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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 8, 1999
BALANCED CARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-13845 25-1761898
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1215 MANOR DRIVE, MECHANICSBURG, PENNSYLVANIA 17055
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 717-796-6100
Page 1 of 4
Exhibit Index begins on page 4.
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ITEM 5 - OTHER EVENTS
As described in the attached press release dated October 11, 1999,
Balanced Care Corporation (the "Company") announced it had entered into a
Subscription Agreement dated October 8, 1999, as amended and restated October
11, 1999 (the "Subscription Agreement"), with IPC Advisors S.A.R.L., a
Luxembourg Company ("IPC") owned by a trust whose beneficiaries are Mr. Paul
Reichmann, Mrs. Lea Reichmann and their children pursuant to which IPC agreed to
make an equity investment of approximately $21 million, in two tranches (the
"Transaction"). Under the first tranche, which closed on October 11, 1999, the
Company issued to IPC 3,300,000 shares of Series C Convertible Preferred Stock,
par value $.001 (the "Series C Preferred Stock"), at $1.25 per share for an
aggregate purchase price of $4,125,000. The relative rights, preferences and
limitations of the Series C Preferred Stock are set forth in the Certificate of
Powers, Designations, Preferences and Rights of the Series C Preferred Stock
filed by the Company with the State of Delaware, Office of the Secretary of
State, on October 8, 1999 (the "Certificate of Designation"). Under the second
tranche, which is subject to approval by a majority of the stockholders of the
Company, the Company will issue to IPC 13,400,000 shares of common stock, par
value $.001 (the "Common Stock"), at $1.25 per share for an aggregate purchase
price of $16,750,000. If stockholder approval is received, the shares of Series
C Preferred Stock will automatically convert into shares of Common Stock, and
IPC will own approximately 49% of the outstanding shares of Common Stock of the
Company (post-Transaction).
Mr. Brad Hollinger, Chairman and CEO of the Company, and certain other
significant shareholders have agreed to vote in favor of the Transaction
pursuant to a Voting Agreement dated October 8, 1999 between the stockholders
and IPC. Also in connection with the Transaction, the Company entered into a
Registration Rights Agreement dated October 8, 1999 with IPC. Under the
Registration Rights Agreement, IPC is entitled to certain demand and piggyback
registration rights with respect to the shares of Common Stock issued in the
Transaction.
As announced in the press release, the Company has postponed its annual
stockholders' meeting, which would have been in November 1999, so that the
stockholders may vote on the Transaction. The annual meeting of stockholders
will be rescheduled as soon as practicable.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits. The following Exhibits are filed with this Current
Report on Form 8-K pursuant to Item 601 of Regulation S-K:
Exhibit No. Description
4.1 Subscription Agreement dated October 8,
1999, as amended and restated October 11,
1999 between the Company and IPC.
4.2 Registration Rights Agreement dated
October 8, 1999 between the Company and IPC.
4.3 Certificate of Powers, Designations,
Preferences and Rights of Series C
Convertible Preferred Stock, par value
$.001, filed with the State of Delaware,
Office of the Secretary of State on
October 8, 1999.
9.1 Voting Agreement dated October 8, 1999
among IPC, the Company and certain of its
stockholders.
99.1 Press release of the Company dated
October 11, 1999.
Pursuant to the Subscription Agreement, the Company and IPC have
entered into a standstill agreement under which IPC will not initiate any
merger, tender offer or similar transaction for common stock of the Company at a
price less than $6.00 per share over the next 36 months without board approval.
Also as part of the Transaction, the Company's board has been expanded
from seven to nine members with IPC appointing four of the nine seats comprising
Mr. Paul Reichmann, his son Mr. Barry Reichmann, Mr. George Kuhl and Mr. Manfred
Walt. Mr. Reichmann is the Chairman of Central Park Lodges, Ltd., Mr. George
Kuhl the Vice Chairman, Mr. Barry Reichmann the President and CEO and Mr.
Manfred Walt the Executive Vice President and CFO.
Page 2 of 4
Exhibit Index begins on page 4.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALANCED CARE CORPORATION
/s/ Brad E. Hollinger
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Date: October 21, 1999 By: Brad E. Hollinger
Chairman of the Board,
President and Chief Executive Officer
Page 3 of 4
Exhibit Index begins on page 4.
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EXHIBIT INDEX
Exhibit No. Description
4.1 Subscription Agreement dated October 8,
1999, as amended and restated October 11,
1999 between the Company and IPC.
4.2 Registration Rights Agreement dated
October 8, 1999 between the Company and IPC.
4.3 Certificate of Powers, Designations,
Preferences and Rights of Series C
Convertible Preferred Stock, par value
$.001, filed with the State of Delaware,
Office of the Secretary of State on
October 8, 1999.
9.1 Voting Agreement dated October 8, 1999
among IPC, the Company and certain of its
stockholders.
99.1 Press release of the Company dated October
11, 1999.
Page 4 of 4
Exhibit Index begins on page 4.
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SUBSCRIPTION AGREEMENT EXHIBIT 4.1
This Agreement made as of the 8th day of October, 1999, as amended and
restated as of the 11th day of October, 1999.
BETWEEN:
IPC ADVISORS S.A.R.L. (the "Purchaser"),
OF THE FIRST PART;
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BALANCED CARE CORPORATION, a corporation governed by the
Laws of the State of Delaware (the "Corporation"),
OF THE SECOND PART.
WHEREAS subject to the terms and conditions hereof the Purchaser
desires to subscribe for and purchase from the Corporation and the Corporation
desires to issue and sell to the Purchaser Sixteen Million Seven Hundred
Thousand (16,700,000) shares of common or convertible preferred stock in the
capital of the Corporation.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and such other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS.
In this Agreement, initially capitalized terms shall have the meaning
set out on Schedule A hereto.
1.2 CONSTRUCTION
In this Agreement:
(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) the words "including", "include", and "includes" shall mean
"including without limitation", "include, without limitation"
and "includes, without limitation", respectively;
(c) any reference to a statute shall mean the statute in force as
at the date hereof and any regulation in force thereunder,
unless otherwise expressly provided;
(d) the use of headings is for convenience of reference only and
shall not affect the construction of this Agreement;
(e) when calculating the period of time within which or filing
which any act is to be done or step taken, the date which is
the reference day in calculating such period shall be
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excluded. If the last day of such period is not a Business
Day, the period shall end on the next Business Day;
(f) all dollar amounts are expressed in United States funds;
(g) whenever reference is made to "generally accepted accounting
principles", such reference shall be deemed to be the United
States generally accepted accounting principles; and
(h) any tender of documents or money under this Agreement may be
made upon the parties or the respective counsel and money may
be tendered by wire transfer, by bank draft drawn upon a bank
or by negotiable cheque payable in United States funds and
certified by a bank.
1.3 SCHEDULES.
The following are the schedules annexed hereto and incorporated by
reference herein and deemed to be part of this Agreement:
Schedule A Definitions
Schedule B Representations and Warranties of the Corporation
-Exhibit I Disclosure Schedule
Schedule C Representations and Warranties of Purchaser
Schedule D Conditions Precedent in favour of the Corporation
Schedule E Conditions Precedent in favour of Purchaser
Schedule F Series C Preferred Share Provisions
Schedule G Registration Rights Agreement
Schedule H Voting Agreement
Schedule I Business Plan
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE OF PURCHASED SHARES.
Subject to the terms and conditions of this Agreement, at the Time of
Closing, the Purchaser shall subscribe for and purchase from the Corporation and
the Corporation shall issue and sell to the Purchaser the Purchased Shares free
and clear from all Encumbrances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to the Purchaser (and
acknowledges that the Purchaser is relying on such representations and
warranties in entering into this Agreement and the transactions contemplated
hereby) as set out in Schedule B hereto.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Corporation (and
acknowledges that the Corporation is relying on such representations and
warranties in entering into this Agreement and the transactions contemplated
hereby) as set out in Schedule C hereto.
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3.3 NATURE AND SURVIVAL.
All representations and warranties contained in this Agreement on the
part of each of the parties shall survive Closing, for a period from the First
Date of Closing to the earlier of twelve (12) months from the Second Date of
Closing or eighteen (18) months from the First Date of Closing. If no claim is
made under this Agreement against a party for any incorrectness in, or breach
of, any representation or warranty made in this Agreement, prior to the expiry
of this survival period, such party shall have no further liability under this
Agreement with respect to such representation or warranty.
ARTICLE IV
CLOSING CONDITIONS
4.1 CONDITIONS FOR THE BENEFIT OF THE CORPORATION.
The obligation of the Corporation to complete the transactions
contemplated by this Agreement is subject to the satisfaction of, or compliance
with, at the Time of Closing, each of the conditions set out in Schedule D
hereto (each of which is acknowledged to be for the exclusive benefit of the
Corporation and may be waived only by the Corporation)
4.2 CONDITIONS FOR THE BENEFIT OF THE PURCHASER.
The obligation of the Purchaser to complete the transactions
contemplated by this Agreement is subject to the satisfaction of, or compliance
with, at the Time of Closing, each of the conditions set out in Schedule E
hereto (each of which is acknowledged to be for the exclusive benefit of the
Purchaser and may be waived only by the Purchaser).
ARTICLE V
CLOSINGS
5.1 LOCATION AND TIME OF CLOSING.
The closing of the purchase and sale of the Purchased Shares shall take
place at the Time of Closing on the First Date of Closing and the Second Date of
Closing at the offices of the Corporation, 1215 Manor Drive, Mechanicsburg,
Pennsylvania 17055.
5.2 DELIVERIES AT CLOSING.
At the Time of Closing on the First Date of Closing, the Corporation
shall issue and deliver to the Purchaser a certificate or certificates
representing Three Million Three Hundred Thousand (3,300,000) Series C Preferred
Shares, together with such other documents as are required or contemplated to be
delivered by the Corporation pursuant to this Agreement, and the Purchaser shall
deliver and pay to the Corporation Four Million One Hundred and Twenty Five
Thousand ($4,125,000) Dollars, together with such other documents as are
required or contemplated to be delivered by the Purchaser pursuant to this
Agreement.
At the Time of Closing on the Second Date of Closing, the Corporation
shall issue and deliver to the Purchaser a certificate or certificates
representing Thirteen Million Four Hundred Thousand (13,400,000) shares of
common stock in the capital of the Corporation, together with such other
documents as are required or contemplated to be delivered by the Corporation
pursuant to this Agreement, and the Purchaser shall deliver and pay to the
Corporation Sixteen Million Seven Hundred and Fifty Thousand ($16,750,000)
Dollars, together with such other documents as are required or contemplated to
be delivered by the Purchaser pursuant to this Agreement.
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ARTICLE VI
POST-CLOSING COVENANTS
6.1 BUSINESS PLAN.
The Corporation agrees that the Purchase Price received by the
Corporation upon the issue and sale of the Purchased Shares shall be used by the
Corporation for the purposes set out in the Business Plan of the Corporation
annexed as Schedule I hereto. The Corporation further agrees that the
Corporation shall not authorize or take any action not expressly contemplated by
the Business Plan nor amend, modify, restate or supersede the Business Plan in
any material respect, without the prior consent of the Purchaser.
6.2 BOARD REPRESENTATION.
The Corporation agrees that it shall cause to be nominated or appointed
to the Board of Directors of the Corporation and shall solicit proxies in favour
of the election, as two (2) Class I directors, one (1) Class II director and one
(1) Class III director, the individual(s) designated by the Purchaser (at its
sole discretion) at each subsequent meeting of the stockholders of the
Corporation at which such Class directors of the Corporation are to be elected.
If any such director designated by the Purchaser shall be disqualified, removed,
resign or otherwise cease to be a director of the Corporation, the Purchaser
shall have the right (exercisable at its sole discretion) to designate (and the
Board of Directors shall appoint) a further individual to fill the vacancy so
created. The Corporation agrees to provide to each director nominated by the
Purchaser any release or indemnity provided to any other director of the
Corporation at any time.
If at any time the Corporation has amended or proposes to amend its
certificate of incorporation to remove the staggered board provisions therein
contained (including so that directors of the Corporation are no longer
organized by Class), the foregoing rights of the Purchaser shall apply mutatus
mutandis but without reference to any particular Class of director.
The Corporation further agrees that it shall not, without the prior
consent of the Purchaser, initiate, facilitate, support or, to the extent
permitted by Law, permit, any action or resolution proposing to fix the number
of directors of the Corporation in excess of nine (9) members. The Corporation
further agrees that the Purchaser shall be entitled to designate at least fifty
(50%) percent of the members of any committee of the Board of Directors of the
Corporation.
6.3 MATERIAL DECISIONS.
During the period commencing on the First Date of Closing and ending
upon the earlier of (i) the Second Date of Closing, and (ii) the date the
Purchaser (and its affiliates and transferees) ceases to hold any Series C
Preferred Shares, no Material Decision shall be taken or implemented.
6.4 HSR ACT.
The parties shall exercise all commercially reasonable efforts to make
all necessary filings with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act in order
to satisfy the requirements thereof, and to address any concerns of such
Authorities, to permit the transactions contemplated by this Agreement,
including the purchase and sale of the remaining Purchased Shares at the Second
Date of Closing, to occur as soon as practicable following the First Date of
Closing.
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6.5 SPECIAL MEETING OF SHAREHOLDERS AND VOTING AGREEMENT.
As soon as practicable following the First Date of Closing, , the
Corporation shall convene the Special Meeting. The Corporation shall cause to be
postponed its currently scheduled annual meeting of stockholders such that its
1999 annual meeting of stockholders shall occur contemporaneously with the
Special Meeting.
For these purposes, the Corporation shall cause to be prepared and
filed with and use its reasonable best efforts to have declared effective, the
Securities and Exchange Commission its draft Proxy Statement in form and
substance reasonably satisfactory to the Purchaser. The Purchaser shall provide
the Corporation on a timely basis with all information as may be required to be
included in the Proxy Statement which relates to it, and the Corporation shall
permit the Purchaser and its counsel to review all drafts of the Proxy Statement
and a reasonable opportunity to provide comments thereon.
The Proxy Statement shall comply with all applicable Laws, including
Rule 14A of the Exchange Act. The Corporation shall keep the Purchaser informed
of any requests or comments made by the Securities and Exchange Commission or
other Authority in relation to the Proxy Statement. As soon as permitted by
applicable Laws, the Corporation shall cause the Proxy Statement in form and
substance satisfactory to the Purchaser to be sent to the appropriate Persons in
accordance with applicable Laws.
Immediately following the First Date of Closing and until the Special
Meeting, the Corporation shall use its reasonable best efforts to cause as many
stockholders of the Corporation as possible to enter into a Voting Agreement in
the form annexed as Schedule H hereto as parties thereto and in any event to
obtain their proxies to vote in favor of the transactions contemplated by this
Agreement at the Special Meeting
6.6 CONSENTS, APPROVALS ETC.
The Corporation agrees that it will use all commercially reasonable
efforts to obtain all authorizations, waivers, exemptions, consents, orders and
other approvals from applicable Authorities and other Persons as are necessary
to consummate the transactions contemplated hereby, and to satisfy each of the
conditions precedent to be satisfied by it and to take or cause to be taken all
other action and to do or cause to be done all other things necessary or
advisable under applicable Laws to permit the completion of the transactions
contemplated hereby in accordance with the provisions of this Agreement. The
Corporation will vigorously defend or cause to be defended any lawsuits or other
proceedings that may be brought against it challenging or opposing this
Agreement or the transactions contemplated hereby.
6.7 NON-SOLICITATION.
Subject to the following paragraph, during the period commencing on the
First Date of Closing and ending upon the earlier of (i) the Second Date of
Closing, and (ii) the date the Purchaser (and its affiliates and transferees)
ceases to hold any Series C Preferred Shares, the Corporation agrees that it
will not, directly or indirectly, solicit, initiate, participate in or encourage
any expression of interest, proposal or offer from, or negotiation with, or
provide information to or facilitate discussions with any Person relating to a
Material Transaction, without the prior consent of the Purchaser. During such
period, the Corporation shall immediately notify the Purchaser upon receipt of
any such expression of interest, proposal or offer from any Person relating to a
Material Transaction and forthwith disclose to the Purchaser all details
thereof.
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Provided, nothing contained in this section 6.7 will prevent the Board
of Directors of the Corporation from responding to any unsolicited expression of
interest, proposal or offer if, upon the advice of counsel (acceptable to the
members of the Board of Directors of the Corporation), the failure to do so
would constitute a violation of the Board's fiduciary duties to its stockholders
and the Corporation. Provided further, that any exercise by the Board of
Directors of the Corporation of its right to respond to any such unsolicited
expression of interest, proposal or offer pursuant to the immediately preceding
sentence shall (i) be subject to the Corporation entering into customary
confidentiality and stand-still covenants in favour of the Corporation, with any
Person provided access to the confidential information of the Corporation, and
(ii) permit the Purchaser, at its election, (a) to immediately terminate its
obligations hereunder to consummate the transactions contemplated hereby to
occur at the Second Date of Closing, and/or (b), to receive, upon notice to such
effect from the Purchaser to the Corporation, from the Corporation the payments
contemplated by section 8.8 hereof, and/or (c) to put its Series C Preferred
Shares to the Corporation.
6.8 STANDSTILL.
The Purchaser agrees that for a period of thirty six (36) months
immediately following the date hereof, it shall not, without the prior written
consent of the Corporation given by resolution of the directors of the
Corporation (the directors designated by the Purchaser pursuant to section 6.2
hereof abstaining from voting thereon), (i) initiate any merger, consolidation,
reorganization, recapitalization, amalgamation, liquidation, tender offer for
the outstanding shares of common stock in the capital of the Corporation which
is subject to Section 14(d)(1) of the Exchange Act or any other similar
transaction that would result in the stockholders equity of the Corporation
being exchanged for a cash equivalent value of less than Six ($6.00) Dollars per
share, or (ii) finance any third party to effect any of the foregoing.
6.9 CONFIDENTIALITY.
Each party agrees that, except as may be required by Law, it shall not
disclose this Agreement or the transactions contemplated hereby to any other
Person (other than its directors, officers, employees and advisors who are
advised of and agree to be bound by these confidentiality provisions). Without
limiting the generality of the foregoing, each party agrees that, to the extent
permitted by Law, it shall not make any public announcement or regulatory filing
disclosing this Agreement or the transactions contemplated hereby without the
prior approval of such announcement or regulatory filing by the other, such
approval not to be unreasonably withheld or delayed.
