereof.
(c) USE OF PREMISES. BCC may, without payment of any rent or any
other charge to Lessee, enter the Property and, without breach of peace, take
possession of the Property or place custodians in exclusive control thereof,
remain on such premises and use the same and any of the Lessee's equipment, for
the purpose of (i) operating the Facility and (ii) collecting any accounts
receivable.
(d) OTHER RIGHTS. BCC may exercise any and all of its rights and
remedies available under the other Transaction Documents, as well as those
available in Law or in equity.
(e) RIGHT TO FORECLOSE. BCC may foreclose upon the Lease, take
immediate possession of the Facility and Property and operate the Property, all
in accordance with the terms and conditions of the Leasehold Mortgage.
(f) The exercise of the remedies under Sections 6.01(b), (c)
and (e) above are subject to concurrent compliance with Article 18 of the Lease.
SECTION 6.02 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.
(a) RIGHTS CUMULATIVE. The rights and remedies of BCC under this
Agreement and each of the other Transaction Documents shall be cumulative and
not exclusive of any rights or remedies which it would otherwise have. In
exercising its rights and remedies BCC may be selective and no failure or delay
by BCC in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise of any other power or right.
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(b) WAIVER OF MARSHALLING. The Lessee and Member hereby waives any
right to require any marshalling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this Article VI
or elsewhere in this Agreement or in any other Transaction Documents shall be
construed as requiring or obligating BCC or any agent or designee thereof to
make any demand, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim or notice or take any
action, with respect to any account or any other Collateral or the moneys due or
to become due under the Notes or any other Transaction Documents or in
connection therewith, or to take any steps necessary to preserve any rights
against prior parties and neither BCC nor any of its agents or designees shall
have any liability to the Lessee for actions taken pursuant to this Article VI,
any other provision of this Agreement or any other Transaction Documents, except
as otherwise provided by Law.
(d) WAIVER OF DEFENSES. Each of Lessee and the Member hereby
waives any and all defenses, either by way of set-off as to matters arising
prior to the date hereof or any other defenses, which Lessee presently believes
it has or which Lessee may have in the future relating to monetary defaults
under this Agreement or any other Transaction Document.
SECTION 6.03 BCC EVENTS OF DEFAULT. Should BCC breach any
covenant, agreement, or obligation of BCC in any Transaction Document, or should
BCC breach any representation or warranty made to Lessee or the Member in any
Transaction Document in any material way or should any BCC Affiliate breach any
covenant, agreement or obligation of such BCC Affiliate in any Transaction
Document to which such BCC Affiliate is a party, then, subject in all events to
the provisions of Section 7.03 below, any such event shall constitute a BCC
Default. In the event of a BCC Default, the Lessee and Member shall have the
following remedies: (i) to pursue any remedy whatsoever in Law or in equity
against BCC and/or (ii) to terminate all obligations of the Member and the
Lessee to BCC and any BCC Affiliate under any or all Transaction Documents,
including obligations of the Member under the Option Agreement. Such remedies
may be exercised concurrently, and no remedy shall be exclusive of any other
remedy available to the Member and the Lessee. Notwithstanding the foregoing, in
no event shall BCC or any BCC Affiliate be liable for any consequential,
incidental, special or similar form of damages to the Lessee or the Member.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 RIGHT TO CURE DEFAULTS UNDER TRANSACTION DOCUMENTS.
The Member and Lessee shall promptly give BCC a copy of any notice of a default
or event of default under any Lease Document or Senior Credit Document received
from Lessor. BCC shall have the right, but not the obligation, to cure such
default or event of default in accordance with the Working Capital Assurance
Agreement.
SECTION 7.02 CONFIDENTIALITY.
(a) Lessee and the Member hereby covenant and agree, on behalf of
Lessee, the Member and all Lessee Affiliates, that all Confidential Information
(as hereinafter defined) will be held and treated by Lessee, the Member, Lessee
Affiliates and the agents and employees of
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Lessee, the Member and Lessee Affiliates in confidence and will not, except as
explicitly consented to by BCC in its sole discretion, be disclosed by Lessee,
the Member, Lessee Affiliates or the agents and employees of Lessee, the Member
or Lessee Affiliates, in any manner whatsoever, in whole or in part, and will
not be used by the Member, Lessee, Lessee Affiliates or the agents and employees
of Lessee, the Member or Lessee Affiliates for any purpose whatsoever. Lessee
and the Member further agree on behalf of Lessee, the Member and Lessee
Affiliates (i) to disclose Confidential Information only to Lessee's employees
who need to know the Confidential Information for purposes related to the
Facility, (ii) to employ all reasonable procedures to ensure that neither the
Lessee, the Member, or Lessee Affiliates, nor any of their respective agents or
employees use the Confidential Information in connection with trading in the
securities of BCC or communicate such information to others who so trade in such
securities and (iii) that any Confidential Information not returned to BCC or
the Management Firm, as applicable, will be held by Lessee and kept subject to
the terms of this Section or destroyed.
(b) As used in this Section, "Confidential Information" means all
information and data containing or otherwise reflecting information concerning
BCC or any BCC Affiliate, or any Phase Facility, which is not available to the
general public but is material to the business, financial condition, or
prospects of BCC and BCC Affiliates or otherwise would be material to making an
investment decision with respect to the publicly traded securities of BCC,
together with analyses, compilations, studies or other documents, whether
prepared by BCC or any other Entity, which contain or otherwise reflect such
information; provided, however, Confidential Information shall in no event
include information that has become public through no wrongful action of Lessee
or the Member or matters for which the Lessee or the Member are required to
disclose pursuant to Laws.
SECTION 7.03 CURE PERIOD FOR BCC. With respect to all obligations
of BCC or a BCC Affiliate under the Transaction Documents, in no event shall BCC
or such BCC Affiliate be in default regarding any such obligations unless and
until Lessee and/or the Member provides notice to BCC of such default and a
period of no less than ten (10) days (or such longer period as may be provided
in the Transaction Documents) to cure such default.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 DEFINITIONS; INTERPRETATION; MISCELLANEOUS.
Capitalized terms used but not otherwise defined in this Agreement have the
respective meanings specified in Appendix 1 hereto; the rules of interpretation
and other provisions set forth in Appendix 1 hereto shall apply to this
Agreement.
SECTION 8.02 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, or by Federal Express or other recognized overnight courier
or sent by registered or certified U.S. mail, return receipt requested or sent
by facsimile or telecopy transmission and addressed:
(i) If to the Lessee or any Member, at:
Financial Care Investors of Loyalsock, LLC
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
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(ii) If to BCC, at
c/o BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Att: Legal Department
Fax: (717) 796-6150
with a copy to
Steven J. Adelkoff
Kirkpatrick & Lockhart, LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: 412-355-6501
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto. Each notice given hereunder shall simultaneously be
provided (by the party giving such notice) to Lessor and its counsel at the
address for such parties identified in the Lease.
SECTION 8.03 JURISDICTION. THE LESSEE AND THE MEMBER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY PENNSYLVANIA COURT OR
FEDERAL COURT SITTING IN PENNSYLVANIA IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO WHICH
THE LESSEE IS A PARTY, AND THE LESSEE AND THE MEMBER HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN SUCH PENNSYLVANIA COURT OR IN SUCH FEDERAL COURT. THE LESSEE AND
THE MEMBER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE LESSEE AND THE MEMBER IRREVOCABLY CONSENT TO THE SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
LESSEE AT ITS ADDRESS SPECIFIED IN SECTION 8.02. THE LESSEE AND THE MEMBER AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF BCC TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
BCC TO BRING ANY ACTION OR PROCEEDING AGAINST THE LESSEE OR ITS PROPERTY (OR THE
MEMBER OR THE MEMBER'S PROPERTY) IN THE COURTS OF OTHER JURISDICTIONS.
SECTION 8.04 PERFORMANCE OF DUTIES. The Lessee's obligations, and
the obligation of the Member, under this Agreement and the other Transaction
Documents shall be
16
<PAGE> 17
performed by the Lessee and the Member at their sole cost and expense. If the
Lessee or the Member shall fail to do any act or thing which it or they have
covenanted to do under this Agreement or any of the other Transaction Documents,
BCC may, but shall not be obligated to, do the same or cause it to be done
either in the name of BCC or in the name and on behalf of the Lessee or the
Member, and the Lessee and the Member hereby irrevocably authorizes BCC to so
act.
SECTION 8.05 INDEMNIFICATION. The Lessee and the Member agree to
reimburse BCC for all costs and expenses, including reasonable counsel fees and
disbursements, incurred, and to indemnify and hold BCC harmless from and against
all losses suffered by BCC in connection with any breach by Lessee or the Member
of any covenant, agreement, representation or warranty under any Transaction
Document,
The Lessee shall indemnify BCC as provided herein upon demand and
in immediately available funds.
SECTION 8.06 INJUNCTIVE RELIEF. All parties recognize that, in the
event BCC, the Lessee or the Member fails to perform, observe or discharge any
of its or their obligations or liabilities under this Agreement or any of the
other Transaction Documents, any remedy of Law may prove to be inadequate
relief, therefore, BCC, the Lessee and the Member agree that the non-defaulting
party(ies) shall be entitled to temporary and permanent equitable relief in any
such case without the necessity of proving actual damages.
SECTION 8.07 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Lessee, the Member and BCC and their respective
personal representatives, heirs, successors and assigns, except that Lessee
shall have no right to assign its rights hereunder or any interest herein.
SECTION 8.08 WAIVERS.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN THE LESSEE, THE MEMBER AND BCC WOULD BE BASED ON DIFFICULT AND COMPLEX
ISSUES OF LAW AND FACT. ACCORDINGLY THE LESSEE, EACH MEMBER AND BCC, HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY
COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE LESSEE
AND/OR THE MEMBER ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE
LESSEE, THE MEMBER AND BCC OF ANY KIND OR NATURE, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE, AND WHETHER NOW EXISTING OR HEREAFTER ARISING, AND LESSEE
AND THE MEMBER HEREBY AGREE AND CONSENT THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE DECIDED BY A COURT TRIAL, IF BCC SO CHOOSES, WITHOUT JURY AND BCC MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE LESSEE AND THE MEMBERS TO THE WAIVER OF THE RIGHT TO TRIAL
BY JURY.
17
<PAGE> 18
(b) FURTHER, THE LESSEE AND THE MEMBER WAIVE THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 8.09 CONFLICT WITH LEASE DOCUMENTS
This Agreement is subject to the covenants and agreements
contained in the Lease and other Lease Documents. In the event of any conflict
between the provisions of this Agreement and the Lease Documents, the provisions
of the Lease Documents shall control.
SECTION 8.10 THIRD PARTY BENEFICIARY
BCC, the Member and the Lessee each acknowledge and agree that
this Agreement and the rights hereunder are intend to benefit, in addition to
the parties hereto, the Lessor, who shall be deemed to be a third party
beneficiary hereof. Without limiting the generality of the foregoing, (i) the
representations, warranties, affirmative covenants and negative covenants of
Lessee and the Member contained herein shall inure to the benefit of Lessor
(together with BCC) and (ii) the Lessor may enforce any or all of the provisions
herein contained. BCC hereby acknowledges and agrees that any security interest
BCC acquires in personal, intangible and other property of the Lessee, including
the Collateral Account (but not the Equity Interests) or the Leasehold Mortgage
pursuant to this Agreement shall be and is subordinate to the security interests
of Lessor created under the Lease and the Senior Credit Documents.
SECTION 8.11 NO AMENDMENT
BCC, Lessee and the Member hereby agree that no Transaction
Document shall be amended, modified, terminated (except for terminations
resulting from the Option or the Asset Purchase Option) or altered in any manner
without the prior written consent of the Lessor.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Shortfall Funding Agreement to be executed by their
respective officers or authorized agents as of the date first above written.
ATTEST: FINANCIAL CARE INVESTORS OF
[______________], LLC,
a Delaware Limited Liability Company,
____________________________________ By:______________________________________
Name:____________________________________
Title:___________________________________
ATTEST: BALANCED CARE CORPORATION
____________________________________ By:______________________________________
Title:___________________________________
ATTEST: FINANCIAL CARE INVESTORS, LLC.,
A Delaware Limited Liability Company,
____________________________________ By:______________________________________
Title:___________________________________
S-2
[Shortfall Funding Agreement]
<PAGE> 20
OMITTED SCHEDULE AND EXHIBITS
SCHEDULE 1: MEMBER OF LESSEE
EXHIBIT A: FORM OF NOTE ATTACHED
EXHIBIT B: FORM OF LEASEHOLD MORTGAGE ATTACHED
EXHIBIT C: FORM OF OPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.8
SCHEDULE TO FORM OF HCRI SHORTFALL FUNDING AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LESSEE LESSOR LESSOR'S LOCATION MANAGEMENT AMOUNT BY
STATE OF FIRM WHICH EQUITY
INCORPORATION CAPITAL
PORTION AND
SENIOR LOAN
CAPITAL
PORTION
CANNOT EXCEED
<S> <C> <C> <C> <C> <C> <C>
LEBANON, Financial Pennsylvania Pennsylvania Lebanon Balanced $808,000
PENNSYLVANIA Care BCC County, Care at
Investors Properties, Pennsylvania Lebanon, Inc.
of Inc.
Lebanon,
LLC
LOYALSOCK, Financial Pennsylvania Pennsylvania Lycoming Balanced $793,000
PENNSYLVANIA Care BCC County, Care at
Investors Properties, Pennsylvania Loyalsock,
of Inc. Inc.
Loyalsock,
LLC
WESTERVILLE, Financial HCN BCC Delaware Franklin Balanced $1,545,500
OHIO Care Holdings, County, Ohio Care at
Investors Inc. Westerville,
of Inc.
Westerville ,
LLC
MORRISTOWN, Financial HCN BCC Delaware Hamblen Balanced $814,118
TENNESSEE Care Holdings, County, Care at
Investors Inc. Tennessee Morristown,
of Inc.
Morristown,
LLC
OAK RIDGE, Financial HCN BCC Delaware Anderson Balanced $1,463,000
TENNESSEE Care Holdings, County, Care at Oak
Investors Inc. Tennessee Ridge, Inc.
of Oak
Ridge, LLC
SAGAMORE Financial HCN BCC Delaware Summit Balanced $1,463,000
HILLS, OHIO Care Holdings, County, Ohio Care at
Investors Inc. Sagamore
of Hills, Inc.
Sagamore
Hills, LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.9
FORM OF HCRI WORKING CAPITAL ASSURANCE AGREEMENT
THIS AGREEMENT is made as of the 22nd day of September, 1998, by and
among BALANCED CARE CORPORATION, a Delaware corporation, with a principal place
of business at c/o BCC Development and Management Co., 5021 Louise Drive, Suite
200, Mechanicsburg, PA 17055 ("BCC") and Pennsylvania BCC Properties, Inc., a
Pennsylvania corporation, with a principal place of business at One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, OH 43603 (the "Lessor").
WITNESSETH:
WHEREAS, the Lessor and FINANCIAL CARE INVESTORS OF [_____________],
LLC, a Delaware limited liability company (the "LESSEE") have agreed to enter
into that certain Lease Agreement, of even date herewith (the "Lease"), relating
to certain premises located in [__________________], on property more fully
described in the Lease (the "Property"); all capitalized terms used herein and
not otherwise defined herein shall have the same meanings as ascribed to such
terms in the Lease or, if not defined in the Lease, in Appendix 1 to the
Shortfall Agreement.
WHEREAS, pursuant to a Shortfall Funding Agreement dated of even date
herewith (the "Shortfall Agreement"), and a Deposit Pledge Agreement dated of
even date herewith (the "Deposit Pledge"), each among the Member (as defined in
Appendix 1 to the Shortfall Agreement) Lessee and BCC, Lessee has or will
deposit funds into the Working Capital Reserve (as defined in the Shortfall
Agreement) as provided in the Shortfall Agreement to fund certain operational
losses anticipated in connection with the Facility; and
WHEREAS, Lessor and BCC Development and Management Co., a Delaware
corporation ("Developer") have entered into a Construction Disbursing Agreement
of even date herewith (the "Development Agreement") for the purpose of
developing an assisted care living facility on the Property (the "Facility");
and
WHEREAS, the Member and the Lessor have entered in a Loan Agreement of
even date herewith and a Security Agreement of even date herewith, and the
Member has issued a Note of even date herewith to Lessor in the principal amount
of [__________________________________] dollars ("$[__________]"), for the
purpose of funding 85% of the Working Capital Reserve (such Loan Agreement,
Security Agreement and Note are collectively referred to herein as the "Senior
Credit Documents" and all obligations of any kind or nature of the Member under
the Senior Credit Documents are referred to herein as the "Senior Loan
Obligations"); and
<PAGE> 2
WHEREAS, Lessee and Balanced Care at Loyalsock, Inc., a Delaware
corporation (the "Manager") have entered into a Management Agreement of even
date herewith (the "Management Agreement") for the operation and management of
the Facility; and
WHEREAS, the Developer and the Manager are wholly-owned subsidiaries of
BCC; and
WHEREAS, as additional security for all of the obligations of Lessee
under the Lease accruing after the date the Facility opens for business and
first accepts residents ("Opening Date"), including without limitation all Rent,
as defined in the Lease (the "Lease Obligations"), the Lessor has requested the
execution and delivery of this Agreement; and
WHEREAS, because of the significant interest of BCC in the success and
economic viability of the Facility, BCC is willing to enter into this Agreement
to, among other matters, provide to the Lessor adequate assurances regarding the
funding of Shortfalls (as hereinafter defined) upon depletion of the Working
Capital Reserve.
NOW THEREFORE, for good and valuable consideration paid by each of the
parties hereto to the other, the receipt and sufficiency of which is hereby
acknowledged and in consideration of the covenants and agreements set forth
herein, the parties hereto intending to be legally bound hereby agree as
follows:
1. (a) Subject to the terms of Section 4 hereof, from and after the
Opening Date until the complete payment and performance of the Lease Obligations
and Senior Loan Obligations, BCC unconditionally agrees to loan to the Lessee,
sufficient funds, by means of working capital loans (collectively, the "Working
Capital Loans"), to pay and satisfy the amount by which the Lessee's cash
requirements to meet all of its obligations (including, without limitation,
operating expenses, debt service, Senior Loan Obligations and the Lease
Obligations) due and payable during any month exceed the gross revenues received
by the Lessee during such month (the "Shortfall"). Without limiting the
generality of the definition of Shortfall, Shortfalls shall also include,
without limitation (i) costs, expenses and damages related to Lessee's failure
to pay Impositions (as defined in the Lease), to maintain adequate insurance, to
maintain any license necessary or desirable to operate the Facility and
indemnification and defense costs and expenses in connection with litigation
arising from or related to the Facility, (ii) all costs of collection and
enforcement incurred by Lessor in exercising any remedies provided in the Lease,
the Senior Credit Documents or this Agreement, and (iii) payment in full of all
Rent, additional rent and other amounts due to Lessor or third parties under the
Lease in the manner and at the time prescribed in the Lease, including pursuant
to Lessor's exercise of remedies.
(b) Working Capital Loans shall be made pursuant to and in accordance
with the Shortfall Agreement. BCC hereby agrees that Lessor may make
distributions of proceeds of Working Capital Loans directly to Lessor or third
party creditors of Lessee.
2. (a) Subject to the terms of Section 4 hereof, whether or not there
has occurred or is continuing any default, breach of condition or failure to
satisfy any condition under the Shortfall Agreement, BCC shall, without further
direction, advance to the Lessee the amount
2
<PAGE> 3
equal to the Shortfall in a timely fashion so that the Lessee is able to meet
all of its working capital obligations (including, without limitation, all Lease
Obligations and all Senior Loan Obligations) when due. Without limiting the
generality of foregoing, BCC shall make Working Capital Loans to Lessee to fund
Shortfalls even if Lessee fails to make contributions on a timely basis to the
Working Capital Reserve as provided in Section 1.01 of the Shortfall Agreement
or otherwise; provided, however, the foregoing shall not otherwise limit the
rights of BCC against the Member or Lessee in the event of such failure to fund
by the Member into the Working Capital Reserve.
(b) Without limiting BCC's obligation to fund Shortfalls as herein
provided, BCC shall promptly notify Lessor should any proceedings under Title 11
of the United States Code (each a "Bankruptcy Proceeding", and the laws applied
during such Bankruptcy Proceedings being referred to herein as "Bankruptcy
Laws") be instituted by or against BCC, Lessee or the Member and, upon request
from Lessor, shall immediately fund or otherwise cause to be paid to all
creditors (exclusive of Lessor) of the party subject to the Bankruptcy
Proceeding all amounts due such creditors. Further, BCC shall use all reasonable
efforts (within the bounds of applicable law) to cause such Bankruptcy
Proceedings to be dismissed as soon as possible.
3. BCC acknowledges that the covenants and agreements made hereunder
by BCC are being made to induce the Lessor to enter into and accept the Lease
and enable the Lessee, upon the complete disbursement of the Working Capital
Reserve, to fulfill its obligations, including, without limitation, the Lease
Obligations and Senior Loan Obligations. Accordingly, it is expressly intended
by BCC that the covenants and agreements by BCC hereunder may be relied upon and
enforced by the Lessor.
