<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 1-13845
BALANCED CARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 25-1761898
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1215 MANOR DRIVE, MECHANICSBURG, PA 17055
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(717) 796-6100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT NOVEMBER 12, 1999
----- --------------------------------
<S> <C>
Common Stock, $.001 par value 16,722,846
</TABLE>
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- --------------------------------------------------------------------------------
<PAGE> 2
BALANCED CARE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1:
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1999 and
June 30, 1999.......................................... 3
Consolidated Statements of Operations for the three months
ended September 30, 1999 and 1998...................... 4
Consolidated Statement of Stockholders' Equity for the
three months ended September 30, 1999.................. 5
Consolidated Statements of Cash Flows for the three months
ended September 30, 1999 and 1998...................... 6
Notes to Consolidated Financial Statements................ 7
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 11
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK...................................................... 19
ITEM 5:
OTHER EVENTS................................................ 19
PART II -- OTHER INFORMATION
ITEM 6:
EXHIBITS AND REPORTS ON FORM 8-K............................ 20
(A) Exhibits
(B) Reports on Form 8-K
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALANCED CARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1999 1999
------------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,731 $ 8,160
Receivables (net of allowance for doubtful receivables)... 11,544 11,912
Development contracts in process.......................... 2,318 2,559
Prepaid expenses and other current assets................. 642 973
-------- --------
Total current assets.............................. 19,235 23,604
Restricted investments...................................... 2,543 2,714
Property and equipment, net................................. 25,202 24,075
Goodwill, net............................................... 15,149 15,293
Purchase option deposits.................................... 5,007 2,974
Other assets................................................ 1,995 2,395
-------- --------
Total assets...................................... $ 69,131 $ 71,055
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 616 $ 450
Accounts payable.......................................... 8,007 10,016
Accrued payroll........................................... 2,294 1,339
Accrued expenses.......................................... 5,258 4,357
-------- --------
Total current liabilities......................... 16,175 16,162
Long-term debt, net of current portion...................... 14,803 11,773
Straight-line lease liability............................... 3,427 3,537
Deferred revenue and other liabilities...................... 797 1,225
-------- --------
Total liabilities................................. 35,202 32,697
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value; authorized -- 5,000,000
shares; none outstanding............................... -- --
Preferred stock, Series A; authorized -- 1,150,958 shares;
none outstanding....................................... -- --
Common stock, $.001 par value; authorized -- 50,000,000
shares; issued and outstanding -- 16,722,846 shares at
September 30, 1999 and June 30, 1999................... 17 17
Additional paid-in capital................................ 63,814 63,814
Accumulated deficit....................................... (29,902) (25,473)
-------- --------
Total stockholders' equity........................ 33,929 38,358
-------- --------
Total liabilities and stockholders' equity........ $ 69,131 $ 71,055
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues:
Patient services............................................ $11,045 $12,365
Resident services......................................... 6,895 5,915
Development fees.......................................... 397 5,263
Management fees........................................... 99 298
Other revenues............................................ 41 30
------- -------
Total revenues.............................................. 18,477 23,871
------- -------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits........................... 8,821 8,341
Other operating expenses............................... 5,429 5,919
Development, general and administrative expense........... 2,594 3,642
Provision for losses under shortfall funding agreements... 800 --
Lease expense............................................. 3,439 2,389
Depreciation and amortization expense..................... 740 506
------- -------
Total operating expenses.................................... 21,823 20,797
------- -------
Income (loss) from operations.......................... (3,346) 3,074
Other income (expense):
Interest and other income................................. 57 304
Interest expense.......................................... (399) (105)
------- -------
Income (loss) before income taxes and extraordinary
item.................................................. (3,688) 3,273
Provision for income taxes.................................. 2 1,333
------- -------
Income (loss) before extraordinary item................ (3,690) 1,940
Extraordinary loss on extinguishment of debt................ (739) --
------- -------
Net income (loss)...................................... $(4,429) $ 1,940
======= =======
Basic earnings (loss) per share:
Income (loss) before extraordinary item................... $ (0.22) $ 0.12
======= =======
Net income (loss)......................................... $ (0.26) $ 0.12
======= =======
Diluted earnings (loss) per share:
Income (loss) before extraordinary item................... $ (0.22) $ 0.11
======= =======
Net income (loss)......................................... $ (0.26) $ 0.11
======= =======
Weighted average shares -- basic............................ 16,723 16,696
======= =======
Weighted average shares -- diluted.......................... 16,723 17,983
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDTL.
ISSUED PAR PAID-IN
SHARES VALUE CAPITAL DEFICIT TOTAL
------ ----- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999.................... 16,723 $17 $63,814 $(25,473) $38,358
Net loss.................................... -- -- -- (4,429) (4,429)
------ --- ------- -------- -------
Balance at September 30, 1999............... 16,723 $17 $63,814 $(29,902) $33,929
====== === ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)........................................... $(4,429) $ 1,940
Adjustments to reconcile net income (loss) to net cash used
for Operating activities:
Depreciation and amortization............................. 740 506
Deferred income taxes..................................... -- 1,308
Provision for losses under shortfall funding agreement.... 800 --
Extraordinary loss on extinguishment of debt.............. 739 --
Changes in operating assets and liabilities, excluding
effects of acquisitions:
Increase in receivables, net........................... (432) (1,000)
Decrease in development contracts in process, net...... 240 (1,615)
Decrease in prepaid expenses and other current
assets................................................ 331 199
Decrease in accounts payable, accrued payroll and
accrued expenses...................................... (153) (1,132)
------- -------
Net cash provided (used) for operating activities.... (2,164) 206
------- -------
Cash Flows from Investing Activities:
Purchases of property and equipment....................... (1,657) (456)
Decrease (increase) in restricted invests................. 171 (159)
Increase in purchase options and other assets............. (1,730) (1,679)
Business acquisitions..................................... -- (1,617)
------- -------
Net cash used for investing activities............... (3,216) (3,911)
------- -------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt.................. 6,403 --
Payments on long-term debt (including extinguishment costs
of $707)............................................... (3,914) (50)
Proceeds from issuance of common stock.................... -- 5
Decrease in straight-line lease liability................. (110) --
Decrease in other liabilities............................. (428) (141)
------- -------
Net cash provided (used) for financing activities.... 1,951 (186)
------- -------
Decrease in cash and cash equivalents..................... (3,429) (3,891)
Cash and cash equivalents at beginning of period.......... 8,160 15,481
------- -------
Cash and cash equivalents at end of period.................. $ 4,731 $11,590
======= =======
Supplemental Cash Flow Information:
Cash paid during the period for interest.................. $ 399 $ 105
======= =======
Cash paid during the period for income taxes.............. $ 2 $ 1
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Background
Balanced Care Corporation (the "Company") was incorporated in April 1995
and is engaged in the operation and selective development and acquisition of
assisted living facilities and other operations which facilitate implementation
of the Company's balanced care continuum strategy, such as medical
rehabilitation, dementia and Alzheimer's services, home health care and skilled
nursing. As of September 30, 1999, the Company owned, leased or managed 61
assisted and independent living communities and 13 skilled nursing facilities.
Also at September 30, 1999, the Company had 13 assisted living communities under
construction. The Company also operated a home health agency and rehabilitation
agencies. The Company's operations are located in Pennsylvania, Missouri,
Arkansas, Virginia, Ohio, North Carolina, Tennessee, West Virginia, Florida,
Maryland and Indiana.
(b) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries from their respective acquisition
dates. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
The financial statements as of and for the three-month periods ended
September 30, 1999 and 1998 are unaudited, but in the opinion of management,
have been prepared on the same basis as the audited financial statements and
reflect all adjustments, consisting of normal recurring accruals necessary for a
fair presentation of the information set forth therein. The results of
operations for the three-month period ended September 30, 1999 are not
necessarily indicative of the operating results to be expected for the full year
or any other period. These financial statements and notes should be read in
conjunction with the financial statements and notes included in the audited
consolidated financial statements of the Company for the year ended June 30,
1999 as contained in the Company's Annual Report on Form 10-K (as amended).
2. PRO FORMA RESULTS OF OPERATIONS
The following unaudited summary, prepared on a pro forma basis, combines
the results of operations of the acquired businesses with those of the Company
as if the acquisitions and leases had been consummated as of the beginning of
the period. The acquired businesses and their respective acquisition dates were
Extended Care Operators of Harrisburg, LLC d/b/a Harrisburg Outlook Pointe in
March 1999, TC Realty of Sherwood, Inc. d/b/a Sherwood Outlook Pointe in April
1999, TC Realty of Mountain Home, Inc. d/b/a Mountain Home Outlook Pointe in
April 1999, TC Realty of Altoona, Inc. d/b/a Altoona Outlook Pointe in May 1999
and TC Realty of Reading, Inc. d/b/a Reading Outlook Pointe in May 1999. The pro
forma results include the impact of certain adjustments such as: amortization of
goodwill, depreciation of assets acquired, interest on acquisition financing and
lease payments on the leased facility (in thousands, except for per share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Revenue..................................................... $18,477 $24,821
Income (loss) before extraordinary item..................... $(3,690) $ 1,880
======= =======
Income (loss) before extraordinary item per common
share -- diluted.......................................... $ (0.22) $ 0.10
======= =======
</TABLE>
The unaudited pro forma results are not necessarily indicative of what
actually might have occurred if the acquisitions had been completed as of July
1, 1999 and 1998. In addition, they are not intended to be a projection of
future results of operations.
7
<PAGE> 8
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. EARNINGS PER SHARE
Earnings (loss) per share ("EPS") is computed using the weighted average
number of common shares and common equivalent shares outstanding (using the
treasury stock method). For the three month period ended September 30, 1999,
common equivalent shares from stock options and warrants are excluded from the
computation, as their effect is antidilutive.
A reconciliation of the weighted average shares used in the computation of
EPS follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Weighted average common shares outstanding.................. 16,723 16,696
Stock options and warrants computed using the Treasury stock
method...................................................... -- 1,287
------ ------
Shares used for diluted EPS................................. 16,723 17,983
====== ======
</TABLE>
4. LINE OF CREDIT AMENDMENTS AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
In April 1999, the Company entered into a $15 million line of credit (the
"Line of Credit") with HCFP Funding, Inc. (the "Lender"). The Line of Credit is
secured by the real estate owned by five of the Company's subsidiaries (BCC at
Darlington, Inc., Balanced Care at Eyers Grove, Inc., Balanced Care at Butler,
Inc., Balanced Care at Sarver, Inc. and Balanced Care at North Ridge, Inc.
(collectively, the "Real Estate Borrowers")) and the eligible accounts
receivable of the Company's ten Missouri skilled nursing facilities. The Line of
Credit is for a term of three years, and of the outstanding borrowings bear
interest at a rate per annum of prime plus 2.75%. In July 1999, the terms of the
Line of Credit were amended. These amendments modified certain definitions and
the borrowing base calculation, increased the Line of Credit to $20 million and
added the real estate of two of the Company's subsidiaries to the lender's
security interest: BCC at Republic Park Care Center, Inc. and BCC at Nevada Park
Care Center, Inc. (the "Skilled Nursing Facility Borrowers"). The primary
component of the borrowing base consists of 85% of the product of 8.0 to 8.5
times EBITDA of the Real Estate Borrowers plus 85% of the product of 6 times
EBITDA of the Skilled Nursing Facility Borrowers. Including the amendments to
the Line of Credit, the borrowing base available (calculated as of September 30,
1999) was approximately $15 million. At September 30, 1999, $12.7 million was
borrowed under the Line of Credit. In a related transaction, the Company repaid
the Skilled Nursing Facility Borrowers' outstanding mortgage debt of $3.1
million. As a result, the Company reported a loss on the early extinguishment of
debt of $739,000 in the first quarter of Fiscal 2000.
5. SUBSEQUENT EVENT
In October 1999, the Company entered into a Subscription Agreement (the
"Subscription Agreement") with IPC Advisors S.A.R.L., a Luxembourg Company
("IPC"), under which IPC agreed to make an equity investment of approximately
$21.0 million in the Company, 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 a price per share of $1.25 for an aggregate
purchase price of $4,125,000. 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 a price per share of $1.25 for an aggregate purchase price of
$16,750,000. If stockholder approval is received, the outstanding shares of
Series C Preferred Stock will automatically convert into 3,300,000 shares of
Common Stock, and IPC will own approximately 49.9% of the outstanding shares of
Common Stock of the Company.
8
<PAGE> 9
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also in connection with the Transaction, IPC and certain stockholders of
the Company entered into a Voting Agreement dated October 8, 1999 (the "Voting
Agreement"). Under the Voting Agreement, the stockholders, who own 3,905,892
shares of the Company's Common Stock, have agreed to vote their shares in favor
of the second tranche of the Transaction. The shares subject to the Voting
Agreement represent 23.36% of the Company's outstanding Common Stock. Also in
connection with the Transaction the Company and IPC entered into a Registration
Rights Agreement dated October 8, 1999 (the "Registration Rights Agreement").
Under the Registration Rights Agreement, IPC is entitled to certain demand and
piggyback registration rights with respect to the shares of Common Stock issued
to IPC in the Transaction.
In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by Financial Care Investors, LLC, a Delaware limited liability company
("FCI"). FCI and its six wholly-owned Operator/Lessees also entered into lease
agreements with a real estate investment trust ("REIT"). The terms of the
agreements among the parties are similar to the terms of the agreements the
Company has entered into with independent third party Operator/Lessees. FCI was
previously owned by Brad E. Hollinger, Chairman of the Board, President and
Chief Executive Officer of the Company. Effective as of September 30, 1999, FCI
redeemed Mr. Hollinger's equity interests in FCI and its six Operator/Lessees.
6. SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 established standards for the
way public business enterprises are to report information about operating
segments in annual and interim financial statements issued to shareholders. It
also established standards for related disclosures about products and services,
geographic areas and major customers.
The Company has three primary reportable segments: (i) Resident Services
which includes all assisted living and independent living services, and the
management of assisted living facilities, (ii) Patient Services which includes
skilled nursing services, home health services, and medical rehabilitation
services, and (iii) Development, General and Administrative. No other individual
business segment exceeds the 10% quantitative thresholds of SFAS No. 131.
Balanced Care Corporation management evaluates the performance of its
operating segments on the basis of income from continuing operations before
non-recurring items (representing provisions for losses on development
activities and severance agreements and gains and losses on sales of assets),
lease expense, interest (net), taxes, depreciation and amortization.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 7,035 $11,045 $ 397 $18,477
Operating expenses............................ 4,438 9,812 -- 14,250
Development, general and administrative
expenses.................................... -- -- 2,594 2,594
Provision for losses under shortfall funding
agreements.................................. 800 -- -- 800
------- ------- ------- -------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization................................ $ 1,797 $ 1,233 $(2,197) $ 833
======= ======= ======= =======
Total Assets.................................. $40,605 $11,384 $17,142 $69,131
======= ======= ======= =======
</TABLE>
9
<PAGE> 10
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 6,243 $12,365 $ 5,263 $23,871
Operating expenses............................ 3,635 10,625 -- 14,260
Development, general and administrative
expenses.................................... -- -- 3,642 3,642
Provision for losses under shortfall funding
agreements.................................. -- -- -- --
------- ------- ------- -------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization................................ $ 2,608 $ 1,740 $ 1,621 $ 5,969
======= ======= ======= =======
Total Assets........................ $38,771 $15,909 $31,650 $86,330
======= ======= ======= =======
</TABLE>
10
<PAGE> 11
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis addresses the Company's results of
operations on a historical basis for the three-month periods ended September 30,
1999 and 1998, and the Company's liquidity and capital resources. This
information should be read in conjunction with the Company's consolidated
financial statements contained elsewhere in this report. This report contains,
in addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially.
Factors that could cause or contribute to such differences include, but are not
limited to, those disclosed in "Risk Factors" in the Company's Annual Report on
Form 10-K for the year ended June 30, 1999 as amended
OVERVIEW
The Company was incorporated in April 1995 and is engaged in the operation
and selective development and acquisition of assisted living facilities and
other operations which facilitate implementation of the Company's balanced care
continuum strategy, such as medical rehabilitation, dementia and Alzheimer's
services, home health care and extended care.
The Company has grown primarily through acquisitions and by designing,
developing, operating and managing its Outlook Pointe(R) signature series
assisted living facilities. The following table summarizes the Company's
operating facilities at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------------------------
1999 1998
-------------------------------- --------------------------------
OWNED LEASED MANAGED TOTAL OWNED LEASED MANAGED TOTAL
----- ------ ------- ----- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Developed Assisted Living
Facilities....................... -- 6 33 39 -- 1 15 16
Acquired Assisted Living
Facilities......................... 5 13 -- 18 13 12 -- 25
Skilled Nursing Facilities......... 2 11 -- 13 3 10 -- 13
Independent Living Facilities...... -- 4 -- 4 -- 4 -- 4
-- -- -- -- -- -- -- --
7 34 33 74 16 27 15 58
== == == == == == == ==
</TABLE>
As of September 30, 1999, the Company had operations in Pennsylvania,
Missouri, Arkansas, Virginia, Ohio, North Carolina, Tennessee, West Virginia,
Florida, Maryland and Indiana. These operating facilities have a capacity for
3,568 assisted living residents, 1,304 skilled nursing patients and 117
independent living residents. The Company also operates a home health care
agency in Missouri. As of September 30, 1999, the Company has discontinued its
own rehabilitation agencies and now exclusively utilizes independent agencies to
provide therapy services.
In addition to the 39 Outlook Pointe(R) signature series assisted living
facilities opened as of September 30, 1999, the Company has signed agreements to
develop and manage an additional 13 assisted living facilities currently under
construction, which are scheduled to open at various dates through April 2000.
The Company generates revenue from four primary sources: patient services,
resident services, development fees and management fees. Patient services
revenues include charges for room and board, rehabilitation therapies, pharmacy,
medical supplies, subacute care, home healthcare, and other programs provided to
patients in skilled nursing facilities as well as rehabilitation and homehealth
services provided to assisted living facility residents. Resident services
include all revenue earned from services provided by the Company's licensed
agencies which are included in patient services revenues. Development fees and
management fees are earned for developing and managing assisted living
facilities for REITs and other owners or lessees. As the Company continues to
implement its business plan, management believes that the mix of the Company's
revenues will continue to change and that revenues from assisted living resident
services will increase as a percentage of total revenues.
11
<PAGE> 12
The Company classifies its operating expenses into the following
categories: (i) facility operating expenses, which include labor, food,
marketing, rehabilitation therapy costs and other direct facility expenses; (ii)
development, general and administrative expense, which primarily include
corporate office expenses, regional office expense, development expenses and
other overhead costs; (iii) provisions for losses, which include losses relating
to working capital advances made under shortfall funding agreements; (iv) lease
expense, which includes rent for the facilities operated by the Company as well
as corporate office and other rent; and (v) depreciation and amortization.
RECENT DEVELOPMENTS
In October 1999, the Company entered into a Subscription Agreement (the
"Subscription Agreement") with IPC Advisors S.A.R.L., a Luxembourg Company
("IPC"), under which IPC agreed to make an equity investment of approximately
$21.0 million in the Company, 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 a price per share of $1.25 for an aggregate
purchase price of $4,125,000. 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 a price per share of $1.25 for an aggregate purchase price of
$16,750,000. If stockholder approval is received, the outstanding shares of
Series C Preferred Stock will automatically convert into 3,300,000 shares of
Common Stock, and IPC will own approximately 49.9% of the outstanding shares of
Common Stock of the Company.
In connection with the Transaction, IPC and certain stockholders of the
Company entered into a Voting Agreement dated October 8, 1999 (the "Voting
Agreement"). Under the Voting Agreement, the stockholders, who own 3,905,892
shares of the Company's Common Stock, have agreed to vote their shares in favor
of the second tranche of the Transaction. The shares subject to the Voting
Agreement represent 23.36% of the Company's outstanding Common Stock. Also in
connection with the Transaction the Company and IPC entered into a Registration
Rights Agreement dated October 8, 1999 (the "Registration Rights Agreement").
Under the Registration Rights Agreement, IPC is entitled to certain demand and
piggyback registration rights with respect to the shares of Common Stock issued
to IPC in the Transaction.
CENSUS TRENDS
Operationally, the Company continues to see the results of its emphasis on
operations and marketing implemented in the fiscal year ended June 30, 1999. The
Company has improved their average census absorption rate at the Outlook
Pointe(R) signature series assisted living communities from 6.28 residents per
building for the quarter ended September 30, 1998 to 12.0 for the last 3 months.
The Company attributes this improvement to its increased investment in
marketing, a new professionally trained and managed sales team, and a focused
community outreach initiative over the past 10 months. The Company believes the
positive effects of the marketing and sales training program and the refined
positioning of the product in the marketplace will continue to increase the
Company's average quarterly census absorption rate.
12
<PAGE> 13
The following table sets forth, for the periods indicated, certain assisted
living resident capacity and occupancy data for the date indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------------------- --------------------------------
STABLE STABLE STABLE STABLE
COMMUNITIES(1) BEDS(1) TOTAL COMMUNITIES(1) BEDS(1) TOTAL
-------------- ------- ----- -------------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
End of Period Capacity
Owned.......................... 5 332 332 6 455 455
Leased......................... 23 1,136 1,136 17 746 746
Managed........................ 7 416 2,217 -- -- 869
-- ----- ----- -- ----- -----
Total.......................... 35 1,884 3,685 23 1,201 2,070
== ===== ===== == ===== =====
End of Period Occupancy
Owned.......................... 88% 88% 87% 87%
Leased......................... 89% 89% 89% 89%
Managed........................ 75% 47% -- 39%
----- ----- ----- -----
Total.......................... 86% 64% 88% 68%
===== ===== ===== =====
</TABLE>
- ---------------
(1) Includes communities or expansions thereof that have (i) achieved 90%
occupancy; (ii) have been opened at least 15 months; or (iii) were acquired
as mature properties.
The above data does not contain divested communities.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain data as
a percentage of total revenue:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
------ ------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Patient services............................................ 59.8% 51.8%
Resident services........................................... 37.3 24.8
Development fees............................................ 2.2 22.1
Management fees............................................. 0.5 1.2
Other....................................................... 0.2 0.1
----- -----
Total revenue............................................... 100.0% 100.0%
Operating expenses:
Facility operating expenses............................... 77.2 59.7
Development, general and administrative expense........... 14.0 15.3
Charges under shortfall funding agreements................ 4.3 --
Lease expense............................................. 18.6 10.0
Depreciation and amortization expense..................... 4.0 2.1
----- -----
Income (loss) from operations............................... (18.1) 12.9
Other income (expense)...................................... (1.9) 0.8
----- -----
Income (loss) before income taxes and extraordinary item.... (20.0) 13.7
Provision for income taxes.................................. -- 5.6
----- -----
Income (loss) before extraordinary item..................... (20.0) 8.1
Extraordinary loss on extinguishment of debt................ (4.0) --
----- -----
Net income (loss)........................................... (24.0) 8.1
===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Total Revenue. Total revenue for the three months ended September 30, 1999
decreased by $5,394,000 to $18,477,000 compared to $23,871,000 for the three
months ended September 30, 1998. This decrease is primarily attributable to: (i)
a $4,866,000 decrease in development fees due to a reduction in development
activities; (ii) a decrease in patient service revenue of $1,162,000 due to the
change in the billing rates for Medicare Part B charges adopted by the Balanced
Budget Act (approximately $830,000) and a lower census (resulting in reduced
revenue of $200,000); and (iii) a $627,000 decrease in resident service revenue
due to the sale of the Wisconsin assisted living facilities. The decrease in
revenues was partially offset by the increase in resident service revenues of
$1,575,000 which resulted primarily from the acquisition of special purpose
entities. Patient services comprised 60% and 52% of total revenues for the three
months ended September 30, 1999 and 1998, respectively.
Operating Expenses. Facility operating expenses for the three months ended
September 30, 1999 decreased by $10,000 to $14,250,000 from $14,260,000 for the
three months ended September 30, 1998. The decrease was primarily related to:
(i) decreased costs of $831,000 for the skilled nursing facilities, due
primarily to cost reducing efforts in the area of therapy delivery and (ii)
reduced expenses of $595,000 relating to the divested Wisconsin assisted living
facilities. These decreases were partially offset by increased facility
operating expenses at assisted living facilities of $1,374,000, primarily
related to the acquisition of special purpose entities. As a percentage of total
revenue, facility operating expenses were 77% for the three months ended
September 30, 1999, and 60% for the three months ended September 30, 1998. The
percentage increased due primarily to the change in development fees.
14
<PAGE> 15
Development, general and administrative expenses decreased by $1,048,000 to
$2,594,000 for the three months ended September 30, 1999 from $3,642,000 for the
three months ended September 30, 1998. The decrease in 1999 is primarily due to
the implementation of the Company's corporate restructuring and cost reduction
plan. As a percentage of total revenue, these expenses decreased to 14% for the
three months ended September 30, 1999 from 15% for the three months ended
September 30, 1998.
The provision for losses under shortfall funding agreements increased to
$800,000 for the three months ended September 30, 1999 from $0 for the three
months ended September 30, 1998. Of the 52 Outlook Pointe(R) signature series
assisted living facilities under construction, managed or leased by the Company
at September 30, 1999 (13 under construction and 39 opened), the Company
estimates it may be required to make future working capital contributions in
connection with 28 managed projects. In addition to the $800,000 of shortfall
contributions incurred during the first fiscal quarter ($5,460,000 of cumulative
losses through September 30, 1999), the Company estimates that it may be
required to fund an additional $2.0 to $2.5 million of working capital through
June 30, 2000. The additional working capital needs relate primarily to projects
that closed on construction financing on or before March 31, 1998.
Lease expense increased to $3,439,000 for the three months ended September
30, 1999 from $2,389,000 for the three months ended September 30, 1998, an
increase of $1,050,000. This increase is attributed to the acquired special
purpose entities, additional contingent rents for assisted living facilities and
skilled nursing facilities and the sale/leaseback of two facilities. As a
percentage of total revenue, these expenses totaled 18.6% for the three months
ended September 30, 1999 and 10.0% for the three months ended September 30,
1998.
Depreciation and amortization increased by $234,000 to $740,000 for the
three months ended September 30, 1999 from $506,000 for the three months ended
September 30, 1998. This increase resulted primarily from the additional
depreciation and amortization related to the acquired, leased or managed
facilities.
Provision for Income Taxes. Income tax expense of $2,000 for three months
ended September 30, 1999 resulted from taxable income reported on individual
state corporate tax returns in states that do not permit consolidated filings.
Income tax expense of $1,333,000 for the three months ended September 30, 1998
is based on the Company's estimated effective tax rate of 40% for the 1999
fiscal year.
Net Income (Loss). The Company's net income decreased by $6,369,000 to a
loss of $4,429,000 for the three months ended September 30, 1999 from a net
income of $1,940,000 for the three months ended September 30, 1998. This
decrease in net income resulted primarily from: (i) the decrease in pretax
contribution of $4,296,000 relating to decreased development activities and
management fees; (ii) shortfall funding losses relating to the special purpose
entities of $800,000; (iii) decreased contribution of $467,000 from the skilled
nursing facilities primarily due to the change in billing rates for Medicare
Part B charges; (iv) a charge for the early extinguishment of debt of $739,000
and (v) increased interest expense of $294,000 primarily related to interest in
the Line of Credit and new debt.
LIQUIDITY AND CAPITAL RESOURCES
General
In October 1999, the Company entered into a Subscription Agreement with
IPC, under which IPC agreed to make an approximate $21 million equity investment
in the Company. The Transaction consists of two tranches. Under the first
tranche, which closed on October 11, 1999, the Company issued to IPC 3,300,000
shares of Series C Preferred Stock, at a price per share of $1.25 for an
aggregate purchase price of $4,125,000. 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 at a price per share
of $1.25 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 3,300,000 shares of Common Stock, and IPC will own approximately 49.9% of
the outstanding shares of Common Stock of the Company.
15
<PAGE> 16
The Company entered into the Transaction with IPC in order to obtain the
capital necessary to enable it to continue to execute its business plan. The
Company's business plan includes:
- supporting the Company's portfolio of operating assisted living
facilities;
- acquiring the leasehold interests of profitable and stabilized assisted
living facilities that the Company currently manages for third party
operators;
- pursuing selective development and acquisition opportunities; and
- acquiring the real estate associated with assisted living facilities
currently managed by the Company.
If the Transaction is not approved by the stockholders, the Company will be
required to seek additional equity or debt financing from other sources to
continue to implement its business plan. Should the Company be unable to raise
additional incremental funds, the Company would be required to alter
substantially its business plan, including, without limitation, delaying or
foregoing making option and purchase payments to third party operators under the
Company's "Black Box Structure" and/or divesting its assets. The effect of the
foregoing would be to reduce the amount of future stabilized cash flow of the
Company with a corresponding decrease in the future enterprise value of the
Company. Under this scenario, the Company estimates it has sufficient capital to
sustain operations through June 30, 2000. In addition, failure to approve the
Transaction with IPC will result in the payment of the $1,000,000 non-completion
fee (plus costs) to IPC, and gives IPC the ability to exercise its right to
require the Company to repurchase all of the Series C Preferred Stock for a
price of $1.25 per share for an aggregate purchase price of $4,125,000.
In April 1999, the Company entered into a $15 million revolving Line of
Credit with HCFP Funding, Inc. The Line of Credit is secured by the real estate
owned by five of the Company's subsidiaries (BCC at Darlington, Inc., Balanced
Care at Eyers Grove, Inc., Balanced Care at Butler, Inc., Balanced Care at
Sarver, Inc. and Balanced Care at North Ridge, Inc.) and the eligible accounts
receivable of the Company's 10 Missouri skilled nursing facilities. The Line of
Credit is for a term of three years, and outstanding borrowings bear interest at
a rate per annum of prime plus 2.75%. In July 1999, the terms of the Line of
Credit were amended. These amendments modified certain definitions and the
borrowing base calculation, increased the Line of Credit to $20 million, and
added the real estate of two of the Company's subsidiaries to the lender's
security interest: BCC at Republic Park Care Center, Inc. and BCC at Nevada Park
Care Center, Inc. (together, the "Skilled Nursing Facility Borrowers").
The primary component of the borrowing base for the amended and restated
Line of Credit that the company is utilizing consists of 85% of the product of
8.0 to 8.5 times EBITDA of the Real Estate Borrowers plus 85% of the product of
6 times EBITDA of the Skilled Nursing Facility Borrowers. Including the
amendments to the Line of Credit, the borrowing base available (calculated as of
September 30, 1999) was approximately $15 million. At September 30, 1999, $12.7
million was borrowed under the Line of Credit. In a related transaction, the
Company repaid the skilled Nursing Facility Borrowers' outstanding mortgage debt
of $3.1 million. As a result of this transaction, the Company reported a loss on
the early extinguishment of debt of $739,000 in the first quarter of Fiscal
2000.
The Company has opened 39 of its Outlook Pointe(R) signature series
assisted living facilities as of September 30, 1999. The Company has adequate
financing to complete construction on the 13 facilities under construction at
September 30, 1999. These facilities are expected to open on various dates
through April 2000.
The Company's development projects have generally involved entering into
development agreements with third party owners, which are typically REITs (each,
an "Owner"). A third party Operator/Lessee leases the assisted living facility
from the Owner when construction has been completed and provides funding for the
working capital during the initial occupancy period. The Company manages the
assisted living facility pursuant to a management agreement for a term of two to
nine years in return for a management fee approximating 6% of the net revenue of
the facility. The foregoing off-balance sheet financing structure is referred to
as the "Black-Box Structure".
For development projects utilizing the Black-Box Structure, the Company has
the option to purchase the equity or assets of the Operator/Lessee at a purchase
price based on a formula set forth in an Option
16
<PAGE> 17
Agreement and a Shortfall Funding Agreement, respectively. As consideration for
the option, which is exercisable by the Company at any time during the term of
the Option Agreement, the Company pays option payments to the Operator/Lessee.
Without the Owner's prior consent, the Operator/Lessee may not sell its equity
or assets to any third party other than the Company. The Company has closed 51
development projects for which the Company holds the foregoing type of option.
To date, the Company has exercised its option to purchase the Operator/Lessee's
equity interests in five projects financed under the Black Box Structure for a
total purchase price of approximately $2.9 million. In conjunction with the
purchase transactions, the Company increased the lease base of the five
facilities by $3.8 million. The Company estimates it will require approximately
$40-$45 million to buy the equity of the 47 Outlook Pointe facilities that
remain under the Black Box Structure through fiscal 2002. The Company has
obtained commitments from certain REITs that currently own developed properties
under the Black Box Structure to finance the Company's capital requirements to
exercise its purchase options under the aforementioned option agreements.
Generally, this take-out financing will be structured as an increase to the
existing facility lease base at a blended annual lease rate. This financing
structure will provide approximately $30 million of the estimated $40-$45
million capital requirement. The balance will be funded from the second tranche
of the Transaction with IPC, with cash raised from financing transactions
discussed above, possible asset divestitures and cash to be provided from
operations. The Company did not exercise any purchase options in this quarter
due to capital considerations, but plans to exercise its options to purchase the
equity interest on five of its managed operations upon stockholder approval of
the Transaction and receipt of the second tranche of funds therefrom. The
Company expects to exercise its purchase options on a total of approximately 16
of its managed operations during Fiscal 2000, including the five discussed
above. The capital required to exercise these options is expected to range from
approximately $3.6 to $4.5 million.
As previously discussed, the Company has incurred a cumulative charge of
$5.5 million representing advances made for the operations of facilities
financed under the Black Box Structure ($800,000 in the first fiscal quarter of
1999) under existing Shortfall Funding Agreements. The Company estimates
additional shortfall funding requirements through June 30, 2000 to be
approximately $2.0 to $2.5 million as the result of additional black box working
capital financing.
The Company currently is using more than $1 million each month to support
corporate overhead and fund facility working capital needs. This amount is
generally decreasing each month as facilities become more profitable as a result
of increased census and cost reduction measures. The Company's other significant
cash need is the $10-$15 million required to make option payments and buy back
black box operations through fiscal 2002.
Most of the facilities operated or managed by the Company are leased under
long-term operating leases. Lease obligations for the next 12 months are
approximately $13,355,000. The lease documents contain financial covenants and
other restrictions which: (i) require the Company to meet certain financial
tests and maintain certain escrow funds, (ii) limit, among other things, the
ability of the Company and certain of its subsidiaries to borrow additional
funds, dispose of assets or engage in mergers or other business combinations,
and (iii) prohibit the Company from operating competing facilities within a
designated radius of existing facilities. Management believes the Company is in
compliance with these lease covenants.
The Company's lease arrangements are generally for initial terms of 9 to 15
years with aggregate renewal terms ranging from 15 to 25 years and provide for
contractually fixed rent plus additional rent, subject to certain limits. The
additional rent is capped at 2% to 3% of the prior year's total rent and is
based on either the annual increase in gross revenues of the facility or the
increase in the consumer price index. The Company's lease arrangements generally
contain an option to purchase the facility at its fair market value at the end
of the initial lease term and each renewal term.
In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by FCI. FCI and its six wholly owned Operator/Lessees also entered into
lease agreements with a REIT. The terms of the agreements among the parties are
similar to the terms of the agreements the Company has entered into with
independent third party Operator/Lessees. FCI was previously owned by Brad E.
Hollinger, Chairman of the Board, President and
17
<PAGE> 18
Chief Executive Officer of the Company. Effective as of September 30, 1999, FCI
redeemed Mr. Hollinger's equity interests in FCI and its six Operator/Lessees.
Operating Activities
Cash used by operations decreased by $2,370,000 to $2,164,000 for the
three-months ended September 30, 1999 from cash provided by operations of
$206,000 for the three months ended September 30, 1998, primarily as a result of
reduced development fees.
Investing and Financing Activities
Cash used for investing activities decreased by $727,000 to $3,184,000 for
the three months ended September 30, 1999 from $3,911,000 for the three months
ended September 30, 1998. Cash provided by financing activities increased by
$2,105,000 to $1,919,000 for the three months ended September 30, 1999 from cash
used of $186,000 for the three months ended September 30, 1998. The decrease in
cash provided by financing activities from the 1998 quarter to the 1999 quarter
was a result of the Line of Credit, offset by the early extinguishment of debt
and the increase in other liabilities.
YEAR 2000 READINESS DISCLOSURE
Computer software and/or hardware that was designed to define the year with
a two digit date field rather than a four digit field may fail or miscalculate
data in the year 2000, causing disruption to the operations or business
activities of the Company.
State of Readiness. The Company uses high quality hardware and operating
systems from current and proven technologies to ensure reliability and optimum
system performance. In order to evaluate these systems and other electronic
systems not related to information technology ("Non-IT Systems"), the Company
formed an oversight committee comprised of information systems, operations,
legal and accounting professionals.
Phases. The committee has performed an inventory and risk assessment of
the Company's internal operations systems, as well as an inventory of third
party relationships and their impact on the Company. In response to requests,
the committee has already received certification of year 2000 readiness from key
hardware and software providers, including suppliers of critical data processing
and financial systems. Internal testing of all critical information systems will
continue throughout 1999. No material deficiencies have been identified to date.
Notwithstanding vendor certification of compliance, the Company has tested,
and continues to test key hardware and software systems. For non-critical
systems, and those that cannot be readily tested, the Company will rely on
vendor certification.
Material Third Parties. Based on the committee's review, the Company has
determined that third party relationships provide the highest risk related to
year 2000 issues. The third party relationships deemed most critical are the
Company's banking relationships, its relationships with third party
intermediaries for skilled nursing facility reimbursement under Medicare and
Medicaid programs and suppliers of basic utilities and food service to the
Company's operating communities. The Company's third party reimbursement
intermediaries and the Health Care Financing Administration have been proactive
in testing for year 2000 compliance. Some intermediaries have required the
submission of test billings that demonstrate year 2000 compatibility with their
payment software. Where required, the Company completed these tests by December
31, 1998. Since April 1999, the Company has used formats for Medicare claims
processing that are year 2000 compliant. The risk of local infrastructure
failure is mitigated by the Company's contingency planning addressed below. The
committee is continuing to evaluate the year 2000 compliance of the Company's
financial institutions to gain assurance regarding their year 2000 readiness.
Costs. Based upon the Company's progress to date in addressing year 2000
issues, management does not expect these issues to have a material impact on
financial position, results of operations or cash flows in future periods,
including the cost of remediation. Costs incurred to date are internal staff
costs of salary, benefits and
18
<PAGE> 19
nominal administrative expenses associated with the activities of the oversight
committee. The Company expects future costs to be of a similar nature.
Risks and Contingency Plans. Based on its survey and testing, the Company
believes the greatest risks to its ongoing operations are isolated local
failures of utilities and food supplies. Accordingly, the Company has
established contingency plans for its facilities that include the accumulation
of two to three weeks of food and water and provision of back-up power sources.
In addition, the Company has completed contingency plans in the event of systems
failures at both its corporate and facility locations.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company did not have any investment securities subject to market risk
as of, or during the three months ended, September 30, 1999.
ITEM 5: OTHER EVENTS
In October 1999, the Company entered into a Subscription Agreement with
IPC, under which IPC agreed to make an equity investment of approximately $21.0
million in the Company. The transaction consists of two tranches. Under the
first tranche, which closed on October 11, 1999, the Company issued to IPC
3,300,000 shares of Series C Preferred Stock, at a price per share of $1.25 for
an aggregate purchase price of $4,125,000. 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, at a price per
share of $1.25 for an aggregate purchase price of $16,750,000. If stockholder
approval is received, the outstanding shares of Series C Preferred Stock will
automatically convert into 3,300,000 shares of Common Stock, and IPC will own
approximately 49.9% of the outstanding shares of Common Stock of the Company.
Also in connection with the Transaction, IPC and certain stockholders of
the Company entered into the Voting Agreement. Under the Voting Agreement, the
stockholders, who own 3,905,892 shares of the Company's Common Stock, have
agreed to vote their shares in favor of the second tranche of the Transaction.
The shares subject to the Voting Agreement represent 23.36% of the Company's
outstanding Common Stock. Also in connection with the Transaction the Company
and IPC entered into the Registration Rights Agreement. Under the Registration
Rights Agreement, IPC is entitled to certain demand and piggyback registration
rights with respect to the shares of Common Stock issued to IPC in the
Transaction.
In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by FCI. FCI and its six wholly-owned Operator/Lessees also entered into
lease agreements with a REIT. The terms of the agreements among the parties are
similar to the terms of the agreements the Company has entered into with
independent third party Operator/Lessees. FCI was previously owned by Brad E.
Hollinger, Chairman of the Board, President and Chief Executive Officer of the
Company. Effective as of September 30, 1999, FCI redeemed Mr. Hollinger's equity
interests in FCI and its six Operator/Lessees.
19
<PAGE> 20
PART II -- OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Second Amendment to Second Series Lease and Security
Agreements by and among C&G Healthcare at Tallahassee,
L.L.C., C&G Healthcare at Pensacola, L.L.C., C&G Healthcare
at Teay's Valley, L.L.C., C&G Healthcare at Johnson City,
L.L.C., C&G Healthcare at Hagerstown, L.L.C., Nationwide
Health Properties, Inc., Balanced Care Corporation, and
Kevin L. Sherry dated as of June 30, 1999 (filed herewith)
10.2 First Amendment to Second Series Master Investment Agreement
and Agreement Regarding Second Series Construction
Schedules, Completion Dates, and Budgets by and between C&G
Healthcare at Tallahassee, L.L.C., C&G Healthcare at
Pensacola, L.L.C., C&G Healthcare at Teay's Valley, L.L.C.,
C&G Healthcare at Johnson City, L.L.C., C&G Healthcare at
Hagerstown, L.L.C., Nationwide Health Properties, Inc.,
Balanced Care Corporation, BCC Development and Management
Co. and Kevin L. Sherry dated as of June 30, 1999 (filed
herewith)
10.3 Form of First Amended and Restated Shortfall Funding
Agreement dated as of June 30, 1999 (filed herewith)
10.4 Schedule to Form of First Amended and Restated Shortfall
Funding Agreement dated as of June 30, 1999 (filed herewith)
10.5 Form of First Amended and Restated Option Agreement by and
between Kevin Sherry and Balanced Care Corporation dated as
of June 30, 1999 (filed herewith)
10.6 Schedule to Form of First Amended and Restated Option
Agreement dated as of June 30, 1999 (filed herewith)
10.7 Second Amendment to First Series Lease and Security
Agreements by and among Balanced Care Corporation,
Nationwide Health Properties, Inc., MLD Delaware Trust,
Elder Care Operators, LLC, Elder Care Operators of York,
LLC, Elder Care Operators of Lakemont Farms, LLC, Elder Care
Operators of Bristol, LLC, Elder Care Operators of
Murfreesboro, LLC, and Elder Care Operators of Akron, LLC,
Elder Care Operators of Hilliard, LLC dated as of June 30,
1999 (filed herewith)
10.8 First Amendment to First Series Master Investment Agreement
and Agreement Regarding First Series Construction Schedules,
Completion Dates, and Budgets by and among Balanced Care
Corporation, BCC Development and Management Co., Nationwide
Health Properties, Inc., MLD Delaware Trust, Elder Care
Operators, LLC, Elder Care Operators of York, LLC, Elder
Care Operators of Lakemont Farms, LLC, Elder Care Operators
of Bristol, LLC, Elder Care Operators of Murfreesboro, LLC,
and Elder Care Operators of Akron, LLC, Elder Care Operators
of Hilliard, LLC, and Kevin L. Sherry dated as of June 30,
1999 (filed herewith)
10.9 Form of First Amended and Restated Shortfall Funding
Agreement dated as of June 30, 1999 (filed herewith)
10.10 Schedule to Form of First Amended and Restated Shortfall
Funding Agreement dated as of June 30, 1999 (filed herewith)
10.11 Form of First Amended and Restated Option Agreement by and
between Elder Care Operators and Balanced Care Corporation
dated as of June 30, 1999 (filed herewith)
10.12 Schedule to Form of First Amended and Restated Option
Agreement dated as of June 30, 1999 (filed herewith)
10.13 Form of First Amended and Restated Working Capital Assurance
Agreement dated as of June 30, 1999 (filed herewith)
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.14 Schedule to Form of First Amended and Restated Working
Capital Assurance Agreement dated as of June 30, 1999 (filed
herewith)
10.15 Form of First Amended and Restated Management Agreement
dated as of June 30, 1999 (filed herewith)
10.16 Schedule to Form of First Amended and Restated Management
Agreement dated as of June 30, 1999 (filed herewith)
10.17 First Amendment to Facility Agreement by and between
American Health Properties, Inc. and Balanced Care
Corporation dated as of July 8, 1999 (filed herewith)
10.18 First Amendment to Option Agreements, Shortfall Funding
Agreements, Management Agreements, Deposit Pledge
Agreements, and Equity Pledge Agreements by and among
Balanced Care Corporation, Balanced Care at Sagamore Hills,
Inc., Balanced Care at Loyalsock, Inc., Balanced Care at
Lebanon, Inc., Balanced Care at Westerville, Inc., Balanced
Care at Oak Ridge, Inc., Balanced Care at Morristown, Inc.,
Financial Care Investors, LLC, Financial Care Investors of
Sagamore Hills, LLC, Financial Care Investors of Loyalsock,
LLC, Financial Care Investors of Lebanon, LLC, Financial
Care Investors of Westerville, LLC, Financial Care Investors
of Oak Ridge, LLC, and Financial Care Investors of
Morristown, LLC dated as of September 30, 1999 (filed
herewith)
10.19 Form of First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.20 Schedule to First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.21 Form of First Amendment to Loan Agreement dated as of
September 30, 1999 (filed herewith)
10.22 Schedule to First Amendment to Loan Agreement dated as of
September 30, 1999 (filed herewith)
10.23 Form of First Amendment to Working Capital Assurance
Agreement dated as of September 30, 1999 (filed herewith)
10.24 Schedule to First Amendment to Working Capital Agreement
dated as of September 30, 1999 (filed herewith)
10.25 Form of First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.26 Schedule to First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.27 Change in Control Agreement by and between Balanced Care
Corporation and Alfred I. Lovitz dated as of September 30,
1999 (filed herewith)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
(B) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended September
30, 1999.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BALANCED CARE CORPORATION
Date: November 15, 1999 By: /s/ CLINT T. FEGAN
------------------------------------
Clint T. Fegan
Chief Financial Officer
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Second Amendment to Second Series Lease and Security
Agreements by and among C&G Healthcare at Tallahassee,
L.L.C., C&G Healthcare at Pensacola, L.L.C., C&G Healthcare
at Teay's Valley, L.L.C., C&G Healthcare at Johnson City,
L.L.C., C&G Healthcare at Hagerstown, L.L.C., Nationwide
Health Properties, Inc., Balanced Care Corporation, and
Kevin L. Sherry dated as of June 30, 1999 (filed herewith)
10.2 First Amendment to Second Series Master Investment Agreement
and Agreement Regarding Second Series Construction
Schedules, Completion Dates, and Budgets by and between C&G
Healthcare at Tallahassee, L.L.C., C&G Healthcare at
Pensacola, L.L.C., C&G Healthcare at Teay's Valley, L.L.C.,
C&G Healthcare at Johnson City, L.L.C., C&G Healthcare at
Hagerstown, L.L.C., Nationwide Health Properties, Inc.,
Balanced Care Corporation, BCC Development and Management
Co. and Kevin L. Sherry dated as of June 30, 1999 (filed
herewith)
10.3 Form of First Amended and Restated Shortfall Funding
Agreement dated as of June 30, 1999 (filed herewith)
10.4 Schedule to Form of First Amended and Restated Shortfall
Funding Agreement dated as of June 30, 1999 (filed herewith)
10.5 Form of First Amended and Restated Option Agreement by and
between Kevin Sherry and Balanced Care Corporation dated as
of June 30, 1999 (filed herewith)
10.6 Schedule to Form of First Amended and Restated Option
Agreement dated as of June 30, 1999 (filed herewith)
10.7 Second Amendment to First Series Lease and Security
Agreements by and among Balanced Care Corporation,
Nationwide Health Properties, Inc., MLD Delaware Trust,
Elder Care Operators, LLC, Elder Care Operators of York,
LLC, Elder Care Operators of Lakemont Farms, LLC, Elder Care
Operators of Bristol, LLC, Elder Care Operators of
Murfreesboro, LLC, and Elder Care Operators of Akron, LLC,
Elder Care Operators of Hilliard, LLC dated as of June 30,
1999 (filed herewith)
10.8 First Amendment to First Series Master Investment Agreement
and Agreement Regarding First Series Construction Schedules,
Completion Dates, and Budgets by and among Balanced Care
Corporation, BCC Development and Management Co., Nationwide
Health Properties, Inc., MLD Delaware Trust, Elder Care
Operators, LLC, Elder Care Operators of York, LLC, Elder
Care Operators of Lakemont Farms, LLC, Elder Care Operators
of Bristol, LLC, Elder Care Operators of Murfreesboro, LLC,
and Elder Care Operators of Akron, LLC, Elder Care Operators
of Hilliard, LLC, and Kevin L. Sherry dated as of June 30,
1999 (filed herewith)
10.9 Form of First Amended and Restated Shortfall Funding
Agreement dated as of June 30, 1999 (filed herewith)
10.10 Schedule to Form of First Amended and Restated Shortfall
Funding Agreement dated as of June 30, 1999 (filed herewith)
10.11 Form of First Amended and Restated Option Agreement by and
between Elder Care Operators and Balanced Care Corporation
dated as of June 30, 1999 (filed herewith)
10.12 Schedule to Form of First Amended and Restated Option
Agreement dated as of June 30, 1999 (filed herewith)
10.13 Form of First Amended and Restated Working Capital Assurance
Agreement dated as of June 30, 1999 (filed herewith)
10.14 Schedule to Form of First Amended and Restated Working
Capital Assurance Agreement dated as of June 30, 1999 (filed
herewith)
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.15 Form of First Amended and Restated Management Agreement
dated as of June 30, 1999 (filed herewith)
10.16 Schedule to Form of First Amended and Restated Management
Agreement dated as of June 30, 1999 (filed herewith)
10.17 First Amendment to Facility Agreement by and between
American Health Properties, Inc. and Balanced Care
Corporation dated as of July 8, 1999 (filed herewith)
10.18 First Amendment to Option Agreements, Shortfall Funding
Agreements, Management Agreements, Deposit Pledge
Agreements, and Equity Pledge Agreements by and among
Balanced Care Corporation, Balanced Care at Sagamore Hills,
Inc., Balanced Care at Loyalsock, Inc., Balanced Care at
Lebanon, Inc., Balanced Care at Westerville, Inc., Balanced
Care at Oak Ridge, Inc., Balanced Care at Morristown, Inc.,
Financial Care Investors, LLC, Financial Care Investors of
Sagamore Hills, LLC, Financial Care Investors of Loyalsock,
LLC, Financial Care Investors of Lebanon, LLC, Financial
Care Investors of Westerville, LLC, Financial Care Investors
of Oak Ridge, LLC, and Financial Care Investors of
Morristown, LLC dated as of September 30, 1999 (filed
herewith)
10.19 Form of First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.20 Schedule to First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.21 Form of First Amendment to Loan Agreement dated as of
September 30, 1999 (filed herewith)
10.22 Schedule to First Amendment to Loan Agreement dated as of
September 30, 1999 (filed herewith)
10.23 Form of First Amendment to Working Capital Assurance
Agreement dated as of September 30, 1999 (filed herewith)
10.24 Schedule to First Amendment to Working Capital Agreement
dated as of September 30, 1999 (filed herewith)
10.25 Form of First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.26 Schedule to First Amendment to Lease Agreement dated as of
September 30, 1999 (filed herewith)
10.27 Change in Control Agreement by and between Balanced Care
Corporation and Alfred I. Lovitz dated as of September 30,
1999 (filed herewith)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
24
<PAGE> 1
Exhibit 10.1
SECOND AMENDMENT TO SECOND SERIES
LEASE AND SECURITY AGREEMENTS
THIS SECOND AMENDMENT TO SECOND SERIES LEASE AND SECURITY AGREEMENTS
(hereinafter designated "Amendment") is made by and between C&G HEALTHCARE AT
TALLAHASSEE, L.L.C. ("Tallahassee"), a Delaware limited liability company, C&G
HEALTHCARE AT PENSACOLA, L.L.C. ("Pensacola"), a Delaware limited liability
company, C&G HEALTHCARE AT TEAY'S VALLEY, L.L.C. ("Teay's Valley"), a Delaware
limited liability company, C&G HEALTHCARE AT JOHNSON CITY, L.L.C. ("Johnson
City"), a Delaware limited liability company, C&G HEALTHCARE AT HAGERSTOWN,
L.L.C. ("Hagerstown"), a Delaware limited liability company (Tallahassee,
Pensacola, Teay's Valley, Johnson City, and Hagerstown being hereinafter
sometimes individually referred to as a "Tenant" and collectively referred to as
the "Tenants"), and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
("NHP"), and joined herein by BALANCED CARE CORPORATION ("BCC"), a Delaware
corporation, and KEVIN L. SHERRY ("Sherry"), an individual, solely for purposes
of acknowledging and consenting to this Amendment, based upon the following
facts:
Recitals
A. The Tenants are each owned by Sherry, as sole member. NHP, the
Tenants (as individual tenants under separate leases), and/or BCC have
previously entered into a series of five (5) transactions, as specifically set
forth in Exhibit "A" attached hereto and included herein for all purposes as
though fully set forth (hereinafter individually referred to as a "Transaction"
and collectively referred to as the "Transactions"), each of which included the
purchase, lease, and development of certain tracts or parcels of real property,
together with all improvements thereon, all personal property to be leased
therewith, and all appurtenances thereto (hereinafter individually referred to
as a "Property" and collectively referred to as the "Properties").