6.10 NOTIFICATION.
During the survival period referred to in section 3.3, each party will
promptly notify the other if any of the representations and warranties made by
it in this Agreement ceases to be true, accurate and complete in any material
respect and of any failure to comply in any material respect with any of its
obligations hereunder.
6.11 POST-CLOSING DELIVERIES
On or prior to October 15, 1999, the Corporation shall cause to be
delivered to the Purchaser and its counsel an executed opinion of counsel
reasonably satisfactory to Purchaser in form, scope and substance reasonably
acceptable to Purchaser , and, if applicable, the amendments referred to in
Section 8 of Schedule E to this Agreement, fully executed by all applicable
parties.
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ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
The Corporation covenants and agrees with the Purchaser, and the
Purchaser covenants and agrees with the Corporation, to indemnify and save
harmless the other (which for purposes of this Article VII shall include its
directors, officers, agents and nominees) from and against any claim, demand,
action, cause of action, damage, loss (other than lost profits), costs,
liability or expense (including professional fees and disbursements), other than
arising solely as a result of the indemnified party's gross negligence or
wilfull misconduct, which may be made or brought against the other or which the
other may suffer or incur in respect of, as a result of, or arising out of any
nonfulfillment of any agreement or covenant on its or their part under this
Agreement or any document or certificate given pursuant to this Agreement, or
any inaccuracy in or breach of any of its representations or warranties
contained in this Agreement or any document or certificate given pursuant to
this Agreement.
7.2 CLAIMS OTHER THAN THIRD PARTY CLAIMS.
Following receipt from the Corporation or the Purchaser, as the case
may be (the "Indemnified Party" which for purposes of this Article VII shall
include its directors, officers, agents and nominees), of a written notice of a
claim for indemnification which has not arisen in respect of a Third Party
Claim, the party who was in receipt of such notice (the "Indemnifying Party")
shall have thirty (30) days to make such investigation of the claim as the
Indemnifying Party considers necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the
claim. If the Indemnified Party and the Indemnifying Party agree at or prior to
the expiration of such thirty (30) days to the validity and amount of the claim,
the Indemnifying Party shall immediately pay the Indemnified Party the full
agreed upon amount of the claim.
7.3 ADDITIONAL RULES AND PROCEDURES.
The obligation of the parties to indemnify each other pursuant to
this Article VII shall also be subject to the following:
(a) an Indemnified Party shall only be entitled to make a claim
for indemnification pursuant to section 7.1 if written notice
containing reasonable particulars of such claim is delivered
to the Indemnifying Party within the time period provided for
in section 3.3 hereof;
(b)
if any claim by a person other than the Indemnified Party (a
"Third Party Claim") is of a nature such that the Indemnified
Party is required by applicable Law to make a payment to any
Person (a "Third Party") with respect to such Third Party
Claim before the completion of settlement negotiations or
related legal proceedings, the Indemnified Party may make
such payment and the Indemnifying Party shall, forthwith
after demand by the Indemnifying Party, reimbursement the
Indemnified Party for any such payment. If the amount of any
liability under the Third Party Claim in respect of which
such a payment was made, as finally determined, is less than
the amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, forthwith
after receipt of the difference from the Third Party, pay
such difference to the Indemnifying Party;
(c) except in the circumstances contemplated by paragraph 7.3(a)
above, and whether or not the Indemnifying Party assumes
control of the negotiation, settlement or defence of any
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Third Party Claim, the Indemnified Party shall not settle or
compromise any Third Party Claim except with the prior
written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed); and
(d) the Indemnifying Party and the Indemnified Party shall provide
each other on an ongoing basis with all information which may
be relevant to the other's liability hereunder and shall
supply copies of all relevant documentation promptly as they
become available.
7.4 RIGHTS CUMULATIVE.
The rights of indemnification contained in this Article VII are
cumulative and are in addition to every other right or remedy of the parties
contained in this Agreement or otherwise, provided that there shall be no
duplication of payment of damages.
ARTICLE VIII
GENERAL
8.1 TIME OF ESSENCE.
Time shall be of the essence in this Agreement.
8.2 GOVERNING LAW, JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York. The parties hereto absolutely and irrevocably
consent and submit to the jurisdiction of the courts of the County of New York
and of any federal courts located in the County of New York in connection with
any actions or proceedings brought against it by any other party hereto arising
out of or relating to this Agreement and the transactions contemplated hereby.
The parties hereto waive any right that they may have to have a trial by jury in
any action or proceeding brought against it by or upon the exercise of any
rights or remedies of any other party hereto arising out of or relating to this
Agreement and the transactions contemplated hereby.
8.3 ENTIRE AGREEMENT.
This Agreement, including the schedules annexed hereto, and agreements
contemplated hereby, and the Agreement and Direction among the Purchaser, the
Corporation and Goodman Phillips & Vineberg dated October 11, 1999, constitute
the entire agreement among the parties hereto relating to the subject matter
hereof and supersede all oral statements and prior writings with respect hereto.
8.4 ASSIGNMENT.
Neither this Agreement nor any right or obligation hereunder may be
assigned by the Corporation without the prior consent of the Purchaser. This
Agreement and any right or obligation hereunder may be assigned by the Purchaser
to any affiliate of the Purchaser, Central Park Lodges Ltd. or any affiliate
thereof without the prior consent of the Corporation.
8.5 SEVERABILITY.
If any provision, or portion thereof, of this Agreement, or of the
application thereof to any Person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision or portion thereof, to any other Person or circumstance shall not
be affected thereby and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by Law.
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8.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and the respective heirs, executives, legal personal
representatives, successors and permitted assigns.
8.7 EXPENSES.
Subject to Section 8.8 hereof, each of the parties hereto shall be
responsible for and shall pay all Taxes, costs, expenses and legal or other fees
incurred by it in connection with the negotiation, settlement and execution of
this Agreement and all matters related thereto and shall indemnify and hold
harmless the other parties from and against any and all liabilities and claims
in respect of any such expenses, costs or fees. Notwithstanding the foregoing,
all applicable filing and administrative costs associated with any required
filings with the United States Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under or in connection with
the HSR Act shall be paid equally by the Corporation and the Purchaser.
8.8 NON-COMPLETION FEE.
If the transactions contemplated hereby to occur on the Second Closing
Date have not been completed on or before the date that is six (6) months from
the date hereof, (a) the Corporation shall on the first Business Day thereafter
deliver and pay to the Purchaser an amount equal to (i) unless the sole reason
such completion did not occur is that the condition in section 10 of Schedule E
has not been met, One Million ($1,000,000) Dollars plus (ii) in all cases, all
costs, expenses and legal or other fees incurred by the Purchaser in connection
with the negotiation, settlement and execution of this Agreement and all matters
related thereto and all disputes arising in connection therewith, (b) the
Purchaser shall have no further obligation to complete the transactions
contemplated hereby to occur on the Second Closing Date and (c) the Purchaser
shall be entitled to exercise the Put Right pursuant to Section 5 of the
certificate attached as Schedule F hereto.
8.9 OBLIGATIONS AS COVENANTS.
Each agreement and obligation of any of the parties hereto in this
Agreement, even though not expressed a covenant, is considered for all purposes
to be a covenant. The parties shall use all commercially reasonable efforts to
cause to be satisfied the respective agreements, covenants and obligations
herein by the date by which same is to be satisfied and co-operate with each
other party in this connection.
8.10 NOTICE.
Any notice, consent, waiver, approval or other communication required
or permitted to be given hereunder shall be in writing and shall be given by
prepaid first-class mail, by facsimile or other means of electronic
communication or by hand-delivery as hereinafter provided. Any such notice,
consent, waiver, approval or other communication, if mailed by prepaid
first-class mail at any time other than during a general discontinuance of
postal service due to strike, lock-out or otherwise shall be deemed to have been
received on the fourth (4th) Business Day after the post-marked date thereof, or
if sent by facsimile or other means of electronic communication, shall be deemed
to have been received on the Business Day following the sending, or if delivery
by hand shall be deemed to have been received at the time it is delivered to the
applicable address noted below either to the individual designated below or to
an individual at such address having apparent authority to accept deliveries on
behalf of the addressee. Notice of change of address shall also be governed by
this section. In the event of a general discontinuance of postal service due to
strike, lockout or otherwise, notices or other communications shall be delivered
by hand or sent by facsimile or other means of electronic communication and
shall be
<PAGE> 10
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deemed to have been received in accordance with this section. Notices and other
communications shall be addressed as follows:
(a) if to the Corporation
Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania
17055
Attention: Brad E. Hollinger
Telecopier No: (717) 796-6278
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York
10022-6069
Attention: Richard Vilsoet
Telecopier No.: (212) 848-7179
(b) if to the Purchaser:
IPC Advisors S.A.R.L.
c/o Unsworth & Associates
Herengracht 483
1017 BT
Amsterdam
Attention: Brad Unsworth
Telecopier No.: 011-31-20-623-2205
with a copy to:
Manfred J. Walt
c/o Central Park Lodges
175 Bloor Street East
South Tower
Toronto, Ontario
M4W 3R8
Telecopier No.: (416) 323-3818
<PAGE> 11
-11-
with a further copy to:
Goodman Phillips & Vineberg
250 Yonge Street, Suite 2400
Toronto, Ontario
M5B 2M6
Attention: Stephen Pincus
Telecopier No.: (416) 979-1234
8.11 WAIVER.
The failure by any party to enforce at any time any provision of this
Agreement or any of its rights in respect thereto or to insist upon strict
adherence to any term of this Agreement shall not be considered to be a waiver
of such provision, right or term or in any way affect the validity of this
Agreement or deprive the applicable party of the right thereafter to insist on
strict adherence to that term or any other term of this Agreement. The exercise
by any party of any of its rights provided by this Agreement shall not preclude
or prejudice such party from exercising any other right it may have under this
Agreement. Without limiting the generality of the foregoing, any waiver of any
condition for the benefit of a party waived by such party in connection with the
closing of the transactions contemplated hereby to be consummated on the First
Date of Closing, shall not be considered a waiver by such party of such
condition or preclude or prejudice such party from exercising its right to
require satisfaction of such condition in connection with the closing of the
transactions contemplated hereby to occur on the Second Date of Closing.
8.12 EXECUTION AND COUNTERPARTS.
For the convenience of the parties, this Agreement may be executed by
facsimile or otherwise in several counterparts, each of which when so executed
shall be, and be deemed to be, an original instrument and such counterparts
together shall constitute one in the same instrument.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties
hereto on the date first indicated above.
BALANCED CARE CORPORATION
By:
---------------------
IPC ADVISORS S.A.R.L.
By:
-------------------
<PAGE> 12
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<PAGE> 13
SCHEDULE A
DEFINITIONS
"AGREEMENT" means this agreement and all schedules annexed to this agreement,
and all agreements contemplated hereby, in each case as they may be amended or
supplemented from time to time, and the expressions "hereof', "herein",
"hereto", "hereunder", "hereby" and similar expressions refer to this agreement,
and unless otherwise indicated, references to Articles and sections are to
Articles and sections in this agreement.
"AFFILIATE" has the meaning ascribed to it in Rule 405 of the Securities Act.
"AUDITED FINANCIAL STATEMENTS" means the audited financial statements of the
Corporation as at and for the fiscal year ended June 30, 1999 and the report of
the auditors of the Corporation thereon filed with the Securities and Exchange
Commission on the Form 10-K/A.
"AUTHORITY" means any governmental or regulatory authority, agency, body, court,
commission, department or stock exchange, whether federal, provincial, state,
municipal or local, having jurisdiction over the Corporation or the Purchaser,
as applicable.
"BUILDINGS" means the buildings constructed on the Real Property and all other
structure, fixtures, erections, appurtenances and improvements located on, in or
forming part of the Real Property.
"BUSINESS DAY" means any day, other than (i) a Saturday, Sunday or statutory
holiday in the State of New York or (ii) any of the first, second, seventh or
eighth day of Passover, the first or second day of Shavuoth, the first or second
day of Rosh Hashanah, Yom Kippur, the first or second day of Sukkoth, Shemini
Azereth or Simchas Torah, and the day prior to any of the foregoing days.
"BUSINESS PLAN" means the business plan annexed as Schedule I hereto.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CLAIMS" means any administrative, court, regulatory or similar proceeding,
arbitration or other dispute resolution settlement procedure, investigation or
inquiry.
"CLOSING" means the consummation of the purchase and sale of the Purchased
Shares contemplated by this Agreement, whether on the First Date of Closing or
the Second Date of Closing, as applicable.
"CORPORATION" means Balanced Care Corporation, a corporation governed by the
Laws of the State of Delaware, and (unless expressly provided otherwise) each of
its affiliates.
"DISCLOSURE SCHEDULE" means Exhibit 1 to Schedule B of this Agreement.
"ENVIRONMENTAL LAWS" means all Laws relating to the protection of human health
and safety, the environment or Hazardous Materials.
"ENCUMBRANCES" means and includes any mortgage, deed of trust, lien, pledge,
charge, security interest, restriction, claim, Encumbrance, preemptive right or
other right to use or acquire, ownership interest, action or demand of any
nature whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
and the rules, regulations and interpretations promulgated thereunder.
<PAGE> 14
A-2
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and all of
the rules and regulations thereunder.
"FACILITIES" means the senior living and care facilities developed, acquired,
owned, leased, managed and/or operated by the Corporation, whether under
construction, in lease-up or in operation.
"FIRST DATE OF CLOSING" means October 8, 1999 or such other date as the parties
shall mutually agree.
"1998 FORM 10-K/A" means the Form 10-K/A of the Corporation dated as of June 30,
1998, together with Exhibits thereto, filed with the Securities and Exchange
Commission.
"1999 FORM 10-K/A" means the Form 10-K/A (Amendment No. 1) of the Corporation
dated September 28, 1999, together with Exhibits thereto, filed with the
Securities and Exchange Commission.
"HAZARDOUS MATERIALS" means any contaminants, pollutants, substances or
materials, including polychlorinated biphenyls, petroleum, petroleum products,
radioactive materials, lead-containing materials, radon, asbestos, urea
formaldehyde foam insulation, liquid waste, special waste, toxic substances,
hazardous or toxic chemicals, or any other substance or material that, when
released to the natural environment could cause, at some immediate or future
time, harm or degradation to the natural environment or risk to human health,
whether or not such contaminants, pollutants, substances or materials are or
shall become prohibited, controlled or regulated by any Authority and any
"contaminants", "dangerous substances", "hazardous materials", "hazardous
substances", "hazardous wastes", "industrial wastes", "liquid wastes",
"pollutants" and "toxic substances", all as defined in, referred to or
contemplated in any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and the rules and regulations thereunder.
"LAWS" means all legally binding federal, provincial, state, municipal and local
constitutions, treaties, Laws, including Environmental Laws, statutes, codes,
ordinances, decrees, rules, regulations, by-laws, judicial or administrative
judgements, orders, decisions, rulings or awards, policies, guidelines,
including general principles of civil and common Law.
"MATERIAL DECISION" means any decision involving:
(a) the declaration or payment of any dividends or any other
distribution in respect of any securities of the Corporation;
(b) the issuance of any debt over one million ($1,000,000) Dollars
(other than drawdowns under the Corporation's existing credit
facility or specifically contemplated by the Business Plan) or
equity securities, warrants and options of the Corporation;
(c) the sale or disposition of any assets or property of the
Corporation during any fiscal year (whether in one or more
transactions) with an aggregate book value in excess of three
million ($3,000,000) Dollars, except as expressly provided for
in the Business Plan;
(d) making or committing to make during any fiscal year capital
expenditures which, in the aggregate, exceed five hundred
thousand ($500,000) Dollars and which have not been expressly
provided for in the Business Plan;
<PAGE> 15
A-3
(e) establishing, acquiring or otherwise becoming involved in any
corporate entity or any partnership, joint venture or similar
arrangements, except as expressly provided for in the Business
Plan;
(f) hiring any employee whose annual remuneration, or retaining any
consultant whose annual consulting fee, exceeds or could exceed
one hundred fifty thousand ($150,000) Dollars per annum, or
amending, terminating or otherwise altering or waiving the terms
of any employment, consulting or management contract with
respect to an individual whose annual remuneration or fee
exceeds that amount;
(g) entering into any transactions with directors, officers, or
employees of the Corporation or members of their families or
other Persons with whom the Corporation does not act at arm's
length;
(h) entering into (other than in the ordinary course to fund working
capital needs expressly contemplated by the Business Plan),
modifying or cancelling any credit facility;
(i) the creation of any mortgage, lien, charge or other form of
Encumbrance with respect to any of the assets of the
Corporation, other than in the ordinary course of business as
expressly contemplated by the Business Plan;
(j) the alteration of the nature of the business of the Corporation
or otherwise engaging in other businesses or activities that are
not incidental to the businesses or activities currently
undertaken by the Corporation, except as expressly contemplated
by the Business Plan;
(k) the entering into of any agreement with a term in excess of one
year which contemplates the payment by or to the Corporation of
more than five hundred thousand ($500,000) Dollars during its
term, except as expressly contemplated by the Business Plan;
(l) the institution, modification or termination of any incentive
compensation arrangement for the directors, officers or
employees of the Corporation;
(m) the amendment, modification or restatement of, or deviation from
the Business Plan;
(n) or changing the auditors of the Corporation.
"MATERIAL TRANSACTION" means any debt or equity financing (other than ordinary
course mortgage refinancings) or offering, tender offer, amalgamation, merger,
arrangement or other business combination involving the Corporation,
acquisition, disposition (other than the sale of the Missouri nursing homes),
lease or exchange of any assets or liabilities or the adoption of any plan of
liquidation or dissolution of or involving the Corporation, or any transaction
similar to any of the foregoing, other than as expressly contemplated by this
Agreement.
"PERSON" means any individual, partnership, limited partnership, joint venture,
syndicate, sole proprietorship, company or corporation with or without share
capital, unincorporated association, trust, trustee, executor, administrator or
other legal personal representative, regulatory body or agency, government or
governmental agency, Authority or entity however designated or constituted.