4. Notwithstanding any provision to the contrary set forth herein,
BCC's obligation to provide the Working Capital Loans, and advance Shortfalls,
to the Lessee shall not commence until such time as (i) all amounts to be
advanced under the Senior Credit Documents have been advanced by the Lessor and
deposited in the Collateral Account (as defined in the Deposit Pledge Agreement)
and (ii) the full amount of the Working Capital Reserve actually deposited in
the Collateral Account has been depleted. BCC shall make or permit disbursements
to Lessor from the Working Capital Reserve to meet any and all Lease Obligations
and Senior Loan Obligations when and as such obligations become due and payable,
pursuant to the terms and provisions of the Deposit Pledge Agreement.
5. The obligations of BCC hereunder shall not be affected by the
termination, discontinuance, release or modification of any agreement from any
endorser, surety or guarantor of the Lease Obligations or Senior Loan
Obligations. Notwithstanding anything to the contrary contained herein, in the
Senior Credit Documents or in the Lease, the Lessor hereby covenants and agrees
with BCC that the Lessor shall not amend, modify or otherwise alter the Lease or
any other document executed in connection therewith (collectively, the "Lease
Documents") or the Senior Credit Documents without BCC's prior written consent,
in each instance, which consent, shall not be unreasonably withheld, conditioned
or delayed.
3
<PAGE> 4
In addition, the Lessor hereby covenants and agrees with BCC that,
except in connection with the exercise of any of its rights and/or remedies
under the Lease Documents, the Lessor shall not terminate the Lease without the
prior written consent of BCC, which consent shall not be unreasonably withheld,
conditioned or delayed.
6. The obligations of BCC hereunder shall not be affected by any
change in the beneficial ownership of the Lessee or by reason of any disability
of the Lessee. This Agreement shall not be construed as a guaranty or surety
agreement, but shall constitute the separate and independent primary obligation
of BCC to Lessor. This Agreement shall be in addition to any guaranty or other
security for the Lease Obligations, and it shall not be prejudiced or rendered
unenforceable by the invalidity of any such guaranty or security. This Agreement
shall continue to be effective or be reinstated, as the case may be, if, at any
time, any payment of the Lease Obligations or Senior Loan Obligations is
rescinded or must otherwise be returned by the Lessor upon the insolvency,
bankruptcy or reorganization of the Lessee or otherwise, all as though such
payment had not been made.
7. (a) Without limiting BCC's obligation to provide the Working
Capital Loans, upon the occurrence of any default under any of the Lease
Documents or the Senior Credit Documents, BCC shall have the right, but not the
obligation, to cure such default within any applicable notice and grace periods
(or in the event of no grace period, within 3 days after receipt by BCC of
notice of such default) and, to the extent permitted by law, enter upon the
Property, if necessary, for such purpose and take all such actions as BCC may
deem necessary or appropriate to remedy such default. The Lessor agrees to give
to BCC a copy of any written notice of any default by Lessee or the Member under
the Lease, any other Lease Document or any Senior Credit Document. The Lessor
agrees to accept any remedy performed by BCC as if the same had been performed
by the Lessee. BCC shall give to Lessor a copy of any notice of default given by
BCC or any BCC Affiliate to Lessee regarding any default under any Transaction
Documents.
(b) Lessor consents to and acknowledges that BCC has the right to
acquire all of the Equity Interests (as defined in Appendix 1 to the Shortfall
Agreement) or assets of Lessee should Lessee fail to timely make all required
deposits into the Working Capital Reserve pursuant to Section 1.01 of the
Shortfall Agreement. In the event that Lessee fails to make such deposits into
the Working Capital Reserve and BCC exercises its rights to purchase the Equity
Interests or assets of the Lessee by having BCC, an Affiliate of BCC or a
designee of BCC purchase all of the Equity Interests in compliance with Section
1.01(c) of the Shortfall Agreement, subject to compliance with Article 18.1(a)
of the Lease, Lessor shall (i) recognize as Lessee under the Lease and other
Lease Documents such designee as BCC may designate so long as such designee
funds 15% of the Working Capital Reserve as provided in the Shortfall Agreement
and otherwise executes and/or delivers to Lessor such documents, instruments,
affidavits, letter of credit amendments, proof of licensure and opinions as
Lessor may reasonably request and (ii) recognize such new lessee's equity
owner(s) as Borrower under the Senior Credit Documents. In such event (but
subject to Section 10 of this Agreement), this Agreement and the obligations of
the parties hereunder (including without limitation BCC's obligation to fund
Shortfalls) shall remain in full force and effect.
4
<PAGE> 5
8. Any notice, request, demand, statement or consent made hereunder
shall be in writing and shall be deemed duly given if personally delivered, sent
by certified mail, return receipt requested, or sent by a nationally recognized
commercial overnight delivery service with provisions for a receipt, postage or
delivery charges prepaid, and shall be deemed given when postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
IF TO BCC: C/O BCC DEVELOPMENT AND MANAGEMENT CO.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attn: President
WITH COPIES TO: C/O BCC DEVELOPMENT AND MANAGEMENT CO.
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attn: General Counsel
and
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Steven J. Adelkoff, Esq.
IF TO THE LESSOR: Pennsylvania BCC Properties, Inc.
One SeaGate, Suite 1500
P.O. Box 1475
Toledo, Ohio 43603-1475
Attn:
and
Shumaker, Loop & Kendrick, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43624-1573
Attn: Diane V. Davis, Esq.
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to BCC or the
Lessee by the Lessor at any time shall not imply that such notice or any further
or similar notice was or is required.
9. This Agreement shall be construed, and the rights and obligations
of the Lessor and BCC shall be determined, in accordance with the laws of the
State in which the Facility is located, exclusive of such State's conflicts of
laws rules.
5
<PAGE> 6
10. This Agreement and BCC's obligations hereunder shall automatically
terminate upon the purchase by BCC or a wholly-owned subsidiary of BCC (a "BCC
Affiliate") of all of the Equity Interests or substantially all of the assets of
Lessee (and Lessor hereby consents to such purchase of equity or assets subject
to compliance with Article 18.1(a) of the Lease); provided, however, if a BCC
Affiliate purchases all of such assets or the Equity Interests, BCC shall
provide to Lessor an unconditional and unlimited guaranty of all Lease
Obligations, in form and substance reasonably satisfactory to Lessor. Lessor
shall have the right, but not the obligation, to terminate this Agreement if (i)
an Event of Default under the Lease remains uncured beyond any applicable cure
period or (ii) BCC fails to perform any of BCC's obligations or duties under
this Agreement.
11. The Lessor covenants and agrees with BCC that (subject to
Bankruptcy Laws) the Lessor shall not consent to any assignment of the Lessee's
interest under the Lease (except to BCC or a BCC Affiliate) or any transfer of
substantially all of the Lessee's assets or any transfer of the outstanding
legal and beneficial interest in the Lessee without the prior written consent of
BCC, which consent BCC may withhold in its sole and absolute discretion. In
addition, in the event that, in violation of the terms of this Agreement or the
Lease, (a) the Lessee assigns its interest in the Lease (or transfers
substantially all of its assets), (b) the current holders of the issued and
outstanding equity of the Lessee transfer any such equity or (c) if any of the
events described in Section 8.1(f) or Section 8.1(g) of the Lease occurs with
respect to Lessee, each of the Lessor and BCC covenant and agree that, subject
to applicable law, the Lessor shall terminate the Lease (in accordance with the
terms thereof) and Lessor shall enter into a new lease of the Property with BCC
(or any of its wholly-owned subsidiaries, provided, that, BCC executes and
delivers an unconditional and unlimited guaranty of any such lease, in form and
substance acceptable to the Lessor); provided, however, that there shall be
concurrent compliance with Article 18.1(a) of the Lease and any such lease shall
be substantially similar to the Lease and provided further, that BCC
concurrently pays all Senior Loan Obligations in full. In connection with the
execution and delivery of any such lease, (y) BCC and its subsidiary shall
execute and/or deliver any additional documents that the Lessor may request, in
form and substance similar to the Lease Documents, and such documents,
instruments, affidavits, letter of credit amendments, proof of licensure and
opinions as Lessor may reasonably request, and (z) BCC shall deliver to the
Lessor such evidence as Lessor shall request, in form and substance acceptable
to the Lessor, that the new lease and all other documents executed and delivered
in connection therewith have been duly authorized, executed and delivered and
are enforceable. BCC agrees to pay all of the costs and expenses reasonably
incurred by the Lessor (including, without limitation, attorneys' fees and
expenses) in connection with the performance of the Lessor's obligations under
this Section 11.
12. (a) Entire Agreement . This Agreement contains the entire
understanding among the parties hereto with respect to its subject matter and
supersedes any prior understandings or agreements between the parties with
respect to such subject matter.
(b) Amendments. This Agreement may be modified or amended only by
a written instrument executed by the Lessor, the Lessee and BCC.
6
<PAGE> 7
(c) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute but a single instrument.
(e) Future Cooperation. Each party covenants and agrees to take
such further action and execute such further documents as may be necessary or
appropriate to carry out the intention of this Agreement.
(f) Successors and Assigns. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
(g) Representations and Warranties of BCC. BCC represents and
warrants that (i) this Agreement constitutes a legal, valid and binding
obligation of BCC, was duly authorized, executed and delivered by BCC, and is
fully enforceable against BCC in accordance with its terms (except as may be
limited by bankruptcy and creditor's rights laws and general principles of
equity), (ii) BCC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified to do all things required of it under this Agreement; (iii) neither
this Agreement nor any agreement, document or instrument executed or to be
executed in connection herewith, violates the terms of any other agreement to
which BCC is a party and (iv) the recitals set forth above are hereby
incorporated by this reference and made a part of this Agreement, and BCC
represents and warrants that such recitals are true and correct. Any material
breach by BCC of the representations and warranties set forth herein shall be a
default under this Agreement.
(h) Subordination. If for any reason whatsoever Lessee, any
Affiliates of Lessee, Developer or Manager now or hereafter becomes indebted to
BCC or any Affiliate of BCC, such indebtedness and all interest therein shall at
all times be subordinated in all respects to the obligations of BCC under this
Agreement, the obligations of Lessee under the Lease, Senior Loan Obligations
and the obligations of Developer under the Development Agreement; provided,
however, so long as no default or event of default shall occur and be continuing
under any Lease Document or Senior Credit Documents, BCC and any Affiliate of
BCC shall be permitted to receive amounts due and owing solely under the
Development Agreement and Management Agreement. Payment on the Notes issued
pursuant to the Shortfall Agreement is permitted solely in connection with the
exercise of the Option or Asset Purchase Option.
7
<PAGE> 8
(i) Counsel Fees. If Lessor or BCC brings any action to interpret
or enforce this Agreement, or for damages for any alleged breach thereof, the
prevailing party in any such action shall be entitled to reasonable attorney's
fees and costs as awarded by the court in addition to all other recovery,
damages and costs.
(j) Reliance by Lessor. BCC acknowledges that (i) BCC will benefit
from the execution and continued existence of the Lease, (ii) Lessor will be
relying upon BCC's assurances, representations, warranties, and covenants
contained herein and (iii) Lessor may take, or delay in taking or refuse to take
any and all action with reference to the Lease (regardless of whether the same
might vary the risk or alter the rights, remedies or recourses of BCC),
including without limitation the settlement or compromise of any amount
allegedly due thereunder, the granting of indulgences or extensions, and/or the
release of or refusal to execute on any and all collateral; provided, however,
nothing contained in this Section shall limit or modify the obligations of
Lessor under this Agreement, including without limitation Section 5 above.
(k) Waiver Provisions. BCC hereby knowingly, voluntarily and
unequivocally waives: (i) all notice of acceptance, protest, demand and
dishonor, presentment and demands of any kind now or hereafter provided for by
any statute or rule of law; (ii) any and all requirements that Lessor institute
any action or proceeding, or exhaust any or all of Lessor's rights, remedies or
recourses, against Lessee or anyone else as a condition precedent to bringing an
action against BCC under this Agreement; (iii) any defense arising by reason of
any disability, insolvency, bankruptcy, lack of authority or power, dissolution
or any other defense of Lessee, BCC, any guarantor of the Lease, or their
respective successors and assigns (even though rendering same void,
unenforceable or otherwise uncollectible); (iv) the benefits of any and all
express or implied waivers which may otherwise be available to or claimed by BCC
under the laws of the State in which the Property is located; (v) any claim BCC
might otherwise have against Lessor by virtue of Lessor's invocation of any
right, remedy or recourse permitted it hereunder or under the Lease, any letter
of credit agreement, any guaranty, or otherwise available at law or equity; (vi)
any failure, omission, delay or lack on the part of Lessor or Lessee to enforce,
assert or exercise any right, power or remedy conferred on Lessor or Lessee in
the Lease, or any action on the part of Lessor granting a waiver, indulgence or
extension to Lessee or any other party; (vii) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets of Lessee or BCC, marshaling of assets or liabilities, receiverships,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other similar proceeding
affecting Lessee, BCC, or their respective assets, or the disaffirmance of the
Lease in any such proceeding; (viii) any release or other reduction of the Lease
Obligations arising as a result of the expansion, release, substitution or
replacement (whether or not in accordance with terms of the Lease) of the
Property or any portion thereof; and (ix) any defense or claim available to BCC
as a result of BCC's exercise of its right to purchase the Property (or any
portion thereof) pursuant to that certain Right of First Refusal Agreement of
even date herewith by and between Lessor and BCC; provided, however, nothing
contained in this Section shall limit or modify the obligations of Lessor under
this Agreement, including without limitation Section 5 and Section 11(a) above.
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<PAGE> 9
(l) Application of Agreement. Subject to Section 10 hereof, this
Agreement shall continue until the complete payment and performance of the Lease
Obligations and the Senior Loan Obligations, and shall apply notwithstanding any
extension or renewal of the Lease, or any holdover following the expiration or
termination of the Term or any renewal or extension of the Term (as defined in
the Lease).
(m) Financial Reporting. Within forty-five (45) days of the end of
each of the first three quarters of the fiscal year of BCC, BCC shall deliver
the quarterly consolidated or combined, as applicable, financial statement of
BCC to Lessor. Within ninety (90) days of the fiscal year end of BCC, BCC shall
deliver to Lessor the annual consolidated or combined, as applicable, financial
statement of BCC audited by a reputable certified public accounting firm. If BCC
is or becomes subject to any reporting requirements of the Securities and
Exchange Commission (the "SEC") during the Term, BCC shall, in lieu of providing
the financial statements described in the first two sentences of this
Subsection, concurrently deliver to Lessor such reports as are delivered to the
SEC pursuant to applicable securities laws. All of the reports and statements
required hereby shall be prepared in accordance with GAAP and BCC's accounting
principles consistently applied and shall be accompanied by a statement signed
by the President, Chief Financial Officer, Principal Accounting Officer,
Controller, Executive Vice President, Development, or other officer of BCC as
approved by Lessor in writing, certifying that said reports are true, correct
and complete in all material respects after due inquiry.
(n) Management Agreement. BCC acknowledges that BCC is the sole
shareholder of the Manager. As sole shareholder of the Manager, BCC agrees and
shall cause the Manager to agree, that in the case of an Event of Default under
the Lease or this Agreement (after applicable cure periods): (i) Lessor shall
have the right to terminate the Management Agreement and Manager's rights to
manage the Facility, (ii) Lessor shall have the right to require the Manager to
cooperate and assist in all reasonable ways during any transition of management
of the Facility after such termination including, without limitation, the
transfer of the Facility license and all other governmental licenses and
permits, (iii) during any such interim management, Lessor shall have the right
to approve or veto all operation budgets and (iv) Manager shall otherwise take
such actions or refrain from taken such actions as Lessor may reasonably
request.
(o) Confidentiality. Lessor shall use reasonable efforts not to
disclose the information provided by Developer, Guarantor or Lessee to Lessor
pursuant to the Lease Documents; provided, however, that Lessor may disclose
such information to any person or entity to whom Lessor is required to make such
disclosure; to governmental authorities; and to any other person or entity
having a legitimate business interest in Lessor, including, but not limited to,
regulators, auditors, accountants, attorneys, investors, underwriters, rating
agencies, bond or surety companies, and lenders of Lessor (including, but not
limited to, collateral pool lenders and line of credit lenders).
13. Event of Default. The failure of BCC to perform or fulfill any
agreement or obligation under this Agreement shall be an Event of Default
hereunder. An Event of Default shall include, without limitation, the failure of
BCC to make any Working Capital Loan as required hereunder by the due date of
any obligation that constitutes a Shortfall.
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<PAGE> 10
14. Remedies. Upon the occurrence of an Event of Default hereunder,
Lessor may do any of the following:
(a) Lessor may exercise any and all of its rights and
remedies under the Lease and this Agreement.
(b) Lessor may pursue an action at law or in equity,
including an action in specific performance.
(c) Lessor may pursue an action for damages and in such case
BCC agrees that the amount of monetary damages payable by BCC to Lessor pursuant
to an Event of Default hereunder shall not be less than the aggregate amount of
Shortfalls due and payable from time to time until the earlier of (i) the date
that the Lease Obligations and Senior Loan Obligations have been paid in full,
or (ii) termination of this Agreement pursuant to Section 10.
(d) Lessor may terminate all rights of BCC and any BCC
affiliate under any Option Agreement, Shortfall Agreement (including the Asset
Purchase Option), Deposit Agreement, Pledge Agreement, Leasehold Mortgage and
Management Agreement that relates to Lessee, the Facility, any Phase Tenant or
any Phase Facility.
16. Bundling Condition. Section 10 of the Option Agreement (as defined
in Appendix 1 to the Shortfall Agreement) and Section 1.03 of the Shortfall
Agreement obligate BCC to purchase either the assets of all Phase Tenants (as
defined in the Option Agreement) or the equity ownership interests in all Phase
Tenants with respect to each Facility in the Current Phase (as defined in the
Lease) in the event that BCC exercises its Option or Asset Purchase Option (as
those terms are defined in Appendix 1 to the Shortfall Agreement) with respect
to the Lessee. BCC covenants and agrees that (i) the Bundling Condition (as
defined in the Option Agreement) may be enforced by Lessor to the same extent as
the Bundling Condition may be enforced by the Member, (ii) a default in the
exercise of the Bundling Condition by BCC as required with respect to any Phase
Tenant shall constitute an Event of Default hereunder and (iii) the Bundling
Condition shall be enforceable by Lessor against BCC even if a default or event
of default by the Member or the Lessee has occurred under the Transaction
Documents.
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<PAGE> 11
EXECUTED as a sealed instrument as of the date first written above.
WITNESS: BCC:
BALANCED CARE CORPORATION, a
Delaware corporation
_____________________________________ By: ________________________________
Name: Name:
Title:
WITNESS: LESSOR:
[______________________], a
Pennsylvania corporation
_____________________________________ By: ________________________________
Name: Name:
Title:
S - 1
<PAGE> 1
EXHIBIT 10.10
SCHEDULE TO FORM OF HCRI WORKING CAPITAL ASSURANCE AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LESSOR LESSOR'S LESSEE LOCATION PRINCIPAL
STATE OF AMOUNT OF
INCORPORATION NOTE
<S> <C> <C> <C> <C> <C>
LEBANON, Pennsylvania Pennsylvania Financial Care Lebanon $686,800
PENNSYLVANIA BCC Investors of County,
Properties, Lebanon, LLC Pennsylvania
Inc.
LOYALSOCK, Pennsylvania Pennsylvania Financial Care Lycoming $674,050
PENNSYLVANIA BCC Investors of County,
Properties, Loyalsock, LLC Pennsylvania
Inc.
WESTERVILLE, HCN BCC Delaware Financial Care Franklin $1,313,675
OHIO Holdings, Inc. Investors of County, Ohio
Westerville,
LLC
MORRISTOWN, HCN BCC Delaware Financial Care Hamblen $692,000
TENNESSEE Holdings, Inc. Investors of County,
Morristown, LLC Tennessee
OAK RIDGE, HCN BCC Delaware Financial Care Anderson $697,948
TENNESSEE Holdings, Inc. Investors of County,
Oak Ridge, LLC Tennessee
SAGAMORE HCN BCC Delaware Financial Care Summit $1,243,550
HILLS, OHIO Holdings, Inc. Investors of County, Ohio
Sagamore Hills,
LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.11
FORM OF HCRI MANAGEMENT AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of the Documentation Date
between Balanced Care at [__________], Inc., a Delaware corporation (the
"MANAGEMENT FIRM") and Financial Care Investors of [____________], LLC, a
Delaware limited liability company, (the "LEASEHOLD TENANT").