B. As a part of the Transactions, (i) the Properties were each leased
from NHP by the applicable Tenant, pursuant to the terms and conditions set
forth in a lease and security agreement (hereinafter individually referred to as
a "Lease" and collectively referred to as the "Leases"), which Leases were all
amended pursuant to the provisions of a First Amendment to Lease and Security
Agreements, entered into by and between all the parties hereto and made
effective as of the respective execution dates of the Leases; (ii) as additional
security for the obligations of Tenants under each respective Lease, BCC entered
into working capital assurance agreements with NHP (collectively, the "Capital
1
<PAGE> 2
Agreements"), whereby BCC agreed to make working capital loans to the applicable
Tenant, and as further security, NHP is party to deposit pledge agreements
(collectively, the "Deposit Agreements") whereby each applicable Tenant pledges
a minimum amount of capital as a working capital reserve for its operations;
(iii) each Property has been or is being developed, used, and licensed (by the
State in which such Property is located) as an assisted living facility,
personal care home, independent living facility, or similar adult care facility
(hereinafter individually referred to as a "Facility" and collectively referred
to as the "Facilities"), including any applicable ancillary services for
independent living, skilled nursing, rehabilitation, or Alzheimer's or dementia
care; (iv) Developer, which is a Delaware corporation wholly owned by BCC, acted
or is acting as developer of each of the Properties, pursuant to the terms and
conditions of development agreements (hereinafter individually referred to as a
"Development Agreement" and collectively referred to as the "Development
Agreements") entered into by and between Developer and NHP; (v) BCC guaranteed
the obligations of Developer under each respective Development Agreement and the
completion of all improvements contemplated in such Development Agreements,
pursuant to a guaranty agreement with NHP (collectively, the "Development
Guaranties"), (vi) each of the Tenants entered into a management agreement with
a newly formed subsidiary of BCC, whereby such BCC subsidiary agreed to manage
the respective Facility on behalf of the respective Tenant (such BCC
subsidiaries being hereinafter collectively referred to as the "Managers"),
(vii) BCC indemnified NHP with respect to possible environmental hazards on each
applicable Property by means of environmental indemnification agreements
(collectively, the "Environmental Indemnifications"), and (viii) NHP, as
applicable, granted rights of first refusal to BCC with respect to any proposed
sales of the Properties, by means of right of first refusal agreements
(collectively, the "Refusal Agreements").
C. It has been determined by the parties that it is necessary and
desirable to amend each of the Leases in the manner set forth in this Amendment.
Amendment
NOW, THEREFORE, the parties to this Amendment hereby agree to amend the
Leases as follows:
1. Definitions. All provisions of the Leases, as previously amended,
shall remain in full force and effect as if restated herein, except as such
provisions may clearly conflict with the terms of this Amendment, and any words
or phrases (other than as amended in Section 2 of this Amendment) which are
defined terms in
2
<PAGE> 3
the Leases shall have the same meaning in this Amendment as such words or
phrases have in the Leases.
2. Amendment of Section 2.1.2 of the Leases. Notwithstanding any other
provision of any of the Leases to the contrary, the parties hereto, in their
respective capacities as Landlord, Tenant, and/or guarantor under the respective
Leases, agree that the current language of Section 2.1.2 of each of the Leases
is hereby deleted in its entirety and replaced with the following language:
"2.1.2 Post-Construction Minimum Rent.
(i) If the Reset Date occurs prior to April
19, 1999, then for the period beginning with the Reset Date
and ending at 12:00 P.M. on April 18, 1999, the monthly
Minimum Rent with respect to the total of (A) the Land Cost
plus (B) all advances under the Development Agreement for Work
plus (C) all accrued but unpaid Construction Period Minimum
Rent shall be reset at an amount equal to one-twelfth (1/12)
of the product of (I) the total of the Land Cost plus such
advances made for Work plus accrued but unpaid Construction
Period Minimum Rent, times (II) three hundred thirty (330)
basis points over the twenty (20) day average 10 year United
States Treasury rate in effect on the Reset Date ("Interim
Post-Construction Minimum Rent").
(ii) For the period beginning as of the
later of the Reset Date or April 19, 1999, the monthly Minimum
Rent with respect to the total of (A) the Land Cost plus (B)
all advances under the Development Agreement for Work plus (C)
all accrued but unpaid Construction Period Minimum Rent plus
(D) all accrued but unpaid Interim Post-Construction Minimum
Rent shall be reset at an amount equal to one-twelfth (1/12)
of the product of (I) the total of the Land Cost plus such
advances made for Work plus accrued but unpaid Construction
Period Minimum Rent, plus accrued but unpaid Interim
Post-Construction Minimum Rent, if any, times (II) the greater
of (x) three hundred thirty (330) basis points over the twenty
(20) day average 10 year United States Treasury rate in effect
on the Reset Date, or (y) ten and 21/100 percent (10.21%) (the
sum of the Interim Post-Construction Minimum Rent, if any,
plus the Minimum Rent as calculated under this Section
2.1.2(ii) being sometimes collectively referred to herein as
"Initial Term Post-Construction Minimum Rent")."
3
<PAGE> 4
This Amendment is made as of June 30, 1999, to be effective with
respect to each of the individual Leases as of the date of execution for each
such Lease, as set forth in Exhibit "A" hereto.
"NHP"
NATIONWIDE HEATH PROPERTIES, INC., a
Maryland corporation
By: /s/ Gary E. Stark (SEAL)
Name: Gary E. Stark
Title: Vice President
"Pensacola"
C&G HEALTHCARE AT PENSACOLA, L.L.C.,
a Delaware limited liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
"Tallahassee"
C&G HEALTHCARE AT TALLAHASSEE,
L.L.C., a Delaware limited liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
"Hagerstown"
C&G HEALTHCARE AT HAGERSTOWN,
L.L.C., a Delaware limited liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
4
<PAGE> 5
"Johnson City"
C&G HEALTHCARE AT JOHNSON CITY,
L.L.C., a Delaware limited liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
"Teay's Valley"
C&G HEALTHCARE AT TEAY'S VALLEY,
L.L.C., a Delaware limited liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
ACKNOWLEDGED, AGREED AND CONSENTED TO:
"BCC"
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ Robin L. Barber
Robin L. Barber, Senior Vice
President and Legal Counsel
"Sherry"
/s/ Kevin L. Sherry
KEVIN L. SHERRY
5
<PAGE> 6
EXHIBIT "A"
TO
AMENDMENT TO LEASE AND SECURITY AGREEMENTS
SCHEDULE OF LEASES
Landlord/Tenant Name & Location of Facility
NHP/Johnson City Outlook Pointe at Johnson City
406 E. Mountain View Road,
Johnson City, 10th Civil District of
Washington County, Tennessee
Lease Execution Date: June 26, 1998
NHP/Hagerstown Balanced Care, Hagerstown
1175 Professional Court, Hagerstown,
Washington County, Maryland
Lease Execution Date: June 26, 1998
NHP/Teay's Valley Outlook Pointe at Teay's Valley
West Virginia State Route 34,
Lot No. 4, Stonegate Plaza,
Scott Plaza, in or near Teay's Valley,
in the Scott District of Putnam County,
West Virginia
Lease Execution Date: June 26, 1998
NHP/Tallahassee Outlook Pointe at Tallahassee
Fleischman Road, Tallahassee,
Leon County, Florida
Lease Execution Date: June 26, 1998
NHP/Pensacola Outlook Pointe at Pensacola
2310 Abbie Lane, Pensacola
Escambia County, Florida
Lease Execution Date: June 26, 1998
<PAGE> 1
Exhibit 10.2
FIRST AMENDMENT TO SECOND SERIES MASTER INVESTMENT AGREEMENT
AND AGREEMENT REGARDING SECOND SERIES
CONSTRUCTION SCHEDULES, COMPLETION DATES, AND BUDGETS
THIS FIRST AMENDMENT TO SECOND SERIES MASTER INVESTMENT AGREEMENT AND
AGREEMENT REGARDING SECOND SERIES CONSTRUCTION SCHEDULES, COMPLETION DATES, AND
BUDGETS (this "Amendment") is made by and between BALANCED CARE CORPORATION
("BCC"), BCC DEVELOPMENT AND MANAGEMENT CO. ("Developer"), a Delaware
corporation, C&G HEALTHCARE AT PENSACOLA, L.L.C., C&G HEALTHCARE AT TALLAHASSEE,
L.L.C., C&G HEALTHCARE AT HAGERSTOWN, L.L.C., C&G HEALTHCARE AT JOHNSON CITY,
L.L.C., and C&G HEALTHCARE AT TEAY'S VALLEY, L.L.C. (such Delaware limited
liability companies being hereinafter individually referred to as a "Tenant" and
collectively as "Tenants"), and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland
corporation ("NHP"), and joined herein by KEVIN L. SHERRY ("Sherry"), solely for
the purposes of acknowledging the changes in the Transaction Documents (defined
below) set forth in this Amendment and reaffirming his obligations under the
Note Guaranties (defined below).
RECITALS:
A. NHP, the Tenants (as individual tenants under separate leases),
and/or BCC have previously entered into a series of five (5) transactions, as
specifically set forth in Exhibit "A" of the Master Agreement (defined below)
(hereinafter individually referred to as a "Transaction" and collectively
referred to as the "Transactions"), each of which included the purchase, lease,
and development of certain tracts or parcels of real property, together with all
improvements thereon, all personal property to be leased therewith, and all
appurtenances thereto (hereinafter individually referred to as a "Property" and
collectively referred to as the "Properties").
B. As a part of the Transactions, (i) the Properties were each leased
from NHP by the applicable Tenant, pursuant to the terms and conditions set
forth in a lease and security agreement (hereinafter individually referred to as
a "Lease" and collectively referred to as the "Leases"), which Leases were all
amended pursuant to the provisions of a First Amendment to Lease and Security
Agreements ("First Lease Amendment"), made effective as of the respective
execution dates of the Leases, and are to be further amended pursuant to the
provisions of a Second Amendment to Lease and Security Agreements ("Second Lease
Amendment"), being entered into contemporaneous herewith; as additional
<PAGE> 2
security for the obligations of Tenants under each respective Lease, BCC entered
into certain shortfall funding agreements and option agreements with the
Tenants, and certain corresponding working capital assurance agreements with NHP
(collectively, the "Capital Agreements"), whereby BCC agreed to make working
capital loans to the applicable Tenant, and as further security, NHP is party to
deposit pledge agreements (collectively, the "Deposit Agreements") whereby each
applicable Tenant pledges a minimum amount of capital as a working capital
reserve for its operations; (iii) each Property has been or is being developed,
used, and licensed (by the State in which such Property is located) as an
assisted living facility, personal care home, independent living facility, or
similar adult care facility (hereinafter individually referred to as a
"Facility" and collectively referred to as the "Facilities"), including any
applicable ancillary services for independent living, skilled nursing,
rehabilitation, or Alzheimer's or dementia care; (iv) BCC DEVELOPMENT AND
MANAGEMENT CO. ("Developer"), a Delaware corporation wholly owned by BCC, acted
or is acting as developer of each of the Properties, pursuant to the terms and
conditions of development agreements (hereinafter individually referred to as a
"Development Agreement" and collectively referred to as the "Development
Agreements") entered into by and between Developer and NHP; (v) BCC guaranteed
the obligations of Developer under each respective Development Agreement and the
completion of all improvements contemplated in such Development Agreements,
pursuant to a guaranty agreement with NHP (collectively, the "Development
Guaranties"), (vi) each of the Tenants entered into a management agreement with
a newly formed subsidiary of BCC, whereby such BCC subsidiary agreed to manage
the respective Facility on behalf of the respective Tenant (such BCC
subsidiaries being hereinafter collectively referred to as the "Managers"),
(vii) BCC indemnified NHP with respect to possible environmental hazards on each
applicable Property by means of environmental indemnification agreements
(collectively, the "Environmental Indemnifications"), and (viii) NHP, as
applicable, granted rights of first refusal to BCC with respect to any proposed
sales of the Properties, by means of right of first refusal agreements
(collectively, the "Refusal Agreements") (hereinafter individually referred to
as a "Refusal Agreement" and collectively referred to as the "Refusal
Agreements"), (x) in order to assist Tenants with ceratin startup costs, NHP
made loans (hereinafter individually referred to as a "Senior Loan" and
collectively referred to as the "Senior Loans") to the Tenants pursuant to the
terms of certain promissory notes, certain guarantees made by Sherry for the
benefit of NHP of repayment of up to fifteen percent (15%) of the principal of
such Senior Loans (collectively, the "Note Guaranties"), and other related
security documents (such notes, Note Guaranties, and
- 2 -
<PAGE> 3
other security documents being hereinafter collectively referred to as the
"Senior Loan Documents"), and (xi) the parties hereto previously entered into
that certain Second Series Master Investment Agreement (the "Master Agreement"),
dated March 27, 1998, whereby the parties agreed that certain provisions related
to NHP's maximum investment, cross default, cross renewal, purchase options,
development fees, and budgets would govern all the Transactions. The documents
and instruments defined or described in this Paragraphs A. and B. of these
Recitals are hereinafter collectively referred to as the "Transaction
Documents".
C. Due to unforeseen delays in construction of some of the Facilities,
revisions to the Budgets, and changes in NHP's Maximum Investment (as defined in
the Master Agreement), the parties have agreed to establish new Construction
Schedules and Completion Dates with respect to the delayed Facilities, establish
new Budgets for all the Facilities, and permit certain increases in NHP's
Maximum Investment.
D. It has been determined by the parties that it is necessary and
desirable to amend the Master Agreement in the manner set forth in this
Amendment.
NOW, THEREFORE, taking the foregoing paragraphs A through D (the
"Recitals") into account, and in consideration of the mutual covenants,
agreements, and conditions set forth herein and in the Transaction Documents
described in the Recitals, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. All provisions of the Transaction Documents described
in the Recitals shall remain in full force and effect as if restated herein,
except as such provisions may clearly conflict with the terms of this Amendment,
and any words or phrases which are defined terms in such documents shall have
the same meaning in this Amendment (except as otherwise defined pursuant to the
changes set forth in this Amendment).
2. Amendments to Lease. The parties hereto hereby acknowledge and agree
to be bound by the terms and provisions of the First Lease Amendment and the
Second Lease Amendment.
3. Construction Schedules, Completion Dates, and Budgets. The parties
hereto hereby acknowledge that some of the Facilities (i) have not been
completed in accordance with the Construction Schedule (as defined in Section
2.2 of the respective Development Agreements) originally provided to NHP with
respect to each of
- 3 -
<PAGE> 4
such Facilities, (ii) have not been completed within thirteen (13) months after
the Execution Date of the Development Agreement related to each of such
Facilities (as required under Section 2.5 of the respective Development
Agreements), and/or (iii) that the Budgets for some or all of the Facilities
have been or will be exceeded, or have otherwise changed, from the Budgets
originally approved by NHP. The owners, names and locations of all the
Facilities, together with the original execution dates of the related
Development Agreements and the actual or newly scheduled completion dates
(hereinafter collectively referred to as the "New Completion Dates") for all the
Facilities are set forth in Exhibit "A" attached hereto and incorporated herein
for all purposes. With respect to any Facility which has not been completed
(hereinafter individually referred to as an "Incomplete Facility") as of the
Effective Date (defined below) of this Agreement, the parties hereto hereby
agree to waive any and all penalties related to Developer's failure to complete
such Facility in accordance with the original Construction Schedule for such
Facility or by the originally required Completion Date for such Facility. The
parties hereto hereby further agree that, notwithstanding anything in the
Development Agreements or the Leases to the contrary, (a) the term "Completion
Date", for purposes of the Master Agreement, the Development Agreements and the
Leases, shall mean the New Completion Dates set forth with respect to each
Facility in Exhibit "A" hereof, (b) the term "Construction Schedule", for
purposes of any Development Agreement related to an Incomplete Facility, shall
mean the Construction Schedule set forth with respect to such Incomplete
Facility in Exhibit "B" attached hereto and incorporated herein for all
purposes, and (c) the term "Budgets", for purposes of the Master Agreement and
any Development Agreement, shall mean and refer to those certain amended and
restated Budgets for each Facility set forth in Exhibit "C" attached hereto and
incorporated herein for all purposes.
4. Increases in NHP's Maximum Investment.
(a) The parties hereby acknowledge and agree that the Budgets attached
hereto as Exhibit "C" shall include amounts ("Equipment Amounts") for additional
funds for new equipment, furniture, furnishings and other personal property
(hereinafter collectively referred to as the "New Equipment") purchased or to be
purchased on behalf of NHP by Developer, and then leased under the Leases to the
respective Tenants for use at the respective Facilities. The portion of the
Equipment Amounts set aside for each respective Facility shall be clearly set
forth in the Budgets attached as Exhibit "C" hereof. Applications for Payment
for the New Equipment shall be made by Developer in the manner required under
and in compliance with Paragraph 2.11(e) and the
- 4 -
<PAGE> 5
other provisions of applicable Development Agreements. Effective as of the date
of payment, any amounts paid by NHP for New Equipment at each Facility shall be
treated as a Development Advance under the Development Agreement for such
Facility, and correspondingly, under the respective Leases (for all purposes,
including, without limitation, calculation of Minimum Rent accruing or payable
thereunder) as advances under such Development Agreements for Work and as
increases in Landlord's Investment in such Facility, regardless of whether such
Facility is an Incomplete Facility or is already operating. For purposes of the
Master Agreement, the term "NHP's Maximum Investment" shall be treated for all
purposes as having been increased by the Equipment Amounts. For purposes of the
Development Agreements, the maximum permitted Development Advance shall be
treated for all purposes as having been increased by that portion of the
Equipment Amounts attributable to the Facility to which such Development
Agreement relates.
(b) The parties hereby acknowledge that, pursuant to the Capital
Agreements between BCC and the Tenants, BCC or a BCC Affiliate (as defined in
Appendix 1 to the Capital Agreements) has the option to purchase all the equity
ownership interests in, or assets of, each individual Tenant. The Parties hereby
agree that in connection with the purchase by BCC or a BCC Affiliate of all of
the equity ownership interests in, or assets of, a Tenant, BCC shall have the
option to require, subject to the conditions set forth below in this Paragraph
4(b), that NHP increase the Landlord's Investment (as defined in the applicable
Lease) in such Tenant's Lease by a lump sum (the "Working Capital Payoff") equal
to the principal amount then outstanding on the Senior Loan made by NHP to such
Tenant, together with all accrued but unpaid interest thereon and all other
amounts due and payable to NHP under the applicable Senior Loan Documents. The
Working Capital Payoff shall be advanced by NHP to pay in full the applicable
Senior Loan, and all other amounts then due and owing in connection with such
Senior Loan to NHP; provided, however, NHP shall be under no obligation to
advance such Working Capital Payoff unless (i) no uncured Event of Default
exists under the applicable Lease or any other Leases or Transaction Documents,
and (ii) BCC or a BCC Affiliate has exercised the right to acquire all of the
equity ownership interests in, or assets of, the applicable Tenant. The Working
Capital Payoff shall be advanced by NHP on the date that BCC or a BCC Affiliate
closes the purchase of the equity ownership interests in, or all of the assets
of, the applicable Tenant. Upon advancing the Working Capital Payoff amount, all
amounts due and owing to NHP in connection with the applicable Senior Loan shall
be paid in full from such Working Capital Payoff, all obligations of the Tenant
under the applicable Senior Loan Documents shall be extinguished,
- 5 -
<PAGE> 6
and the Landlord's Investment under the applicable Lease shall be increased (as
of the date that the Working Capital Payoff is advanced) on a dollar for dollar
basis by the amount of the Working Capital Payoff. For purposes of the Master
Agreement, the term "NHP's Maximum Investment" shall be treated for all purposes
as having been increased by the Working Capital Payoff.
5. Miscellaneous. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document. This Amendment shall be binding upon the
successors and permitted assigns of the parties hereto (and the Affiliates of
such parties, successors, and permitted assigns). This Amendment shall be
construed and enforced in accordance with the internal laws of the State of
Texas, without regard to the rules governing choice of law. The parties hereto
agree that venue for any and all lawsuits related to this Amendment shall be in
Harris County, Texas.
This Amendment is made effective as of June 30, 1999 (the "Effective
Date").
"NHP"
NATIONWIDE HEATH PROPERTIES, INC.,
a Maryland corporation
By: /s/ Gary E. Stark (SEAL)
Name: Gary E. Stark
Title: Vice President
"BCC"
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ Robin L. Barber (SEAL)
Name: Robin L. Barber
Title: Senior Vice President and
Legal Counsel
- 6 -
<PAGE> 7
"Developer"
BCC DEVELOPMENT AND MANAGEMENT CO.,
a Delaware corporation
By: /s/ Robin L. Barber (SEAL)
Name: Robin L. Barber
Title: Vice President and
Secretary
"Tenants"
C&G HEALTHCARE AT PENSACOLA,
L.L.C., a Delaware limited
liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
C&G HEALTHCARE AT TALLAHASSEE,
L.L.C., a Delaware limited
liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
C&G HEALTHCARE AT HAGERSTOWN,
L.L.C., a Delaware limited
liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
C&G HEALTHCARE AT JOHNSON CITY,
L.L.C., a Delaware limited
liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
- 7 -
<PAGE> 8
C&G HEALTHCARE AT TEAY'S VALLEY,
L.L.C., a Delaware limited
liability company
By: /s/ Kevin L. Sherry (SEAL)
Name: Kevin L. Sherry
Title: Sole Member and President
Joined herein by Kevin L. Sherry, the sole member of Elder Care
Operators, LLC, solely for the purposes of acknowledging the changes in the
Transaction Documents set forth in this Amendment and reaffirming his
obligations under the Note Guaranties.
/s/ Kevin L. Sherry
KEVIN L. SHERRY, individually
- 8 -
<PAGE> 1
Exhibit 10.3
FORM OF
FIRST AMENDED AND RESTATED
SHORTFALL FUNDING AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED SHORTFALL FUNDING AGREEMENT
(this "Agreement") is made as of the 30th day of June, 1999 by and among [ ],
a Delaware limited liability company (the "Lessee"), the member(s) of Lessee
listed on Schedule 1 attached hereto (collectively, the "Member") and Balanced
Care Corporation, a Delaware corporation ("BCC").
W I T N E S S E T H
WHEREAS, the Member constitutes the holder of all equity
interests in the Lessee; and
WHEREAS, Lessee executed and delivered the Lease dated as of
the Documentation Date (the "Lease") between Lessee and Nationwide Health
Properties, Inc., a Maryland corporation (the "Lessor"), whereby Lessee leased
from Lessor property, together with all improvements built or to be built
thereon, located in [ ] more fully described in the Lease (the "Property");
and
WHEREAS, the Lessee and [ ], a Delaware corporation (the
"Management Firm") have entered into that certain Management Agreement dated as
of the Documentation Date (the "Management Agreement"), whereby Lessee has
appointed the Management Firm as the exclusive manager and operator of the
Facility; and
WHEREAS, Lessor and BCC Development and Management Company,
Inc., a Delaware corporation ("Developer"), have entered into a Development
Agreement dated as of the Documentation Date (the "Development Agreement") for
the purpose of developing the Facility; and
WHEREAS, the Developer and the Management Firm are
wholly-owned subsidiaries of BCC; and
WHEREAS, Lessee will deposit immediately available funds from
time to time as specifically provided in this Agreement to fund the Working
Capital Reserve (to be used to fund Shortfalls); and
<PAGE> 2
WHEREAS, such funds to be deposited in the Working Capital
Reserve will come from the proceeds of the Senior Note issued by Lessee to the
Senior Lender pursuant to the Senior Credit Documents; and
WHEREAS, the Lessee, the Member and BCC entered into a
Shortfall Funding Agreement dated as of the Documentation Date (the "Original
Shortfall Agreement"), whereby the Lessee agreed to deposit immediately
available funds from time to time as specifically provided in the Original
Shortfall Agreement to fund the Working Capital Reserve (to be used to fund
Shortfalls); and
WHEREAS, the Lessee, the Member and BCC desire to enter into
this Agreement to amend and restate the Original Shortfall Agreement in its
entirety; and
WHEREAS, upon the advance of the 100% of the total principal
amount of the Senior Note and upon depletion of the Working Capital Reserve, BCC
intends to make Advances to the Lessee, on the terms and conditions herein
stated, to fund continuing Shortfalls; and
WHEREAS, BCC is willing to fund Advances to the Lessee
covering Shortfalls after 100% of the total amount of the Senior Note has been
advanced and upon depletion of the Working Capital Reserve, only on the terms
and conditions provided in this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
FUNDING SHORTFALLS
SECTION 1.01 Funding; Capitalization of the Lessee; Working
Capital Reserve. (a) At such time as BCC or the Management Firm requests, and
upon receipt of advances from the Senior Lender under and in accordance with the
Senior Note, the Member and/or the Lessee shall deposit into the Collateral
Account so much of such funds so advanced under the Senior Note, up to the
maximum amount of no less than of [ ], representing 100% of the total
principal amount of the Senior
2
<PAGE> 3
Note and 100% of the total capital needed to fully fund the Working Capital
Reserve. Time is of the essence with respect to such contributions described in
this Section 1.01(a).
(b) The contributions described in Section 1.01(a) shall be
made directly into the Collateral Account. The contribution of funds into the
Collateral Account as provided in this Section 1.01 is referred to herein as a
"Funding," and the aggregate of all Fundings to be made into the Collateral
Account as provided in Section 1.01(a) above, together with any Fundings made
pursuant to Section 1.01 of the Original Shortfall Agreement, is referred to as
the "Working Capital Reserve." As contemplated pursuant to the Senior Note, BCC
or the Management Firm will from time to time request that Fundings be made
under the Senior Note into the Collateral Account to fund the Working Capital
Reserve. Under the Working Capital Assurance Agreement, the Lessor may also
request Fundings. No Fundings may be made into the Collateral Account until such
time as BCC or the Management Firm (or the Lessor, as appropriate) so requests;
provided, however, if BCC or the Management Firm has failed to make a request
for Fundings as provided under the Senior Note (and if the Lessor has failed to
make a request for Fundings pursuant to the Working Capital Assurance
Agreement), and a Shortfall exists, BCC shall be obligated to make Advances
pursuant to the provisions of Section 1.02 below if all other conditions to
making such Advances have been satisfied or waived in writing by BCC.
(c) BCC, the Member and the Lessee recognize that Senior
Lender has not committed to fund sums into the Working Capital Reserve in excess
of the principal amount of the Senior Note.
(d) The Member and the Lessee acknowledge and agree that (i)
Fundings under the Senior Note and any other borrowings of the Lessee to fund
the Working Capital Reserve shall be recourse to the Member to the extent that
the Member will be liable for no less than 15% of the total amount to be funded
into the Working Capital Reserve as provided in Section 1.01(a) above (such
maximum guarantied liability of the Member, as adjusted from time to time to
reflect the advances actually made pursuant to the Senior Note, is referred to
herein as the "Guarantied Portion" of the Working Capital Reserve), (ii) the
Member has sufficient funds in personal accounts such that the guaranty of
3
<PAGE> 4
Indebtedness in connection with sums borrowed for the Working Capital Reserve is
meaningful and has a likelihood of being repaid and (iii) the Lessor and the
Management Firm may (without notice to the Lessee or the Member, and whether
acting alone or together) withdraw funds from the Working Capital Reserve to
fund Shortfalls with respect to the Facility as provided in the Transaction
Documents and the Lease Documents.
SECTION 1.02 Advances. Upon the advance of 100% of all sums
under the Senior Note into the Working Capital Reserve and the complete
depletion of the Working Capital Reserve, and to the extent thereafter of any
Shortfall, BCC hereby agrees to advance (each, an "Advance," and collectively,
the "Advances") from time to time funds to the Lessee upon no less than five (5)
days' prior written notice, upon the terms and conditions provided herein.
Advances shall be evidenced by one or more promissory notes issued by the Lessee
in the form attached hereto as Exhibit A (collectively, the "Notes"). The Notes
shall mature on the anniversary of the fifth year after issuance of the first
Note issued under this Agreement. Interest shall accrue on the Notes at the rate
of 2% over the Prime Rate as announced from time to time in the Eastern Edition
of the Wall Street Journal (or, in the event of the discontinuance of the
publishing of the Prime Rate in such Eastern Edition of the Wall Street Journal,
such other source as the parties may agree), and shall be payable in arrears on
the first day of each calendar quarter. All sums owed under the Notes and
hereunder to BCC, and all other obligations and covenants under the Transaction
Documents applicable to the Lessee and the Member (including the obligations of
the Member under the Option Agreement, as defined in Section 1.04 below),
together with all interest payable under the Transaction Documents and all other
costs and expenses payable by the Lessee or the Member to or for the benefit of
BCC or any BCC Affiliate (including indemnification and defense obligations) are
referred to herein as the "Obligations." Notwithstanding any provision to the
contrary contained in the Transaction Documents, the provisions of this Section
1.02, and any Notes issued hereunder, shall be subject in all respects to the
terms and conditions of Section 7(c) of the Option Agreement.
SECTION 1.03 Asset Purchase Option. (a) The Lessee and the
Member hereby grant to BCC an option (the "Asset Purchase Option") to purchase
all of the assets of the Lessee (including the option to take an assignment of
the Lease) for the Asset
4
<PAGE> 5
Purchase Price. The Asset Purchase Option may be exercised by BCC by providing
written notice to the Lessee at any time during the term of the Lease. The
closing of the purchase of the assets of the Lessee shall take place within 30
days after BCC exercises the Asset Purchase Option at such location in
Pennsylvania as BCC may designate. At the closing of the asset purchase, the
Lessee shall transfer, assign and convey to BCC (or its designee) all assets of
the Lessee, free and clear of all Liens and restrictions of any kind or nature,
except for Liens or restrictions in favor of the Lessor pursuant to the Lease
Documents or in favor of BCC pursuant to the Transaction Documents (provided,
however, Liens in favor of BCC securing Advances or other Obligations shall be
paid in full by the Lessee and the Member at the closing of the asset purchase).
The Lessee (and the Member if requested by BCC) shall execute and deliver at the
closing of the asset purchase an assignment of lease (assigning the Lease to the
purchaser), a bill of sale conveying all other assets of the Lessee and such
other documents and instruments as BCC may reasonably request, all in form and
substance reasonably satisfactory to BCC. The "Asset Purchase Price" as used
herein shall mean (i) all amounts actually funded into the Working Capital
Reserve pursuant to the Senior Note (together with any accrued and unpaid
interest and other charges then due as of the date of determination), plus (ii)
an amount (calculated as a yearly return) equal to 27.5% of the Guarantied
Portion of the Working Capital Reserve, calculated as though the Working Capital
Reserve were fully funded as of the Documentation Date, compounded on an annual
basis through the closing date, plus (iii) the aggregate amount of all Advances
and all other Obligations due and payable by the Lessee or the Member to BCC or
a BCC Affiliate through the closing date (exclusive of the Management Fee),
minus (iv) any payments made to the Member under the Option Agreement or the
Original Option Agreement (defined in Section 1.04 below), but subject to the
following provisions regarding credit for option payments paid as Current Yield
(as defined in the Option Agreement) in advance. To avoid any doubt, BCC shall
receive, according to the following schedule, a credit against the Asset
Purchase Price for any payments made to the Member under the Option Agreement
paid as Current Yield in advance, to the extent that such advanced option
payments are attributable to Current Yield accruing from and after the closing
date:
5
<PAGE> 6
<TABLE>
<CAPTION>
Credit received by BCC for
option payments paid as
Number of months Current Yield in advance
between June 30, 1999 (as % of Current Yield paid
and the closing date in advance)
<S> <C>
0-6 none
7-8 25%
9-10 50%
11-12 75%
more than 12 100%
</TABLE>
All Advances and all other Obligations due and payable by the Lessee or the
Member to BCC or a BCC Affiliate through the closing date of the asset purchase
shall be payable from the Asset Purchase Price to BCC or the BCC Affiliate, as
appropriate. Notwithstanding any provision to the contrary contained in the
Transaction Documents, the provisions of this Section 1.03 shall be subject in
all respects to the terms and conditions of Section 7(c) of the Option Agreement
and Section 6.04 of this Agreement.
(b) Notwithstanding any provision to the contrary contained
herein or in any other Transaction Document, BCC agrees that the Asset Purchase
Option shall not be exercised unless (i) BCC or its designee is prohibited (by
operation of law, or any other reason other than the acts or omissions of BCC or
any BCC Affiliate) from exercising the Option to acquire the Equity Interests
pursuant to the Option Agreement, or (ii) the Lessee or the Member is in Default
of any covenant, agreement, representation or warranty contained in this
Agreement (except for a Default in the payment of interest under the Notes) or
the Option Agreement, which Default was not caused by BCC or any BCC Affiliate.
SECTION 1.04 Transaction Documents. In addition to the Notes,
and to better secure the performance of the Lessee hereunder and under the other
Transaction Documents, the Lessee or the Member or both (as applicable) have
executed and delivered to Lessor or BCC (as applicable) the following:
(i) the Lease, the other Lease Documents and the
Senior Credit Documents to which it is a party;
(ii) the [ ], in the form attached
6
<PAGE> 7
hereto as Exhibit B encumbering the Property in
favor of BCC (the "Leasehold Mortgage");
(iii) the Deposit Pledge Agreement and the Pledge
Agreement; and
(iv) such other documents, certificates, powers,
affidavits and instrument as BCC may reasonably
request.
In addition to the foregoing documents, the Member has
executed and delivered to BCC a First Amended and Restated
Option Agreement (the "Option Agreement") substantially in the
form attached hereto as Exhibit C, whereby the Member has
agreed that BCC shall have an option to purchase the equity
interests of the Member in the Lessee, on the terms and
conditions provided therein. The Option Agreement amended and
restated that certain Option Agreement dated as of the
Documentation Date by and between the Member and BCC (the
"Original Option Agreement").
SECTION 1.05 Interest Payments. In no event shall the amount
of interest due or payable pursuant to any Transaction Document (exclusive of
payment made under the Option Agreement and sums paid in connection with the
Asset Purchase Option) exceed the maximum rate of interest allowed by Law and,
in the event any such payment is inadvertently paid by the Lessee or the Member
or inadvertently received by BCC or any BCC Affiliate, then such excess sum
shall be credited as a payment of principal due to BCC or any BCC Affiliate. It
is the express intention of the parties hereto that neither the Lessee nor the
Member pay to BCC, directly or indirectly, in any manner whatsoever, interest in
excess of that which may be lawfully paid by the Lessee.
SECTION 1.06 Intention. It is the intention of BCC, the Member
and the Lessee that (i) the Management Firm operate the Facility pursuant to the
Management Agreement and that the Lessee act as a passive investor with respect
to the Facility, (ii) the Lessee include on its financial statements all revenue
and losses with respect to the Facility during the term of this Agreement for
accounting purposes, and (iii) Advances made hereunder and all other obligations
of the Lessee and the Member under the Transaction Documents be secured by and
pursuant to the
7
<PAGE> 8
Leasehold Mortgage and the Pledge Agreement, but subject to the rights of Lessor
under the Lease, regardless of any bankruptcy, insolvency, receivership or
similar proceedings instituted by or against the Lessee. BCC, the Member and the
Lessee agree to take no position inconsistent with the intention of the parties
as herein stated.
ARTICLE II
CONDITIONS TO ADVANCES
SECTION 2.01 Conditions Precedent to Advances. The obligations
of BCC to accept delivery of the Transaction Documents and make Advances are
subject to the condition precedent that BCC receives the following five (5) days
prior to the making of any Advance:
(a) the Note(s);
(b) the Working Capital Assurance Agreement;
(c) the Leasehold Mortgage;
(d) the Option Agreement;
(e) the Management Agreement;
(f) a certificate of the Secretary of State of the State of
Delaware stating that the Lessee is duly organized, validly existing and in good
standing in such state;
(g) a certified copy of the Operating Agreement of the Lessee
and the Member, together with certified resolutions or authorizations of the
Lessee and the Member granting the power to the Lessee and the Member to enter
into and perform the Transaction Documents;
(h) all other Transaction Documents; and
(i) the Lease and all other Lease Documents.
SECTION 2.02 Additional Conditions Precedent to Advances. The
obligation of BCC to accept delivery of the Transaction Documents and consummate
this transaction, and to
8
<PAGE> 9
make any Advance, shall be further subject to the condition precedent that the
following statements shall be true and correct (and the delivery by the Lessee
and the Member of the Notes and the other Transaction Documents shall be deemed
to constitute a representation and warranty by the Lessee and the Member that
such statements are true on such date):
(i) The representations and warranties contained in
Article III of this Agreement and the other Transaction
Documents are true and correct in all material respects on and
as of date of the execution and delivery of this Agreement, at
the time of each Advance, and as of each date until the
Obligations are satisfied in full; and
(ii) No event has occurred and is continuing which
constitutes a Default or an Event of Default on the part of
the Lessee or the Member under any of the Transaction
Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Lessee. The
Lessee and the Member represent and warrant as follows:
(a) Organization; Qualification. The Lessee is a limited
liability company duly formed, validly existing and in good standing under the
laws of State of Delaware, has qualified to do business in the State in which
the Facility is located, and has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be
conducted; provided, however, notwithstanding any provision to the contrary
contained herein or in the other Transaction Documents, if the foregoing is
false or misleading (and so long as such representation or warranty was not made
false or misleading as a result of the acts or omissions of the Lessee or the
Member), in no event shall BCC fail to fund Advances if required to do so
hereunder or raise as a defense to the consequences of BCC's failure to make
Option Payments the failure of the foregoing from being true and correct, but
neither the Lessee nor the Member shall raise as a defense to the obligations of
the Lessee or the
9
<PAGE> 10
Member hereunder or under any other Transaction Document the failure of the
foregoing from being true and correct in all material respects.
(b) Power; Authority. The execution, delivery and performance
by the Lessee of this Agreement and the other Transaction Documents to which it
is a party are within the Lessee's power and have been duly authorized by all
necessary action, and this Agreement and the other Transaction Documents to
which the Lessee is a party have been duly executed and delivered by the duly
authorized representative of the Lessee.
(c) Approval or Consents. No approval or consent of any
foreign, domestic, federal, state or local authority is required for the due
execution, delivery and performance by the Lessee of this Agreement or any other
Transaction Document to which it is a party and the execution, delivery and
performance by the Lessee of this Agreement and the other Transaction Documents
to which it is a party do not conflict with, and will not result in the breach
of or default under, any contract, agreement or other document or instrument to
which the Lessee is a party or by which its properties are bound.
(d) Binding Obligations. This Agreement and the other
Transaction Documents to which the Lessee is a party are legal, valid and
binding obligations of the Lessee enforceable against the Lessee in accordance
with their respective terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting generally the
enforcement of creditors' rights; provided, however, notwithstanding any
provision to the contrary contained herein or in the other Transaction
Documents, if the foregoing is false or misleading (and so long as such
representation or warranty was not made false or misleading as a result of the
acts or omissions of the Lessee or the Member), in no event shall BCC fail to
fund Advances if required to do so hereunder or raise as a defense to the
consequences of BCC's failure to make Option Payments the failure of the
foregoing from being true and correct, but neither the Lessee nor the Member
shall raise as a defense to the obligations of the Lessee or the Member
hereunder or under any other Transaction Document the failure of the foregoing
from being true and correct in all material respects.
(e) Litigation. There is no pending or, to the best
10
<PAGE> 11
of the Lessee's knowledge, threatened action, suit or proceeding against or
affecting the Lessee before any court, governmental agency or arbitrator.
(f) Applicable Law. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Lessee is a
party, and the borrowings hereunder, do not and will not, by the passage of
time, the giving of notice or otherwise, violate any Law applicable to the
Lessee; provided, however, notwithstanding any provision to the contrary
contained herein or in the other Transaction Documents, if the foregoing is
false or misleading (and so long as such representation or warranty was not made
false or misleading as a result of the acts or omissions of the Lessee or the
Member), in no event shall BCC fail to fund Advances if required to do so
hereunder or raise as a defense to the consequences of BCC's failure to make
Option Payments the failure of the foregoing from being true and correct, but
neither the Lessee nor the Member shall raise as a defense to the obligations of
the Lessee or the Member hereunder or under any other Transaction Document the
failure of the foregoing from being true and correct in all material respects.
(g) Title and Condition of Assets. Except for the Lessee's
leasehold interest in the Lease, the Lessee has good, marketable and legal title
to its properties and assets. The Lessee has a good and valid leasehold interest
in the Lease.
(h) Liens. None of the properties and assets of the Lessee are
subject to any Lien or other charge other than Liens in favor of Lessor pursuant
to the Lease or the Senior Credit Documents, BCC as provided herein, or a BCC
Affiliate ("Permitted Liens"), and the execution, delivery and performance by
the Lessee of this Agreement and the other Transaction Documents to which it is
a party will neither result in the creation of any Lien or other charge upon any
of the Lessee's properties or assets, nor cause a default under any agreements
to which the Lessee is a party.
(i) {intentionally omitted}.
(j) Tax Returns and Payments. All federal, state and other tax
returns of the Lessee required by Law to be filed have been duly filed, and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the
11
<PAGE> 12
Lessee and its properties, income, profits and assets which are due and payable
have been paid; provided, however, if the failure to file such tax returns was
due to the acts or omissions of BCC or a BCC Affiliate, the foregoing shall not
constitute an Event of Default.
(k) No Employees. The Lessee has no employees for which it is
required to comply with the Employment Retirement Income Security Act of 1974.
(l) Absence of Defaults. To the Lessee's and the Member's
knowledge, no event has occurred, which has not been remedied, cured or waived,
which constitutes, or with the passage of time or giving of notice or both would
constitute, a Default or an Event of Default under any Transaction Document or
Lease Document or which constitutes or which with the passage of time or giving
of notice or both would constitute a default or event of default by the Lessee
under any agreement or judgment, decree or order, to which the Lessee is a party
or by which the Lessee or any of its properties may be bound.
(m) Accuracy and Completeness of Information. No document
furnished or written statement made to BCC by the Lessee or the Member in
connection with the execution of this Agreement or any of the other Transaction
Documents (or in connection with the organization or capitalization of the
Lessee by the Members) contains or will contain any untrue statement of a
material fact or fails to state a material fact necessary in order to make the
statements contained therein not materially misleading.
(n) Subsidiaries. The Lessee does not own, directly or
indirectly, of record or beneficially, any of the voting stock of any class or
classes of, or any other voting interests of, any Entity.
(o) Investment Company. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(p) Public Utility Company. The Lessee is not a "holding
company" or a "subsidiary company", or an "affiliate" of a "holding company",
within the meaning of the Public Holding Company Act of 1935, as amended.
12
<PAGE> 13
(q) Sole Member. The Member is the sole member of the Lessee,
and no other person or Entity holds any equity interest or other security in the
Lessee.
(r) Capital Contributions. No less than 15% of the total
amount to be contributed to the Working Capital Reserve as provided in Section
1.01(a) above shall be guarantied personally by the Member, and the Member has
the financial resources and ability to pay the Guarantied Portion.
ARTICLE IV
COVENANTS OF THE LESSEE
SECTION 4.01 Affirmative Covenants. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation hereunder or under the other
Transaction Documents owed to it, the Lessee will and the Member shall cause the
Lessee to:
(a) Compliance with Laws. Comply, in all material respects
with all applicable Laws, such compliance to include paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its properties.
(b) {intentionally omitted}
(c) Notice of Litigation and Other Matters. Promptly give
notice to BCC of the following: (i) any actions, suits or proceedings instituted
against the Lessee; (ii) any change in the chief executive office, principal
place of business or location of the books and records of the Lessee and (iii)
the occurrence of a Default or an Event of Default.
(d) {intentionally omitted}
(e) Preservation of Existence and Similar Matters. Preserve
and maintain its existence under the Laws of the state of its formation, and
preserve and maintain its rights, franchises, licenses and privileges in such
state as a limited liability company, and qualify and remain qualified and
authorized to do business in such state.
(f) Business. At all times endeavor to carry on its business
in the most efficient manner possible under the
13
<PAGE> 14
circumstances and engage only in the business presently carried on by the
Lessee.
(g) Further Assurances. At BCC's request, from time to time,
execute, acknowledge or take such further action as BCC may reasonably require
(i) to effectuate the purposes of this Agreement and the purposes of the other
Transaction Documents or (ii) to comply or consent to such actions as BCC may
wish to comply or consent to on behalf of the Lessee under the Lease Documents.
Provided, however, notwithstanding anything to the contrary contained in this
Section 4.01, the Lessee shall not be in default hereunder to the extent that
the obligations described in this Section 4.01 are required to be performed by
the Management Firm under the Management Agreement.
SECTION 4.02 Negative Covenants. Except as expressly permitted
under the Transaction Documents or the Lease Documents, so long as BCC shall
have any commitment or Obligation hereunder or under the other Transaction
Documents owed to it, the Lessee will not, and Member will not cause the Lessee
to, without the prior written consent of BCC:
(a) Liens Created by the Lessee. Create or suffer to exist any
Lien or any other type of preferential arrangement, upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign any right
to receive income, other than Permitted Liens.
(b) Distributions. Make any distribution of cash or other
property to the Member (other than payments to the Member to satisfy Federal,
state or local income tax consequences resulting exclusively from the operations
of the Facility) or declare or pay any dividend or distribution on any
securities of the Lessee.
(c) Other Business. Engage in any business venture or enter
into any agreement with respect to any business venture, except as expressly
provided in the Transaction Documents with respect to the Facility.
(d) Transfer of Assets. Except as expressly contemplated in
the Transaction Documents to BCC or an Entity
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<PAGE> 15
designated by BCC or otherwise as expressly permitted in the Lease with respect
to Subleases of a portion of the Facility, convey, transfer, lease, sublease,
assign or otherwise dispose of (whether in one transaction or in a series of
transactions) any of its assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets of, any person or Entity. The
restrictions of this Subsection shall include a prohibition on any assignment,
pledge, hypothecation or other transfer of the Lease or sublease or license of
the Facility, except to BCC or a BCC Affiliate in accordance with the terms and
conditions of the Lease or otherwise as expressly permitted in the Lease with
respect to Subleases of a portion of the Facility.
(e) Indebtedness for Borrowed Money. Create, assume, guaranty
or otherwise become or remain obligated in respect of, or permit or suffer to
exist or to be created, assumed or incurred or to be outstanding, any
Indebtedness, except Indebtedness incurred to BCC or a BCC Affiliate under the
Transaction Documents or Indebtedness incurred to Lessor as expressly provided
in the Lease Documents.
(f) Creation of Affiliates. Form, organize or participate in
the formation or organization of any Entity, or make any investment in any newly
formed or existing Entity.
(g) Loans. Extend credit to or make any advance, loan or
contribution to any person or Entity.
(h) Governance Documents. Amend, supplement or otherwise
modify the terms of the Articles of Formation or the Limited Liability Company
Agreement of the Lessee in any way.
(i) Other Transactions with Lessor. Enter into any transaction
with Lessor or any affiliate or related party to or with Lessor, other than
pursuant to the Transaction Documents.
(j) Transfers of Equity Interests. Permit the Member to
transfer all or any portion of the Member's Equity Interest in the Lessee.
(k) Amend Transaction Documents. (i) Amend, terminate,
supplement or otherwise modify any Transaction Document, (ii) waive any default
or potential event of default by Lessor under, or consent to any action
requested by Lessor
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<PAGE> 16
pursuant to, any Lease Document, (iii) declare a default or event of default
under any Lease Document, (iv) exercise any right to extend the term of the
Lease, (v) exercise any right to purchase the Facility or exercise a right of
refusal with respect thereto, or (vi) exercise any right to cancel the Lease as
a result of a casualty or condemnation with respect to the Facility, or
otherwise.
(l) Mergers and Consolidations. Merge or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire any
Entity.
(m) Issuance of Securities. Except for the equity interests of
the Lessee that have been issued to the Member and are outstanding as of the
date hereof, issue any equity interests or options, warrants or other rights to
purchase any equity interests or any securities convertible or exchangeable for
equity interests, or commit to do any of the foregoing.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. Each of the following events
shall constitute an event of default hereunder ("Shortfall Event of Default"),
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
nongovernmental body; provided, however, notwithstanding anything to the
contrary contained in this Section 5.01, no Shortfall Event of Default may be
declared hereunder in the event that the Shortfall Event of Default resulted
from a default on the part of BCC or a BCC Affiliate under any of the
Transaction Documents:
(a) The Lessee shall fail to make any payment of principal or
interest, as stated in the Notes, when due (a "Monetary Default"); or
(b) Any material representation or warranty made by the Lessee
or the Member under or in connection with any Transaction Document shall prove
to have been incorrect or misleading in any material respect when made; or
16
<PAGE> 17
(c) The Lessee or the Member shall fail to perform or observe
any term, covenant or agreement contained in this Agreement, or in any other
Transaction Document, on its or their part to be performed or observed beyond
the applicable cure period; or
(d) The Lessee or the Member shall generally not pay its debts
when due; or
(e) The Lessee or the Member shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Lessee or the Member seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of the Lessee or the Member of any of its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for the Lessee or
the Member or for any substantial part of its property; or the Lessee or the
Member shall take any action to authorize any of the actions set forth above in
this subsection; or
(f) Any nonappealable judgment or order for the payment of
money in excess of $50,000 shall be rendered against the Lessee and the same
shall not be discharged within 30 days after entry; or
(g) A warrant or writ of attachment or execution or similar
process shall be issued against any property of the Lessee which exceeds $50,000
in value and such warrant or process shall continue undischarged or unstayed for
30 consecutive days; or
(h) Any material provision of any Transaction Document to
which the Lessee or the Member is a party shall for any reason cease to be valid
and binding on the Lessee or the Member, or the Lessee or the Member shall so
state in writing; or
(i) The Leasehold Mortgage shall for any reason cease to
create a valid and perfected security interest in any of the collateral covered
thereby, subject in priority only to the Permitted Liens; or
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<PAGE> 18
(j) an Option Agreement Event of Default, a Mortgage Event of
Default, a Lease Event of Default, a Deposit Pledge Event of Default, an Other
Transaction Default or a Management Agreement Event of Default on the part of
the Lessee or the Member shall occur and be continuing.
ARTICLE VI
REMEDIES
SECTION 6.01 Applicable Provisions Upon Occurrence of an Event
of Default. Upon the occurrence of a Shortfall Event of Default, the following
provisions shall apply:
(a) Acceleration and Termination:
(i) Automatic. Upon the occurrence of a Shortfall
Event of Default specified in Section 5.01(e), the principal
of, and the interest on, the Notes at the time outstanding,
and all other amounts owed to BCC under this Agreement and any
of the other Transaction Documents, shall become automatically
due and payable without presentment, demand, protest, or other
notice of any kind all of which are expressly waived, anything
in this Agreement or the other Transaction Documents to the
contrary notwithstanding.
(ii) Optional. If any other Shortfall Event of
Default shall have occurred, and in every such event, BCC may
do the following: declare the principal of, and interest on,
the Notes at the time outstanding, and all other amounts owed
to BCC under this Agreement and the other Transaction
Documents, to be forthwith due and payable, whereupon the same
shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or the other
Transaction Documents to the contrary notwithstanding.
(b) BCC's Right to Enter Property. Subject to the terms of the
Lease Documents and the Transaction Documents, BCC may enter upon the Property
and any premises on which collateral may be located and, without resistance or
interference by the
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<PAGE> 19
Lessee, take physical possession of any or all thereof and maintain such
possession on such premises or move the same or any part thereof to such other
place or places as BCC shall choose, without being liable to the Lessee on
account of any loss, damage or depreciation that may occur as a result thereof.
(c) Use of Premises. BCC may, without payment of any rent or
any other charge, enter the Property and, without breach of peace, take
possession of the Property or place custodians in exclusive control thereof,
remain on such premises and use the same and any of the Lessee's equipment, for
the purpose of (i) operating the Facility and (ii) collecting any accounts
receivable.