<PAGE> 16
A-4
"PLANS" means all written or unwritten bonus, deferred compensation and
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical benefits, life or other insurance,
supplemental unemployment benefits, profit sharing, pension or retirement plans,
programs, agreements or arrangements, and each other employee benefit plan,
program, agreement or arrangement sponsored, maintained or contributed to or
required to be contributed to by the Corporation or any of its affiliates or by
any other Person for the benefit of any employee, officer, former employee or
former officer of the Corporation or any of its affiliates whether formal or
informal and whether legally binding or not, and includes, where applicable, the
assets and funds maintained to provide benefits under or related to the Plans
and any employee benefit, profit sharing or other plan within the meaning of or
subject to ERISA.
"PROXY STATEMENT" means the information statement, together with form of proxy,
to be disseminated by the Corporation in connection with the solicitation by the
Corporation of proxies in favour of such of the transactions contemplated by
this Agreement as are required to be approved under applicable Laws, and such
other matters as may be designated by the Purchaser pursuant to Article VI
hereof.
"PURCHASE PRICE" means Twenty Million Eight Hundred and Seventy Five Thousand
($20,875,000) Dollars, being One Dollar and Twenty Five Cents ($1.25) per
Purchased Share, payable as set out in Article V hereof.
"PURCHASED SHARES" means the Three Million Three Hundred Thousand (3,300,000)
Series C Preferred Shares and the Thirteen Million Four Hundred Thousand
(13,400,000) shares of common stock in the capital of the Corporation to be
issued and sold by the Corporation and purchased by the Purchaser pursuant to
this Agreement.
"PURCHASER" means IPC Advisors S.A.R.L.
"REAL PROPERTY" means all real property upon which the Facilities are situate
and all adjacent real properties, whether or not owned or leased by the
Corporation, and all Buildings, whether or not owned or leased by the
Corporation, facilities, landscaping, fencing, surfacing or paving, on, or
plumbing, electrical, mechanical or other systems of any of the foregoing.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement in the
form annexed as Schedule F hereto.
"SEC DOCUMENTS" has the meaning set out in Schedule B to the agreement to which
this Schedule A is attached.
"SECOND DATE OF CLOSING" means the second Business Day next following the date
on which the later of the date of the Special Meeting, and the expiry or
termination of any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and all of the
rules and regulations thereunder.
"SERIES C PREFERRED SHARE" means a share of preferred stock Series C having the
rights, conditions, privileges and entitlements set out in Schedule F hereto.
"SPECIAL MEETING" means the annual meeting of the stockholders of the
Corporation to be convened, as soon as practicable, or such later date as the
parties may agree, to consider and if deemed advisable to
<PAGE> 17
A-5
approve such of the transactions contemplated by this Agreement as require
stockholder approval under applicable Laws, and such other matters as may be
designated by the Purchaser pursuant to Article VI hereof.
"TAXES" means all taxes (including income, corporation, capital, value added,
sales, withholding, franchise, customs duties, profits, gross receipts, excise,
property, stamp, transfer, water, business, payroll, workers' compensation and
goods and services taxes), imposts, duties, levies, deductions, withholdings,
charges, assessments, reassessments or fees of any nature (including interest,
penalties and additions) that are imposed under any Laws or by any relevant
taxing Authority, and "TAX" means any one of them.
"THIRD PARTY CLAIM" has the meaning set out in section 7.3 hereof.
"TIME OF CLOSING" means 10:00 a.m. (New York time) on each of the First Date of
Closing and the Second Date of Closing, as applicable, or such other time as the
parties shall mutually agree.
<PAGE> 18
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to the Purchaser (and acknowledges that
the Purchaser is relying on such representations and warranties in entering into
this Agreement and the transactions contemplated hereby) as follows:
1. CORPORATE.
The Corporation is a corporation incorporated, existing and in good standing
under the Laws of the State of Delaware, and each of its material affiliates has
been incorporated, existing and in good standing under the Laws of their
respective jurisdiction of incorporation. The Corporation has all necessary
corporate power, authority and capacity to own its assets and to carry on its
business as currently conducted.
2. AUTHORIZATION.
The Corporation has all necessary corporate power, authority and capacity to
enter into this Agreement and to perform its obligations hereunder and
thereunder, including under section 203 of the General Corporation Law of the
State of Delaware. This Agreement and each of the agreements and instruments
contemplated by this Agreement has been authorized, executed and delivered by
the Corporation, and is a valid and binding obligation of it, enforceable in
accordance with its terms, subject only to creditors' rights generally and the
rules of Law governing equitable remedies.
3. CAPITALIZATION.
The authorized capital of the Corporation consists of Five Million (5,000,000)
shares of preferred stock par value $0.001 of which none are outstanding, One
Million One Hundred and Fifty Thousand Nine Hundred and Fifty Eight (1,150,958)
shares of preferred stock Series A of which none are outstanding, Five Million
Nine Thousand Seven Hundred and Fifty (5,009,750) shares of preferred stock
Series B of which none are outstanding, and Fifty Million (50,000,000) shares of
common stock par value $0.001 of which, prior to giving effect to the issuance
and sale of the Purchased Shares contemplated hereby, Sixteen Million Seven
Hundred and Twenty Two Thousand Eight Hundred and Forty Six (16,722,846) shares
have been issued and are outstanding as fully paid and non-assessable shares of
common stock in the capital of the Corporation.
Except for 2,589,028 options to purchase an equal number of shares of common
stock in the capital of the Corporation and 1,023,268 warrants to purchase an
equal number of shares of common stock in the capital of the Corporation, there
are no outstanding securities convertible into or exchangeable or exercisable
for any shares of the capital stock of the Corporation, nor does the Corporation
have outstanding any rights to subscribe for or to purchase, or any option for
the purchase of, or any agreements providing for the issuance, transfer or sale
of, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock.
Except as set out in the 1999 Form 10-K/A, the Corporation does not as principal
own or have any obligation to acquire any assets or securities in the capital of
any other Person. Except as set out in the Prospectus dated February 11, 1998
filed by the Corporation in connection with its initial public offering, the
1998 Form 10-K/A and the 1999 Form 10-K/A (the "SEC Documents"), the Corporation
is not a party to any partnership, joint venture or other similar arrangement
with any other Person. Except as set out in the Form 10-K/A, all of the shares
in the capital of each affiliate of the Corporation and
<PAGE> 19
B-2
beneficially owned by the Corporation have been validly issued and are
outstanding as fully paid and non-assessable shares of the capital stock of each
such affiliate, free and clear of all Encumbrances.
Except as set out in the 1999 Form 10-K/A, there are no outstanding securities
convertible into or exchangeable or exercisable for any shares of the capital
stock of any affiliate of the Corporation, nor does any such affiliate have
outstanding any rights to subscribe for or to purchase, or any option for the
purchase of, or any agreements providing for the issuance, transfer or sale of,
any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock.
4. PURCHASED SHARES.
Upon their issuance subject to and in accordance with the terms and conditions
of this Agreement, the Purchased Shares will have been authorized, validly
issued and outstanding as fully paid and non-assessable shares of common stock
or preferred stock, as the case may be, in the capital of the Corporation, free
and clear of any Encumbrances.
The shares of common stock in the capital of the Corporation are listed and
posted for trading on the American Stock Exchange and there are no proceedings
to revoke or suspend such listing. All shares of common stock to be issued at
the Second Date of Closing or upon the conversion of the Series C Preferred
Shares in accordance with their terms, will be eligible for listing and upon
exercise of the Purchaser's rights under the Registration Rights Agreement, the
Corporation will use its reasonable best efforts to list them on the American
Stock Exchange.
5. VALIDITY OF TRANSACTIONS.
The execution, delivery and performance of this Agreement by the Corporation has
not and will not contravene or violate or result in any breach or default (with
or without the giving of notice or lapse of time, or both) under, or give rise
to any right of termination, cancellation or acceleration of any obligations or
loss of any material benefit of it under any Laws applicable to it, any
judgement, order, writ, injunction or decree of any Authority currently
applicable to it, the provisions of its certificate of incorporation or by-laws,
the provisions of any material agreement (including leases), arrangement or
understanding to which it is a party or by which it or its assets are bound, or
the provisions of any agreement, arrangement or understanding to which it or any
of its affiliates is a party with any of their respective employees or officers.
6. APPROVALS AND CONSENTS.
Except as set out in Section 1 of the Disclosure Schedule, no authorization,
consent or approval of, or filing with, or notice to, any Authority or other
Person (including any Person that is a party to any material agreement
(including leases), arrangement or understanding with the Corporation or, if an
officer or employee, any other agreement, arrangement or understanding with the
Corporation) is required to be made or obtained by the Corporation in connection
with the purchase and sale of the Purchased Shares contemplated by this
Agreement.
7. CONDUCT OF BUSINESS.
The Corporation has conducted its business in material compliance with, and
holds all material licenses, permits, authorizations, service provider
agreements, reimbursement contracts and any other agreements necessary for the
lawful operation of its business, pursuant to all applicable Laws or as may be
required for the use and participation of each of its Facilities, or as may be
necessary for participation in the
<PAGE> 20
B-3
Medicare, Medicaid or other applicable reimbursement programs, free and clear of
any Encumbrance which would materially adversely affect the use or operation of
any of its Facilities.
The Corporation has not received any notice of proceedings relating to the
suspension, revocation, limitation, modification or non-renewal of any such
licence, permit, authorization, service provider agreement or reimbursement
contract which, alone or in the aggregate, would result in a material adverse
effect on the condition, financial or otherwise, of the Corporation or any of
its Facilities. The Corporation has not granted to any other person the right to
reduce the number of licensed skilled care beds or licensed intermediate care
beds in any of its Facilities or applied for approval to transfer the right to
any such licensed beds to any other location.
The Corporation has maintained and maintains (i) the standard of care for the
patients/residents of each Facility at all times at a level reasonably necessary
to ensure quality care for the patients/residents of such Facility in accordance
with customary and prudent industry standards, (ii) sufficient inventory,
furniture, fixtures and equipment of types and quantities at each Facility to
adequately perform operations at such Facility to adequately perform operations
at such Facility, and (iii) sufficient cash in the operating accounts in order
to satisfy the working capital needs of each Facility.
8. ASSETS.
The Corporation owns or leases all of the assets (including real, personal and
intellectual assets and properties) used in its businesses, with good, valid and
marketable title thereto in fee simple or a valid and subsisting leasehold or
use and occupancy interest therein, in each case free and clear of all
Encumbrances, except for the Encumbrances specifically set out in Section 2 of
the Disclosure Schedule. None of such assets encroaches upon the property of, or
otherwise conflicts with the rights of any other Person, in each case which
would materially adversely affect the operation of or title to the properties.
The Real Property is adequately serviced by all necessary utilities to operate
the Facilities and or the business of the Corporation operated thereon and there
is free and unlimited access to and from all of the Real Property. None of the
Real Property is need of any material improvements, repair or other remedial
action. Except as set out in the SEC Documents, no lease of any Real Property or
Facility is subject to any exceptions that materially interfere with the use
made and proposed to be made of such property or Facility by the Corporation.
9. INSURANCE.
The Corporation is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
business in which it is engaged. The Corporation has not been refused any
insurance coverage sought or applied for by the Corporation. The Corporation has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the condition (financial or
otherwise) of the Corporation.
10. ENVIRONMENTAL MATTERS.
The businesses and all activities pertaining to any of the assets or carried on
at any Real Property owned or leased by the Corporation or any of its affiliates
have been and are being carried on in compliance with all Laws, including
Environmental Laws. Neither the Corporation nor any of its affiliates has used
or uses any of the assets owned or leased by it or permits them to be used to
generate, manufacture, refine,
<PAGE> 21
B-4
treat, transport, handle, store, dispose of, transfer, produce or process
Hazardous Materials, except in compliance with all applicable Laws, including
Environmental Laws. No Hazardous Material other than medical waste held in the
ordinary course of business is or was present in, at, on or under, or has been
released from, any of the Real Property owned or leased by the Corporation or
any of its affiliates.
In the ordinary course of its business, the Corporation reviews the effect of
Environmental Laws on the business , operations, properties (including
Facilities) of the Corporation and its affiliates, in the course of which it
identifies and evaluates associated costs and liabilities (including any capital
or operating expenditures required for remedial activities for compliance with
applicable Laws, including Environmental Laws, any related constraints on
operating activities and any potential liabilities to other Persons). On the
basis of such review, the Corporation has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the condition (financial or otherwise) of the
Corporation.
11. PENSION AND BENEFIT MATTERS
Section 7 of the Disclosure Schedule contains a complete and correct list of
each of the Plans. Except as otherwise described therein, neither the
Corporation nor any of its affiliates has any formal plans or commitments
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any of its employees or former
employees. The Plans are duly registered where required by, and are in good
standing under all applicable Laws and, to the knowledge of the Corporation,
there exists no state of facts which could jeopardize such status. Each of the
Plans has been maintained, funded and administered in compliance in all respects
with its terms and with all applicable Laws, including, if applicable, ERISA and
the Code. All employee and employer contributions and premiums required under
the Plans to the date hereof have been made. The Corporation and each of its
affiliates has given all proper notices required under Section 4980B of the Code
and does not maintain a self-funded medical plan. None of the Corporation or any
of its affiliates, the administrator or any fiduciary of the Plans (or agent of
any of the foregoing) have been in breach of any fiduciary obligation with
respect to the administration of the Plans or have engaged in any transaction or
act or have failed to act in a manner which would subject the Corporation or any
of its affiliates to any liability for a breach of fiduciary duty under any
applicable Laws. All obligations of the Corporation or any of its affiliates
required to be performed in connection with the Plans and funding media
established therefor up to the date hereof have been performed. There have been
no improper withdrawals, applications or transfers of assets from any Plan or
the trusts or other funding media relating thereto. Neither the Corporation nor
any of its affiliates has any plans, programs, agreements or arrangements or
other commitments to employees or former employees or their beneficiaries under
which any of them have any obligation to provide any retiree or other employee
benefit payments which are not adequately funded through a trust or other
funding arrangement. The consummation of the transactions contemplated by this
Agreement will not entitle any employee or officer or former employee or officer
of the Corporation or any of its affiliates to severance pay, unemployment
compensation or any other payment, or accelerate the time of payment or vesting
or increase in the amount of any compensation due any such employee or officer.
No Plan is intended to qualify under Section 401(a) of the Code. The Corporation
and each of its affiliates is not now, and at no time has it been, a member of a
controlled group, as defined in Section 412(n)(6)(B) of the Code, with any other
enterprise. The Corporation and each of its affiliates does not presently
maintain or contribute to, and at no time has it maintained or contributed to,
any single-employer plan (within the meaning of Section 3(41) of ERISA) or any
multi-employer plan (within the meaning of Section 3(37) of ERISA) subject to
Title IV of ERISA, and the Corporation is not aware of any circumstances
pursuant to which the Corporation or any of its affiliates could have liability
to any Person under Title IV of ERISA. Neither the Corporation nor any of its
affiliates has not incurred any liability
<PAGE> 22
B-5
for any tax imposed under Section 4971 through 4980B of the Code or civil
liability under Section 502(i) or (1) of ERISA which could have an adverse
effect on the condition of the Corporation or any of its affiliates. No Plan
provides health or death benefit coverage beyond the termination of an
employee's employment, except as required by Part 6 of Subtitle b of Title I of
ERISA or Section 4980B of the Code.
12. FINANCIAL STATEMENTS.
The Audited Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved, and present fairly, in all material respects, the financial position
of the Corporation as of June 30, 1999 and June 30, 1998, and the results of
their operations and their cash flows for each of the years in the three year
period ended June 30, 1999. The related financial statement schedule to the
Audited Financial Statements, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. Since June 30, 1999, there
has been no material adverse change (actual or threatened) in the assets,
liabilities (contingent or other), affairs, operations, prospects or condition
(financial or other) of the Corporation. Other than as disclosed in the Audited
Financial Statements, since June 30, 1999, the Corporation has not incurred
material liabilities or obligations, fixed or contingent, matured or unmatured
or otherwise, except for liabilities or obligations, that, individually or in
the aggregate, do not or would not have a material adverse effect on the
condition (financial or otherwise) of the Corporation, or arising in the
ordinary course of business. There has been no reportable disagreement between
the Corporation and its auditors or any predecessor auditors, as applicable. The
Corporation and each of its affiliates is solvent for purposes of 11 U.S.C.
s.548. All material liabilities and obligations, fixed or contingent, matured or
unmatured or otherwise, of the Corporation now existing or reasonably expected
to be incurred or arise in connection with any "black box" arrangements with the
Corporation are specifically set out in Section 3(c) of the Disclosure Schedule.
The Corporation has no obligation, present or future, to purchase any "black
box' entities or any assets thereof. Except with respect to Facilities leased
from American Health Properties, Ocwen Financial and Healthcare Realty Trust,
all working capital and construction finance required by each "black box" entity
with which the Corporation has any relationship or arrangement is required to be
funded by the lessor of the relevant facility or Real Property and the
Corporation has no reason to believe any such funding will not be provided when
required.
13. AGREEMENTS.
All contracts, agreements and instruments required to be filed as an exhibit to
the SEC Documents are legal, valid, binding and in full force and effect and
enforceable by the Corporation in accordance with their respective terms,
subject only to creditors' rights generally and the rules of Law governing
equitable remedies. The Corporation is not in default or breach in any material
respect of any material agreement, contract, lease or other instrument to which
it is a party or by which it is bound, and the Corporation has not received
notice of any intention of any Person to terminate any such agreement, contract,
lease or other instrument, otherwise than in the ordinary course business, and
the Corporation has no knowledge of any fact or circumstance that will (with or
without the giving of notice or lapse of time, or both) give rise to any right
of termination, cancellation or acceleration of any obligations of loss of any
material benefit of it under any such agreement.