W I T N E S S E T H
WHEREAS, the Leasehold Tenant executed and delivered that certain
Lease Agreement dated as of the Documentation Date (the "LEASE") whereby the
Leasehold Tenant leased from [_______________], Inc. a [___________] corporation
(the "LESSOR") property, together with all improvements built or to be built
thereon, located in [_______________________] together with such other
improvements and property, all as more fully described in the Lease (the
"PROPERTY"); and
WHEREAS, Balanced Care Corporation, a Delaware corporation ("BCC"),
Leasehold Tenant, and all equity owners of Leasehold Tenant (the "MEMBERS") have
entered into that certain Shortfall Funding Agreement dated as of the
Documentation Date (the "SHORTFALL AGREEMENT") whereby, among other matters,
Members agreed to fund a Working Capital Reserve, as more fully provided in the
Shortfall Agreement; and
WHEREAS, Leasehold Tenant is or will be the sole operator of the
Facility located on the Property; and
WHEREAS, the Management Firm is experienced in operating such
facilities and is willing to be the exclusive manager and operator of the
Facility on behalf of the Leasehold Tenant, as an independent contractor
pursuant to the terms and conditions set forth herein; and
WHEREAS, Leasehold Tenant, not having experience in managing and
operating the Facility, wishes to engage Management Firm as the sole and
exclusive operator and manager of the Facility; and
WHEREAS, during the term of this Agreement, the Management Firm
shall be the exclusive manager and operator of the Facility on behalf of and in
the name of the Leasehold Tenant.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
<PAGE> 2
1. SCOPE OF WORK. Leasehold Tenant hereby appoints Management Firm as the
exclusive operator and manager of the Facility during the term of this
Agreement. The Management Firm shall have full responsibility and authority in
the name and on behalf of Leasehold Tenant to operate and manage the Facility
and hereby covenants and agrees to take all actions necessary or desirable to
operate and manage the Facility and to fulfill its duties hereunder, including
without limitation to: (i) operate and maintain the Facility on behalf of the
Leasehold Tenant as a comprehensive residential care facility providing personal
care services; (ii) collect all room and board revenue, as well as other
revenue, and timely pay all debts and other obligations relating to the
Facility, including operating expenses, fixed expenses and taxes; (iii) request
from BCC funds held in the Collateral Account to apply toward the payment of any
obligation incurred in connection with the operation of the Facility, (iv)
ensure the Facility complies with applicable Federal, state and local laws and
regulations; (v) provide all necessary services to ensure that the Facility
provides quality care to its residents; (vi) recruit, hire and train personnel
as needed for the operation of all departments and services of the Facility;
(vii) maintain such bank accounts as may be necessary or desirable for the
operation of the Facility (the "OPERATING ACCOUNTS"); (viii) establish salary
levels, performance standards, personnel policies and employee benefits for the
Leasehold Tenant's employees; (ix) comply with all terms of the Lease and the
other Lease Documents (exclusive of the Development Agreement); and (x) to take
all other actions necessary or desirable to operate and manage the Facility in
accordance with prudent practice and industry standards.
Without limiting the generality of the foregoing, Management Firm
shall, as part of its management duties hereunder and on behalf of Leasehold
Tenant (as an expense allocable to the Facility), perform each and every
obligation of Leasehold Tenant under the Lease and the other Lease Documents
(exclusive of the Development Agreement) through out the term thereof, including
all representations and warranties of Leasehold Tenant contained therein, to the
extent applicable to the Facility. Additionally, the Management Firm shall
collect all revenues of any kind or nature from the Facility, and so long as any
amounts are owing to Lessor under the Lease, the other Lease Documents and
Senior Credit Documents, make payments of rent, Net Cash Flow (as defined in the
Senior Credit Documents) and other sums due and owing to Lessor under the Lease
and Senior Credit Documents from revenues of Facility or as otherwise provided
in the Transaction Documents.
In performing its duties, the Management Firm (through its in-house
corporate staff or independent contractors) shall perform the following with
respect to the Facility, as well as any other matters reasonably related thereto
commencing upon the date of this Agreement:
(a) MANAGEMENT INFORMATION SYSTEMS (MIS)
Support centralized Facility information system which provides
systems management for the following areas:
-- Accounts Payable
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<PAGE> 3
-- Payroll
-- Financial Reporting
-- Marketing
-- General Ledger
The Management Firm shall be responsible for billing and collection of
accounts receivable generated in connection with the Facility.
(b) LEGAL COUNSEL
(i) Prepare or coordinate with outside legal counsel for
preparation of documents for operation of the Facility, including
resident agreements, supplier/vendor contracts, service contracts,
equipment leases and other ancillary contracts; (ii) prepare or
coordinate licensure and other regulatory applications; (iii)
coordinate all litigation involving the Facility with local counsel or
the insurance companies; (iv) coordinate with local counsel on local
law issues affecting the Facility; (v) process working capital requests
from the Working Capital Reserve or otherwise, and apply for, negotiate
and obtain letters of credit or other credit enhancements from lending
institutions; and (vi) provide legal counsel or coordinate with local
counsel to provide counsel to the Facility's Human Resources
Department.
Without limiting the generality of Section 2 and Section 10 below, the
parties acknowledge that all outside counsel expenses under the foregoing
paragraph shall be an expense allocable to the Facility.
(c) ACCOUNTING/TAX
(i) Provide an accountant to supervise all accounting activities;
(ii) implement accounting policies and guidelines; (iii) provide a
centralized cash management system; (iv) deposit in Operating Accounts
established in the Facility's name all funds received from the
operations of the Facility, satisfy obligations of the Facility from
such Operating Accounts, and not commingle funds in the Operating
Accounts with any other funds; (v) negotiate and administer working
capital lines of credit available to the Facility; (vi) supervise the
Facility's internal control structure; (vii) provide payroll, income
and real estate tax support as follows: prepare or supervise
preparation of all tax returns, assist the Facility in the event of a
tax audit, assist the Facility with technical issues relating to
payroll, excise and other taxes, and monitor pending and final Federal,
State and local tax Law changes; (viii) perform periodic site visits to
review the Facility's accounting and tax records; (ix) provide
operations expertise through site visits and strategies to maximize
fiscal performance; and (x) develop and
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<PAGE> 4
implement a budget for operations, capital outlay and cash
requirements. All checks or other documents for withdrawal of funds
shall be signed by the appropriate officer of the Management Firm or
its designee. Deposits may be made by the appropriate officer of the
Management Firm or its designee.
(d) HUMAN RESOURCES
(i) Implement all personnel policies and guidelines; (ii) recruit
management personnel of the Facility, including the community director
of the Facility, which recruitment and the salaries related thereto
shall be an expense allocable to the Facility; (iii) provide on-going
training for the Facility's Human Resources Director; (iv) negotiate
and administer all employee benefit plans including health insurance,
dental insurance, life insurance, long-term disability insurance, and
retirement/401K; (v) negotiate and administer general and professional
liability, workers' compensation, property, and vehicular insurance
plans; (vi) monitor the Facility's compliance with Federal, State and
local employment Laws; (vii) respond to all government compliance
agencies and legal proceedings as necessary; (viii) implement and
monitor safety/loss control programs; (ix) develop and implement career
planning and manpower development strategies; (x) recruit, employ and
train personnel as needed for the operation of all departments and
services of the Facility; and (xi) establish salary levels, performance
standards, personnel policies and employee benefits for all employees
within applicable budgetary and regulatory limits. Leasehold Tenant
acknowledges and agrees that all personnel employed at the Facility
shall be deemed the employees of the Management Firm, but shall be paid
salaries and wages (including employment taxes and the like) as an
expense allocable to the Facility.
(e) PROGRAM DEVELOPMENT
(i) Provide ongoing program development and management
consultation; (ii) supply select program manuals for local modification
and implementation; and (iii) provide program development/management
training. A community director shall be engaged by the Management Firm
for the Facility. Such community director shall be an employee of the
Management Firm, but his/her salary and employee benefits shall be paid
as an expense incurred in connection with and allocable to the
operations of the Facility. The Management Firm shall be reimbursed up
to $10,000 per year for the costs of providing training services and
seminars given by BCC Affiliates. These costs shall include all
training materials, including all manuals, brochures and other
preparation materials.
4
<PAGE> 5
(f) QUALITY MANAGEMENT
(i) Provide model quality management systems and implement such
including risk management, resident/family satisfaction, licensing and
accreditation, and program evaluation; and (ii) provide ongoing
monitoring of the Facility resident outcomes, compare with regional and
national norms, and make program modifications.
(g) MARKETING/COMMUNICATION
(i) Hire, direct and supervise marketing department staff; (ii)
train staff (program managers, rehabilitation liaisons, marketing
representatives, etc.) in marketing skills; (iii) organize strong sales
efforts within the target area, develop program mix strategies, and
develop marketing plans for the Facility; (iv) establish an
intake/admission system and continuously review the admission process;
(v) develop image building advertising strategies for the Facility; and
(vi) develop and produce Facility selected promotional literature. The
director of marketing shall be an employee of the Management Firm, but
such person's employee benefits and salary (including employment tax
and the like) shall be paid as an expense incurred in connection with
and allocable to the operations of the Facility.
(h) CONTRACTING
Negotiate and execute contracts and agreements related to the
Facility with third parties and parties affiliated with the Management
Firm; provided that all contracts and agreements with parties
affiliated with the Management Firm shall be on terms no less favorable
than terms for comparable contracts and agreements with unaffiliated
parties.
(i) MISCELLANEOUS
(1) Obtain and maintain in accordance with all applicable laws and
regulations all licenses, approvals and certifications required
for operation of the Facility and use reasonable efforts to
procure eligibility for participation in other applicable
referral or payor programs. Comply with all notification and
reporting requirements imposed under laws and regulations in
connection with the operation of the Facility.
(2) Purchase supplies, using procurement practices in accordance
with industry standards, and purchase or lease equipment under
5
<PAGE> 6
national and regional agreements or purchase contracts of the
Management Firm or its affiliated companies and provide to the
Leasehold Tenant all benefits resulting therefrom to the extent
permitted by their terms and by Law. All such supplies so
purchased shall become property of the Leasehold Tenant. Once
leases are completed, equipment shall become property of the
Leasehold Tenant.
(3) Review and analyze the performance of ancillary services under
contract and negotiate contractual arrangements therefor.
(4) Maintain books and records for the Facility at the Management
Firm's address herein for the purpose of providing services
under this Agreement. The Management Firm shall make available
to the Leasehold Tenant and any lessor leasing the Facility to
Leasehold Tenant, and their respective agents, accountants, and
attorneys during normal business hours all books and records
pertaining to the Facility, and the Management Firm shall
promptly respond to any questions of the Leasehold Tenant or
any such lessor with respect to such books and records and
shall confer with the Leasehold Tenant and any such lessor at
all reasonable times, upon request, concerning the operation of
the Facility.
(5) Order, supervise and conduct a program of regular maintenance
and repair of the Facility at the Leasehold Tenant's cost and
expense. So long as the Lease is in full force and effect, such
maintenance and repair program shall comply with the
requirements of the Lease related thereto.
(6) Supervise and provide for the operation of food service
facilities for the Facility.
(7) Make periodic evaluations of the performance of all departments
of the Facility and investigate and report, upon request, any
inconsistency between expenditures and budget.
(8) Implement all policies and procedures reasonably necessary for
the operation of the Facility consistent with applicable
regulations.
(9) Foster a working relationship between Management Firm and any
authorized volunteer or auxiliary groups interested in
providing
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<PAGE> 7
support to the Facility and residents of the Facility.
2. ADDITIONAL SERVICES. It is the intention of the parties that the Management
Firm be responsible for providing all service necessary or desirable for the
efficient and orderly management and operations of the Facility; provided, the
cost and expense of operating the Facility is to be paid by Leasehold Tenant to
the extent of (i) Fundings required under the Shortfall Agreement by Leasehold
Tenant and its equity owners and (ii) revenues derived from the Facility. The
Management Firm shall actively utilize staff specialists in its employ or that
of its affiliates in such areas as accounting, budgeting, marketing,
reimbursement, dietary, housekeeping, clinical, pharmaceutical, purchasing and
third party payments in the management of the Facility when considered desirable
by the Management Firm. The expense of such personnel shall be the
responsibility of Leasehold Tenant, allocable to the Facility.
3. FINANCIAL STATEMENT. The Management Firm shall prepare and deliver to the
Leasehold Tenant an unaudited balance sheet within forty-five (45) days after
the close of each fiscal quarter of the Leasehold Tenant. The Management Firm
shall also cause an unaudited annual statement to be made of the financial
records of the Facility and a copy of such report shall be provided to the
Leasehold Tenant as soon as it is available after the end of the fiscal year.
The cost of the reports shall be an expense allocable to the Facility. The
fiscal year for the Facility shall coincide with the Management Firm's fiscal
year. All financial statements are to be prepared in accordance with GAAP.
Management Firm shall cause to be prepared all financial statements required of
Leasehold Tenant pursuant to the Lease and other Lease Documents; provided,
however, Leasehold Tenant shall provide all information reasonably requested by
Management Firm in connection with the preparation of such financial statements
that is not otherwise reasonably available to the Management Firm, and shall
certify to Management Firm, BCC and Lessor that such statements are, to the best
knowledge of Leasehold Tenant, true and correct in all material respects.
4. PROPERTY INTERESTS/CONFIDENTIALITY. (a) The technical systems, methods,
policies, procedures and controls, copyrights, "know-how", tradenames,
trademarks, servicemarks, other registered names or marks and all other
intellectual property rights related thereto employed by the Management Firm
(the "INTANGIBLE RIGHTS") are to remain the property of the Management Firm and
are not, at any time, to be utilized, distributed, copied or otherwise employed
or acquired by the Leasehold Tenant except as authorized in writing by the
Management Firm or except as may be required by Law.
(b) Leasehold Tenant understands and acknowledges that Management Firm
has devoted substantial time, energy and expense to developing a process and
procedure to manage and operate facilities such as the Facility, and that such
processes, procedures, Intangible Rights and the information and materials
compiled or prepared in connection therewith, including without limitation
marketing plans, business plans, pricing information , information on
competition, demographics, suppliers and providers of services and financing
arrangements (collectively "CONFIDENTIAL INFORMATION") are proprietary to
Management Firm and the
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<PAGE> 8
confidential information of the Management Firm. Leasehold Tenant shall not
disclose to any party any Confidential Information, without the prior written
consent of Management Firm, except as may be required by Law.
(c) The provisions of this Section shall survive the expiration or
sooner termination of this Agreement.
5. TERM OF AGREEMENT. The term of this Agreement shall commence upon the date
hereof, and continue for a period of nine (9) years thereafter. This Agreement
shall be automatically renewed for additional consecutive one (1) year terms
unless either party gives the other party notice of its intent not to renew,
which notice must be given at least ninety (90) days prior to the expiration of
the then current term.
6. TERMINATION. (a) The Leasehold Tenant may terminate this Agreement upon
written notice if the Management Firm defaults in the performance of any
material covenant, agreement, term or provision of this Agreement to be
performed by it and such default continues for a period of forty-five (45) days
after written notice to the Management Firm from the Leasehold Tenant stating
the specific default or, if such default is not subject to cure within
forty-five (45) days, such longer period as may be required to effect a cure,
provided Management Firm initiates curative action within forty-five (45) days
and thereafter is diligently and in good faith pursuing such cure. Further, and
notwithstanding any provision to the contrary contained in the Transaction
Documents, this Agreement may be terminated at the option of the Leasehold
Tenant in the event that BCC fails to pay the Current Yield (as defined in the
Option Agreement) as and when due after notice of such failure has been provided
in accordance with the terms and conditions of the Option Agreement.
(b) The Management Firm may terminate this Agreement upon written
notice in the event any one or more of the following events shall occur:
(1) If the Leasehold Tenant shall fail to timely pay to the
Management Firm any Management Fee required to be paid in
accordance with Paragraph 9 hereof and such failure continues
for ten (10) days after written notice to the Leasehold Tenant;
or
(2) If the Leasehold Tenant defaults in the performance of any
other material covenant, agreement, term or provision of this
Agreement to be performed by the Leasehold Tenant and such
default continues for a period of forty-five (45) days after
written notice to the Leasehold Tenant from the Management Firm
stating the specific default or, if such default is not subject
to cure within forty-five (45) days, such longer period as may
be required to effect a cure, provided the defaulting party
initiates curative action within forty-five (45) days and
thereafter is diligently and
8
<PAGE> 9
in good faith pursuing such cure; or
(3) If the Facility or a material portion thereof is damaged or
destroyed by fire or other casualty and the Leasehold Tenant
fails to commence to repair, restore, rebuild or replace any
such damage or destruction within ninety (90) days of the
occurrence of such damage or destruction, and thereafter to
complete such work within a reasonable period of time.
In the event of termination of this Agreement by either party pursuant
to Section 6(a) or 6(b) above, the Management Firm shall have the right to enter
the Facility and remove all of its personal property and Intangible Rights
material.
7. LIABILITY AND INDEMNIFICATION/FORCE MAJUERE. (a) By the Management Firm. The
Management Firm shall indemnify, defend, save and hold harmless the Leasehold
Tenant, its members, shareholders, officers, directors, employees, or agents
from and against all demands, claims, actions, losses, damages, deficiencies,
liabilities, costs and expenses (including, without limitation, attorney's fees,
interest, penalties and all amounts paid in investigation, defense or settlement
of any of the foregoing) asserted against or incurred by the Leasehold Tenant,
its members, shareholders, officers, directors, employees, or agents, in
connection with, or arising out of, or resulting from (i) a breach of any
covenant, agreement, representation or warranty of the Management Firm or (ii)
the negligent or willful acts or omissions of Management Firm, its employees or
agents. The provisions of this Section shall survive the expiration or sooner
termination of this Agreement.
(b) By the Leasehold Tenant. The Leasehold Tenant shall indemnify,
defend, save and hold harmless the Management Firm, its shareholders, officers,
directors, employees, or agents from and against all demands, claims, actions,
losses, damages, deficiencies, liabilities, costs and expenses (including,
without limitation, attorney's fees, interest, penalties and all amounts paid in
investigation, defense or settlement of any of the foregoing) asserted against
or incurred by the Management Firm, its officers, directors, employees, or
agents, in connection with, or arising out of, or resulting from (i) a breach of
any covenant, agreement, representation or warranty of the Leasehold Tenant or
(ii) the negligent or willful acts or omissions of Leasehold Tenant, its
employees or agents. The provisions of this Section shall survive the expiration
or sooner termination of this Agreement.
Nothing contained herein shall preclude either party from asserting any
claims or suits against the other party which may arise out of the terms and
provisions of this Agreement.
(c) The Management Firm shall not be deemed to be in violation of this
Agreement, and its performance shall be excused, if it is prevented from
performing any of its obligations hereunder for any reason beyond its control,
including shortages in labor or supplies, war, acts of God, failure of the
Leasehold Tenant to advance funds, or changes in any Law of Federal, State
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or local government, or any agency thereof.
8. RELATIONSHIP BETWEEN PARTIES. The relationship of the Management Firm to the
Leasehold Tenant shall be that of independent contractor.
9. MANAGEMENT FEE. The Management Firm for the services rendered hereunder shall
be entitled to six percent (6%) of all gross revenues of the Facility as its
sole compensation for management of the Facility (the "MANAGEMENT FEE"). The
Management Fee shall be paid monthly, and shall be based on the financial
operations of the Facility as of the end of each calendar month. To the extent
that the year-end audited financial statements for the Facility disclose that
the Management Fee actually received during the year than ended was greater or
less than what should have been received, Leasehold Tenant shall (in case of
underpayment) pay upon demand the shortfall and (in the case of overpayment)
shall be credited against the Management Fee due in the next succeeding quarter
such overpayment. In additional to the Management Fee, the Management Firm shall
be paid on a monthly basis beginning on that date which is six months prior to
substantial completion of the Facility the sum of $3,000 per month.
Notwithstanding the foregoing, the employee benefits and salary of the community
director and director of marketing for the Facility shall be an expense
allocable to the Facility, but such community director and director of marketing
shall at all times remain the employee of the Management Firm. Management Firm
acknowledges and agrees that the Management Fees payable hereunder are expressly
subordinated to all sums owed to Lessor under the Lease and other Lease
Documents; provided, however, so long as no default or event of default exists
under the Lease or the Lease Documents, the Management Firm shall be entitled to
receive and use the Management Fee as its property free of all claims of the
Lessor.
10. FUNDING OF COSTS AND EXPENSES BY THE LEASEHOLD TENANT. Subject to the
Shortfall Agreement, the Leasehold Tenant, and not the Management Firm, shall be
responsible for the costs and expenses of all operations of the Facility. The
Leasehold Tenant shall at all times provide sufficient working capital for
operation of the Facility and shall deposit such capital from time to time into
the Operating Accounts of the Facility in advance of the time required to be
disbursed by the Management Firm.
11. NO APPROVAL BY THE LEASEHOLD TENANT. The Management Firm shall operate the
Facility and the Leasehold Tenant act as a passive investor with respect
thereto. The Management Firm shall, not less frequently than annually, adopt a
plan of operation for the Facility which shall set forth proposed staffing,
budgets, program and related matters; such shall not, however, be subject to
approval of the Leasehold Tenant or its designee. The Leasehold Tenant shall not
participate in the day-to-day operation of the Facility.
12. OTHER FACILITIES. Leasehold Tenant understands and acknowledges that
Management Firm is in the business of operating facilities such as the Facility,
and that Management Firm intends to continue to manage and operate such other
facilities, which may or may not be in competition with the Facility. Nothing
contained herein shall be deemed to be construed as a restriction on
10
<PAGE> 11
the Management Firm's right to so operate and manage such other existing
facilities or facilities that may be opened in the future, even if such
facilities are in competition with the Facility.
13. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered in person, Federal
Express or other recognized overnight courier or sent by registered or certified
U.S. mail, return receipt requested or sent by facsimile or telecopy
transmission and addressed:
(i) If to the Management Firm, at:
BCC DEVELOPMENT & MANAGEMENT CO.
5021 Louise Drive, Suite 200
Mechanicsburg, Pennsylvania 17055
Attention: Legal Department
(ii) If to the Leasehold Tenant, at:
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
Attention: Mr. Brian Barth
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
14. ARBITRATION. Any controversy or dispute between the Management Firm and the
Leasehold Tenant with respect to the application or interpretation of the terms
of this Agreement, except failure of the Leasehold Tenant to pay compensation to
the Management Firm as required herein, will be submitted to mediation under the
National Health Lawyer's Association ("NHLA") Alternative Dispute Resolution
Service Rules of Procedure for Mediation. If any dispute is not resolved by
mediation no later than thirty (30) days after its submission to mediation, the
dispute shall be submitted to arbitration in accordance with the NHLA
Alternative Dispute Resolution Service Rules for Arbitration. The same person
may serve as both mediator and arbitrator. Any such arbitration shall be final
and binding upon the parties to the fullest extent permitted by Law. The cost of
mediation and/or arbitration shall be shared equally by the Leasehold Tenant and
the Management Firm; however, each party shall bear the expense of its own
attorneys, representatives and witnesses, and the cost of any transcripts or
related matters.
15. COMPLIANCE WITH FEDERAL RECORDS REQUIREMENTS. To the extent required under
applicable Law, the Management Firm shall, (and if Management Firm carries out
any of the duties under this Agreement through a subcontract with a related
organization and such subcontract has a value or cost of $10,000 or more during
any 12-month period, Management Firm shall cause such subcontract to contain a
clause to the effect that the subcontractor shall),
11
<PAGE> 12
until the expiration of four (4) years after the furnishing of services
hereunder, make available upon written request by the Secretary of Health and
Human Service or the Comptroller General of the United States or any of their
duly authorized representatives, this Agreement and the books, documents and
records of the Management Firm (or such subcontractor) that are necessary to
verify the nature and extent of the costs furnished under this Agreement.
16. SUCCESSORS AND ASSIGNS. Leasehold Tenant may not assign this Agreement,
expressly, by operation of law, or otherwise, without the prior written consent
of the Management Firm, which consent may be withheld in the sole discretion of
the Management Firm. Management Firm may not assign this Agreement, expressly,
by operation of law, or otherwise, without the prior written consent of the
Leasehold Tenant; provided, however, Management Firm may assign its rights and
obligations hereunder without consent to (i) any BCC Affiliate, (ii)
collaterally to any lender to the Management Firm or any entity affiliated with
the Management Firm and (iii) to the Lessor.
17. DEFINITIONS; INTERPRETATION; MISCELLANEOUS. Capitalized terms used but not
otherwise defined in this Agreement have the respective meanings specified in
Appendix 1 hereto; the rules of interpretation and other provisions set forth in
Appendix 1 hereto shall apply to this Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have affixed their names by their proper officers or duly authorized
representatives the day and year first above written.
MANAGEMENT FIRM: BALANCED CARE AT [____________], INC.,
a Delaware corporation,
By: _______________________________________
Name:
Title:
LEASEHOLD TENANT: FINANCIAL CARE INVESTORS OF [__________], LLC,
a Delaware limited liability company,
By: ________________________________________
Name:
Title:
Its Authorized Representative
S-1
[MANAGEMENT AGREEMENT]
<PAGE> 1
EXHIBIT 10.12
SCHEDULE TO FORM OF HCRI MANAGEMENT AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
MANAGEMENT LEASEHOLD LESSOR LESSOR'S LOCATION
FIRM TENANT STATE OF
INCORPORATION
<S> <C> <C> <C> <C> <C>
LEBANON, Balanced Financial Pennsylvania Pennsylvania Lebanon
PENNSYLVANIA Care at Care BCC County,
Lebanon, Inc. Investors of Properties, Pennsylvania
Lebanon, LLC Inc.
LOYALSOCK, Balanced Financial Pennsylvania Pennsylvania Lycoming
PENNSYLVANIA Care at Care BCC County,
Loyalsock, Investors of Properties, Pennsylvania
Inc. Loyalsock, Inc.
LLC
WESTERVILLE, Balanced Financial HCN BCC Delaware Franklin
OHIO Care at Care Holdings, County, Ohio
Westerville, Investors of Inc.
Inc. Westerville,
LLC
MORRISTOWN, Balanced Financial HCN BCC Delaware Hamblen
TENNESSEE Care at Care Holdings, County,
Morristown, Investors of Inc. Tennessee
Inc. Morristown,
LLC
OAK RIDGE, Balanced Financial HCN BCC Delaware Anderson
TENNESSEE Care at Oak Care Holdings, County,
Ridge, Inc. Investors of Inc. Tennessee
Oak Ridge,
LLC
SAGAMORE HILLS, Balanced Financial HCN BCC Delaware Summit
OHIO Care at Care Holdings, County, Ohio
Sagamore Investors of Inc.
Hills, Inc. Sagamore
Hills, LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.13
FORM OF HCRI GUARANTY
LEBANON, PENNSYLVANIA
TO: BALANCED CARE CORPORATION
1. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. For value
received and hereby acknowledged, intending to be legally bound hereby, and as
an inducement to BALANCED CARE CORPORATION, a Delaware corporation, having its
principal office at 5021 Louise Drive, Suite 200, Mechanicsburg, PA, 17055,
("BCC") to enter into the Transaction Documents (as that term is defined in
Appendix 1 to that certain Shortfall Funding Agreement dated as of September 22,
1998 [the "SHORTFALL Agreement"]) among FINANCIAL CARE INVESTORS, LLC, a
Delaware limited liability company ("FCI") and FINANCIAL CARE INVESTORS OF
[______________], LLC, a Delaware limited liability company [the "TENANT"], Brad
Hollinger, an individual resident of Cumberland County, PA having his principal
place of business at 5021 Louise Drive, Suite 200, Mechanicsburg, PA, 17055,
[the "GUARANTOR"], being the SOLE member of FCI, will derive a substantial
benefit from the consummation of the transactions contemplated by the
Transaction Documents, and hereby unconditionally guarantees to BCC the full
payment and performance of each of the Tenant's and FCI's respective obligations
to fund the Equity Capital Portion, as defined in Appendix 1 to the Shortfall
Agreement (the "Guaranteed Obligations").
This Guaranty is an absolute, unconditional and continuing guaranty of
the full and punctual payment and performance of the Guarantied Obligations and
not merely of their collectibility, and is in no way conditioned upon any
requirement that BCC first collect or attempt to collect the Guarantied
Obligations or any portion thereof from the Tenant or from any endorser, surety
or other guarantor of any of the same or resort to any security or other means
of obtaining the payment and/or performance of any of the Guarantied Obligations
that BCC now has or may acquire after the date hereof, or upon any other
contingency whatsoever. Payments by the Guarantor hereunder may be required by
BCC on any number of occasions. This Guaranty shall continue in full force and
effect until the complete payment and performance of all of the Guarantied
Obligations.
2. DEFINED TERMS. Capitalized terms used herein and not otherwise
specifically defined herein shall have the same meanings ascribed to such terms
in Appendix 1 to the Shortfall Agreement.
3. LIABILITY OF THE GUARANTOR. This Guaranty is unlimited and the
Guarantor shall be jointly and severally liable with every endorser, surety or
other guarantor of any or all of the Guarantied Obligations and the continuation
of this Guaranty shall not be affected by the termination, discontinuance,
release or modification of any agreement from any such endorser, surety or
guarantor. Nothing contained herein or otherwise shall require BCC to make
demand
<PAGE> 2
upon or join Tenant, FCI or any such endorser, surety or guarantor or other
party in any suit brought upon this Guaranty; and the Guarantor hereby waives
any right to require marshaling or exhaustion of any remedy against any
collateral, other property, or any other person or Entity primarily or
secondarily liable.
4. BCC'S FREEDOM TO DEAL WITH THE TENANT AND OTHER PARTIES. BCC shall
be at liberty, without giving notice to or obtaining the assent of the Guarantor
and without relieving the Guarantor of any liability hereunder, to deal with the
Tenant and FCI and with each other person or entity who now is or after the date
hereof becomes liable in any manner for any of the Guarantied Obligations in
such manner as BCC deems fit. BCC has full authority to do any or all of the
following things, none of which shall discharge or affect the Guarantor's
liability hereunder:
(a) extend credit, make loans and afford other financial accommodations
to the Tenant and FCI at such times, in such amounts and on such terms as BCC
may approve;
(b) modify, amend, vary the terms and grant extensions or renewals of
any present or future indebtedness or of any of the Guarantied Obligations or
any instrument relating to or securing the same;
(c) grant time, waivers and other indulgences in respect of any of the
Guarantied Obligations;
(d) vary, exchange, release or discharge, wholly or partially, or delay
or abstain from perfecting and enforcing any security or guaranty or other means
of obtaining payment of any of the Guarantied Obligations which BCC now has or
acquires after the date hereof;
(e) take or omit to take any of the actions referred to in any
instrument evidencing, securing or relating to any of the Guarantied Obligations
or any actions under this Guaranty;
(f) fail, omit or delay to enforce, assert or exercise any right, power
or remedy conferred on BCC in this Guaranty or in any other instrument
evidencing, securing or relating to any of the Guarantied Obligations or take or
refrain from taking any other action;
(g) accept partial payments from the Tenant, FCI or any other person or
Entity;
(h) release or discharge, wholly or partially, the Tenant, FCI and/or
any other person or Entity now or hereafter primarily or secondarily liable for
the Guarantied Obligations (or any portion hereof) or accept additional
collateral for the payment of any Guarantied Obligations;
(i) compromise or make any settlement or other arrangement with the
Tenant, FCI or any other person or Entity referred to in clause (h) above; and
(j) consent to and participate in the proceeds of any assignment, trust
or mortgage for the benefit of creditors.
-2-
<PAGE> 3
6. UNENFORCEABILITY OF GUARANTIED OBLIGATIONS; INVALIDITY OF SECURITY
OR OTHER GUARANTIES. The obligations of the Guarantor hereunder shall not be
affected by reason of any disability of the Tenant or FCI, or by any other
circumstance (other than the complete payment and performance of the Guarantied
Obligations) which might constitute a defense available to, or a discharge of,
the Tenant or FCI, in respect of any of the Guarantied Obligations. If for any
reason now or hereafter the Tenant or FCI is under no legal obligation to
discharge any of the Guarantied Obligations undertaken or purported to be
undertaken by Tenant or FCI or on Tenant's or FCI's behalf, or if any of the
moneys included in the Guarantied Obligations have become irrecoverable from the
Tenant or FCI, by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor and the Guarantor shall remain
unconditionally liable for the complete payment and performance of the
Guarantied Obligations. This Guaranty shall be in addition to any other guaranty
or other security for the Guarantied Obligations, and it shall not be prejudiced
or rendered unenforceable by the invalidity of any such other guaranty or
security. This Guaranty shall continue to be effective or be reinstated, as the
case may be, if, at any time, any payment of any of the Guarantied Obligations
is rescinded or must otherwise be returned by BCC, upon the insolvency,
bankruptcy or reorganization of the Tenant or FCI or otherwise, all as though
such payment had not been made. The Guarantor covenants to cause the Tenant to
maintain and preserve the enforceability of any instruments now or hereafter
executed in favor of BCC, and to take no action of any kind which might be the
basis for a claim that the Guarantor has any defense hereunder other than the
complete payment and performance of the Guarantied Obligations.
7. NO CONTEST WITH BCC. No set-off, counterclaim, reduction or
diminution of any obligation, or any claim or defense of any kind or nature
which the Guarantor has or may have against the Tenant, FCI or BCC shall be
available hereunder to the Guarantor. The Guarantor shall not, in any
proceedings under the Bankruptcy Code or insolvency proceedings of any nature,
prove in competition with BCC in respect of any payment hereunder or be entitled
to have the benefit of any counterclaim or proof of claim or dividend or payment
by or on behalf of the Tenant, or the benefit of any other security for any
Guarantied Obligation which, now or hereafter, the Guarantor may hold in
competition with BCC.
8. SET-OFF. In addition to any rights now or hereafter granted under
any agreement or applicable law and not by way of limitation of any such rights,
upon the occurrence of any default by the Guarantor hereunder, BCC is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Guarantor or to any other person or
entity, all of which are hereby expressly waived, to set off and to appropriate
and apply any and all deposits and any other indebtedness at any time held by or
owing to BCC to or for the credit or the account of the Guarantor against and on
account of the Guarantied Obligations and liabilities of the Guarantor to BCC
under this Guaranty, irrespective of whether or not BCC shall have made any
demand and although said Guarantied Obligations, liabilities or claims, or any
of them, may then be contingent or unmatured and without regard to the
availability or adequacy of other collateral.
9. WAIVERS. The Guarantor waives presentment for payment, demand,
protest, notice of nonpayment, notice of dishonor, protest of any dishonor,
suretyship defenses, notice of
-3-
<PAGE> 4
protest and protest, and all other notices in connection with (a) the delivery
or the acceptance of the Transaction Documents and any reliance thereon and/or
(b) the performance, default or enforcement of any obligation under the
Transaction Documents, and agrees that its liability shall be unconditional
without regard to the liability of any other party and shall not be in any
manner affected by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by BCC; and the Guarantor consents to any
and all extensions of time, renewals, waivers or modifications that may be
granted or consented to by BCC with respect to the payment or performance of any
obligations under the Transaction Documents and to the release of any
collateral, with or without substitution, and agrees that additional makers,
endorsers, guarantors or sureties may become parties to the Transaction
Documents without notice to the Guarantor or affecting the liability of the
Guarantor hereunder or under the Transaction Documents.
10. NOTICES. Any notice, request, demand, statement or consent made
hereunder shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally recognized commercial overnight delivery service with provisions for
a receipt, postage or delivery charges prepaid, and shall be deemed given when
postmarked or placed in the possession of such mail or delivery service and
addressed as follows:
IF TO THE GUARANTOR: Brad Hollinger
c/o Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
IF TO BCC: Brian Barth
Balanced Care Corporation
5021 Louise Drive, Suite 200
Mechanicsburg, PA 17055
or at such other place as any of the parties hereto may from time to time
hereunder designate to the others in writing. Any notice given to the Guarantor
by BCC at any time shall not imply that such notice or any further or similar
notice was or is required.
11. GOVERNING LAW. This Guaranty shall be construed, and the rights and
obligations of BCC and the Guarantor shall be determined, in accordance with the
laws of the Commonwealth of Pennsylvania, exclusive of its conflicts of laws
rules.
[SIGNATURES BEGIN ON THE NEXT PAGE.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an
instrument under seal as of September 22, 1998.
WITNESS: GUARANTOR:
____________________________ __________________________(seal)
Brad Hollinger
S-1
[Guaranty]
<PAGE> 1
EXHIBIT 10.14
SCHEDULE TO FORM OF HCRI GUARANTY
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
TENANT
LEBANON, Financial Care
PENNSYLVANIA Investors of
Lebanon, LLC
LOYALSOCK, Financial Care
PENNSYLVANIA Investors of
Loyalsock, LLC
WESTERVILLE, Financial Care
OHIO Investors of
Westerville, LLC
MORRISTOWN, Financial Care
TENNESSEE Investors of
Morristown,
LLC
OAK RIDGE, Financial Care
TENNESSEE Investors of Oak
Ridge, LLC
SAGAMORE HILLS, Financial Care
OHIO Investors of
Sagamore Hills,
LLC
<PAGE> 1
EXHIBIT 10.15
FORM OF HCRI LOAN AGREEMENT
BETWEEN
[_______________], INC.
AND
FINANCIAL CARE INVESTORS, LLC
SEPTEMBER 22, 1998
[________________]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE 1: PURPOSE AND DEFINITIONS.............................................................................. 1
1.1 Purpose........................................................................................ 1
1.2 Definitions.................................................................................... 1
1.3 Incorporation of Amendments.................................................................... 5
1.4 Exhibits....................................................................................... 5
ARTICLE 2: LOAN AND LOAN DOCUMENTS.............................................................................. 5
2.1 Obligation to Lend............................................................................. 5
2.2 Obligation to Repay............................................................................ 5
2.2.1 Term of the Loan...................................................................... 5
2.2.2 Interest and Payments................................................................. 5
2.3 Use of Proceeds................................................................................ 5
2.4 Loan Expenses.................................................................................. 5
2.5 Disbursements.................................................................................. 6
2.5.1 Loan Advances......................................................................... 6
2.5.2 Disbursement Schedule................................................................. 6
2.5.3 Standby Termination................................................................... 6
2.5.4 Collateral Account.................................................................... 6
2.5.5 Manager.............................................................................. 6
2.6 Closing........................................................................................ 6
ARTICLE 3: CONDITIONS PRECEDENT TO DISBURSEMENT................................................................. 6
3.1 Conditions Precedent to Initial Disbursement................................................... 6
3.1.1 Lender's Documents.................................................................... 6
3.1.2 Organizational Documents.............................................................. 7
3.1.3 Budget and Schedule................................................................... 7
3.1.4 Legal Opinion......................................................................... 7
3.1.5 Equity Contribution................................................................... 7
3.1.6 Other Closing Requirements............................................................ 7
3.2 Conditions Precedent to Each Disbursement...................................................... 7
3.2.1 Disbursement Voucher.................................................................. 7
3.2.2 Post-Closing Obligations.............................................................. 7
3.2.3 Damage and Destruction................................................................ 7
3.2.4 No Event of Default................................................................... 7
ARTICLE 4: BORROWER'S REPRESENTATIONS AND WARRANTIES............................................................ 7
4.1 Organization and Good Standing................................................................. 8
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
4.2 Power and Authority............................................................................ 8
4.3 Enforceability................................................................................. 8
4.4 No Violation................................................................................... 8
4.5 No Litigation.................................................................................. 8
4.6 Reports, Statements and Copies................................................................. 8
4.7 No Default..................................................................................... 9
4.8 ERISA.......................................................................................... 9
4.9 Chief Executive Office......................................................................... 9
ARTICLE 5: AFFIRMATIVE COVENANTS................................................................................ 9
5.1 Perform Obligations............................................................................ 9
5.2 Documents and Information...................................................................... 9
5.2.1 Furnish Documents..................................................................... 9
5.2.2 Furnish Information................................................................... 9
5.2.3 Further Assurances and Information.................................................... 9
5.2.4 Material Communications............................................................... 10
5.2.5 Requirements for Financial Statements................................................. 10
5.3 Broker's Commission............................................................................ 10
5.4 Existence...................................................................................... 10
5.5 Net Cash Flow.................................................................................. 10
5.6 Cash Management................................................................................ 10
ARTICLE 6: NEGATIVE COVENANTS................................................................................... 11
6.1 No Debt........................................................................................ 11
6.2 No Liens....................................................................................... 11
6.3 No Guaranties.................................................................................. 11
6.4 No Dissolution................................................................................. 11
6.5 No Change in Ownership......................................................................... 11
6.6 No Investments................................................................................. 11
6.7 Subordination of Payments...................................................................... 11
6.8 Change of Location or Name..................................................................... 11
6.9 No Amendments.................................................................................. 12
ARTICLE 7: DEFAULT AND REMEDIES................................................................................. 12
7.1 Event of Default............................................................................... 12
7.2 Remedies on Default............................................................................ 13
7.2.1 Acceleration.......................................................................... 13
7.2.2 Other Remedies........................................................................ 13
7.2.3 Waiver................................................................................ 13
7.2.4 Terminate Disbursement................................................................ 14
ARTICLE 8: MISCELLANEOUS........................................................................................ 14
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
8.1 Advances by Lender............................................................................. 14
8.2 [Deleted]...................................................................................... 14
8.3 Construction of Rights and Remedies and Waiver of Notice and Consent........................... 14
8.3.1 Applicability......................................................................... 14
8.3.2 Waiver of Notices and Consent to Remedies............................................. 14
8.3.3 Cumulative Rights..................................................................... 14
8.3.4 Extension or Modification of Loan..................................................... 14
8.3.5 Right to Select Security.............................................................. 14
8.3.6 Forbearance Not a Waiver.............................................................. 14
8.3.7 No Waiver............................................................................. 15
8.3.8 No Continuing Waivers................................................................. 15
8.3.9 [Deleted]............................................................................. 15
8.3.10 No Release............................................................................ 15
8.4 Assignment..................................................................................... 15
8.4.1 Assignment by Lender.................................................................. 15
8.4.2 Assignment by Borrower................................................................ 15
8.5 Notices........................................................................................ 15
8.6 Entire Agreement............................................................................... 16
8.7 Severability................................................................................... 16
8.8 Captions and Headings.......................................................................... 16
8.9 Governing Law.................................................................................. 16
8.10 Binding Effect................................................................................. 16
8.11 Modification................................................................................... 16
8.12 Construction of Agreement...................................................................... 16
8.13 Counterparts................................................................................... 17
8.14 No Third-Party Beneficiary Rights.............................................................. 17
8.15 Lender's Authority to Furnish Copies of Loan Documents......................................... 17
8.16 Lender Merely a Lender......................................................................... 17
8.16.1 No Agency............................................................................. 17
8.16.2 No Obligation to Pay.................................................................. 17
8.16.3 No Responsibility for Construction.................................................... 17
8.17 Substitution of Borrower and/or Tenant......................................................... 18
</TABLE>
EXHIBIT A: DISBURSEMENT SCHEDULE
EXHIBIT B: DISBURSEMENT VOUCHER
EXHIBIT C: WORKING CAPITAL BUDGET
EXHIBIT D: PENDING LITIGATION
EXHIBIT E: DOCUMENTS TO BE DELIVERED
EXHIBIT F: BORROWER'S CERTIFICATE
(iii)
<PAGE> 5
FORM OF HCRI LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into effective as
of September 22, 1998 (the "Effective Date") between FINANCIAL CARE INVESTORS,
LLC, a limited liability company organized under the laws of the State of
Delaware (the "Borrower"), having its chief executive office at 5021 Louise
Drive, Suite 200, Mechanicsburg, Pennsylvania 17055, and [____________________],
a corporation organized under the laws of the State of Delaware (the "Lender"),
having an address of One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603.