(d) Other Rights. BCC may exercise any and all of its rights
and remedies available under the other Transaction Documents, as well as those
available in Law or in equity.
(e) Right to Foreclose. Subject to the rights of the Lessor
under the Lease Documents and the Senior Credit Documents, BCC may foreclose
upon the Lease, take immediate possession of the Facility and Property and
operate the Property, all in accordance with the terms and conditions of the
Leasehold Mortgage.
SECTION 6.02 Application of Proceeds. All proceeds from each
sale of, or other realization upon, all or any part of the Collateral following
a Shortfall Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred
in connection with such sale or other realization, including, without
limitation, the expenses for indemnification as provided herein;
(b) Second: to the payment of the interest due upon the Notes;
(c) Third: to the payment of the principal due upon the Notes
or any other payments owed to BCC under the Transaction Documents; and
(d) Fourth: the balance (if any) of such proceeds shall be
paid to the Lessee subject to any duty imposed by law or
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<PAGE> 20
otherwise to the holder of any subordinate lien in the Collateral known to BCC
and subject to the direction of a court of competent jurisdiction.
The Lessee shall remain liable and will pay, on demand, any
deficiency remaining in respect of the Obligations owing by the Lessee to BCC
after the application of proceeds set forth above together with interest thereon
at a rate per annum equal to the highest rate then payable hereunder.
SECTION 6.03 Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of BCC under
this Agreement and each of the other Transaction Documents shall be cumulative
and not exclusive of any rights or remedies which it would otherwise have. In
exercising its rights and remedies BCC may be selective and no failure or delay
by BCC in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise of any other power or right.
(b) Waiver of Marshaling. The Lessee hereby waives any right
to require any marshaling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this Article
VI or elsewhere in this Agreement or in any other Transaction Documents shall be
construed as requiring or obligating BCC or any agent or designee thereof to
make any demand, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim or notice or take any
action, with respect to any account or any other Collateral or the moneys due or
to become due under the Notes or any other Transaction Documents or in
connection therewith, or to take any steps necessary to preserve any rights
against prior parties and neither BCC nor any of its agents or designees shall
have any liability to the Lessee for actions taken pursuant to this Article VI,
any other provision of this Agreement or any other Transaction Documents, except
as otherwise provided by Law.
(d) Waiver of Defenses. The Lessee hereby waives any and all
defenses, either by way of set-off as to matters arising
20
<PAGE> 21
prior to the date hereof or any other defenses, which the Lessee presently
believes it has or which the Lessee may have in the future relating to defaults
by the Lessee or the Member under this Agreement or any other Transaction
Document.
SECTION 6.04 Remedies of the Lessee and the Member. So long as
no Event of Default has occurred under any Transaction Document or Lease
Document which was caused by either the Member or the Lessee, in the event that
BCC fails to make Advances once required as provided herein, after ten (10) days
prior written notice of such failure sent by the Lessee to BCC, the Lessee and
the Member shall have the following remedies and rights: (i) BCC shall no longer
have any right to exercise the Option or the Asset Purchase Option, (ii) all
Notes issued by the Lessee pursuant to this Agreement shall automatically be
amended to provide that interest due under the Notes will accrue and not be due
and payable until the date which is the fifth (5th) anniversary of the date of
issuance of the first Note so issued by the Lessee pursuant to this Agreement
and (iii) the lien encumbering the Equity Interests and other assets in favor of
BCC arising hereunder and under the Pledge Agreement and the Leasehold Mortgage
shall automatically be released and terminated. BCC agrees, after the failure to
make Advances and an opportunity to cure as provided herein, to execute such
documents and instruments, and accept delivery of such replacement Notes
(returning the Notes to be replaced) as the Member may reasonably request to
effect the provisions of Subsections (i), (ii) and (iii) above.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Right to Cure Defaults Under Transaction
Documents. The Lessee shall give BCC immediate notice of an default or event of
default under any Transaction Document received from Lessor. BCC shall have the
right, but not the obligation, to cure such default or event of default. To the
extent that BCC shall expend sums to cure any such default or event of default,
such sums shall be deemed Advances hereunder, payable upon demand.
21
<PAGE> 22
SECTION 7.02 Confidentiality.
(a) The Lessee and the Member hereby covenant and agree, on
behalf of the Lessee, the Member and all Lessee Affiliates, that all
Confidential Information (as hereinafter defined) will be held and treated by
the Lessee, the Member, Lessee Affiliates and the agents and employees of the
Lessee, the Member and Lessee Affiliates in confidence and will not, except as
explicitly consented to by BCC in its sole discretion, be disclosed by the
Lessee, the Member, Lessee Affiliates or the agents and employees of the Lessee,
the Member or Lessee Affiliates, in any manner whatsoever, in whole or in part,
and will not be used by the Member, the Lessee, Lessee Affiliates or the agents
and employees of the Lessee, the Member or Lessee Affiliates for any purpose
whatsoever. The Lessee and the Member further agree on behalf of the Lessee, the
Member and Lessee Affiliates (i) to disclose Confidential Information only to
the Lessee's employees who need to know the Confidential Information for
purposes related to the Facility, (ii) to employ all reasonable procedures to
ensure that neither the Lessee, the Member, or Lessee Affiliates, nor any of
their respective agents or employees use the Confidential Information in
connection with trading in the securities of BCC or communicate such information
to others who so trade in such securities and (iii) that any Confidential
Information not returned to BCC or the Management Firm, as applicable, will be
held by the Lessee and kept subject to the terms of this Section or destroyed.
(b) As used in this Section, "Confidential Information" means
all information and data containing or otherwise reflecting information
concerning BCC or any BCC Affiliate, or any Other Facility, which is not
available to the general public but is material to the business, financial
condition, or prospects of BCC and BCC Affiliates or otherwise would be material
to making an investment decision with respect to the publicly traded securities
of BCC, together with analyses, compilations, studies or other documents,
whether prepared by BCC or any other Entity, which contain or otherwise reflect
such information; provided, however, Confidential Information shall in no event
include information that has become public through no wrongful action of the
Lessee or the Member or matters for which the Lessee or the Member are required
to disclose pursuant to Laws.
SECTION 7.03 Cure Period For BCC. With respect to
22
<PAGE> 23
all obligations of BCC or a BCC Affiliate under the Transaction Documents, in no
event shall be BCC or such BCC Affiliate be in default regarding any such
obligations unless and until the Lessee and/or the Member provides notice to BCC
of such default and a period of no less than ten (10) days (or such longer
period as may be provided in the Transaction Documents) to cure such default.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Definitions; Interpretation; Miscellaneous.
Capitalized terms used but not otherwise defined in this Agreement have the
respective meanings specified in Appendix 1 attached hereto and incorporated
herein; the rules of interpretation and other provisions set forth in Appendix 1
attached hereto shall apply to this Agreement. All exhibits, schedules,
appendices and other attachments to this Agreement are incorporated by reference
herein.
SECTION 8.02 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, Federal Express or other recognized overnight courier or
sent by registered or certified U.S. mail, return receipt requested or sent by
facsimile or telecopy transmission and addressed:
(i) If to the Lessee or the Member, to:
Sherry, Coleman & Holthouse LLP
610 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Attention: Kevin Sherry
(ii) If to BCC, to
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto. Copies of all notices given hereunder shall be sent
simultaneously to the Lessor
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<PAGE> 24
and its counsel at their respective addresses stated in the Lease.
SECTION 8.03 Jurisdiction. THE LESSEE AND THE MEMBER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY PENNSYLVANIA COURT OR
FEDERAL COURT SITTING IN PENNSYLVANIA IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO WHICH
THE LESSEE IS A PARTY, AND THE LESSEE AND THE MEMBER HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN SUCH PENNSYLVANIA COURT OR IN SUCH FEDERAL COURT. THE LESSEE AND
THE MEMBER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE LESSEE AND THE MEMBER IRREVOCABLY CONSENT TO THE SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
LESSEE AT ITS ADDRESS SPECIFIED IN SECTION 8.02. THE LESSEE AND THE MEMBER AGREE
THAT A NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION SHALL AFFECT THE
RIGHT OF BCC TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF BCC TO BRING ANY ACTION OR PROCEEDING AGAINST THE LESSEE OR
ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.
SECTION 8.04 Performance of the Lessee's Duties. The Lessee's
obligations, and the obligation of the Member, under this Agreement and the
other Transaction Documents shall be performed by the Lessee and the Member at
their sole cost and expense. If the Lessee or the Member shall fail to do any
act or thing which it or they have covenanted to do under this Agreement or any
of the other Transaction Documents, BCC may, but shall not be obligated to, do
the same or cause it to be done either in the name of BCC or in the name and on
behalf of the Lessee or the Member, and the Lessee and the Member hereby
irrevocably authorizes BCC so to act.
SECTION 8.05 Indemnification. (a) The Lessee agrees to
reimburse BCC for all costs and expenses, including reasonable counsel fees and
disbursements, incurred, and to indemnify and hold BCC harmless from and against
all losses suffered by BCC in connection with: (i) any breach by the Lessee
24
<PAGE> 25
or the Member of any covenant, agreement, representation or warranty under any
Transaction Document and (ii) any claim, debt, demand, loss, damage, action,
cause of action, liability, cost and expense or suit of any kind or nature
whatsoever, brought against or incurred by BCC, in any manner arising out of or,
directly or indirectly, related to or connected with the operation of the
Lessee's business, which claim, debt, demand, loss, damage, action , cause of
action, liability, cost or expense was not caused by the acts or omissions of
BCC or a BCC Affiliate. The Lessee shall indemnify BCC as provided herein upon
demand and in immediately available funds.
(b) BCC agrees to reimburse the Lessee for all costs and
expenses, including reasonable counsel fees and disbursements, incurred, and to
indemnify and hold the Lessee harmless from and against (i) all losses suffered
by the Lessee or the Member, as the case may be, in connection with any breach
by BCC or any BCC Affiliate of any covenant, agreement, representation or
warranty under any Transaction Document and (ii) any claim, debt, demand, loss,
damage, action, cause of action, liability, cost and expense or suit of any kind
or nature whatsoever, brought against or incurred by the Lessee, in any manner
arising out of or, directly or indirectly, related to or connected with the
operation of BCC's or a BCC Affiliates' business, which claim, debt, demand,
loss, damage, action, cause of action, liability, cost or expense was not
caused by the acts or omissions of the Lessee or the Member. BCC shall indemnify
the Lessee and/or the Member (as the case may be) as provided herein upon demand
and in immediately available funds.
SECTION 8.06 Injunctive Relief. The Lessee and the Member
recognize that, in the event the Lessee or the Member fails to perform, observe
or discharge any of its or their obligations or liabilities under this Agreement
or any of the other Transaction Documents, any remedy of Law may prove to be
inadequate relief to BCC; therefore, the Lessee and the Member agrees that BCC
shall be entitled to temporary and permanent equitable relief in any such case
without the necessity of proving actual damages.
SECTION 8.07 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Lessee, the Member and BCC and their
respective personal representatives, heirs,
25
<PAGE> 26
successors and assigns, except that the Lessee shall have no right to assign its
rights hereunder or any interest herein. In the event of an assignment of BCC's
obligations and rights hereunder, BCC shall nonetheless remain primarily liable
to the Lessee and the Member for BCC's obligations hereunder.
SECTION 8.08 WAIVERS.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR
CONTROVERSY BETWEEN THE LESSEE, THE MEMBER AND BCC WOULD BE BASED ON DIFFICULT
AND COMPLEX ISSUES OF LAW AND FACT. ACCORDINGLY THE LESSEE, THE MEMBER AND BCC,
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN
ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE
LESSEE AND/OR THE MEMBER ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, AND WHETHER NOW EXISTING OR HEREAFTER ARISING, AND THE LESSEE AND THE
MEMBER HEREBY AGREE AND CONSENT THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL, IF BCC SO CHOOSES, WITHOUT JURY AND BCC MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE LESSEE AND THE MEMBER TO THE WAIVER OF THE RIGHT TO TRIAL
BY JURY.
(b) FURTHER, THE LESSEE AND THE MEMBER WAIVE THE BENEFIT OF
ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 8.09 Amendment of Original Shortfall Agreement;
Conflict with Lease Documents
The parties agree that this Agreement amends and restates the
Original Shortfall Agreement in its entirety (including Appendix 1 attached
hereto). However, nothing contained herein shall be deemed to amend or modify in
any way the terms of the Original Shortfall Agreement applicable to the period
of time prior to the date hereof. BCC represents to the Lessee and the Member
that BCC has no actual knowledge (without making inquiry of any third party or
otherwise) of any default or event of default occurring under the Original
Shortfall Agreement. This Agreement is subject to the covenants and agreements
contained in the Lease and other Lease Documents. In
26
<PAGE> 27
the event of any conflict between the provisions of this Agreement and the Lease
Documents, the provisions of the Lease Documents (except the Original Shortfall
Agreement) shall control.
SECTION 8.10 Third Party Beneficiary
BCC, the Member and the Lessee each acknowledge and agree that
this Agreement and the rights hereunder are intend to benefit, in addition to
the parties hereto, the Lessor, who shall be deemed to be a third party
beneficiary hereof. Without limiting the generality of the foregoing, (i) the
representations, warranties, affirmative covenants and negative covenants of the
Lessee and the Member contained herein shall inure to the benefit of Lessor
(together with BCC) and (ii) the Lessor may enforce any or all of the provisions
herein contained. BCC hereby acknowledges and agrees that any security interest
BCC acquires in personal, intangible and other property of the Lessee pursuant
to this Agreement shall be and is subordinate to the security interest of Lessor
created under the Lease and the Senior Lender under the Senior Credit Documents.
SECTION 8.11 No Amendment
BCC, the Lessee and the Member hereby agree that no
Transaction Document shall be amended, modified or altered in any manner without
the prior written consent of the Lessor.
{Remainder of page intentionally left blank.}
27
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this First Amended and Restated Shortfall
Funding Agreement to be executed by their respective officers or authorized
agents as of the date first above written.
WITNESS: [ ], a
Delaware limited liability company
/s/ Leslie F. Sherry By:/s/ Kevin Sherry
Kevin Sherry, its Sole Member
MEMBER:
/s/ Kevin Sherry
Kevin Sherry
ATTEST: BALANCED CARE CORPORATION,
a Delaware corporation
/s/ Lorie A. Taylor /s/ Robin L. Barber
Robin L. Barber,
its Senior Vice President and
Legal Counsel
S - 2
[Shortfall Funding Agreement]
<PAGE> 29
SCHEDULE 1
MEMBERS OF LESSEE
Kevin Sherry, the Sole Member of the Lessee
<PAGE> 1
Exhibit 10.4
<TABLE>
<CAPTION>
Schedule to Form of First Amended and
Restated Shortfall Funding Agreement
Project Lessee Management Firm Maximum Amount
of Advance
<S> <C> <C> <C>
Hagerstown, Maryland C&G Healthcare at Balanced Care at $829,000.00
Hagerstown, L.L.C. Hagerstown, Inc.
Johnson City, Tennessee C&G Healthcare at Johnson Balanced Care at Johnson $926,000.00
City, L.L.C. City, Inc.
Pensacola, Florida C&G Healthcare at Balanced Care at $1,198,000.00
Pensacola, L.L.C. Pensacola, Inc.
Tallahassee, Florida C&G Healthcare at Balanced Care at $1,489,000.00
Tallahassee, L.L.C. Tallahassee, Inc.
Teay's Valley, West Virginia C&G Healthcare at Teay's Balanced Care at Teay's $814,000.00
Valley, L.L.C. Valley, Inc.
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Project Property Leasehold Mortgage
<S> <C> <C>
Hagerstown, Maryland Washington Township, Leasehold Deed of Trust and Security Agreement
Maryland
Johnson City, Tennessee Washington Township, Revolving Credit/Future Advances Leasehold Deed of Trust,
Tennessee Security Agreement and Fixture Filing
Pensacola, Florida Escambia County, Florida Leasehold Mortgage and Security Agreement
Tallahassee, Florida Leo County, Florida Corrective Leasehold Mortgage and Security Agreement
Teay's Valley, West Virginia Putnam County, West Credit Line Deed of Trust of Leasehold Interest, Security
Virginia Agreement and Fixture Financing Statement
</TABLE>
2
<PAGE> 1
Exhibit 10.5
FORM OF
FIRST AMENDED AND RESTATED OPTION AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED OPTION AGREEMENT (this
"Agreement") is made as of June 30, 1999, by and between KEVIN SHERRY
("Optionor") and BALANCED CARE CORPORATION, a Delaware corporation, or its
successors and assigns ("BCC").
W I T N E S S E T H
WHEREAS, Optionor is the owner of 100% of the equity interests
(the "Equity Interests") of [ ], a Delaware limited liability company (the
"Company"), which Equity Interests are evidenced by certificate number 1 of the
Company, and represent 100% of the equity interests in the Company; and
WHEREAS, the Company executed and delivered that certain Lease
and Security Agreement dated as of the Documentation Date (the "Lease"), whereby
the Company leased from Nationwide Health Properties, Inc., a Maryland
corporation (the "Lessor"), property, together with all improvements built or to
be built thereon, located in [ ], as more fully described in the
Lease (the "Property"); and
WHEREAS, the Company and [ ], a Delaware corporation (the
"Management Firm"), have entered into that certain Management Agreement dated as
of the Documentation Date (the "Management Agreement"), whereby the Company has
appointed the Management Firm as the exclusive manager and operator of the
Facility; and
WHEREAS, BCC, Optionor and the Company have entered into that
certain Shortfall Funding Agreement dated as of the Documentation Date (the
"Original Shortfall Agreement," and, as such has been amended and restated on
the date hereof by and among BCC, Optionor and the Company, the "Shortfall
Agreement"), whereby, among other matters, BCC has agreed to fund certain
Shortfalls by making loans to the Company, as more fully provided in the
Original Shortfall Agreement and the Shortfall Agreement; and
WHEREAS, BCC was willing to enter into the Original Shortfall
Agreement, and all other Transaction Documents to which BCC is a party, only if
Optionor executed and delivered an option agreement whereby BCC or its
successors and assigns may acquire
<PAGE> 2
all of the Equity Interests in the Company; and
WHEREAS, Optionor and BCC entered into an Option Agreement
dated as of the Documentation Date (the "Original Option Agreement")
memorializing the terms and conditions of the Option granted to BCC; and
WHEREAS, Optionor and BCC now wish to amend and restate in its
entirety the Original Option Agreement as herein provided.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Grant of Option/Consideration. (a) Optionor hereby grants
to BCC an option (the "Option") to purchase all of Optionor's right, title and
interest in and to the Equity Interests on the terms and conditions provided
herein. The Purchase Price for the Equity Interests shall be paid to Optionor on
the Closing Date in immediately available funds. The Option shall be exercisable
by providing written notice to Optionor on or before the ninth anniversary after
the date of this Agreement (the "Option Term").
(b) In consideration of the grant of the Option to BCC, BCC
shall make the following payments (the "Option Payments") to Optionor: (1)
within two days of the date hereof, an amount equal to 200% of the Current Yield
(as hereinafter defined), representing (A) the annual Current Yield on the
Working Capital Reserve as if the same were fully funded on the Documentation
Date and outstanding until the date hereof, payable in arrears, and (B) the
annual Current Yield on the Working Capital Reserve for the 12-month period
beginning July 1, 1999, payable in advance; and (2) thereafter, on the first day
of the month of each calendar quarter following the first anniversary of the
date hereof (i.e., July 1, October 1, January 1 and April 1, as applicable) and
for so long as this Agreement is in effect (but ending in all events at the time
of exercise of the Option), 25% of the Current Yield, representing quarterly
installments of the annual Current Yield for the applicable 12-month period
following each anniversary of the date of this Agreement, payable in advance.
"Current Yield" as used in this Agreement means an annual return equal to 27.5%
of the Guarantied Portion (as defined in the Shortfall Agreement) of the Working
Capital Reserve, compounded on an annual basis and calculated as though the
Working Capital Reserve were fully funded as of the
2
<PAGE> 3
Documentation Date. Notwithstanding any provision to the contrary contained
herein, if the Option is exercised, BCC's obligation to make Option Payments
thereafter shall cease. Option Payments shall be made to Optionor without demand
or notice, except as expressly provided herein.
(c) Until BCC provides written notice of its exercise of the
Option, BCC shall be under no obligation whatsoever to purchase the Equity
Interests or exercise the Option, and shall not otherwise have any liability
whatsoever hereunder in connection with Option Payments or the purchase of the
Equity Interests.
(d) The "Purchase Price" as used herein shall mean (i) an
amount equal to the Working Capital Reserve actually funded pursuant to the
Senior Note to or for the benefit of the Company (together with any accrued and
unpaid interest and other charges then due as of the date of determination),
plus (ii) an amount equal to the Current Yield on the Working Capital Reserve,
calculated as though the Working Capital Reserve were fully funded as of the
Documentation Date, compounded annually through the Closing Date (as defined
below), plus (iii) the aggregate amount of all Advances and all other
obligations due and payable by the Company or Optionor to BCC or a BCC Affiliate
under the Transaction Documents through the Closing Date (exclusive of the
Management Fee under the Management Agreement), minus (iv) any Option Payments
(subject to the following provisions regarding credit for Option Payments paid
as Current Yield in advance). The aggregate amount of all Advances and all other
obligations due and payable by the Company or Optionor through the Closing Date
to BCC or a BCC Affiliate under the Transaction Documents, as provided in
subsection (iii) of this Section 1(d), shall be paid to BCC or the BCC Affiliate
(as appropriate) on the Closing Date from the Purchase Price. To avoid any
doubt, BCC shall receive, according to the following schedule, a credit against
the Purchase Price for Option Payments paid as Current Yield in advance, to the
extent that such advanced Option Payments are attributable to Current Yield
accruing from and after the Closing Date:
<TABLE>
<CAPTION>
Number of months Credit received by BCC for Option Payments paid as
between June 30, 1999 and the Current Yield in advance
Closing Date (as % of Current Yield paid in advance)
<S> <C> <C>
0-6 None
7-8 25%
9-10 50%
11-12 75%
more than 12 100%
</TABLE>
3
<PAGE> 4
2. Closing. (a) The closing of the purchase of the Equity
Interests (the "Closing"), pursuant to the exercise of the Option, shall take
place at such time and location in Pennsylvania as shall be designated by BCC
upon three (3) days prior written notice to Optionor (the "Closing Date"). At
the Closing (i) BCC shall deliver the Purchase Price and (ii) Optionor shall
deliver to BCC (A) the certificates representing the original Equity Interests,
together with such powers and other instruments as BCC may request and (B) the
certificate of an appropriate officer of the Company stating that the transfer
of the Equity Interests to BCC has been recorded on the books and records of the
Company, and affirming to BCC such additional matters as BCC may reasonably
request. Additionally, both BCC and Optionor shall take such further actions and
execute and deliver such further documents and instruments as either party may
reasonably request. The Equity Interests shall be transferred to BCC free and
clear of all Liens and restrictions of any kind or nature, except for Liens in
favor of BCC as expressly provided herein and Liens in favor of Lessor as
expressly provided in the Lease.
(b) Notwithstanding any provision to the contrary contained
herein or in the other Transaction Documents and without in any way implying
that such actions are permissible under the Transaction Documents, if and to the
extent that the funding of the Working Capital Reserve is advanced in the form
of a loan to the Company, including advances made under the Senior Note to or
for the benefit of the Company (such advances, together with all interest,
penalties and other costs and fees assessed or incurred in connection therewith,
are referred to herein as the "Borrowings"), the Borrowings shall be repaid in
full from the Purchase Price at the Closing. Optionor shall give BCC prior
written notice before authorizing the Company to make any Borrowings, detailing
the amount thereof. BCC shall have the right at the Closing to pay to the holder
of any note evidencing Borrowings from the Purchase Price the total amount
outstanding with respect to the Borrowings.
3. Covenants of Optionor/Legend/Pledge. (a) Optionor shall not
(i) sell, assign, convey, pledge (except as expressly provided herein), encumber
or otherwise transfer (by operation of law or otherwise) any of Optionor's
rights, title or interest under, in or to the Equity Interests, (ii) cause or
permit the
4
<PAGE> 5
Company to merge, consolidate, dissolve, liquidate, change its capital
structure, issue new or substitute Equity Interests (including the issuance of
warrants) or sell, convey, assign or otherwise transfer all or any portion of
the Company's assets or (iii) cause or permit the Company to otherwise take any
action that with the passage of time and/or the giving of notice would
constitute a default under or a breach of any covenant or provision of the
Shortfall Agreement or the other Transaction Documents.
(b) Optionor shall cause the Company to place the following
legend on all certificates representing Equity Interests:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION TO PURCHASE IN FAVOR OF BALANCED CARE CORPORATION
AND ITS SUCCESSORS AND ASSIGNS, AS MORE FULLY SET FORTH IN
THAT CERTAIN FIRST AMENDED AND RESTATED OPTION AGREEMENT DATED
AS OF JUNE 30, 1999.
(c) To secure the obligations of Optionor hereunder, Optionor
hereby grants and pledges to BCC a first priority lien and security interest in
the Equity Interests. Such pledge shall be further memorialized by the Pledge
Agreement. For purposes of perfecting the security interest in the Equity
Interests, Optionor shall deliver herewith to BCC possession of all
certificates, instruments, documents and other evidence of Optionor's ownership
of the Equity Interests accompanied by undated powers of attorney or other
appropriate duly executed blank transfer powers. Optionor shall take such
further actions, and execute such further documents, as may be requested by BCC
to effect the pledge and grant of a security interest in the Equity Interests.
(d) In addition to the other covenants stated herein, Optionor
covenants and agrees that Optionor shall not cause the Company to, without the
prior written consent of BCC: (i) except as otherwise expressly permitted under
the Transaction Documents or the Lease Documents, create or suffer to exist any
Lien or any other type of preferential arrangement, upon or with respect to any
of the properties of the Company, whether now owned or hereafter acquired, or
assign any right to receive income, (ii) except as otherwise expressly permitted
under the Transaction Documents or the Lease Documents, make any distribution of
cash or other property or declare or pay any dividend or distribution
5
<PAGE> 6
on any securities issued by the Company or Optionor (provided, however, this
restrictions shall not be construed to (A) prohibit Optionor from receiving
Option Payments in accordance with the terms and conditions of this Agreement
and distributing Option Payments without restriction or (B) prohibit
distributions for the purpose of paying tax liabilities as provided in Section 1
of the Management Agreement), (iii) engage in any business venture or enter into
any agreement with respect to any business venture, except as expressly provided
in the Transaction Documents and the Lease Documents with respect to the
Facility, (iv) except as otherwise expressly permitted under the Transaction
Documents and the Lease Documents, convey, transfer, lease, sublease, assign or
otherwise dispose of (whether in one transaction or in a series of transactions)
any of the assets of the Company (whether now owned or hereafter acquired) to,
or acquire all or substantially all of the assets of, any person or Entity, (v)
create, assume, guaranty or otherwise become or remain obligated in respect of,
or permit or suffer to exist or to be created, assumed or incurred or to be
outstanding, any Indebtedness, except as expressly provided in the Lease
Documents or the Transaction Documents, (vi) form, organize or participate in
the formation or organization of any Entity, or make any investment in any newly
formed or existing Entity, (vii) amend, supplement or otherwise modify the terms
of the Articles of Organization or the Operating Agreement of the Company in any
way, (viii) enter into any transaction with Lessor or any affiliate or related
party to or with Lessor, other than pursuant to the Transaction Documents and
the Lease Documents, (ix) merge or consolidate with, purchase all or any
substantial part of the assets of, or otherwise acquire any Entity, (x) issue
any equity interests in the Company or options, warrants or other rights to
purchase any equity interests in the Company or any securities convertible or
exchangeable for equity interests in the Company, or commit to do any of the
foregoing, other than in favor of BCC in accordance with the Transaction
Documents or (xi) enter into any administrative or other similar agreement with
any party relating to the provision of administrative or management service for
the benefit of the Company.
4. Representations and Warranties. Optionor represents and
warrants to BCC that (i) Optionor is the sole and exclusive owner of the Equity
Interests free and clear of all Liens and restrictions (except Permitted Liens),
and Optionor's ownership interest in the Equity Interests is appropriately noted
and documented on the books and records of the Company, (ii) this Agreement and
the other Transaction Documents to which Optionor is a party have been duly
authorized by all requisite action and
6
<PAGE> 7
this Agreement and the other Transaction Documents to which Optionor is a party
constitutes the legal, valid and binding obligation of Optionor, subject only to
bankruptcy and creditor's rights laws; provided, however, notwithstanding any
provision to the contrary contained herein or in the other Transaction
Documents, if the foregoing is false or misleading (through no fault of Optionor
or the Company), in no event shall BCC fail to fund Advances under the Shortfall
Agreement as and when required or raise as a defense to the consequences of
failing to make Option Payments that the foregoing was not true and correct, but
neither the Company nor Optionor shall raise as a defense to the obligations of
the Company or Optionor hereunder or under any other Transaction Document the
failure of the foregoing from being true and correct in all material respects,
(iii) no Person or Entity holds any Equity Interests in the Company, other than
Optionor, (iv) the Equity Interests have been duly issued to Optionor, are fully
paid and nonassessable, (v) Optionor has the full right and power to transfer
and convey the Equity Interests, enter into this Agreement and sell the Equity
Interests to BCC without the need to obtain the consent or joinder of any Person
or Entity, (vi) Optionor (and each person or Entity that has an ownership in
Optionor) has had the opportunity to ask all questions of BCC, the Company and
any other person or entity necessary or desirable concerning Optionor's
investment in the Equity Interests, (vii) Optionor (and each person or Entity
that has an ownership interest in Optionor) has the requisite knowledge and
sophistication to make informed decisions regarding the risks and merits of an
investment in the Company, and has not relied on any oral or written statements
of BCC or any BCC Affiliate in connection with Optionor's investment in the
Company and (viii) Optionor (and each person or Entity that has an ownership
interest in Optionor) understands that the Equity Interests will be deemed
restricted securities within the meaning of the 1933 Act (and state securities
laws), the transferability of the Equity Interests is restricted and Optionor
(and each person or Entity that has an ownership interest in Optionor) must be
able to bear the economic risks of ownership of the Equity Interests for an
indefinite period of time. The provisions of this Section shall survive the
Closing and purchase of the Equity Interests.
5. Binding Effect. The rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their heirs, personal representatives, successors and assigns.
6. Assignment. Optionor may not assign, pledge,
7
<PAGE> 8
hypothecate or otherwise transfer its rights, obligations and duties hereunder
without the prior written consent of BCC; provided, however, Optionor shall be
entitled to assign all or a portion of its rights to receive payments hereunder,
but such assignment shall in no event relieve Optionor from its liabilities and
obligations hereunder. BCC shall have the right to transfer and assign its
rights, obligations and duties hereunder to any affiliate or third party without
the consent of Optionor; provided, however, no such transfer or assignment shall
relieve BCC of its obligations hereunder.
7. Default. (a) In the case of default by Optionor hereunder,
BCC shall be entitled, after ten (10) days prior written notice to Optionor, to
(a) seek an action in specific performance and/or (b) seek such other relief,
including without limitation an action at law for damages, as may be available.
Optionor shall pay all reasonable counsel fees of BCC in connection with
enforcing any rights or benefits of BCC hereunder or under the other Transaction
Documents. The rights and remedies of BCC under this Agreement are cumulative
and not exclusive of any rights or remedies which it may otherwise have.
(b) In the case of default by BCC hereunder, Optionor shall be
entitled, after ten (10) days prior written notice to BCC, to seek such relief,
including without limitation an action at law for damages, as may be available
to Optionor. BCC shall pay all reasonable counsel fees of Optionor in connection
with enforcing any rights or benefits of Optionor hereunder. The rights and
remedies of Optionor under this Agreement are cumulative and not exclusive of
any rights or remedies which they may otherwise have.
(c) Notwithstanding the provisions of Section 7(b) and so long
as no Event of Default has occurred under any Transaction Document or Lease
Document which was caused by either Optionor or the Company, in the event that
BCC fails to make Option Payments as provided hereunder, after ten (10) days
prior written notice of such failure sent by Optionor to BCC, Optionor shall
have the following remedies and rights, which remedies and rights shall be the
sole and exclusive remedies and rights of Optionor in the case of such failure:
(i) BCC shall no longer have any right to exercise the Option or the Asset
Purchase Option, (ii) all Notes issued by the Company pursuant to the Shortfall
Agreement shall automatically be amended to provide that interest due under the
Notes will accrue and not be due and payable until the date which is the fifth
(5th) anniversary of the date of issuance of the first Note so issued by the
Company pursuant to the Shortfall
8
<PAGE> 9
Agreement and (iii) the lien encumbering the Equity Interests and other assets
in favor of BCC arising hereunder and under the Pledge Agreement and the
Leasehold Mortgage shall automatically be released and terminated. BCC agrees,
after the failure to make Option Payments and an opportunity to cure as provided
herein, to execute such documents and instruments, and accept delivery of such
replacement Notes (returning the Notes to be replaced) as Optionor may
reasonably request to effect the provisions of Subsections (c)(i), (c)(ii) and
(c)(iii) above.
8. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person, Federal Express or other recognized overnight courier or sent by
registered or certified U.S. mail, return receipt requested or sent by facsimile
or telecopy transmission and addressed:
(i) If to Optionor, to:
Sherry, Coleman & Holthouse LLP
610 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
(ii) If to BCC, to:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
9. Definitions; Interpretation; Miscellaneous. Capitalized
terms used but not otherwise defined in this Agreement have the respective
meanings specified in Appendix 1 attached hereto and incorporated herein; the
rules of interpretation and other provisions set forth in Appendix 1 attached
hereto shall apply to this Agreement. The parties agree that this Agreement
amends and restates the Original Option Agreement in its entirety. However,
nothing contained herein shall be deemed to amend or modify in any way the terms
of the Original Option Agreement applicable to the period of time prior to the
date hereof. BCC represents to Optionor and the Company that BCC has no actual
knowledge (without making inquiry of any third party or otherwise) of any
default or event of default occurring under the Original Option Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Option Agreement as of the day and year first above
written.
WITNESS: OPTIONOR:
/s/ Leslie F. Sherry /s/ Kevin Sherry
Kevin Sherry
WITNESS: BCC:
BALANCED CARE CORPORATION,
a Delaware corporation
/s/ Lorie A. Taylor By: /s/ Robin L. Barber
Robin L. Barber,
its Senior Vice President and
Legal Counsel
S - 1
[Option Agreement]
<PAGE> 1
Exhibit 10.6
Schedule to Form of First Amended and
Restated Option Agreement
<TABLE>
<CAPTION>
Project Company Property Management Firm
<S> <C> <C> <C>
Hagerstown, C&G Healthcare at Washington County, Balanced Care at
Maryland Hagerstown, L.L.C. Maryland Hagerstown, Inc.
Johnson City, C&G Healthcare at Washington County, Balanced Care at
Tennessee Johnson City, L.L.C. Tennessee Johnson City,
Inc.
Pensacola, C&G Healthcare at Escambia County, Balanced Care at
Florida Pensacola, L.L.C. Florida Pensacola, Inc.
Tallahassee, C&G Healthcare at Leo County, Balanced Care at
Florida Tallahassee, L.L.C. Florida Tallahassee,
Inc.
Teay's Valley, C&G Healthcare at Putnam County, Balanced Care at
West Virginia Teay's Valley, West Virginia Teay's Valley,
L.L.C. Inc.
</TABLE>
1
<PAGE> 1
Exhibit 10.7
SECOND AMENDMENT TO FIRST SERIES
LEASE AND SECURITY AGREEMENTS
THIS SECOND AMENDMENT TO FIRST SERIES LEASE AND SECURITY AGREEMENTS
(hereinafter designated "Amendment") is made by and between ELDER CARE OPERATORS
OF YORK, LLC ("York"), a Delaware limited liability company, ELDER CARE
OPERATORS OF LAKEMONT FARMS, LLC ("Lakemont Farms"), a Delaware limited
liability company, ELDER CARE OPERATORS OF HILLIARD, LLC ("Hilliard"), a
Delaware limited liability company, ELDER CARE OPERATORS OF MURFREESBORO, LLC
("Murfreesboro"), a Delaware limited liability company, ELDER CARE OPERATORS OF
BRISTOL, LLC ("Bristol"), a Delaware limited liability company, ELDER CARE
OPERATORS OF AKRON, LLC ("Akron"), a Delaware limited liability company (York,
Lakemont Farms, Hilliard, Murfreesboro, Bristol, and Akron being hereinafter
sometimes individually referred to as a "Tenant" and collectively referred to as
the "Tenants"), and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
("NHP") and MLD DELAWARE TRUST ("MLD"), a Delaware business trust, and joined
herein by BALANCED CARE CORPORATION ("BCC"), a Delaware corporation, and ELDER
CARE OPERATORS, LLC ("Elder Care"), a Delaware limited liability company, solely
for purposes of acknowledging and consenting to this Amendment, based upon the
following facts:
Recitals
A. NHP (as landlord under 4 separate leases), MLD (as landlord under 2
separate leases), the Tenants (as individual tenants under separate leases),
Elder Care, and/or BCC have previously entered into a series of six (6)
transactions, as specifically set forth in Exhibit "A" attached hereto and
included herein for all purposes as though fully set forth (hereinafter
individually referred to as a "Transaction" and collectively referred to as the
"Transactions"), each of which included the purchase, lease, and development of
certain tracts or parcels of real property, together with all improvements
thereon, all personal property to be leased therewith, and all appurtenances
thereto (hereinafter individually referred to as a "Property" and collectively
referred to as the "Properties").
B. As a part of the Transactions, (i) the Properties were each leased
from NHP or MLD by the applicable Tenant, pursuant to the terms and conditions
set forth in a lease and security agreement (hereinafter individually referred
to as a "Lease" and collectively referred to as the "Leases"), which Leases were
all amended pursuant to the provisions of a First Amendment to Lease and
Security Agreements, entered into by and between all the
1
<PAGE> 2
parties hereto and made effective as of the respective execution dates of the
Leases; (ii) Elder Care, which owns all or part of the membership interests in
each of the Tenants, guaranteed the obligations of the applicable Tenants under
each of the Leases pursuant to a lease guaranty (collectively, the "Lease
Guaranties"); (iii) as additional security for the obligations of Tenants under
each respective Lease, BCC entered into working capital assurance agreements
with NHP or MLD (collectively, the "Capital Agreements"), whereby BCC agreed to
make working capital loans to the applicable Tenant, and as further security,
NHP or MLD are party to deposit pledge agreements (collectively, the "Deposit
Agreements") whereby each applicable Tenant pledges a minimum amount of capital
as a working capital reserve for its operations; (iv) each Property has been or
is being developed, used, and licensed (by the State in which such Property is
located) as an assisted living facility, personal care home, independent living
facility, or similar adult care facility (hereinafter individually referred to
as a "Facility" and collectively referred to as the "Facilities"), including any
applicable ancillary services for independent living, skilled nursing,
rehabilitation, or Alzheimer's or dementia care; (v) BCC DEVELOPMENT AND
MANAGEMENT CO. ("Developer"), a Delaware corporation wholly owned by BCC, acted
or is acting as developer of each of the Properties, pursuant to the terms and
conditions of development agreements (hereinafter individually referred to as a
"Development Agreement" and collectively referred to as the "Development
Agreements") entered into by and between Developer and NHP or MLD; (vi) BCC
guaranteed the obligations of Developer under each respective Development
Agreement and the completion of all improvements contemplated in such
Development Agreements, pursuant to a guaranty agreement with NHP or MLD
(collectively, the "Development Guaranties"), (vii) each of the Tenants entered
into a management agreement with a newly formed subsidiary of BCC, whereby such
BCC subsidiary agreed to manage the respective Facility on behalf of the
respective Tenant (such BCC subsidiaries being hereinafter collectively referred
to as the "Managers"), (viii) BCC indemnified NHP or MLD with respect to
possible environmental hazards on each applicable Property by means of
environmental indemnification agreements (collectively, the "Environmental
Indemnifications"), and (ix) NHP or MLD, as applicable, granted rights of first
refusal to BCC with respect to any proposed sales of the Properties, by means of
right of first refusal agreements (hereinafter individually referred to as a
"Refusal Agreement" and collectively referred to as the "Refusal Agreements").
C. Due to changing market conditions, NHP, Akron, Elder Care, and BCC
have mutually determined it is not practical to
2
<PAGE> 3
continue the development of a Facility on the Akron, Ohio Property at this time.
D. It has been determined by the parties that it is necessary and
desirable to amend each of the Leases in the manner set forth in this Amendment.
Amendment
NOW, THEREFORE, the parties to this Amendment hereby agree to amend the
Leases as follows:
1. Definitions. All provisions of the Leases, as previously amended,
shall remain in full force and effect as if restated herein, except as such
provisions may clearly conflict with the terms of this Amendment, and any words
or phrases (other than as amended in Section 2 of this Amendment) which are
defined terms in the Leases shall have the same meaning in this Amendment as
such words or phrases have in the Leases.
2. Amendment of Section 2.1.2 of the Leases. Notwithstanding any other
provision of any of the Leases to the contrary, the parties hereto, in their
respective capacities as Landlord, Tenant, and/or guarantor under the respective
Leases, agree that the current language of Section 2.1.2 of each of the Leases
is hereby deleted in its entirety and replaced with the following language:
"2.1.2 Post-Construction Minimum Rent.
(i) If the Reset Date occurs prior to April
19, 1999, then for the period beginning with the Reset Date
and ending at 12:00 P.M. on April 18, 1999, the monthly
Minimum Rent with respect to the total of (A) the Land Cost
plus (B) all advances under the Development Agreement for Work
plus (C) all accrued but unpaid Construction Period Minimum
Rent shall be reset at an amount equal to one-twelfth (1/12)
of the product of (I) the total of the Land Cost plus such
advances made for Work plus accrued but unpaid Construction
Period Minimum Rent, times (II) three hundred thirty (330)
basis points over the twenty (20) day average 10 year United
States Treasury rate in effect on the Reset Date ("Interim
Post-Construction Minimum Rent").
(ii) For the period beginning as of the
later of the Reset Date or April 19, 1999, the monthly Minimum
Rent with respect to the total of (A) the Land Cost plus
3
<PAGE> 4
(B) all advances under the Development Agreement for Work plus
(C) all accrued but unpaid Construction Period Minimum Rent
plus (D) all accrued but unpaid Interim Post-Construction
Minimum Rent, if any, shall be reset at an amount equal to
one-twelfth (1/12) of the product of (I) the total of the Land
Cost plus such advances made for Work plus accrued but unpaid
Construction Period Minimum Rent, plus accrued but unpaid
Interim Post-Construction Minimum Rent, times (II) the
greater of (x) three hundred thirty (330) basis points over
the twenty (20) day average 10 year United States Treasury
rate in effect on the Reset Date, or (y) ten and 21/100
percent (10.21%) (the sum of the Interim Post-Construction
Minimum Rent, if any, plus the Minimum Rent as calculated
under this Section 2.1.2(ii) being sometimes collectively
referred to herein as "Initial Term Post-Construction Minimum
Rent")."
3. Amendment of the Akron, Ohio Lease. Notwithstanding any other
provision of the Akron, Ohio Lease to the contrary, Akron, NHP, Elder Care, and
BCC, in their respective capacities as Landlord, Tenant, or guarantor under the
Akron, Ohio Lease, and pursuant to their respective interests under the various
transaction documents described in the recitals hereto, hereby acknowledge and
agree that the Akron, Ohio Lease is hereby amended by inserting at the end
thereof the following provisions:
"44. Suspension of Development of Facility. Due to changing market
conditions, the parties have mutually agreed not to proceed with development or
construction of a Facility on the Real Property at this time. Therefore,
notwithstanding any other provisions in this Lease to the contrary, the parties
agree as follows:
(A) Landlord and Developer will not be obligated to complete
development or construction of a Facility on the Real Property, and
Tenant and Manager will not be required to maintain or license such
Facility, until or unless Landlord determines, in its sole and absolute
discretion, that it is economically desirable to build a Facility on
the Property, and gives Tenant and Developer written notice of such its
intent to complete construction of a Facility on the Real Property
("Construction Notice");
(B) Until or unless Landlord gives Tenant and Developer a Construction
Notice, Landlord will have the right, but not the obligation, to
terminate this Lease and sell the Real Property, with or without
Tenant's consent (but subject to the terms and conditions of that
certain Right of First Refusal
4
<PAGE> 5
Agreement previously entered into by and between BCC and Landlord,
dated March 31, 1998). In the event Landlord elects to terminate this
Lease and sell the Property, Landlord will give Tenant and Developer
written notice of such election ("Sale Notice");
(C) Until or unless Landlord gives Tenant a Sale Notice, Minimum Rent,
Additional Rent, and Construction Period Minimum Rent will continue to
be deferred and accrue as otherwise provided in Section 2 of this
Lease;
(D) Until or unless Landlord gives Tenant and Developer a Construction
Notice, the Completion Date (as referenced in the first paragraph of
Section 2.1.1 of this Lease and Section 2.5 of the Development
Agreement) shall be deemed not to have occurred. The parties
acknowledge that a new Completion Date will be set as soon as possible
following Tenant's and Developer's receipt of said Construction Notice,
which Completion Date will be no later than one (1) calendar year from
the date Developer is deemed to have received said Construction Notice;
and
(E) In the event Landlord gives Tenant a Sale Notice, then (i) the
Lease will be treated as having been terminated as of the date ("Notice
Date") Landlord is deemed to have given Tenant such Sale Notice
(pursuant to the provisions of Section 15 of this Lease), (ii) Minimum
Rent, Additional Rent, and Construction Period Minimum Rent will cease
to accrue as of the Notice Date and will be prorated in the month in
which the Sale Notice is deemed to have been given to Tenant on the
basis of a thirty (30) day month and actual days elapsed, (iii) Tenant
will comply with all provisions related to termination set forth in
this Lease, including, without limitation, Section 14 hereof."
[FOLLOWING PAGE IS SIGNATURE PAGE]
5
<PAGE> 6
This Amendment is made as of June 30, 1999, to be effective with
respect to each of the individual Leases as of the date of execution for each
such Lease, as set forth in Exhibit "A" hereto.
"NHP"
NATIONWIDE HEATH PROPERTIES, INC., a
Maryland corporation
By: /s/ Gary E. Stark
Gary E. Stark, Vice President
"MLD"
MLD DELAWARE TRUST, a Delaware
business trust
By: /s/ Mark L. Desmond
Mark L. Desmond, Trustee
"York"
ELDER CARE OPERATORS OF YORK, LLC,
a Delaware limited liability company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member
and President
"Lakemont Farms"
ELDER CARE OPERATORS OF LAKEMONT
FARMS, LLC, a Delaware limited
liability company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member
and President
6
<PAGE> 7
"Hilliard"
ELDER CARE OPERATORS OF HILLIARD,
LLC, a Delaware limited liability
company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member and
President
"Murfreesboro"
ELDER CARE OPERATORS OF MURFREESBORO,
LLC, a Delaware limited liability
company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member and
President
"Bristol"
ELDER CARE OPERATORS OF BRISTOL, LLC,
a Delaware limited liability company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member and
President
7
<PAGE> 8
"Akron"
ELDER CARE OPERATORS OF AKRON, LLC, a
Delaware limited liability company
By: Elder Care Operators, LLC, a
Delaware limited liability
company, its sole member
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member and
President
ACKNOWLEDGED, AGREED AND CONSENTED TO:
"BCC"
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ Robin L. Barber
Robin L. Barber, Senior Vice
President and Legal Counsel
"Elder Care"
ELDER CARE OPERATORS, LLC,
a Delaware limited liability company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, sole member and
President
8
<PAGE> 9
EXHIBIT "A"
TO
AMENDMENT TO LEASE AND SECURITY AGREEMENTS
SCHEDULE OF LEASES
Landlord/Tenant Name & Location of Facility
MLD/York Outlook Pointe at York
Knob Hill Road, York Township,
York County, Pennsylvania
Lease Execution Date: March 27, 1998
MLD/Lakemont Farms Outlook Point at Lakemont Farms
Washington Pike, South Fayette
Township, Allegheny County,
Pennsylvania
Lease Execution Date: March 27, 1998
NHP/Murfreesboro Outlook Pointe at Murfreesboro
U.S. Hwy 231, Murfreesboro,
Rutherford County, Tennessee
Execution Date: March 27, 1998
NHP/Bristol Outlook Pointe at Bristol
Meadow View Road, Bristol,
Sullivan County, Tennessee
Execution Date: March 31, 1998
NHP/Hilliard Outlook Pointe at Hilliard
Constitution Blvd., Hilliard,
Franklin County, Ohio
Execution Date: March 27, 1998
NHP/Akron Outlook Pointe at Akron
South Hawkins Avenue, Akron,
Summit County, Ohio
Execution Date: March 31, 1998
<PAGE> 1
Exhibit 10.8
FIRST AMENDMENT TO FIRST SERIES MASTER INVESTMENT AGREEMENT
AND AGREEMENT REGARDING FIRST SERIES
CONSTRUCTION SCHEDULES, COMPLETION DATES, AND BUDGETS
THIS FIRST AMENDMENT TO FIRST SERIES MASTER INVESTMENT AGREEMENT AND
AGREEMENT REGARDING FIRST SERIES CONSTRUCTION SCHEDULES, COMPLETION DATES, AND
BUDGETS (this "Amendment") is made by and between BALANCED CARE CORPORATION
("BCC"), BCC DEVELOPMENT AND MANAGEMENT CO. ("Developer"), a Delaware
corporation, ELDER CARE OPERATORS, LLC ("Elder Care"), a Delaware limited
liability company, ELDER CARE OPERATORS OF YORK, LLC ("York"), a Delaware
limited liability company, ELDER CARE OPERATORS OF LAKEMONT FARMS, LLC
("Lakemont"), a Delaware limited liability company, ELDER CARE OPERATORS OF
MURFREESBORO, LLC ("Murfreesboro"), a Delaware limited liability company, ELDER
CARE OPERATORS OF BRISTOL, LLC ("Bristol"), a Delaware limited liability
company, ELDER CARE OPERATORS OF HILLIARD, LLC ("Hilliard"), a Delaware limited
liability company, ELDER CARE OPERATORS OF AKRON, LLC ("Akron"), a Delaware
limited liability company (York, Lakemont, Murfreesboro, Bristol, Hilliard, and
Akron being hereinafter each individually referred to as a "Tenant" and
collectively referred to as the "Tenants"), and NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation ("NHP") and MLD DELAWARE TRUST ("MLD"), a Delaware
business trust, and joined herein by KEVIN L. SHERRY ("Sherry"), solely for the
purposes of acknowledging the changes in the Transaction Documents (defined
below) set forth in this Amendment and reaffirming his obligations under the
Note Guaranties (defined below).
RECITALS:
A. NHP (as landlord under 4 separate leases), MLD (as landlord under 2
separate leases), the Tenants (as individual tenants under separate leases),
Elder Care, and/or BCC have previously entered into a series of six (6)
transactions, as specifically set forth in Exhibit "A" of the Master Agreement
(defined below) (hereinafter individually referred to as a "Transaction" and
collectively referred to as the "Transactions"), each of which included the
purchase, lease, and development of certain tracts or parcels of real property,
together with all improvements thereon, all personal property to be leased
therewith, and all appurtenances thereto (hereinafter individually referred to
as a "Property" and collectively referred to as the "Properties").