Section 3 of the Disclosure Schedule lists all material contracts, agreements,
leases and other instruments (including any which involve the payment by or to
the Corporation of more than Five Hundred Thousand ($500,000) Dollars in any
twelve (12) month period or which cannot be terminated by the Corporation or any
of its affiliates, as applicable, on less than thirty (30) days' notice) to
which the Corporation or any of its affiliates is a party or by which any of
them is bound, and sets out in summary form all material
<PAGE> 23
B-6
business terms and conditions thereof (other than terms and conditions which the
Board of Directors of the Corporation has reasonably determined are customary to
agreements of such nature and on commercially reasonable terms in the ordinary
course of business), categorized as follows:
(a) leases of real property;
(b) financing and security agreements;
(c) material obligations, fees and options under management,
option, funding, construction and other agreements relating to
"black box" structures;
(d) agreements and other arrangements (including stock option
plans, separation agreements, consulting agreements and change
of control agreements) with present and former directors,
officers and employees and other non-arm's length persons, in
each case whose annual compensation currently exceeds One
Hundred Thousand ($100,000) Dollars; and
(e) non-competition and other restrictions.
14. TAX MATTERS.
Each of the Corporation and its affiliates has filed all Tax returns required to
be filed by it in all applicable jurisdictions and has paid all Taxes due and
payable by it or has made adequate provision in the audited consolidated
financial statements of the Corporation included in the 1999 Form 10-K/A for the
payment of all Taxes not due and payable for any taxation period ending on, or
prior to, the date thereof. There are no claims or assessments pending against
the Corporation or any of its affiliates for any material alleged deficiency in
any Tax, and neither the Corporation nor any of its affiliates has been notified
in writing of any material proposed Tax claims or assessments against the
Corporation or any of this affiliates. No Tax return of the Corporation is or
has been the subject of an examination by any Tax Authority. The Corporation has
withheld from each payment made to any of its past or current employees,
officers and directors, and any other Person, the amount of all material Taxes
and other deductions required to be withheld therefrom and paid the same to the
proper Tax Authority within the time required by applicable Laws.
15. LITIGATION AND OTHER PROCEEDINGS.
Except as set out in Section 4 of the Disclosure Schedule or the 1999 Form
10-K/A, there are no Claims in excess of $25,000 pending or, to the knowledge of
the Corporation, threatened against the Corporation or any of its directors or
senior management (including executive officers) or affecting any of its assets,
properties, businesses or affairs, and there are no facts or circumstances known
to the Corporation which are likely to give rise to any Claims. There is not
currently outstanding against the Corporation any judgment, execution, decree,
injunction, rule, proceeding or order of, or to the knowledge of the
Corporation, investigation of any Authority in excess of Twenty Five Thousand
($25,000) Dollars.
16. FINDER'S FEES ETC.
Except as disclosed in Section 5 of the Disclosure Schedule, the Corporation has
not taken any action that would cause the Purchaser or the Corporation to become
liable to any claim or demand for a brokerage commission, finder's fee or other
similar arrangement.
<PAGE> 24
B-7
17. SEC DOCUMENTS.
The Corporation has furnished to the Purchaser, a true and complete copy of each
of the SEC Documents). As of the their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, as applicable, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, as of their respective filing dates. Other than the SEC
Documents listed in Section 6 of the Disclosure Schedule, the Corporation has
not filed or been required to file any other reports or statements with the
Securities and Exchange Commission since July 1, 1999.
18. DISCLOSURE
No representation or warranty in this Agreement contains any untrue statement of
a material fact or omits to state any material fact necessary to make any such
representation or warranty not misleading to a prospective purchaser of the
Purchased Shares seeking full information as to the Corporation and its
affiliates and their respective assets, businesses and affairs. All facts,
events and circumstances which the Corporation believes could reasonably be
expected to be material to a prospective purchaser of the Purchased Shares
relating to the assets, liabilities (contingent or other), affairs, operations,
prospects or condition (financial or other) of the Corporation has been
disclosed in the SEC Documents (without having reference to the Exhibits
thereto) or the Disclosure Schedule.
<PAGE> 25
EXHIBIT 1
DISCLOSURE SCHEDULE
<PAGE> 26
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation (and acknowledges that
the Corporation is relying on such representations and warranties in entering
into this Agreement and the transactions contemplated hereby) as follows:
1. CORPORATE.
It is a corporation incorporated and existing under the Laws of Luxembourg. The
principal office of the Purchaser is located at 38-40 Rue Sainte Lithe, L-2763,
Luxembourg.
2. AUTHORIZATION.
It has all necessary corporate power, authority and capacity to enter into this
Agreement and to perform its obligations hereunder. This Agreement and each of
the agreements and instruments contemplated by this Agreement has been
authorized, executed and delivered by it, and is a valid and binding obligation
of it, enforceable in accordance with its terms, subject to creditors' rights
generally and rules of Law governing equitable remedies.
3. VALIDITY OF TRANSACTIONS.
The execution, delivery and performance of this Agreement by it has not and will
not contravene or violate or result in any breach or default (with or without
the giving of notice or lapse of time, or both) under, or give rise to any right
of termination, cancellation or acceleration of any obligations or loss of any
material benefit of it under any Laws applicable to it, any judgement, order,
writ, injunction or decree of any Authority currently applicable to it, the
provisions of its articles or by-laws, or the provisions of any material
agreement, arrangement or understanding to which it is a party or by which it or
its assets is bound.
4. APPROVALS AND CONSENTS.
No authorization, consent or approval of, or filing with, or notice to, any
Authority or other Person is required to be made or obtained by the Purchaser in
connection with the purchase and sale of the Purchased Shares contemplated by
this Agreement.
5. SECURITIES MATTERS.
The Purchaser is acquiring the Purchased Shares for its own account for
investment purposes and not for resale or with a view to distribution thereof in
violation of the Securities Act. The Purchaser is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
6. PURCHASED SHARES.
The Purchaser understands that the Purchased Shares have not been registered
under the Securities Act, by reason of their issuance by the Corporation in a
transaction that is exempt from the registration requirements of the Securities
Act, and that, subject to the Registration Rights Agreement, the Purchased
Shares must continue to be held by the Purchaser unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration. The Purchaser understands that the exemptions from registration
afforded by Rule 144 under the Securities Act depend on the satisfaction of
<PAGE> 27
C- 2
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
7. FINDER'S FEES ETC.
The Purchaser has not taken any action that would cause the Corporation to
become liable to any claim or demand for a brokerage commission, finder's fee or
other similar arrangement.
<PAGE> 28
SCHEDULE D
CONDITIONS PRECEDENT IN FAVOUR OF THE CORPORATION
The obligation of the Corporation to complete the transactions contemplated by
this Agreement is subject to the satisfaction of, or compliance with, at the
Time of Closing at each of the First Date of Closing and the Second Date of
Closing, each of the following conditions, each of which is for the exclusive
benefit of the Corporation and may only be waived by the Corporation.
1. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Purchaser made in, or pursuant
to, this Agreement shall be true and correct in all material respects at each
Time of Closing, and the Corporation shall have received a certificate to such
effect from a senior officer of the Purchaser.
2. COMPLIANCE WITH COVENANTS.
The Purchaser shall have performed or complied with, in all material respects,
each of its agreements, obligations and covenants in this Agreement which are to
be performed or complied with by the Purchaser at or prior to each Time of
Closing, and the Corporation shall have received a certificate to such effect
from a senior officer of the Purchaser.
3. APPROVALS AND CONSENTS.
The Purchaser shall have co-operated with the Corporation and shall have used
all commercially reasonable efforts to obtain and shall have obtained at or
prior to each Time of Closing all necessary approvals and consents of applicable
Authorities and other Persons as are required to consummate the transactions
contemplated hereby at such time. Without limiting the generality of the
foregoing, at the Time of Closing on the Second Date of Closing, any waiting
period (and any extension thereof) under the HSR Act applicable to the
transactions contemplated hereby shall have expired and no action shall have
been taken thereunder by any Authority or other Person to preclude the
completion of the transactions contemplated hereby.
4. RECEIPT OF CLOSING DOCUMENTATION.
All documentation relating to the authorization and completion of the
transactions contemplated hereby, including the purchase and sale of the
Purchased Shares, and all actions and proceedings taken on or prior to each
Closing Date in connection with the performance by the Purchaser of its
obligations hereunder shall be satisfactory to the Corporation and its counsel,
acting reasonably, and the Corporation shall have received copies of all such
documentation or other evidence as they may reasonably request in order to
establish the consummation of the transactions contemplated hereby and the
taking of all corporate proceedings in connection therewith in compliance with
these conditions, in form and substance satisfactory to the Corporation and its
counsel, acting reasonably.
5. NO ACTION TO RESTRAIN.
No action or proceeding shall be pending or threatened by any Authority or any
other Person (including a party hereto) to restrain or prohibit the completion
of the transactions contemplated by this Agreement.
<PAGE> 29
SCHEDULE E
CONDITIONS PRECEDENT IN FAVOUR OF PURCHASER
The obligation of the Purchaser to complete the transactions contemplated by
this Agreement is subject to the satisfaction of, or compliance with, at the
Time of Closing at each of the First Date of Closing and the Second Date of
Closing, each of the following conditions, each of which is for the exclusive
benefit of the Purchaser and may only be waived by the Purchaser.
1. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Corporation made in, or
pursuant to, this Agreement shall be true and correct in all material respects
at each Time of Closing, and the Purchaser shall have received a certificate to
such effect from each of the President and Chief Executive Officer, the Chief
Financial Officer and the Senior Vice President and Counsel, Assistant Secretary
of the Corporation.
2. COMPLIANCE WITH COVENANTS.
The Corporation shall have performed or complied with, in all material respects,
each of its agreements, obligations and covenants in this Agreement which are to
be performed or complied with by Corporation at or prior to each Time of
Closing, and the Purchaser shall have received a certificate to such effect from
each of the President and Chief Executive Officer, the Chief Financial Officer
and the Senior Vice President and Counsel, Assistant Secretary of the
Corporation.
3. APPROVALS AND CONSENTS.
The Corporation shall have co-operated with the Purchaser and shall have used
all commercially reasonable efforts to obtain and shall have obtained at or
prior to each Time of Closing all necessary approvals and consents of applicable
Authorities and other Persons as are required to consummate the transactions
contemplated hereby at such time. Without limiting the generality of the
foregoing, at the Time of Closing on the Second Date of Closing, any waiting
period (and any extension thereof) under the HSR Act applicable to the
transactions contemplated hereby shall have expired and no action shall have
been taken thereunder by any Authority or other Person to preclude the
completion of the transactions contemplated hereby, and any approval of
stockholders of the Corporation required under applicable Laws to approve the
transactions contemplated hereby to be consummated at such Time of Closing shall
have been obtained.
4. BOARD REPRESENTATION.
The Corporation shall have caused to be elected or appointed four (4) directors
designated by the Purchaser (at its sole discretion) comprising two (2) Class I
directors having a current term expiring in 2001, one (1) Class II director
having a current term expiring in at the Special Meeting, and one (1) Class III
director having a current term expiring in 2000, and the Board of Directors of
the Corporation shall be comprised of not more than nine (9) directors. The
Corporation shall also have increased the size of each of the Audit Committee
and the Compensation Committee to four (4) directors comprising in each case at
least two (2) directors designated by the Purchaser (at its sole discretion).
<PAGE> 30
E-2
5. SERIES C PREFERRED SHARES.
The Corporation shall have amended its certificate of designation and
certificate of incorporation in order to create the Series C Preferred Shares.
6. REGISTRATION RIGHTS AGREEMENT.
The Corporation shall have entered into the Registration Rights Agreement in the
form annexed as Schedule G hereto.
7. VOTING AGREEMENT.
The Voting Agreement in the form annexed as Schedule H hereto shall have been
entered into by the Corporation and each of the other parties contemplated
thereby (other than the Purchaser), which other parties beneficially own or have
control or direction over not less than Seventeen (17%) percent of the
outstanding shares of common stock in the capital of the Corporation entitled to
vote at the Special Meeting, and such other parties shall, if requested by the
Purchaser, have delivered to the Purchaser an irrevocable proxy in blank
designating the Purchaser representing all of the shares of common stock in the
capital of the Corporation beneficially owned or controlled by such parties and
designating the Purchaser as their respective proxy, coupled with an interest
and with full power of substitution, to vote such share at the Special Meeting.
8. EMPLOYMENT AGREEMENTS.
The Corporation shall have amended in form and substance acceptable to the
Purchaser its employment agreement with each of its executive officers referred
to in Section 1 of Schedule E to provide (unless counsel to the Purchaser
confirms that the applicable employment or change of control agreement
termination provisions covers this matter to the same effect) that any material
breach of a representation or warranty of the Corporation within such
executive's specific knowledge shall be deemed to be reason for termination for
cause of such executive officer by the Corporation.
9. RECEIPT OF CLOSING DOCUMENTATION.
All documentation relating to the authorization and completion of the
transactions contemplated hereby, including the purchase and sale of the
Purchased Shares, and all actions and proceedings taken on or prior to each Time
of Closing in connection with the performance by the Corporation of its
obligations hereunder shall be satisfactory to the Purchaser and its counsel,
acting reasonably, and the Purchaser shall have received copies of all such
documentation or other evidence as they may reasonably request, including on the
Second Date of Closing an opinion of counsel to the Corporation in substantially
the form attached as Schedule J, in order to establish the consummation of the
transactions contemplated hereby and the taking of all corporate proceedings in
connection therewith in compliance with these conditions, all in form and
substance satisfactory to the Purchaser and its counsel, acting reasonably.
10. NO MATERIAL ADVERSE CHANGE.
There shall have been no material adverse change (actual, proposed, whether
financial or otherwise) in the condition of the Corporation or in any material
assets, liabilities (contingent or otherwise), capital, affairs, business or
operations of the Corporation since the date of the 1999 Form 10-K/A, including
there being no actions, suits, proceedings or inquiries pending or threatened
against or affecting the
<PAGE> 31
E- 3
Corporation at law or in equity before or by any Authority which may, in the
reasonable discretion of the Purchaser, materially and adversely affect the
Corporation.
11. NO ACTION TO RESTRAIN.
No action or proceeding shall be pending or threatened by any Authority or any
other Person (including a party hereto) to restrain or prohibit the completion
of the transactions contemplated by this Agreement.
<PAGE> 32
SCHEDULE F
SERIES C PREFERRED SHARE PROVISIONS
<PAGE> 33
SCHEDULE G
REGISTRATION RIGHTS AGREEMENT
<PAGE> 34
SCHEDULE H
VOTING AGREEMENT
<PAGE> 35
SCHEDULE I
BUSINESS PLAN
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2
This Agreement made as of the 8th day of October, 1999.
BETWEEN:
IPC ADVISORS S.A.R.L., a corporation governed by the
laws of Luxembourg (the "Purchaser")
OF THE FIRST PART;
- and -
BALANCED CARE CORPORATION, a corporation governed by
the laws of the State of Delaware (the "Corporation")
OF THE SECOND PART.
WHEREAS
A. subject to the terms and conditions of that certain
subscription agreement (the "Subscription Agreement") dated
the date hereof between the Purchaser and the Corporation, the
Purchaser has subscribed for and the Corporation has issued
and sold to the Purchaser shares, and will issue and sell
additional shares, of capital stock of the Corporation; and
B. pursuant to the terms and conditions of the Subscription
Agreement the Corporation and the Purchaser have agreed to
enter into this Registration Rights Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and such other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged), the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS IN SUBSCRIPTION AGREEMENT.
Unless otherwise defined herein, defined terms used in this
Agreement shall have the meanings set forth in the Subscription Agreement.
1.2 DEFINITIONS.
The following capitalized terms, when used in this Agreement, have the
respective meanings set forth below:
"BLACK-OUT NOTICE" has the meaning set forth in Section 2.7.
<PAGE> 2
-2-
"CORPORATION" means Balanced Care Corporation, a corporation governed
by the laws of the State of Delaware.
"DEMAND REGISTRATION" has the meaning set forth in Section 2.1.
"HOLDERS" means the Purchaser and such of its successors and affiliate
transferees who acquire Registrable Securities.
"PIGGYBACK HOLDERS" has the meaning set forth in Section 3.1.
"PIGGYBACK REGISTRATION" has the meaning set forth in Section 3.1.
"PURCHASER" means IPC Advisors S.A.R.L.
"REGISTER", "REGISTERED" and "REGISTRATION" means a registration of
Registrable Securities effected by preparing and filing a Registration
Statement in compliance with the applicable Securities Laws and the
declaration or ordering of the effectiveness of such Registration
Statement by the appropriate Securities Regulators.
"REGISTRABLE SECURITIES" means shares of common stock of the
Corporation acquired, directly or indirectly, pursuant to the
Subscription Agreement, or pursuant to any subdivision,
reclassification or other similar change in respect thereof, including
upon the conversion of the Series C Preferred Shares, owned or held by
a Holder.
"REGISTRATION EXPENSES" means any and all expenses incidental to the
performance of or compliance with this Agreement by the Corporation,
including without limitation: (i) all registration and filing fees of
the Securities Regulators, the National Association of Securities
Dealers, Inc. and other similar Persons, (ii) all fees and expenses
incurred in connection with compliance with provincial and state
securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with the "blue sky"
qualification of any of the Registrable Securities), (iii) all expenses
incurred by the Corporation in preparing, printing and distributing any
Registration Statement, any prospectus, any amendments or supplements
thereto, and other documents relating to the performance of and
compliance with this Agreement by the Corporation, (iv) all fees and
expenses incurred by the Corporation in connection with the listing, if
any, of the Registrable Securities on any securities exchange or
quotation system, (v) the fees and disbursements of counsel for the
Corporation and of the independent public accountants of the
Corporation, including the expenses of any special audits or "cold
comfort" letters required by or incidental to such performance and
compliance, and (vi) the fees and expenses of one United States and one
Canadian counsel to the Holders, which counsel shall be selected by the
Selling Holders; provided that underwriting discounts and selling
commissions, fees and expenses and any transfer taxes in respect of any
Selling Holder's Registrable Securities incurred in connection with any
registration and sale of Registrable Securities shall not be
Registration Expenses.
"REGISTRATION STATEMENTS" means a registration statement of the
Corporation on the appropriate form, and all amendments and supplements
to such document (including post-effective amendments), in each case
including all exhibits thereto and all materials incorporated by
reference therein.
"SECURITIES LAWS" means U.S. Securities Laws.
"SECURITIES REGULATORS" means any U.S. Securities Regulator.