R E C I T A L S:
A. Lender has leased to Financial Care Investors of [________________],
LLC, a limited liability company organized under the laws of the State of
Delaware ("Tenant"), certain real property pursuant to a Lease Agreement made
between Lender and Tenant dated as of the Effective Date. Borrower is the sole
member of Tenant.
B. Lender has agreed to provide a loan to Borrower ("Loan"), subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and the
premises contained herein, the parties, intending to be legally bound hereby,
agree as follows:
ARTICLE 1: PURPOSE AND DEFINITIONS
1.1 Purpose. The purpose of this Agreement is to establish the Loan with Lender
for the financing as set forth above.
1.2 Definitions. Except as otherwise expressly provided, [i] the terms defined
in this section have the meanings assigned to them in this section and include
the plural as well as the singular; [ii] all accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with generally
accepted accounting principles as of the time applicable; and [iii] the words
"herein", "hereof", and "hereunder" and similar words refer to this Agreement as
a whole and not to any particular section.
"Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Borrower.
"Control" (and the correlative meanings of the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such entity.
"Affiliate" includes, without limitation, any corporation, partnership or
limited liability company (now or hereafter existing) of which the equity
interest is owned by any one or more Affiliates or by the members of Borrower.
<PAGE> 6
"Affiliate Loan" means each loan extended by Lender or any Lender
Affiliate to an Affiliate.
"Affiliate Obligation" means all indebtedness and obligations of
Borrower and any Affiliate to Lender or any Lender Affiliate now existing or
hereafter arising, including, without limitation, the Lease Documents,
indebtedness evidenced by promissory notes, lease agreements, guaranties or
otherwise and obligations under such indebtedness documents and all other
documents executed by Borrower or any Affiliate in connection therewith, and any
extensions, modifications, substitutions or renewals thereof.
"Annual Financial Statements" means the unaudited balance sheet and
statement of income of Borrower for the most recent fiscal year.
"Balanced Care" means Balanced Care Corporation, a corporation
organized under the laws of the State of Delaware.
"Borrower" means Financial Care Investors, LLC, a limited liability
company organized under the laws of the State of Delaware, its successors and
permitted assigns.
"Business Day" means any day which is not a Saturday or Sunday or a
public holiday under the laws of the United States of America or the State of
Ohio.
"Closing" means the closing of the Loan.
"Collateral Account" has the meaning set forth in the Deposit
Agreement.
"Credit Facility Commitment" means the Commitment Letter for lease
financing issued by Health Care REIT, Inc. and accepted by Borrower, dated
September 22, 1998 and as amended from time to time.
"Current Phase" has the meaning set forth in the Lease.
"Deposit Agreement" has the meaning set forth in the Shortfall
Agreement.
"Disbursement Schedule" means the Disbursement Schedule attached hereto
as Exhibit A setting forth Borrower's estimate of the dates and amounts of the
disbursements required hereunder.
"Disbursement Voucher" means Borrower's written request for a Loan
Advance set forth on the form attached hereto as Exhibit B.
"Effective Date" means the date of this Agreement.
"Event of Default" has the meaning set forth in Section 7.1.
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"Facility" has the meaning set forth in the Lease.
"Lease" means the Lease Agreement between Lender and Tenant dated as of
the Effective Date, as amended from time to time.
"Lease Documents" means the Lease and all other documents executed by
Tenant in connection with the Lease, each as amended from time to time.
"Leased Property" has the meaning set forth in the Lease.
"Lender" means [______________], a corporation organized under the laws
of the State of Delaware, its successors and assigns.
"Lender Affiliate" means any person, corporation, partnership, limited
liability company, trust or other legal entity that, directly or indirectly,
controls or is controlled by, or is under common control with Lender. "Control"
(and the correlative meanings of the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity.
"Lender Affiliate" includes without limitation, Health Care REIT, Inc.,
Pennsylvania BCC Properties, Inc. and any affiliate of Health Care REIT, Inc.
"Loan" means the loan by Lender to Borrower in the amount up to the
Loan Amount.
"Loan Amount" means $[___________].00.
"Loan Advance" means each advance of proceeds of the Loan.
"Loan Commitment" means the term sheet for the Loan issued by Health
Care REIT, Inc. and accepted by Borrower, dated as of September 22, 1998 and as
amended from time to time.
"Loan Documents" means [i] this Agreement; [ii] the Note; [iii] the
Security Agreement between Tenant and Lender dated as of the Effective Date; and
[iv] all other documents and instruments executed by Borrower in connection with
the Loan, each as amended from time to time.
"Loan Expenses" means all reasonable costs and expenses incurred by
Lender in investigating, making and administering the Loan, including but not
limited to, [i] attorneys' and paralegals' fees and costs; and [ii] travel,
transportation, food, and lodging costs and expenses incurred by Lender and
Lender's attorneys and paralegals, but excluding Lender's internal bookkeeping
and routine loan servicing costs.
"Management Agreement" means the Management Agreement between Manager
and Tenant.
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"Manager" means Balanced Care at [________________], Inc., a
corporation organized under the laws of the State of Delaware.
"Member" means Brad E. Hollinger.
"Net Cash Flow" means the net income of Tenant for the preceding month
as shown on Tenant's income statement, plus [i] the amount of the provision for
depreciation and amortization, plus [ii] all net insurance proceeds, if any,
after payment from proceeds of all out-of-pocket claims or losses, minus [iii]
the rent payments under the Lease, minus [iv] the payments of principal and
interest due under Section 3(c) of the Note, and minus [v] the customary and
ordinary operating expenses incurred in connection with the Facility operations
in accordance with the Working Capital Budget, including, without limitation,
all fees payable to Manager under the Management Agreement. For purposes of this
definition, the "income" of Tenant shall be deemed to include all cash received
by Tenant from whatever source. Each income statement shall be prepared in a
manner consistent with the prior income statements of such entity.
"Note" means the Note of even date made by Borrower in favor of Lender
for a principal amount equal to the Loan Amount, and any extensions,
modifications, substitutions or renewals thereof.
"Organizational Documents" means [i] for a corporation, its Articles of
Incorporation certified by the Secretary of State of the state of organization,
as amended to date, and its Bylaws certified by an officer of such corporation,
as amended to date; [ii] for a limited partnership, its Certificate of
Partnership certified by the Secretary of State of the state of organization, as
amended to date, and its Limited Partnership Agreement certified by the general
partner of such partnership, as amended to date; and [iii] for a limited
liability company, its Certificate of Organization certified by the Secretary of
State of the State of Organization, as amended to date and its Operating
Agreement certified by the managing member of such limited liability company, as
amended to date.
"Periodic Financial Statements" means the unaudited balance sheet and
statement of income of Borrower for the most recent month and quarter.
"Shortfall Agreement" means the Shortfall Funding Agreement among
Borrower, Tenant and Balanced Care Corporation, dated as of the Effective Date
and as amended from time to time.
"State" means the State of [___________].
"Tenant" means Financial Care Investors of [________________], LLC, a
limited liability company organized under the laws of the State of Delaware.
"Transaction Documents" means the Loan Documents, Lease Documents, the
Management Agreement, and all agreements and documents made between Borrower or
Tenant and Balanced Care or by Borrower or Tenant in favor of Balanced Care,
including, without limitation, the Shortfall Agreement, the Option Agreement,
all Promissory Notes, the Open End Leasehold
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Mortgage and Security Agreement, the Deposit Agreement and the Equity Pledge
Agreement; provided, however, Transaction Documents refer only to agreements and
documents entered into in connection with any lease within the Current Phase
that includes the Lease.
"Working Capital Budget" means the three year budget of the working
capital and operating expenses for the Facility, prepared by Manager and
approved by Lender, a copy of which is attached hereto as Exhibit C, and as
revised from time to time, subject to the prior written approval of Lender which
shall not be unreasonably withheld.
1.3 Incorporation of Amendments. The definition of any agreement, document, or
instrument set forth in this Agreement or in any other Loan Document shall be
deemed to incorporate all amendments, modifications, and renewals thereof and
all substitutions and replacements therefor.
1.4 Exhibits. The following exhibits are attached hereto and incorporated
herein:
Exhibit A: Disbursement Schedule
Exhibit B: Disbursement Voucher
Exhibit C: Working Capital Budget
Exhibit D: Pending Litigation
Exhibit E: Documents to be Delivered
Exhibit F: Certificate
ARTICLE 2: LOAN AND LOAN DOCUMENTS
2.1 Obligation to Lend. Subject to the terms and upon the conditions set forth
in the Loan Documents, Lender shall lend to Borrower up to the Loan Amount. The
indebtedness of Borrower to Lender for the Loan is evidenced by the Note.
2.2 Obligation to Repay. Borrower shall repay the Loan in accordance with the
terms of the Note and the other Loan Documents.
2.2.1 Term of the Loan. The term of the Loan will expire on the Maturity Date
set forth in the Note.
2.2.2 Interest and Payments. Borrower shall make payments in accordance with the
Note at the rate set forth in the Note.
2.3 Use of Proceeds. All Loan Advances (less closing costs) shall be used by
Borrower solely to fund its capital contribution to Tenant which will be used by
Tenant solely to fund 85% of the Equity Contribution (as defined in the Credit
Facility Commitment) for the Facility. In accordance with the Management
Agreement, Manager will use the Loan Advances exclusively for the working
capital needs of the Facility in accordance with the Working Capital Budget.
2.4 Loan Expenses. At the Closing, Borrower shall pay or reimburse Lender for
any Loan Expenses incurred up to the Effective Date. Within 30 days after
receipt of an invoice therefor,
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Borrower shall reimburse Lender for any Loan Expenses incurred by Lender. Lender
shall apply proceeds of the Loan, up to the Loan Amount, to pay the Loan
Expenses.
2.5 Disbursements.
2.5.1 Loan Advances. For each Loan Advance, Manager, on behalf of Borrower,
shall submit to Lender and Borrower a Disbursement Voucher. The amount of each
Loan Advance shall be equal to 85% of the amount of the current Funding that is
required under the Shortfall Agreement; provided, however, that disbursement of
each Loan Advance shall be pro rata with the funding by Borrower and Tenant of
Tenant's 15% Equity Contribution in accordance with the Shortfall Agreement.
Lender may make disbursements from time to time but shall not be obligated to
disburse more frequently than once in each calendar month and shall not be
obligated to disburse until at least seven Business Days following receipt of a
Disbursement Voucher.
2.5.2 Disbursement Schedule. Manager estimates that the schedule of Loan
Advances will be in accordance with the Disbursement Schedule; provided,
however, the actual disbursement dates shall be determined by the dates on which
Manager submits a Disbursement Voucher in accordance with the working capital
needs of the Facility.
2.5.3 Standby Termination. Lender's obligation to make Loan Advances pursuant to
this Agreement shall terminate on the Maturity Date set forth in the Note,
unless terminated earlier pursuant to an Event of Default.
2.5.4 Collateral Account. Until the Deposit Agreement is terminated, all Loan
Advances shall be deposited by Lender into the Collateral Account and shall be
subject in all respects to the Deposit Agreement. Balanced Care and Lender are
the secured parties under the Deposit Agreement.
2.5.5 Manager. Upon the termination of the Management Agreement, all provisions
in this Agreement relating to the Manager shall terminate and Loan Advances will
be made to Borrower or its designee and all obligations of Manager hereunder
shall be performed by Borrower or such other party approved by Lender.
2.6 Closing. The Closing shall occur on the Effective Date. Lender may elect to
close by exchanging executed counterparts of one or more of the Loan Documents
and other closing documents by mail or a national courier service, or by
telecopier followed by exchanging documents by mail or national courier service.
ARTICLE 3: CONDITIONS PRECEDENT TO DISBURSEMENT
3.1 Conditions Precedent to Initial Disbursement. Borrower shall comply with,
and Lender's obligation to disburse the first Loan Advance shall be conditioned
upon Borrower's performance of the following conditions precedent:
3.1.1 Lender's Documents. Borrower shall have delivered to Lender fully executed
originals of the Transaction Documents and a Disbursement Voucher.
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3.1.2 Organizational Documents. Borrower shall have delivered to Lender copies
of Borrower's Organizational Documents, in form and substance satisfactory to
Lender, and Borrower's resolutions authorizing the Transaction Documents,
certified by Borrower to be true and complete and not revoked or amended since
the respective dates thereof.
3.1.3 Budget and Schedule. Borrower shall have delivered to Lender the Working
Capital Budget and the Disbursement Schedule in form and substance reasonably
satisfactory to Lender.
3.1.4 Legal Opinion. Borrower shall have delivered to Lender an opinion of
Borrower's counsel in form and substance satisfactory to Lender.
3.1.5 Equity Contribution. Tenant shall have funded its pro rata share of the
15% Equity Contribution in accordance with Section 2.5.1 hereof.
3.1.6 Other Closing Requirements. Borrower shall have satisfied the requirements
of Section 3.2.4 and all other closing requirements of the Transaction Documents
and the Loan Commitment.
3.2 Conditions Precedent to Each Disbursement. Borrower shall comply with, and
Lender's obligation to disburse each Loan Advance after the first Loan Advance
shall be conditioned upon Borrower's performance of the following conditions
precedent:
3.2.1 Disbursement Voucher. Manager shall have delivered to Lender a
Disbursement Voucher in accordance with Section 2.5.1.
3.2.2 Post-Closing Obligations. Borrower shall have satisfied all post-closing
obligations under the Loan Documents to be performed as of the date of such Loan
Advance request.
3.2.3 Damage and Destruction. The Facility for which the Loan Advance is drawn
shall not have been substantially or materially damaged or destroyed, in whole
or in part, by fire or other casualty nor shall eminent domain proceedings have
been threatened or be pending with respect to a substantial or material part of
the Facility.
3.2.4 No Event of Default. There shall be no uncured Event of Default under any
Transaction Document or any event which with the giving of notice or the passage
of time would constitute an Event of Default.
ARTICLE 4: BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower hereby makes the following representations and warranties, as
of the Effective Date and the date of each Loan Advance, to Lender and
acknowledges that Lender is making the Loan in reliance upon such
representations and warranties. Borrower's representations and warranties shall
survive the Closing and, except as specifically provided below, shall continue
in full force and effect until Borrower has repaid the Loan in full and
performed all other obligations under the Loan Documents.
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<PAGE> 12
4.1 Organization and Good Standing. Borrower is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 Power and Authority. Borrower has the power and authority to execute,
deliver, and perform Borrower's obligations under the Transaction Documents and
has taken all requisite action to authorize the execution, delivery and
performance of Borrower's obligations under such documents.
4.3 Enforceability. The Transaction Documents constitute valid and binding
obligations of Borrower enforceable in accordance with their terms, except as
enforceability may be limited by creditor's rights laws, equitable principles
and the effect of judicial discretion.
4.4 No Violation. The execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents [i] do not conflict with and will not conflict with, and
do not result and will not result in a breach of Borrower's Organizational
Documents; [ii] do not conflict with and will not conflict with, and do not
result and will not result in a breach of, or constitute or will constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under any of the terms, conditions or provisions of any
agreement or other instrument or obligation to which Borrower is a party or by
which its assets are bound; and [iii] to Borrower's actual knowledge, do not
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Borrower.
4.5 No Litigation. Except as disclosed on Exhibit D, [i] there are no actions,
suits, proceedings or, to Borrower's actual knowledge, investigations by any
governmental agency or regulatory body pending against Borrower; [ii] Borrower
has not received written notice of any threatened actions, suits or proceeding
or investigations against Borrower at law or in equity, or before any
governmental board, agency or authority which, if determined adversely to
Borrower, would materially and adversely affect the financial condition of
Borrower; [iii] there are no unsatisfied or outstanding judgments against
Borrower; [iv] there is no labor dispute materially and adversely affecting the
operation or business conducted by Borrower; and [v] Borrower does not have
knowledge of any facts or circumstances which might reasonably form the basis
for any such action, suit, or proceeding.
4.6 Reports, Statements and Copies. All reports, statements, certificates and
other data furnished by Borrower to Lender in connection with the Transaction
Documents, or the transactions contemplated thereunder, and all representations
and warranties made therein, or any certificate or other instrument delivered in
connection therewith, are true and correct in all material respects and do not
omit to state any material fact or circumstance necessary to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading as of the date of such information, reports, statements or
certificates. The copies of all agreements and instruments submitted to Lender
are true, correct and complete copies and include all amendments and
modifications of such agreements.
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4.7 No Default. As of the Effective Date, there is no existing Event of Default
by Borrower or Tenant under the Transaction Documents and no event has occurred
which, with the giving of notice or the passage of time, would constitute or
result in such an Event of Default.
4.8 ERISA. All plans [as defined in Section 4021(a) of the Employee Retirement
Income Security Act of 1974 as amended or supplemented from time to time
("ERISA")] for which Borrower is an "employer" or a "substantial employer" [as
defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively] are in
compliance with ERISA and the regulations and published interpretations
thereunder. To the extent Borrower maintains a qualified defined benefit pension
plan: [i] there exists no accumulated funding deficiency; [ii] no reportable
event and no prohibited transaction has occurred; [iii] no lien has been filed
or, to Borrower's actual knowledge, threatened to be filed by the Pension
Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of
ERISA; and [iv] Borrower has not been deemed to be a substantial employer as of
the Effective Date.
4.9 Chief Executive Office. Borrower maintains its chief executive office and
its books and records at the address set forth in the introductory paragraph of
this Agreement.
ARTICLE 5: AFFIRMATIVE COVENANTS
5.1 Perform Obligations. Borrower shall perform all its obligations under the
Transaction Documents.
5.2 Documents and Information.
5.2.1 Furnish Documents. Borrower shall periodically during the term of the Loan
deliver to Lender the Annual Financial Statements, Periodic Financial Statements
and other documents described on Exhibit E within the specified time periods.
With each delivery of Annual Financial Statements and Periodic Financial
Statements to Lender, Borrower shall also deliver to Lender a certificate signed
by Member in the form of Exhibit F.
5.2.2 Furnish Information. Borrower shall [i] within ten business days after any
request therefor, supply Lender with such information concerning its financial
condition, affairs and property, as Lender may reasonably request from time to
time hereafter; [ii] promptly notify Lender in writing of any condition or event
that constitutes a breach or event of default of any term, condition, warranty,
representation, or provisions of any Loan Document or any other Transaction
Document; [iii] maintain a standard and modern system of accounting; [iv] permit
Lender or any of its agents or representatives to have access to and to examine
all of its books and records regarding the financial condition of Borrower at
any time or times hereafter during business hours; and [v] permit Lender to copy
and make abstracts from any and all of said books and records, provided that
such copies and abstracts shall not be made available by Lender to anyone other
than to governmental authorities, attorneys, auditors, underwriters, credit
rating agencies and such other persons for which there is a legitimate business
purpose for such disclosure.
5.2.3 Further Assurances and Information. Borrower shall, on request of Lender
from time to time, execute, deliver, and furnish documents as may be necessary
to fully consummate the
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<PAGE> 14
transactions contemplated under this Agreement. Within ten business days after a
request from Lender, Borrower shall provide to Lender such additional
information regarding Borrower or Borrower's financial condition as Lender, or
any existing or proposed creditor of Lender, or any auditor or underwriter of
Lender, may require from time to time.
5.2.4 Material Communications. Borrower shall transmit to Lender, within five
business days after receipt thereof, any communication that may materially and
adversely affect Borrower, any existing Facility, the Loan Documents or the
Lease Documents and Borrower will promptly respond to Lender's inquiry with
respect to such communication. Upon receipt of written notice thereof, Borrower
shall promptly notify Lender in writing of any threatened or existing litigation
or proceeding against, or investigation of, Borrower or any Facility that may
materially and adversely affect the right to operate the Facility or title to
the Facility or Lender's interest therein.
5.2.5 Requirements for Financial Statements. Borrower shall meet the following
requirements in connection with the preparation of the financial statements: [i]
all audited financial statements (if any) shall be prepared in accordance with
generally accepted accounting principles consistently applied; [ii] all
unaudited financial statements shall be prepared in a manner substantially
consistent with prior audited and unaudited financial statements submitted to
Lender; [iii] all financial statements shall fairly present the financial
condition and performance of Borrower for the relevant period in all material
respects; [iv] the financial statements shall include all notes to the audited
financial statements and a complete schedule of contingent liabilities and
transactions with Affiliates; and [v] the audited financial statements shall
contain an unqualified opinion.