<PAGE> 2
B. As a part of the Transactions, (i) the Properties were each leased
from NHP or MLD by the applicable Tenant, pursuant to the terms and conditions
set forth in a lease and security agreement (hereinafter individually referred
to as a "Lease" and collectively referred to as the "Leases"), which Leases were
all amended pursuant to the provisions of a First Amendment to Lease and
Security Agreements ("First Lease Amendment"), made effective as of the
respective execution dates of the Leases, and are to be further amended pursuant
to the provisions of a Second Amendment to Lease and Security Agreements
("Second Lease Amendment"), being entered into contemporaneous herewith; (ii)
Elder Care, which owns all or part of the membership interests in each of the
Tenants, guaranteed the obligations of the applicable Tenants under each of the
Leases pursuant to a lease guaranty (collectively, the "Lease Guaranties");
(iii) as additional security for the obligations of Tenants under each
respective Lease, BCC entered into certain shortfall funding agreements and
option agreements with the Tenants, and certain corresponding working capital
assurance agreements with NHP or MLD, (collectively, the "Capital Agreements"),
whereby BCC agreed to make working capital loans to the applicable Tenant, and
as further security, NHP or MLD are party to deposit pledge agreements
(collectively, the "Deposit Agreements") whereby each applicable Tenant pledges
a minimum amount of capital as a working capital reserve for its operations;
(iv) each Property has been or is being developed, used, and licensed (by the
State in which such Property is located) as an assisted living facility,
personal care home, independent living facility, or similar adult care facility
(hereinafter individually referred to as a "Facility" and collectively referred
to as the "Facilities"), including any applicable ancillary services for
independent living, skilled nursing, rehabilitation, or Alzheimer's or dementia
care; (v) BCC DEVELOPMENT AND MANAGEMENT CO. ("Developer"), a Delaware
corporation wholly owned by BCC, acted or is acting as developer of each of the
Properties, pursuant to the terms and conditions of development agreements
(hereinafter individually referred to as a "Development Agreement" and
collectively referred to as the "Development Agreements") entered into by and
between Developer and NHP or MLD; (vi) BCC guaranteed the obligations of
Developer under each respective Development Agreement and the completion of all
improvements contemplated in such Development Agreements, pursuant to a guaranty
agreement with NHP or MLD (collectively, the "Development Guaranties"), (vii)
each of the Tenants entered into a management agreement with a newly formed
subsidiary of BCC, whereby such BCC subsidiary agreed to manage the respective
Facility on behalf of the respective Tenant (such BCC subsidiaries being
hereinafter collectively referred to as the
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<PAGE> 3
"Managers"), (viii) BCC indemnified NHP or MLD with respect to possible
environmental hazards on each applicable Property by means of environmental
indemnification agreements (collectively, the "Environmental Indemnifications"),
(ix) NHP or MLD, as applicable, granted rights of first refusal to BCC with
respect to any proposed sales of the Properties, by means of right of first
refusal agreements (hereinafter individually referred to as a "Refusal
Agreement" and collectively referred to as the "Refusal Agreements"), (x) in
order to assist Tenants with certain startup costs, NHP or MLD made loans
(hereinafter individually referred to as a "Senior Loan" and collectively
referred to as the "Senior Loans") to Elder Care with respect to each facility,
pursuant to the terms of certain promissory notes, certain guarantees made by
Sherry for the benefit of NHP of repayment of up to fifteen percent (15%) of the
principal of such Senior Loans (collectively, the "Note Guaranties"), and other
related security documents (such notes, Note Guaranties, and other security
documents being hereinafter collectively referred to as the "Senior Loan
Documents"), and (xi) the parties hereto previously entered into that certain
First Series Master Investment Agreement (the "Master Agreement"), dated March
27, 1998, whereby NHP, MLD, BCC, Developer, Elder Care, and Oakhaven Elder
Living, Inc. (a former 1% member of each of the Tenants) agreed that certain
provisions related to NHP's maximum investment, cross default, cross renewal,
purchase options, development fees, and budgets would govern all the
Transactions (since Sherry has purchased all the equity ownership interests in
Elder Care and the Tenants, Oakhaven Elder Living, Inc. is no longer a party to
the Master Agreement). The documents and instruments defined or described in
this Paragraphs A. and B. of these Recitals are hereinafter collectively
referred to as the "Transaction Documents".
C. Due to unforeseen problems with the soil conditions at the Akron,
Ohio Property, NHP, Elder Care, Akron, and BCC have determined it is not
feasible or practical to continue the development of a Facility on such Property
at this time, and that it may be necessary to sell such Property without further
development and independently of the other Properties.
D. Due to unforeseen delays in construction of some of the Facilities,
revisions to the budgets, and changes in NHP's Maximum Investment (as defined in
the Master Agreement), the parties have agreed to establish new Construction
Schedules and Completion Dates with respect to the delayed Facilities (other
than the Akron, Ohio Facility), establish new Budgets for all the Facilities
(other than the Akron, Ohio Facility), and permit certain increases in NHP's
Maximum Investment.
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<PAGE> 4
E. It has been determined by the parties that it is necessary and
desirable to amend the Master Agreement in the manner set forth in this
Amendment.
NOW, THEREFORE, taking the foregoing paragraphs A through E (the
"Recitals") into account, and in consideration of the mutual covenants,
agreements, and conditions set forth herein and in the Transaction Documents
described in the Recitals, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. All provisions of the Master Agreement will remain in
full force and effect as if restated herein, except as such provisions may
clearly conflict with the terms of this Amendment, and any words or phrases
which are defined terms in the Master Agreement will have the same meaning in
this Amendment as such words or phrases have in the Master Agreement (except as
otherwise defined pursuant to the amendments set forth in this Amendment).
2. Amendment of Section 6(a) of the Master Agreement. Notwithstanding
any other provision of the Master Agreement to the contrary, the parties hereto
agree that the current language of the second sentence of Section 6(a) Master
Agreement is hereby corrected and amended by replacing the phrase "exceeds NHP's
Maximum Investment" with the phrase "exceeds six and one-half percent (6.5%) of
NHP's Maximum Investment".
3. Further Amendment of the Master Agreement. Notwithstanding any other
provision of the Master Agreement to the contrary, the parties hereto agree that
the current language of the Master Agreement is hereby amended by inserting at
the end thereof the following provisions:
"13. DEVELOPMENT OR SALE OF AKRON PROPERTY.
(a) Notwithstanding anything in this Master Agreement or the
Akron Development Agreement to the contrary, until or unless NHP
determines, in its sole and absolute discretion, that it is
economically desirable to build a Facility on the Akron, Ohio Premises
(as defined in the Akron, Ohio Lease) (herein referred to as the "Akron
Property") and gives BCC and Tenant written notice ("Construction
Notice") of its intent to complete construction of a Facility on the
Akron Property, NHP will not be obligated to (i) complete development
or construction of a Facility on the Akron Property, (ii) make any
additional payments for Work (as
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<PAGE> 5
defined in the Akron Development Agreement) performed on the Akron
Property (whether or not an Application for Payment has already been
received; provided, however, payments already made by NHP prior to the
Effective Date [as defined in the Amendment by which this Paragraph 13
was added to this Agreement] are not effected by this provision), or
(iii) pay or commit any additional funds with respect to the
development of the Akron Property, or with respect to any Development
Fees, Development Advance, or Land Acquisition Costs related to the
Akron Property. NHP and Developer hereby agree to stop all Work on the
Akron Property until or unless NHP delivers a Construction Notice to
Developer. Developer agrees to record, at Developer's expense and
within thirty (30) days after the Effective Date, signed unconditional
mechanic's lien waivers and releases from the Contractor (as defined in
the Akron Development Agreement) and each subcontractor or materials
supplier who has provided work or materials for the Improvements (as
defined in the Akron Development Agreement) constructed or the Work
performed on or before the Effective Date. BCC and Developer hereby
represent and warrant to NHP that (w) all Applications for Payment with
respect to Work performed on or before the Effective Date have been
submitted to NHP, (x) all payments due to the Contractor,
subcontractors, materials suppliers, or other parties with respect to
such Improvements or Work have either already been made or will be made
within thirty (30) days after the Effective Date, (y) no additional
Work will be performed at the Akron Property after the Effective Date
without NHP's express written consent, and (z) that all ancillary items
required to be delivered or recorded under the terms of the Akron
Development Agreement with respect to Work performed to date and any
related Application for Payment have in fact been delivered and/or
recorded.
(b) Until or unless NHP delivers a Construction Notice to
Tenant and Developer, (i) the term "NHP's Maximum Investment" (as
defined in Paragraph A of the Recitals to this Master Agreement), for
all purposes of this Master Agreement, will be reduced by the Akron
Amount (as defined below), determined as of the first day of each
calendar month, and (ii) the provisions of Section 6(b) of this
Agreement will not apply to the Akron Property or to any Development
Advances made or to be made with respect thereto. For purposes of this
Section 13(b), the term "Akron Amount" shall mean the sum, as of the
date the Akron Amount is being determined, of (I) $7,050,000.00 (the
maximum NHP investment amount set forth with respect to the Akron
- 5 -
<PAGE> 6
Property in Exhibit "A" to the Master Agreement), less (II) the Land
Acquisition Costs for the Akron Property (as defined in Section 4.3 of
the Akron Development Agreement), less (III) all amounts actually
disbursed as a Development Advance under the Akron Development
Agreement (including any Development Fees, but not including accrued
rent under the Akron Lease), less (IV) the aggregate of all accrued and
unpaid rent under the Akron Lease (depending on the date the Akron
Amount is being determined, such accrued but unpaid rent might include
Construction Period Minimum Rent, Interim Post-Construction Minimum
Rent, other Initial Term Post-Construction Minimum Rent, Additional
Rent, and/or Suspension Period Minimum Rent, all as defined in the
Akron Lease). The parties hereto acknowledge and agree that NHP is
entitled to sell the Akron Property at any time, subject to the
provisions of the Akron, Ohio Refusal Agreement. In the event NHP
elects to sell the Property, NHP will give Tenant and BCC written
notice of such election ("Sale Notice"). If NHP delivers a Sale Notice
to BCC, (i) the term "NHP's Maximum Investment" (as defined in
Paragraph A of the Recitals to this Master Agreement), for all purposes
of this Master Agreement, will be reduced by the Akron Amount,
determined as of the date of such Sale Notice, but following
application of all payments or refunds of rent delivered within the
thirty (30) day period set forth in Section 44(E) of the Akron Lease,
and (ii) the provisions of Section 6(b) of this Agreement will not
apply to the Akron Property or to any Development Advances made or to
be made with respect thereto.
14. BCC PURCHASE OPTION AS TO AKRON PROPERTY. Notwithstanding anything
in Section 5 hereof to the contrary, and provided that (i) NHP has not given
Tenant and BCC a Construction Notice or a Sale Notice, (ii) all the Leases are
still in effect, and (iii) no Event of Default (as defined in the respective
Leases and subject to Section 2 hereof) under any of the Leases remains uncured
as of (A) BCC's exercise of its option to purchase the Akron Property pursuant
to this Section 14, and (B) the closing date established to consummate the
purchase of the Akron Property pursuant to BCC's exercise of such option, then
BCC shall have the option to purchase (or cause a BCC Affiliate to purchase) the
Akron Property upon the following terms and conditions:
(a) At any time prior to NHP's delivery of a Construction
Notice or Sale Notice, BCC may, but is not obligated to, exercise an
option to purchase the Akron
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<PAGE> 7
Property by giving NHP written notice thereof (the "Option Notice");
(b) The purchase price ("Akron Purchase Price") for the Akron
Property will be payable in cash by BCC and will be equal to the NHP's
Investment (as defined below) as of the closing date. For purposes of
this Section 14, the term "NHP's Investment" means the sum of (i)
$631,272.00 (the Land Cost as defined in Section 2.2.1(ii)(A) of the
Akron Lease), plus (ii) all amounts advanced by NHP pursuant to Section
5.7 of the Akron Lease (for additional capital improvements), plus
(iii) all amounts advanced by NHP under the Development Agreement for
Work, plus (iv) the total accrued but unpaid Construction Period
Minimum Rent (as defined in the Akron Lease), plus (v) all Development
Fees previously paid to BCC or the Developer pursuant to Section 4.2 of
the Akron Development Agreement ($300,000.00 maximum, 65% of which was
paid on or about the time of NHP's purchase of the Akron Property),
plus (vi) any other land acquisition costs paid by NHP and directly
attributable to the Akron Property, minus (vi) any net award paid to
Landlord pursuant to Section 13.1 or Section 13.2 of the Akron Lease;
(c) Once the Akron Purchase Price is established pursuant to
the above, NHP and/or its designated Affiliates, as seller (hereinafter
sometimes collectively referred to as "Sellers"), and BCC and/or its
designated Affiliates, as buyer (hereinafter sometimes collectively
referred to as "Buyers"), will immediately open an escrow to consummate
such purchase at a national title company selected by NHP on the
following terms: (i) the form of such instructions to be then signed by
Sellers and Buyers will be such title company's standard sale escrow
instructions without any representations or warranties and without due
diligence or other contingencies in favor of Buyers, (ii) the purchase
price will be payable in cash by Buyers at closing, (iii) Buyers will
pay all transaction costs, (iv) at close, Sellers will deliver title to
the Properties subject only to those title exceptions agreed to by NHP
and free and clear of any liens created by Sellers (other than liens,
Leases, subleases, and related instruments entered into, caused, or
created in whole or in part by BCC, Elder Care, Sherry, Developer,
Manager, Buyers, Tenants, or their respective Affiliates), (v) the sale
escrow instructions will provide for a deposit ("Escrow Deposit") equal
to five percent (5%) of the Akron Purchase Price and will provide that
the deposit may be retained by Sellers as liquidated damages in the
event of any breach by Buyers of the terms of the escrow instructions
(provided, however, such liquidated damages
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<PAGE> 8
will relate only to Sellers' damages by reason of a breach of the
escrow instructions and will in no way liquidate or limit Sellers'
damages by reason of a breach of this Agreement), (vi) the escrow will
close within sixty (60) days of the date on which the Option Notice is
deemed to have been given to NHP (the "Closing Period"), (vii) the
Developer will be required to deliver and/or record, to or for the
benefit of NHP, any and all waivers and releases in the manner and form
required under the terms of the Akron Development Agreement (but only
to the extent not previously delivered or recorded), and (viii) the
escrow instructions will otherwise be in form and substance reasonably
satisfactory to NHP;
(d) If BCC fails to close the escrow within the Closing Period
for any reason other than a breach by NHP, then the Escrow Deposit will
be paid to NHP, and BCC's rights under this Section 14 will terminate
with respect to the applicable Option Notice."
4. Amendments to Lease. The parties hereto hereby acknowledge and agree
to be bound by the terms and provisions of the First Lease Amendment and the
Second Lease Amendment.
5. Construction Schedules, Completion Dates, and Budgets. The parties
hereto hereby acknowledge that some of the Facilities (i) have not been
completed in accordance with the Construction Schedule (as defined in Section
2.2 of the respective Development Agreements) originally provided to NHP or MLD
with respect to each of such Facilities, (ii) have not been completed within
thirteen (13) months after the Execution Date of the Development Agreement
related to each of such Facilities (as required under Section 2.5 of the
respective Development Agreements), and/or (iii) that the Budgets for some or
all of the Facilities have been or will be exceeded, or have otherwise changed,
from the Budgets originally approved by NHP or MLD. The owners, names and
locations of all the Facilities, together with the original execution dates of
the related Development Agreements and the actual or newly scheduled completion
dates (hereinafter collectively referred to as the "New Completion Dates") for
all the Facilities are set forth in Exhibit "A" attached hereto and incorporated
herein for all purposes. With respect to any Facility which has not been
completed (hereinafter individually referred to as an "Incomplete Facility") as
of the Effective Date (defined below) of this Agreement, the parties hereto
hereby agree to waive any and all penalties related to Developer's failure to
complete such Facility in accordance with the original Construction Schedule for
such Facility or by the originally required Completion Date for such Facility.
The parties hereto
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<PAGE> 9
hereby further agree that, notwithstanding anything in the Development
Agreements or the Leases to the contrary, (a) the term "Completion Date", for
purposes of the Master Agreement, the Development Agreements and the Leases,
shall mean the New Completion Dates set forth with respect to each Facility in
Exhibit "A" hereof (other than the Akron, Ohio Facility), (b) the term
"Construction Schedule", for purposes of any Development Agreement related to an
Incomplete Facility (other than the Akron, Ohio Facility), shall mean the
Construction Schedule set forth with respect to such Incomplete Facility in
Exhibit "B" attached hereto and incorporated herein for all purposes, and (c)
the term "Budgets", for purposes of the Master Agreement and any Development
Agreement, shall mean and refer to those certain amended and restated Budgets
for each Facility set forth in Exhibit "C" attached hereto and incorporated
herein for all purposes. In the event a Construction Notice is ever delivered by
NHP with respect to the Akron, Ohio Facility, the officers of Elder Care, NHP
and Developer shall (I) insert a New Completion Date for such Facility in
Exhibit "A" of this Amendment, (II) sign a new Construction Schedule for such
Facility, which shall be attached to Exhibit "B" of this Amendment, and (II)
sign an amended and restated Budget for such Facility, which Budget shall be
attached to Exhibit "C" of this Amendment.
6. Increases in NHP's Maximum Investment.
(a) The parties hereby acknowledge and agree that the Budgets attached
hereto as Exhibit "C" shall include amounts ("Equipment Amounts") for new
equipment, furniture, furnishings and other personal property (hereinafter
collectively referred to as the "New Equipment") purchased or to be purchased on
behalf of NHP or MLD by Developer, and then leased under the Leases to the
respective Tenants for use at the respective Facilities. The portion of the
Equipment Amounts set aside for each respective Facility shall be clearly set
forth in the Budgets attached as Exhibit "C" hereof. Applications for Payment
for the New Equipment shall be made by Developer in the manner required under
and in compliance with Paragraph 2.11(e) and the other provisions of applicable
Development Agreements. Effective as of the date of payment, any amounts paid by
NHP or MLD for New Equipment at each Facility shall be treated as a Development
Advance under the Development Agreement for such Facility, and correspondingly,
under the respective Leases (for all purposes, including, without limitation,
calculation of Minimum Rent accruing or payable thereunder) as advances under
such Development Agreements for Work and as increases in Landlord's Investment
in such Facility, regardless of whether such Facility is an Incomplete Facility
or is already operating. For purposes of the Master Agreement, the term "NHP's
Maximum Investment"
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<PAGE> 10
shall be treated for all purposes as having been increased by the Equipment
Amounts. For purposes of the Development Agreements, the maximum permitted
Development Advance shall be treated for all purposes as having been increased
by that portion of the Equipment Amounts attributable to the Facility to which
such Development Agreement relates.
(b) The parties hereby acknowledge that, pursuant to the Capital
Agreements between BCC and the Tenants, BCC or a BCC Affiliate (as defined in
Apendix 1 to the Capital Agreements) has the option to purchase all the equity
ownership interests in, or assets of, each individual Tenant. The Parties hereby
agree that in connection with the purchase by BCC or a BCC Affiliate of all of
the equity ownership interests in, or assets of, a Tenant, BCC shall have the
option to require, subject to the conditions set forth below in this Paragraph
4(b), that NHP or MLD, as applicable, increase the Landlord's Investment (as
defined in the applicable Lease) in such Tenant's Lease by a lump sum (the
"Working Capital Payoff") equal to the principal amount then outstanding on the
Senior Loan made by NHP or MLD to such Tenant, together with all accrued but
unpaid interest thereon and all other amounts due and payable to NHP or MLD
under the applicable Senior Loan Documents. The Working Capital Payoff shall be
advanced by NHP or MLD to pay in full the applicable Senior Loan, and all other
amounts then due and owing in connection with such Senior Loan to NHP or MLD;
provided, however, NHP or MLD shall be under no obligation to advance such
Working Capital Payoff unless (i) no uncured Event of Default exists under the
applicable Lease or any other Leases or Transaction Documents, and (ii) BCC or a
BCC Affiliate has exercised the right to acquire all of the equity ownership
interests in, or assets of, the applicable Tenant. The Working Capital Payoff
shall be advanced by NHP or MLD on the date that BCC or a BCC Affiliate closes
the purchase of the equity ownership interests in, or all of the assets of, the
applicable Tenant. Upon advancing the Working Capital Payoff amount, all amounts
due and owing to NHP or MLD in connection with the applicable Senior Loan shall
be paid in full from such Working Capital Payoff, all obligations of the Tenant
under the applicable Senior Loan Documents shall be extinguished, and the
Landlord's Investment under the applicable Lease shall be increased (as of the
date that the Working Capital Payoff is advanced) on a dollar for dollar basis
by the amount of the Working Capital Payoff. For purposes of the Master
Agreement, the term "NHP's Maximum Investment" shall be treated for all purposes
as having been increased by the Working Capital Payoff.
7. Miscellaneous. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
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<PAGE> 11
This Amendment shall be binding upon the successors and permitted assigns of the
parties hereto (and the Affiliates of such parties, successors, and permitted
assigns). This Amendment shall be construed and enforced in accordance with the
internal laws of the State of Texas, without regard to the rules governing
choice of law. The parties hereto agree that venue for any and all lawsuits
related to this Agreement shall be in Harris County, Texas.
[FOLLOWING PAGE IS SIGNATURE PAGE]
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<PAGE> 12
This Amendment is made effective as of June 30, 1999 (the "Effective
Date").
"NHP"
NATIONWIDE HEATH PROPERTIES, INC.,
a Maryland corporation
By: /s/ Gary E. Stark
Gary E. Stark, Vice President
"MLD"
MLD DELAWARE TRUST, a Delaware
business trust
By: /s/ Mark L. Desmond
Mark L. Desmond, Trustee
"BCC"
BALANCED CARE CORPORATION,
a Delaware corporation
By: /s/ Robin L. Barber
Robin L. Barber, Senior Vice
President and Legal Counsel
"Developer"
BCC DEVELOPMENT AND MANAGEMENT CO.,
a Delaware corporation
By: /s/ Robin L. Barber
Robin L. Barber, Vice
President and Secretary
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<PAGE> 13
"Elder Care"
ELDER CARE OPERATORS, LLC,
a Delaware limited liability
company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
ELDER CARE OPERATORS OF YORK, LLC,
a Delaware limited liability
company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
ELDER CARE OPERATORS OF LAKEMONT
FARMS, LLC, a Delaware limited
liability company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
ELDER CARE OPERATORS OF
MURFREESBORO, LLC, a Delaware
limited liability company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
ELDER CARE OPERATORS OF BRISTOL,
LLC, a Delaware limited liability
company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
- 13 -
<PAGE> 14
ELDER CARE OPERATORS OF HILLIARD,
LLC, a Delaware limited liability
company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
ELDER CARE OPERATORS OF AKRON, LLC,
a Delaware limited liability
company
By: /s/ Kevin L. Sherry
Kevin L. Sherry, Sole Member
and President
Joined herein by Kevin L. Sherry, the sole member of Elder Care
Operators, LLC, solely for the purposes of acknowledging the changes in the
Transaction Documents set forth in this Amendment and reaffirming his
obligations under the Note Guaranties.
/s/ Kevin L. Sherry
KEVIN L. SHERRY, individually
- 14 -
<PAGE> 15
EXHIBIT "A"
TO
FIRST AMENDMENT TO FIRST SERIES MASTER INVESTMENT AGREEMENT AND
AGREEMENT REGARDING FIRST SERIES CONSTRUCTION SCHEDULES,
COMPLETION DATES, AND BUDGETS
SCHEDULE OF FACILITIES AND COMPLETION DATES
<TABLE>
<CAPTION>
Development Actual or
Agreement Newly Scheduled
Owner Name & Location of Facility Execution Date Completion Date
- ----- --------------------------- -------------- ---------------
<S> <C> <C> <C>
MLD Outlook Pointe at York March 27, 1998 November 24, 1998
Knob Hill Road,
York Township,
York County, Pennsylvania
MLD Outlook Point at Lakemont Farms March 27, 1998 March 17, 1999
Washington Pike,
South Fayette Township,
Allegheny County,
Pennsylvania
NHP Outlook Pointe at Murfreesboro March 27, 1998 February 23, 1999
U.S. Hwy 231, Murfreesboro,
Rutherford County,
Tennessee
NHP Outlook Pointe at Bristol March 31, 1998 February 12, 1999
Meadow View Road, Bristol,
Sullivan County,
Tennessee
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
NHP Outlook Pointe at Hilliard March 27, 1998 April 27, 1999
Constitution Blvd., Hilliard,
Franklin County,
Ohio
NHP Outlook Pointe at Akron March 31, 1998 (Not applicable
South Hawkins Avenue, Akron, until or unless NHP
Summit County, delivers Construction
Ohio Notice)
</TABLE>
<PAGE> 1
Exhibit 10.9
FORM OF
FIRST AMENDED AND RESTATED
SHORTFALL FUNDING AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED SHORTFALL FUNDING AGREEMENT
(this "Agreement") is made as of the 30th day of June, 1999 by and among [ ], a
Delaware limited liability company (the "Lessee"), ELDER CARE OPERATORS, LLC, a
Delaware limited liability company which is the sole member of the Lessee (the
"Member"), and BALANCED CARE CORPORATION, a Delaware corporation ("BCC").
W I T N E S S E T H
WHEREAS, the Lessee executed and delivered a Lease dated as of
the Documentation Date (the "Lease") between the Lessee and [ ], [ ] (the
"Lessor"), whereby the Lessee leased from Lessor property, together with all
improvements built or to be built thereon, located in [ ], as more fully
described in the Lease (the "Property"); and
WHEREAS, the Lessee and [ ], a Delaware corporation (the
"Management Firm"), have entered into that certain Management Agreement dated as
of the Documentation Date (as such has been amended and restated on the date
hereof by and between the Lessee and the Management Firm, the "Management
Agreement"), whereby the Lessee has appointed the Management Firm as the
exclusive manager and operator of the Facility; and
WHEREAS, the Lessor and BCC Development and Management
Company, Inc., a Delaware corporation ("Developer"), have entered into a
Development Agreement dated as of the Documentation Date (the "Development
Agreement") for the purpose of developing the Facility; and
WHEREAS, the Developer and the Management Firm are
wholly-owned subsidiaries of BCC; and
WHEREAS, BCC, the Lessee, the Member, and Oakhaven Elder
Living, Inc., a California corporation ("Oakhaven") and the prior owner of 1% of
the equity interests of the Lessee (the "Oakhaven Interests"), entered into a
Shortfall Funding Agreement dated as of the Documentation Date (the "Original
Shortfall Agreement"), whereby the Lessee agreed to deposit immediately
available funds from time to time as specifically provided in the
<PAGE> 2
Original Shortfall Agreement to fund the Working Capital Reserve (to be used to
fund Shortfalls); and
WHEREAS, as of June 30, 1999, Kevin Sherry (the "Guarantor")
acquired the Oakhaven Interests and all equity ownership interests in the Member
(which Member, prior to the date hereof, held 99% of the equity interests in the
Lessee), pursuant to an Equity Interests Purchase Agreement (the "Purchase
Agreement") of even date herewith; and
WHEREAS, the Guarantor transferred the Oakhaven Interests to
the Member, such that the Member is now the sole owner of 100% of the equity
interests in the Lessee; and
WHEREAS, the Lessee, the Member and BCC desire to enter into
this Agreement to amend and restate the Original Shortfall Agreement in its
entirety, and to provide, in part, that such funds to be deposited by the Lessee
in the Working Capital Reserve from and after the date hereof will come from the
equity contributions made by the Member to the Lessee from the proceeds of the
Senior Note issued by the Member to the Senior Lender pursuant to the Senior
Credit Documents; and
WHEREAS, upon the advance of the 100% of the total principal
amount of the Senior Note and upon depletion of the Working Capital Reserve, BCC
intends to make Advances to the Lessee, on the terms and conditions herein
stated, to fund continuing Shortfalls; and
WHEREAS, BCC is willing to fund Advances to the Lessee
covering Shortfalls after 100% of the total amount of the Senior Note has been
advanced and upon depletion of the Working Capital Reserve, only on the terms
and conditions provided in this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
FUNDING SHORTFALLS
SECTION 1.01 Funding; Capitalization of the Lessee;
2
<PAGE> 3
Working Capital Reserve. (a) At such time as BCC or the Management Firm
requests, and upon receipt of equity contributions from the Member (made from
advances to the Member from the Senior Lender under and in accordance with the
Senior Note), the Lessee shall deposit into the Collateral Account so much of
such funds so advanced under the Senior Note and contributed as equity to the
Lessee, up to the maximum amount of no less than of [ ], representing 100% of
the total principal amount of the Senior Note and 100% of the total capital
needed to fully fund the Working Capital Reserve; provided, however, that the
Guarantor may utilize up to $89,665 advanced under the Senior Note towards the
acquisition, pursuant to the Purchase Agreement, of the Oakhaven Interests and
the equity ownership interests of the Member. Time is of the essence with
respect to such contributions described in this Section 1.01(a).
(b) Except for sums utilized by the Guarantor towards the
acquisition of the Oakhaven Interests and all of the equity interests in the
Member in accordance with the Purchase Agreement, the contributions described in
Section 1.01(a) shall be made directly into the Collateral Account. The
contribution of funds into the Collateral Account as provided in this Section
1.01 is referred to herein as a "Funding," and the aggregate of all Fundings to
be made into the Collateral Account as provided in Section 1.01(a) above,
together with any Fundings made pursuant to Section 1.01 of the Original
Shortfall Agreement, is referred to as the "Working Capital Reserve." As
contemplated pursuant to the Senior Note, BCC or the Management Firm will from
time to time request that Fundings be made under the Senior Note into the
Collateral Account to fund the Working Capital Reserve. Under the Working
Capital Assurance Agreement, the Lessor may also request Fundings. No Fundings
may be made into the Collateral Account until such time as BCC or the Management
Firm (or the Lessor, as appropriate) so requests; provided, however, if BCC or
the Management Firm has failed to make a request for Fundings as provided under
the Senior Note (and if the Lessor has failed to make a request for Fundings
pursuant to the Working Capital Assurance Agreement), and a Shortfall exists,
BCC shall be obligated to make Advances pursuant to the provisions of Section
1.02 below if all other conditions to making such Advances have been satisfied
or waived in writing by BCC.
(c) BCC, the Member and the Lessee recognize that Senior
Lender has not committed to fund sums into the Working
3
<PAGE> 4
Capital Reserve in excess of the principal amount of the Senior Note.
(d) The Guarantor and the Lessee acknowledge and agree that
(i) Fundings under the Senior Note and any other borrowings of the Member or the
Lessee to fund the Working Capital Reserve shall be recourse to the Guarantor to
the extent that the Guarantor will be liable for no less than 15% of the total
amount to be funded into the Working Capital Reserve as provided in Section
1.01(a) above (such maximum guarantied liability of the Guarantor, as adjusted
from time to time to reflect the advances actually made pursuant to the Senior
Note, is referred to herein as the "Guarantied Portion" of the Working Capital
Reserve), (ii) the Guarantor has sufficient funds in personal accounts such that
the guaranty of Indebtedness in connection with sums borrowed for the Working
Capital Reserve is meaningful and has a likelihood of being repaid and (iii) the
Lessor and the Management Firm may (without notice to the Lessee or the Member,
and whether acting alone or together) withdraw funds from the Working Capital
Reserve to fund Shortfalls with respect to the Facility as provided in the
Transaction Documents and the Lease Documents.
SECTION 1.02 Advances. Upon the advance of 100% of all sums
under the Senior Note as equity contributions to the Lessee and the deposit of
100% of such sums into the Working Capital Reserve and the complete depletion of
the Working Capital Reserve, and to the extent thereafter of any Shortfall, BCC
hereby agrees to advance (each, an "Advance," and collectively, the "Advances")
from time to time funds to the Lessee upon no less than five (5) days' prior
written notice, upon the terms and conditions provided herein. Advances shall be
evidenced by one or more promissory notes issued by the Lessee in the form
attached hereto as Exhibit A (collectively, the "Notes"). The Notes shall mature
on the anniversary of the fifth year after issuance of the first Note issued
under this Agreement. Interest shall accrue on the Notes at the rate of 2% over
the Prime Rate as announced from time to time in the Eastern Edition of the Wall
Street Journal (or, in the event of the discontinuance of the publishing of the
Prime Rate in such Eastern Edition of the Wall Street Journal, such other source
as the parties may agree), and shall be payable in arrears on the first day of
each calendar quarter. All sums owed under the Notes and hereunder to BCC, and
all other obligations and covenants under the Transaction Documents applicable
to the Lessee and the Member (including the
4
<PAGE> 5
obligations of the Member under the Option Agreement, as defined in Section 1.04
below), together with all interest payable under the Transaction Documents and
all other costs and expenses payable by the Lessee or the Member to or for the
benefit of BCC or any BCC Affiliate (including indemnification and defense
obligations) are referred to herein as the "Obligations." Notwithstanding any
provision to the contrary contained in the Transaction Documents, the provisions
of this Section 1.02, and any Notes issued hereunder, shall be subject in all
respects to the terms and conditions of Section 7(c) of the Option Agreement.
SECTION 1.03 Asset Purchase Option. (a) The Lessee and the
Member hereby grant to BCC an option (the "Asset Purchase Option") to purchase
all of the assets of the Lessee (including the option to take an assignment of
the Lease) for the Asset Purchase Price. The Asset Purchase Option may be
exercised by BCC by providing written notice to the Lessee at any time during
the term of the Lease. The closing of the purchase of the assets of the Lessee
shall take place within 30 days after BCC exercises the Asset Purchase Option at
such location in Pennsylvania as BCC may designate. At the closing of the asset
purchase, the Lessee shall transfer, assign and convey to BCC (or its designee)
all assets of the Lessee, free and clear of all Liens and restrictions of any
kind or nature, except for Liens or restrictions in favor of the Lessor pursuant
to the Lease Documents or in favor of BCC pursuant to the Transaction Documents
(provided, however, Liens in favor of BCC securing Advances or other Obligations
shall be paid in full by the Lessee and the Member at the closing of the asset
purchase). The Lessee (and the Member if requested by BCC) shall execute and
deliver at the closing of the asset purchase an assignment of lease (assigning
the Lease to the purchaser), a bill of sale conveying all other assets of the
Lessee and such other documents and instruments as BCC may reasonably request,
all in form and substance reasonably satisfactory to BCC. The "Asset Purchase
Price" as used herein shall mean (i) all amounts actually funded into the
Working Capital Reserve pursuant to the Senior Note (together with any accrued
and unpaid interest and other charges then due as of the date of determination),
plus (ii) an amount (calculated as a yearly return) equal to 27.5% of the
Guarantied Portion of the Working Capital Reserve, calculated as though the
Working Capital Reserve were fully funded as of the date hereof, compounded on
an annual basis through the closing date, plus (iii) the aggregate amount of all
Advances and all other
5
<PAGE> 6
Obligations due and payable by the Lessee or the Member to BCC or a BCC
Affiliate through the closing date (exclusive of the Management Fee), minus (iv)
any payments made to the Member under the Option Agreement (but subject to the
following provisions regarding credit for option payments paid as Current Yield
(as defined in the Option Agreement) in advance and exclusive of the option
payments made to the Member or Oakhaven pursuant to the terms of the Original
Option Agreement (as defined in Section 1.04 below)). To avoid any doubt, BCC
shall receive, according to the following schedule, a credit against the Asset
Purchase Price for any payments made to the Member under the Option Agreement
paid as Current Yield in advance, to the extent that such advanced option
payments are attributable to Current Yield accruing from and after the closing
date:
Number of months Credit received by BCC for
between June 30, option payments paid as
1999 Current Yield in advance
and the closing (as % of Current Yield paid
date in advance)
0-6 none
7-8 25%
9-10 50%
11-12 75%
more than 12 100%
All Advances and all other Obligations due and payable by the Lessee or the
Member to BCC or a BCC Affiliate through the closing date of the asset purchase
shall be payable from the Asset Purchase Price to BCC or the BCC Affiliate, as
appropriate. Notwithstanding any provision to the contrary contained in the
Transaction Documents, the provisions of this Section 1.03 shall be subject in
all respects to the terms and conditions of Section 7(c) of the Option Agreement
and Section 6.04 of this Agreement.
(b) Notwithstanding any provision to the contrary contained
herein or in any other Transaction Document, BCC agrees that the Asset Purchase
Option shall not be exercised unless (i) BCC or its designee is prohibited (by
operation of law, or any other reason other than the acts or omissions of BCC or
any BCC Affiliate) from exercising the Option to acquire the Equity Interests
pursuant to the Option Agreement, or (ii) the Lessee or the Member is in Default
of any covenant, agreement, representation or warranty contained in this
Agreement (except
6
<PAGE> 7
for a Default in the payment of interest under the Notes) or the Option
Agreement, which Default was not caused by BCC or any BCC Affiliate.
SECTION 1.04 Transaction Documents. In addition to the Notes,
and to better secure the performance of the Lessee hereunder and under the other
Transaction Documents, the Lessee or the Member or both (as applicable) have
executed and delivered to Lessor or BCC (as applicable) the following:
(i) the Lease, the other Lease Documents and the
Senior Credit Documents to which it is a party;
(ii) the [ ] in the form attached hereto as Exhibit B
encumbering the Property in favor of BCC (the "Leasehold
Mortgage");
(iii) the Deposit Pledge Agreement and the Pledge
Agreement; and
(iv) such other documents, certificates, powers,
affidavits and instrument as BCC may reasonably request.
In addition to the foregoing documents, the Member has
executed and delivered to BCC a First Amended and Restated
Option Agreement (the "Option Agreement") substantially in the
form attached hereto as Exhibit C, whereby the Member has
agreed that BCC shall have an option to purchase the equity
interests of the Member in the Lessee, on the terms and
conditions provided therein. The Option Agreement amended and
restated that certain Option Agreement dated as of the
Documentation Date by and among the Member, Oakhaven and BCC
(the "Original Option Agreement").
SECTION 1.05 Interest Payments. In no event shall the amount
of interest due or payable pursuant to any Transaction Document (exclusive of
payment made under the Option Agreement and sums paid in connection with the
Asset Purchase Option) exceed the maximum rate of interest allowed by Law and,
in the event any such payment is inadvertently paid by the Lessee or the Member
or inadvertently received by BCC or any BCC Affiliate,
7
<PAGE> 8
then such excess sum shall be credited as a payment of principal due to BCC or
any BCC Affiliate. It is the express intention of the parties hereto that
neither the Lessee nor the Member pay to BCC, directly or indirectly, in any
manner whatsoever, interest in excess of that which may be lawfully paid by the
Lessee.
SECTION 1.06 Intention. It is the intention of BCC, the Member
and the Lessee that (i) the Management Firm operate the Facility pursuant to the
Management Agreement and that the Lessee act as a passive investor with respect
to the Facility, (ii) the Lessee include on its financial statements all revenue
and losses with respect to the Facility during the term of this Agreement for
accounting purposes, and (iii) Advances made hereunder and all other obligations
of the Lessee and the Member under the Transaction Documents be secured by and
pursuant to the Leasehold Mortgage and the Pledge Agreement, but subject to the
rights of Lessor under the Lease, regardless of any bankruptcy, insolvency,
receivership or similar proceedings instituted by or against the Lessee. BCC,
the Member and the Lessee agree to take no position inconsistent with the
intention of the parties as herein stated.
ARTICLE II
CONDITIONS TO ADVANCES
SECTION 2.01 Conditions Precedent to Advances. The obligations
of BCC to accept delivery of the Transaction Documents and make Advances are
subject to the condition precedent that BCC receives the following five (5) days
prior to the making of any Advance:
(a) the Note(s);
(b) the Working Capital Assurance Agreement;
(c) the Leasehold Mortgage;
(d) the Option Agreement;
(e) the Management Agreement;
(f) a certificate of the Secretary of State of the State of
Delaware stating that the Lessee is duly organized, validly existing and in good
standing in such state;
8
<PAGE> 9
(g) a certified copy of the Operating Agreement of the Lessee
and the Member, together with certified resolutions or authorizations of the
Lessee and the Member granting the power to the Lessee and the Member to enter
into and perform the Transaction Documents;
(h) all other Transaction Documents; and
(i) the Lease and all other Lease Documents.
SECTION 2.02 Additional Conditions Precedent to Advances. The
obligation of BCC to accept delivery of the Transaction Documents and consummate
this transaction, and to make any Advance, shall be further subject to the
condition precedent that the following statements shall be true and correct (and
the delivery by the Lessee and the Member of the Notes and the other Transaction
Documents shall be deemed to constitute a representation and warranty by the
Lessee and the Member that such statements are true on such date):
(i) The representations and warranties contained in
Article III of this Agreement and the other Transaction
Documents are true and correct in all material respects on and
as of date of the execution and delivery of this Agreement, at
the time of each Advance, and as of each date until the
Obligations are satisfied in full; and
(ii) No event has occurred and is continuing which
constitutes a Default or an Event of Default on the part of
the Lessee or the Member under any of the Transaction
Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Lessee. The
Lessee and the Member represent and warrant, as of the date hereof and not as to
any period of time prior to the date hereof, as follows:
9
<PAGE> 10
(a) Organization; Qualification. The Lessee is a limited
liability company duly formed, validly existing and in good standing under the
laws of State of Delaware, has qualified to do business in the State in which
the Facility is located, and has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be
conducted; provided, however, notwithstanding any provision to the contrary
contained herein or in the other Transaction Documents, if the foregoing is
false or misleading (and so long as such representation or warranty was not made
false or misleading as a result of the acts or omissions of the Lessee or the
Member), in no event shall BCC fail to fund Advances if required to do so
hereunder or raise as a defense to the consequences of BCC's failure to make
Option Payments the failure of the foregoing from being true and correct, but
neither the Lessee nor the Member shall raise as a defense to the obligations of
the Lessee or the Member hereunder or under any other Transaction Document the
failure of the foregoing from being true and correct in all material respects.
(b) Power; Authority. The execution, delivery and performance
by the Lessee of this Agreement and the other Transaction Documents to which it
is a party are within the Lessee's power and have been duly authorized by all
necessary action, and this Agreement and the other Transaction Documents to
which the Lessee is a party have been duly executed and delivered by the duly
authorized representative of the Lessee.
(c) Approval or Consents. No approval or consent of any
foreign, domestic, federal, state or local authority is required for the due
execution, delivery and performance by the Lessee of this Agreement or any other
Transaction Document to which it is a party and the execution, delivery and
performance by the Lessee of this Agreement and the other Transaction Documents
to which it is a party do not conflict with, and will not result in the breach
of or default under, any contract, agreement or other document or instrument to
which the Lessee is a party or by which its properties are bound.
(d) Binding Obligations. This Agreement and the other
Transaction Documents to which the Lessee is a party are legal, valid and
binding obligations of the Lessee enforceable against the Lessee in accordance
with their respective terms, except as the same may be limited by bankruptcy,
insolvency,
10
<PAGE> 11
reorganization, moratorium or other laws affecting generally the enforcement of
creditors' rights; provided, however, notwithstanding any provision to the
contrary contained herein or in the other Transaction Documents, if the
foregoing is false or misleading (and so long as such representation or warranty
was not made false or misleading as a result of the acts or omissions of the
Lessee or the Member), in no event shall BCC fail to fund Advances if required
to do so hereunder or raise as a defense to the consequences of BCC's failure to
make Option Payments the failure of the foregoing from being true and correct,
but neither the Lessee nor the Member shall raise as a defense to the
obligations of the Lessee or the Member hereunder or under any other Transaction
Document the failure of the foregoing from being true and correct in all
material respects.
(e) Litigation. There is no pending or, to the best of the
Lessee's knowledge, threatened action, suit or proceeding against or affecting
the Lessee before any court, governmental agency or arbitrator.
(f) Applicable Law. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Lessee is a
party, and the borrowings hereunder, do not and will not, by the passage of
time, the giving of notice or otherwise, violate any Law applicable to the
Lessee; provided, however, notwithstanding any provision to the contrary
contained herein or in the other Transaction Documents, if the foregoing is
false or misleading (and so long as such representation or warranty was not made
false or misleading as a result of the acts or omissions of the Lessee or the
Member), in no event shall BCC fail to fund Advances if required to do so
hereunder or raise as a defense to the consequences of BCC's failure to make
Option Payments the failure of the foregoing from being true and correct, but
neither the Lessee nor the Member shall raise as a defense to the obligations of
the Lessee or the Member hereunder or under any other Transaction Document the
failure of the foregoing from being true and correct in all material respects.
(g) Title and Condition of Assets. Except for the Lessee's
leasehold interest in the Lease, the Lessee has good, marketable and legal title
to its properties and assets. The Lessee has a good and valid leasehold interest
in the Lease.
(h) Liens. None of the properties and assets of the
11
<PAGE> 12
Lessee are subject to any Lien or other charge other than Liens in favor of
Lessor pursuant to the Lease or the Senior Credit Documents, BCC as provided
herein, or a BCC Affiliate ("Permitted Liens"), and the execution, delivery and
performance by the Lessee of this Agreement and the other Transaction Documents
to which it is a party will neither result in the creation of any Lien or other
charge upon any of the Lessee's properties or assets, nor cause a default under
any agreements to which the Lessee is a party.
(i) {intentionally omitted}.
(j) Tax Returns and Payments. All federal, state and other tax
returns of the Lessee required by Law to be filed have been duly filed, and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Lessee and its properties, income, profits and assets which are
due and payable have been paid; provided, however, if the failure to file such
tax returns was due to the acts or omissions of BCC or a BCC Affiliate, the
foregoing shall not constitute an Event of Default.
(k) No Employees. The Lessee has no employees for which it is
required to comply with the Employment Retirement Income Security Act of 1974.
(l) Absence of Defaults. To the Lessee's and the Member's
knowledge, no event has occurred, which has not been remedied, cured or waived,
which constitutes, or with the passage of time or giving of notice or both would
constitute, a Default or an Event of Default under any Transaction Document or
Lease Document or which constitutes or which with the passage of time or giving
of notice or both would constitute a default or event of default by the Lessee
under any agreement or judgment, decree or order, to which the Lessee is a party
or by which the Lessee or any of its properties may be bound.
(m) Accuracy and Completeness of Information. No document
furnished or written statement made to BCC by the Lessee or the Member in
connection with the execution of this Agreement or any of the other Transaction
Documents (or in connection with the organization or capitalization of the
Lessee by the Members) contains or will contain any untrue statement of a
material fact or fails to state a material fact necessary in order to make the
12
<PAGE> 13
statements contained therein not materially misleading.
(n) Subsidiaries. The Lessee does not own, directly or
indirectly, of record or beneficially, any of the voting stock of any class or
classes of, or any other voting interests of, any Entity.
(o) Investment Company. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(p) Public Utility Company. The Lessee is not a "holding
company" or a "subsidiary company", or an "affiliate" of a "holding company",
within the meaning of the Public Holding Company Act of 1935, as amended.
(q) Sole Member. The Member is the sole member of the Lessee,
and no other person or Entity holds any equity interest or other security in the
Lessee.
(r) Capital Contributions. The Guarantor has the financial
resources and ability to pay the Guarantied Portion.
ARTICLE IV
COVENANTS OF THE LESSEE
SECTION 4.01 Affirmative Covenants. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation hereunder or under the other
Transaction Documents owed to it, the Lessee will and the Member shall cause the
Lessee to:
(a) Compliance with Laws. Comply, in all material respects
with all applicable Laws, such compliance to include paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its properties.
(b) {intentionally omitted}
(c) Notice of Litigation and Other Matters. Promptly give
notice to BCC of the following: (i) any actions, suits or proceedings instituted
against the Lessee; (ii) any change in the chief executive office, principal
place of business or location of the books and records of the Lessee and (iii)
the occurrence
13
<PAGE> 14
of a Default or an Event of Default.
(d) {intentionally omitted}
(e) Preservation of Existence and Similar Matters. Preserve
and maintain its existence under the Laws of the state of its formation, and
preserve and maintain its rights, franchises, licenses and privileges in such
state as a limited liability company, and qualify and remain qualified and
authorized to do business in such state.
(f) Business. At all times endeavor to carry on its business
in the most efficient manner possible under the circumstances and engage only in
the business presently carried on by the Lessee.
(g) Further Assurances. At BCC's request, from time to time,
execute, acknowledge or take such further action as BCC may reasonably require
(i) to effectuate the purposes of this Agreement and the purposes of the other
Transaction Documents or (ii) to comply or consent to such actions as BCC may
wish to comply or consent to on behalf of the Lessee under the Lease Documents.
Provided, however, notwithstanding anything to the contrary contained in this
Section 4.01, the Lessee shall not be in default hereunder to the extent that
the obligations described in this Section 4.01 are required to be performed by
the Management Firm under the Management Agreement.
SECTION 4.02 Negative Covenants. Except as expressly permitted
under the Transaction Documents or the Lease Documents, so long as BCC shall
have any commitment or Obligation hereunder or under the other Transaction
Documents owed to it, the Lessee will not, and Member will not cause the Lessee
to, without the prior written consent of BCC:
(a) Liens Created by the Lessee. Create or suffer to exist any
Lien or any other type of preferential arrangement, upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign any right
to receive income, other than Permitted Liens.
(b) Distributions. Make any distribution of cash or
14
<PAGE> 15
other property to the Member (other than payments to the Member to satisfy
Federal, state or local income tax consequences resulting exclusively from the
operations of the Facility) or declare or pay any dividend or distribution on
any securities of the Lessee.
(c) Other Business. Engage in any business venture or enter
into any agreement with respect to any business venture, except as expressly
provided in the Transaction Documents with respect to the Facility.
(d) Transfer of Assets. Except as expressly contemplated in
the Transaction Documents to BCC or an Entity designated by BCC or otherwise as
expressly permitted in the Lease with respect to Subleases of a portion of the
Facility, convey, transfer, lease, sublease, assign or otherwise dispose of
(whether in one transaction or in a series of transactions) any of its assets
(whether now owned or hereafter acquired) to, or acquire all or substantially
all of the assets of, any person or Entity. The restrictions of this Subsection
shall include a prohibition on any assignment, pledge, hypothecation or other
transfer of the Lease or sublease or license of the Facility, except to BCC or a
BCC Affiliate in accordance with the terms and conditions of the Lease or
otherwise as expressly permitted in the Lease with respect to Subleases of a
portion of the Facility.
(e) Indebtedness for Borrowed Money. Create, assume, guaranty
or otherwise become or remain obligated in respect of, or permit or suffer to
exist or to be created, assumed or incurred or to be outstanding, any
Indebtedness, except Indebtedness incurred to BCC or a BCC Affiliate under the
Transaction Documents or Indebtedness incurred to Lessor as expressly provided
in the Lease Documents.
(f) Creation of Affiliates. Form, organize or participate in
the formation or organization of any Entity, or make any investment in any newly
formed or existing Entity.
(g) Loans. Extend credit to or make any advance, loan or
contribution to any person or Entity.
(h) Governance Documents. Amend, supplement or otherwise
modify the terms of the Articles of Formation or the Limited Liability Company
Agreement of the Lessee in any way.
15
<PAGE> 16
(i) Other Transactions with Lessor. Enter into any transaction
with Lessor or any affiliate or related party to or with Lessor, other than
pursuant to the Transaction Documents.
(j) Transfers of Equity Interests. Permit the Member to
transfer all or any portion of the Member's Equity Interest in the Lessee.
(k) Amend Transaction Documents. (i) Amend, terminate,
supplement or otherwise modify any Transaction Document, (ii) waive any default
or potential event of default by Lessor under, or consent to any action
requested by Lessor pursuant to, any Lease Document, (iii) declare a default or
event of default under any Lease Document, (iv) exercise any right to extend the
term of the Lease, (v) exercise any right to purchase the Facility or exercise a
right of refusal with respect thereto, or (vi) exercise any right to cancel the
Lease as a result of a casualty or condemnation with respect to the Facility, or
otherwise.
(l) Mergers and Consolidations. Merge or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire any
Entity.
(m) Issuance of Securities. Except for the equity interests of
the Lessee that have been issued to the Member and are outstanding as of the
date hereof, issue any equity interests or options, warrants or other rights to
purchase any equity interests or any securities convertible or exchangeable for
equity interests, or commit to do any of the foregoing.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. Each of the following events
shall constitute an event of default hereunder ("Shortfall Event of Default"),
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
nongovernmental body; provided, however, notwithstanding anything to the
contrary contained in this Section 5.01, no Shortfall Event of Default may be
declared hereunder in the event that the
16
<PAGE> 17
Shortfall Event of Default resulted from a default on the part of BCC or a BCC
Affiliate under any of the Transaction Documents:
(a) The Lessee shall fail to make any payment of principal or
interest, as stated in the Notes, when due (a "Monetary Default"); or
(b) Any material representation or warranty made by the Lessee
or the Member under or in connection with any Transaction Document shall prove
to have been incorrect or misleading in any material respect when made; or
(c) The Lessee or the Member shall fail to perform or observe
any term, covenant or agreement contained in this Agreement, or in any other
Transaction Document, on its or their part to be performed or observed beyond
the applicable cure period; or
(d) The Lessee or the Member shall generally not pay its debts
when due; or
(e) The Lessee or the Member shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Lessee or the Member seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of the Lessee or the Member of any of its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for the Lessee or
the Member or for any substantial part of its property; or the Lessee or the
Member shall take any action to authorize any of the actions set forth above in
this subsection; or
(f) Any nonappealable judgment or order for the payment of
money in excess of $50,000 shall be rendered against the Lessee and the same
shall not be discharged within 30 days after entry; or
(g) A warrant or writ of attachment or execution or similar
process shall be issued against any property of the Lessee which exceeds $50,000
in value and such warrant or process
17
<PAGE> 18
shall continue undischarged or unstayed for 30 consecutive days; or
(h) Any material provision of any Transaction Document to
which the Lessee or the Member is a party shall for any reason cease to be valid
and binding on the Lessee or the Member, or the Lessee or the Member shall so
state in writing; or
(i) The Leasehold Mortgage shall for any reason cease to
create a valid and perfected security interest in any of the collateral covered
thereby, subject in priority only to the Permitted Liens; or
(j) an Option Agreement Event of Default, a Mortgage Event of
Default, a Lease Event of Default, a Deposit Pledge Event of Default, an Other
Transaction Default or a Management Agreement Event of Default on the part of
the Lessee or the Member shall occur and be continuing.