<PAGE> 3
-3-
"SELLING HOLDERS" means each Holder participating in a registration
effected pursuant to the provisions of the Agreement such that all or
part of the Registrable Securities owned by the Holder are included
among the securities offered by the Registration Statement.
"U.S. SECURITIES LAWS" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, and the Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"U.S. SECURITIES REGULATOR" means the Securities and Exchange
Commission, and any other Person performing similar functions under the
U.S. Securities Laws.
1.3 CONSTRUCTION.
In this Agreement:
(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) the words "including", "include", and "includes" shall mean
"including without limitation", "include, without limitation"
and "includes, without limitation", respectively;
(c) any reference to a statute shall mean the statute in force as
at the date hereof and any regulation in force thereunder,
unless otherwise expressly provided;
(d) the use of headings is for convenience of reference only and
shall not affect the construction of this Agreement;
(e) when calculating the period of time within which or filing
which any act is to be done or step taken, the date which is
the reference day in calculating such period shall be
excluded. If the last day of such period is not a Business
Day, the period shall end on the next Business Day;
(f) all dollar amounts are expressed in United States funds;
(g) whenever reference is made to "generally accepted accounting
principles", such reference shall be deemed to be the United
States generally accepted accounting principles; and
any tender of documents or money under this Agreement may be
made upon the parties or the respective counsel and money may
be tendered by wire transfer, by bank draft drawn upon a bank
or by negotiable cheque payable in United States funds and
certified by a bank.
1.4 ACTIONS BY SELLING HOLDERS.
Any action to be taken, and any decision or selection to be
made, by the Selling Holders in connection with a registration effected pursuant
to the provisions of this Agreement shall be determined by the affirmative vote
or consent of those Selling Holders owning a majority of the Registrable
Securities offered by the Registration Statement.
<PAGE> 4
-4-
ARTICLE II
DEMAND REGISTRATIONS
2.1 REQUESTS FOR REGISTRATION.
(a) At any time after the date of the Special Meeting, each of the
Holders (the "Requesting Holder") may request registration of
all or part of their Registrable Securities under the
Securities Laws. Within ten (10) days after receipt of any
such request, the Corporation will give written notice of such
request to all remaining Holders. Thereafter, the Corporation
will use all reasonable efforts to effect the registration
under the Securities Laws, including in such registration all
Registrable Securities with respect to which the Corporation
has received written requests for inclusion therein by Holders
within thirty (30) days after the receipt of the Corporation's
notice, subject to the provisions of Section 2.4. (All
registrations requested pursuant to this Section 2.1 are
referred to herein as "Demand Registrations".)
(b) A Requesting Holder which requests a Demand Registration under
this Article II may, at any time prior to the effective date
of the Registration Statement relating to such registration,
revoke such request by providing written notice to the
Corporation; provided, however, that notwithstanding such
revocation, such Demand Registration shall be deemed a request
for purposes of Section 2.2 unless, after consultation with
the Corporation and any proposed underwriter, the Requesting
Holder in good faith determines that the Registrable
Securities which it has requested to be registered would not
be sold pursuant to such Demand Registration within a
reasonable period of time or at a price acceptable to such
Requesting Holder.
(c) Any request for a Demand Registration pursuant to this Article
II shall specify the number of Registrable Securities proposed
to be sold by the Requesting Holder and the intended method of
disposition thereof.
(d) Notwithstanding any of the foregoing provisions, the
Corporation shall not be required to effect a Demand
Registration if the Registrable Securities which the
Requesting Holder has requested to be registered have ceased
to be "restricted securities" pursuant to Rule 144 of the
Securities Act and have become freely tradeable upon the
expiration of any otherwise applicable hold period under the
Securities Laws.
2.2 REGISTRATIONS.
The Holders will be entitled to request pursuant to this
Article II up to three (3) Demand Registrations. The Corporation will pay all
Registration Expenses in connection with any such Demand Registrations and/or
any Piggyback Registrations.
2.3 EFFECTIVE REGISTRATION STATEMENT.
No Demand Registration shall be deemed to have been effected
for purposes of Section 2.2:
(i) unless a Registration Statement with respect thereto
has become effective;
(ii) if, after it has become effective, any stop order,
injunction or other order or requirement of a
Securities Regulator or other governmental agency or
court for any reason, affecting any of the securities
offered by such Registration
<PAGE> 5
-5-
Statement, is issued or threatened by a Securities
Regulator or other governmental agency or court;
(iii) if the Corporation delivers a Black-Out Notice with
respect to such Demand Registration;
(iv) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered
into in connection with such registration are not
satisfied by reason of a failure by or inability of
the Corporation to satisfy any of such conditions, or
the occurrence of an event outside the reasonable
control of the Requesting Holder;
(v) the revocation notice described in the proviso to
Section 2.1(b) has been delivered by the Requesting
Holder; or
(vi) if the Requesting Holder is not able to register and
sell at least fifty percent (50%) of the Registrable
Securities which were requested to be included in
such registration,
and the Corporation will pay all Registration Expenses in connection with any
registration if the registration is deemed not to have been effected pursuant to
this Section 3.
2.4 PRIORITY ON DEMAND REGISTRATIONS.
(a) The Corporation will not include in any Demand Registration
any securities which are not Registrable Securities without
the written consent of the Selling Holders; provided, that the
foregoing shall not restrict the obligations of the
Corporation pursuant to its registration or similar agreements
with Persons (other than the Purchaser) existing as at the
date hereof.
(b) If the Requesting Holder and the remaining Selling Holders
request Registrable Securities to be included in a Demand
Registration which is an underwritten offering and the
managing underwriters advise the Corporation in writing that
in their opinion the number of Registrable Securities
requested to be included exceeds the number of Registrable
Securities which can be sold in such offering within a price
range acceptable to the Selling Holders, the Corporation will
include any securities to be sold in such Demand Registration
in the following order (i) FIRST, the Registrable Securities
owned by the Requesting Holder; (ii) SECOND, the Registrable
Securities requested to be included in such registration by
the remaining Selling Holders, provided, that if the managing
underwriters determine in good faith that a lower number of
Registrable Securities should be included, then only that
lower number of Registrable Securities requested to be
included by the remaining Selling Holders shall be included in
such registration, and the remaining Selling Holders shall
participate in the registration pro rata based upon their
total ownership, on a fully diluted basis, of Registrable
Securities; (iii) THIRD, the securities the Corporation
proposes to sell; and (iv) FOURTH, any securities other than
Registrable Securities to be sold by Persons other than the
Corporation included pursuant to Section 2.4(a) hereof.
(c) Any Person other than Holders including any securities in a
registration effected pursuant to this Article II must pay its
share of the Registration Expenses incurred in connection
therewith.
<PAGE> 6
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2.5 SELECTION OF UNDERWRITERS.
The Requesting Holder will have the right to select the
underwriters and the managing underwriter to administer any Demand Registration
(which underwriters and managing underwriter shall be reasonably acceptable to
the Corporation).
2.6 BLACK-OUT RIGHTS AND POSTPONEMENT.
(a) The Corporation shall not be required to effect a Demand
Registration if the Corporation, within the ninety (90) day
period preceding the date of a request for a Demand
Registration, has effected a registration of securities in
which the Requesting Holder was entitled to participate to the
fullest extent pursuant to the Demand Registration rights
afforded to Holders by this Article II or the Piggyback
Registration rights afforded to Holders by Article III.
(b) The Corporation may, upon written notice (a "Black-Out
Notice") to the Requesting Holder requesting a Demand
Registration, require the Requesting Holder to withdraw such
Demand Registration upon the good faith determination by the
Board of Directors of the Corporation that such postponement
is necessary (i) to avoid disclosure of material non-public
information; or (ii) as a result of a pending material
financing (including a public offering of shares in the
capital of the Corporation) or acquisition transaction, and in
each case, none of the Holders may request another Demand
Registration for a period of up to ninety (90) days, as
specified by the Corporation in such Black-Out Notice. The
Corporation may only give a Black-Out Notice where the giving
of such notice has been specifically approved by the
Corporation's Board of Directors. Upon receipt of a Black-Out
Notice, the Demand Registration shall be deemed to be
rescinded and retracted and shall not be counted as a Demand
Registration for any purpose. The Corporation may not deliver
more than one (1) Black-Out Notice in any twelve (12) month
period.
ARTICLE III
PIGGYBACK REGISTRATIONS
3.1 RIGHT TO PIGGYBACK.
Whenever the Corporation proposes (other than pursuant to a
Demand Registration) to register any of its equity securities under the
Securities Laws (whether for the Corporation's own account or for the account of
any other Person) (a "Piggyback Registration"), the Corporation will give prompt
written notice to all Holders of its intention to effect such a registration,
and such notice shall offer each Holder the opportunity to, subject to the terms
of similar agreements with Persons (other than the Purchaser) existing as at the
date hereof, register on the same terms and conditions such number of
Registrable Securities as the Holder may request. The Corporation will include
in such registration all Registrable Securities with respect to which the
Corporation has received written requests for the inclusion therein within
thirty (30) days after the receipt of the Corporation's notice, subject to the
provisions of Sections 3.3 and 3.4.
3.2 PIGGYBACK EXPENSES.
The Registration Expenses of the Selling Holders will be paid
by the Corporation in connection with all Piggyback Registrations.
<PAGE> 7
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3.3 PRIORITY ON PRIMARY REGISTRATIONS.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Corporation and the managing underwriters advise
the Corporation in writing that in their opinion the number of securities
requested to be included in such registration are such that the success of the
offering would be materially and adversely affected, the Corporation will
include any securities to be sold in such registration in the following order:
(i) FIRST, the securities the Corporation proposes to sell; (ii) SECOND, the
Registrable Securities requested to be included in such registration by the
Holders pursuant to Section 3.1 hereof, provided, that, subject to the terms of
similar agreements with Persons (other than the Purchaser) existing as at the
date hereof, if the managing underwriters in good faith determine that a lower
number of Registrable Securities should be included, then the Corporation shall
be required to include in such registration only that lower number of
Registrable Securities, and the Holders shall participate in the registration
pro rata based upon their total ownership, on a fully diluted basis, of
Registrable Securities; and (iii) THIRD, other securities requested to be
included in such registration.
3.4 PRIORITY ON SECONDARY REGISTRATIONS.
If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Corporation's securities and the
managing underwriters advise the Corporation in writing that in their opinion
the number of securities requested to be included in such registration are such
that the success of the offering would be materially and adversely affected, the
Corporation will include any securities to be sold in such registration in the
following order: (i) FIRST, the securities of such holders; (ii) SECOND, the
Registrable Securities requested to be included in such registration by the
Holders pursuant to Section 3.1 hereof, provided, that if the managing
underwriters in good faith determine that a lower number of Registrable
Securities should be included, then the Corporation shall be required to include
in such registration only that lower number of Registrable Securities, and the
Holders shall participate in the registration pro rata based upon their total
ownership, on a fully diluted basis, of Registrable Securities; and (iii) THIRD,
other securities requested to be included in such registration.
ARTICLE IV
HOLDBACK AGREEMENTS
4.1 HOLDBACK.
Each Holder agrees not to effect any public sale or
distribution of Registrable Securities, or any securities convertible,
exchangeable or exercisable for or into such securities, during the seven (7)
days prior to, and the ninety (90) day period beginning on the effective date
of, any underwritten Demand Registration or any underwritten Piggyback
Registration in which such Holder had an opportunity to participate without
cutback under Article II or Article III (in each case except as part of such
underwritten registration), unless the managing underwriters of the registered
public offering otherwise agree.
4.2 COMPANY HOLDBACK.
The Corporation agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible,
exchangeable or exercisable for or into such securities, during the fourteen
(14) days prior to, and during the ninety (90) day period beginning on, the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which Holders participate unless the managing
underwriters of such underwritten Demand Registration or underwritten Piggyback
Registration otherwise agree.
<PAGE> 8
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ARTICLE V
REGISTRATION PROCEDURES
5.1 REGISTRATION PROCEDURES.
Whenever the Holders have requested that any Registrable
Securities be registered pursuant to this Agreement, the Corporation will use
all reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Corporation will as expeditiously as possible
(or, in the case of Section 5.1(n) below, will not):
(a) prepare and file with the Securities Regulators a Registration
Statement with respect to such Registrable Securities (such
Registration Statement to include all information which the
Selling Holders shall reasonably request) and use all
reasonable efforts to cause such Registration Statement to
become effective; provided, that as promptly as practicable
before filing such Registration Statement, the Corporation
will: (i) furnish to counsel selected by the Selling Holders
copies of all such documents proposed to be filed, and the
Corporation shall not file any such documents to which such
counsel shall have reasonably objected on the grounds that
such document does not comply in all material respects with
the requirements of the Securities Laws; and (ii) notify each
Selling Holder of (x) any request by the Securities Regulators
to amend such Registration Statement or (y) any stop order
issued or threatened by the Securities Regulators, and take
all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
(b) (i) prepare and file with the Securities Regulators such
amendments and supplements to such Registration Statement as
may be necessary to keep such Registration Statement effective
until all Registrable Securities offered by such Registration
Statement are sold in accordance with the intended plan of
distribution set forth in such Registration Statement; and
(ii) comply with the provisions of the Securities Laws with
respect to the disposition of all securities offered by such
Registration Statement during such period in accordance with
the intended methods of disposition set forth in such
Registration Statement;
(c) furnish to each Selling Holder, each underwriter of any
underwritten offering and each broker through whom Registrable
Securities are to be sold, without charge, as many conformed
copies of such Registration Statement, each amendment and
supplement thereto, the prospectus included in such
Registration Statement (including each preliminary prospectus
and, in each case, including all exhibits thereto and
documents incorporated by reference therein) and such other
documents as the Selling Holder, underwriter or broker may
reasonably request in order to facilitate the disposition of
such Registrable Securities;
(d) use its best efforts to register or qualify such Registrable
Securities under provincial and state securities or blue sky
laws of such jurisdictions as any Selling Holder shall
reasonably request, to keep such registration or qualification
in effect for so long as such Registration Statement remains
in effect and do any and all other acts and things which may
be reasonably necessary or advisable to enable the Selling
Holder to consummate the disposition of the Holder's
Registrable Securities in such jurisdictions, provided,
however, that the Corporation will not be required to: (i)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
<PAGE> 9
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Section 5.1(d); (ii) subject itself to Taxation in any such
jurisdiction; or (iii) consent to general service of process
in any such jurisdiction;
(e) furnish to each Selling Holder a signed copy, addressed to the
Selling Holder (and the underwriters, if any), of an opinion
of counsel for the Corporation (and/or special counsel to the
selling securityholders in the case of a secondary
registration), dated the effective date of such Registration
Statement (and, if such Registration Statement includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), reasonably satisfactory in
form and substance to the Selling Holder, covering
substantially the same matters with respect to such
Registration Statement (and the prospectus included therein)
as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public
offerings;
(f) notify each Selling Holder, at a time when a prospectus
relating to the offering is required to be delivered to
purchasers or prospective purchasers under the Securities
Laws, of the occurrence of any event known to the Corporation
as a result of which the prospectus included in such
Registration Statement, as then in effect, contains an untrue
statement of a material fact or omits to state any fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances under which they were made, and, at the request
of the Selling Holders, the Corporation will prepare and
furnish to each Selling Holder, each underwriter (if any) and
each broker through whom Registrable Securities are to be
sold, without charge, as many conformed copies of a supplement
to or an amendment of such prospectus as the Selling Holder,
underwriter or broker may reasonably request so that, as
thereafter delivered to the purchasers of the Registrable
Securities offered thereby, such prospectus shall not include
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made and, in the event the
Corporation shall give such notice, the Corporation shall
extend the period during which such Registration Statement
shall be maintained effective by the number of days during the
period from and including the date of the giving of such
notice to the Selling Holders to the date when the Corporation
made available to the Selling Holders, the underwriters (if
any) and the brokers through whom Registrable Securities are
to be sold conformed copies of an appropriately amended or
supplemented prospectus;
(g) enter into such customary arrangements and take all such other
customary actions as the Selling Holders or the underwriters
(if any) reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(h) make available for inspection by any Selling Holder, any
underwriter and any attorney, accountant or other agent
retained by any Selling Holder or underwriter, upon reasonable
notice and during normal business hours, all financial and
other records, pertinent corporate documents and properties of
the Corporation, and cause the Corporation's officers,
directors, employees and independent accountants to supply all
information reasonably requested by the Selling Holder,
underwriter, attorney, accountant or agent in connection with
such Registration Statement;
(i) subject to other provisions hereof, use all reasonable efforts
to cause the Registrable Securities offered by such
Registration Statement to be registered with or approved by
such other governmental agencies or authorities or
self-regulatory organizations as may be necessary to enable
the Selling Holders to consummate the disposition of such
Registrable Securities;
<PAGE> 10
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(j) use all reasonable efforts to obtain a "comfort" letter, dated
the effective date of such Registration Statement (and, if
such registration includes an underwritten offering, dated the
date of the closing under the underwriting agreement), signed
by the independent public accountants who have certified the
Corporation's financial statements, addressed to each Selling
Holder and to the underwriters (if any) covering substantially
the same matters with respect to such Registration Statement
(and the prospectus included therein) and with respect to
events subsequent to the date of such financial statements, as
are customarily covered in accountants' letters delivered to
the underwriters in underwritten public offerings of
securities and such other financial matters as the Selling
Holders (and the underwriters, if any) may reasonably request;
(k) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the Securities Regulators;
(l) permit any Selling Holder (which Selling Holder, in its sole
judgment, exercised in good faith, might be deemed to be a
controlling Person of the Corporation with the meaning of the
U.S. Securities Laws) to participate in the preparation of
such Registration Statement and to include therein material,
furnished to the Corporation in writing, which in the
reasonable judgment of the Selling Holder should be included
and which is reasonably acceptable to the Corporation and not
in violation of applicable Law;
(m) use all reasonable efforts to obtain the lifting at the
earliest possible time of any stop order suspending the
effectiveness of such Registration Statement or of any order
preventing or suspending the use of any prospectus;
(n) at any time file or make any amendment to such Registration
Statement, or any amendment of or supplement to the prospectus
contained therein (including amendments of the documents
incorporated by reference in the prospectus), of which each
Selling Holder or the managing underwriters shall not have
previously been advised and furnished a copy or to which the
Selling Holders, the managing underwriters, or counsel for the
Selling Holders or for the underwriters shall reasonably
object;
(o) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to Selling Holders
and the underwriters (if any) in form, substance and scope as
are customarily made by issuers to underwriters and selling
securityholders, as the case may be, in underwritten public
offerings of substantially the same type; and
(p) if any proposed Registration Statement refers to a Holder by
name or otherwise as the holder of any securities of the
Corporation then: (i) the Corporation shall be required at the
request of such Holder to insert therein language, in form and
substance reasonably satisfactory to such Holder, the
Corporation and the managing underwriters, to the effect that
the ownership by such Holder of such securities is not to be
construed as a recommendation by such Holder as to the
investment quality of the Corporation's securities offered
thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial
requirements of the Corporation; or (ii) in the event that
such reference to such Holder by name or otherwise is not
required by the Securities Laws, any similar federal,
provincial or state statute, or any rule or regulation of any
other regulatory body having jurisdiction over the offering,
then in force, the Corporation shall be required at the
request of such Holder to delete the reference to such Holder.