5.3 Broker's Commission. Borrower and Lender each represent that it has not
incurred an obligation to any broker in connection with the Loan.
5.4 Existence. Borrower shall maintain its existence throughout the term of this
Agreement and every other Transaction Document.
5.5 Net Cash Flow. All Net Cash Flow of Tenant shall be paid by Borrower and
Manager, on behalf of Tenant, to Lender by the fifteenth day of each month. No
later than the fifteenth day of each month, Manager shall deliver to Lender a
reconciliation statement of the gross revenues, operating expenses, payroll
taxes, reserves, depreciation, debt service, rent payments, amortization, net
insurance proceeds, development fees, management fees and Net Cash Flow of
Tenant and evidence that the Net Cash Flow of Tenant has been paid in accordance
with this Section 5.5. The reconciliation statement shall be in a form
reasonably satisfactory to Lender.
5.6 Cash Management. At any time [i] after the occurrence of any default
hereunder and until such default is cured, or [ii] when Lender has reason to
believe that Tenant or Manager has failed to comply with Section 5.5 above,
Lender may require that all cash payments to Borrower and to Manager on behalf
of Tenant, from any source and of whatever nature, be paid directly to Lender or
Lender's agent ("Lender Payee"). Upon receipt of such funds, Lender Payee shall
[i] pay all taxes, debt service and approved operating expenses and reserves of
Tenant in accordance with the Working Capital Budget; and [ii] retain an amount
equal to the Net Cash Flow of Tenant for payment on the Note. Upon notice from
Lender, Borrower and Manager shall [i] enter into a Cash Management
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<PAGE> 15
Agreement with Lender in accordance with the foregoing, in form and substance
reasonably satisfactory to Lender; and [ii] give written notice to all facility
residents and all other payors of cash payments to Borrower and Manager that
payments should be sent to an address designated by Lender Payee effective as of
the date of the notice.
ARTICLE 6: NEGATIVE COVENANTS
Until the Loan has been paid in full, Borrower shall not do any of the
following without the prior written consent of Lender which shall not be
unreasonably withheld:
6.1 No Debt. Borrower shall not create, incur, assume, or permit to exist any
indebtedness other than indebtedness incurred under the Transaction Documents.
6.2 No Liens. Borrower shall not create, incur, or permit to exist any lien upon
or pledge of any interest in Borrower except pursuant to the Transaction
Documents.
6.3 No Guaranties. Borrower shall not create, incur, assume, or permit to exist
any guarantee of any loan or other indebtedness except for the endorsement of
negotiable instruments for collection in the ordinary course of business.
6.4 No Dissolution. Borrower shall not dissolve, liquidate, merge, consolidate
or terminate its existence or, except pursuant to and in accordance with the
Transaction Documents, sell, assign, lease, or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired).
6.5 No Change in Ownership. No change shall occur in the ownership of any equity
interest in Borrower except for transfers pursuant to and in accordance with the
Transaction Documents or in accordance with Section 8.17 hereof.
6.6 No Investments. Except for investments in tenants of leases included within
the Current Phase, Borrower shall not purchase or otherwise acquire, hold, or
invest in securities (whether capital stock or instruments evidencing
indebtedness) of or make loans or advances to any person, including, without
limitation, any shareholder, partner or member of Borrower.
6.7 Subordination of Payments. Borrower shall not make any payments or
distributions (including, without limitation, salary, bonuses, fees, principal,
interest, dividends, liquidating distributions, management fees, cash flow
distributions or lease payments) to any Affiliate or any shareholder, member or
partner of Borrower or any Affiliate, or any family member of any such
shareholder, member or partner. As long as there is no existing, uncured Event
of Default, Borrower may pay the management fees pursuant to the Transaction
Documents and Borrower may make distributions to Member of Option Payments
received in accordance with the terms of the Option Agreement (as defined in the
Lease).
6.8 Change of Location or Name. Borrower shall not change any of the following:
[i] the location of the principal place of business or chief executive office of
Borrower, or any office where
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<PAGE> 16
any of Borrower's books and records are maintained; or [ii] the name under which
Borrower conducts any of its business or operations, until Borrower has given
Lender 30 days' advance notice and has executed and delivered to Lender all UCC
financing statements, amendments and other documents reasonably requested by
Lender in connection with such change.
6.9 No Amendments. Borrower shall not consent or agree to any amendment,
modification, alteration or termination of any Transaction Document.
ARTICLE 7: DEFAULT AND REMEDIES
7.1 Event of Default. Any one or more of the following events shall constitute
an "Event of Default" hereunder:
7.1.1 Borrower or Manager fails to pay all Net Cash Flow to Lender or any other
monetary obligation payable by Borrower or Manager under the Loan Documents
within 10 days after the date that such payment is due.
7.1.2 Borrower fails to comply with any covenant set forth in Section 5.4 or
Article 6 and Borrower or Manager fails to comply with any covenant set forth in
Sections 2.3, 5.5 and 5.6 of this Agreement.
7.1.3 Borrower fails to observe and perform any other covenant, condition or
agreement under the Loan Documents to be performed by Borrower and [i]
continuance of such failure for a period of 30 days after written notice thereof
is given to the Borrower by the Lender; or [ii] if, by reason of the nature of
such default the same cannot be remedied within the said 30 days, Borrower fails
to proceed with reasonable diligence (reasonably satisfactory to Lender) after
receipt of the notice to cure the same or, in any event, fails to cure such
default within 60 days after receipt of the notice. The foregoing notice and
cure provisions do not apply to any Event of Default otherwise specifically
described in any other subsection of Section 7.1.
7.1.4 [i] The filing by Borrower of a petition under 11 U.S.C. or the
commencement of a bankruptcy or similar proceeding by Borrower; [ii] the failure
by Borrower within 60 days to dismiss any involuntary bankruptcy petition or
other commencement of a bankruptcy, reorganization or similar proceeding against
Borrower or to lift or stay any execution, garnishment or attachment of the
Facility; [iii] the entry of an order for relief under 11 U.S.C. in respect of
Borrower; [iv] assignment by Borrower for the benefit of its creditors; [v] the
entry by Borrower into an agreement of composition with its creditors; [vi] the
approval by a court of competent jurisdiction of a petition applicable to
Borrower in any proceeding for its reorganization instituted under the
provisions of any state or federal bankruptcy, insolvency, or similar laws; or
[vii] appointment by final order, judgment or decree of a court of competent
jurisdiction of a receiver of the whole or any substantial part of the
properties of Borrower (provided such receiver shall not have been removed or
discharged within 60 days of the date of his qualification).
7.1.5 [i] Any receiver, administrator, custodian or other person takes
possession or control of all or part of any Facility and continues in possession
for 60 days; [ii] any writ against all or part of any Facility is not released
within 60 days; [iii] any final, non-appealable judgment is rendered
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against all or part of any Facility, any Affiliate or Borrower and which is
undismissed for 60 days (except as otherwise provided in this section); [iv] all
or a substantial part of the assets of Borrower are attached, seized, subjected
to a writ or distress warrant, or are levied upon, or come into the possession
of any receiver, trustee, custodian, or assignee for the benefit of creditors
and are not released within 60 days; [v] Borrower is enjoined, restrained, or in
any way prevented by court order, or any proceeding is filed or commenced
seeking to enjoin, restrain, or in any way prevent Borrower from conducting all
or a substantial part of its business or affairs and such proceeding is not
released within 60 days; or [vi] if a notice of lien, levy, or assessment is
filed of record with respect to all or any part of the property of Borrower and
is not dismissed within 30 days.
7.1.6 Any representation or warranty made by Borrower in the Transaction
Documents, any security for the Loan, or any report, certificate, application,
financial statement or other instrument furnished by Borrower pursuant hereto or
thereto shall prove to be false, misleading or incorrect in any material respect
as of the date made.
7.1.7 Borrower, Tenant or any Affiliate defaults on any indebtedness or
obligation to Lender or any Lender Affiliate, any agreement with Lender or any
Lender Affiliate or any Affiliate Obligation, or Borrower or Tenant defaults
under any Transaction Document, (in each case limited to the indebtedness,
obligations, agreements and documents relating to the Current Phase) and any
applicable grace or cure period with respect to default under such indebtedness,
obligation or agreement expires without such default having been cured. This
provision applies to all such indebtedness, obligations and agreements as they
may be amended, modified, extended, or renewed from time to time.
7.1.8 Any guarantor (if any) of the Loan dies, dissolves, terminates, is
adjudicated incompetent, files a petition in bankruptcy, or is adjudicated
insolvent under 11 U.S.C. or any other insolvency law, or fails to comply with
any covenant or requirement set forth in the guaranty of such guarantor, and in
the case of the death or incompetency of a personal guarantor only, Borrower
fails within 30 days to deliver to Lender a substitute guaranty or other
collateral reasonably satisfactory to Lender.
7.2 Remedies on Default. Whenever any Event of Default occurs, Lender may, in
addition to any other remedies under the Loan Documents, at law or in equity,
take any one or more of the following remedial steps concurrently or
successively:
7.2.1 Acceleration. Lender may declare the Loan to be immediately due and
payable, without presentment of any kind, demand, notice of dishonor, protest,
or other notice of any kind, all of which Borrower hereby waives.
7.2.2 Other Remedies. Lender may take whatever action at law or in equity as may
appear necessary or desirable to collect any monies then due and/or thereafter
to become due.
7.2.3 Waiver. Without waiving any prior or subsequent Event of Default, Lender
may waive any Event of Default or, with or without waiving any Event of Default,
remedy any default.
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<PAGE> 18
7.2.4 Terminate Disbursement. Lender may terminate its obligation to disburse
Loan proceeds.
ARTICLE 8: MISCELLANEOUS
8.1 Advances by Lender. At any time and from time to time, Lender may incur
and/or pay and/or advance costs or expenses: [i] which Lender is authorized or
has the right (but not necessarily the obligation) to incur or may incur under
any Loan Document or any law; [ii] in exercising any right or remedy provided
under any Loan Document or in taking any action which Lender is authorized to
take under any Loan Document; [iii] which are required to be paid by Borrower
under any Loan Document, but which Borrower fails to pay upon demand; or [iv]
from which Borrower is required to hold Lender harmless under any Loan Document,
but from which Borrower fails to hold Lender harmless. Any costs, expenses, or
advances incurred or paid by Lender as described in this Section 8.1 shall
become part of the Loan and, upon demand, shall be paid to Lender together with
interest thereon at the Default Rate from the date of disbursement by Lender.
8.2 [Deleted]
8.3 Construction of Rights and Remedies and Waiver of Notice and Consent.
8.3.1 Applicability. The provisions of this Section 8.3 shall apply to all
rights and remedies provided by any Loan Document or by law or equity.
8.3.2 Waiver of Notices and Consent to Remedies. Unless otherwise expressly
provided herein, any right or remedy may be pursued without notice to or further
consent of Borrower, both of which Borrower waives.
8.3.3 Cumulative Rights. Each right or remedy under the Loan Documents is
distinct from but cumulative to each other right or remedy and may be exercised
independently of, concurrently with, or successively to any other rights and
remedies.
8.3.4 Extension or Modification of Loan. No extension of time for or
modification of amortization of the Loan shall release the liability or bar the
availability of any right or remedy against Borrower or any successor in
interest, and Lender shall not be required to commence proceedings against
Borrower or any successor or to extend time for payment or otherwise to modify
amortization of the Loan by reason of any demand by Borrower or any successor.
8.3.5 Right to Select Security. Lender has the right to proceed at its election
against all security or against any item or items of such security from time to
time, and no action against any item or items of security shall bar subsequent
actions against any item or items of security.
8.3.6 Forbearance Not a Waiver. No forbearance in exercising any right or remedy
shall operate as a waiver thereof; no forbearance in exercising any right or
remedy on any one or more occasion shall operate as a waiver thereof on any
further occasion; and no single or partial exercise of any right or remedy shall
preclude any other exercise thereof or the exercise of any other right or
remedy.
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<PAGE> 19
8.3.7 No Waiver. Failure by Lender to insist upon the strict performance of any
of the covenants and agreements herein set forth or to exercise any rights or
remedies upon default by Borrower hereunder shall not be considered or taken as
a waiver or relinquishment for the future of the right to insist upon and to
enforce by mandamus or other appropriate legal or equitable remedy strict
compliance by Borrower with all of the covenants and conditions hereof, or of
the rights to exercise any such rights or remedies, if such default by Borrower
is continued or repeated. To the extent permitted by law, any two or more of
such rights or remedies may be exercised at the same time.
8.3.8 No Continuing Waivers. If any covenant or agreement contained in the Loan
Documents is breached by Borrower and thereafter waived by Lender, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder. No waiver shall be binding unless it is in
writing and signed by Lender. No course of dealing between Lender and Borrower,
nor any delay nor omission on the part of Lender in exercising any rights under
the Loan Documents, shall operate as a waiver.
8.3.9 [Deleted]
8.3.10 No Release. Borrower and any other person now or hereafter obligated for
the payment or performance of all or any part of the Note shall not be released
from paying and performing under the Note by reason of [i] the failure of Lender
to comply with any request of Borrower (or of any other person so obligated), to
take action to enforce any of the provisions of the Loan Documents, or [ii] the
release, regardless of consideration, of the obligations of any person liable
for payment or performance of the Note, or any part thereof, or [iii] any
agreement or stipulation extending the time of payment or modifying the terms of
the Note, and in the event of such agreement or stipulation, Borrower and all
such other persons shall continue to be liable under such documents, as amended
by such agreement or stipulation, unless expressly released and discharged in
writing by Lender.
8.4 Assignment.
8.4.1 Assignment by Lender. Lender may assign, negotiate, pledge, or transfer
this Agreement, the Note and all other Loan Documents to any Lender Affiliate or
any other person or entity.
8.4.2 Assignment by Borrower. Borrower shall not assign or attempt to assign its
rights nor delegate its obligations under the Loan Documents except in
accordance with Section 8.17 hereof.
8.5 Notices. All notices, demands, requests, and consents (hereinafter
"notices") given pursuant to the terms of this Agreement shall be in writing,
shall be addressed to the addresses set forth in the introductory paragraph of
this Agreement and shall be served by [i] personal delivery; [ii] United States
mail, postage prepaid; or [iii] nationally recognized overnight courier. All
notices shall be deemed to be given upon the earlier of actual receipt or three
days after deposit in the United States mail or one business day after deposit
with the overnight courier. All notices sent pursuant to this Agreement or any
other Loan Document shall be simultaneously sent to Balanced Care at its address
as set forth in the Shortfall Agreement. Any notices meeting the requirements of
-15-
<PAGE> 20
this section shall be effective, regardless of whether or not actually received.
Balanced Care, Lender and Borrower may change their notice address at any time
by giving the other party notice of such change.
8.6 Entire Agreement. This Agreement and the other Loan Documents constitute the
entire agreement between Borrower and Lender relating to the subject matter
hereof. No representations, warranties, and agreements have been made by Lender
except as set forth in this Agreement and the other Loan Documents. If there is
any conflict between the terms and provisions of the Loan Commitment and the
terms of this Agreement, this Agreement shall govern.
8.7 Severability. If any term or provision of this Agreement is held or deemed
by Lender to be invalid or unenforceable, such holding shall not affect the
remainder of this Agreement and the same shall remain in full force and effect.
8.8 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Agreement or the intent of any provision thereof.
8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State, without giving effect to the
conflict of laws rules thereof.
8.10 Binding Effect. This Agreement will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Lender and Borrower.
8.11 Modification. This Agreement may only be modified by a writing signed by
both Lender and Borrower. All references to this Agreement, whether in this
Agreement or in any other document or instrument, shall be deemed to incorporate
all amendments, modifications, and renewals of this Agreement made after the
date hereof. If Borrower requests Lender's consent to any change in ownership,
merger or consolidation of Borrower, any assumption of the Loan, or any
modification of the Loan Documents, Borrower shall provide Lender all relevant
information and documents sufficient to enable Lender to evaluate the request.
In connection with any such request, Borrower shall pay to Lender a fee in the
amount of $2,500.00 and shall pay all of Lender's reasonable attorney's fees and
expenses and other reasonable out-of-pocket expenses incurred in connection with
Lender's evaluation of Borrower's request, the preparation of any documents and
amendments, the subsequent amendment of any documents between Lender and its
collateral pool lenders (if applicable), and all related matters. In connection
with any proposed change in the ownership of Borrower or Tenant, or an
assumption of the Loan and Lease, relating to a proposed substitution of
Borrower and Tenant, Lender's fee shall be limited to $2,500 for all
modifications and consents relating to the Current Phase and made concurrently.
8.12 Construction of Agreement. This Agreement has been prepared by Lender and
its professional advisors and reviewed by Borrower and its professional
advisors. Lender, Borrower and their advisors believe that this Agreement is the
product of all their efforts, it expresses their agreement, and that it shall
not be interpreted in favor of either Lender or Borrower or against either
Lender or Borrower merely because of their efforts in preparing it.
-16-
<PAGE> 21
8.13 Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original hereof.
8.14 No Third-Party Beneficiary Rights. Except for Balanced Care, no person not
a party to this Agreement shall have or enjoy any rights hereunder and all
third-party beneficiary rights are expressly negated. Without limiting the
generality of the foregoing, no one other than Borrower, Manager and Balanced
Care shall have any rights to obtain or compel a disbursement of proceeds of the
Loan hereunder. Notwithstanding any provision to the contrary contained herein
or in any other Loan Document, [i] Balanced Care is a third-party beneficiary of
this Agreement and the other Loan Documents, [ii] no Loan Document shall be
amended without the prior written consent of Balanced Care, and [iii] Balanced
Care shall have the right to enforce the provisions of this Agreement.
8.15 Lender's Authority to Furnish Copies of Loan Documents. Lender may exhibit
or furnish the Loan Documents or copies thereof to any potential transferee of
the Loan Documents (whether such transfer is absolute or collateral), to any
governmental or regulatory authority in connection with any legal,
administrative or regulatory proceedings requiring the disclosure of the terms
of the Loan Documents, to Lender's attorneys, auditors and underwriters, and to
any other person or entity for which there is a legitimate business purpose for
such disclosure.
8.16 Lender Merely a Lender.
8.16.1 No Agency. Lender is not and will not be in any way the agent for or
trustee of Borrower. Lender does not intend to act in any way for or on behalf
of Borrower in disbursing the proceeds of the Loan. Lender does not intend to be
and is not and will not be responsible for the completion of any improvements
erected or to be erected upon the Leased Property; the payment of bills or any
other details in connection with the Leased Property and improvements; any plans
and specifications prepared in connection with the Leased Property and
improvements; or Borrower's relations with any contractors, subcontractors,
materialmen, or laborers performing work or supplying materials for the Leased
Property and improvements.
8.16.2 No Obligation to Pay. This Agreement is not to be construed by Borrower
or anyone furnishing labor, materials, or any other work or product for
improving the Leased Property as an agreement upon the part of Lender to assure
that anyone will be paid for furnishing such labor, materials, or any other work
or product.
8.16.3 No Responsibility for Construction. Lender is not responsible for
construction of the improvements. Notwithstanding inspection of the Leased
Property and the improvements, Lender assumes no responsibility for the quality
of construction or workmanship or for the architectural or structural soundness
of any improvements to be erected upon the Leased Property or for the adherence
to or approval of any plans and specifications in connection therewith or for
any improvements.
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<PAGE> 22
8.17 Substitution of Borrower and/or Tenant. Notwithstanding any provision to
the contrary in the Loan Documents or Lease Documents, if [i] Member desires to
transfer the equity interest in Borrower, [ii] Borrower desires to assign its
rights and obligations under the Loan Documents, [iii] Borrower desires to
transfer the equity interest in Tenant, or [iv] Tenant desires to assign its
rights and obligations under the Lease Documents, in each case to a person or
entity ("Transferee") that is not an Affiliate of Borrower, Member, Tenant or
Balanced Care and in which Borrower, Member, Tenant and Balanced Care hold no
equity interest, the following conditions shall apply:
(a) The prior written consent of Lender shall be required but
shall not be unreasonably withheld. Lender's review of the proposed Transferee
shall include application of Lender's customary underwriting standards.
(b) Lender shall have received such documents, instruments,
letter of credit amendments and amendments to the Loan Documents and Lease
Documents as Lender may reasonably request in connection with such transfer.
(c) All parties shall reasonably cooperate and take such
actions as may be reasonably requested in order to facilitate the transfer to
the Transferee.
(d) Lender shall have received reimbursement from Balanced
Care for all attorneys' fees and expenses and all other reasonable out-of-pocket
expenses incurred in connection with the foregoing.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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<PAGE> 23
IN WITNESS WHEREOF, Lender and Borrower have executed and delivered
this Agreement effective as of the Effective Date.
LENDER: [_____________________________]
By: ___________________________
Title: ____________________
BORROWER: FINANCIAL CARE INVESTORS, LLC
By: ___________________________
Tax I.D. No. ______________ Title: ____________________
AGREEMENT OF MANAGER
The undersigned Manager shall comply with all provisions and perform
all obligations applicable to Manager set forth in the foregoing Loan Agreement,
including, without limitation, Sections 2.3, 2.5, 2.7, 5.2.1, 5.5 and 56.