ARTICLE VI
REMEDIES
SECTION 6.01 Applicable Provisions Upon Occurrence of an Event
of Default. Upon the occurrence of a Shortfall Event of Default, the following
provisions shall apply:
(a) Acceleration and Termination:
(i) Automatic. Upon the occurrence of a Shortfall
Event of Default specified in Section 5.01(e), the principal
of, and the interest on, the Notes at the time outstanding,
and all other amounts owed to BCC under this Agreement and any
of the other Transaction Documents, shall become automatically
due and payable without presentment, demand, protest, or other
notice of any kind all of which are expressly waived, anything
in this Agreement or the other Transaction Documents to the
contrary notwithstanding.
(ii) Optional. If any other Shortfall Event of
Default shall have occurred, and in every such event, BCC may
do the following: declare the principal of, and interest on,
the Notes at the time outstanding, and all other amounts owed
to BCC under this Agreement and the
18
<PAGE> 19
other Transaction Documents, to be forthwith due and payable,
whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any
kind, all of which are expressly waived, anything in this
Agreement or the other Transaction Documents to the contrary
notwithstanding.
(b) BCC's Right to Enter Property. Subject to the terms of the
Lease Documents and the Transaction Documents, BCC may enter upon the Property
and any premises on which collateral may be located and, without resistance or
interference by the Lessee, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part thereof
to such other place or places as BCC shall choose, without being liable to the
Lessee on account of any loss, damage or depreciation that may occur as a result
thereof.
(c) Use of Premises. BCC may, without payment of any rent or
any other charge, enter the Property and, without breach of peace, take
possession of the Property or place custodians in exclusive control thereof,
remain on such premises and use the same and any of the Lessee's equipment, for
the purpose of (i) operating the Facility and (ii) collecting any accounts
receivable.
(d) Other Rights. BCC may exercise any and all of its rights
and remedies available under the other Transaction Documents, as well as those
available in Law or in equity.
(e) Right to Foreclose. Subject to the rights of the Lessor
under the Lease Documents and the Senior Credit Documents, BCC may foreclose
upon the Lease, take immediate possession of the Facility and Property and
operate the Property, all in accordance with the terms and conditions of the
Leasehold Mortgage.
SECTION 6.02 Application of Proceeds. All proceeds from each
sale of, or other realization upon, all or any part of the Collateral following
a Shortfall Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred
in connection with such sale or other realization, including, without
limitation, the expenses for indemnification
19
<PAGE> 20
as provided herein;
(b) Second: to the payment of the interest due upon the Notes;
(c) Third: to the payment of the principal due upon the Notes
or any other payments owed to BCC under the Transaction Documents; and
(d) Fourth: the balance (if any) of such proceeds shall be
paid to the Lessee subject to any duty imposed by law or otherwise to the holder
of any subordinate lien in the Collateral known to BCC and subject to the
direction of a court of competent jurisdiction.
The Lessee shall remain liable and will pay, on demand, any
deficiency remaining in respect of the Obligations owing by the Lessee to BCC
after the application of proceeds set forth above together with interest thereon
at a rate per annum equal to the highest rate then payable hereunder.
SECTION 6.03 Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of BCC under
this Agreement and each of the other Transaction Documents shall be cumulative
and not exclusive of any rights or remedies which it would otherwise have. In
exercising its rights and remedies BCC may be selective and no failure or delay
by BCC in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise of any other power or right.
(b) Waiver of Marshaling. The Lessee hereby waives any right
to require any marshaling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this Article
VI or elsewhere in this Agreement or in any other Transaction Documents shall be
construed as requiring or obligating BCC or any agent or designee thereof to
make any demand, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim or notice or take any
action, with respect to any account or any
20
<PAGE> 21
other Collateral or the moneys due or to become due under the Notes or any other
Transaction Documents or in connection therewith, or to take any steps necessary
to preserve any rights against prior parties and neither BCC nor any of its
agents or designees shall have any liability to the Lessee for actions taken
pursuant to this Article VI, any other provision of this Agreement or any other
Transaction Documents, except as otherwise provided by Law.
(d) Waiver of Defenses. The Lessee hereby waives any and all
defenses, either by way of set-off as to matters arising prior to the date
hereof or any other defenses, which the Lessee presently believes it has or
which the Lessee may have in the future relating to defaults by the Lessee or
the Member under this Agreement or any other Transaction Document.
SECTION 6.04 Remedies of the Lessee and the Member. So long as
no Event of Default has occurred under any Transaction Document or Lease
Document which was caused by either the Member or the Lessee, in the event that
BCC fails to make Advances once required as provided herein, after ten (10) days
prior written notice of such failure sent by the Lessee to BCC, the Lessee and
the Member shall have the following remedies and rights: (i) BCC shall no longer
have any right to exercise the Option or the Asset Purchase Option, (ii) all
Notes issued by the Lessee pursuant to this Agreement shall automatically be
amended to provide that interest due under the Notes will accrue and not be due
and payable until the date which is the fifth (5th) anniversary of the date of
issuance of the first Note so issued by the Lessee pursuant to this Agreement
and (iii) the lien encumbering the Equity Interests and other assets in favor of
BCC arising hereunder and under the Pledge Agreement and the Leasehold Mortgage
shall automatically be released and terminated. BCC agrees, after the failure to
make Advances and an opportunity to cure as provided herein, to execute such
documents and instruments, and accept delivery of such replacement Notes
(returning the Notes to be replaced) as the Member may reasonably request to
effect the provisions of Subsections (i), (ii) and (iii) above.
ARTICLE VII
ADDITIONAL AGREEMENTS
21
<PAGE> 22
SECTION 7.01 Right to Cure Defaults Under Transaction
Documents. The Lessee shall give BCC immediate notice of an default or event of
default under any Transaction Document received from Lessor. BCC shall have the
right, but not the obligation, to cure such default or event of default. To the
extent that BCC shall expend sums to cure any such default or event of default,
such sums shall be deemed Advances hereunder, payable upon demand.
SECTION 7.02 Confidentiality.
(a) The Lessee and the Member hereby covenant and agree, on
behalf of the Lessee, the Member and all Lessee Affiliates, that all
Confidential Information (as hereinafter defined) will be held and treated by
the Lessee, the Member, Lessee Affiliates and the agents and employees of the
Lessee, the Member and Lessee Affiliates in confidence and will not, except as
explicitly consented to by BCC in its sole discretion, be disclosed by the
Lessee, the Member, Lessee Affiliates or the agents and employees of the Lessee,
the Member or Lessee Affiliates, in any manner whatsoever, in whole or in part,
and will not be used by the Member, the Lessee, Lessee Affiliates or the agents
and employees of the Lessee, the Member or Lessee Affiliates for any purpose
whatsoever. The Lessee and the Member further agree on behalf of the Lessee, the
Member and Lessee Affiliates (i) to disclose Confidential Information only to
the Lessee's employees who need to know the Confidential Information for
purposes related to the Facility, (ii) to employ all reasonable procedures to
ensure that neither the Lessee, the Member, or Lessee Affiliates, nor any of
their respective agents or employees use the Confidential Information in
connection with trading in the securities of BCC or communicate such information
to others who so trade in such securities and (iii) that any Confidential
Information not returned to BCC or the Management Firm, as applicable, will be
held by the Lessee and kept subject to the terms of this Section or destroyed.
(b) As used in this Section, "Confidential Information" means
all information and data containing or otherwise reflecting information
concerning BCC or any BCC Affiliate, or any Other Facility, which is not
available to the general public but is material to the business, financial
condition, or prospects of BCC and BCC Affiliates or otherwise would be material
to making an investment decision with respect to the publicly traded
22
<PAGE> 23
securities of BCC, together with analyses, compilations, studies or other
documents, whether prepared by BCC or any other Entity, which contain or
otherwise reflect such information; provided, however, Confidential Information
shall in no event include information that has become public through no wrongful
action of the Lessee or the Member or matters for which the Lessee or the Member
are required to disclose pursuant to Laws.
SECTION 7.03 Cure Period For BCC. With respect to all
obligations of BCC or a BCC Affiliate under the Transaction Documents, in no
event shall be BCC or such BCC Affiliate be in default regarding any such
obligations unless and until the Lessee and/or the Member provides notice to BCC
of such default and a period of no less than ten (10) days (or such longer
period as may be provided in the Transaction Documents) to cure such default.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Definitions; Interpretation; Miscellaneous.
Capitalized terms used but not otherwise defined in this Agreement have the
respective meanings specified in Appendix 1 hereto; the rules of interpretation
and other provisions set forth in Appendix 1 hereto shall apply to this
Agreement.
SECTION 8.02 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, Federal Express or other recognized overnight courier or
sent by registered or certified U.S. mail, return receipt requested or sent by
facsimile or telecopy transmission and addressed:
(i) If to the Lessee or the Member, to:
Sherry, Coleman & Holthouse LLP
610 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Attention: Kevin Sherry
23
<PAGE> 24
(ii) If to BCC, to:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto. Copies of all notices given hereunder shall be sent
simultaneously to the Lessor and its counsel at their respective addresses
stated in the Lease.
SECTION 8.03 Jurisdiction. THE LESSEE AND THE MEMBER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY PENNSYLVANIA COURT OR
FEDERAL COURT SITTING IN PENNSYLVANIA IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO WHICH
THE LESSEE IS A PARTY, AND THE LESSEE AND THE MEMBER HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN SUCH PENNSYLVANIA COURT OR IN SUCH FEDERAL COURT. THE LESSEE AND
THE MEMBER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE LESSEE AND THE MEMBER IRREVOCABLY CONSENT TO THE SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
LESSEE AT ITS ADDRESS SPECIFIED IN SECTION 8.02. THE LESSEE AND THE MEMBER AGREE
THAT A NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION SHALL AFFECT THE
RIGHT OF BCC TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF BCC TO BRING ANY ACTION OR PROCEEDING AGAINST THE LESSEE OR
ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.
SECTION 8.04 Performance of the Lessee's Duties. The Lessee's
obligations, and the obligation of the Member, under this Agreement and the
other Transaction Documents shall be performed by the Lessee and the Member at
their sole cost and expense. If the Lessee or the Member shall fail to do any
act or thing which it or they have covenanted to do under this Agreement or any
of the other Transaction Documents, BCC may, but shall not be obligated to, do
the same or cause it to be done either in the
24
<PAGE> 25
name of BCC or in the name and on behalf of the Lessee or the Member, and the
Lessee and the Member hereby irrevocably authorizes BCC so to act.
SECTION 8.05 Indemnification. (a) The Lessee agrees to
reimburse BCC for all costs and expenses, including reasonable counsel fees and
disbursements, incurred, and to indemnify and hold BCC harmless from and against
all losses suffered by BCC in connection with: (i) any breach by the Lessee or
the Member of any covenant, agreement, representation or warranty under any
Transaction Document and (ii) any claim, debt, demand, loss, damage, action,
cause of action, liability, cost and expense or suit of any kind or nature
whatsoever, brought against or incurred by BCC, in any manner arising out of or,
directly or indirectly, related to or connected with the operation of the
Lessee's business, which claim, debt, demand, loss, damage, action , cause of
action, liability, cost or expense was not caused by the acts or omissions of
BCC or a BCC Affiliate. The Lessee shall indemnify BCC as provided herein upon
demand and in immediately available funds.
(b) BCC agrees to reimburse the Lessee for all costs and
expenses, including reasonable counsel fees and disbursements, incurred, and to
indemnify and hold the Lessee harmless from and against (i) all losses suffered
by the Lessee or the Member, as the case may be, in connection with any breach
by BCC or any BCC Affiliate of any covenant, agreement, representation or
warranty under any Transaction Document and (ii) any claim, debt, demand, loss,
damage, action, cause of action, liability, cost and expense or suit of any kind
or nature whatsoever, brought against or incurred by the Lessee, in any manner
arising out of or, directly or indirectly, related to or connected with the
operation of BCC's or a BCC Affiliates' business, which claim, debt, demand,
loss, damage, action, cause of action, liability, cost or expense was not
caused by the acts or omissions of the Lessee or the Member. BCC shall indemnify
the Lessee and/or the Member (as the case may be) as provided herein upon demand
and in immediately available funds.
SECTION 8.06 Injunctive Relief. The Lessee and the Member
recognize that, in the event the Lessee or the Member fails to perform, observe
or discharge any of its or their obligations or liabilities under this Agreement
or any of the other Transaction Documents, any remedy of Law may prove to be
25
<PAGE> 26
inadequate relief to BCC; therefore, the Lessee and the Member agrees that BCC
shall be entitled to temporary and permanent equitable relief in any such case
without the necessity of proving actual damages.
SECTION 8.07 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Lessee, the Member and BCC and their
respective personal representatives, heirs, successors and assigns, except that
the Lessee shall have no right to assign its rights hereunder or any interest
herein. In the event of an assignment of BCC's obligations and rights hereunder,
BCC shall nonetheless remain primarily liable to the Lessee and the Member for
BCC's obligations hereunder.
SECTION 8.08 WAIVERS.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR
CONTROVERSY BETWEEN THE LESSEE, THE MEMBER AND BCC WOULD BE BASED ON DIFFICULT
AND COMPLEX ISSUES OF LAW AND FACT. ACCORDINGLY THE LESSEE, THE MEMBER AND BCC,
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN
ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE
LESSEE AND/OR THE MEMBER ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, AND WHETHER NOW EXISTING OR HEREAFTER ARISING, AND THE LESSEE AND THE
MEMBER HEREBY AGREE AND CONSENT THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL, IF BCC SO CHOOSES, WITHOUT JURY AND BCC MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE LESSEE AND THE MEMBER TO THE WAIVER OF THE RIGHT TO TRIAL
BY JURY.
(b) FURTHER, THE LESSEE AND THE MEMBER WAIVE THE BENEFIT OF
ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 8.09 Amendment of Original Shortfall Agreement;
Conflict with Lease Documents
The parties agree that this Agreement amends and restates the
Original Shortfall Agreement in its entirety (including Appendix 1 attached
hereto, which has also been
26
<PAGE> 27
amended and restated). However, nothing contained herein shall be deemed to
amend or modify in any way the terms of the Original Shortfall Agreement
applicable to the period of time prior to the date hereof. BCC represents to the
Lessee and the Member that BCC has no actual knowledge (without making inquiry
of any third party or otherwise) of any default or event of default occurring
under the Original Shortfall Agreement. This Agreement is subject to the
covenants and agreements contained in the Lease and other Lease Documents. In
the event of any conflict between the provisions of this Agreement and the Lease
Documents, the provisions of the Lease Documents (except the Original Shortfall
Agreement) shall control.
SECTION 8.10 Third Party Beneficiary
BCC, the Member and the Lessee each acknowledge and agree that
this Agreement and the rights hereunder are intend to benefit, in addition to
the parties hereto, the Lessor, who shall be deemed to be a third party
beneficiary hereof. Without limiting the generality of the foregoing, (i) the
representations, warranties, affirmative covenants and negative covenants of the
Lessee and the Member contained herein shall inure to the benefit of Lessor
(together with BCC) and (ii) the Lessor may enforce any or all of the provisions
herein contained. BCC hereby acknowledges and agrees that any security interest
BCC acquires in personal, intangible and other property of the Lessee pursuant
to this Agreement shall be and is subordinate to the security interest of Lessor
created under the Lease and the Senior Lender under the Senior Credit Documents.
SECTION 8.11 No Amendment
BCC, the Lessee and the Member hereby agree that no
Transaction Document shall be amended, modified or altered in any manner without
the prior written consent of the Lessor.
{Remainder of page intentionally left blank.}
27
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this First Amended and Restated Shortfall
Funding Agreement to be executed by their respective officers or authorized
agents as of the date first above written.
[ ]
a Delaware limited liability
company
By: ELDER CARE OPERATORS, LLC, a
Delaware limited liability company,
its Sole Member
By: /s/ Kevin Sherry
Kevin Sherry,
its Sole Member and President
ELDER CARE OPERATORS, LLC,
a Delaware limited liability
company
By: /s/ Kevin Sherry
Kevin Sherry, its Sole Member
and President
ATTEST: BALANCED CARE CORPORATION,
a Delaware corporation
/s/ Robert J. Sutton By: /s/ Robin L. Barber
Robin L. Barber,
its Senior Vice President and
Legal Counsel
<PAGE> 29
Joinder of the Guarantor
By his signature below, the Guarantor agrees with and consents to
the provisions of this Agreement including Section 1.01(d) above.
/s/ Kevin Sherry
Kevin Sherry
<PAGE> 1
Exhibit 10.10
Schedule to Form of First Amended and
Restated Shortfall Funding Agreement
<TABLE>
<CAPTION>
Project Lessee Lessor Type of Lessor Entity Property
<S> <C> <C> <C> <C>
Akron, Ohio Elder Care Operators of Nationwide Health A Maryland Summit County, Ohio
Akron, LLC Properties, Inc. corporation
Bristol, Tennessee Elder Care Operators of Nationwide Health A Maryland Sullivan County,
Bristol, LLC Properties, Inc. corporation Tennessee
Hilliard, Ohio Elder Care Operators of Nationwide Health A Maryland Franklin County, Ohio
Hilliard, LLC Properties, Inc. corporation
Lakemont Farms, Elder Care Operators of MLD Delaware Trust A Delaware Business Allegheny County,
Pennsylvania Lakemont Farms, LLC Trust Pennsylvania
Murfreesboro, Tennessee Elder Care Operators of Nationwide Health A Maryland Rutherford County,
Murfreesboro Properties, Inc. corporation Tennessee
York, Pennsylvania Elder Care Operators of MLD Delaware Trust A Delaware Business York County,
York, LLC Trust Pennsylvania
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Project Maximum Amount Management Firm Leasehold Mortgage
<S> <C> <C> <C>
Akron, Ohio $110,000.00 Balanced Care at Akron, Inc. Open End Leasehold Mortgage
and Security Agreement
Bristol, Tennessee $790,430.00 Balanced Care at Bristol, Amended and Restated Revolving
Inc. Credit/Future Advances
Leasehold Deed of Trust and
Security Agreement
Hilliard, Ohio $1,380,390.00 Balanced Care at Hilliard, Open End Leasehold Mortgage
Inc. and Security Agreement
Lakemont Farms, Pennsylvania $1,071,624.00 Balanced Care at Lakemont Open End Leasehold Mortgage
Farms, Inc. and Security Agreement
Murfreesboro, Tennessee $777,427.00 Balanced Care at Revolving Credit/Future
Murfreesboro, Inc. Advances Leasehold Deed of
Trust and Security Agreement
York, Pennsylvania $737,996.00 Balanced Care at York, Inc. Open End Leasehold Mortgage
and Security Agreement
</TABLE>
2
<PAGE> 1
Exhibit 10.11
FORM OF
FIRST AMENDED AND RESTATED OPTION AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED OPTION AGREEMENT (this
"Agreement") is made as of June 30, 1999, by and between ELDER CARE OPERATORS,
LLC, a Delaware limited liability company ("Optionor"), and BALANCED CARE
CORPORATION, a Delaware corporation, or its successors and assigns ("BCC").
W I T N E S S E T H
WHEREAS, Optionor is the owner of 100% of the equity interests
(the "Equity Interests") of [ ], a Delaware limited liability company (the
"Company"), which Equity Interests are evidenced by certificate number 6 of the
Company, and represent 100% of the equity interests in the Company; and
WHEREAS, the Company executed and delivered that certain Lease
and Security Agreement dated as of the Documentation Date (the "Lease"), whereby
the Company leased from [ ], [ ] (the "Lessor"), property, together
with all improvements built or to be built thereon, located in [ ], as more
fully described in the Lease (the "Property"); and
WHEREAS, the Company and [ ], a Delaware corporation (the
"Management Firm"), have entered into that certain Management Agreement dated as
of the Documentation Date (as such has been amended and restated on the date
hereof by and between the Company and the Management Firm, the "Management
Agreement"), whereby the Company has appointed the Management Firm as the
exclusive manager and operator of the Facility; and
WHEREAS, BCC, the Company, Optionor, and Oakhaven Elder
Living, Inc., a California corporation ("Oakhaven") and the prior owner of 1% of
the Equity Interests (the "Oakhaven Interests"), entered into that certain
Shortfall Funding Agreement dated as of the Documentation Date (the "Original
Shortfall Agreement," and, as such has been amended and restated on the date
hereof by and among BCC, the Company, and Optionor, the "Shortfall Agreement"),
whereby, among other matters, BCC agreed to fund certain Shortfalls by making
loans to the Company, as more fully provided in the Original Shortfall Agreement
and the Shortfall Agreement; and
WHEREAS, Kevin Sherry, an individual resident of Orange
<PAGE> 2
County, California (the "Guarantor"), purchased the Oakhaven Interests and 100%
of the equity interests in Optionor (which Optionor, prior to the date hereof,
held 99% of the Equity Interests in the Company), pursuant to an Equity
Interests Purchase Agreement (the "Purchase Agreement") of even date herewith;
and
WHEREAS, the Guarantor transferred the Oakhaven Interests to
Optionor, such that Optionor is now the owner of 100% of the Equity Interests in
the Company; and
WHEREAS, BCC was willing to enter into the Original Shortfall
Agreement, and all other Transaction Documents to which BCC is a party, only if
Optionor and Oakhaven executed and delivered an option agreement whereby BCC or
its successors and assigns may acquire all of the Equity Interests in the
Company; and
WHEREAS, Optionor, Oakhaven and BCC entered into an Option
Agreement dated as of the Documentation Date (the "Original Option Agreement")
memorializing the terms and conditions of the Option granted to BCC; and
WHEREAS, Optionor and BCC now wish to amend and restate in its
entirety the Original Option Agreement as herein provided.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Grant of Option/Consideration. (a) Optionor hereby grants
to BCC an option (the "Option") to purchase all of Optionor's right, title and
interest in and to the Equity Interests on the terms and conditions provided
herein. The Purchase Price for the Equity Interests shall be paid to Optionor on
the Closing Date in immediately available funds. The Option shall be exercisable
by providing written notice to Optionor on or before the ninth anniversary after
the date of this Agreement (the "Option Term").
(b) In consideration of the grant of the Option to BCC, BCC
shall make the following payments (the "Option Payments") to Optionor: (1)
forty-five (45) days after the date hereof, an amount equal to the Current Yield
(as hereinafter defined), representing the annual Current Yield on the Working
Capital Reserve as if the same were fully funded on the date
2
<PAGE> 3
hereof and outstanding until June 30, 2000, payable in advance; (2) on July 1,
2001, an amount equal to 100% of the Current Yield, representing the four
quarterly installments of the annual Current Yield for the 12-month period
beginning July 1, 2000, payable in arrears, plus an amount equal to 25% of the
Current Yield, representing the first quarterly installment of the annual
Current Yield for the 12-month period beginning July 1, 2001, payable in
advance; and (3) on the first day of the month of each calendar quarter
thereafter (i.e., October 1, January 1, April 1 and July 1, as applicable) and
for so long as this Agreement is in effect (but ending in all events at the time
of exercise of the Option), 25% of the Current Yield, representing, on October
1, 2001, January 1, 2002, and April 1, 2002, the second, third, and fourth
quarterly installments, respectively, of the annual Current Yield for the
12-month period beginning July 1, 2001, payable in advance, and representing, on
July 1, 2002 and thereafter, quarterly installments of the annual Current Yield
for the applicable 12-month period following each anniversary of the date of
this Agreement, payable in advance. "Current Yield" as used in this Agreement
means an annual return equal to 27.5% of the Guarantied Portion (as defined in
the Shortfall Agreement) of the Working Capital Reserve, compounded on an annual
basis and calculated as though the Working Capital Reserve were fully funded as
of the date of this Agreement. Notwithstanding any provision to the contrary
contained herein, if the Option is exercised, BCC's obligation to make Option
Payments thereafter shall cease. Option Payments shall be made to Optionor
without demand or notice, except as expressly provided herein.
(c) Until BCC provides written notice of its exercise of the
Option, BCC shall be under no obligation whatsoever to purchase the Equity
Interests or exercise the Option, and shall not otherwise have any liability
whatsoever hereunder in connection with Option Payments or the purchase of the
Equity Interests.
(d) The "Purchase Price" as used herein shall mean (i) an
amount equal to the Working Capital Reserve actually funded pursuant to the
Senior Note to or for the benefit of the Company (together with any accrued and
unpaid interest and other charges then due as of the date of determination),
plus (ii) an amount equal to the Current Yield on the Working Capital Reserve,
calculated as though the Working Capital Reserve was fully funded as of the date
hereof, compounded annually through the Closing Date (as defined below), plus
(iii) the aggregate amount of all Advances and all other obligations due and
payable by the Company or Optionor to BCC or a BCC Affiliate under the
Transaction
3
<PAGE> 4
Documents through the Closing Date (exclusive of the Management Fee under the
Management Agreement), minus (iv) any Option Payments (but excluding Option
Payments paid to Optionor or Oakhaven pursuant to the terms of the Original
Option Agreement and subject to the following provisions regarding credit for
Option Payments paid as Current Yield in advance). The aggregate amount of all
Advances and all other obligations due and payable by the Company or Optionor
through the Closing Date to BCC or a BCC Affiliate under the Transaction
Documents, as provided in subsection (iii) of this Section 1(d), shall be paid
to BCC or the BCC Affiliate (as appropriate) on the Closing Date from the
Purchase Price. To avoid any doubt, BCC shall receive, according to the
following schedule, a credit against the Purchase Price for Option Payments paid
as Current Yield in advance, to the extent that such advanced Option Payments
are attributable to Current Yield accruing from and after the Closing Date:
<TABLE>
<CAPTION>
Number of months Credit received by BCC for Option Payments paid as
between June 30, 1999 Current Yield in advance
and the Closing Date (as % of Current Yield paid in advance)
<S> <C>
0-6 none
7-8 25%
9-10 50%
11-12 75%
more than 12 100%
</TABLE>
2. Closing. (a) The closing of the purchase of the Equity
Interests (the "Closing"), pursuant to the exercise of the Option, shall take
place at such time and location in Pennsylvania as shall be designated by BCC
upon three (3) days prior written notice to Optionor (the "Closing Date"). At
the Closing (i) BCC shall deliver the Purchase Price and (ii) Optionor shall
deliver to BCC (A) the certificates representing the original Equity Interests,
together with such powers and other instruments as BCC may request and (B) the
certificate of an appropriate officer of the Company stating that the transfer
of the Equity Interests to BCC has been recorded on the books and records of the
Company, and affirming to BCC such additional matters as BCC may reasonably
request. Additionally, both BCC and Optionor shall take such further actions and
execute and deliver such further documents and instruments as either party may
reasonably request. The Equity Interests shall be transferred to BCC free and
clear of all Liens and restrictions of any kind or nature, except for Liens in
favor of BCC as expressly provided herein and Liens in favor of Lessor as
4
<PAGE> 5
expressly provided in the Lease.
(b) Notwithstanding any provision to the contrary contained
herein or in the other Transaction Documents and without in any way implying
that such actions are permissible under the Transaction Documents, if and to the
extent that the funding of the Working Capital Reserve is advanced in the form
of a loan to the Company, including advances made under the Senior Note to or
for the benefit of the Company (such advances, together with all interest,
penalties and other costs and fees assessed or incurred in connection therewith,
are referred to herein as the "Borrowings"), the Borrowings shall be repaid in
full from the Purchase Price at the Closing. Optionor shall give BCC prior
written notice before authorizing the Company to make any Borrowings, detailing
the amount thereof. BCC shall have the right at the Closing to pay to the holder
of any note evidencing Borrowings from the Purchase Price the total amount
outstanding with respect to the Borrowings.
3. Covenants of Optionor/Legend/Pledge. (a) Optionor shall not
(i) sell, assign, convey, pledge (except as expressly provided herein), encumber
or otherwise transfer (by operation of law or otherwise) any of Optionor's
rights, title or interest under, in or to the Equity Interests, (ii) cause or
permit the Company to merge, consolidate, dissolve, liquidate, change its
capital structure, issue new or substitute Equity Interests (including the
issuance of warrants) or sell, convey, assign or otherwise transfer all or any
portion of the Company's assets or (iii) cause or permit the Company to
otherwise take any action that with the passage of time and/or the giving of
notice would constitute a default under or a breach of any covenant or provision
of the Shortfall Agreement or the other Transaction Documents.
(b) Optionor shall cause the Company to place the following
legend on all certificates representing Equity Interests:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION TO PURCHASE IN FAVOR OF BALANCED CARE CORPORATION
AND ITS SUCCESSORS AND ASSIGNS, AS MORE FULLY SET FORTH IN
THAT CERTAIN FIRST AMENDED AND RESTATED OPTION AGREEMENT DATED
AS OF JUNE 30, 1999.
(c) To secure the obligations of Optionor hereunder,
5
<PAGE> 6
Optionor hereby grants and pledges to BCC a first priority lien and security
interest in the Equity Interests. Such pledge shall be further memorialized by
the Pledge Agreement. For purposes of perfecting the security interest in the
Equity Interests, Optionor shall deliver herewith to BCC possession of all
certificates, instruments, documents and other evidence of Optionor's ownership
of the Equity Interests accompanied by undated powers of attorney or other
appropriate duly executed blank transfer powers. Optionor shall take such
further actions, and execute such further documents, as may be requested by BCC
to effect the pledge and grant of a security interest in the Equity Interests.
(d) In addition to the other covenants stated herein, Optionor
covenants and agrees that Optionor shall not cause the Company to, without the
prior written consent of BCC: (i) except as otherwise expressly permitted under
the Transaction Documents or the Lease Documents, create or suffer to exist any
Lien or any other type of preferential arrangement, upon or with respect to any
of the properties of the Company, whether now owned or hereafter acquired, or
assign any right to receive income, (ii) except as otherwise expressly permitted
under the Transaction Documents or the Lease Documents, make any distribution of
cash or other property or declare or pay any dividend or distribution on any
securities issued by the Company or Optionor (provided, however, this
restrictions shall not be construed to (A) prohibit Optionor from receiving
Option Payments in accordance with the terms and conditions of this Agreement
and distributing Option Payments without restriction or (B) prohibit
distributions for the purpose of paying tax liabilities as provided in Section 1
of the Management Agreement), (iii) engage in any business venture or enter into
any agreement with respect to any business venture, except as expressly provided
in the Transaction Documents and the Lease Documents with respect to the
Facility, (iv) except as otherwise expressly permitted under the Transaction
Documents and the Lease Documents, convey, transfer, lease, sublease, assign or
otherwise dispose of (whether in one transaction or in a series of transactions)
any of the assets of the Company (whether now owned or hereafter acquired) to,
or acquire all or substantially all of the assets of, any person or Entity, (v)
create, assume, guaranty or otherwise become or remain obligated in respect of,
or permit or suffer to exist or to be created, assumed or incurred or to be
outstanding, any Indebtedness, except as expressly provided in the Lease
Documents or the Transaction Documents, (vi) form, organize or participate in
the formation or organization of any Entity, or make any investment in any newly
formed or existing Entity, (vii) amend, supplement or otherwise
6
<PAGE> 7
modify the terms of the Articles of Organization or the Operating Agreement of
the Company in any way, (viii) enter into any transaction with Lessor or any
affiliate or related party to or with Lessor, other than pursuant to the
Transaction Documents and the Lease Documents, (ix) merge or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire any
Entity, (x) issue any equity interests in the Company or options, warrants or
other rights to purchase any equity interests in the Company or any securities
convertible or exchangeable for equity interests in the Company, or commit to do
any of the foregoing, other than in favor of BCC in accordance with the
Transaction Documents or (xi) enter into any administrative or other similar
agreement with any party relating to the provision of administrative or
management service for the benefit of the Company.
4. Representations and Warranties. (a) Optionor represents and
warrants to BCC that (i) Optionor is the sole and exclusive owner of the Equity
Interests free and clear of all Liens and restrictions (except Permitted Liens),
and Optionor's ownership interest in the Equity Interests is appropriately noted
and documented on the books and records of the Company, (ii) this Agreement and
the other Transaction Documents to which Optionor is a party have been duly
authorized by all requisite action and this Agreement and the other Transaction
Documents to which Optionor is a party constitutes the legal, valid and binding
obligation of Optionor, subject only to bankruptcy and creditor's rights laws;
provided, however, notwithstanding any provision to the contrary contained
herein or in the other Transaction Documents, if the foregoing is false or
misleading (through no fault of Optionor or the Company), in no event shall BCC
fail to fund Advances under the Shortfall Agreement as and when required or
raise as a defense to the consequences of failing to make Option Payments that
the foregoing was not true and correct, but neither the Company nor Optionor
shall raise as a defense to the obligations of the Company or Optionor hereunder
or under any other Transaction Document the failure of the foregoing from being
true and correct in all material respects, (iii) no Person or Entity holds any
Equity Interests in the Company, other than Optionor, (iv) the Equity Interests
have been duly issued to Optionor, are fully paid and nonassessable, (v)
Optionor has the full right and power to transfer and convey the Equity
Interests, enter into this Agreement and sell the Equity Interests to BCC
without the need to obtain the consent or joinder of any Person or Entity, (vi)
Optionor (and each person or Entity that has an ownership in Optionor) has had
the opportunity to ask all questions of BCC, the Company and any other person or
entity
7
<PAGE> 8
necessary or desirable concerning Optionor's investment in the Equity Interests,
(vii) Optionor (and each person or Entity that has an ownership interest in
Optionor) has the requisite knowledge and sophistication to make informed
decisions regarding the risks and merits of an investment in the Company, and
has not relied on any oral or written statements of BCC or any BCC Affiliate in
connection with Optionor's investment in the Company and (viii) Optionor (and
each person or Entity that has an ownership interest in Optionor) understands
that the Equity Interests will be deemed restricted securities within the
meaning of the 1933 Act (and state securities laws), the transferability of the
Equity Interests is restricted and Optionor (and each person or Entity that has
an ownership interest in Optionor) must be able to bear the economic risks of
ownership of the Equity Interests for an indefinite period of time. The
provisions of this Section shall survive the Closing and purchase of the Equity
Interests. BCC hereby acknowledges that the representations and warranties made
by Optionor in clauses (i) through (v) hereinabove are based solely on (A) the
actual knowledge of the Guarantor, who is the sole member and exclusive owner of
Optionor, and (B) the representations and warranties made by Oakhaven and Care
Operators Funding, LLC, a Delaware limited liability company, pursuant to the
Purchase Agreement.
(b) BCC represents and warrants to Optionor that, with respect
to the Company, the Equity Interests in the Company, the equity interests in
Optionor, and the Mortgaged Property, BCC holds liens only against (1) the
Equity Interests pursuant to an Equity Pledge Agreement by and among Optionor,
Oakhaven, the Company and BCC dated as of the Documentation Date, and (2) the
Mortgaged Property, pursuant to and as that term is defined in the Leasehold
Mortgage. BCC holds no liens against the equity interests in Optionor.
5. Binding Effect. The rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their heirs, personal representatives, successors and assigns.
6. Assignment. Optionor may not assign, pledge, hypothecate or
otherwise transfer its rights, obligations and duties hereunder without the
prior written consent of BCC; provided, however, Optionor shall be entitled to
assign all or a portion of its rights to receive payments hereunder, but such
assignment shall in no event relieve Optionor from its liabilities and
obligations hereunder. BCC shall have the right to transfer and assign its
rights, obligations and duties
8
<PAGE> 9
hereunder to any affiliate or third party without the consent of Optionor;
provided, however, no such transfer or assignment shall relieve BCC of its
obligations hereunder.
7. Default. (a) In the case of default by Optionor hereunder,
BCC shall be entitled, after ten (10) days prior written notice to Optionor, to
(a) seek an action in specific performance and/or (b) seek such other relief,
including without limitation an action at law for damages, as may be available.
Optionor shall pay all reasonable counsel fees of BCC in connection with
enforcing any rights or benefits of BCC hereunder or under the other Transaction
Documents. The rights and remedies of BCC under this Agreement are cumulative
and not exclusive of any rights or remedies which it may otherwise have.
(b) In the case of default by BCC hereunder, Optionor shall be
entitled, after ten (10) days prior written notice to BCC, to seek such relief,
including without limitation an action at law for damages, as may be available
to Optionor. BCC shall pay all reasonable counsel fees of Optionor in connection
with enforcing any rights or benefits of Optionor hereunder. The rights and
remedies of Optionor under this Agreement are cumulative and not exclusive of
any rights or remedies which they may otherwise have.
(c) Notwithstanding the provisions of Section 7(b) and so long
as no Event of Default has occurred under any Transaction Document or Lease
Document which was caused by either Optionor or the Company, in the event that
BCC fails to make Option Payments as provided hereunder, after ten (10) days
prior written notice of such failure sent by Optionor to BCC, Optionor shall
have the following remedies and rights, which remedies and rights shall be the
sole and exclusive remedies and rights of Optionor in the case of such failure:
(i) BCC shall no longer have any right to exercise the Option or the Asset
Purchase Option, (ii) all Notes issued by the Company pursuant to the Shortfall
Agreement shall automatically be amended to provide that interest due under the
Notes will accrue and not be due and payable until the date which is the fifth
(5th) anniversary of the date of issuance of the first Note so issued by the
Company pursuant to the Shortfall Agreement and (iii) the lien encumbering the
Equity Interests and other assets in favor of BCC arising hereunder and under
the Pledge Agreement and the Leasehold Mortgage shall automatically be released
and terminated. BCC agrees, after the failure to make Option Payments and an
opportunity to cure as provided herein, to execute such documents and
instruments, and accept delivery of such replacement Notes (returning the Notes
to be
9
<PAGE> 10
replaced) as Optionor may reasonably request to effect the provisions of
Subsections (c)(i), (c)(ii) and (c)(iii) above.
8. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person, Federal Express or other recognized overnight courier or sent by
registered or certified U.S. mail, return receipt requested or sent by facsimile
or telecopy transmission and addressed:
(i) If to Optionor, to:
Sherry, Coleman & Holthouse LLP
610 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
(ii) If to BCC, to:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
9. Definitions; Interpretation; Miscellaneous. Capitalized
terms used but not otherwise defined in this Agreement have the respective
meanings specified in Appendix 1 hereto; the rules of interpretation and other
provisions set forth in Appendix 1 hereto shall apply to this Agreement. The
parties agree that this Agreement amends and restates the Original Option
Agreement in its entirety. However, nothing contained herein shall be deemed to
amend or modify in any way the terms of the Original Option Agreement applicable
to the period of time prior to the date hereof. BCC represents to Optionor and
the Company that BCC has no actual knowledge (without making inquiry of any
third party or otherwise) of any default or event of default occurring under the
Original Option Agreement.
{Remainder of page intentionally left blank.}
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Option Agreement as of the day and year first above
written.
WITNESS: OPTIONOR:
ELDER CARE OPERATORS, LLC,
a Delaware limited liability company
/s/ Leslie F. Sherry By: /s/ Kevin Sherry
Kevin Sherry,
its Sole Member and President
WITNESS: BCC:
BALANCED CARE CORPORATION,
a Delaware corporation
/s/ Angela Kelly By: /s/ Robin L. Barber
Robin L. Barber,
its Senior Vice President and Legal
Counsel
S - 1
[Option Agreement]
<PAGE> 1
Exhibit 10.12
Schedule to Form of First Amended and
Restated Option Agreement
<TABLE>
<CAPTION>
Project Company Lessor Type of Lessor Entity Property
<S> <C> <C> <C> <C>
Akron, Ohio Elder Care Operators of Nationwide Health A Maryland Summit County, Ohio
Akron, LLC Properties, Inc. corporation
Bristol, Tennessee Elder Care Operators of Nationwide Health A Maryland Sullivan County,
Bristol, LLC Properties, Inc. corporation Tennessee
Hilliard, Ohio Elder Care Operators of Nationwide Health A Maryland Franklin County, Ohio
Hilliard, LLC Properties, Inc. corporation
Lakemont Farms, Elder Care Operators of MLD Delaware Trust A Delaware Business Allegheny County,
Pennsylvania Lakemont Farms, LLC Trust Pennsylvania
Murfreesboro, Tennessee Elder Care Operators of Nationwide Health A Maryland Rutherford County,
Murfreesboro Properties, Inc. corporation Tennessee
York, Pennsylvania Elder Care Operators of MLD Delaware Trust A Delaware Business York County,
York, LLC Trust Pennsylvania
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Project Management Firm
<S> <C>
Akron, Ohio Balanced Care at Akron, Inc.
Bristol, Tennessee Balanced Care at Bristol,
Inc.
Hilliard, Ohio Balanced Care at Hilliard,
Inc.
Lakemont Farms, Pennsylvania Balanced Care at Lakemont
Farms, Inc.
Murfreesboro, Tennessee Balanced Care at
Murfreesboro, Inc.
York, Pennsylvania Balanced Care at York, Inc.
</TABLE>
2
<PAGE> 1
Exhibit 10.13
FORM OF
FIRST AMENDED AND RESTATED
WORKING CAPITAL ASSURANCE AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED WORKING CAPITAL ASSURANCE AGREEMENT
(this "Agreement") is made as of the 30th day of June, 1999, by and between
Balanced Care Corporation, a Delaware corporation with a principal place of
business at 1215 Manor Drive, Mechanicsburg, PA 17055 ("BCC"), and [ ], [ ] with
a principal place of business at 610 Newport Center Drive, Suite 1150, Newport
Beach, CA 92660 (the "Lessor").
W I T N E S S E T H:
WHEREAS, the Lessor and [ ], a Delaware limited liability company (the
"Lessee"), entered into that certain Lease and Security Agreement dated as of
the Documentation Date (the "Lease"), relating to certain premises located in
[ ] on property more fully described in the Lease (the "Property"); all
capitalized terms used herein and not otherwise defined herein shall have the
same meanings as ascribed to such terms in the Lease; and
WHEREAS, pursuant to a First Amended and Restated Shortfall Funding
Agreement of even date herewith (the "Shortfall Agreement") by and among the
Member (as defined in the Shortfall Agreement), the Lessee, and BCC, and a First
Amended and Restated Deposit Pledge Agreement of even date herewith (the
"Deposit Pledge") by and among the Lessor, the Member, the Lessee and BCC, the
Lessee will deposit funds into the Working Capital Reserve (as defined in the
Shortfall Agreement) as provided in the Shortfall Agreement to fund certain
operational losses anticipated in connection with the Project; and
WHEREAS, the Member has issued a Senior Note to the Senior Lender under
the Senior Credit Documents (all as defined in Appendix 1 to the Shortfall
Agreement), whereby the Member will receive the proceeds of a loan in the amount
of [ ] from Senior Lender to make equity contributions to the Lessee, so that
the Lessee can deposit such proceeds in the Collateral Account (as defined in
the Deposit Pledge) for the benefit of the Lessor, BCC and the Manager (as
hereinafter defined) pursuant to the terms of the Deposit Pledge and the
Shortfall Agreement; and
<PAGE> 2
WHEREAS, the Lessor and BCC Development and Management Co., a Delaware
corporation ("Developer"), have entered into a Development Agreement dated as of
the Documentation Date (the "Development Agreement") for the purpose of
developing a [ ]-unit personal care home/assisted living facility on the
Property (the "Facility"); and
WHEREAS, the Lessee and [ ], a Delaware corporation (the "Manager"),
have entered into a First Amended and Restated Management Agreement of even date
herewith (the "Management Agreement") for the operation and management of the
Facility; and
WHEREAS, the Developer and the Manager are wholly-owned subsidiaries of
BCC; and
WHEREAS, as additional security for all of the obligations of the
Lessee under the Lease, including without limitation all Minimum Rent and
Additional Rent, as defined in the Lease (the "Lease Obligations"), the Lessor
has requested the execution and delivery of this Agreement; and
WHEREAS, because of the significant interest of BCC in the success and
economic viability of the Facility, BCC entered into a Working Capital Assurance
Agreement dated as of the Documentation Date (the "Original Working Capital
Agreement"), whereby, among other matters, BCC agreed to provide to the Lessor
adequate assurances regarding the funding of Shortfalls (as hereinafter defined)
upon depletion of the Working Capital Reserve; and
WHEREAS, BCC and the Lessor now desire to enter into this Agreement to
amend and restate the Original Working Capital Agreement in its entirety as
herein provided.
NOW THEREFORE, for good and valuable consideration paid by each of the
parties hereto to the other, the receipt and sufficiency of which is hereby
acknowledged and in consideration of the covenants and agreements set forth
herein, the parties hereto intending to be legally bound hereby agree as
follows:
1. (a) Subject to the terms of Section 4 hereof, from the date hereof
until the complete payment and performance of the Lease Obligations, BCC
unconditionally agrees to loan to the Lessee, by means of working capital loans
(collectively, the "Working Capital Loans"), sufficient funds to pay and satisfy
the amount by which the Lessee's cash requirements to meet all of its
obligations (including, without limitation, operating expenses,
2
<PAGE> 3
debt service and the Lease Obligations) due and payable during any month exceed
the gross revenues received by the Lessee during such month (the "Shortfall").
Without limiting the generality of the definition of "Shortfall," Shortfalls
shall also include, without limitation (i) costs, expenses and damages related
to the Lessee's failure to pay Taxes (as defined in the Lease), to maintain
adequate insurance, to maintain any license necessary or desirable to operate
the Facility and indemnification and defense costs and expenses in connection
with litigation arising from or related to the Facility, (ii) all costs of
collection and enforcement incurred by the Lessor in exercising any remedies
provided in the Lease, and (iii) payment in full of all rent, additional rent
and other amounts due to the Lessor or third parties under the Lease in the
manner and at the time prescribed in the Lease.
(b) Working Capital Loans shall be made pursuant to the Shortfall
Agreement. BCC hereby agrees that the Lessor may make distributions of proceeds
of Working Capital Loans directly to the Lessor or third party creditors of the
Lessee.
2. (a) Subject to the terms of Section 4 hereof, whether or not there
has occurred or is continuing any default, breach of condition or failure to
satisfy any condition under the Shortfall Agreement, BCC shall, without further
direction, advance to the Lessee the amount equal to the Shortfall in a timely
fashion so that the Lessee is able to meet all of its working capital
obligations (including, without limitation, all Lease Obligations) when due.
Without limiting the generality of foregoing, BCC shall make Working Capital
Loans to the Lessee to fund Shortfalls even if the Lessee fails to make
contributions on a timely basis to the Working Capital Reserve as provided in
Section 1.01 of the Shortfall Agreement or otherwise.
(b) Without limiting BCC's obligation to fund Shortfalls as herein
provided, BCC shall promptly notify the Lessor should any proceedings under
Title 11 of the United States Code (each, a "Bankruptcy Proceeding," and the
laws applied during such Bankruptcy Proceedings being referred to herein as
"Bankruptcy Laws") be instituted by or against BCC, the Lessee or the Member,
and, upon request from the Lessor, shall immediately fund or otherwise cause to
be paid to all creditors (exclusive of the Lessor) of the party subject to the
Bankruptcy Proceeding all amounts due such creditors. Further, BCC shall use all
reasonable efforts (within the bounds of applicable law) to cause such
Bankruptcy Proceedings to be dismissed as soon as possible.
3
<PAGE> 4
3. BCC acknowledges that the covenants and agreements made hereunder by
BCC are being made to enable the Lessee, upon the complete disbursement of the
Working Capital Reserve, to fulfill its obligations, including, without
limitation, the Lease Obligations. Accordingly, it is expressly intended by BCC
that the covenants and agreements by BCC hereunder may be relied upon and
enforced by the Lessor. BCC acknowledges that (i) the Original Working Capital
Agreement was made by BCC to induce Lessor to enter into and accept the Lease
and (ii) this Agreement is being made by BCC to induce Lessor to accept the
change in ownership of the Member and of the Lessee and to enter into and accept
the Senior Credit Documents.
4. Notwithstanding anything to the contrary set forth herein, BCC's
obligation to provide the Working Capital Loans, and advance Shortfalls, to the
Lessee shall not commence until such time as (i) the Senior Lender has advanced
the full principal amount of the Senior Note to or for the benefit of the Lessee
into the Working Capital Reserve and (ii) the full amount actually deposited by
the Lessee in the Working Capital Reserve has been depleted. BCC shall make or
permit disbursements to the Lessor from the Working Capital Reserve to meet any
and all Lease Obligations when and as such Lease Obligations become due and
payable, pursuant to the terms and provisions of the Deposit Pledge.
5. The obligations of BCC hereunder shall not be affected by the
termination, discontinuance, release or modification of any agreement from any
endorser, surety or guarantor of the Lease Obligations. Notwithstanding anything
to the contrary contained herein or in the Lease, the Lessor hereby covenants
and agrees with BCC that the Lessor shall not amend, modify or otherwise alter
the Lease or any other document executed in connection therewith (collectively,
the "Lease Documents") without BCC's prior written consent, in each instance,
which consent, shall not be unreasonably withheld, conditioned or delayed.
In addition, the Lessor hereby covenants and agrees with BCC that,
except in connection with the exercise of any of its rights and/or remedies
under the Lease Documents, the Lessor shall not terminate the Lease without the
prior written consent of BCC, which consent shall not be unreasonably withheld,
conditioned or delayed.
6. The obligations of BCC hereunder shall not be affected by any change
in the beneficial ownership of the Lessee or by
4
<PAGE> 5
reason of any disability of the Lessee. This Agreement shall not be construed as
a guaranty or surety agreement, but shall constitute the separate and
independent primary obligation of BCC to the Lessor. This Agreement shall be in
addition to any guaranty or other security for the Lease Obligations, and it
shall not be prejudiced or rendered unenforceable by the invalidity of any such
guaranty or security. This Agreement shall continue to be effective or be
reinstated, as the case may be, if, at any time, any payment of the Lease
Obligations is rescinded or must otherwise be returned by the Lessor upon the
insolvency, bankruptcy or reorganization of the Lessee or otherwise, all as
though such payment had not been made.
7. (a) Without limiting BCC's obligation to provide the Working Capital
Loans, upon the occurrence of any default under any of the Lease Documents, BCC
shall have the right, but not the obligation, to cure such default within any
applicable notice and grace periods (or in the event of no grace period, within
3 days after receipt by BCC of notice of such default) and, to the extent
permitted by law, enter upon the Property, if necessary, for such purpose and
take all such actions as BCC may deem necessary or appropriate to remedy such
default. The Lessor agrees to give written notice to BCC of any notices of
default by the Lessee under the Lease or any other Lease Document which the
Lessor sends to the Lessee. The Lessor agrees to accept any remedy performed by
BCC as if the same had been performed by the Lessee.
(b) The Lessor acknowledges that BCC has the right to acquire all of
the Equity Interests (as defined in Appendix 1 to the Shortfall Agreement)
should the Lessee fail to timely make all required deposits into the Working
Capital Reserve pursuant to Section 1.01 of the Shortfall Agreement. In the
event that the Lessee fails to make such deposits into the Working Capital
Reserve and BCC exercises its rights under Section 1.01 of the Shortfall
Agreement by having BCC, an Affiliate of BCC or a designee of BCC purchase all
of the Equity Interests, the Lessor shall recognize as the Lessee under the
Lease and other Lease Documents such designee as BCC may designate so long as
such designee fully funds the Working Capital Reserve as provided in the
Shortfall Agreement and otherwise executes and delivers to the Lessor such
documents, instruments, affidavits and opinions as the Lessor may reasonably
request. In such event (but subject to Section 10 of this Agreement), this
Agreement and the obligations of the parties hereunder (including without
limitation BCC's obligation to fund Shortfalls) shall remain in full force and
effect.
5
<PAGE> 6
8. Any notice, request, demand, statement or consent made hereunder
shall be in writing and shall be deemed duly given if personally delivered, sent
by certified mail, return receipt requested, or sent by a nationally recognized
commercial overnight delivery service with provisions for a receipt, postage or
delivery charges prepaid, and shall be deemed given when postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
If to BCC:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
Attention: President
With copies to:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, PA 17055
Attention: General Counsel
and
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attention: Steven J. Adelkoff, Esq.
If to the Lessor:
[ ]
610 Newport Center Drive, Suite 1150
Newport Beach, CA 92660
Attention: President and General Counsel
Cordray & Goodrich
3306 Sul Ross
Houston, TX 77098
Attn: Howard F. Cordray, Jr.
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to BCC or the
Lessee by the Lessor at any time shall not imply that such notice or any further
or similar notice was or is required.
6
<PAGE> 7
9. This Agreement shall be construed, and the rights and obligations of
the Lessor and BCC shall be determined, in accordance with the laws of the State
in which the Facility is located, exclusive of such State's conflicts of laws
rules.