<PAGE> 11
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ARTICLE VI
REGISTRATION EXPENSES
6.1 FEES.
(a) The Corporation shall pay all Registration Expenses in
connection with any registration of Registrable Securities
effected pursuant to the provisions of this Agreement.
(b) Upon any sale of Registrable Securities by a Selling Holder,
such Selling Holder shall pay all brokerage commissions,
underwriting discounts and commissions, transfer taxes (if
any), and fees and expenses relating to the sale or
disposition of such Registrable Securities.
ARTICLE VII
UNDERWRITTEN OFFERINGS
7.1 DEMAND UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a Demand Registration, the Corporation
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to be satisfactory in substance and form to the
Corporation, the Requesting Holder and the underwriters, and to contain such
representations and warranties by the Corporation and such other terms as are
customarily included in agreements of this type, including without limitation
indemnities customarily included in such agreements. The Selling Holders will
cooperate in good faith with the Corporation in the negotiation of the
underwriting agreement. The Selling Holders may be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Corporation to and for the benefit of such underwriters shall also be made to
and for the benefit of the Selling Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the Selling Holders. The
Corporation shall cooperate with any Selling Holder in order to limit any
representations or warranties to, or agreements with the Corporation or the
underwriters to be made by the Selling Holder only to those representations,
warranties or agreements regarding the Selling Holder, the Selling Holder's
Registrable Securities and the Selling Holder's intended method of distribution
and any other representation required by the Securities Laws.
7.2 INCIDENTAL UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a Piggyback Registration, the Selling
Holders shall be parties to the underwriting agreement between the Corporation
and such underwriters, and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Corporation to and for the benefit of such underwriters shall also be made to
and for the benefit of the Selling Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the Selling Holders. The
Corporation shall cooperate with any Selling Holder in order to limit any
representations and warranties to, or agreements with, the Corporation or the
underwriters to be made by the Selling Holder only to those representations,
warranties or agreements regarding the Selling Holder, the Selling Holder's
Registrable Securities, the Selling Holder's intended method of distribution and
any other representation required by the Securities Laws.
<PAGE> 12
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ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE CORPORATION.
The Corporation agrees to indemnify and hold harmless, to the
fullest extent permitted by law, each of the Selling Holders, each other Person,
if any, who controls each of the Selling Holders within the meaning of the U.S.
Securities Laws and each of their respective directors, general partners and
officers, as follows:
(i) against any and all loss, liability, claim, damage or
expense arising out of or based upon an untrue
statement or alleged untrue statement of a material
fact contained in any Registration Statement by which
Registrable Securities are offered (or any amendment
or supplement thereto), including all documents
incorporated therein by reference, or in any
preliminary prospectus or prospectus (or any
amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact
required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense to the extent of the aggregate amount
paid in settlement of any litigation, investigation
or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission or
any such alleged untrue statement or omission, if
such settlement is effected with the written consent
of the Corporation; and
(iii) against any and all expense incurred by them in
connection with investigating, preparing or defending
against any litigation, or investigation or
proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission or
any such alleged untrue statement or omission, to the
extent that any such expense is not paid under clause
(i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Corporation by or on behalf
of the Selling Holder expressly for use in the preparation of any Registration
Statement (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) contained therein; and
provided further, that the Corporation will not be liable under the indemnity
agreement in this Section 8.1 with respect to any preliminary prospectus or the
final prospectus or the final prospectus as amended or supplemented, as the case
may be, to the extent that any such loss, liability, claim, damage or expense
results from the fact that the Selling Holder or underwriter (if any) sold
Registrable Securities to a Person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
or of the final prospectus as then amended or supplemented, whichever is most
recent, if the Corporation previously furnished, in a timely fashion, sufficient
copies thereof to the Selling Holder, the underwriter (if any) or the broker
through whom the Registrable Securities were sold. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Selling Holder, any controlling Person of the Selling Holder or any of their
respective directors, officers or general partners, and shall survive the
closing of the offering.
<PAGE> 13
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8.2 INDEMNIFICATION BY A HOLDER.
Each Selling Holder agrees to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 8.1 of this
Agreement), to the extent permitted by law, the Corporation and its directors,
officers and controlling Persons, and their respective directors, officers and
general partners, with respect to any statement or alleged statement in or
omission or alleged omission contained in any Registration Statement by which
Registrable Securities are offered (or any amendment or supplement thereto),
including all documents incorporated therein by reference or in any preliminary
prospectus or prospectus (or any amendment or supplement thereto), if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information that relates only to
the Selling Holder that is expressly furnished to the Corporation by or on
behalf of the Selling Holder for use in the preparation of such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Corporation, or its directors, officers or
controlling Persons or their respective directors, officers or general partners
and shall survive the closing of the offering. With respect to each claim
pursuant to this Section 8.2, each Selling Holder's maximum liability under this
Section shall be limited to an amount equal to the net proceeds actually
received by the Selling Holder (after deducting any underwriting discount and
expenses) from the sale of the Selling Holder's Registrable Securities offered
by such Registration Statement.
8.3 INDEMNIFICATION PROCEDURE.
Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in Section 8.1 or Section 8.2 of this Agreement, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not release the indemnifying party of its obligations under Section
8.1 or Section 8.2 except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal fees and expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment an actual or potential conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim, in
which case the indemnifying party shall not be liable for the fees and expenses
of: (i) more than one counsel (in addition to any local counsel) for all Selling
Holders selected by the Selling Holders; or (ii) more than one counsel (in
addition to any local counsel) for the Corporation selected by the Corporation
in connection with any one action or separate but similar or related actions. An
indemnifying party who is not entitled to (pursuant to an immediately preceding
sentence), or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel (in addition to any local
counsel) for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party an actual
or potential conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not, without the
prior consent of each indemnified party, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such indemnified party or any Person who controls such indemnified party
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim,
<PAGE> 14
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action, suit or proceeding. Notwithstanding anything to the contrary set forth
herein, and without limiting any of the rights set forth above, in any event any
party will have the right to retain, at its own expense, counsel with respect to
the defense of a claim.
8.4 UNDERWRITING AGREEMENT.
The Corporation and each Selling Holder shall provide for the
foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any registration of Registrable Securities.
8.5 CONTRIBUTION.
If the indemnification provided for in Sections 8.1 and 8.2 of
this Agreement is unavailable to hold harmless an indemnified party under such
Sections, then each indemnifying party shall agree to contribute to the amount
paid or payable by such indemnifying party on the one hand, and the indemnified
party on the other, in connection with statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations, including without limitation the relative
benefits received by each party from the sale of the securities offered by the
Registration Statement, the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted
and the opportunity to correct and prevent any statement or omission. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statements or omission. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this Section 8.5 were to be
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
first and second sentences of this Section 8.5. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 8.5 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim (which shall be
limited as provided in Section 8.3 if the indemnifying party has assumed the
defense of any such action in accordance with the provisions thereof) which is
the subject of this Section 8.5. Promptly after receipt by an indemnified party
under this Section 8.5 of notice of the commencement of any action against such
party in respect of which a claim for contribution may be made against an
indemnifying party under this Section 8.5, such indemnified party shall notify
the indemnifying party in writing of the commencement thereof if the notice
specified in Section 8.3 has not been given with respect to such action;
provided that the omission to so notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may otherwise have to any
indemnified party under this Section 8.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. The
Corporation and each Selling Holder shall agree with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
that: (i) the underwriters' portion of such contribution shall not exceed the
underwriting fee or discount and (ii) that the Selling Holder's portion of such
contribution shall not exceed an amount equal to the net proceeds actually
received by the Selling Holder from the sale of the Selling Holder's Registrable
Securities in the offering to which the losses, liabilities, claims, damages or
expenses of the indemnified parties relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
<PAGE> 15
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8.6 PERIODIC PAYMENTS.
The indemnification required by this Article VIII shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
ARTICLE IX
RULE 144
9.1 RULE 144
The Corporation covenants that it will file the reports
required to be filed by it under the U.S. Securities Laws in a timely fashion,
and will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act in compliance with: (i)
Rule 144 under the Securities Act, as such Rule may be amended from time to
time; or (ii) any similar rule or regulation hereafter adopted by the U.S.
Securities Regulator. Upon the request of any Holder, the Corporation will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
ARTICLE X
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
10.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration
hereunder unless such Person: (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements; and (ii) complete and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, escrow agreements and other documents reasonably required under the
terms of such underwriting arrangements and consistent with the provisions of
this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 TIME OF ESSENCE.
Time shall be of the essence in this Agreement.
11.2 JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York.
11.3 ENTIRE AGREEMENT.
This Agreement and the Subscription Agreement constitute the entire
agreement among the parties hereto relating to the subject matter hereof and
supersede all oral statements and prior writings with respect hereto.
<PAGE> 16
-16-
11.4 NO INCONSISTENT AGREEMENTS.
The Corporation will not hereafter enter into any agreement which is
inconsistent with, or would otherwise restrict the performance by the
Corporation of its obligations hereunder.
11.5 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.
The Corporation will not take any action, or fail to take any action
which it may properly take, with respect to its securities which would adversely
affect the ability of the Holders to include Registrable Securities in a
registration effected pursuant to the provisions of this Agreement or which, to
the extent within its control, would adversely affect the marketability of such
Registrable Securities in any such registration (including without limitation
effecting a stock split or a combination of shares).
11.6 ACTIONS TAKEN; AMENDMENTS AND WAIVERS.
Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement will be effective against the
Corporation or any Holder, unless such modification, amendment or waiver is
approved in writing by the Corporation and the Holders. The failure of any party
to enforce any of the provisions of this Agreement will in no way be construed
as a waiver of such provisions and will not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
11.7 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not; in
addition, whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of Holders are also for the benefit of,
and enforceable by, any subsequent Holder, except to the extent reserved to or
by the transferor in connection with any such transfer; provided that the
benefits of this Agreement shall inure to and be enforceable by any transferee
of Registrable Securities so long as such transferee shall have executed an
agreement agreeing to be bound by the provisions of this Agreement and assuming
and agreeing to fulfil and perform all of the obligations of a Holder hereunder.
11.8 NOTICE.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be given by prepaid first-class mail, by
facsimile or other means of electronic communication or by hand-delivery as
hereinafter provided. Any such notice or other communication, if mailed by
prepaid first-class mail at any time other than during a general discontinuance
of postal service due to strike, lock-out or otherwise shall be deemed to have
been received on the fourth (4th) Business Day after the post-marked date
thereof, or if sent by facsimile or other means of electronic communication,
shall be deemed to have been received on the Business Day following the sending,
or if delivery by hand shall be deemed to have been received at the time it is
delivered to the applicable address noted below either to the individual
designated below or to an individual at such address having apparent authority
to accept deliveries on behalf of the addressee. Notice of change of address
shall also be governed by this section. In the event of a general discontinuance
of postal service due to strike, lockout or otherwise, notices or other
communications shall be delivered by hand or sent by facsimile or other means of
electronic communication and shall be deemed to have been received in accordance
with this section. Notices and other communications shall be addressed as
follows:
<PAGE> 17
-17-
(a) if to the Corporation
Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania
17055
Attention: Brad E. Hollinger
Telecopier No: (717) 796-6248
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York
10022-6069
Attention: Richard Vilsoet
Telecopier No.: (212) 848-7179
(b) if to the Purchaser:
IPC Advisors S.A.R.L.
c/o Unsworth & Associates
Herengrach 483
1017 BT
Amsterdam
Attention: Brad Unsworth
Telecopier No.: 011-31-20-623-2285
with a copy to:
Manfred J. Walt
c/o Central Park Lodges
175 Bloor Street East
South Tower
Toronto, Ontario
M4W 3R8
Attention: Manfred J. Walt
Telecopier No.: (416) 323-3818
<PAGE> 18
-18-
with a further copy to:
Goodman Phillips & Vineberg
250 Yonge Street, Suite 2400
Toronto, Ontario
M5B 2M6
Attention: Stephen Pincus
Telecopier No.: (416) 979-1234
11.9 SEVERABILITY.
If any provision, or portion thereof, of this Agreement, or of the
application thereof to any Person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision or portion thereof, to any other Person or circumstance shall not
be affected thereby and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11.10 EXECUTION AND COUNTERPARTS.
For the convenience of the parties, this Agreement may be executed by
facsimile or otherwise in several counterparts, each of which when so executed
shall be, and be deemed to be, an original instrument and such counterparts
together shall constitute one in the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereof on the date first indicated above.
BALANCED CARE CORPORATION
Per:
-------------------------------------
Per:
-------------------------------------
IPC ADVISORS S.A.R.L.
Per:
-------------------------------------
<PAGE> 1
EXHIBIT 4.3
BALANCED CARE CORPORATION
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.001 PER SHARE
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The following resolution was duly adopted by the Board of
Directors of Balanced Care Corporation, a Delaware corporation (the "Company"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, on October 8, 1999, by the unanimous written consent of the
Board of Directors:
WHEREAS, the Board of Directors of the Company is authorized,
subject to limitations prescribed by law and the provisions of the Certificate
of Incorporation (as defined below) of the Company, to provide for the issuance
of all or any of the shares of Preferred Stock, par value $.001 per share, in
one or more series, and by filing a certificate pursuant to the applicable law
of the State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the powers, designation, preferences
and relative, participating, optional or other special rights of the shares of
each such series and the qualifications or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors, pursuant
to its authority as aforesaid, to authorize and fix the terms of a series of
preferred stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED that, pursuant to the authority
expressly granted to the Board of Directors of the Company by the Certificate of
Incorporation of the Company, and pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware, there be created from the 11,160,708
shares of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of
the Company authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock consisting of 5,000,000 shares of
Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the
voting powers, designations, preferences and relative, participating, optional
or other special rights of which, and qualifications, limitations or
restrictions thereof, shall be as follows:
1. Definitions. As used herein, the following terms shall
have the following meanings:
1.1 "Affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such first Person. For the purpose of this
definition, "control" shall mean, as to any
<PAGE> 2
Person, the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
1.2 "Board of Directors" shall mean the Board of Directors of
the Company, as constituted from time to time.
1.3 "Business Day" means any day, other than (i) a Friday,
Saturday, Sunday or statutory holiday in the State of New York or (ii) any of
the first, second, seventh or eighth day of Passover, the first or second day of
Shavuoth, the first or second day of Rosh Hashanah, Yom Kippur, the first or
second day of Sukkoth, Shemini Azereth or Simchas Torah, and the day prior to
any of the foregoing days.
1.4 "Certificate of Incorporation" shall mean the Certificate
of Incorporation of the Company, as amended through the date hereof.
1.5 "Closing Price" of the Common Stock as of any day, means
(i) the last reported sale price of such stock or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, in either
case as reported on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or (ii) if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and lowest reported asked quotation for the
Common Stock, in either case reported on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), or a similar service if
NASDAQ is no longer reporting such information.
1.6 "Common Stock" shall mean the class of Common Stock, par
value $.001 per share, of the Company or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or as a result of a
subdivision or combination.
1.7 "Common Stock Conversion Rate" shall mean, as of any
date, a rate for each share of Series C Preferred Stock equal to (i) the
Liquidation Value thereof plus all accrued and unpaid dividends thereon pursuant
to Section 2.1 herein, divided by (ii) the Conversion Price in effect as of such
date.
1.8 "Conversion Price" shall mean $1.25 per share of Series C
Preferred Stock, subject to adjustment as provided herein.
1.9 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.10 "Issue Date" shall mean the First Date of Closing (as
defined in the Subscription Agreement).
<PAGE> 3
1.11 "Subscription Agreement" shall mean the Subscription
Agreement, dated as of October 8, 1999, between the Company and IPC Advisors
S.A.R.L., as amended from time to time.
1.12 "Junior Stock" shall mean the Common Stock and the
shares of any other class or series of stock of the Company which, by the terms
of the Certificate of Incorporation or of the instrument by which the Board of
Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be junior to the Series C Preferred Stock in respect of the right
to receive dividends and to participate in any distribution of assets other than
by way of dividends.
1.13 "Liquidation Value" shall mean $1.25 per share of Series
C Preferred Stock, subject to adjustment as provided herein.
1.14 "Parity Stock" shall mean the shares of any other class
or series of stock of the Company which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall, in the event that
the stated dividends thereon are not paid in full, be entitled to share ratably
with the Series C Preferred Stock in the payment of dividends, including
accumulations, if any, in accordance with the sums which would be payable on
such shares if all dividends were declared and paid in full, and shall, in the
event that the amounts payable thereon on liquidation are not paid in full, be
entitled to share ratably with the Series C Preferred Stock in any distribution
of assets other than by way of dividends in accordance with the sums which would
be payable in such distribution if all sums payable were discharged in full;
provided, however, that the term "Parity Stock" shall be deemed to refer (i) in
Section 2.2 hereof, to any stock which is Parity Stock in respect of the right
to receive dividends and (ii) in Section 6 hereof, to any stock which is Parity
Stock in respect of any distribution of assets other than by way of dividends.