BALANCED CARE AT [_________], INC.
By:______________________________
Title:_____________________
-19-
<PAGE> 1
EXHIBIT 10.16
SCHEDULE TO FORM OF HCRI LOAN AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LENDER TENANT LOAN AMOUNT MANAGER STATE DEFINITION
REFERS TO STATE
OF
<S> <C> <C> <C> <C> <C>
LEBANON, PENNSYLVANIA Pennsylvania BCC Financial Care $686,800 Balanced Care at Pennsylvania
Properties, Inc. Investors of Lebanon, Inc.
Lebanon, LLC
LOYALSOCK, PENNSYLVANIA Pennsylvania BCC Financial Care $674,050 Balanced Care at Pennsylvania
Properties, Inc. Investors of Loyalsock, Inc.
Loyalsock, LLC
WESTERVILLE, OHIO HCN BCC Holdings, Financial Care $1,313,675 Balanced Care at Ohio
Inc. Investors of Westerville, Inc.
Westerville, LLC
MORRISTOWN, TENNESSEE HCN BCC Holdings, Financial Care $692,000 Balanced Care at Tennessee
Inc. Investors of Morristown, Inc.
Morristown, LLC
OAK RIDGE, TENNESSEE HCN BCC Holdings, Financial Care $697,948 Balanced Care at Tennessee
Inc. Investors of Oak Oak Ridge, Inc.
Ridge, LLC
SAGAMORE HILLS, OHIO HCN BCC Holdings, Financial Care $1,243,550 Balanced Care at Ohio
Inc. Investors of Sagamore Hills,
Sagamore Hills, LLC Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.17
FORM OF KWM GROUP, INC. PRE-DEVELOPMENT AGREEMENT
THIS PRE-DEVELOPMENT AGREEMENT dated as of September 21, 1998 (the
"Agreement"), executed by and between BCC Development and Management Co., a
Delaware corporation (the "Developer"), and KWM Group, Inc., a corporation
(together with its successors and assigns, the "Owner").
RECITALS:
WHEREAS, Developer has a certain real estate option to acquire real
property located in [__________________] (the "Land"); and
WHEREAS, Owner and Developer have entered into that certain Letter of
Intent dated as of September 21, 1998 (the "LOI"), under which Owner has agreed,
among other things, to develop, construct and finance a 60-unit residential care
facility and related site improvements (collectively, the "Improvements") on the
Land (hereinafter, the acquisition of the Land, together with the planning,
development, construction, licensing and financing arising in connection with
the Improvements to be erected thereon, may hereinafter be referred to as the
"Project"); and
WHEREAS, Developer is experienced in the acquisition, planning, and
pre-development of residential care facilities; and
WHEREAS, Owner has requested, and Developer has agreed, to assist Owner
with the pre-development of the Project detailed in Section 1.1 below, which
includes certain services that have already been provided by Developer prior to
the date of this Agreement; and
WHEREAS, Owner and Developer intend by this Agreement to confirm the
terms and conditions upon which Developer has assisted Owner in connection with
the pre-development of the Project.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1 - SERVICES
1.1 Services. Prior to the date of this Agreement, Developer has
performed the following services in connection with the pre-development of the
Project on behalf of Owner:
(a) Market Analysis. Developer has provided a preliminary analysis
of the demand for "residential care" in the area where the Land is
located, an investigation of local labor supplies and of suitable
locations for a residential care facility and consultation regarding a
feasibility study.
(b) Architectural Consultation. Developer has worked in
conjunction with architectural firms in developing architectural plans
and specifications (the "Plans and
<PAGE> 2
Specifications") for the Project, and has acquired all of the rights
thereto.
(c) Plans and Specifications. Developer will permit the use of the
Plans and Specifications to permit the construction of the Improvements
but this use shall be solely with respect to the Project.
(d) Construction Consultation. Developer has provided assistance
in preparing a construction schedule, cost estimate, construction
budget, bidding information and bidding forms for the Project.
(e) Civil Engineering Consultation. Developer has provided
assistance in (i) evaluating civil engineering and site work and (ii)
reviewing, negotiating and/or awarding civil engineering contracts for
the Project.
(f) Geotechnical/Environmental Consultation. Developer has
obtained a written report from a qualified geotechnical or engineering
firm concerning the presence, handling, treatment and disposal of
hazardous substances with respect to the Project and the recommended
construction practices based on the properties of the subsurface soils
comprising the Land.
(g) Site Selection. Developer has worked in conjunction with real
estate brokers and agents to locate the Land that either permits the
construction and development of the Project as a matter of right for an
unlimited time period and not merely as a non-conforming use or that
permits the Land to be subdivided and rezoned, if necessary, in order
to permit the foregoing.
(h) Option Agreements. Developer has negotiated and obtained a
fully executed and assignable land option agreement (the "Option
Agreement") attached hereto and incorporated herein as Exhibit A to
purchase the Land on which the Project will be constructed.
(i) Survey. Developer has obtained an ALTA/ACSM land survey for
the Project, which includes a metes and bounds description of the
property and a surveyor's certificate that runs, or will run, in favor
of Developer, Owner, Owner's financing source(s) and the title insurer
as being true and accurate.
(j) Subdivision. Where applicable, Developer has subdivided the
Land to permit the Land to be used for its intended use and to be
treated as a separate legal lot or parcel which for all purposes may be
taxed, mortgaged, conveyed and otherwise dealt with as a separate lot
or parcel.
(k) Utilities; Governmental Concurrences; Access. Developer has
obtained confirmation from certain governmental authorities and public
utility companies that (i) utilities, including without limitation,
telephone, gas, electric power, fire protection, storm and sanitary
sewer facilities and water are or will be available to the boundaries
of the Land; (ii) such utilities are or will be adequate for Owner's
intended use of the Land as a
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<PAGE> 3
residential care facility and such ancillary uses as are permitted by
law and may be necessary in connection therewith or incidental thereto,
and (iii) the means of ingress and egress, access to public streets and
drainage facilities are or will be adequate for Owner's intended use of
the Land.
(l) Land Use Approvals. Where applicable, Developer has obtained
certain preliminary/final land development plan approvals in connection
with the Project.
(m) Regulatory Approvals. Where applicable, Developer has obtained
certain regulatory approvals, including certificates of need, with
respect to the Project.
ARTICLE 2 - DEVELOPER'S REPRESENTATIONS AND WARRANTIES
Developer represents and warrants to Owner that:
2.1 It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2.2 It has the requisite power and authority to carry on its business
as now being conducted and as contemplated by this Agreement.
2.3 It has the power to execute, deliver and perform this Agreement,
and the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Developer and will not (i) violate
any provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Developer.
ARTICLE 3 - OWNER'S REPRESENTATIONS AND WARRANTIES
Owner represents and warrants to Developer that:
3.1 It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation.
3.2 It has the requisite power and authority to carry on its business
as now being conducted and as contemplated by this Agreement.
3.3 It has the power to execute, deliver and perform this Agreement,
and the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Owner and will not (i) violate any
provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
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<PAGE> 4
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Owner.
ARTICLE 4 - COMPENSATION OF DEVELOPER
As compensation for the services hereunder, Owner agrees to pay
Developer a fee in the amount of $[_______], which fee shall be paid as follows:
(i) $[_______] due and payable upon the earlier to occur of (a) December 31,
1998 or (b) closing on the financing for the Project and (ii) $[_______] due and
payable on the last business day of each calendar month commencing on Janaury
31, 1999 and continuing thereafter up through and including October 31, 1999.
ARTICLE 5 - EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of one or more of the following
events shall, at the option of the non-defaulting party, constitute an "Event of
Default" hereunder:
(a) Developer or Owner fails to observe or perform any of their
respective obligations in accordance with the terms and provisions of
this Agreement or breaches any of their respective representations or
warranties and such failure or breach continues uncured for a period of
30 days after the giving of notice by the non-defaulting party to the
defaulting party specifying the nature of such failure or breach;
(b) A court of competent jurisdiction enters a decree or order for
relief with respect to Developer or Owner in any involuntary case under
the Federal Bankruptcy Code or any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, trustee or similar official of
such party or for any substantial part of such party's property, or for
the winding up or liquidation of such party's affairs and such decree
or order remains in effect for a period of 90 days from the date of
entry thereof; or
(c) Developer or Owner commences a voluntary case under the
Federal Bankruptcy Code or any applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry
of an order of relief in an involuntary case under such law, or shall
consent to the appointment of or taking possession by a receiver,
liquidator, trustee or similar official of such party or for any
substantial part of such party's property.
5.2 Remedies. Upon the occurrence of any Event of Default, the
non-defaulting party will be entitled to terminate this Agreement by written
notice to such effect given to the defaulting party. The non-defaulting party
shall have all rights available at law or in equity as a result of any Event of
Default, including, without limitation, an action for damages and/or specific
performance.
Page 4
<PAGE> 5
ARTICLE 6 - INDEMNIFICATION
6.1 By Developer. Developer will indemnify and save Owner harmless
from and against any and all loss, cost or expense (including, without
limitation, reasonable attorneys' fees and court costs) arising out of any
breach of any of the representations, warranties, covenants and agreements of
Developer under this Agreement.
6.2 By Owner. Owner will indemnify and save Developer harmless from
and against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Owner under this
Agreement.
ARTICLE 7 - MISCELLANEOUS
7.1 Termination Date. The obligations of Developer under this
Agreement shall terminate as of the date (herein referred to as the "Termination
Date") when the Project has been substantially completed.
7.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter, and it is agreed that there are no terms, understandings,
representations or warranties, express or implied, other than those set forth
herein.
7.3 Binding Effect. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned by either of the parties hereto without the written consent of
the other party; provided, however, Owner may assign this Agreement to an
affiliate of Owner without such consent.
7.4 Captions. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only, and are not intended and will
not be construed, to limit, enlarge or affect the scope or intent of this
Agreement or the meaning of any provision hereof.
7.5 Notices. All notices, consents, waivers, directions, requests or
other instruments or communications provided for in this Agreement will be in
writing, signed by the party giving the same or such party's attorney, and shall
be deemed properly given if sent by reputable overnight service, by telegram or
by registered or certified United States mail, return receipt requested, postage
prepaid, and addressed as follows:
Page 5
<PAGE> 6
If to Developer:
BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Brian L. Barth
With a copy to:
Balanced Care Corporation
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Robin L. Barber
If to Owner:
KWM Group, Inc.
3805 McCain Park Drive, Suite 120
North Little Rock, AR 72116
or to such other address as a party may from time to time designate in the
manner set forth above.
7.6 No Oral Modification. This Agreement may not be changed or
modified except by an agreement in writing executed by each of the parties
hereto.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute one and the same instrument.
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA BUT WITHOUT REGARD
TO ITS CONFLICTS OF LAW PROVISIONS.
7.9 Severability. If any provision of this Agreement is held invalid,
it will not affect in any respect whatsoever the validity of the remainder of
this Agreement.
[SIGNATURES CONTINUED ON NEXT PAGE]
Page 6
<PAGE> 7
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed by its duly authorized
officers empowered so to act as of the day and year first above written.
BCC DEVELOPMENT AND MANAGEMENT CO.
By: _____________________________________
Name:
Title:
KWM GROUP, INC.
By: _____________________________________
Name:
Title:
Page 7
<PAGE> 1
EXHIBIT 10.18
SCHEDULE TO FORM OF KWM GROUP, INC. PRE-DEVELOPMENT AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OF TOTAL AMOUNT OF AMOUNT OF
LAND COMPENSATION COMPENSATION COMPENSATION
OF DEVELOPER OF DEVELOPER OF DEVELOPER
PAYABLE UPON PAYABLE ON A
THE OCCURRENCE MONTHLY BASIS
OF CERTAIN
EVENTS
<S> <C> <C> <C> <C>
LEESBURG, Leesburg, $325,000 $162,500 $16,250
FLORIDA Florida
NEW PORT New Port $325,000 $162,500 $16,250
RICHEY, FLORIDA Richey, Florida
ROCKLEDGE, Rockledge, $425,000 $212,500 $21,250
FLORIDA Florida
TITUSVILLE, Titusville, $325,000 $162,500 $16,250
FLORIDA Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.19
FORM OF CAPITAL POINT PRE-DEVELOPMENT AGREEMENT
THIS PRE-DEVELOPMENT AGREEMENT dated as of August 26, 1998 (the
"Agreement"), executed by and between BCC Development and Management Co., a
Delaware corporation (the "Developer"), and Capital Point Holding Company, LLC,
a Texas limited liability company or its assigns (the "Owner").
RECITALS:
WHEREAS, Developer has a certain real estate option to acquire real
property located in [________________] (the "Land"); and
WHEREAS, Owner and Developer have entered into that certain Letter of
Intent dated as of August 17, 1998 (the "LOI"), under which Owner has agreed,
among other things, to develop, construct and finance a 60-unit residential care
facility and related site improvements (collectively, the "Improvements") on the
Land (hereinafter, the acquisition of the Land, together with the planning,
development, construction, licensing and financing arising in connection with
the Improvements to be erected thereon, may hereinafter be referred to as the
"Project"); and
WHEREAS, Developer is experienced in the acquisition, planning, and
pre-development of residential care facilities; and
WHEREAS, Owner has requested, and Developer has agreed, to assist Owner
with the pre-development of the Project detailed in Section 1.1 below, which
includes certain services that have already been provided by Developer prior to
the date of this Agreement; and
WHEREAS, Owner and Developer intend by this Agreement to confirm the terms
and conditions upon which Developer has assisted Owner in connection with the
pre-development of the Project.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE 1 - SERVICES
1.1 Services. Prior to the date of this Agreement, Developer has performed
the following services in connection with the pre-development of the Project on
behalf of Owner:
(a) Market Analysis. Developer has provided a preliminary analysis
of the demand for "residential care" in the area where the Land is
located, an investigation of local labor supplies and of suitable
locations for a residential care facility and
<PAGE> 2
consultation regarding a feasibility study.
(b) Architectural Consultation. Developer has worked in conjunction
with architectural firms in developing architectural plans and
specifications (the "Plans and Specifications") for the Project, and has
acquired all of the rights thereto.
(c) Plans and Specifications. Developer will permit the use of the
Plans and Specifications to permit the construction of the Improvements
but this use shall be solely with respect to the Project.
(d) Construction Consultation. Developer has provided assistance in
preparing a construction schedule, cost estimate, construction budget,
bidding information and bidding forms for the Project.
(e) Civil Engineering Consultation. Developer has provided
assistance in (i) evaluating civil engineering and site work and (ii)
reviewing, negotiating and/or awarding civil engineering contracts for the
Project.
(f) Geotechnical/Environmental Consultation. Developer has obtained
a written report from a qualified geotechnical or engineering firm
concerning the presence, handling, treatment and disposal of hazardous
substances with respect to the Project and the recommended construction
practices based on the properties of the subsurface soils comprising the
Land.
(g) Site Selection. Developer has worked in conjunction with real
estate brokers and agents to locate the Land that either permits the
construction and development of the Project as a matter of right for an
unlimited time period and not merely as a non-conforming use or that
permits the Land to be subdivided and rezoned, if necessary, in order to
permit the foregoing.
(h) Option Agreements. Developer has negotiated and obtained a fully
executed and assignable land option agreement, as amended (the "Option
Agreement") attached hereto and incorporated herein as Exhibit A to
purchase the Land on which the Project will be constructed. The Option
Agreement expires on [____________], unless extended as contemplated under
the Option Agreement.
(i) Survey. Developer has obtained an ALTA/ACSM land survey for the
Project, which includes a metes and bounds description of the property and
a surveyor's certificate that runs, or will run, in favor of Developer,
Owner, Owner's financing source(s) and the title insurer as being true and
accurate.
(j) Subdivision. Where applicable, Developer has subdivided the Land
to permit the Land to be used for its intended use and to be treated as a
separate legal lot or parcel which for all purposes may be taxed,
mortgaged, conveyed and otherwise dealt with as a separate lot or parcel.
Page 2
<PAGE> 3
(k) Utilities; Governmental Concurrences; Access. Developer has
obtained confirmation from certain governmental authorities and public
utility companies that (i) utilities, including without limitation,
telephone, gas, electric power, fire protection, storm and sanitary sewer
facilities and water are or will be available to the boundaries of the
Land; (ii) such utilities are or will be adequate for Owner's intended use
of the Land as a residential care facility and such ancillary uses as are
permitted by law and may be necessary in connection therewith or
incidental thereto, and (iii) the means of ingress and egress, access to
public streets and drainage facilities are or will be adequate for Owner's
intended use of the Land.
(l) Land Use Approvals. Where applicable, Developer has obtained
certain preliminary/final land development plan approvals in connection
with the Project.
(m) Regulatory Approvals. Where applicable, Developer has obtained
certain regulatory approvals, including certificates of need, with respect
to the Project.
ARTICLE 2 - DEVELOPER'S REPRESENTATIONS AND WARRANTIES
Developer represents and warrants to Owner that:
2.1 It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2.2 It has the requisite power and authority to carry on its business as
now being conducted and as contemplated by this Agreement.
2.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Developer and will not (i) violate
any provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Developer.
ARTICLE 3 - OWNER'S REPRESENTATIONS AND WARRANTIES
Owner represents and warrants to Developer that:
3.1 It is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Texas.
3.2 It has the requisite power and authority to carry on its business as
now being
Page 3
<PAGE> 4
conducted and as contemplated by this Agreement.
3.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Owner and will not (i) violate any
provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Owner.
ARTICLE 4 - COMPENSATION OF DEVELOPER
As compensation for the services hereunder, Owner agrees to pay Developer
a fee in the amount of $300,000, which fee shall be paid as follows: (i)
$150,000 due and payable upon the earlier to occur of (a) November 30, 1998 or
(b) closing on the financing for the Project and (ii) $25,000 due and payable on
the last business day of each calendar month commencing on December 31, 1998 and
continuing thereafter up through and including May 31, 1999.
ARTICLE 5 - EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of one or more of the following
events shall, at the option of the non-defaulting party, constitute an "Event of
Default" hereunder:
(a) Developer or Owner fails to observe or perform any of their
respective obligations in accordance with the terms and provisions of this
Agreement or breaches any of their respective representations or
warranties and such failure or breach continues uncured for a period of 30
days after the giving of notice by the non-defaulting party to the
defaulting party specifying the nature of such failure or breach;
(b) A court of competent jurisdiction enters a decree or order for
relief with respect to Developer or Owner in any involuntary case under
the Federal Bankruptcy Code or any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, trustee or similar official of such party or for any
substantial part of such party's property, or for the winding up or
liquidation of such party's affairs and such decree or order remains in
effect for a period of 90 days from the date of entry thereof; or
(c) Developer or Owner commences a voluntary case under the Federal
Bankruptcy Code or any applicable bankruptcy, insolvency or similar law
now or hereafter in effect, or shall consent to the entry of an order of
relief in an involuntary case under such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, trustee or
similar official of such party or for any substantial part of such party's
property.
Page 4
<PAGE> 5
5.2 Remedies. Upon the occurrence of any Event of Default, the
non-defaulting party will be entitled to terminate this Agreement by written
notice to such effect given to the defaulting party. The non-defaulting party
shall have all rights available at law or in equity as a result of any Event of
Default, including, without limitation, an action for damages and/or specific
performance.
ARTICLE 6 - INDEMNIFICATION
6.1 By Developer. Developer will indemnify and save Owner harmless from
and against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Developer under
this Agreement.
6.2 By Owner. Owner will indemnify and save Developer harmless from and
against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Owner under this
Agreement.
ARTICLE 7 - MISCELLANEOUS
7.1 Termination Date. The obligations of Developer under this Agreement
shall terminate as of the date (herein referred to as the "Termination Date")
when the Project has been substantially completed.
7.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter, and it is agreed that there are no terms, understandings,
representations or warranties, express or implied, other than those set forth
herein.
7.3. Binding Effect. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned by either of the parties hereto without the written consent of
the other party; provided, however, Owner may assign this Agreement to an
affiliate of Owner without such consent.
7.4 Captions. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only, and are not intended and will
not be construed, to limit, enlarge or affect the scope or intent of this
Agreement or the meaning of any provision hereof.
7.5 Notices. All notices, consents, waivers, directions, requests or other
instruments or communications provided for in this Agreement will be in writing,
signed by the party giving the same or such party's attorney, and shall be
deemed properly given if sent by reputable overnight service, by telegram or by
registered or certified United States mail, return receipt requested, postage
prepaid, and addressed as follows:
Page 5
<PAGE> 6
If to Developer:
BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Brian L. Barth
With a copy to:
Balanced Care Corporation
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Robin L. Barber
If to Owner:
Capital Point Holding Company, LLC
10370 Richmond Avenue, Suite 900
Houston, TX 77042
Attention: J. Michael Sadler
With a copy to:
Richard D. Penry, Esq.
10370 Richmond Avenue, Suite 900
Houston, TX 77042
or to such other address as a party may from time to time designate in the
manner set forth above.
7.6 No Oral Modification. This Agreement may not be changed or modified
except by an agreement in writing executed by each of the parties hereto.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute one and the same instrument.
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF [_______________] BUT
WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS.