10. This Agreement and BCC's obligations hereunder shall automatically
terminate upon the purchase by BCC or a wholly-owned subsidiary of BCC (a "BCC
Affiliate") of all of the issued and outstanding equity of the Lessee or
substantially all of the assets of the Lessee (and the Lessor hereby consents to
such purchase of equity or assets); provided, however, if a BCC Affiliate
purchases all of the assets or the outstanding equity of the Lessee, BCC shall
provide to the Lessor an unconditional guaranty of all Lease Obligations, in
form and substance reasonably satisfactory to the Lessor. The Lessor shall have
the right, but not the obligation, to terminate this Agreement if (i) an Event
of Default under the Lease remains uncured beyond any applicable cure period or
(ii) BCC fails to perform any of BCC's obligations or duties under this
Agreement.
11. (a) The Lessor covenants and agrees with BCC that (subject to
Bankruptcy Laws) the Lessor shall not consent to any assignment of the Lessee's
interest under the Lease (except to BCC or a BCC Affiliate) or any transfer of
substantially all of the Lessee's assets or any transfer of the issued and
outstanding equity of the Lessee without the prior written consent of BCC, which
consent BCC may withhold in its sole and absolute discretion. In addition, in
the event that, in violation of the terms of this Agreement or the Lease, (a)
the Lessee or any Guarantor (as defined in the Lease) attempts to assign its
interest in the Lease (or transfer substantially all of its assets), (b) the
current holders of the issued and outstanding equity of the Lessee attempt to
transfer any such equity or (c) if any of the events described in Section 10.1.8
and Section 10.1.10 of the Lease occurs with respect to the Lessee or a
Guarantor, each of the Lessor and BCC covenant and agree that, subject to
applicable law, the Lessor shall terminate the Lease (in accordance with the
terms thereof) and the Lessor shall enter into a new lease of the Property with
BCC (or any of its wholly-owned subsidiaries, provided, that, BCC executes and
delivers a guaranty of any such lease, in form and substance acceptable to the
Lessor), in form and substance acceptable to the Lessor; provided, however, that
any such lease shall be substantially similar to the Lease. In connection with
the execution and delivery of any such lease, (y) BCC and its subsidiary shall
execute and deliver any additional documents that the Lessor may request, in
form and substance similar to the Lease Documents and
7
<PAGE> 8
(z) BCC shall deliver to the Lessor such evidence as the Lessor shall request,
in form and substance acceptable to the Lessor, that the new lease and all other
documents executed and delivered in connection therewith have been duly
authorized, executed and delivered and are enforceable. BCC agrees to pay all of
the costs and expenses reasonably incurred by the Lessor (including, without
limitation, attorneys' fees and expenses) in connection with the performance of
the Lessor's obligations under this Section 11.
(b) BCC agrees to indemnify, defend and hold the Lessor, its
Affiliates, and their respective trustees, officers, directors, shareholders and
other representatives (the "Indemnified Parties") harmless from and against any
and all claims, demands, actions, causes of action, damages, losses,
liabilities, fees (including without limitation attorneys fees), costs
(including without limitation court costs) and expenses (collectively "Claims")
in any way or manner whatsoever related or attributed to or arising out of
suits, litigation or threatened suits or litigation by the Lessee or the Member
in connection with (i) the rights, interests, obligations and duties of the
Lessor or BCC under this Agreement, the Shortfall Agreement, the Deposit Pledge
Agreement and any related leasehold mortgages, option agreements, equity pledge
agreements, financing statements or other security interests (the "Applicable
Documents") and/or (ii) any acts or failures to act, or the performance or
assertion of any rights, duties or obligations, by BCC or the Indemnified
Parties with respect to the Applicable Documents; provided, however, no
Indemnified Party shall be held harmless or entitled to indemnifications or
defenses to the extent that the Claim was caused in whole or in part by a breach
of any obligation, covenant or agreement of the Indemnified Party under Sections
5, 7 or 11 of this Agreement.
12. (a) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to its subject matter and
supersedes any prior understandings or agreements between the parties with
respect to such subject matter. The parties agree that this Agreement amends and
restates the Original Working Capital Agreement in its entirety. However,
nothing contained herein shall be deemed to amend or modify in any way the terms
of the Original Working Capital Agreement applicable to the period of time prior
to the date hereof.
8
<PAGE> 9
(b) Amendments. This Agreement may be modified or
amended only by a written instrument executed by the Lessor, the Lessee and BCC.
(c) Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
(d) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which together shall constitute but a single instrument.
(e) Future Cooperation. Each party covenants and
agrees to take such further action and execute such further documents as may be
necessary or appropriate to carry out the intention of this Agreement.
(f) Successors and Assigns. This Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
(g) Representations and Warranties of BCC. BCC
represents and warrants that (i) this Agreement constitutes a legal, valid and
binding obligation of BCC, was duly authorized, executed and delivered by BCC,
and is fully enforceable against BCC in accordance with its terms (except as may
be limited by bankruptcy and creditor's rights laws and general principles of
equity), (ii) BCC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified to do all things required of it under this Agreement; (iii) neither
this Agreement nor any agreement, document or instrument executed or to be
executed in connection herewith, violates the terms of any other agreement to
which BCC is a party and (iv) the recitals set forth above are hereby
incorporated by this reference and made a part of this Agreement, and BCC
represents and warrants that such recitals
9
<PAGE> 10
are true and correct. Any material breach by BCC of the representations and
warranties set forth herein shall be a default under this Agreement.
(h) Subordination. If for any reason whatsoever the
Lessee, any Affiliates of the Lessee, Developer or Manager now or hereafter
becomes indebted to BCC or any Affiliate of BCC, such indebtedness and all
interest therein shall at all times be subordinated in all respects to the
obligations of BCC under this Agreement, the obligations of the Lessee under the
Lease, the obligations of the Lessee and the Member to the Senior Lender under
the Senior Credit Documents and the obligations of Developer under the
Development Agreement. For purposes of this Agreement, the terms "Affiliate" and
"Affiliates" shall have the meanings set forth in that certain Second Series
Master Investment Agreement (the "Master Agreement") dated as of the
Documentation Date and amended by a First Amendment of even date herewith, by
and among the Lessor, Developer, the Member and BCC.
(i) Counsel Fees. If the Lessor or BCC brings any
action to interpret or enforce this Agreement, or for damages for any alleged
breach thereof, the prevailing party in any such action shall be entitled to
reasonable attorney's fees and costs as awarded by the court in addition to all
other recovery, damages and costs.
(j) Reliance by the Lessor. BCC acknowledges that (i)
BCC will benefit from the execution and continued existence of the Lease, (ii)
the Lessor will be relying upon BCC's assurances, representations, warranties,
and covenants contained herein and (iii) the Lessor may take, or delay in taking
or refuse to take any and all action with reference to the Lease (regardless of
whether the same might vary the risk or alter the rights, remedies or recourses
of BCC), including without limitation the settlement or compromise of any amount
allegedly due thereunder, the granting of indulgences or extensions, and/or the
release of or refusal to execute on any and all collateral; provided, however,
nothing contained in this Section shall limit or modify the obligations of the
Lessor under this Agreement, including without limitation Section 5 above.
(k) Waiver Provisions. BCC hereby knowingly,
voluntarily and unequivocally waives: (i) all notice of acceptance, protest,
demand and dishonor, presentment and demands of any kind now or hereafter
provided for by any statute or rule of law; (ii) any and all requirements that
the Lessor institute any action or proceeding, or exhaust any or all of the
Lessor's
10
<PAGE> 11
rights, remedies or recourses, against the Lessee or anyone else as a
condition precedent to bringing an action against BCC under this Agreement;
(iii) any defense arising by reason of any disability, insolvency, bankruptcy,
lack of authority or power, dissolution or any other defense of the Lessee, BCC,
any guarantor of the Lease, or their respective successors and assigns (even
though rendering same void, unenforceable or otherwise uncollectible); (iv) the
benefits of any and all express or implied waivers which may otherwise be
available to or claimed by BCC under the laws of the State in which the Property
is located; (v) any claim BCC might otherwise have against the Lessor by virtue
of the Lessor's invocation of any right, remedy or recourse permitted it
hereunder or under the Lease, any letter of credit agreement, any guaranty, or
otherwise available at law or equity; (vi) any failure, omission, delay or lack
on the part of the Lessor or the Lessee to enforce, assert or exercise any
right, power or remedy conferred on the Lessor or the Lessee in the Lease, or
any action on the part of the Lessor granting a waiver, indulgence or extension
to the Lessee or any other party; (vii) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets of the Lessee or BCC, marshaling of assets or liabilities,
receiverships, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
proceeding affecting the Lessee, BCC, or their respective assets, or the
disaffirmance of the Lease in any such proceeding; (viii) any release or other
reduction of the Lease Obligations arising as a result of the expansion,
release, substitution or replacement (whether or not in accordance with terms of
the Lease) of the Premises or any portion thereof; and (ix) any defense or claim
available to BCC as a result of BCC's exercise of its right to purchase the
Premises (or any portion thereof) pursuant to the Master Agreement or that
certain Right of First Refusal Agreement dated as of the Documentation Date by
and between the Lessor and BCC; provided, however, nothing contained in this
Section shall limit or modify the obligations of the Lessor under this
Agreement, including without limitation Section 5 and Section 11(a) above.
(l) Application of Agreement. This Agreement shall
apply notwithstanding any extension or renewal of the Lease, or any holdover
following the expiration or termination of the Term or any renewal or extension
of the Term (as defined in the Lease).
11
<PAGE> 12
(m) Financial Reporting. Within forty-five (45) days
of the end of each of the first three quarters of the fiscal year of BCC, BCC
shall deliver the quarterly consolidated or combined, as applicable, financial
statement of BCC to the Lessor. Within one hundred (100) days of the fiscal year
end of BCC, BCC shall deliver to the Lessor the annual consolidated or combined,
as applicable, financial statement of BCC audited by a reputable certified
public accounting firm. If BCC is or becomes subject to any reporting
requirements of the Securities and Exchange Commission (the "SEC") during the
Term, BCC shall, in lieu of providing the financial statements described in the
first two sentences of this Subsection, concurrently deliver to the Lessor such
reports as are delivered to the SEC pursuant to applicable securities laws. All
of the reports and statements required hereby shall be prepared in accordance
with GAAP and BCC's accounting principles consistently applied and shall be
accompanied by a statement signed by the President, Chief Financial Officer,
Principal Accounting Officer, Controller, Executive Vice President, Development,
or other officer of BCC as approved by the Lessor in writing, certifying that
said reports are true, correct, and complete in all material respects after due
inquiry.
(n) Leasehold Mortgage. To secure the obligations of
the Lessee under the Shortfall Agreement, the Lessee has granted to BCC an Open
End Leasehold Mortgage and Security Agreement (the "Leasehold Mortgage")
encumbering the Lessee's interest in the Lease. BCC shall, concurrently with the
execution and delivery of this Agreement, execute and deliver to the Lessor an
escrow letter and satisfaction instrument in the form attached hereto as Exhibit
A removing the Leasehold Mortgage of record, which satisfaction instrument may
only be recorded as provided in such escrow letter. BCC shall provide notice to
the Lessor if BCC shall desire to institute any foreclosure proceedings by BCC
under the Leasehold Mortgage, and BCC shall not institute such proceedings
without the prior written consent of the Lessor, which consent shall not be
unreasonably withheld, conditioned or delayed; provided, however, BCC agrees
that the Lessor may condition consent to such foreclosure on the agreement by
BCC that all personal property leased to the Lessee under the Lease will remain
in the Facility and that such foreclosure will not materially or unreasonably
disrupt or interrupt the operation of the Facility.
(o) Management Agreement. BCC acknowledges that BCC
is the sole shareholder of the Manager. As sole shareholder of the Manager, BCC
agrees and shall cause the Manager to agree, that
12
<PAGE> 13
in the case of an Event of Default under the Lease (after applicable cure
periods): (i) the Lessor shall have the right to terminate the Management
Agreement and Manager's rights to manage the Facility, (ii) the Lessor shall
have the right to require the Manager to cooperate and assist in all reasonable
ways during any transition of management of the Facility after such termination,
(iii) during any such interim management, the Lessor shall have the right to
approve or veto all operation budgets and (iv) Manager shall otherwise take such
actions or refrain from taken such actions as the Lessor may reasonably request.
(p) Confidentiality. The Lessor hereby covenants and
agrees, on behalf of the Lessor and all Affiliates of the Lessor, that all
Confidential Information (as hereinafter defined) will be held and treated by
the Lessor, the Lessor's Affiliates and the agents and employees of the Lessor
and its Affiliates in confidence and will not, except as explicitly consented to
by BCC in its sole discretion, be disclosed by the Lessor, its Affiliates or the
agents and employees of the Lessor or its Affiliates, in any manner whatsoever,
in whole or in part, and will not be used by the Lessor, its Affiliates or the
agents and employees of the Lessor or its Affiliates other than in connection
with the Other Facilities (as defined in Appendix 1 to the Shortfall Agreement).
The Lessor further agrees on behalf of itself and its Affiliates (i) to disclose
Confidential Information only to (A) the Lessor's employees who need to know the
Confidential Information in connection with the Facility and (B) potential or
actual participants or assignees of the Lessor's interest in the Lease, the
other Lease Documents, any other documents related thereto and the Facility, but
only after receiving from such potential or actual participants or assignees an
agreement whereby the recipient of such Confidential Information agrees to be
bound by the provisions hereof relating to confidentiality and non-disclosure,
(ii) to employ all reasonable procedures to ensure that neither the Lessor, nor
its Affiliates, agents, employees or potential or actual participants or
assignees of the Lessor or its Affiliates use the Confidential Information in
connection with trading in the securities of BCC or communicate such information
to others who so trade in such securities and (iii) that any Confidential
Information not returned to BCC, the Management Firm or the Lessee, as
applicable, will be held by the Lessor and kept subject to the terms of this
Section or destroyed. As used in this Section, (i) "Confidential Information"
means all information and data containing or otherwise reflecting information
concerning BCC or any Affiliate of BCC, or any Other Facility, which is not
available to the general public but is material to the business,
13
<PAGE> 14
financial condition, or prospects of BCC and its Affiliates or otherwise would
be material to making an investment decision with respect to the publicly traded
securities of BCC, together with analyses, compilations, studies or other
documents, whether prepared by BCC, the Lessor or any other Entity (as defined
in Appendix 1 to the Shortfall Agreement), which contain or otherwise reflect
such information and (ii) "Affiliate" of any Entity (the "Subject") shall mean
(x) any Entity which, directly or indirectly, controls or is controlled by or is
under common control with the Subject, (b) any Entity or person owning,
beneficially, directly or indirectly, five percent or more of the outstanding
capital stock, shares or equity interests of the Subject or (c) any officer,
director, employee, general partner, member, manager or trustee of either the
Subject or any Entity controlling, controlled by or under common control with
the Subject (excluding trustees and persons serving in similar capacities who
are not otherwise an Affiliate of the Subject).
{Remainder of page intentionally left blank.}
14
<PAGE> 15
EXECUTED as a sealed instrument as of the date first written above.
WITNESS: BCC:
BALANCED CARE CORPORATION,
a Delaware corporation
/s/ Angela Kelly By: /s/ Robin L. Barber
Name: Angela Kelly Robin L. Barber,
its Senior Vice President and
Legal Counsel
WITNESS: LESSOR:
[ ], [ ]
/s/ Andrea Brockway By: [ ]
Name: Andrea Brockway Name: [ ]
Title: [ ]
S - 1
<PAGE> 16
Joinder of the Lessee
Pursuant to Section 12(b) of the Original Working Capital Agreement, by
signing below, the Lessee agrees with and consents to the provisions of this
First Amended and Restated Working Capital Assurance Agreement.
LESSEE:
[ ]
By: ELDER CARE OPERATORS, LLC,
its Sole Member
By: /s/ Kevin L. Sherry
Kevin Sherry,
its Sole Member and
President
16
<PAGE> 1
Exhibit 10.14
Schedule to Form of First Amended and Restated Working Capital
Assurance Agreement
<TABLE>
<CAPTION>
Lessor Type of Lessor Entity Lessee Property Loan Proceeds Unit
<S> <C> <C> <C> <C> <C>
MLD Delaware Trust A Delaware Business Elder Care Operators of York County, $737,996.00 66
Trust York, LLC Pennsylvania
MLD Delaware Trust A Delaware Business Elder Care Operators of Allegheny County, $1,071,624.00 106
Trust Lakemont Farms, LLC Pennsylvania
Nationwide Health A Maryland Elder Care Operators of Summit County, Ohio $110,000.00 106
Properties, Inc. corporation Akron, LLC
Nationwide Health A Maryland Elder Care Operators of Franklin County, Ohio $1,380,390.00 106
Properties, Inc. corporation Hilliard, LLC
Nationwide Health A Maryland Elder Care Operators of Rutherford County, $774,427.00 66
Properties, Inc. corporation Murfreesboro, LLC Tennessee
Nationwide Health A Maryland Elder Care Operators of Sullivan County, $790,430.00 60
Properties, Inc. corporation Bristol, LLC Tennessee
</TABLE>
<TABLE>
<CAPTION>
Lessor Manager Lessor
Signature Block
<S> <C> <C>
MLD Delaware Trust Balanced Care at /s/ Mark L. Desmond
York, Inc. Name: Mark L. Desmond
Title: Trustee
MLD Delaware Trust Balanced Care at /s/ Mark L. Desmond
Lakemont Farms, Name: Mark L. Desmond
Inc. Title: Trustee
Nationwide Health Balanced Care at /s/ Gary E. Stark
Properties, Inc. Akron, Inc. Name: Gary E. Stark
Title: Vice President
Nationwide Health Balanced Care at /s/ Gary E. Stark
Properties, Inc. Hilliard, Inc. Name: Gary E. Stark
Title: Vice President
Nationwide Health Balanced Care at /s/ Gary E. Stark
Properties, Inc. Murfreesboro, Name: Gary E. Stark
Inc. Title: Vice President
Nationwide Health Balanced Care at /s/ Gary E. Stark
Properties, Inc. Bristol, Inc. Name: Gary E. Stark
Title: Vice President
</TABLE>
<PAGE> 1
Exhibit 10.15
FORM OF
FIRST AMENDED AND RESTATED
MANAGEMENT AGREEMENT
[Project]
THIS FIRST AMENDED AND RESTATED MANAGEMENT AGREEMENT (this
"Agreement") is made as of the 30th day of June, 1999 by and between [ ], a
Delaware corporation (the "Management Firm"), and [ ], a Delaware limited
liability company (the "Leasehold Tenant").
W I T N E S S E T H
WHEREAS, the Leasehold Tenant executed and delivered that
certain Lease and Security Agreement dated as of the Documentation Date (the
"Lease"), whereby the Leasehold Tenant leased from [ ], [ ] (the "Lessor"),
property, together with all improvements built or to be built thereon, located
in [ ] all as more fully described in the Lease (the "Property"); and
WHEREAS, Balanced Care Corporation, a Delaware corporation
("BCC"), the Leasehold Tenant, and Elder Care Operators, LLC, a Delaware
corporation which is the sole member of the Leasehold Tenant (the "Member"),
entered into that certain First Amended and Restated Shortfall Funding Agreement
of even date herewith (the "Shortfall Agreement"), whereby, among other matters,
the Leasehold Tenant agreed to deposit immediately available funds from time to
time to fund the Working Capital Reserve (to be used to fund Shortfalls) as more
fully provided in the Shortfall Agreement; and
WHEREAS, as of June 30, 1999, Kevin Sherry (the "Guarantor")
acquired 1% of the equity interests in the Leasehold Tenant from Oakhaven Elder
Living, Inc., a California corporation (the "Oakhaven Interests"), and all
equity ownership interests in the Member (which Member, prior to the date
hereof, held 99% of the equity interests in the Leasehold Tenant), pursuant to
an Equity Interests Purchase Agreement of even date herewith; and
WHEREAS, the Guarantor transferred the Oakhaven Interests to
Member, such that Member is now the owner of 100% of the equity interests in the
Lessee; and
<PAGE> 2
WHEREAS, the Management Firm and the Leasehold Tenant entered
into a Management Agreement dated as of the Documentation Date (the "Original
Management Agreement"), whereby the Leasehold Tenant appointed the Management
Firm as the exclusive manager and operator of the Facility on behalf of the
Leasehold Tenant, as an independent contractor pursuant to the terms and
conditions therein; and
WHEREAS, the Leasehold Tenant and the Management Firm desire
to enter into this Agreement to amend and restate the Original Management
Agreement in its entirety.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Scope of Work. The Leasehold Tenant hereby appoints the Management Firm as
the exclusive operator and manager of the Facility during the term of this
Agreement. The Management Firm shall have full responsibility and authority in
the name and on behalf of the Leasehold Tenant to operate and manage the
Facility and hereby covenants and agrees to take all actions necessary or
desirable to operate and manage the Facility and to fulfill its duties
hereunder, including without limitation to: (i) operate and maintain the
Facility on behalf of the Leasehold Tenant as a personal care home/assisted
living facility providing personal care services; (ii) collect all room and
board revenue, as well as other revenue, and timely pay all debts and other
obligations relating to the Facility, including rent and other charges due under
the Lease Documents, payments of principal and interest under the Senior Note,
payments of interest on BCC advances of Shortfall operating expenses, fixed
expenses and taxes; (iii) request from BCC funds held as Collateral pursuant to
the Deposit Pledge Agreement to apply toward the payment of any obligation
incurred in connection with the operation of the Facility, the Lease Documents
and the Senior Note, (iv) ensure the Facility complies with applicable Federal,
state and local laws and regulations; (v) provide all necessary services to
ensure that the Facility provides quality care to its residents; (vi) recruit,
hire and train personnel as needed for the operation of all departments and
services of the Facility; (vii) maintain such bank accounts as may be necessary
or desirable for the operation of the Facility (the "Operating Accounts");
(viii) establish salary levels, performance
2
<PAGE> 3
standards, personnel policies and employee benefits for the Leasehold Tenant's
employees; (ix) comply with all terms of the Lease; and (x) to take all other
actions necessary or desirable to operate and manage the Facility in accordance
with prudent practice and industry standards.
Without limiting the generality of the foregoing, the Management
Firm shall, as part of its management duties hereunder and on behalf of (and at
the sole cost of) the Leasehold Tenant, perform each and every obligation of the
Leasehold Tenant under the Lease and the Lease Documents (exclusive of the
Development Agreement) through out the term thereof, including all
representations and warranties of the Leasehold Tenant contained therein, to the
extent applicable. Additionally, the Management Firm shall collect all revenues
of any kind or nature from the Facility, and so long as any amounts are owing to
Lessor under the Lease and the other Lease Documents make payments of rent and
other sums due and owing to Lessor under the Lease from revenues of Facility or
as otherwise provided in the Transaction Documents.
Further, the Management Firm shall distribute to the Leasehold
Tenant (for further distribution to the Member, if applicable) from the
Operating Accounts any Federal, state or local income or sales tax due by the
Leasehold Tenant in connection with revenue derived exclusively from the
Facility or due by Member as a result of earnings of the Leasehold Tenant in
connection with the Facility (other than income tax relating to Option Payment,
or the exercise of the Asset Purchase Option or the Option).
In performing its duties, the Management Firm (through its in-house
corporate staff or independent contractors) shall perform the following with
respect to the Facility, as well as any other matters reasonably related thereto
commencing upon the date of this Agreement:
(a) Management Information Systems (MIS)
Support centralized Facility information system which
provides systems management for the following areas:
-- Accounts Payable
-- Payroll
-- Financial Reporting
3
<PAGE> 4
-- Marketing
-- General Ledger
The Management Firm shall be responsible for billing and collection
of accounts receivable generated in connection with the Facility.
(b) Legal Counsel
(i) Prepare or coordinate with outside legal counsel for
preparation of documents for operation of the Facility, including
resident agreements, supplier/vendor contracts, service contracts,
equipment leases and other ancillary contracts; (ii) prepare or
coordinate licensure and other regulatory applications; (iii)
coordinate all litigation involving the Facility with local counsel
or the insurance companies; (iv) coordinate with local counsel on
local law issues affecting the Facility; (v) process working
capital requests from the Working Capital Reserve or otherwise, and
apply for, negotiate and obtain letters of credit or other credit
enhancements from lending institutions; and (vi) provide legal
counsel or coordinate with local counsel to provide counsel to the
Facility's Human Resources Department.
Without limiting the generality of Section 2 and Section 10 below,
the parties acknowledge that all outside counsel expenses under the foregoing
paragraph shall be an expense allocable to the Facility.
(c) Accounting/Tax
(i) Provide an accountant to supervise all accounting
activities; (ii) implement accounting policies and guidelines;
(iii) provide a centralized cash management system; (iv) deposit in
Operating Accounts established in the Facility's name all funds
received from the operations of the Facility, satisfy obligations
of the Facility from such Operating Accounts, and not commingle
funds in the Operating Accounts with any other funds; (v) negotiate
and administer working capital lines of credit available to the
Facility; (vi) supervise
4
<PAGE> 5
the Facility's internal control structure; (vii) provide payroll,
income and real estate tax support as follows: prepare or supervise
preparation of all tax returns, assist the Facility in the event of
a tax audit, assist the Facility with technical issues relating to
payroll, excise and other taxes, prepare all tax returns of the
Leasehold Tenant in connection with the Facility and monitor
pending and final Federal, State and local tax Law changes; (viii)
perform periodic site visits to review the Facility's accounting
and tax records; (ix) provide operations expertise through site
visits and strategies to maximize fiscal performance; and (x)
develop and implement a budget for operations, capital outlay and
cash requirements. All checks or other documents for withdrawal of
funds shall be signed by the appropriate officer of the Management
Firm or its designee. Deposits may be made by the appropriate
officer of the Management Firm or its designee.
(d) Human Resources
(i) Implement all personnel policies and guidelines; (ii)
recruit management personnel of the Facility, including the
community director of the Facility, which recruitment and the
salaries related thereto shall be an expense of the Leasehold
Tenant; (iii) provide on-going training for the Facility's Human
Resources Director; (iv) negotiate and administer all employee
benefit plans including health insurance, dental insurance, life
insurance, long-term disability insurance, and retirement/401K; (v)
negotiate and administer general and professional liability,
workers' compensation, property, and vehicular insurance plans;
(vi) monitor the Facility's compliance with Federal, State and
local employment Laws; (vii) respond to all government compliance
agencies and legal proceedings as necessary; (viii) implement and
monitor safety/loss control programs; (ix) develop and implement
career planning and manpower development strategies; (x) recruit,
employ and train personnel as needed for the operation of all
departments and services
5
<PAGE> 6
of the Facility; and (xi) establish salary levels, performance
standards, personnel policies and employee benefits for all
employees within applicable budgetary and regulatory limits. The
Leasehold Tenant acknowledges and agrees that all personnel
employed at the Facility shall be deemed the employees of the
Management Firm, but shall be paid salaries and wages (including
employment taxes and the like) by the Leasehold Tenant as part of
the expenses of the Facility.
(e) Program Development
(i) Provide ongoing program development and management
consultation; (ii) supply select program manuals for local
modification and implementation; and (iii) provide program
development/management training. A community director shall be
engaged by the Management Firm for the Facility. Such community
director shall be an employee of the Management Firm, but his/her
salary and employee benefits shall be paid by the Leasehold Tenant
as an expense incurred in connection with the operations of the
Facility.
(f) Quality Management
(i) Provide model quality management systems and implement
such including risk management, resident/family satisfaction,
licensing and accreditation, and program evaluation; and (ii)
provide ongoing monitoring of the Facility resident outcomes,
compare with regional and national norms, and make program
modifications.
(g) Marketing/Communication
(i) Hire, direct and supervise marketing department staff;
(ii) train staff (program managers, rehabilitation liaisons,
marketing representatives, etc.) in marketing skills; (iii)
organize strong sales efforts within the target area, develop
program mix strategies, and develop marketing plans for the
Facility; (iv) establish an intake/admission system and
6
<PAGE> 7
continuously review the admission process; (v) develop image
building advertising strategies for the Facility; and (vi) develop
and produce Facility selected promotional literature. The director
of marketing shall be an employee of the Management Firm, but such
person's employee benefits and salary (including employment tax and
the like) shall be paid by the Leasehold Tenant as an expense
incurred in connection with the operations of the Facility.
(h) Contracting
Negotiate and execute contracts and agreements related to the
Facility with third parties and parties affiliated with the
Management Firm; provided that all contracts and agreements with
parties affiliated with the Management Firm shall be on terms no
less favorable than terms for comparable contracts and agreements
with unaffiliated parties.
(i) Miscellaneous
(1) Obtain and maintain in accordance with all applicable
laws and regulations all licenses, approvals and
certifications required for operation of the Facility
and use reasonable efforts to procure eligibility for
participation in other applicable referral or payor
programs. Comply with all notification and reporting
requirements imposed under laws and regulations in
connection with the operation of the Facility.
(2) Purchase supplies, using procurement practices in
accordance with industry standards, and purchase or
lease equipment under national and regional agreements
or purchase contracts of the Management Firm or its
affiliated companies and provide to the Leasehold
Tenant all benefits resulting therefrom to the extent
permitted by their terms and by Law. All such supplies
so purchased shall become property of the
7
<PAGE> 8
Leasehold Tenant. Once leases are completed, equipment
shall become property of the Leasehold Tenant.
(3) Review and analyze the performance of ancillary
services under contract and negotiate contractual
arrangements therefor.
(4) Maintain books and records for the Facility at the
Management Firm's address herein for the purpose of
providing services under this Agreement. The Management
Firm shall make available to the Leasehold Tenant and
any lessor leasing the Facility to the Leasehold
Tenant, and their respective agents, accountants, and
attorneys during normal business hours all books and
records pertaining to the Facility, and the Management
Firm shall promptly respond to any questions of the
Leasehold Tenant or any such lessor with respect to
such books and records and shall confer with the
Leasehold Tenant and any such lessor at all reasonable
times, upon request, concerning the operation of the
Facility.
(5) Order, supervise and conduct a program of regular
maintenance and repair of the Facility at the Leasehold
Tenant's cost and expense. So long as the Lease is in
full force and effect, such maintenance and repair
program shall comply with the requirements of the Lease
related thereto.
(6) Supervise and provide for the operation of food service
facilities for the Facility.
(7) Make periodic evaluations of the performance of all
departments of the Facility and investigate and report,
upon request, any inconsistency between expenditures
and budget.
(8) Implement all policies and procedures reasonably
necessary for the operation of
8
<PAGE> 9
the Facility consistent with applicable regulations.
(9) Foster a working relationship between the Management
Firm and any authorized volunteer or auxiliary groups
interested in providing support to the Facility and
residents of the Facility.
2. Additional Services. It is the intention of the parties that the Management
Firm be responsible for providing all service necessary or desirable for the
efficient and orderly management and operations of the Facility; provided, the
cost and expense of operating the Facility is to be paid by the Leasehold
Tenant. The Management Firm shall actively utilize staff specialists in its
employ or that of its affiliates in such areas as accounting, budgeting,
marketing, reimbursement, dietary, housekeeping, clinical, pharmaceutical,
purchasing and third party payments in the management of the Facility when
considered desirable by the Management Firm. The expense of such personnel shall
be the responsibility of the Leasehold Tenant, allocable to the Facility.
3. Financial Statement. The Management Firm shall prepare and deliver to the
Leasehold Tenant an unaudited balance sheet within forty-five (45) days after
the close of each fiscal quarter of the Leasehold Tenant. The Management Firm
shall also cause an unaudited annual statement to be made of the financial
records of the Facility and a copy of such report shall be provided to the
Leasehold Tenant as soon as it is available after the end of the fiscal year.
The cost of the reports shall be an expense of the Facility and shall be paid
for by the Leasehold Tenant as an expense allocable to the operation of the
Facility. The fiscal year for the Facility shall coincide with the Leasehold
Tenant's fiscal year. All financial statements are to be prepared in accordance
with GAAP. The Management Firm shall cause to be prepared all financial
statements required of the Leasehold Tenant pursuant to the Lease and other
Lease Documents; provided, however, the Leasehold Tenant shall provide all
information reasonably requested by the Management Firm in connection with the
preparation of such financial statements, and shall certify to the Management
Firm, BCC and Lessor that such statements are, to the best knowledge of the
Leasehold Tenant, true and correct in all material respects.
9
<PAGE> 10
4. Property Interests/Confidentiality. (a) The technical systems, methods,
policies, procedures and controls, copyrights, "know-how", tradenames,
trademarks, servicemarks, other registered names or marks and all other
intellectual property rights related thereto employed by the Management Firm
(the "Intangible Rights") are to remain the property of the Management Firm and
are not, at any time, to be utilized, distributed, copied or otherwise employed
or acquired by the Leasehold Tenant except as authorized in writing by the
Management Firm or except as may be required by Law.
(b) The Leasehold Tenant understands and acknowledges that the
Management Firm has devoted substantial time, energy and expense to developing a
process and procedure to manage and operate facilities such as the Facility, and
that such processes, procedures, Intangible Rights and the information and
materials compiled or prepared in connection therewith, including without
limitation marketing plans, business plans, pricing information , information on
competition, demographics, suppliers and providers of services and financing
arrangements (collectively "Confidential Information") are proprietary to the
Management Firm and the confidential information of the Management Firm. The
Leasehold Tenant shall not disclose to any party any Confidential Information,
without the prior written consent of the Management Firm, except as may be
required by Law.
(c) The provisions of this Section shall survive the expiration or
sooner termination of this Agreement.
5. Term of Agreement. The term of this Agreement shall commence upon the date
hereof, and continue for a period of nine (9) years thereafter. This Agreement
shall be automatically renewed for additional consecutive one (1) year terms
unless either party gives the other party notice of its intent not to renew,
which notice must be given at least ninety (90) days prior to the expiration of
the then current term.
6. Termination. (a) The Leasehold Tenant may terminate this Agreement upon
written notice if the Management Firm defaults in the performance of any
material covenant, agreement, term or provision of this Agreement to be
performed by it and such default continues for a period of forty-five (45) days
after written notice to the Management Firm from the Leasehold Tenant stating
the specific default or, if such default is not subject to cure within
forty-five (45) days, such longer period as may be
10
<PAGE> 11
required to effect a cure, provided the Management Firm initiates curative
action within forty-five (45) days and thereafter is diligently and in good
faith pursuing such cure.
(b) The Management Firm may terminate this Agreement upon written
notice in the event any one or more of the following events shall occur, so long
as the following do not result from a failure of the Management Firm to perform
its obligations and duties hereunder:
(1) If the Leasehold Tenant shall fail to timely pay to the
Management Firm any Management Fee required to be paid
in accordance with Paragraph 9 hereof and such failure
continues for ten (10) days after written notice to the
Leasehold Tenant; or
(2) If the Leasehold Tenant defaults in the performance of
any other material covenant, agreement, term or
provision of this Agreement to be performed by the
Leasehold Tenant and such default continues for a
period of forty-five (45) days after written notice to
the Leasehold Tenant from the Management Firm stating
the specific default or, if such default is not subject
to cure within forty-five (45) days, such longer period
as may be required to effect a cure, provided the
defaulting party initiates curative action within
forty-five (45) days and thereafter is diligently and
in good faith pursuing such cure; or
(3) If the Facility or a material portion thereof is
damaged or destroyed by fire or other casualty and the
Leasehold Tenant fails to commence to repair, restore,
rebuild or replace any such damage or destruction
within ninety (90) days of the occurrence of such
damage or destruction, and thereafter to complete such
work within a reasonable period of time.
In the event of termination of this Agreement by either party
pursuant to Section 6(a) or 6(b) above, the Management Firm
11
<PAGE> 12
shall have the right to enter the Facility and remove all of its personal
property and Intangible Rights material.
7. Liability and Indemnification/Force Majuere. (a) By the Management Firm. The
Management Firm shall indemnify, defend, save and hold harmless the Leasehold
Tenant, its members, shareholders, officers, directors, employees, or agents
from and against all demands, claims, actions, losses, damages, deficiencies,
liabilities, costs and expenses (including, without limitation, attorney's fees,
interest, penalties and all amounts paid in investigation, defense or settlement
of any of the foregoing) asserted against or incurred by the Leasehold Tenant,
its members, shareholders, officers, directors, employees, or agents, in
connection with, or arising out of, or resulting from (i) a breach of any
covenant, agreement, representation or warranty of the Management Firm or (ii)
the negligent or willful acts or omissions of the Management Firm, its employees
or agents. The provisions of this Section shall survive the expiration or sooner
termination of this Agreement.
(b) By the Leasehold Tenant. The Leasehold Tenant shall indemnify,
defend, save and hold harmless the Management Firm, its shareholders, officers,
directors, employees, or agents from and against all demands, claims, actions,
losses, damages, deficiencies, liabilities, costs and expenses (including,
without limitation, attorney's fees, interest, penalties and all amounts paid in
investigation, defense or settlement of any of the foregoing) asserted against
or incurred by the Management Firm, its officers, directors, employees, or
agents, in connection with, or arising out of, or resulting from (i) a breach of
any material covenant, agreement, representation or warranty of the Leasehold
Tenant or (ii) the negligent or willful acts or omissions of the Leasehold
Tenant, its employees or agents. The provisions of this Section shall survive
the expiration or sooner termination of this Agreement.
Nothing contained herein shall preclude either party from asserting
any claims or suits against the other party which may arise out of the terms and
provisions of this Agreement.
(c) The Management Firm shall not be deemed to be in violation of
this Agreement, and its performance shall be excused, if it is prevented from
performing any of its obligations hereunder for any reason beyond its control,
including shortages in labor or supplies, war, acts of God,
12
<PAGE> 13
failure of the Leasehold Tenant to advance funds, or changes in any Law of
Federal, State or local government, or any agency thereof.
8. Relationship Between Parties. The relationship of the Management Firm to the
Leasehold Tenant shall be that of independent contractor.
9. Management Fee. The Management Firm for the services rendered hereunder shall
be entitled to six percent (6%) of all gross revenues of the Facility as its
sole compensation for management of the Facility (the "Management Fee"). The
Management Fee shall be paid monthly, and shall be based on the financial
operations of the Facility as of the end of each calendar month. To the extent
that the year-end audited financial statements for the Facility disclose that
the Management Fee actually received during the year than ended was greater or
less than what should have been received, the Leasehold Tenant shall (in case of
underpayment) pay upon demand the shortfall and (in the case of overpayment)
shall be credited against the Management Fee due in the next succeeding quarter
such overpayment. In additional to the Management Fee, the Management Firm shall
be paid on a monthly basis beginning on that date which is six months prior to
substantial completion of the Facility the sum of $3,000 per month.
Notwithstanding the foregoing, the employee benefits and salary of the community
director and director of marketing for the Facility shall be an expense
allocable to the Facility, but such community director and director of marketing
shall at all times remain the employee of the Management Firm.
10. Funding of Costs and Expenses by the Leasehold Tenant. The Leasehold Tenant,
and not the Management Firm, shall be responsible for the costs and expenses of
all operations of the Facility. Subject to Senior Lender making advances under
the Senior Note and BCC making Advances as and when required under the Shortfall
Agreement, the Leasehold Tenant shall at all times provide sufficient working
capital for operation of the Facility and shall deposit such capital from time
to time into the Operating Accounts of the Facility in advance of the time
required to be disbursed by the Management Firm.
11. Approval by the Leasehold Tenant. The Management Firm shall, not less
frequently than annually, adopt a plan of operation for the Facility which shall
set forth proposed staffing, budgets,
13
<PAGE> 14
program and related matters; which plan of operation shall be subject to
approval of the Leasehold Tenant, which approval shall not be unreasonably
withheld, conditioned or delayed. The Leasehold Tenant shall not participate in
the day-to-day operation of the Facility during the term of this Agreement.
12. Other Facilities. The Leasehold Tenant understands and acknowledges that the
Management Firm is in the business of operating facilities such as the Facility,
and that the Management Firm intends to continue to manage and operate such
other facilities, which may or may not be in competition with the Facility.
Nothing contained herein shall be deemed to be construed as a restriction on the
Management Firm's right to so operate and manage such other existing facilities
or facilities that may be opened in the future, even if such facilities are in
competition with the Facility.
13. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered in person, Federal
Express or other recognized overnight courier or sent by registered or certified
U.S. mail, return receipt requested or sent by facsimile or telecopy
transmission and addressed:
(i) If to the Management Firm, to:
c/o BCC Development and Management Co.
1215 Manor Drive
Mechanicsburg, Pennsylvania 17055
Attention: Legal Department
(ii) If to the Leasehold Tenant, to:
610 Newport Center Drive
Suite 1200
Newport Beach, California 92660
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
14. Arbitration. Any controversy or dispute between the Management Firm and the
Leasehold Tenant with respect to the application or interpretation of the terms
of this Agreement, except failure of the Leasehold Tenant to pay compensation to
the Management Firm as required herein, will be submitted to
14
<PAGE> 15
mediation under the National Health Lawyer's Association ("NHLA") Alternative
Dispute Resolution Service Rules of Procedure for Mediation. If any dispute is
not resolved by mediation no later than thirty (30) days after its submission to
mediation, the dispute shall be submitted to arbitration in accordance with the
NHLA Alternative Dispute Resolution Service Rules for Arbitration. The same
person may serve as both mediator and arbitrator. Any such arbitration shall be
final and binding upon the parties to the fullest extent permitted by Law. The
cost of mediation and/or arbitration shall be shared equally by the Leasehold
Tenant and the Management Firm; however, each party shall bear the expense of
its own attorneys, representatives and witnesses, and the cost of any
transcripts or related matters.
15. Compliance with Federal Records Requirements. To the extent required under
applicable Law, the Management Firm shall, (and if the Management Firm carries
out any of the duties under this Agreement through a subcontract with a related
organization and such subcontract has a value or cost of $10,000 or more during
any 12-month period, the Management Firm shall cause such subcontract to contain
a clause to the effect that the subcontractor shall), until the expiration of
four (4) years after the furnishing of services hereunder, make available upon
written request by the Secretary of Health and Human Service or the Comptroller
General of the United States or any of their duly authorized representatives,
this Agreement and the books, documents and records of the Management Firm (or
such subcontractor) that are necessary to verify the nature and extent of the
costs furnished under this Agreement.
16. Successors and Assigns. The Leasehold Tenant may not assign this Agreement,
expressly, by operation of law, or otherwise, without the prior written consent
of the Management Firm, which consent may be withheld in the sole discretion of
the Management Firm. The Management Firm may not assign this Agreement,
expressly, by operation of law, or otherwise, without the prior written consent
of the Leasehold Tenant; provided, however, the Management Firm may assign its
rights and obligations hereunder without consent to (i) any BCC Affiliate, (ii)
collaterally to any lender to the Management Firm or any entity affiliated with
the Management Firm and (iii) to the Lessor.
17. Definitions; Interpretation; Miscellaneous. Capitalized terms used but not
otherwise defined in this Agreement have the respective meanings specified in
Appendix 1 hereto; the rules of
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<PAGE> 16
interpretation and other provisions set forth in Appendix 1 hereto shall apply
to this Agreement. All exhibits, schedules, appendices and other attachments to
this Agreement are incorporated by reference herein.
18. Compliance With Lease and Working Capital Assurance Agreement. The
Management Firm acknowledges and hereby agrees to be bound by the provisions of
Section 22 of the Lease. Further, the Management Firm acknowledges and hereby
agrees to be bound by the provisions of Section 12(o) of that certain First
Amended and Restated Working Capital Assurance Agreement of even date herewith
between BCC and Lessor.
19. Amendment of Original Management Agreement. The parties agree that this
Agreement amends and restates the Original Management Agreement in its entirety
(including Appendix 1 attached hereto, which has also been amended and
restated). However, nothing contained herein shall be deemed to amend or modify
in any way the terms of the Original Management Agreement applicable to the
period of time prior to the date hereof.
{Remainder of page intentionally left blank.}
16
<PAGE> 17
IN WITNESS WHEREOF, intending to be legally bound hereby, the
parties hereto have affixed their names by their proper officers or duly
authorized representatives the day and year first above written.
MANAGEMENT FIRM: [ ]
a Delaware corporation
By: /s/ Robin L. Barber
Robin L. Barber,
its Vice President and Secretary
LEASEHOLD TENANT: [ ]
a Delaware limited liability company
By: ELDER CARE OPERATORS, LLC,
a Delaware limited liability
company, its Sole Member
By: /s/ Kevin Sherry
Kevin Sherry,
its Sole Member and President
S - 1
[Management Agreement]
<PAGE> 1
Exhibit 10.16
Schedule to Form of First Amended and Restated Management Agreement
<TABLE>
<CAPTION>
Project Management Firm Leasehold Tenant Lessor
<S> <C> <C> <C>
Akron, Ohio Balanced Care at Akron, Elder Care Operators of Akron, LLC Nationwide Health Properties,
Inc. Inc.
Bristol, Tennessee Balanced Care at Elder Care Operators of Bristol, LLC Nationwide Health Properties,
Bristol, Inc. Inc.
Hilliard, Ohio Balanced Care at Elder Care Operators of Hilliard, LLC Nationwide Health Properties,
Hilliard, Inc. Inc.
Lakemont Farms, Balanced Care at Elder Care Operators of Lakemont MLD Delaware Trust
Pennsylvania Lakemont Farms, Inc. Farms, LLC
Murfreesboro, Tennessee Balanced Care at Elder Care Operators of Nationwide Health Properties,
Murfreesboro, Inc. Murfreesboro, LLC Inc.
York, Pennsylvania Balanced Care at Elder Care Operators of York, LLC MLD Delaware Trust
York, Inc.
</TABLE>
<TABLE>
<CAPTION>
Project Property Type of Lessor Entity
<S> <C> <C>
Akron, Ohio Summit County, Ohio A Maryland corporation
Bristol, Tennessee Sullivan County, Tennessee A Maryland corporation
Hilliard, Ohio Franklin County, Ohio A Maryland corporation
Lakemont Farms, Allegheny County, Pennsylvania A Delaware Business Trust
Pennsylvania
Murfreesboro, Tennessee Rutherford County, Tennessee A Maryland corporation
York, Pennsylvania York County, Pennsylvania A Delaware Business Trust
</TABLE>
<PAGE> 1
Exhibit 10.17
FIRST AMENDMENT TO FACILITY AGREEMENT
THIS FIRST AMENDMENT TO FACILITY AGREEMENT (the "Amendment") is entered
into as of the 8th day of July, 1999 by and between AMERICAN HEALTH PROPERTIES,
INC., a Delaware corporation ("American Health") and BALANCED CARE CORPORATION,
a Delaware corporation ("Balanced Care") with reference to the following facts:
A. American Health and Balanced Care have entered into that certain
Facility Agreement dated as of January 30, 1998 (the "Facility Agreement"). All
capitalized terms used in this Amendment shall have the meaning ascribed to such
terms in the Facility Agreement, except as provided herein to the contrary.
B. In accordance with Section 15.6 of the Facility Agreement, the
parties now wish to modify and amend the terms of the Facility Agreement as more
particularly set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Amendment, intending to be fully and
legally bound hereby, do hereby amend the Facility Agreement and the Transaction
Documents contemplated therein, as follows:
1. Qualified Property. The definition of Qualified Property in Article 1 of the
Agreement is revised to read as follows:
"Qualified Property" shall mean the three (3) individual parcels of
land located in Jackson, Tennessee, Anderson, Indiana and Evansville,
Indiana, which AHP has acquired at the request of Balanced Care
pursuant to the terms of this Agreement. Notwithstanding any
implication to the contrary in this Agreement, AHP shall not be
required to consider or approve any other property as a Qualified
Property under this Agreement.
2. Term. Section 2.1 of the Agreement is revised to read as follows:
2.1 Term. The term of this Agreement (the "Term") shall commence on
January 30, 1998 and unless sooner terminated in accordance with the terms of
the Transaction Documents
<PAGE> 2
(including this Agreement) shall expire upon the earlier of July 8, 1999 and the
date on which Developer Commences Construction with respect to the third Project
to be acquired and developed pursuant to this Agreement. Neither American Health
nor AHP shall have any obligation to consider or acquire Qualified Properties
nor to enter into any Transaction Documents with respect to any property,
Project or Facility upon the expiration or sooner termination of this Agreement.
3. Failure to Commence Construction. Section 13.1(g) of the Agreement is hereby
revised to read follows:
(g) Balanced Care and BCC shall have failed to Commence Construction of
three (3) Facilities on three (3) Qualified Properties on or prior to the
expiration or sooner termination of the Term; provided, however, that American
Health acknowledges, based upon information provided to American Health by
Balanced Care and BCC with respect to the three (3) Qualified Properties, that
Balanced Care and BCC have fulfilled the requirements of this Section 13.1(g).
4. Amendment to Leases. As a condition to American Health agreeing to the
foregoing provisions of this Amendment and to induce American Health and AHP to
enter into this Amendment, Balanced Care shall cause each of Assisted Care
Operators of Jackson, LLC, Assisted Care Operators Anderson, LLC and Assisted
Care Operators of Evansville, LLC (individually a "Tenant" and collectively,
"Tenants") to enter into an amendment to the Lease of the Qualified Property
operated by that Tenant in substantially the form attached hereto Exhibit "A",
Exhibit "B" and Exhibit "C" respectively.
f. Affirmation. In all other respects, the Facility Agreement and each of the
Transaction Documents delivered pursuant thereto are hereby declared to remain
in full force and effect without modification.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and
year first above written.
<PAGE> 3
AMERICAN HEALTH PROPERTIES, BALANCED CARE CORPORATION
INC., a Delaware corporation a Delaware corporation
By: /s/ Steven A. Roseman By: /s/ Robin L. Barber
Name: Steven A. Roseman Name: Robin L. Barber
Title: Senior Vice President Title: Senior Vice
President and Legal Counsel
& Assistant Secretary
THE UNDERSIGNED HEREBY ACKNOWLEDGE, AGREE AND CONSENT TO THE FOREGOING AMENDMENT
AHP OF INDIANA., BALANCED CARE AT EVANSVILLE,
an Indiana corporation INC., a Delaware corporation
By: /s/ Steven A. Roseman By: /s/ Robin L. Barber
Name: Steven A. Roseman Name: Robin L. Barber
Title: Vice President Title: Vice President and
Secretary
Its authorized
representative
ASSISTED CARE OPERATORS OF BALANCED CARE AT ANDERSON,
EVANSVILLE, LLC, a Delaware INC., a Delaware corporation
limited liability company,
By: Assisted Care Operators, LLC, By: /s/ Robin L. Barber
a Delaware limited liability Name: Robin L. Barber
company, its Manager and Title: Vice President and
authorized representative Secretary
Its authorized
representative
By: /s/ James A. Diebold
Name: James A. Diebold
Title: Executive Vice President
Its Authorized Representative
<PAGE> 4
ASSISTED CARE OPERATORS OF
ANDERSON,LLC, a Delaware
limited liability Company
its Manager and authorized
representative
By: /s/ James A. Diebold
Name: James A. Diebold
Title: Executive Vice
President
Its Authorized Representative
AHP OF TENNESSEE, INC., BALANCED CARE AT JACKSON,
a Tennessee corporation INC., a Delaware corporation
By: /s/ Steven A. Roseman By: /s/ Robin L. Barber
Name: Steven A. Roseman Name: Robin L. Barber
Title: Vice President Title: Vice President and
Secretary
Its authorized
representative
ASSISTED CARE OPERATORS OF
JACKSON,LLC, a Delaware
limited liability Company
its Manager and authorized
representative
By: /s/ James A. Diebold
Name: James A. Diebold
Title: Executive Vice
President
Its Authorized
Representative
<PAGE> 5
EXHIBIT A
FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT (the "Amendment")
is entered into as of the 8th day of July, 1999 by and between AHP OF TENNESSEE,
INC., a Tennessee corporation ("Landlord") and ASSISTED CARE OPERATORS OF
JACKSON, LLC, a Delaware limited liability company ("Tenant") with reference to
the following facts:
A. Landlord and Tenant have entered into that certain Lease and
Security Agreement dated as of January 30, 1998 (the "Lease"). All capitalized
terms used in this Amendment shall have the meaning ascribed to such terms in
the Lease, except as provided herein to the contrary.
B. In accordance with Section 29.17 of the Lease, the parties now wish
to modify and amend the terms of the Lease as more particularly set forth in
this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Amendment, intending to be fully and
legally bound hereby, do hereby amend the Facility Agreement and the Transaction
Documents contemplated therein, as follows:
1. Ten Year Treasury Rate.
The definition of "Ten Year Treasury Rate" set forth in Article 1 of
the Lease is hereby amended by adding the following sentence to the end thereof:
Notwithstanding the foregoing to the contrary, in no event shall the
Ten Year Treasury be less than 6.80% for any purpose of this Lease.