1.15 "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, government (or
an agency or political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
1.16 "Pro Rata Repurchase" shall mean any purchase of shares
of Common Stock by the Company or by any of its subsidiaries whether for cash,
shares of capital stock of the Company, other securities of the Company,
evidences of indebtedness of the Company or any other Person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Company), or any
combination thereof, effected while any of the
<PAGE> 4
shares of Series C Preferred Stock are outstanding, which purchase is subject to
Section 13(e) of the Exchange Act or is made pursuant to an offer made available
to all holders of Common Stock.
1.17 "Senior Stock" shall mean the shares of any class or
series of stock of the Company which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be senior to the
Series C Preferred Stock in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of dividends.
1.18 "Trading Day" shall mean, so long as the Common Stock is
listed or admitted to trading on a national securities exchange, a day on which
the principal national securities exchange on which the Common Stock is listed
is open for the transaction of business, or, if the Common Stock is not so
listed or admitted for trading on any national securities exchange, a day on
which NASDAQ is open for the transaction of business.
2. Dividends.
2.1 Beginning on the Issue Date of the Series C Preferred
Stock, if the Board of Directors of the Company shall declare a dividend or make
any other distribution (including, without limitation, in cash or other property
or assets), to holders of shares of Common Stock, to receive, out of funds
legally available therefor, a dividend or distribution in an amount equal to the
amount of such dividend or distribution receivable by a holder of the number of
shares of Common Stock for which such share of Series C Preferred Stock is
convertible on the record date for such dividend or distribution. Any such
amount shall be paid to the holders of shares of Series C Preferred Stock at the
same time such dividend or distribution is made to holders of Common Stock.
2.2 In the event the Company shall fail to pay the Put
Purchase Price to any holder of a share of Series C Preferred Stock entitled
thereto pursuant to Section 5 hereof, such holder shall be entitled to receive
quarterly cash dividends, out of funds legally available therefor, at a rate of
15% of the Liquidation Value. Dividends shall be payable on the last day of
March, June, September and December in each year. In the event such dividends
are not paid, such dividends will continue to accrue and compound quarterly.
Dividends payable for any partial dividend period shall be computed on the basis
of actual days elapsed over a 365-day year.
2.3 Except as hereinafter provided in this Section 2.3,
unless full cumulative dividends on the outstanding shares of Series C Preferred
Stock that shall have accrued and become payable as of any date shall have been
paid, or declared and funds shall have been set apart for payment thereof, no
dividend or other distribution (payable other than
<PAGE> 5
in shares of Junior Stock) shall be paid to the holders of Junior Stock or
Parity Stock. When dividends are not paid in full upon the shares of Series C
Preferred Stock and any Parity Stock, all dividends declared upon shares of
Series C Preferred Stock and all Parity Stock shall be declared pro rata so that
the amount of dividends declared per share on Series C Preferred Stock and all
such Parity Stock shall in all cases bear to each other the same ratio that
accrued cumulative dividends per share on the shares of Series C Preferred Stock
and all such Parity Stock bear to each other.
3. Conversion of Series C Preferred Stock.
3.1 Conversion at the Option of the Holder of Series C
Preferred Stock.
(a) Each holder of a share of Series C Preferred
Stock shall have the right, at any time after the Issue Date, to convert such
share into a fully paid and nonassessable share of Common Stock at the Common
Stock Conversion Rate as of the date of conversion.
(b) Any holder of shares of Series C Preferred
Stock electing to convert such shares into Common Stock shall surrender the
certificate or certificates for such shares at the offices of the Company (or at
such other place in New York City as the Company may designate by written notice
to the holders of shares of Series C Preferred Stock) during regular business
hours, duly endorsed to the Company or in blank, or accompanied by instruments
of transfer to the Company or in blank, in form reasonably satisfactory to the
Company, and shall give written notice to the Company at such offices that such
holder elects to convert such shares of Series C Preferred Stock. As soon as
practicable (but in any event not later than five (5) Business Days) after any
holder deposits certificates for shares of Series C Preferred Stock, accompanied
by the written notice above prescribed, the Company shall issue and deliver at
such office to the holder for whose account such shares were surrendered, or to
his nominee, certificates representing the number of shares of Common Stock and
the cash in lieu of fractional shares, if any, to which such holder is entitled
upon such conversion.
(c) Conversion shall be deemed to have been made as
of the date that certificates for the shares of Series C Preferred Stock to be
converted and the written notice are received by the Company and the Person
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such Common Stock on such date.
The Corporation shall not be required to deliver certificates for shares of
Common Stock while the stock transfer books for such stock or for Series C
Preferred Stock are duly closed (but not for any period in excess of five days)
for any purpose, but certificates for shares of Common Stock shall be issued and
delivered as soon as practicable after the opening of such books.
3.2 Automatic Conversion of the Series C Preferred Stock.
<PAGE> 6
(a) Immediately following the issuance of all the
Common Stock on the Second Date of Closing pursuant to the Subscription
Agreement, each share of Series C Preferred Stock shall automatically convert
into fully-paid and non-assessable shares of Common Stock at the Common Stock
Conversion Rate as of the date of conversion.
(b) Following the conversion referred to in Section
3.2(a) above, the Company shall, as soon as reasonably practicable, deliver to
the holders of such shares of Series C Preferred Stock converted into Common
Stock pursuant to Section 3.2(a), a certificate or certificates representing the
number of fully-paid and non-assessable shares of Common Stock into which such
shares of Series C Preferred Stock have been converted in accordance with the
provisions of this Section 3.2. For purposes of the foregoing, such conversion
shall be deemed to have been made at the close of business on the Conversion
Date and the Person entitled to receive the Common Stock issuable upon such
conversion shall be treated, for all purposes, as the recordholder of such
Common Stock on such date.
3.3 No fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon conversion of Series C
Preferred Stock. Instead of any fractional interest in a share of Common Stock
that would otherwise be deliverable upon the conversion of a share of Series C
Preferred Stock, the Company shall, subject to Section 3.4(c), make a cash
payment (calculated to the nearest $.01) equal to such fraction multiplied by
the Closing Price of the Common Stock on the last Trading Day prior to the date
of conversion.
3.4 The Common Stock Conversion Rate shall be
adjusted from time to time as follows:
(a) If the Company shall, at any time or from
time to time while any shares of the Series C Preferred Stock are outstanding,
(i) pay a dividend on its Common Stock in shares of its capital stock, (ii)
combine its outstanding shares of Common Stock into a smaller number of shares,
(iii) subdivide its outstanding shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Company, then the Common Stock Conversion Rate in effect immediately before
such action shall be adjusted so that the holders of the Series C Preferred
Stock, upon conversion of shares thereof immediately following such action,
shall be entitled to receive the kind and amount of shares of capital stock of
the Company which they would have owned or been entitled to receive upon or by
reason of such event if such shares of Series C Preferred Stock had been
converted immediately before the record date or effective date for such action.
(b) If the Company or any subsidiary thereof
shall, at any time or from time to time while any of the Series C Preferred
Stock is outstanding, make a Pro Rata Repurchase, the Common Stock Conversion
Rate shall be adjusted by multiplying the Common Stock Conversion Rate in effect
immediately prior to such action by a fraction
<PAGE> 7
(which in no event shall be less than one (1)), the numerator of which shall be
the product of (i) the number of shares of Common Stock outstanding immediately
before such Pro Rata Repurchase minus the number of shares of Common Stock
repurchased in such Pro Rata Repurchase and (ii) the Current Market Price of the
Common Stock as of the day immediately preceding the first public announcement
by the Company of the intent to effect such Pro Rata Repurchase, and the
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (ii) the aggregate purchase price of the Pro Rata Repurchase
(provided that such denominator shall never be less than $.01).
(c) All calculations under this Section 3.4
shall be made to the nearest $.01 (with $.005 being rounded upward),
one-hundredth of a share (with .005 being rounded upward) or, in the case of a
conversion rate, one ten-thousandth (with .00005 being rounded upward).
Notwithstanding any other provision of this Section 3.4, the Company shall not
be required to make any adjustment of the Common Stock Conversion Rate unless
such adjustment would require an increase or decrease of at least 0.05% of such
rate. Any lesser adjustment shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
any adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 0.05% in such rate. Any adjustments under this Section 3.4
shall be made successively whenever an event requiring such an adjustment
occurs.
(d) Whenever an adjustment in the Common Stock
Conversion Rate is required, the Company shall promptly cause to be mailed (but
in any event not later than five (5) days after the date of the event giving
rise to such adjustment) first-class postage prepaid, to the holders of record
of the outstanding shares of Series C Preferred Stock, notice of such adjustment
and a certificate of a firm of independent public accountants of recognized
national standing selected by the Board of Directors (who shall be appointed at
the Company's expense and who may be the independent public accountants
regularly employed by the Company) setting forth the adjusted Common Stock
Conversion Rate in effect as of such date determined as provided herein. Such
notice and certificate shall set forth in reasonable detail such facts as shall
be necessary to show the reason for and the manner of computing such adjustment.
(e) In the event that at any time as a result
of an adjustment made pursuant to this Section 3.4, the holder of any share of
Series C Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of stock of the Company other than shares of
Common Stock, the conversion rate of such other shares so receivable upon
conversion of any such share of Series C Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in
subparagraphs (a) through (d) and (f) of this Section 3.4, and the provisions of
this Section 3 with respect to the
<PAGE> 8
Common Stock shall apply on like or similar terms to any such other shares and
the determination of the Board of Directors as to any such adjustment shall be
conclusive.
(f) No adjustment shall be made pursuant to
this Section if the effect thereof would be to reduce the Conversion Price below
the par value of the Common Stock.
3.5 The Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
stock, for the purpose of effecting the conversion of the shares of Series C
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C Preferred Stock into such Common Stock at any
time (assuming that, at the time of the computation of such number of shares,
all such Common Stock would be held by a single holder). The Company shall from
time to time, in accordance with the laws of the State of Delaware, use its best
efforts to cause the authorized amount of Common Stock to be increased if the
aggregate of the authorized amount of the Common Stock remaining unissued and
the issued shares of such Common Stock in its treasury (other than any shares of
such Common Stock reserved for issuance in any other connection) shall not be
sufficient to permit the conversion of the shares of Series C Preferred Stock
into the Common Stock. The Company covenants that any shares of Common Stock
issued upon conversions of the Series C Preferred Stock shall be validly issued,
fully paid and nonassessable.
3.6 If any shares of Common Stock which would be
issuable upon conversion of shares of Series C Preferred Stock hereunder require
registration with or approval of any governmental authority before such shares
may be issued upon conversion, the Company will in good faith and as
expeditiously as possible cause such shares to be duly registered or approved,
as the case may be.
3.7 The Company shall pay any and all issue or other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series C Preferred Stock pursuant
hereto. The Company shall not, however, be required to pay any tax which is
payable in respect of any transfer involved in the issue or delivery of Common
Stock in a name other than that in which the shares of Series C Preferred Stock
so converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
such tax, or has established, to the satisfaction of the Company, that such tax
has been paid.
3.8 For purposes of this Section 3, the number of
shares of Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the Company or any
subsidiary. The Company shall not pay a dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
<PAGE> 9
3.9 If any action or transaction would require
adjustment of the Common Stock Conversion Rate pursuant to more than one
paragraph of this Section 3, only one adjustment shall be made and each such
adjustment shall be the amount of adjustment that has the highest absolute
value.
3.10 From and after the date a share of Series C
Preferred Stock is converted pursuant to Sections 3.1 or 3.2, dividends on such
shares of Series C Preferred Stock shall cease to accrue, and said shares shall
no longer be deemed to be outstanding and all rights of the holders thereof as a
holder of Series C Preferred Stock (except the right to receive from the Company
the Common Stock) shall cease except as otherwise provided herein and in the
Subscription Agreement.
3.11 In case:
(a) of a consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required; or
(b) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(c) of the sale, exchange or other conveyance
(for cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Company except to a
wholly-owned subsidiary; or
(d) of any Pro Rata Repurchase;
then, in each case, the Company shall cause to be mailed, first-class postage
prepaid, to the holders of record of the outstanding shares of Series C
Preferred Stock, not less than 20 days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of any distribution or grant of rights triggering an
adjustment to the Conversion Price pursuant to this Section 3, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
entitled to such distribution, rights are to be determined, or (y) the date on
which any reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation, winding up or Pro Rata Repurchase is expected to
become effective, if known, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or
Pro Rata Repurchase, if known. Failure to give the notice specified hereunder
shall have no effect on the status or effectiveness of the action to which the
required notice relates.
4. Voting. The shares of Series C Preferred Stock shall have
no voting rights except as required by law or as set forth below:
<PAGE> 10
(a) So long as the Series C Preferred Stock is
outstanding, each share of Series C Preferred Stock shall entitle the holder
thereof to vote, in person or by proxy, at a special or annual meeting of
stockholders, on all matters entitled to be voted on by holders of Common Stock
voting together as a single class with other shares entitled to vote thereon.
With respect to any such vote, each share of Series C Preferred Stock shall
entitle the holder thereof to cast that number of votes per share as is equal to
the number of votes that such holder would be entitled to cast had such holder
converted its shares of Series C Preferred Stock into shares of Common Stock on
the record date for determining the stockholders of the Company eligible to vote
on any such matters.
(b) So long as Series C is Preferred Stock
outstanding, the Company shall not, without the affirmative vote at a meeting or
the written consent with or without a meeting of the holders of shares of Series
C Preferred Stock representing at least a majority of the aggregate voting power
of shares of the Series C Preferred Stock outstanding, voting as a separate
class, authorize or issue any Senior Stock or Parity Stock or reclassify any
Junior Stock as Parity Stock or Senior Stock or reclassify any Parity Stock as
Senior Stock.
(c) The Company shall not, without the
affirmative vote at a meeting or the written consent with or without a meeting
of the holders of shares of Series C Preferred Stock representing at least a
majority of the aggregate voting power of shares of Series C Preferred Stock
then outstanding, voting as a separate class, amend, alter or repeal any of the
provisions of the Certificate of Incorporation or this Certificate of
Designation, including by way of merger or otherwise, so as in any such case to
adversely affect the preferences, special rights, powers or privileges of the
shares of Series C Preferred Stock.
(d) In addition to the foregoing, the holders
of the Series C Preferred Stock shall have such other voting, consent and
approval rights as are specified in the Subscription Agreement.
5. Put Rights.
5.1 Each holder of a share of Series C Preferred
Stock shall have the right, at any time after (x) the earlier to occur of (i)
the date that is six months following the Issue Date and (ii) the date upon
which the Purchaser is entitled to terminate its obligations under the
Subscription Agreement to consummate the transactions contemplated thereby to
occur at the Second Closing Date, and prior to (y) the earlier to occur of (i)
the issuance of all the Common Stock pursuant to the Second Date of Closing
under the Subscription Agreement and (ii) first anniversary of the Issue Date,
to cause the Company to repurchase any shares of Series C Preferred Stock held
by such holder at a purchase price (the "Put Purchase Price"=) equal to the
Liquidation Value thereof plus all accrued and unpaid dividends thereon pursuant
to Section 2.1 herein (the "Put Right").
<PAGE> 11
5.2 Any holder of shares of Series C Preferred
Stock electing to exercise the Put Right shall give written notice (the "Put
Right Notice") to the Company at the Company"s offices that such holder elects
to exercise its Put Right with respect to such number of shares of Series C
Preferred Stock. On the fifth Business Day following delivery of the Put Right
Notice, the Company shall pay, by wire transfer of immediately funds to an
account designated by such holder, the Put Payment to which such holder is
entitled against delivery by the holder of the certificate or certificates for
such shares at the offices of the Company (or at such other place in New York
City as the Company may designate by written notice to the holders of shares of
Series C Preferred Stock) during regular business hours, duly endorsed to the
Company or in blank, or accompanied by instruments of transfer to the Company or
in blank, in a form reasonably satisfactory to the Company.
6. Liquidation Rights. For the purposes of this Section 6, an
"Extraordinary Event" shall mean: (i) the dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary; (ii) the sale, exchange or
other conveyance (for cash, shares of stock, securities or other consideration)
of all or substantially all the property and assets of the Company other than to
a wholly-owned subsidiary; and/or (iii) any consolidation or merger to which the
Company is a party, other than a merger or consolidation in which the Company is
the surviving or continuing corporation.
6.1 Upon an Extraordinary Event, the holders of the
shares of Series C Preferred Stock shall be entitled to receive out of the
assets of the Company available for distribution to stockholders, in preference
to the holders of, and before any payment or distribution shall be made on,
Junior Stock, an amount (the "Liquidation Amount") equal to the greater of (i)
the Liquidation Value per share plus all accrued and unpaid dividends thereon
(whether or not declared) to the date fixed for the Extraordinary Event, or (ii)
the amount that it would have received if immediately prior to the Extraordinary
Event, the Series C Preferred Stock had been converted to Common Stock.
6.2 After the payment to the holders of the shares
of Series C Preferred Stock of full preferential amounts provided for in this
Section 6, the holders of Series C Preferred Stock as such shall have no right
or claim to any of the remaining assets of the Company.
6.3 In the event the assets of the Company
available for distribution to the holders of shares of Series C Preferred Stock
upon an Extraordinary Event shall be insufficient to pay in full all amounts to
which such holders are entitled pursuant to Section 6.1, then the holders of all
shares of Series C Preferred Stock shall share ratably in such distribution of
assets in accordance with the amount that would be payable on such distribution
if the amounts to which the holders of outstanding shares of Series C Preferred
Stock are entitled were paid in full.
7. Other Provisions.
<PAGE> 12
7.1 Shares of Series C Preferred Stock issued and
reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of Preferred Stock of the
Company undesignated as to series and may with any and all other authorized but
unissued shares of Preferred Stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of Preferred
Stock of the Company, except that any issuance or reissuance of shares of Series
C Preferred Stock must be in compliance with this certificate of designation.
7.2 The Company shall be entitled to recognize the
exclusive right of a Person registered on its records as the holder of shares of
Series C Preferred Stock, and such record holder shall be deemed the holder of
such shares for all purposes.
7.3 Any registered holder of Series C Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designations and to enforce specifically
the terms and provisions of this Certificate of Designations in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
7.4 If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
7.5 All notice periods referred to herein shall
commence on the date of the mailing of the applicable notice.
<PAGE> 13
IN WITNESS WHEREOF, BALANCED CARE CORPORATION has caused this
certificate to be duly executed and attested as of the day and year first above
written.