Page 6
<PAGE> 7
7.9 Severability. If any provision of this Agreement is held invalid, it
will not affect in any respect whatsoever the validity of the remainder of this
Agreement.
[SIGNATURES CONTINUED ON NEXT PAGE]
Page 7
<PAGE> 8
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed by its duly authorized
officers empowered so to act as of the day and year first above written.
BCC DEVELOPMENT AND MANAGEMENT CO.
By: ________________________________________
Name:
Title:
CAPITAL POINT HOLDING COMPANY, LLC
By:_________________________________________
Name:
Title:
Page 8
<PAGE> 9
OMITTED EXHIBIT
EXHIBIT A: OPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.20
SCHEDULE TO FORM OF CAPITAL POINT PRE-DEVELOPMENT AGREEMENT
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OF EXPIRATION GOVERNING LAW
LAND DATE OF OPTION
AGREEMENT
<S> <C> <C> <C>
BRIDGEPORT, Bridgeport, November 28, 1998 West Virginia
WEST VIRGINIA Simpson
District,
Harrison
County, West
Virginia
DANVILLE, Danville, October 11, 1998 Kentucky
KENTUCKY Kentucky
FRANKFORT, Frankfort, September 23, 1998 Kentucky
KENTUCKY Kentucky
VIENNA, WEST Vienna, West October 19, 1998 West Virginia
VIRGINIA Virginia
</TABLE>
<PAGE> 1
EXHIBIT 10.21
FORM OF ANGELES PRE-DEVELOPMENT AGREEMENT, TYPE I
THIS PRE-DEVELOPMENT AGREEMENT dated as of September 30, 1998 (the
"Agreement"), executed by and between BCC Development and Management Co., a
Delaware corporation (the "Developer"), and Angeles BCC Company, LLC, a Delaware
limited liability company (the "Owner").
RECITALS:
WHEREAS, Developer has a certain real estate option to acquire real
property located in [_____________] (the "Land"); and
WHEREAS, an affiliate of Owner (the "Affiliate") and Developer have
entered into that certain Letter Agreement dated as of September 30, 1998 (the
"Letter Agreement"), under which Affiliate has agreed, among other things, to
develop, construct and finance a [__]-unit senior living facility and related
site improvements (collectively, the "Improvements") on the Land (hereinafter,
the acquisition of the Land, together with the planning, development,
construction, licensing and financing arising in connection with the
Improvements to be erected thereon, may hereinafter be referred to as the
"Project"); and
WHEREAS, Developer is experienced in the acquisition, planning, and
pre-development of residential care facilities; and
WHEREAS, Owner has requested, and Developer has agreed, to assist Owner
with the pre-development of the Project detailed in Section 1.1 below, which
includes certain services that have already been provided by Developer prior to
the date of this Agreement; and
WHEREAS, Owner and Developer intend by this Agreement to confirm the terms
and conditions upon which Developer has assisted Owner in connection with the
pre-development of the Project.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE 1 - SERVICES
1.1 Services. Prior to the date of this Agreement, Developer has performed
the following services in connection with the pre-development of the Project on
behalf of Owner:
(a) Market Analysis. Developer has provided a preliminary analysis
of the demand for "residential care" in the area where the Land is
located, an investigation of local labor supplies and of suitable
locations for a residential care facility and consultation regarding a
feasibility study.
<PAGE> 2
(b) Architectural Consultation. Developer has worked in conjunction
with architectural firms in developing architectural plans and
specifications (the "Plans and Specifications") for the Project, and has
acquired all of the rights thereto.
(c) Plans and Specifications. Developer will permit the use of the
Plans and Specifications to permit the construction of the Improvements
but this use shall be solely with respect to the Project.
(d) Construction Consultation. Developer has provided assistance in
preparing a construction schedule, cost estimate, construction budget,
bidding information and bidding forms for the Project.
(e) Civil Engineering Consultation. Developer has provided
assistance in (i) evaluating civil engineering and site work and (ii)
reviewing, negotiating and/or awarding civil engineering contracts for the
Project.
(f) Geotechnical/Environmental Consultation. Developer has obtained
a written report from a qualified geotechnical or engineering firm
concerning the presence, handling, treatment and disposal of hazardous
substances with respect to the Project and the recommended construction
practices based on the properties of the subsurface soils comprising the
Land.
(g) Site Selection. Developer has worked in conjunction with real
estate brokers and agents to locate the Land that either permits the
construction and development of the Project as a matter of right for an
unlimited time period and not merely as a non-conforming use or that
permits the Land to be subdivided and rezoned, if necessary, in order to
permit the foregoing.
(h) Option Agreements. Developer has negotiated and obtained a fully
executed and assignable land option agreement (the "Option Agreement")
attached hereto and incorporated herein as Exhibit A to purchase the Land
on which the Project will be constructed.
(i) Survey. Developer has obtained an ALTA/ACSM land survey for the
Project, which includes a metes and bounds description of the property and
a surveyor's certificate that runs, or will run, in favor of Developer,
Owner, Owner's financing source(s) and the title insurer as being true and
accurate.
(j) Subdivision. Where applicable, Developer has subdivided the Land
to permit the Land to be used for its intended use and to be treated as a
separate legal lot or parcel which for all purposes may be taxed,
mortgaged, conveyed and otherwise dealt with as a separate lot or parcel.
(k) Utilities; Governmental Concurrences; Access. Developer has
obtained
Page 2
<PAGE> 3
confirmation from certain governmental authorities and public utility
companies that (i) utilities, including without limitation, telephone,
gas, electric power, fire protection, storm and sanitary sewer facilities
and water are or will be available to the boundaries of the Land; (ii)
such utilities are or will be adequate for Owner's intended use of the
Land as a residential care facility and such ancillary uses as are
permitted by law and may be necessary in connection therewith or
incidental thereto, and (iii) the means of ingress and egress, access to
public streets and drainage facilities are or will be adequate for Owner's
intended use of the Land.
ARTICLE 2 - DEVELOPER'S REPRESENTATIONS AND WARRANTIES
Developer represents and warrants to Owner that:
2.1 It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2.2 It has the requisite power and authority to carry on its business as
now being conducted and as contemplated by this Agreement.
2.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Developer and will not (i) violate
any provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Developer.
ARTICLE 3 - OWNER'S REPRESENTATIONS AND WARRANTIES
Owner represents and warrants to Developer that:
3.1 It is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware.
3.2 It has the requisite power and authority to carry on its business as
now being conducted and as contemplated by this Agreement.
3.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Owner and will not (i) violate any
provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due
Page 3
<PAGE> 4
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or (iii) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the assets of Owner.
ARTICLE 4 - COMPENSATION OF DEVELOPER
As compensation for the services hereunder, Owner agrees to pay Developer
a fee in the amount of $[_________], which fee shall be paid as follows: (i) 50%
due and payable upon the earlier to occur of (a) [______________] or (b) closing
on the financing for the Project and (ii) 10% due and payable on the last
business day of each of the five successive calendar months commencing on
[___________] and ending on [______________].
ARTICLE 5 - EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of one or more of the following
events shall, at the option of the non-defaulting party, constitute an "Event of
Default" hereunder:
(a) Developer or Owner fails to observe or perform any of their
respective obligations in accordance with the terms and provisions of this
Agreement or breaches any of their respective representations or
warranties and such failure or breach continues uncured for a period of 30
days after the giving of notice by the non-defaulting party to the
defaulting party specifying the nature of such failure or breach;
(b) A court of competent jurisdiction enters a decree or order for
relief with respect to Developer or Owner in any involuntary case under
the Federal Bankruptcy Code or any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, trustee or similar official of such party or for any
substantial part of such party's property, or for the winding up or
liquidation of such party's affairs and such decree or order remains in
effect for a period of 90 days from the date of entry thereof; or
(c) Developer or Owner commences a voluntary case under the Federal
Bankruptcy Code or any applicable bankruptcy, insolvency or similar law
now or hereafter in effect, or shall consent to the entry of an order of
relief in an involuntary case under such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, trustee or
similar official of such party or for any substantial part of such party's
property.
5.2 Remedies. Upon the occurrence of any Event of Default, the
non-defaulting party will be entitled to terminate this Agreement by written
notice to such effect given to the defaulting party. The non-defaulting party
shall have all rights available at law or in equity as a result of any Event of
Default, including, without limitation, an action for damages and/or specific
performance.
ARTICLE 6 - INDEMNIFICATION
Page 4
<PAGE> 5
6.1 By Developer. Developer will indemnify and save Owner harmless from
and against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Developer under
this Agreement.
6.2 By Owner. Owner will indemnify and save Developer harmless from and
against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Owner under this
Agreement.
ARTICLE 7 - MISCELLANEOUS
7.1 Termination Date. The obligations of Developer under this Agreement
shall terminate as of the date (herein referred to as the "Termination Date")
when the Project has been substantially completed.
7.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter, and it is agreed that there are no terms, understandings,
representations or warranties, express or implied, other than those set forth
herein.
7.3. Binding Effect. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned by either of the parties hereto without the written consent of
the other party (which consent shall not be unreasonably withheld).
7.4 Captions. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only, and are not intended and will
not be construed, to limit, enlarge or affect the scope or intent of this
Agreement or the meaning of any provision hereof.
7.5 Notices. All notices, consents, waivers, directions, requests or other
instruments or communications provided for in this Agreement will be in writing,
signed by the party giving the same or such party's attorney, and shall be
deemed properly given if sent by reputable overnight service or 5 days after
being sent by registered or certified United States mail, return receipt
requested, postage prepaid, and addressed as follows:
If to Developer:
BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Brian L. Barth
Page 5
<PAGE> 6
With a copy to:
Balanced Care Corporation
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Robin L. Barber
If to Owner:
Angeles BCC Company, LLC
12700 Park Central Drive, Suite 1606
Dallas, TX 75251
Attention: John Lanier
With a copy to:
Winston Walp, Esq.
Jenkens & Gilchrist
Fountain Place
1445 Ross Avenue, Suite 3200
Dallas, TX 75202
or to such other address as a party may from time to time designate in the
manner set forth above.
7.6 No Oral Modification. This Agreement may not be changed or modified
except by an agreement in writing executed by each of the parties hereto.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute one and the same instrument.
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE BUT WITHOUT
REGARD TO ITS CONFLICTS OF LAW PROVISIONS.
7.9 Severability. If any provision of this Agreement is held invalid, it
will not affect in any respect whatsoever the validity of the remainder of this
Agreement.
Page 6
<PAGE> 7
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed by its duly authorized
officers empowered so to act as of the day and year first above written.
BCC DEVELOPMENT AND MANAGEMENT CO.
By: ________________________________________
Name:
Title:
ANGELES BCC COMPANY, LLC
By: _________________________________________
Name:
Title:
Page 7
<PAGE> 8
OMITTED EXHIBIT
EXHIBIT A: OPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.22
SCHEDULE TO FORM OF ANGELES PRE-DEVELOPMENT AGREEMENT, TYPE I
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OF NUMBER TOTAL AMOUNT 50% OF DEVELOPER 10% OF DEVELOPER
LAND OF UNITS OF DEVELOPER FEE PAYABLE ON FEE PAYABLE AT THE
FEE THE EARLIER OF END OF EACH MONTH
THE FOLLOWING OF THE FOLLOWING
DATE OR CLOSING PERIOD
<S> <C> <C> <C> <C> <C>
BATON ROUGE, Baton 80 $400,000 November 30, 1998 December 31, 1998
LOUISIANA Rouge, to April 30, 1999
Louisiana
CLARKSVILLE, $300,000 November 30, 1998 December 31, 1998
TENNESSEE Tennessee to April 30, 1999
</TABLE>
<PAGE> 1
EXHIBIT 10.23
FORM OF ANGELES PRE-DEVELOPMENT AGREEMENT, TYPE II
THIS PRE-DEVELOPMENT AGREEMENT dated as of September 30, 1998 (the
"Agreement"), executed by and between BCC Development and Management Co., a
Delaware corporation (the "Developer"), and Angeles BCC Company, LLC, a Delaware
limited liability company (the "Owner").
RECITALS:
WHEREAS, Developer has a certain real estate option to acquire real
property located in [____________] (the "Land"); and
WHEREAS, an affiliate of Owner (the "Affiliate") and Developer have
entered into that certain Letter Agreement dated as of September 30, 1998 (the
"Letter Agreement"), under which Affiliate has agreed, among other things, to
develop, construct and finance a [__]-unit senior living facility and related
site improvements (collectively, the "Improvements") on the Land (hereinafter,
the acquisition of the Land, together with the planning, development,
construction, licensing and financing arising in connection with the
Improvements to be erected thereon, may hereinafter be referred to as the
"Project"); and
WHEREAS, Developer is experienced in the acquisition, planning, and
pre-development of residential care facilities; and
WHEREAS, Owner has requested, and Developer has agreed, to assist Owner
with the pre-development of the Project detailed in Section 1.1 below, which
includes certain services that have already been provided by Developer prior to
the date of this Agreement; and
WHEREAS, Owner and Developer intend by this Agreement to confirm the terms
and conditions upon which Developer has assisted Owner in connection with the
pre-development of the Project.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE 1 - SERVICES
1.1 Services. Prior to the date of this Agreement, Developer has performed
the following services in connection with the pre-development of the Project on
behalf of Owner:
(a) Market Analysis. Developer has provided a preliminary analysis
of the demand for "residential care" in the area where the Land is
located, an investigation of local labor supplies and of suitable
locations for a residential care facility and consultation regarding a
feasibility study.
<PAGE> 2
(b) Architectural Consultation. Developer has worked in conjunction
with architectural firms in developing architectural plans and
specifications (the "Plans and Specifications") for the Project, and has
acquired all of the rights thereto.
(c) Plans and Specifications. Developer will permit the use of the
Plans and Specifications to permit the construction of the Improvements
but this use shall be solely with respect to the Project.
(d) Construction Consultation. Developer has provided assistance in
preparing a construction schedule, cost estimate, construction budget,
bidding information and bidding forms for the Project.
(e) Civil Engineering Consultation. Developer has provided
assistance in (i) evaluating civil engineering and site work and (ii)
reviewing, negotiating and/or awarding civil engineering contracts for the
Project.
(f) Site Selection. Developer has worked in conjunction with Owner
to locate the Land that either permits the construction and development of
the Project as a matter of right for an unlimited time period and not
merely as a non-conforming use or that permits the Land to be subdivided
and rezoned, if necessary, in order to permit the foregoing.
ARTICLE 2 - DEVELOPER'S REPRESENTATIONS AND WARRANTIES
Developer represents and warrants to Owner that:
2.1 It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2.2 It has the requisite power and authority to carry on its business as
now being conducted and as contemplated by this Agreement.
2.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Developer and will not (i) violate
any provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Developer.
ARTICLE 3 - OWNER'S REPRESENTATIONS AND WARRANTIES
Page 2
<PAGE> 3
Owner represents and warrants to Developer that:
3.1 It is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware.
3.2 It has the requisite power and authority to carry on its business as
now being conducted and as contemplated by this Agreement.
3.3 It has the power to execute, deliver and perform this Agreement, and
the execution, delivery and performance of the terms and provisions of this
Agreement on its part to be observed or performed have been duly authorized by
all requisite corporate action on the part of Owner and will not (i) violate any
provision of law, any order of any court or governmental instrumentality or
other agency, or any indenture, agreement or other instrument to which it is a
party or by which it is bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the assets of Owner.
ARTICLE 4 - COMPENSATION OF DEVELOPER
As compensation for the services hereunder, Owner agrees to pay Developer
a fee in the amount of $[_________], which fee shall be paid as follows: (i) 50%
due and payable upon the earlier to occur of (a) [_____________] or (b) closing
on the financing for the Project and (ii) 10% due and payable on the last
business day of each of the five successive calendar months commencing on
[______________] and ending on [______________].
ARTICLE 5 - EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of one or more of the following
events shall, at the option of the non-defaulting party, constitute an "Event of
Default" hereunder:
(a) Developer or Owner fails to observe or perform any of their
respective obligations in accordance with the terms and provisions of this
Agreement or breaches any of their respective representations or
warranties and such failure or breach continues uncured for a period of 30
days after the giving of notice by the non-defaulting party to the
defaulting party specifying the nature of such failure or breach;
(b) A court of competent jurisdiction enters a decree or order for
relief with respect to Developer or Owner in any involuntary case under
the Federal Bankruptcy Code or any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, trustee or similar official of such party or for any
substantial part of such party's property, or for the winding up or
liquidation of such party's affairs and such decree or order remains in
effect for a period of 90 days from the date of entry thereof; or
(c) Developer or Owner commences a voluntary case under the Federal
Page 3
<PAGE> 4
Bankruptcy Code or any applicable bankruptcy, insolvency or similar law
now or hereafter in effect, or shall consent to the entry of an order of
relief in an involuntary case under such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, trustee or
similar official of such party or for any substantial part of such party's
property.
5.2 Remedies. Upon the occurrence of any Event of Default, the
non-defaulting party will be entitled to terminate this Agreement by written
notice to such effect given to the defaulting party. The non-defaulting party
shall have all rights available at law or in equity as a result of any Event of
Default, including, without limitation, an action for damages and/or specific
performance.
ARTICLE 6 - INDEMNIFICATION
6.1 By Developer. Developer will indemnify and save Owner harmless from
and against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Developer under
this Agreement.
6.2 By Owner. Owner will indemnify and save Developer harmless from and
against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees and court costs) arising out of any breach of any of
the representations, warranties, covenants and agreements of Owner under this
Agreement.
ARTICLE 7 - MISCELLANEOUS
7.1 Termination Date. The obligations of Developer under this Agreement
shall terminate as of the date (herein referred to as the "Termination Date")
when the Project has been substantially completed.
7.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter, and it is agreed that there are no terms, understandings,
representations or warranties, express or implied, other than those set forth
herein.
7.3. Binding Effect. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned by either of the parties hereto without the written consent of
the other party (which consent shall not be unreasonably withheld).
7.4 Captions. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only, and are not intended and will
not be construed, to limit, enlarge or affect the scope or intent of this
Agreement or the meaning of any provision hereof.
Page 4
<PAGE> 5
7.5 Notices. All notices, consents, waivers, directions, requests or other
instruments or communications provided for in this Agreement will be in writing,
signed by the party giving the same or such party's attorney, and shall be
deemed properly given if sent by reputable overnight service or 5 days after
being sent by registered or certified United States mail, return receipt
requested, postage prepaid, and addressed as follows:
If to Developer:
BCC Development and Management Co.
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Brian L. Barth
With a copy to:
Balanced Care Corporation
5021 Louise Drive
Suite 200
Mechanicsburg, PA 17055
Attention: Robin L. Barber
If to Owner:
Angeles BCC Company, LLC
12700 Park Central Drive, Suite 1606
Dallas, TX 75251
Attention: John Lanier
With a copy to:
Winston Walp, Esq.
Jenkens & Gilchrist
Fountain Place
1445 Ross Avenue, Suite 3200
Dallas, TX 75202
or to such other address as a party may from time to time designate in the
manner set forth above.
7.6 No Oral Modification. This Agreement may not be changed or modified
except by an agreement in writing executed by each of the parties hereto.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute one and the same instrument.
Page 5
<PAGE> 6
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE BUT WITHOUT
REGARD TO ITS CONFLICTS OF LAW PROVISIONS.
7.9 Severability. If any provision of this Agreement is held invalid, it
will not affect in any respect whatsoever the validity of the remainder of this
Agreement.
WITNESS WHEREOF, intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed by its duly authorized officers
empowered so to act as of the day and year first above written.
BCC DEVELOPMENT AND MANAGEMENT CO.
By: ________________________________________
Name:
Title:
ANGELES BCC COMPANY, LLC
By: _________________________________________
Name:
Title:
Page 6
<PAGE> 1
EXHIBIT 10.24
SCHEDULE TO FORM OF ANGELES PRE-DEVELOPMENT AGREEMENT, TYPE II
PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OF NUMBER TOTAL AMOUNT 50% OF DEVELOPER 10% OF DEVELOPER FEE
LAND OF UNITS OF DEVELOPER FEE PAYABLE ON PAYABLE AT THE END
FEE THE EARLIER OF OF EACH MONTH OF THE
THE FOLLOWING FOLLOWING PERIOD
DATE OR CLOSING
<S> <C> <C> <C> <C> <C>
BILOXI, Biloxi, 80 $400,000 December 31, 1998 January 31, 1999 to
MISSISSIPPI Mississippi May 31, 1999
LAFAYETTE, Lafayette, 79 $400,000 December 31, 1998 January 31, 1999 to
LOUISIANA Louisiana May 31, 1999
LAKE CHARLES, Lake 80 $400,000 December 31, 1998 January 31, 1999 to
LOUISIANA Charles, May 31, 1999
Louisiana
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,590
<SECURITIES> 0
<RECEIVABLES> 20,630
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,173
<PP&E> 27,912
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,330
<CURRENT-LIABILITIES> 12,562
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> 63,787
<TOTAL-LIABILITY-AND-EQUITY> 86,330
<SALES> 23,871
<TOTAL-REVENUES> 23,871
<CGS> 0
<TOTAL-COSTS> 20,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 3,273
<INCOME-TAX> 1,333
<INCOME-CONTINUING> 1,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,940
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