2. Revision of Option to Purchase all Properties. The definition of Option
Purchase Date set forth in Article 1 of the Lease and the terms and conditions
of Section 25.4 of the Lease are hereby revised as follows:
(a) The definition of Option Purchase Date set forth in Article 1 of
the Lease is revised in its entirety to read as follows:
<PAGE> 6
"Option Purchase Date" shall mean any date occurring on or after July
1, 1999 but not sooner than six months after the notice of exercise as
to the first facility to be purchased.
(b) Section 25.4 of the Lease is hereby revised in its entirety to read
as follows:
25.4 Tenant's Option to Purchase All Properties. Provided
no Event of Default has occurred and is continuing, Landlord hereby
grants to Tenant the option (the "Call Option"), exercisable on not
less than six months' nor more than 18 months' Notice, to purchase at
any time on or after the Option Purchase Date all property
(collectively, the "Option Properties") leased by Landlord or its
Affiliates in accordance with the Facility Agreement to either (x) any
wholly-owned subsidiary of Guarantor or (y) any Person previously
wholly-owned by Guarantor for a purchase price (determined on a
property-by-property basis) equal to the greater of the Fair Market
Value Purchase Price of each such property as of the Option Purchase
Date or the Minimum Repurchase Price. For the avoidance of doubt, the
Option Properties expressly include the Facilities known as Outlook
Pointe at Jackson (Tennessee), Outlook Pointe at Anderson (Indiana) and
Outlook Pointe at Evansville (Indiana). Any exercise of the Call Option
shall be effected by delivery of written Notice of exercise to each
Landlord of each of the Option Properties, which Notice shall be duly
executed by all Tenants of all Option Properties. Tenant's timely and
proper exercise of the Call Option shall constitute Tenant's
irrevocable agreement and commitment to purchase the Property from
Landlord for the price and on the terms and conditions stated in this
Section. If Tenant shall timely and properly exercise the Call Option,
the sale of the properties shall be consummated through an escrow (the
"Escrow") to be opened with a title or escrow company mutually
acceptable to Landlord and Tenant (the "Escrow Holder"). The purchase
price for the properties (net solely of the principal balance of any
Facility Mortgages placed on a Property by Landlord and expressly
assumed by Tenant) shall be deposited into Escrow in immediately
available federal funds at least two business days prior to the close
of Escrow and shall be paid to Landlord at the close of Escrow in
immediately available federal funds. The close of Escrow shall occur as
of the date properly specified in Tenant's notice of exercise of the
Call Option; provided
<PAGE> 7
that Tenant may in its notice of exercise specify different dates for
the closing of its acquisition of different Facilities provided that
(i) the time period between the closing of the first Facility and the
last Facility to be acquired pursuant to the Call Option shall not
exceed twelve (12) months and (ii) the last Facility to be acquired
pursuant to the Call Option shall be acquired by Tenant no later than
eighteen (18) months from the date of exercise of the Call Option.
Tenant acknowledges and agrees that it shall purchase all such property
from Landlord "AS IS" and subject to all faults, all defects in title
and all other matters whatsoever, including without limitation all
matters of record. Landlord shall be conclusively deemed not to have
made any warranty or representation regarding the title, condition or
other status of the properties but Landlord covenants to remove
Facility Mortgages against the properties to be conveyed under the Call
Option solely to the extent that such Facility Mortgage both (a) was in
excess of the amount permitted under Article 26 at the time it was
placed against title to such property and (b) has a principal balance
in excess of the purchase price to be paid for all properties subject
to the Call Option pursuant to this Section 25.4. Landlord shall pay at
closing any lien encumbering the Land or the Building which secures
either (x) any income tax liability of the Landlord or (y) a liability
of Landlord unrelated to any of the Property, the Rent, the Facility or
the use, occupancy or operation of the Property. All closing costs
associated with the sale of the properties to Tenant to this Section
shall be paid by Tenant.
3. Acknowledgement.
The parties acknowledge and agree as follows:
(a) Completion. The "Project" (as defined in the Development Agreement)
was Finally Completed (within the meaning of the Development Agreement) on or
about April 22, 1999.
(b) Commencement Date. The "Commencement Date" of the Lease is
therefore acknowledged to be April 22, 1999. Landlord acknowledges that Tenant
has been in occupancy of the Property and has commenced Tenant's operations of
the Facility on or about January 20, 1999 and Landlord hereby waives the default
of Tenant, Developer, Manager and Balanced Care which may arise by
<PAGE> 8
reason of such occupancy and operation occurring prior to the Commencement Date.
(c) Total Project Costs. The Total Project Cost for all purposes of the
Lease is, Four Million Five Hundred Forty Nine Thousand Seventy and 11/100ths
Dollars ($4,459,970.11).
(d) Initial Base Rent. The initial annual Base Rent due under the Lease
is Four Hundred Sixty One Thousand Eight Hundred Twenty One and 97/100ths
Dollars ($461,821.97) per annum. The first installment of Base Rent was due as
of June 1, 1999, in the amount of Eighty Eight Thousand Five Hundred Fifteen and
88/100ths Dollars ($88,515.88) covering the period from the Commencement Date to
April 30, 1999 and the Base Rent due, in advance per the terms of the Lease, for
the months of May and June 1999. Said first installment of Base Rent shall be
paid to Landlord concurrently with Tenant's execution of this Amendment. This
Amendment shall not be effective unless and until Landlord has received such
installment of Base Rent. Base Rent shall remain subject to adjustment as
provided in the Lease and all Additional Rent and Additional Charges shall
remain payable as provided in the Lease.
4. Approval of Proposed Capital Addition. Subject to compliance with the
provisions of Section 11.2 of the Lease, and Landlord's approval of the items be
submitted in accordance with Section 11.2 of the Lease, Landlord acknowledges
and agrees that it has approved the installation of the Capital Additions to the
Facility described on Schedule "1" attached to this Amendment, incorporated
herein by this reference.
5. Acknowledgement. Landlord hereby acknowledges that it does not have current
actual knowledge, without inquiry to such matters, of default by Tenant under
the Lease.
6. Affirmation. Except for the modifications expressly provided for in this
Amendment, the Lease and each of the Transaction Documents are hereby declared
to remain in full force and effect without further amendment or modification.
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
AHP OF TENNESSEE, INC.,
a Tennessee corporation
By:_______________________
Steven A. Roseman,
Vice President
ASSISTED CARE OPERATORS OF
JACKSON, LLC, a Delaware limited
liability company,
By: Assisted Care Operators, LLC, a
Delaware limited liability company, its
Manager and authorized representative
By:__________________
Name:
Title:
Its Authorized Representative
THE UNDERSIGNED MANAGER OF THE FACILITY AND OBLIGOR UNDER THE WORKING CAPITAL
AGREEMENT HEREBY ACKNOWLEDGE, AGREE AND CONSENT TO THE FOREGOING AMENDMENT
BALANCED CARE AT JACKSON, INC., BALANCED CARE CORPORATION
a Delaware corporation a Delaware corporation
By:___________________________ By:__________________________
Name: Name:
Title: Title:
Its authorized representative Its authorized representative
<PAGE> 10
Schedule 1
Outlook Pointe at Jackson Approved Renovations
<TABLE>
<S> <C>
Alzheimers Unit $120,000
Interior Lighting 1,000
Dishwashing Area Wall Covering 1,500
Canopy 8,000
Waste Container Fencing 3,000
New Exterior Signage 4,000
Flag Pole 1,500
Model Room 8,000
Total Approved Capital Expenditures $147,000
</TABLE>
It is acknowledged that upon final identification of the capital additions,
pursuant to Section 11.2 of the Lease, such identified capital additions shall
not exceed a total cost of $129,500.
<PAGE> 11
EXHIBIT B
FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT (the "Amendment")
is entered into as of the 8th day of July, 1999 by and between AHP OF INDIANA,
INC., an Indiana corporation ("Landlord") and ASSISTED CARE OPERATORS OF
ANDERSON, LLC, a Delaware limited liability company ("Tenant") with reference to
the following facts:
A. Landlord and Tenant have entered into that certain Lease and
Security Agreement dated as of January 30, 1998 (the "Lease"). All capitalized
terms used in this Amendment shall have the meaning ascribed to such terms in
the Lease, except as provided herein to the contrary.
B. In accordance with Section 29.17 of the Lease, the parties now wish
to modify and amend the terms of the Lease as more particularly set forth in
this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Amendment, intending to be fully and
legally bound hereby, do hereby amend the Facility Agreement and the Transaction
Documents contemplated therein, as follows:
1. Ten Year Treasury Rate.
The definition of "Ten Year Treasury Rate" set forth in Article 1 of
the Lease is hereby amended by adding the following sentence to the end thereof:
Notwithstanding the foregoing to the contrary, in no event shall the
Ten Year Treasury be less than 6.80% for any purpose of this Lease.
2. Revision of Option to Purchase all Properties. The definition of Option
Purchase Date set forth in Article 1 of the Lease and the terms and conditions
of Section 25.4 of the Lease are hereby revised as follows:
(a) The definition of Option Purchase Date set forth in Article 1 of
the Lease is revised in its entirety to read as follows:
<PAGE> 12
"Option Purchase Date" shall mean any date occurring on or after July
1, 1999 but not sooner than six months after the notice of exercise as
to the first facility to be purchased.
(b) Section 25.4 of the Lease is hereby revised in its entirety to read
as follows:
25.4 Tenant's Option to Purchase All Properties. Provided
no Event of Default has occurred and is continuing, Landlord hereby
grants to Tenant the option (the "Call Option"), exercisable on not
less than six months' nor more than 18 months' Notice, to purchase at
any time on or after the Option Purchase Date all property
(collectively, the "Option Properties") leased by Landlord or its
Affiliates in accordance with the Facility Agreement to either (x) any
wholly-owned subsidiary of Guarantor or (y) any Person previously
wholly-owned by Guarantor for a purchase price (determined on a
property-by-property basis) equal to the greater of the Fair Market
Value Purchase Price of each such property as of the Option Purchase
Date or the Minimum Repurchase Price. For the avoidance of doubt, the
Option Properties expressly include the Facilities known as Outlook
Pointe at Jackson (Tennessee), Outlook Pointe at Anderson (Indiana) and
Outlook Pointe at Evansville (Indiana). Any exercise of the Call Option
shall be effected by delivery of written Notice of exercise to each
Landlord of each of the Option Properties, which Notice shall be duly
executed by all Tenants of all Option Properties. Tenant's timely and
proper exercise of the Call Option shall constitute Tenant's
irrevocable agreement and commitment to purchase the Property from
Landlord for the price and on the terms and conditions stated in this
Section. If Tenant shall timely and properly exercise the Call Option,
the sale of the properties shall be consummated through an escrow (the
"Escrow") to be opened with a title or escrow company mutually
acceptable to Landlord and Tenant (the "Escrow Holder"). The purchase
price for the properties (net solely of the principal balance of any
Facility Mortgages placed on a Property by Landlord and expressly
assumed by Tenant) shall be deposited into Escrow in immediately
available federal funds at least two business days prior to the close
of Escrow and shall be paid to Landlord at the close of Escrow in
immediately available federal funds. The close of Escrow shall occur as
of the date properly specified in Tenant's notice of exercise of the
Call Option; provided
<PAGE> 13
that Tenant may in its notice of exercise specify different dates for
the closing of its acquisition of different Facilities provided that
(i) the time period between the closing of the first Facility and the
last Facility to be acquired pursuant to the Call Option shall not
exceed twelve (12) months and (ii) the last Facility to be acquired
pursuant to the Call Option shall be acquired by Tenant no later than
eighteen (18) months from the date of exercise of the Call Option.
Tenant acknowledges and agrees that it shall purchase all such property
from Landlord "AS IS" and subject to all faults, all defects in title
and all other matters whatsoever, including without limitation all
matters of record. Landlord shall be conclusively deemed not to have
made any warranty or representation regarding the title, condition or
other status of the properties but Landlord covenants to remove
Facility Mortgages against the properties to be conveyed under the Call
Option solely to the extent that such Facility Mortgage both (a) was in
excess of the amount permitted under Article 26 at the time it was
placed against title to such property and (b) has a principal balance
in excess of the purchase price to be paid for all properties subject
to the Call Option pursuant to this Section 25.4. Landlord shall pay at
closing any lien encumbering the Land or the Building which secures
either (x) any income tax liability of the Landlord or (y) a liability
of Landlord unrelated to any of the Property, the Rent, the Facility or
the use, occupancy or operation of the Property. All closing costs
associated with the sale of the properties to Tenant to this Section
shall be paid by Tenant.
3. Approval of Proposed Capital Addition. Subject to compliance with the
provisions of Section 11.2 of the Lease, and Landlord's approval of the items be
submitted in accordance with Section 11.2 of the Lease, Landlord acknowledges
and agrees that it has approved the installation of the Capital Additions to the
Facility described on Schedule "1" attached to this Amendment, incorporated
herein by this reference.
4. Acknowledgement. Landlord hereby acknowledges that it does not have current
actual knowledge, without inquiry to such matters, of default by Tenant under
the Lease.
5. Affirmation. Except for the modifications expressly provided for in this
Amendment, the Lease and each of the
<PAGE> 14
Transaction Documents are hereby declared to remain in full force and effect
without further amendment or modification.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
AHP OF INDIANA, INC.,
an Indiana corporation
By:_______________________
Steven A. Roseman,
Vice President
ASSISTED CARE OPERATORS OF
ANDERSON, LLC, a Delaware limited
liability company,
By: Assisted Care Operators, LLC, a
Delaware limited liability company, its
Manager and authorized representative
By:__________________
Name:
Title:
Its Authorized Representative
THE UNDERSIGNED MANAGER OF THE FACILITY AND OBLIGOR UNDER THE WORKING CAPITAL
AGREEMENT HEREBY ACKNOWLEDGE, AGREE AND CONSENT TO THE FOREGOING AMENDMENT
BALANCED CARE AT ANDERSON, INC., BALANCED CARE CORPORATION
a Delaware corporation a Delaware corporation
By:___________________________ By:__________________________
Name: Name:
Title: Title:
Its authorized representative Its authorized representative
<PAGE> 15
Schedule 1
Outlook Pointe at Anderson Approved Renovations
<TABLE>
<S> <C>
Alzheimers Unit $120,000
Interior Lighting 1,000
Dishwashing Area Wall Covering 1,500
Canopy 8,000
Waste Container Fencing 3,000
New Exterior Signage 4,000
Flag Pole 1,500
Model Room 8,000
Total Approved Capital Expenditures $147,000
</TABLE>
It is acknowledged that upon final identification of the capital additions,
pursuant to Section 11.2 of the Lease, such identified capital additions shall
not exceed a total cost of $129,500.
<PAGE> 16
EXHIBIT C
FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LEASE AND SECURITY AGREEMENT (the "Amendment")
is entered into as of the 8th day of July, 1999 by and between AHP OF INDIANA,
INC., an Indiana corporation ("Landlord") and ASSISTED CARE OPERATORS OF
EVANSVILLE, LLC, a Delaware limited liability company ("Tenant") with reference
to the following facts:
A. Landlord and Tenant have entered into that certain Lease and
Security Agreement dated as of June 16, 1998 (the "Lease"). All capitalized
terms used in this Amendment shall have the meaning ascribed to such terms in
the Lease, except as provided herein to the contrary.
B. In accordance with Section 29.17 of the Lease, the parties now wish
to modify and amend the terms of the Lease as more particularly set forth in
this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Amendment, intending to be fully and
legally bound hereby, do hereby amend the Facility Agreement and the Transaction
Documents contemplated therein, as follows:
1. Ten Year Treasury Rate.
The definition of "Ten Year Treasury Rate" set forth in Article 1 of
the Lease is hereby amended by adding the following sentence to the end thereof:
Notwithstanding the foregoing to the contrary, in no event shall the
Ten Year Treasury be less than 6.80% for any purpose of this Lease.
2. Revision of Option to Purchase all Properties. The definition of Option
Purchase Date set forth in Article 1 of the Lease and the terms and conditions
of Section 25.4 of the Lease are hereby revised as follows:
(a) The definition of Option Purchase Date set forth in Article 1 of
the Lease is revised in its entirety to read as follows:
<PAGE> 17
"Option Purchase Date" shall mean any date occurring on or after July
1, 1999 but not sooner than six months after the notice of exercise as
to the first facility to be purchased.
(b) Section 25.4 of the Lease is hereby revised in its entirety to read
as follows:
25.4 Tenant's Option to Purchase All Properties. Provided
no Event of Default has occurred and is continuing, Landlord hereby
grants to Tenant the option (the "Call Option"), exercisable on not
less than six months' nor more than 18 months' Notice, to purchase at
any time on or after the Option Purchase Date all property
(collectively, the "Option Properties") leased by Landlord or its
Affiliates in accordance with the Facility Agreement to either (x) any
wholly-owned subsidiary of Guarantor or (y) any Person previously
wholly-owned by Guarantor for a purchase price (determined on a
property-by-property basis) equal to the greater of the Fair Market
Value Purchase Price of each such property as of the Option Purchase
Date or the Minimum Repurchase Price. For the avoidance of doubt, the
Option Properties expressly include the Facilities known as Outlook
Pointe at Jackson (Tennessee), Outlook Pointe at Anderson (Indiana) and
Outlook Pointe at Evansville (Indiana). Any exercise of the Call Option
shall be effected by delivery of written Notice of exercise to each
Landlord of each of the Option Properties, which Notice shall be duly
executed by all Tenants of all Option Properties. Tenant's timely and
proper exercise of the Call Option shall constitute Tenant's
irrevocable agreement and commitment to purchase the Property from
Landlord for the price and on the terms and conditions stated in this
Section. If Tenant shall timely and properly exercise the Call Option,
the sale of the properties shall be consummated through an escrow (the
"Escrow") to be opened with a title or escrow company mutually
acceptable to Landlord and Tenant (the "Escrow Holder"). The purchase
price for the properties (net solely of the principal balance of any
Facility Mortgages placed on a Property by Landlord and expressly
assumed by Tenant) shall be deposited into Escrow in immediately
available federal funds at least two business days prior to the close
of Escrow and shall be paid to Landlord at the close of Escrow in
immediately available federal funds. The close of Escrow shall occur as
of the date properly specified in Tenant's notice of exercise of the
Call Option; provided
<PAGE> 18
that Tenant may in its notice of exercise specify different dates for
the closing of its acquisition of different Facilities provided that
(i) the time period between the closing of the first Facility and the
last Facility to be acquired pursuant to the Call Option shall not
exceed twelve (12) months and (ii) the last Facility to be acquired
pursuant to the Call Option shall be acquired by Tenant no later than
eighteen (18) months from the date of exercise of the Call Option.
Tenant acknowledges and agrees that it shall purchase all such property
from Landlord "AS IS" and subject to all faults, all defects in title
and all other matters whatsoever, including without limitation all
matters of record. Landlord shall be conclusively deemed not to have
made any warranty or representation regarding the title, condition or
other status of the properties but Landlord covenants to remove
Facility Mortgages against the properties to be conveyed under the Call
Option solely to the extent that such Facility Mortgage both (a) was in
excess of the amount permitted under Article 26 at the time it was
placed against title to such property and (b) has a principal balance
in excess of the purchase price to be paid for all properties subject
to the Call Option pursuant to this Section 25.4. Landlord shall pay at
closing any lien encumbering the Land or the Building which secures
either (x) any income tax liability of the Landlord or (y) a liability
of Landlord unrelated to any of the Property, the Rent, the Facility or
the use, occupancy or operation of the Property. All closing costs
associated with the sale of the properties to Tenant to this Section
shall be paid by Tenant.
3. Approval of Proposed Capital Addition. Subject to compliance with the
provisions of Section 11.2 of the Lease, and Landlord's approval of the items be
submitted in accordance with Section 11.2 of the Lease, Landlord acknowledges
and agrees that it has approved the installation of the Capital Additions to the
Facility described on Schedule "1" attached to this Amendment, incorporated
herein by this reference.
4. Acknowledgement. Landlord hereby acknowledges that it does not have current
actual knowledge, without inquiry to such matters, of default by Tenant under
the Lease.
5. Affirmation. Except for the modifications expressly provided for in this
Amendment, the Lease and each of the
<PAGE> 19
Transaction Documents are hereby declared to remain in full force and effect
without further amendment or modification.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
AHP OF INDIANA, INC.,
an Indiana corporation
By:_______________________
Steven A. Roseman,
Vice President
ASSISTED CARE OPERATORS OF
EVANSVILLE, LLC, a Delaware limited
liability company,
By: Assisted Care Operators, LLC, a
Delaware limited liability company, its
Manager and authorized representative
By:__________________
Name:
Title:
Its Authorized Representative
THE UNDERSIGNED MANAGER OF THE FACILITY AND OBLIGOR UNDER THE WORKING CAPITAL
AGREEMENT HEREBY ACKNOWLEDGE, AGREE AND CONSENT TO THE FOREGOING AMENDMENT
BALANCED CARE AT EVANSVILLE, INC., BALANCED CARE CORPORATION
a Delaware corporation a Delaware corporation
By:___________________________ By:__________________________
Name: Name:
Title: Title:
Its authorized representative Its authorized representative
<PAGE> 20
Schedule 1
Outlook Pointe at Evansville Approved Renovations
<TABLE>
<S> <C>
Alzheimers Unit $120,000
Dishwashing Area Wall Covering 1,500
Canopy 8,000
Waste Container Fencing 3,000
New Exterior Signage 4,000
Flag Pole 1,500
Model Room 8,000
Total Approved Capital Expenditures $147,000
</TABLE>
It is acknowledged that upon final identification of the capital additions,
pursuant to Section 11.2 of the Lease, such identified capital additions shall
not exceed a total cost of $129,500.
<PAGE> 1
Exhibit 10.18
FIRST AMENDMENT
TO OPTION AGREEMENTS, SHORTFALL FUNDING AGREEMENTS, MANAGEMENT AGREEMENTS,
DEPOSIT PLEDGE AGREEMENTS,
AND EQUITY PLEDGE AGREEMENTS
THIS AGREEMENT ("Agreement") is made as of September 30, 1999
by and among Balanced Care Corporation, a Delaware corporation ("BCC"), Balanced
Care at Sagamore Hills, Inc., a Delaware corporation (the "Sagamore Hills
Manager"), Balanced Care at Loyalsock, Inc., a Delaware corporation (the
"Loyalsock Manager"), Balanced Care at Lebanon, Inc., a Delaware corporation
(the "Lebanon Manager"), Balanced Care at Westerville, Inc., a Delaware
corporation (the "Westerville Manager"), Balanced Care at Oak Ridge, Inc., a
Delaware corporation (the "Oak Ridge Manager"), Balanced Care at Morristown,
Inc., a Delaware corporation (the "Morristown Manager"), Financial Care
Investors, LLC, a Delaware limited liability company ("FCI"), Financial Care
Investors of Sagamore Hills, LLC, a Delaware limited liability company
("FCISH"), Financial Care Investors of Loyalsock, LLC, a Delaware limited
liability company ("FCILO"), Financial Care Investors of Lebanon, LLC, a
Delaware limited liability company ("FCILE"), Financial Care Investors of
Westerville, LLC, a Delaware limited liability company ("FCIW"), Financial Care
Investors of Oak Ridge, a Delaware limited liability company ("FCIOR") and
Financial Care Investors of Morristown, LLC, a Delaware limited liability
company ("FCIMO"). The Sagamore Hills Manager, Loyalsock Manager, Lebanon
Manager, Westerville Manager, Oak Ridge Manager and Morristown Manager are
collectively referred to herein as the "Managers" and individually as a
"Manager." FCISH, FCILO, FCILE, FCIW, FCIOR and FCIMO are collectively referred
to herein as the "Lessees" and are individually referred to herein as a
"Lessee."
WHEREAS, the Lessees have each entered into Lease Agreements
as tenants for properties located in Pennsylvania, Ohio and Tennessee (such
Lease Agreements being referred to herein collectively as the "Leases" and
individually as a "Lease"), which Leases are more fully described on Schedule 1
attached hereto; and
WHEREAS, with respect to each property that is the subject of
a Lease, the Lessor thereof has caused to be constructed a personal care or
assisted care facility located thereon (such facilities being referred to herein
collectively as the "Facilities" and individually as a "Facility"); and
<PAGE> 2
WHEREAS, in connection with each Lease, FCI and BCC entered
into Option Agreements whereby BCC has the right to acquire all membership
interests in all Lessees (such Option Agreements being referred to herein
collectively as the "Option Agreements" and individually as an "Option
Agreement"), which Option Agreements are more fully described on Schedule 1
attached hereto; and
WHEREAS, in connection with each Lease, FCI, the Lessees and
BCC entered into Shortfall Funding Agreements (such Shortfall Funding Agreements
being referred to herein collectively as the "Shortfall Agreements" and
individually as a "Shortfall Agreement"), which Shortfall Agreements are more
fully described on Schedule 1 attached hereto; and
WHEREAS, in connection with the operation of each Facility,
each Lessee and each Manager have entered into a management agreement (such
management agreements being referred to herein collectively as the "Management
Agreements" and individually as a "Management Agreement"), which Management
Agreements are more fully described on Schedule 1 attached hereto; and
WHEREAS, in connection with the Lessees' obligations under the
Leases and the Shortfall Agreements, the Lessees, FCI, the Lessors and BCC have
entered into Deposit Pledge Agreements (such Deposit Pledge Agreements being
referred to herein collectively as the "Deposit Pledge Agreements" and
individually as a "Deposit Pledge Agreement"), which Deposit Pledge Agreements
are more fully described on Schedule 1 attached hereto; and
WHEREAS, in connection with the options granted to BCC under
the Option Agreements and BCC's obligations under the Shortfall Agreements, the
Lessees, FCI and BCC have entered into Equity Pledge Agreements (such Equity
Pledge Agreements being referred to herein collectively as the "Equity Pledge
Agreements" and individually as an "Equity Pledge Agreement"), which Equity
Pledge Agreements are more fully described on Schedule 1 attached hereto; and
WHEREAS, each Lessee, each Manager, FCI and BCC desire to
amend all Option Agreements, all Shortfall Agreements, all Management
Agreements, all Deposit Pledge Agreements and all Equity Pledge Agreements as
herein provided.
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<PAGE> 3
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree to amend all Option Agreements, all
Shortfall Agreements, all Management Agreements, all Deposit Pledge Agreements
and all Equity Pledge Agreements as follows:
1. Option Agreements.
(a) Each Option Agreement with respect to the membership
interests of FCILO, FCILE, FCIMO or FCIOR (each of which leases a Facility
containing 60 units) is hereby amended by deleting in its entirety Section 1(b)
and replacing such Section with the following:
(b) (i) In consideration of the grant of the Option to
BCC, BCC shall make the following payments (the "Equity Option Payments") to
Optionor: (1) on the earlier of one day after (A) the issuance of the
certificate of occupancy for the Facility or (B) October 26, 2000 (the "First
Equity Payment Date"), (x) an amount equal to the Equity Current Yield (as
hereinafter defined) on the Equity Capital Portion of the Working Capital
Reserve actually funded from time to time into the Collateral Account through
such date, compounded on an annual basis, prorated for the period from July 29,
1999 to the First Equity Payment Date, payable in arrears for such period, plus
(y) an amount equal to the Equity Current Yield on the Equity Capital Portion of
the Working Capital Reserve actually funded from time to time into the
Collateral Account through such date, compounded on an annual basis,
representing payment of the Equity Current Yield for the 12-month period
subsequent to the First Equity Payment Date, payable in advance for such period,
and (2) thereafter, beginning on that date which is the first day of a calendar
quarter (i.e., January, April, July and October) and which falls immediately
after 12 months after the First Equity Payment Date (the "Second Equity Payment
Date"), and quarterly thereafter for so long as this Agreement is in effect (but
ending in all events at the time of exercise of the Option), (x) an amount equal
to 25% of the Equity Current Yield on the Equity Capital Portion of the Working
Capital Reserve actually funded from time to time into the Collateral Account
through the payment date, compounded on an annual basis, representing payment of
the Equity Current Yield for the subsequent calendar quarter, payable in advance
for such quarter, plus (on only the Second Equity Payment Date) (y) an amount
equal to the Equity Current Yield on the Equity Capital Portion of the Working
Capital Reserve
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<PAGE> 4
actually funded from time to time into the Collateral Account through the Second
Equity Payment Date, compounded on an annual basis, prorated for the period from
the date 12 months after the First Equity Payment Date to the Second Equity
Payment Date, payable in arrears for such period. "Equity Current Yield" as used
in this Agreement means an annual internal rate of return equal to 22.5% of the
Equity Capital Portion of the Working Capital Reserve actually funded from time
to time into the Collateral Account through the date of the calculation;
provided, however, the definition of Equity Current Yield shall in all respects
be subject to the provisions of Section 1.01(e) of the Shortfall Agreement.
(b) (ii) In further consideration of the grant of the Option
to BCC, BCC shall make the following payments (the "Debt Option Payments") to
Optionor: (1) on that date which is the earlier to occur of (A) the exercise of
the Option or (B) twelve (12) months after the date of issuance of a certificate
of occupancy for the Facility (the "First Debt Payment Date"), (x) an amount
equal to the Debt Current Yield (as hereinafter defined) on the Senior Loan
Capital Portion of the Working Capital Reserve actually funded from time to time
into the Collateral Account through such date, compounded on an annual basis,
prorated for the period from the initial funding of the Senior Loan Capital
Portion to the First Debt Payment Date, payable in arrears for such period, plus
(y) an amount equal to 25% of the Debt Current Yield on the Senior Loan Capital
Portion of the Working Capital Reserve actually funded from time to time into
the Collateral Account through such date, compounded on an annual basis,
representing payment of the Debt Current Yield for the 3-month period subsequent
to the First Debt Payment Date, payable in advance for such period, and (2)
thereafter, beginning on that date which is the first day of a calendar quarter
(i.e., January, April, July and October) and which falls immediately after 3
months after the First Debt Payment Date (the "Second Debt Payment Date"), and
quarterly thereafter for so long as this Agreement is in effect (but ending in
all events at the time of exercise of the Option), (x) an amount equal to 25% of
the Debt Current Yield on the Senior Loan Capital Portion of the Working Capital
Reserve actually funded from time to time into the Collateral Account through
the payment date, compounded on an annual basis, representing payment of the
Debt Current Yield for the subsequent calendar quarter, payable in advance for
such quarter, plus (on only the Second Debt Payment Date) (y) an amount equal to
the Debt Current Yield on the Senior Loan Capital Portion of the Working Capital
Reserve actually funded from time
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<PAGE> 5
to time into the Collateral Account through the Second Debt Payment Date,
compounded on an annual basis, prorated for the period from the date 3 months
after the First Debt Payment Date to the Second Debt Payment Date, payable in
arrears for such period. "Debt Current Yield" as used in this Agreement means an
annual internal rate of return equal to 2.0% of the Senior Loan Capital Portion
of the Working Capital Reserve actually funded from time to time into the
Collateral Account through the date of the calculation.
(b) (iii) "Option Payments", as used herein, means,
collectively, the Equity Option Payments and the Debt Option Payments.
Notwithstanding anything to the contrary contained herein, if the Option is
exercised, BCC's obligation to make Option Payments thereafter shall cease;
provided, however, if the Option has been deemed exercised solely as a result of
the exercise of one or more Phase Options or Phase Asset Purchase Options, in
each case not related to the Facility, BCC shall nonetheless continue to make
Option Payments hereunder with respect to the Facility until Closing. Option
Payments shall be made to Optionors without demand or notice, except as
expressly provided herein. "Current Yield", as used herein, means, collectively,
the Equity Current Yield and the Debt Current Yield."
(b) Each Option Agreement with respect to the membership
interests of FCIW or FCISH (each of which leases a Facility containing 106
units) is hereby amended by deleting in its entirety Section 1(b) and replacing
such Section with the following:
(b) (i) In consideration of the grant of the Option to
BCC, BCC shall make the following payments (the "Equity Option Payments") to
Optionor: (1) on the earlier of one day after (A) the issuance of the
certificate of occupancy for the Facility or (B) October 26, 2000 (the "First
Equity Payment Date"), (x) an amount equal to the Equity Current Yield (as
hereinafter defined) on the Equity Capital Portion of the Working Capital
Reserve actually funded from time to time into the Collateral Account through
such date, compounded on an annual basis, prorated for the period from July 29,
1999 to the First Equity Payment Date, payable in arrears for such period, plus
(y) an amount equal to 150% of the Equity Current Yield on the Equity Capital
Portion of the Working Capital Reserve actually funded from time to time into
the Collateral Account through such date, compounded on an annual basis,
representing the payment of
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<PAGE> 6
the Equity Current Yield for the 18-month period subsequent to the First Equity
Payment Date, payable in advance for such period, and (2) thereafter, beginning
on that date which is the first day of a calendar quarter (i.e., January, April,
July and October) and which falls immediately after 18 months after the First
Equity Payment Date (the "Second Equity Payment Date"), and quarterly thereafter
for so long as this Agreement is in effect (but ending in all events at the time
of exercise of the Option), (x) an amount equal to 25% of the Equity Current
Yield on the Equity Capital Portion of the Working Capital Reserve actually
funded from time to time into the Collateral Account through the payment date,
compounded on an annual basis, representing payment of the Equity Current Yield
for the subsequent calendar quarter, payable in advance for such quarter, plus
(on only the Second Equity Payment Date) (y) an amount equal to the Equity
Current Yield on the Equity Capital Portion of the Working Capital Reserve
actually funded from time to time into the Collateral Account through the Second
Equity Payment Date, compounded on an annual basis, prorated for the period from
the date 18 months after the First Equity Payment Date to the Second Equity
Payment Date, payable in arrears for such period. "Equity Current Yield" as used
in this Agreement means an annual internal rate of return equal to 22.5% of the
Equity Capital Portion of the Working Capital Reserve actually funded from time
to time into the Collateral Account through the date of the calculation;
provided, however, the definition of Equity Current Yield shall in all respects
be subject to the provisions of Section 1.01(e) of the Shortfall Agreement.
(b) (ii) In further consideration of the grant of the Option
to BCC, BCC shall make the following payments (the "Debt Option Payments") to
Optionor: (1) on that date which is the earlier to occur of (A) the exercise of
the Option or (B) eighteen (18) months after the date of issuance of a
certificate of occupancy for the Facility (the "First Debt Payment Date"), (x)
an amount equal to 150% of the Debt Current Yield (as hereinafter defined) on
the Senior Loan Capital Portion of the Working Capital Reserve actually funded
from time to time into the Collateral Account through such date, compounded on
an annual basis, prorated for the period from the initial funding of the Senior
Loan Capital Portion to the First Debt Payment Date, payable in arrears for such
period, plus (y) an amount equal to 25% of the Debt Current Yield on the Senior
Loan Capital Portion of the Working Capital Reserve actually funded from time to
time into the Collateral Account through such date, compounded on an annual
basis, representing payment of the Debt Current Yield for
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<PAGE> 7
the 3-month period subsequent to the First Debt Payment Date, payable in advance
for such period, and (2) thereafter, beginning on that date which is the first
day of a calendar quarter (i.e., January, April, July and October) and which
falls immediately after 3 months after the First Debt Payment Date (the "Second
Debt Payment Date"), and quarterly thereafter for so long as this Agreement is
in effect (but ending in all events at the time of exercise of the Option), (x)
an amount equal to 25% of the Debt Current Yield on the Senior Loan Capital
Portion of the Working Capital Reserve actually funded from time to time into
the Collateral Account through the payment date, compounded on an annual basis,
representing payment of the Debt Current Yield for the subsequent calendar
quarter, payable in advance for such quarter, plus (on only the Second Debt
Payment Date) (y) an amount equal to the Debt Current Yield on the Senior Loan
Capital Portion of the Working Capital Reserve actually funded from time to time
into the Collateral Account through the Second Debt Payment Date, compounded on
an annual basis, prorated for the period from the date 3 months after the First
Debt Payment Date to the Second Debt Payment Date, payable in arrears for such
period. "Debt Current Yield" as used in this Agreement means an annual internal
rate of return equal to 2.0% of the Senior Loan Capital Portion of the Working
Capital Reserve actually funded from time to time into the Collateral Account
through the date of the calculation.
(b) (iii) "Option Payments", as used herein, means,
collectively, the Equity Option Payments and the Debt Option Payments."
Notwithstanding anything to the contrary contained herein, if the Option is
exercised, BCC's obligation to make Option Payments thereafter shall cease;
provided, however, if the Option has been deemed exercised solely as a result of
the exercise of one or more Phase Options or Phase Asset Purchase Options, in
each case not related to the Facility, BCC shall nonetheless continue to make
Option Payments hereunder with respect to the Facility until Closing. Option
Payments shall be made to Optionors without demand or notice, except as
expressly provided herein. "Current Yield", as used herein, means, collectively,
the Equity Current Yield and the Debt Current Yield."
(c) The following Sections of each Option Agreement are hereby
amended as follows:
(i) add the words "including the BCC Loan" after the
words "Transaction Documents" in Section 1(d)(iii) and after
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<PAGE> 8
the words "Transaction Documents" in the second sentence of Section 1(d);
(ii) replace the first sentence of Section 2(a) with the
following sentence: "The closing of the purchase of the Equity Interests (the
"Closing"), pursuant to the exercise of the Option, shall take place on such
date (the "Closing Date") and at such location in Pennsylvania as BCC may
designate, provided, however, that the Closing Date shall be (i) within 30 days
after BCC exercises the Option, if no other Phase Option or Phase Asset Purchase
Option (as such terms are defined in Section 10 hereof) has been exercised prior
to the exercise of the Option, or (ii) within 12 months of the Exercise Date (as
such term is defined in Section 10 hereof), if the Option has been exercised
pursuant to the Bundling Condition set forth in Section 10 hereof."
(iii) add the words "except, as to Optionor, as expressly
provided in the transaction documents, BCC loan documents, senior credit
documents and lease documents entered into with respect to the other Projects
(as defined in Section 10 below) and except as contemplated by the BCC Loan"
prior to the colon in the first phrase of Section 3(d);
(iv) change the words "Senior Loan Documents" in Section
3(d)(i) to "Senior Credit Documents";
(v) add the words "or from receiving option payments in
accordance with the terms and conditions of the option agreements entered into
with respect to other Projects" to the end of Section 3(d)(ii)(A);
(vi) add the words "and except for the other Projects" to the
end of Section 3(d)(vi); and
(vii) replace the words "neither a Default nor an" in the
first sentence of Section 7(c) with the word "no".
(d) The signatures page of each Option Agreement shall be
deemed to include, in addition to the signature of an authorized representative
of BCC but instead of the signature of an authorized representative of each
Lessee, the signature of an authorized representative of FCI as set forth below:
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<PAGE> 9
WITNESS: FINANCIAL CARE INVESTORS, LLC,
a Delaware limited liability company
By:
Title:
The amendment to the signature page of each Option Agreement contained in this
Section 1(d) shall be deemed to apply retroactively to the date of each Option
Agreement. FCI hereby confirms and acknowledges that each Option Agreement has
been duly executed and delivered, and constitutes the legal, valid and binding
obligation of FCI, enforceable in accordance with the terms of each Option
Agreement (except as enforceability may be limited by creditor's rights laws and
general principles of equity).
2. Shortfall Agreements.
(a) The first paragraph of Section 1.01(a) of each Shortfall
Agreement is hereby amended by adding the words "except for the BCC Loan" after
the words "working capital" in the ninth line thereof. In addition, the third
full sentence of the first paragraph of Section 1.01(a) of each Shortfall
Agreement is hereby deleted and replaced in its entirety with the following:
"The Equity Capital Portion and the Senior Loan Capital Portion shall be
contributed by the Member to the Lessee, and the Lessee to the Collateral
Account. Fundings into the Collateral Account shall occur such that no less than
15% of the Equity Capital Portion for each Funding is contributed to the
Collateral Account prior to (or simultaneously with) the contribution of the 85%
attributable to the Senior Loan Capital Portion."
(b) The first paragraph of Section 1.01(a) of each Shortfall
Agreement provides that the aggregate amount of the Equity Capital Portion and
Senior Loan Capital Portion will not exceed a specified dollar amount. The first
paragraph of each Shortfall Agreement is hereby amended by replacing such dollar
amount with the dollar amounts reflected on Schedule 3 attached hereto
applicable to the appropriate Facility.
(c) Section 1.01 of each Shortfall Agreement is hereby amended
by adding the following as new Section 1.01(e):
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<PAGE> 10
"(e) At the option of the Member upon seven (7) days
advance notice to BCC, BCC (or a BCC Affiliate) shall
loan (the "BCC Loan") to the Member a portion of the
Equity Capital Portion in an amount not to exceed the
BCC Loan Amount, on the following conditions: (i) the
Member shall execute and deliver to BCC a promissory
note, loan agreement and such other documents or
instruments as BCC may reasonably request, all in
form and substance satisfactory to BCC (in its sole
good faith discretion) memorializing the BCC Loan
(collectively, the "BCC Loan Documents"), (ii)
interest shall be payable with respect to the BCC
Loan as follows: 8% per annum, which accrues until
the fourth anniversary of the date of the Loan, and
is payable quarterly in arrears thereafter until
maturity (which occurs upon the earlier of the
closing of the sale pursuant to the Option, the
closing of the sale pursuant to the Asset Purchase
Option, or the expiration of the Lease term), (iii)
the principal amount of the BCC Loan, together with
all accrued but unpaid interest and all other sums
due BCC under the documents and instruments executed
in connection with the BCC Loan, shall be due and
payable immediately on maturity, (iv) the Member
shall have previously deposited in the Collateral
Account as a portion of the Working Capital Reserve
an amount equal to or greater than the Equity Capital
Portion minus the BCC Loan Amount, (v) neither the
Member nor the Lessee shall be in default under any
Lease Document or Transaction Document and (vi) all
proceeds from the BCC Loan shall be deposited into
the Collateral Account as part of the Working Capital
Reserve to be used for working capital for the
Facility. Notwithstanding any provision to the
contrary contained in any Transaction Document,
amounts advanced by BCC pursuant to the BCC Loan
shall in no event be deemed Equity Capital Portion
for purposes of calculating Equity Current Yield or
Equity Option Payments with respect to the Option
Agreement or for purposes of calculating the Purchase
Price in connection with the exercise of the Option
or the Asset Purchase Price in connection with the
exercise of the Asset Purchase Option; provided,
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<PAGE> 11
however, the principal amount advanced in connection
with the BCC Loan shall be deemed Working Capital
Reserve actually funded into the Collateral Account
for purposes only of Section 1(d)(i) of the Option
Agreement and Section 1.03(i) of this Agreement."
(d) Section 1.01 of each Shortfall Agreement is hereby amended
by adding the following as a new Section 1.01(f):
"(f) In the event the Member or the Lessee makes
principal and interest payments, in whole or in part,
with respect to the Notes or amounts due under the
BCC Loan, then (i) all such payments shall be deemed
Equity Capital Portion for purposes of this Agreement
and the Option Agreement, (ii) Current Yield will be
based on and calculated accounting for the increase
in the Equity Capital Portion as a result of such
payments (but Current Yield will be calculated with
respect to such increase only from the date of
receipt of payment on the Notes or the BCC Loan, as
applicable) and (iii) for purposes of calculating the
Purchase Price with respect to the Option (or, in the
case of the exercise of the Asset Purchase Option,
the Asset Purchase Price) such amounts paid with
respect to the Notes and the BCC Loans shall be
deemed a portion of the Working Capital Reserve."
(e) The BCC Loan Amounts are more fully described on Schedule
2 attached hereto.
(f) Section 1.03 of each Shortfall Agreement is hereby
modified to refer to that Section as "Section 1.03(a)". The new Section 1.03(a)
of each Shortfall Agreement is further modified as follows:
(i) The third sentence of each current Section 1.03
is hereby replaced with the following sentence: "The closing of the purchase of
the assets of the Lessee shall take place on such date and at such location in
Pennsylvania as BCC may designate, provided, however, that such closing shall be
(i) within 30 days after BCC exercises the Asset Purchase Option, if no other
Phase Option or Phase Asset Purchase Option (as such terms are defined in
Section 10 of the Option Agreement) has been
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<PAGE> 12
exercised prior to the exercise of the Asset Purchase Option, or (ii) within 12
months of the Exercise Date (as such term is defined in Section 10 of the Option
Agreement), if the Asset Purchase Option has been exercised pursuant to the
Bundling Condition set forth in Section 10 of the Option Agreement."
(ii) The following sentence is hereby added to each
current Section 1.03 immediately after the sentence defining the "Asset Purchase
Price": "To avoid any doubt, BCC shall receive a credit against the Purchase
Price for Option Payments paid as Current Yield in advance, to the extent that
such advanced Option Payments are attributable to Current Yield accruing after
the Closing Date."
(g) A new Section 1.03(b) shall be added to each Shortfall
Agreement, which shall provide as follows: "Notwithstanding any provision to the
contrary contained herein or in any other Transaction Document, BCC agrees that
the Asset Purchase Option shall not be exercised unless (i) BCC or its designee
is prohibited (by operation of law, or any other reason other than the acts or
omissions of BCC or any BCC Affiliate) from exercising the Option to acquire the
Equity Interests pursuant to the Option Agreement or (ii) the Lessee or any
Member is in Default of any covenant, agreement, representation or warranty
contained herein or in the Option Agreement, which Default was not caused by BCC
or any BCC Affiliate."
(h) The following Sections of each Shortfall Agreement are
hereby amended as follows: (i) add after the words "Section 1.01(a)" in Section
1.01(c) the following "unless due to the wrongful failure of BCC (or its
affiliate) to fund the BCC Loan"; (ii) add the words "of Lessee and the Member"
after the words "representations and warranties" in the first line of Section
2.02(i); (iii) add the words "other than Permitted Liens" after the words
"properties or assets" in the second to last line of Section 3.01(h); (iv) add
the words "unless due to the wrongful failure of BCC (or its affiliate) to fund
the BCC Loan" after the words "Collateral Account" in Section 5.01(a); and (v)
add the words "(other than a Monetary Default)" after the words "performed or
observed" in Section 5.01(c).
(i) Section 8.04 of each Shortfall Agreement is hereby amended
to add the following after the words "sole cost and expense" and before the
period at the end of the first sentence of that Section: "; provided, however,
that the costs incurred by the Member or any Lessee in complying with the
reporting
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<PAGE> 13
requirements of Section 15.3.1 of the Lease and Section 5.2.1 of the Loan
Agreement dated as of the Documentation Date between the Member and the Lessor
shall be paid by BCC, after BCC has had the opportunity to review such costs and
consent to payment, which consent shall not be unreasonably withheld".
(j) The signature page of each Shortfall Agreement shall be
deemed to include, in addition to the signatures of authorized representatives
of each Lessee and BCC, the signature of an authorized representative of FCI as
set forth below:
WITNESS: FINANCIAL CARE INVESTORS, LLC,
a Delaware limited liability company
By:
Title:
The amendment to the signature page of each Shortfall Agreement contained in
this Section 2(j) shall be deemed to apply retroactively to the date of each
Shortfall Agreement. FCI and each Lessee hereby confirm and acknowledge that
each Shortfall Agreement has been duly executed and delivered, and constitutes
the legal, valid and binding obligation of FCI and each Lessee (as applicable),
enforceable in accordance with the terms of each Shortfall Agreement (except as
enforceability may be limited by creditor's rights laws and general principles
of equity).
(k) The form of Promissory Note, which is attached as Exhibit
A to each Shortfall Agreement, is hereby amended to delete the last sentence,
i.e., "All amounts borrowed by the Member under the Senior Credit Documents
shall be repaid to the Lessor from the Asset Purchase Price."
(l) The following definitions set forth in Appendix 1
("Appendix 1") attached to each Shortfall Agreement and certain Transaction
Documents (as defined in Appendix 1) are hereby amended as follows: (i) with
respect to the definition of Advance, the reference therein to Section 1.01 is
hereby changed to Section 1.02; (ii) the definition of "Lessee" is hereby
amended by replacing the phrase "a Delaware corporation" with the phrase "a
Delaware limited liability company"; and (iii) the "BCC Loan Documents" are
hereby added to the definition of "Transaction Documents".
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<PAGE> 14
3. Management Agreements.
(a) Section 1 of each Management Agreement is hereby amended
by adding the following paragraph after the second full paragraph of such
Section:
Further, Management Firm shall distribute to
Leasehold Tenant (for further distribution to the
Member, if applicable) from the Operating Accounts
any Federal, state or local income or sales tax due
by Leasehold Tenant in connection with revenue
derived exclusively from the Facility or due by
Member as a result of earnings of Leasehold Tenant in
connection with the Facility (other than income tax
relating to Option Payments or the exercise of the
Asset Purchase Option or the Option).
(b) Section 1(c)(vii) of each Management Agreement is hereby
amended by adding the words "prepare all tax returns of Leasehold Tenant in
connection with the Facility" after the words "payroll, excise and other taxes,"
in such Section.
(c) Section 10 of each Management Agreement is hereby amended
by adding the words "Subject to the obligation of BCC to make Advances when and
as required under the Shortfall Agreement," at the beginning of the second
sentence of such Section.
3. Deposit Pledge Agreements.
(a) Section 1.A(i) of each Deposit Pledge Agreement is hereby
amended by adding the words "and Section 1.01(e)" after each reference to
"Section 1.01(a)".
(b) Section 1.B of each Deposit Pledge Agreement is hereby
amended by adding the word "no" after the words "provided, that," and before the
words "Default or no Event of Default".
4. Equity Pledge Agreements.
(a) Section 2(i)(a) of each Equity Pledge Agreement is hereby
amended by adding the words "or in the Senior Credit Documents" after the words
"except as provided herein".
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<PAGE> 15
(b) Section 5 of each Equity Pledge Agreement is hereby
amended by adding the following paragraph after the second full paragraph of
such Section 5:
Notwithstanding any provision to the contrary
contained in this Agreement, in no event shall any
action or inaction of Lessee be deemed an Event of
Default hereunder if and to the extent that such
action or inaction is the responsibility of the
Management Firm pursuant to the Management Agreement;
provided, however, such action or inaction shall
nonetheless constitute an Event of Default hereunder
if the Management Firm was unable to perform its
responsibilities under the Management Agreement as a
result of either (i) the negligent or willful acts or
omissions of Lessee or (ii) a Default or Event of
Default by Lessee under any Transaction Document
other than this Agreement, not caused by the Secured
Party or any BCC Affiliate.
5. Miscellaneous Provisions.
(a) Entire Agreement. This Agreement, together with all other
Transaction Documents (as amended hereby), contains the entire understanding
among the parties hereto with respect to its subject matter and supersedes any
prior understandings or agreements between the parties with respect to such
subject matter.
(b) Amendments. This Agreement may be modified or amended only
by a written instrument executed by the parties hereto.
(c) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as
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<PAGE> 16
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
(d) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
together shall constitute but a single instrument.
(e) Future Cooperation. Each party covenants and agrees to
take such further action and execute such further documents as may be necessary
or appropriate to carry out the intention of this Agreement.
(f) Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
(g) Transaction Documents Remain Effective. Except as
expressly provided herein, each Shortfall Agreement, Option Agreement and
Management Agreement (and all other Transaction Documents) shall remain in full
force and effect, unmodified except as expressly provided herein. Each party
hereto reaffirms all obligations, covenants and agreements under the Transaction
Documents to which it is a party.
(h) Definitions. Capitalized terms not otherwise defined
herein have the respective meanings as defined in Appendix 1, and to the extent
not inconsistent with the terms hereof, the rules of interpretation contained in
Appendix 1 shall be applicable to this Agreement.
(i) Representations and Warranties. All representations and
warranties of the Member contained in each Shortfall Agreement and each Option
Agreement are hereby affirmed as though made as of the date of this Agreement.
All representations and warranties of each Lessee contained in each Shortfall
Agreement and Management Agreement to which such Lessee is a party are hereby
affirmed as though made as of the date of this Agreement.
{remainder of page intentionally left blank}
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<PAGE> 17
IN WITNESS WHEREOF, BCC, FCI, the Lessees and the Managers
have caused this Agreement to be duly executed and delivered as of the date
first above written.
BALANCED CARE CORPORATION
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Senior Vice President Legal
Counsel
FINANCIAL CARE INVESTORS, LLC
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
FINANCIAL CARE INVESTORS OF
SAGAMORE HILLS,LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
FINANCIAL CARE INVESTORS OF LOYALSOCK, LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
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FINANCIAL CARE INVESTORS OF LEBANON, LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
FINANCIAL CARE INVESTORS OF
WESTERVILLE, LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
FINANCIAL CARE INVESTORS OF OAKRIDGE, LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
FINANCIAL CARE INVESTORS OF
MORRISTOWN, LLC
By: FINANCIAL CARE INVESTORS, LLC
Managing Member
By: /s/ F. David Carr
Name: F. David Carr
Title: Managing Member
Global Amendment
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<PAGE> 19
BALANCED CARE AT SAGAMORE HILLS, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
BALANCED CARE AT LOYALSOCK, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
BALANCED CARE AT LEBANON, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
BALANCED CARE AT WESTERVILLE, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
BALANCED CARE AT OAK RIDGE, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
Global Amendment
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<PAGE> 20
BALANCED CARE AT MORRISTOWN, INC.