BALANCED CARE CORPORATION
By:_________________________________
Name:
Title:
Dated: October 8, 1999
[SEAL]
ATTEST: _________________
<PAGE> 1
Exhibit 9.1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 8, 1999 (this
"Agreement"), by and among IPC Advisors S.A.R.L., a Luxemburg corporation
("Purchaser") and the stockholders of Balanced Care Corporation, a Delaware
corporation (the "Company") listed on the signature pages hereto (each, a
"Shareholder" and, collectively, the "Shareholders").
WHEREAS, the Company and Purchaser propose to enter into an
Subscription Agreement, dated as of the date hereof (the "Subscription
Agreement"), which provides for, among other things, the purchase by the
Purchaser from the Company of 13,400,000 shares of common stock, par value $.001
per share (the "Company Common Stock") of the Company (the "Issuance");
WHEREAS, as of the date hereof, the Shareholders are holders
of record or Beneficially Own (as defined herein) shares of Company Common
Stock; and
WHEREAS, as a condition to the willingness of Purchaser to
enter into the Subscription Agreement, Purchaser has required that each
Shareholder agrees, and in order to induce Purchaser to enter into the
Subscription Agreement, each Shareholder has agreed, severally and not jointly,
to enter into this Agreement with respect to all of the shares of Company Common
Stock now held of record or Beneficially Owned and which may hereafter be
acquired by such Shareholder (collectively, the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section I.1 General. Capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Subscription
Agreement.
Section I.2 Beneficial Ownership. For purposes of this
Agreement, "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
<PAGE> 2
2
ARTICLE II
Section II.1 Voting Agreement. Each of the Shareholders hereby
agrees as follows:
(a) to appear, or cause the holder of record on any
applicable record date with respect to any Shares Beneficially Owned by such
Shareholder (the "Record Holder") to appear, in person or by proxy, for the
purpose of obtaining a quorum at any annual or special meeting of stockholders
of the Company and at any adjournment or postponement thereof at which matters
relating to the Issuance, the Subscription Agreement or any transaction
contemplated thereby are considered; and
(b) at any meeting of the stockholders of the Company,
however called, and in any action by consent of the stockholders of the Company,
to vote, or cause to be voted by the Record Holder, in person or by proxy, the
Shares held of record or Beneficially Owned by such Shareholder: (i) in favor of
the adoption and approval of the Issuance pursuant to the Subscription Agreement
and (ii) as directed by the Purchaser on any other matter.
Section II.2 No Ownership Interest. Except as set forth in
Section 2.1, nothing contained in this Agreement shall be deemed to vest in
Purchaser any direct or indirect ownership or incidence of ownership of or with
respect to any Shares. All rights, ownership and economic benefits of and
relating to the Shares shall remain and belong to the Shareholders, and
Purchaser shall have no authority to exercise any power or authority to direct
the Shareholders in the voting of any of the Shares except as otherwise provided
herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants,
severally and not jointly, to Purchaser as follows:
Section III.1 Authority Relative to This Agreement. Such
Shareholder has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Where such Shareholder is a corporation,
partnership or other entity, the execution and delivery of this Agreement by
such Shareholder and the consummation by such Shareholder of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors or other governing body of such Shareholder, and no other proceedings
on the part of such Shareholder are necessary to authorize this Agreement or to
consummate such transactions and where such Shareholder is an individual, such
individual has the capacity to enter into this Agreement. This
<PAGE> 3
3
Agreement has been duly and validly executed and delivered by such Shareholder
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes a legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally or by general
principles governing the availability of equitable remedies.
Section III.2 No Conflict. (a) The execution and delivery of
this Agreement by such Shareholder does not, and the performance of this
Agreement by such Shareholder shall not, (i) where such Shareholder is a
corporation, partnership or other entity, conflict with or violate the
organizational documents of such Shareholder, (ii) conflict with or violate any
agreement, arrangement, law, rule, regulation, order, judgment or decree to
which such Shareholder is a party or by which such Shareholder (or the Shares
held of record or Beneficially Owned by such Shareholder) is bound or affected
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse or time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the Shares held of record or
Beneficially Owned by such Shareholder pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such Shareholder is a party or by which such
Shareholder (or the Shares held of record or Beneficially Owned by such
Shareholder) is bound or affected, except, in the case of clauses (ii) and (iii)
of this Section 3.2, for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent the performance by such Shareholder of
its obligations under this Agreement.
(b) The execution and delivery of this Agreement
by such Shareholder does not, and the performance of this Agreement by such
Shareholder shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Authority except for applicable
requirements, if any, of federal or state securities and antitrust laws and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent the
performance by such Shareholder of its obligations under this Agreement.
Section III.3 Title to the Shares. As of the date hereof,
such Shareholder is the record or Beneficial Owner of the Shares listed opposite
the name of such Shareholder on such Shareholder's signature page hereto. The
Shares listed opposite the name of such Shareholder on such Shareholder's
signature page hereto are all the securities of the Company either held of
record or Beneficially Owned by such Shareholder. Such Shareholder has not
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the Shares held of record or Beneficially Owned by such
Shareholder. The Shares listed opposite the name of such Shareholder on such
Shareholder's signature page hereto are owned free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, limitations
<PAGE> 4
4
on such Shareholder's voting rights, charges and other encumbrances of any
nature whatsoever other than Encumbrances under applicable Law.
ARTICLE IV
COVENANTS OF THE SHAREHOLDER
Section IV.1 No Inconsistent Agreements. Each Shareholder
hereby represents, warrants, covenants and agrees that, except as contemplated
by this Agreement and the Subscription Agreement, such Shareholder has not and
shall not, and will use its reasonable best efforts to not permit any Person
under such Shareholder's control (including any Record Holder) to, enter into
any voting agreement or grant a proxy or power of attorney with respect to the
Shares held of record or Beneficially Owned by such Shareholder which, in either
case, is inconsistent with this Agreement.
Section IV.2 Transfer of Title. Each Shareholder hereby
covenants and agrees that such Shareholder will not, prior to the termination of
this Agreement, either directly or indirectly, offer or otherwise agree to sell,
assign, pledge, hypothecate, transfer, exchange, or dispose of any Shares or
options, warrants or other convertible securities to acquire or purchase Company
Common Stock (collectively "Derivative Securities"), owned either directly or
indirectly by such Shareholder or with respect to which such Shareholder has the
power of disposition, whether now or hereafter acquired, without the prior
written consent of Purchaser (provided nothing contained herein will be deemed
to restrict the exercise or conversion of Derivative Securities outstanding on
the date hereof), unless the Person to whom Shares or Derivative Securities have
been sold, assigned, pledged, hypothecated, transferred, exchanged or disposed
agrees to be bound by this Agreement as if a party hereto. Each Shareholder
hereby agrees and consents to the entry of stop transfer instructions by the
Company against the transfer of any Shares inconsistent with the terms of this
Section 4.2.
ARTICLE V
MISCELLANEOUS
Section V.1 No Solicitation. From the date hereof until
the consummation of the Issuance or, if earlier, the payment of both the Put
Purchase Payment under the Certificate of Designations for the Series C
Preferred Stock, in the event the Purchaser exercises the Put Right thereunder,
and the Non-Completion Fee pursuant to Section 6.8 the Subscription Agreement,
the Shareholders (a) shall not have, or shall immediately terminate any
discussions with, any third party concerning a Material Transaction and (b)
shall not, and shall not permit any officer, director, employee, controlled
Affiliate, investment banker or other agent (in such agency
<PAGE> 5
5
capacity), of the Shareholder to, directly or indirectly, (i) solicit, engage in
discussions or negotiate with any Person (whether such discussions or
negotiations are initiated by the Shareholder or otherwise) or take any other
action intended or designed to facilitate the efforts of any Person, other than
Purchaser, relating to a Material Transaction, (ii) provide information with
respect to the Company or any of its subsidiaries to any Person, other than
Purchaser, relating to a possible Material Transaction by any person other than
Purchaser, (iii) enter into an agreement with any person, other than Purchaser,
providing for a possible Material Transaction, or (iv) make or authorize any
statement, recommendation or solicitation in support of any possible Material
Transaction by any Person, other than by Purchaser.
Section V.2 Further Assurances. Each Shareholder shall use
reasonable commercial efforts to assist the Company in fulfilling its
obligations pursuant to Section 6.6 of the Subscription Agreement.
Section V.3 Termination. This Agreement shall terminate
following the occurrence of the annual or special meeting of the stockholders of
the Company at which the Issuance is voted on by the stockholders. Upon such
termination, no party shall have any further obligations or liabilities
hereunder; provided, however, that nothing in this Agreement shall relieve any
party from liability for the breach of any of its representations, warranties,
covenants and agreements set forth in this Agreement prior to such termination.
Section V.4 Additional Shares. If, after the date hereof,
a Shareholder acquires the right to vote any additional shares of Company Common
Stock (any such shares shall be referred to herein as "Additional Shares"),
including, without limitation, upon exercise or conversion of any Derivative
Security or through any stock dividend or stock split, the provisions of this
Agreement applicable to the Shares shall be applicable to such Additional Shares
as if such Additional Shares had been outstanding Shares as of the date hereof.
The provisions of the immediately preceding sentence shall be effective with
respect to Additional Shares without action by any Person immediately upon the
acquisition by a Shareholder of record or Beneficial Ownership of such
Additional Shares.
Section V.5 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
Section V.6 Entire Agreement. This Agreement constitutes
the entire agreement between Purchaser and the Shareholders with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between Purchaser and the Shareholders with respect to
the subject matter hereof.
<PAGE> 6
6
Section V.7 Amendment. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section V.8 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
or law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereby shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in a mutually acceptable manner in order that the terms of this
Agreement remain as originally contemplated.
Section V.9 Notices. Any notice, consent, waiver,
approval or other communication required or permitted to be given hereunder
shall be in writing and shall be given by prepaid first-class mail, by facsimile
or other means of electronic communication or by hand delivery as hereinafter
provided. Any such notice, consent, waiver, approval or other communication, if
mailed by prepaid first-class mail at any time other than during a general
discontinuance of postal service due to strike, lock-out or otherwise shall be
deemed to have been received on the fourth (4th) Business Day after the
post-marked date thereof, or if sent by facsimile or other means of electronic
communication, shall be deemed to have been received on the Business Day
following the sending, or if delivery by hand shall be deemed to have been
received at the time it is delivered to the applicable address noted below
either to the individual designated below or to an individual at such address
having apparent authority to accept deliveries on behalf of the addressee.
Notice of change of address shall also be governed by this section. In the event
of a general discontinuance of postal service due to strike, lockout or
otherwise, notices or other communications shall be delivered by hand or sent by
facsimile or other means of electronic communication and shall be deemed to have
been received in accordance with this section. Notices and other communications
shall be addressed as follows:
If to a Shareholder to the address set forth on such
Shareholder's signature page hereto.
If to Purchaser, to:
IPC Advisors S.A.R.L.
c/o Unsworth & Associates
Herengrach 483
1017 BT
Amsterdam
Attention: Brad Unswroth
Fax: 011-31-20-623-2285
<PAGE> 7
7
with a copy to:
Central Park Lodges
175 Bloor Street East
South Tower
Toronto, Ontario M4W 3R8
Attention: Manfred J. Walt
Fax: (416) 323-3818
with another copy to:
Goodman Phillips & Vineberg
250 Yonge Street
Suite 2400
Toronto, Ontario M5B 2M6
Attention: Stephen Pincus
Fax: (416) 979-1234
Section V.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such state.
Section V.11 Obligations of Shareholders. The obligations
of the Shareholders hereunder shall be "several" and not "joint" or "joint and
several." Without limiting the generality of the foregoing, under no
circumstances will any Shareholder have any liability or obligation with respect
to any misrepresentation or breach of covenant of any other Shareholder.
Section V.12 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be an original and all of
which, when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Shareholders and Purchaser
have caused this Agreement to be duly executed on the date hereof.
IPC Advisors S.A.R.L.
By: ____________________________________
Name:
Title:
Brad E. Hollinger
Number of Shares: 779,463
Address: Balanced Care Corporation
1215 Manor Drive
<PAGE> 8
8
Mechanicsburg, Pennsylvania
17055
David K. Barber
Number of Shares: 71,554
Address: Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania
17055
Robert Sutton
Number of Shares: 433,838
Address: Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania
17055
Robin Barber
Number of Shares: 64,054
Address: Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania
17055
Bill R. Foster, Sr.
Number of Shares: 767,412
Address: Foster Health Care Group
426 South Jefferson
Springfield, MO
65801-2351
John Brennan
Number of Shares: 1,049,051
Address: 11212 Mann Road
Mooresville, IN
46158
Suzanne B. Croco (by Power of Attorney)
<PAGE> 9
9
Number of Shares: 41,554
Address: 2956 Alta Court
Lisle, Illinois
60532
Stacey Reitz (by Power of Attorney)
Scott Reitz (by Power of Attorney)
Number of Shares: 36,353
Address: 516 Seminole Drive
Blacksburg, Virginia
24060
Sarah Barber (by Power of Attorney)
Number of Shares: 306,100
Address: 4076 Greystone Drive
Harrisburg, Pennsylvania
17112
James Diebold (by Power of Attorney)
Number of Shares: 190,852
Address: 735 Markham Court
Lewisberry, Pennsylvania
17339
F. David Carr (by Power of Attorney)
Number of Shares: 115,661
Address: 1350 Bayshore Highway, Suite 300
Burlingame, California
94010
Acknowledged:
BALANCED CARE CORPORATION
By: ____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE CONTACT: BRAD E. HOLLINGER, CEO
CLINT T. FEGAN, CFO
(717) 796-6100
BALANCED CARE ANNOUNCED TODAY A $21 MILLION EQUITY FUNDING
COMMITMENT FROM IPC ADVISORS S.A.R.L.
MECHANICSBURG, PA, OCTOBER 11, 1999----Balanced Care Corporation announced today
that it has secured a $21 million equity funding commitment from IPC Advisors
S.A.R.L., a company owned by a trust whose beneficiaries are Mr. Paul Reichmann,
Mrs. Lea Reichmann and their children.
The investment has been structured in two tranches. The first tranche is in the
form of a convertible preferred stock that closed today providing Balanced Care
with over $4.1 million in equity capital. This preferred stock is convertible
into 3,300,000 shares of common stock representing a 16.5% equity interest in
Balanced Care. IPC Advisors has also agreed to subscribe for an additional 13.4
million shares of common stock of Balanced Care at $1.25 per share, subject to
shareholder approval. Mr. Brad Hollinger, Chairman and CEO of Balanced Care, and
certain other significant shareholders have agreed to vote in favor of this
transaction. To avoid the necessity of calling a special shareholders meeting,
Balanced Care has postponed its annual shareholders meeting, which would have
been held in November, 1999. The annual meeting of shareholders will be
rescheduled as soon as practicable. Following completion of the proposed
transaction, IPC Advisors will own approximately 49% of Balanced Care.
The Company and IPC Advisors have entered into a standstill agreement under
which IPC Advisors will not initiate any merger, tender offer or similar
transaction for common shares of the Company at a price less than $6.00 per
share over the next 36 months without board approval.
As part of the transaction, the Balanced Care board has been expanded from seven
to nine members with IPC Advisors appointing four of these nine seats comprising
Mr. Paul Reichmann, his son Mr. Barry Reichmann, Mr. George Kuhl and Mr. Manfred
Walt. Mr. Paul Reichmann is the Chairman of Central Park Lodges, Ltd., Mr.
George Kuhl the Vice Chairman, Mr. Barry Reichmann the President and CEO and Mr.
Manfred Walt the Executive Vice President and CFO.
Mr. Brad Hollinger, Chairman and CEO of Balanced Care, said "We are very excited
about the strategic association created between IPC Advisors and Balanced Care
which brings not only needed equity capital to the Company but the association
with Mr. Reichmann brings significant finance, corporate and real estate
expertise as well."
(CONTINUED ON NEXT PAGE)
<PAGE> 2
Mr. Hollinger continued, "Balanced Care has made great operating progress over
the past several months and now has the needed financial partner to enhance
shareholder value through realizing the embedded growth in the Company's
assisted living portfolio." He added, "It is our intent to utilize the new
capital to...
- - Lease-up and operate our young portfolio of signature assisted living
communities throughout the mid-Atlantic region.
- - To accelerate the purchase from Black Box owners of ten to fourteen
operations that have achieved positive cash flow.
- - Strategically develop and/or acquire additional capacity in our defined
operating markets."
Mr. Reichmann stated, "This investment in Balanced Care is a strategic
investment for IPC Advisors. Balanced Care has over 6,000 beds in operation or
under construction. We view the current public market sentiment in the U.S. as
an investment opportunity and see our association with the Balanced Care team as
a logical first step in expanding our share of the assisted living market in the
U.S."
Central Park Lodges. Ltd., Canada's largest assisted living company, is 70%
owned by Mr. Paul Reichmann and his family and 30% owned by Mr. George Kuhl and
his family. Central Park Lodges currently operates or has under development, 92
facilities having over 9,800 beds. In addition, Central Park Lodges owns a 15%
interest in and manages CPL Long Term Care REIT, Canada's largest skilled
nursing facility entity, which is listed on the Toronto Stock Exchange.
Mr. Reichmann stated, "We believe that Brad and his management team have a
common philosophy with us and have established an excellent platform upon which
to grow. I expect to leverage the talents from CPL and Balanced Care into a
dominant industry player."
Balanced Care Corporation is a leading provider of senior care services in
non-urban, secondary markets, providing a continuum of senior care that includes
assisted living, independent living, specialized dementia services and in
certain markets, extended care. The Company utilizes assisted living facilities
as the primary service platform to provide an array of health care and
hospitality services, including preventive care and wellness, medical
rehabilitation, Alzheimer's/dementia care and extended care services.
Except for the historical information contained in the press release, the
matters discussed herein contain forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from expectations. These include risks associated with, among other
things, substantial debt and operating lease payment obligations, integration of
acquired operations, managing rapid expansion, the need for additional
financing, the possibility of rising interest rates, securing necessary
licensing and permits, construction delays, cost increases on new construction
and increased competition. These and other risks are set forth in the company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 and other
reports recently filed with the Securities and Exchange Commission.