By: /s/ Robin L. Barber
Name: Robin L. Barber
Title: Vice President and
Secretary
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<PAGE> 21
CONSENT OF LESSORS
HCN BCC Holdings, Inc., a Delaware corporation, and Pennsylvania
BCC Properties, Inc., a Pennsylvania corporation, each as Lessor under certain
Leases (as set forth in Schedule 1 attached hereto), hereby consent to the
foregoing modifications and amendments to the relevant documents as provided in
the above Agreement.
HCN BCC Holdings, Inc.
By: /s/ Erin C. Ibele
Name: Erin C. Ibele
Title: Vice President and
Corporate Secretary
Pennsylvania BCC Properties,
Inc.
By: /s/ Erin C. Ibele
Name: Erin C. Ibele
Title: Vice President and
Corporate Secretary
Global Amendment
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<PAGE> 22
SCHEDULE 1
LEASES
Date of
Lease Parties
09/22/98 HCN BCC Holdings, Inc. (Lessor)
Financial Care Operators of Sagamore Hills, LLC (Lessee)
09/22/98 Pennsylvania BCC Properties, Inc. (Lessor)
Financial Care Investors of Loyalsock, LLC (Lessee)
09/22/98 Pennsylvania BCC Properties, Inc. (Lessor)
Financial Care Investors of Lebanon, LLC (Lessee)
09/22/98 HCN BCC Holdings, Inc. (Lessor)
Financial Care Investors of Oak Ridge, LLC (Lessee)
09/22/98 HCN BCC Holdings, Inc. (Lessor)
Financial Care Investors of Westerville, LLC (Lessee)
09/22/98 HCN BCC Holdings, Inc. (Lessor)
Financial Care Operators of Morristown, LLC (Lessee)
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<PAGE> 23
SHORTFALL FUNDING AGREEMENTS
Date of
Agreement Parties
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Sagamore Hills, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Loyalsock, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Lebanon, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Oak Ridge, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Westerville, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Morristown, LLC (Lessee)
Balanced Care Corporation
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<PAGE> 24
OPTION AGREEMENTS
Date of
Agreement Parties
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Sagamore Hills)
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Loyalsock)
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Lebanon)
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Westerville)
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Oak Ridge)
09/22/98 Financial Care Investors, LLC (Optionor)
Balanced Care Corporation
(for Morristown)
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<PAGE> 25
MANAGEMENT AGREEMENTS
Date of
Agreement Parties
09/22/98 Financial Care Investors of Sagamore Hills, LLC
Balanced Care at Sagamore Hills, Inc.
(for Sagamore Hills)
09/22/98 Financial Care Investors, LLC of Loyalsock, LLC
Balanced Care at Loyalsock, Inc.
(for Loyalsock)
09/22/98 Financial Care Investors of Lebanon, LLC
Balanced Care at Lebanon, Inc.
(for Lebanon)
09/22/98 Financial Care Investors of Westerville, LLC
Balanced Care at Westerville, Inc.
(for Westerville)
09/22/98 Financial Care Investors of Oak Ridge, LLC
Balanced Care at Oak Ridge, Inc.
(for Oak Ridge)
09/22/98 Financial Care Investors of Morristown, LLC
Balanced Care at Morristown, Inc.
(for Morristown)
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<PAGE> 26
DEPOSIT PLEDGE AGREEMENTS
Date of
Agreement Parties
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Sagamore Hills, LLC (Lessee)
HCN BCC Holdings, Inc. (Lessor)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Loyalsock, LLC (Lessee)
Pennsylvania BCC Properties, Inc. (Lessor)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Lebanon, LLC (Lessee)
Pennsylvania BCC Properties, Inc. (Lessor)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Oak Ridge, LLC (Lessee)
HCN BCC Holdings, Inc. (Lessor)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Westerville, LLC (Lessee)
HCN BCC Holdings, Inc. (Lessor)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Morristown, LLC (Lessee)
HCN BCC Holdings, Inc. (Lessor)
Balanced Care Corporation
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<PAGE> 27
EQUITY PLEDGE AGREEMENTS
Date of
Agreement Parties
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Sagamore Hills, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Loyalsock, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Lebanon, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Oak Ridge, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Investors of Westerville, LLC (Lessee)
Balanced Care Corporation
09/22/98 Financial Care Investors, LLC
Financial Care Operators of Morristown, LLC (Lessee)
Balanced Care Corporation
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<PAGE> 28
SCHEDULE 2
BCC LOAN AMOUNTS
<TABLE>
<S> <C>
Sagamore Hills $ 55,456.00
Loyalsock $ 30,059.00
Lebanon $ 30,628.00
Westerville $ 58,582.00
Oak Ridge $ 31,125.00
Morristown $ 30,860.00
TOTAL $236,710.00
</TABLE>
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<PAGE> 29
SCHEDULE 3
TOTAL WORKING CAPITAL RESERVE AMOUNTS AS REFERENCED IN THE FIRST PARAGRAPH OF
SECTION 1.01(a) OF EACH SHORTFALL AGREEMENT
<TABLE>
<S> <C>
Sagamore Hills $1,463,000
Loyalsock $793,000
Lebanon $808,000
Westerville $1,545,500
Oak Ridge $821,115
Morristown $814,118
</TABLE>
Global Amendment Schedules
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<PAGE> 1
Exhibit 10.19
FORM OF
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") is made
effective as of the 30th day of September, 1999 ("Effective Date") between [ ],
a corporation organized under the laws of the State of [ ] ("Landlord"), having
its principal office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio 43603, and [ ], a limited liability company organized under the laws of the
State of Delaware ("Tenant"), having its principal office located at 1350 Old
Bayshore Highway, Suite 300, Burlingame, California 94010.
R E C I T A L S
A. Landlord leased to Tenant property located in [ ]
("Property") pursuant to a Lease Agreement dated as of September 22, 1998
("Lease"). Tenant intends to operate a [ ]-unit ([ ]-bed) [ ] ("Facility") on
the Property.
B. The Lease is guaranteed by the Unconditional and Continuing
Lease Guaranty of Balanced Care Corporation ("Guarantor") dated as of September
22, 1998 ("Guaranty").
C. Pursuant to a Construction Disbursing Agreement
("Construction Agreement") dated as of September 22, 1998 between Landlord and
BCC Development and Management Co. ("Developer") and the Lease, Landlord has
agreed to pay for certain acquisition, development and construction costs of the
Facility.
D. Landlord has extended to Financial Care Investors, LLC
("Member"), the sole member of Tenant, a loan up to the amount of [ ] for
Facility working capital purposes ("Equity Loan"). The Equity Loan is evidenced
by a Note ("Note") and subject to the terms of a Loan Agreement ("Loan
Agreement"), each dated as of September 22, 1998. The Equity Loan is secured by
a security interest granted by Tenant under a Security Agreement dated as of
September 22, 1998 ("Security Agreement"). The Note, Loan Agreement, and
Security Agreement may be collectively called the "Equity Loan Documents".
E. Under a Shortfall Funding Agreement among Guarantor, Tenant
and Member, Member agreed to contribute capital to Tenant to fund the working
capital needs of Tenant. Member agreed to borrow 85% of the working capital
needs of Tenant through the Equity Loan ("Senior Loan Capital Portion"). Member
<PAGE> 2
also agreed to fund the remaining 15% as an equity contribution ("Equity Capital
Portion"). The Senior Loan Capital Portion and the Equity Capital Portion
collectively constitute the Working Capital Reserve. Guarantor agreed to advance
funds to Tenant upon the depletion of the Working Capital Reserve to pay any
shortfalls in the working capital needs of Tenant. Guarantor's obligation to
fund working capital shortfalls is confirmed in and subject to the terms of the
Working Capital Assurance Agreement between Guarantor and Landlord dated as of
September 22, 1998 ("Working Capital Assurance Agreement").
F. Tenant provided a Letter of Credit to Landlord in the
amount of 5% of the Maximum Lease Amount as security for the performance of the
Secured Obligations (as defined in the Lease).
G. As additional security for the Secured Obligations and the
Equity Loan, Tenant and Member granted to Landlord and to Guarantor a pledge of
and security interest in a certain Collateral Account as defined in the Deposit
Pledge Agreement among Landlord, Guarantor, Member, and Tenant dated as of
September 22, 1998 ("Pledge Agreement").
H. The sole member of Financial Care Investors, LLC, Brad E.
Hollinger, now desires to withdraw as the nominal holder of the equity interests
of Member so as to permit a group of investors to purchase 100% of the equity
interests and to make certain investments in Member ("Equity Purchase").
Landlord has consented to the Equity Purchase subject to certain conditions
including but not limited to modifications to the Lease.
I. In connection with the Equity Purchase, Developer has
agreed to make loans to Member to fund a portion of the Equity Capital Portion
of Tenant's working capital needs ("BCC Loans").
J. In addition, Tenant has requested certain changes to the
financial covenants contained in the Lease.
K. Tenant and Landlord desire to amend the Lease to reflect
certain changes in the terms of the Lease related to the Equity Purchase and the
BCC Loans and to modify the financial covenants.
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NOW THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. Principal Place of Business. Tenant's chief executive
office as stated in the introductory paragraph of the Lease is amended to read
as follows: "1350 Old Bayshore Highway, Suite 300, Burlingame, California
94010".
2. Term. Section 1.2 of the Lease is amended to read in its
entirety as follows:
1.2 Term. The Construction Term of this Lease
commences on the Effective Date and expires on the Conversion Date. The
initial term ("Initial Term") of this Lease commences on the day after
the Conversion Date and expires at 12:00 Midnight Eastern Time on the
sixteenth anniversary of the Term Commencement Date (the "Expiration
Date"); provided, however, that [i] Tenant has one or more options to
renew the Lease pursuant to Article 12, and [ii] the Initial Term may
be extended from time to time pursuant to Article 23.
3. Definitions. Any capitalized terms not defined in this
Amendment shall have the meaning set forth in the Lease or the Construction
Agreement, as the case may be.
(a) Section 1.3 of the Lease is amended to substitute the
following definitions:
"Equity Loan" means any loan extended by Landlord to
Member for working capital purposes pursuant to the term of the Equity
Loan Documents.
"Equity Loan Documents" means the Loan Agreement and
Note executed on behalf of Member and the Security Agreement executed
by Tenant in connection with the Equity Loan.
"Increaser Rate" means [i] in any Lease Year (other
than Lease Years 15 and 16 of the Initial Term) in which the nationwide
Consumer Price Index for all urban consumers increases by a percentage
that is less than 20%, 25 basis points per year for the Initial Term
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and 25 basis points per year for each Renewal Term; [ii] in all other
Lease Years (other than Lease Years 15 and 16 of the Initial Term), 30
basis points per year for the Initial Term and 30 basis points per year
for each Renewal Term; and [iii] in Lease Years 15 and 16 of the
Initial Term, 58 basis points per year if the nationwide Consumer Price
Index for all urban consumers increases by a percentage that is less
than 20% or 63 basis points per year if the nationwide Consumer Price
Index for all urban consumers increases by a percentage that is 20% or
greater.
"Lease Documents" means [i] this Lease; [ii] the
Construction Agreement; [iii] the Collateral Assignment of Construction
Contract; [iv] the Collateral Assignment of Architect's Contract; [v]
the Collateral Assignment of Management Agreement and Consent of
Manager to Collateral Assignment of Management Agreement and Security
Agreement; [vi] the Cash Collateral Security Agreement (Fill Up
Account); [vii] the Cash Collateral Security Agreement (Working Capital
Account), and [viii] all other documents and instruments executed by
Tenant, Manager or Developer and Landlord in connection with the Lease.
"Working Capital Documents" means [i] the Transaction
Documents as defined in Appendix I to that certain Shortfall Funding
Agreement among Guarantor, Tenant, and Member; [ii] the Working Capital
Assurance Agreement; and [iii] the BCC Loan Documents.
(b) Section 1.3 of the Lease is amended to add the
following definitions:
"Actual Fill Up Schedule" means, for each month of
each Fill Up Quarter, the computation of actual results for each of the
following:
[i] Average Daily Census;
[ii] Quarterly Cash Flow; and
[iii] Cumulative Cash Flow.
"Applicable Percentage" means 25% for the first Fill
Up Quarter, 20% for the second Fill Up Quarter, 15% for the third Fill
Up Quarter, 10% for the fourth Fill Up Quarter, and 5% for each Fill Up
Quarter thereafter.
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"Average Daily Census" means the result of dividing
the total resident days for a specific month by the number of days
contained in that month.
"BCC Loan" means any loan extended by Developer to
Member to fund a portion of the Equity Capital Portion of Tenant's
working capital needs.
"BCC Loan Documents" means the Loan Agreement and
Note executed by Member in connection with a BCC Loan.
"Budgeted Fill Up Schedule" means, for each Fill Up
Quarter, the schedule as set forth on Exhibit H for each of the
following:
[i] Average Daily Census;
[ii] Quarterly Cash Flow;
[iii] Cumulative Cash Flow;
[iv] Stabilization; and
[v] Fill Up Working Capital Amount.
"C of O" means the certificate of occupancy issued
for the Facility.
"Cumulative Cash Flow" means the accumulation of the
Quarterly Cash Flow a set forth on the Budgeted Fill Up Schedule.
"Developer" means BCC Development and Management Co.,
a corporation organized under the laws of the State of Delaware.
"Fill Up Account" means an interest bearing account
under the control of Landlord established with National City Bank of
Cleveland into which Landlord shall deposit funds received from Tenant
pursuant to Section 15.7.6.
"Fill Up Period" means the period of time commencing
on the first day of the first Fill Up Quarter and terminating upon
Stabilization.
"Fill Up Quarter" means a three month period of time,
the first of which will commence on either [i] the first day of the
month after the issuance of the C
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<PAGE> 6
of O or [ii] if the C of O is issued during the first five days of the
month, then the first day of the month that the C of O is issued, and
terminating three full months thereafter, and each three month period
thereafter during the Fill Up Period.
"Fill Up Working Capital Amount" means the amount
necessary to meet anticipated working capital needs for the period set
forth on the Budgeted Fill Up Schedule.
"Quarterly Cash Flow" means the net income of Tenant
as reflected on the income statement of Tenant plus [i] the amount of
the provision for depreciation and amortization; plus [ii] the amount
of the provision for management fees; plus [iii] the amount of the
provision for income taxes; plus [iv] the amount of the provision for
interest and lease payment, if any; less [v] the amount of the
provision for Rent payments.
"Revised Fill Up Schedule" means, for each Fill Up
Quarter that Tenant is required to prepare a reconciliation pursuant to
Section 15.7.6(b) hereof, the revised schedule for each of the
following for the period covered by the Budgeted Fill Up Schedule:
[i] Average Daily Census;
[ii] Quarterly Cash Flow;
[iii] Cumulative Cash Flow;
[iv] Fill Up Working Capital Amount; and
[v] Working Capital Deficiency.
"Revised Fill Up Working Capital Amount" means the
Fill Up Working Capital Amount set forth on the Revised Fill Up
Schedule, calculated to adjust for any variances in Average Daily
Census and Quarterly Cash Flow and projected forward utilizing the
assumption set forth in the Underwriting Schedule.
"Stabilization" means the end of the Fill Up Quarter
in which Tenant first achieves the Average Daily Census and Quarterly
Cash Flow shown in the column headed "Stabilized" on the Budgeted Fill
Up Schedule.
"Underwriting Schedule" means the schedule set forth
on Exhibit I.
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<PAGE> 7
"Working Capital Account" means the account funded as
provided in Section 15.9.
"Working Capital Deficiency" means the amount derived
from adding the Revised Fill Up Working Capital Amount plus the
Cumulative Cash Flow as set forth in the Revised Fill Up Schedule and
subtracting the Fill Up Working Capital Amount as set forth in the
Budgeted Fill Up Schedule.
4. Financial Covenants.
(a) Section 15.7.2 of the Lease is amended to read in its
entirety as follows:
15.7.2 Coverage Ratio. Tenant shall maintain a
Coverage Ratio with respect to the Facility of not less than 1.25 to
1.00, measured on a monthly basis commencing on the date of
Stabilization as set forth on the Budgeted Fill Up Schedule.
(b) Section 15.7.3 of the Lease is amended to read in its
entirety as follows:
15.7.3 Net Worth. Guarantor shall maintain for each
fiscal quarter a Net Worth and equity capitalization of not less than
$35,000,000.00.
(c) Section 15.7.5 of the Lease is amended to read in its
entirety as follows:
15.7.5 Debt to Equity Ratio. Guarantor shall maintain
for each fiscal quarter a ratio of total indebtedness to shareholders'
equity not to exceed 10.0 to 1.0. The aggregate lease amount under all
capitalized and operating leases shall be included as indebtedness and
all subordinated debt shall be included as equity. For purposes of this
section, "operating leases" shall include all future lease obligations
where Guarantor is not currently the tenant but has an option to
purchase the equity interest in or assets of the tenant or where
Guarantor otherwise has rights to purchase the assets or equity of the
tenant or where Guarantor has agreed to fund operating shortfalls in
connection with the operation of the facility by the tenant.
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<PAGE> 8
5. Fill Up Requirements. Article 15 of the Lease is amended to
add the following Section 15.7.6:
15.7.6 Fill Up Requirement. For each Fill Up Quarter,
Tenant shall have achieved the Average Daily Census and the Cumulative
Cash Flow specified in the Budgeted Fill Up Schedule for that month.
Failure to satisfy this provision shall not be a default under this
Lease if Tenant complies with the requirements of Section 15.7.6(a) -
(d).
(a) Reporting of Compliance with Fill Up Schedule.
Within 15 days after each Fill Up Quarter, Tenant shall provide
Landlord with the Actual Fill Up Schedule for said Fill Up Quarter.
(b) Reconciliation. In the event the Actual Fill Up
Schedule shows any deviation from the Budgeted Fill Up Schedule, Tenant
shall submit, together with the Actual Fill Up Schedule, a Revised Fill
Up Schedule in form reasonably acceptable to Landlord. The Revised Fill
Up Schedule shall set forth detailed line item reconciliation of each
item reported on the Budgeted Fill Up Schedule, including a calculation
of the Revised Fill Up Working Capital Amount required to stabilize the
Facility and the Working Capital Deficiency.
(c) Amended Budgeted Fill Up Schedule. If the Revised
Fill Up Schedule submitted by Tenant to Landlord under Section
15.7.6(b) above is acceptable to Landlord, such Revised Fill Up
Schedule shall thereafter be deemed to be the Budgeted Fill Up Schedule
for purposes of this Section 15.7.6.
(d) Fill Up Account.
Deposits. Within five (5) business days after Landlord has approved the
Revised Fill Up Schedule (which approval shall not be unreasonably
withheld, conditioned or delayed), Tenant shall deliver to Landlord for
deposit in the Fill Up Account the greater of [i] the Fill Up Working
Capital Deficiency or [ii] the Applicable Percentage of the Fill Up
Working Capital Amount. Within five (5) business days after Landlord
notifies Tenant that the Revised Fill Up Schedule is not acceptable,
Tenant shall deliver to Landlord for deposit in the Fill Up Account the
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<PAGE> 9
Applicable Percentage of the Fill Up Working Capital Amount as shown on
the Budgeted Fill Up Schedule. Within ten (10) business days after
Landlord notifies Tenant that the Revised Fill Up Schedule is not
acceptable, Tenant shall deliver to Landlord a modified Revised Fill Up
Schedule acceptable to Landlord.
(i) Use of Fill Up Account Funds. All funds delivered
to Landlord pursuant to this section shall be deposited in the Fill Up
Account. All interest accrued on the Fill Up Account shall be deemed to
be income of Tenant and shall be so reported for tax purposes.
Withdrawals from the Fill Up Account shall be permitted solely for
working capital purposes and only upon the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned
or delayed. No funds may be drawn under the Fill Up Account until
Member has borrowed all funds available under the Equity Loan Documents
and the BCC Loan Documents. If Landlord at any time applies funds in
the Fill Up Account to payments due under the Lease, which Landlord may
do but which Landlord is not obligated to do, then Tenant shall
promptly replenish the Fill Up Account to its original amount. The Fill
Up Account, including accrued interest, shall be released to Tenant
within five (5) business days after satisfaction of the following
conditions: [a] no monetary Event of Default has occurred under any
financing made pursuant to the Credit Facility; and [b] the Facility
has reached Stabilization.
6. Additional Equity Investment. Article 15 of the Lease shall
be amended to add a new Section 15.9 as follows:
15.9 Additional Equity Investment. Guarantor and
Member shall provide Landlord with evidence of additional equity
invested in Member in the amount of at least $236,710.00 on or before
November 30, 1999. If Guarantor and Member fail to satisfy the
foregoing requirement within the time specified, Landlord shall place
the Shortfall Equity Amount (as hereinafter defined) into an interest
bearing account under the control of Landlord established with National
City Bank of Cleveland ("Working Capital Account"). Developer shall
execute a Cash Collateral Security Agreement in
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<PAGE> 10
favor of Landlord, granting to Landlord a security interest in the
Working Capital Account. The Shortfall Equity Amount shall be taken
solely from Development Fees owing to Developer under the Construction
Agreements for each Facility described on Exhibit H and shall be in an
amount equal to the difference between $236,710.00 and the amount of
additional equity investments, if any, that have been actually received
by FCI as of November 30, 1999. All interest accrued on the Working
Capital Account shall be deemed to be income of Developer and shall be
so reported for tax purposes. Funds in the Working Capital Account,
including accrued interest, shall be released to Developer under the
following conditions: [i] monthly working capital draw requests from
Developer for working capital shortfall advances that Developer is
obligated to pay under the BCC Loan Documents; or [ii] all Facilities
shown on Exhibit H have reached Stabilization.
7. Earnout Lease Advance. Section 17.1 of the Lease is amended
to read in its entirety as follows:
17.1 Earnout Lease Advance. Prior to the fourth
anniversary of the Effective Date, Landlord shall, at Guarantor's
request, make a Lease Advance ("Earnout Lease Advance") to Tenant in an
amount not to exceed the sum of [i] ten percent (10%) of the Maximum
Lease Amount, plus [ii] the lesser of [a] the amount, subject to
Landlord's approval (not to be unreasonably withheld, conditioned or
delayed), by which the budgeted construction costs (as shown on the
Project Budget) exceed the actual construction costs for the Facility
as determined by Landlord, or [b] $54,166.00, upon satisfaction of the
Earnout Conditions (defined below).
8. Budgeted Fill Up Schedule. The Lease is amended to add an
Exhibit H attached hereto and made a part hereof.
9. Underwriting Schedule. The Lease is amended to add an
Exhibit I attached hereto and make a part hereof.
10. Affirmation. Except as specifically modified by this
Amendment, the terms and provisions of the Lease and the security for the
Secured Obligations are hereby affirmed and shall remain in full force and
effect.
-10-
<PAGE> 11
11. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of Landlord and
Tenant.
12. Representations and Warranties. Tenant affirms all
representations and warranties contained in the Lease as of the Effective Date.
13. Further Modification. The Lease may be further modified
only by a writing signed by Landlord and Tenant.
14. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
15. Consent of Guarantor and Developer. This Amendment shall
have no force or effect unless and until Guarantor and Developer have executed
the Consents set forth below.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-11-
<PAGE> 12
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amendment as of the date first set forth above.
Signed and acknowledged [ ]
in the presence of:
Signature /s/ Rita J. Rogge By: /s/ Erin C. Ibele
Print Name Rita J. Rogge
Title: Vice President and
Corporate Secretary
Signature /s/ Andrea Rosebery
Print Name Andrea Rosebery
[ ]
Signature /s/ Loretta Gauci By: /s/ F. David Carr
Print Name Loretta Gauci
Title: Manager
Signature /s/ Lorraine Murphy
Print Name Lorraine Murphy
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this 26th
day of October, 1999 by Erin C. Ibele, the Vice President and Corporate
Secretary of [ ], a [ ] corporation, on behalf of the corporation.
/s/ Rita J. Rogge
Notary Public
My Commission Expires: August 26, 2000 [SEAL]
S-1
<PAGE> 13
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California )
) ss.
County of San Mateo )
On Oct. 26, 1999, before me, Caroline D'Aquino, Notary Public personally
appeared F. David Carr, personally known to me to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity and that by his signature on the instrument the
person or the entity upon behalf of which the person acted, executed the
instrument.
Witness my hand and official seal.
/s/ Caroline D'Aquino
Place Notary Seal Above
OPTIONAL
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document.
Description of Attached Document
Title or Type of Document: First Amend To Lease Agmt.
Document Date: 10/26/99 Number of Pages:
Signer(s) Other Than Named Above:
Capacity(ies) Claimed by Signer
Signer's Name:
Individual
Corporate Officer - Title(s):
Partner - Limited General
Attorney in Fact
Trustee
Guardian or Conservator
Other:
Signer is Representing:
S-2
<PAGE> 14
CONSENT OF GUARANTOR
Guarantor hereby [i] consents to the foregoing Amendment; [ii]
agrees to be bound by the terms and provisions of the Amendment to the extent
applicable to Guarantor pursuant to the Guaranty, as amended from time to time;
[iii] affirms the Guaranty which shall remain in full force and effect; and [iv]
waives any suretyship defenses arising in connection with the Amendment.
BALANCED CARE CORPORATION
By: /s/ Robin L. Barber
Title: Senior Vice President and Counsel;
Assistant Secretary
<PAGE> 15
CONSENT OF DEVELOPER
Developer hereby [i] consents to the foregoing Amendment; [ii]
agrees to be bound by the terms and provisions of the Amendment to the extent
applicable to Developer pursuant to the Construction Disbursing Agreement, as
amended from time to time; [iii] affirms the Construction Disbursing Agreement
which shall remain in full force and effect; and [iv] waives any suretyship
defenses arising in connection with the Amendment.
BCC DEVELOPMENT AND MANAGEMENT CO.
By: /s/ Robin L. Barber
Title: Vice President and Secretary
S-2
<PAGE> 1
Exhibit 10.20
Schedule to Form of First Amendment to Lease Agreement
<TABLE>
<CAPTION>
Landlord State of Incorporation Tenant
- -------- ---------------------- ------
<S> <C> <C>
Pennsylvania BCC Pennsylvania Financial Care Investors of
Properties, Inc. Lebanon, L.L.C.
Pennsylvania BCC Pennsylvania Financial Care Investors of
Properties, Inc. Loyalsock, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Sagamore Hills, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Westerville, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Morristown, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Oak Ridge, L.L.C.
</TABLE>
<TABLE>
<CAPTION>
Landlord Unit Bed Facility Loan Amount
- -------- ---- --- -------- -----------
<S> <C> <C> <C> <C>
Pennsylvania BCC 60 66 Personal Care $686,800.00
Properties, Inc.
Pennsylvania BCC 60 66 Personal Care $674,050.00
Properties, Inc.
HCN BCC Holdings, Inc. 103 105 Residential Care $1,243,550.00
HCN BCC Holdings, Inc. 106 106 Residential Care $1,313,675.00
HCN BCC Holdings, Inc. 60 66 Assisted-Care Living $692,000.00
HCN BCC Holdings, Inc. 60 66 Assisted-Care Living $697,948.00
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Tenant Property
- ------ --------
<S> <C>
Financial Care Investors of Lebanon, L.L.C. Lebanon, Pennsylvania
Financial Care Investors of Loyalsock, L.L.C. Williamsport, Pennsylvania
Financial Care Investors of Sagamore Hills, L.L.C. Sagamore Hills, Ohio
Financial Care Investors of Westerville, L.L.C. Westerville, Ohio
Financial Care Investors of Morristown, L.L.C. Morristown, Tennessee
Financial Care Investors of Oak Ridge, L.L.C. Oak Ridge, Tennessee
</TABLE>
<PAGE> 1
Exhibit 10.21
FORM OF
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT ("Amendment") is made
effective as of the 30th day of September, 1999 ("Effective Date") between [ ],
a corporation organized under the laws of the State of [ ] ("Lender"), having
its principal office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio 43603, and FINANCIAL CARE INVESTORS, LLC, a limited liability company
organized under the laws of the State of Delaware ("Borrower"), having its
principal office located at 1350 Old Bayshore Highway, Suite 300, Burlingame,
California 94010.
R E C I T A L S
A. Lender has extended to Borrower a loan up to the amount of
[ ] ("Loan"). The Loan is evidenced by a Note ("Note") and subject to the terms
of a Loan Agreement ("Loan Agreement"), each dated as of September 22, 1998. The
Loan is secured by a security interest granted by [ ], a limited liability
company organized under the laws of the State of Delaware ("Tenant") under a
Security Agreement dated as of September 22, 1998 ("Security Agreement"). The
Note, Loan Agreement, and Security Agreement may be collectively called the
"Loan Documents".
B. Lender has leased to Tenant property located in [ ]
("Property") pursuant to a Lease Agreement dated as of September 22, 1998 as
amended by a First Amendment to Lease Agreement of even date ("Lease"). Tenant
intends to operate a [ ]-unit ([ ]-bed) [ ] ("Facility") on the Property.
C. Under a Shortfall Funding Agreement among Balanced Care
Corporation, Tenant and Borrower, Borrower agreed to contribute capital to
Tenant to fund the working capital needs of Tenant. Borrower agreed to borrow
85% of the working capital needs of Tenant through the Loan ("Senior Loan
Capital Portion"). Borrower also agreed to fund the remaining 15% as an equity
contribution ("Equity Capital Portion"). The Senior Loan Capital Portion and the
Equity Capital Portion collectively constitute the Working Capital Reserve.
D. The sole member of Borrower, Brad E. Hollinger, now desires
to withdraw as the nominal holder of the equity interests of Borrower so as to
permit a group of investors to purchase 100% of the equity interests and to make
certain investments in
<PAGE> 2
Borrower ("Equity Purchase"). Lender has consented to the Equity Purchase
subject to certain conditions including but not limited to modifications to the
Loan Agreement, Lease, and other documents.
E. In connection with the Equity Purchase, BCC Development and
Management Co. has agreed to make loans to Borrower to fund a portion of the
Equity Capital Portion of Tenant's working capital needs ("BCC Loans").
F. Borrower and Lender desire to amend the Loan Agreement to
reflect certain changes in the terms of the Loan Agreement related to the Equity
Purchase and the BCC Loans.
NOW THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. Principal Place of Business. Borrower's chief executive
office as stated in the introductory paragraph of the Loan Agreement is amended
to read as follows: "1350 Old Bayshore Highway, Suite 300, Burlingame,
California 94010".
2. Definitions. Any capitalized terms not defined in this
Amendment shall have the meaning set forth in the Loan Agreement.
(a) Section 1.2 of the Loan Agreement is amended to substitute
the following definitions:
"Affiliate" means any person, corporation,
partnership, limited liability company, trust, or other legal entity
that, directly or indirectly, controls, or is controlled by, or is
under common control with Borrower. "Control" (and the correlative
meanings of the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity.
"Affiliate" includes, without limitation, any corporation, partnership
or limited liability company (now or hereafter existing) of which the
equity interest is owned by any one or more Affiliates or by the
members of Borrower. "Affiliate" does not include any Member
individually or the Members collectively.
-2-
<PAGE> 3
"Member" means F. David Carr and Jan E. Mercer,
Co-Trustees of the Carr Living Trust dated January 17, 1992; James A.
Diebold, an individual resident of Pennsylvania; Gary James, an
individual resident of Pennsylvania; the Robert Smith and Nancy Smith
1993 Family Trust; and Edward R. Stolman and Carolyn S. Stolman,
Trustees, or their successors in trust under the Stolman Family
Revolvable Trust u/t/a dated November 29, 1994, individually and
collectively.
"Transaction Documents" means the Loan Documents,
Lease Documents, the Management Agreement, the BCC Loan Documents, and
all agreements and documents made between Borrower or Tenant and
Balanced Care or by Borrower or Tenant in favor of Balanced Care,
including, without limitation, the Shortfall Agreement, the Option
Agreement, all Promissory Notes, the Open End Leasehold Mortgage and
Security Agreement, the Deposit Agreement and the Equity Pledge
Agreement; provided, however, Transaction Documents refer only to
agreements and documents entered into in connection with any lease
within the Current Phase that includes the Lease.
(b) Section 1.2 of the Loan Agreement is amended to add the
following definitions:
"BCC Loan" means any loan extended by BCC Development
and Management Co. to Borrower to fund a portion of the Equity Capital
Portion of Tenant's working capital needs.
"BCC Loan Documents" means the Loan Agreement and
Note executed by Borrower in connection with a BCC Loan.
3. Financial Documents. The last sentence of Section 5.2.1 of
the Loan Agreement is amended to read in its entirety as follows:
With each delivery of Annual Financial Statements and Periodic
Financial Statements to Lender, Borrower shall also deliver to Lender a
certificate signed by the managing member of Borrower in the form of
Exhibit F.
-3-
<PAGE> 4
4. Working Capital Budget. Exhibit C of the Loan Agreement,
Working Capital Budget, is amended to substitute the Exhibit C attached hereto
and made a part hereof.
5. Affirmation. Except as specifically modified by this
Amendment, the terms and provisions of the Loan Agreement are hereby affirmed
and shall remain in full force and effect.
6. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of Lender and
Borrower.
7. Representations and Warranties. Borrower affirms all
representations and warranties contained in the Loan Agreement as of the
Effective Date.
8. Further Modification. The Loan Agreement may be further
modified only by a writing signed by Lender and Borrower.
9. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
10. Consent of Manager. This Amendment shall have no force or
effect unless and until Manager has executed the Consent set forth below.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-4-
<PAGE> 5
IN WITNESS WHEREOF, Lender and Borrower have executed this
Amendment as of the date first set forth above.
[ ]
By: /s/ Erin C. Ibele
Erin C. Ibele
Title: Vice President and
Corporate Secretary
FINANCIAL CARE INVESTORS, LLC
By: /s/ F. David Carr
F. David Carr
Title: Manager
S-1
<PAGE> 6
CONSENT OF MANAGER
Manager hereby [i] consents to the foregoing Amendment; [ii]
agrees to be bound by the terms and provisions of the Amendment to the extent
applicable to Manager; [iii] affirms the Management Agreement which shall remain
in full force and effect; and [iv] waives any suretyship defenses arising in
connection with the Amendment.
BALANCED CARE AT [ ], INC.
By: /s/ Robin L. Barber
Robin L. Barber
Title: Vice President and Secretary
<PAGE> 1
Exhibit 10.22
Schedule to Form of First Amendment to Loan Agreement
<TABLE>
<CAPTION>
Lender State of Incorporation Tenant
- ------ ---------------------- ------
<S> <C> <C>
Pennsylvania BCC Pennsylvania Financial Care Investors of
Properties, Inc. Lebanon, L.L.C.
Pennsylvania BCC Pennsylvania Financial Care Investors of
Properties, Inc. Loyalsock, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Sagamore Hills, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Westerville, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Morristown, L.L.C.
HCN BCC Holdings, Inc. Delaware Financial Care Investors of
Oak Ridge, L.L.C.
</TABLE>
<TABLE>
<CAPTION>
Lender Unit Bed Facility Loan
- ------ ---- --- -------- ----
<S> <C> <C> <C> <C>
Pennsylvania BCC 60 66 Personal Care $686,800.00
Properties, Inc.
Pennsylvania BCC 60 66 Personal Care $674,050.00
Properties, Inc.
HCN BCC Holdings, Inc. 103 105 Residential Care $1,243,550.00
HCN BCC Holdings, Inc. 106 106 Residential Care $1,313,675.00
HCN BCC Holdings, Inc. 60 66 Assisted-Care Living $692,000.00
HCN BCC Holdings, Inc. 60 66 Assisted-Care Living $697,948.00
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Tenant Property Manager
- ------ -------- -------
<S> <C> <C>
Financial Care Investors of Lebanon, Lebanon, Pennsylvania Lebanon
L.L.C.
Financial Care Investors of Williamsport, Pennsylvania Loyalsock
Loyalsock, L.L.C.
Financial Care Investors of Sagamore Sagamore Hills, Ohio Sagamore Hills
Hills, L.L.C.
Financial Care Investors of Westerville, Ohio Westerville
Westerville, L.L.C.
Financial Care Investors of Morristown, Tennessee Morristown
Morristown, L.L.C.
Financial Care Investors of Oak Oak Ridge, Tennessee Oak Ridge
Ridge, L.L.C.
</TABLE>
<PAGE> 1
Exhibit 10.23
FORM OF
FIRST AMENDMENT TO WORKING CAPITAL ASSURANCE AGREEMENT
THIS FIRST AMENDMENT TO WORKING CAPITAL ASSURANCE AGREEMENT
("Amendment") is made effective as of the 30th day of September, 1999
("Effective Date") between [ ], a corporation organized under the laws of
the State of [ ] ("Landlord"), having its principal office located at
One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603, and BALANCED CARE
CORPORATION, a corporation organized under the laws of the State of Delaware
("BCC"), having its principal office located at 1215 Manor Drive, Mechanicsburg,
Pennsylvania 17055.
R E C I T A L S
A. Landlord leased to [ ], a limited liability company
organized under the laws of the State of Delaware ("Tenant") property located in
[ ] ("Property") pursuant to a Lease Agreement dated as of September 22,
1998 as amended by a First Amendment to Lease Agreement of even date ("Lease").
Tenant intends to operate a [ ]-unit ([ ]-bed) [ ] facility
("Facility") on the Property.
B. The Lease is guaranteed by the Unconditional and Continuing
Lease Guaranty of BCC dated as of September 22, 1998 ("Guaranty").
C. Pursuant to a Construction Disbursing Agreement
("Construction Agreement") dated as of September 22, 1998 between Landlord and
BCC Development and Management Co. ("Developer") and the Lease, Landlord has
agreed to pay for certain acquisition, development and construction costs of the
Facility.
D. Landlord has extended to Financial Care Investors, LLC
("Member"), the sole member of Tenant, a loan up to the amount of [ ]
for Facility working capital purposes ("Equity Loan"). The Equity Loan is
evidenced by a Note ("Note") and subject to the terms of a Loan Agreement ("Loan
Agreement"), each dated as of September 22, 1998. The Equity Loan is secured by
a security interest granted by Tenant under a Security Agreement dated as of
September 22, 1998 ("Security Agreement"). The Note, Loan Agreement, and
Security Agreement may be collectively called the "Equity Loan Documents".
E. Under a Shortfall Funding Agreement among BCC, Tenant and
Member, Member agreed to contribute capital to Tenant
<PAGE> 2
to fund the working capital needs of Tenant. Member agreed to borrow 85% of the
working capital needs of Tenant through the Equity Loan ("Senior Loan Capital
Portion"). Member also agreed to fund the remaining 15% as an equity
contribution ("Equity Capital Portion"). The Senior Loan Capital Portion and the
Equity Capital Portion collectively constitute the Working Capital Reserve. BCC
agreed to advance funds to Tenant upon the depletion of the Working Capital
Reserve to pay any shortfalls in the working capital needs of Tenant. BCC's
obligation to fund working capital shortfalls is confirmed in and subject to the
terms of the Working Capital Assurance Agreement between BCC and Landlord dated
as of September 22, 1998 ("Working Capital Assurance Agreement").
F. The sole member of Financial Care Investors, LLC, Brad E.
Hollinger, now desires to withdraw as the nominal holder of the equity interests
of Member so as to permit a group of investors to purchase 100% of the equity
interests and to make certain investments in Member ("Equity Purchase").
Landlord has consented to the Equity Purchase subject to certain conditions
including but not limited to modifications to the Lease, the Working Capital
Assurance Agreement, and other documents.
G. In connection with the Equity Purchase, Developer has
agreed to make loans to Member to fund a portion of the Equity Capital Portion
of Tenant's working capital needs ("BCC Loans").
H. BCC and Landlord desire to amend the Working Capital
Assurance Agreement to reflect certain changes in the terms of the Working
Capital Assurance Agreement related to the Equity Purchase and the BCC Loans.
NOW THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. Definitions. Any capitalized terms not defined in this
Amendment shall have the meaning set forth in the Working Capital Assurance
Agreement. In addition, the following definitions shall be added to the Working
Capital Assurance Agreement:
"BCC Loan" means any loan extended by Developer to Member
to fund a portion of the Equity Capital Portion of Lessee's working
capital needs.
-2-
<PAGE> 3
"BCC Loan Documents" means the Loan Agreement and
Note executed by Member in connection with a BCC Loan.
2. Obligation to Provide Working Capital Loans. Section 4 of
the Working Capital Assurance Agreement is amended to read in its entirety as
follows:
4. Notwithstanding any provision to the contrary set
forth herein, BCC's obligation to provide the Working Capital Loans,
and advance Shortfalls, to the Lessee shall not commence until such
time as (i) Lessor has advanced all amounts required to be advanced by
Lessor under the Senior Credit Documents and such amounts have been
deposited in the Collateral Account (as defined in the Deposit Pledge
Agreement); and (ii) the full amount of the Working Capital Reserve
actually deposited in the Collateral Account has been depleted. BCC
shall make or permit disbursements to Lessor from the Working Capital
Reserve to meet any and all Lease Obligations and Senior Loan
Obligations when and as such obligations become due and payable,
pursuant to the terms and provisions of the Deposit Pledge Agreement.
3. Subordination. Section 12(h) of the Working Capital
Assurance Agreement is amended to read in its entirety as follows:
h. Subordination. If for any reason whatsoever
Lessee, Member, any Affiliates of Lessee, Developer or Manager now or
hereafter becomes indebted to BCC or any Affiliate of BCC, such
indebtedness and all interest therein shall at all times be
subordinated in all respects to the obligations of BCC under this
Agreement, the obligations of Lessee under the Lease and Senior Loan
Obligations, the obligations of Member under the Senior Loan
Obligations, the obligations of Developer under the Development
Agreement; provided, however, so long as no default or event of default
shall occur and be continuing under any Lease Document or Senior Credit
Documents, BCC and any Affiliate of BCC shall be permitted to receive
amounts due and owing solely under the Development Agreement, the
Management Agreement, and the BCC Loan Documents. Payment on the Notes
issued pursuant to the Shortfall Agreement is permitted solely in
connection with the exercise of the
-3-
<PAGE> 4
Option or Asset Purchase Option. Payments of any kind or nature on the
BCC Loans (i) are to be paid solely from equity contributions to Member
if payment is not being made in connection with the exercise of the
Option or Asset Purchase Option, (ii) are not to be considered as
operating expenses of the Facility or obligations of the Lessee, and
(iii) may not be paid from revenues and other income attributable to
the Facility earned by or on behalf of the Lessee (or revenues and
other income attributable to any other facility included in the Current
Phase).
4. Affirmation. Except as specifically modified by this
Amendment, the terms and provisions of the Working Capital Assurance Agreement
are hereby affirmed and shall remain in full force and effect.
5. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of Landlord and
BCC.
6. Representations and Warranties. BCC affirms all
representations and warranties contained in the Working Capital Assurance
Agreement as of the Effective Date.
7. Further Modification. The Working Capital Assurance
Agreement may be further modified only by a writing signed by Landlord and BCC.
8. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-4-
<PAGE> 5
IN WITNESS WHEREOF, Landlord and BCC have executed this
Amendment as of the date first set forth above.
[ ]
By: /s/ Erin C. Ibele
Title: Vice President and
Corporate Secretary
BALANCED CARE CORPORATION
By: /s/ Robin L. Barber
Title: Senior Vice
President and Counsel;
Assistant Secretary
S-1
<PAGE> 1
Exhibit 10.24
Schedule to Form of First Amendment to
Working Capital Assurance Agreement
<TABLE>
<CAPTION>
Landlord Property Equity
Loan
<S> <C> <C>
Pennsylvania BCC Properties, Lebanon, Pennyslvania $686,800.00
Inc.
Pennsylvania BCC Properties, Williamsport, $674,050.00
Inc. Pennsylvania
HCN BCC Holdings, Inc. Sagamore Hills, Ohio $1,243,550.00
HCN BCC Holdings, Inc. Westerville, Ohio $1,313,675.00
HCN BCC Holdings, Inc. Morristown, Tennessee $692,000.00
HCN BCC Holdings, Inc. Oak Ridge, Tennessee $697,948.00
<CAPTION>
Landlord Unit Bed State of Incorporation Tenant
<S> <C> <C> <C> <C>
Pennsylvania BCC Properties, 60 66 Pennsylvania Financial Care Investors of Lebanon,
Inc. L.L.C.
Pennsylvania BCC Properties, 60 66 Pennsylvania Financial Care Investors of Loyalsock,
Inc. L.L.C.
HCN BCC Holdings, Inc. 103 105 Delaware Financial Care Investors of Sagamore
Hills, L.L.C.
HCN BCC Holdings, Inc. 106 106 Delaware Financial Care Investors of Westerville,
L.L.C.
HCN BCC Holdings, Inc. 60 66 Delaware Financial Care Investors of Morristown,
L.L.C.
HCN BCC Holdings, Inc. 60 66 Delaware Financial Care Investors of Oak Ridge,
L.L.C.
</TABLE>
<PAGE> 2
Property Facility
Lebanon, Pennyslvania Personal Care
Williamsport, Pennsylvania Personal Care
Sagamore Hills, Ohio Residential Care
Westerville, Ohio Residential Care
Morristown, Tennessee Assisted-Care Living
Oak Ridge, Tennessee Assisted-Care Living
<PAGE> 1
Exhibit 10.25
FORM OF
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") is made
effective as of the 30th day of September, 1999 ("Effective Date") between
PENNSYLVANIA BCC PROPERTIES, INC., a corporation organized under the laws of the
State of Pennsylvania ("Landlord"), having its principal office located at One
SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603, and BALANCED CARE AT
[ ], INC., a corporation organized under the laws of the State of Delaware
("Tenant"), having its principal office located at 1215 Manor Drive,
Mechanicsburg, Pennsylvania 17055.
R E C I T A L S
A. Landlord leased to Balanced Care at [ ], Inc., a
corporation organized under the laws of the State of Delaware ("Tenant")
property located in [ ], Pennsylvania ("Property") pursuant to a Lease
Agreement dated as of March 15, 1999 ("Lease"). Tenant is operating a [ ]-unit
([ ]-bed) [ ] facility ("Facility") on the Property.
B. The Lease is guaranteed by the Unconditional and Continuing
Lease Guaranty of Balanced Care Corporation ("Guarantor") dated as of March 15,
1999 ("Guaranty").
C. Tenant and Guarantor have requested certain changes to the
financial covenants contained in the Lease; Landlord has agreed to this request.
Tenant and Landlord now desire to amend the Lease to reflect these changes.
NOW THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. Definitions. Any capitalized terms not defined in this
Amendment shall have the meaning set forth in the Lease.
2. Financial Covenants.
(a) Section 15.7.3 of the Lease is amended to read in its
entirety as follows:
<PAGE> 2
15.7.3 Net Worth. Guarantor shall maintain for each
fiscal quarter a Net Worth and equity capitalization of not less than
$35,000,000.00.
(b) Section 15.7.5 of the Lease is amended to read in its
entirety as follows:
15.7.5 Debt to Equity Ratio. Guarantor shall maintain
for each fiscal quarter a ratio of total indebtedness to shareholders'
equity not to exceed 10.0 to 1.0. The aggregate lease amount under all
capitalized and operating leases shall be included as indebtedness and
all subordinated debt shall be included as equity. For purposes of this
section, "operating leases" shall include all future lease obligations
where Guarantor is not currently the tenant but has an option to
purchase the equity interest in or assets of the tenant or where
Guarantor otherwise has rights to purchase the assets or equity of the
tenant or where Guarantor has agreed to fund operating shortfalls in
connection with the operation of the facility by the tenant.
3. Affirmation. Except as specifically modified by this
Amendment, the terms and provisions of the Lease are hereby affirmed and shall
remain in full force and effect.
4. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of Landlord and
Tenant.
5. Representations and Warranties. Tenant affirms all
representations and warranties contained in the Lease as of the Effective Date.
6. Further Modification. The Lease may be further modified
only by a writing signed by Landlord and Tenant.
7. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
8. Consent of Guarantor. This Amendment shall have no force or
effect unless and until Guarantor has executed the Consent set forth below.
<PAGE> 3
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amendment as of the date first set forth above.
Signed and acknowledged
in the presence of: PENNSYLVANIA BCC PROPERTIES, INC.
Signature /s/ Rita J. Rogge By: /s/ Erin C. Ibele
Print Name Rita J. Rogge Title: Vice President and
Secretary
Signature /s/ Jay P. Morgan
Print Name Jay P. Morgan
BALANCED CARE AT [ ], INC.
Signature /s/ Jaynelle D. Covert By: /s/ Robin L. Barber
Print Name Jaynelle D. Covert Title: Vice President and
Secretary
Signature /s/ Angela A. Kelly
Print Name Angela A. Kelly
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this 26th
day of October, 1999 by Erin C. Ibele, the Vice President and Corporate
Secretary of Pennsylvania BCC Properties, Inc., a Pennsylvania corporation, on
behalf of the corporation.
/s/ Rita J. Rogge
Notary Public
My Commission Expires: August 26, 2000 [SEAL]
<PAGE> 4
STATE OF PENNSYLVANIA )
) SS:
COUNTY OF CUMBERLAND )
The foregoing instrument was acknowledged before me this 27th
day of October, 1999 by Robin L. Barber, the Vice President and Secretary of
Balanced Care at [ ], Inc., a Delaware corporation, on behalf of the
corporation.
/s/ Barbara E. Davis
Notary Public
My Commission Expires: August 20,2002 [SEAL]
THIS INSTRUMENT PREPARED BY:
Cynthia L. Rerucha, Esq.
Shumaker, Loop & Kendrick, LLP
1000 Jackson Street
Toledo, Ohio 43624
<PAGE> 5
CONSENT OF GUARANTOR
Guarantor hereby [i] consents to the foregoing Amendment; [ii]
agrees to be bound by the terms and provisions of the Amendment to the extent
applicable to Guarantor pursuant to the Guaranty, as amended from time to time;
[iii] affirms the Guaranty which shall remain in full force and effect; and [iv]
waives any suretyship defenses arising in connection with the Amendment.
BALANCED CARE CORPORATION
By: /s/ Robin L. Barber
Title: Senior Vice President and Counsel;
Assistant Secretary
<PAGE> 1
Exhibit 10.26
Schedule to Form of First Amendment to Lease Agreement
<TABLE>
<S> <C> <C> <C> <C>
Tenant Property Unit Bed Facility
Bloomsburg II Bloomsburg 36 66 skilled nursing
Saxonburg Saxonburg 77 123 assisted living (personal care)
</TABLE>
<PAGE> 1
Exhibit 10.27
CHANGE IN CONTROL AGREEMENT
THIS FIRST AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT, made as of
the 30th day of September, 1999, by and between Balanced Care Corporation, a
Delaware corporation with a principal office at 1215 Manor Drive, Mechanicsburg,
PA, 17055 (the "Company") and Alfred I. Lovitz, an individual health care
executive (the "Executive").
Reference is made to that certain Change in Control Agreement dated
June 24, 1998, by and between the Company and the Executive (the "Existing
Agreement").
WITNESSETH:
WHEREAS, the Company and the Executive desire to amend and restate the
terms and conditions of the Existing Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, the Company and the Executive agree to amend and
restate the Existing Agreement in its entirety and to that end agree that this
First Amended and Restated Change in Control Agreement shall be deemed effective
on and as of the date hereof, shall supersede the Existing Agreement in its
entirety and shall be referred to herein as the "Agreement".
The Company and the Executive covenant and agree as follows:
1. Employment. The company hereby employs Executive as an employee at
will and Executive hereby accepts employment by the Company subject to all of
the terms and conditions set forth in that certain employment offer letter dated
June 23, 1998, as such terms and conditions may be modified hereby.
2. Change in Control (Other than due to the Sale of the Missouri
Division). The Executive shall be entitled to receive a Severance Payment if,
within one (1) year following a Change in Control as defined in Sections
<PAGE> 2
4(II)(ii.) and 4(II)(iii.) below, there occurs any of the following events:
(I) any termination of the Executive except for Cause;
(II) any material reduction in the Executive's
responsibilities (including reporting
responsibilities) or authority, including as such
responsibilities or authority may be increased from
time to time;
(III) the assignment to the Executive of duties
inconsistent with the Executive's office on the date
of the Change in Control or as same may be increased
from time to time after the Change in Control;
(IV) any material reduction (including, after the Change
in Control, proportional reductions affecting all
employees or executive employees) in the Executive's
annual Base Salary in effect on the date of the
Change in Control or as same may be increased from
time to time after the Change in Control;
(V) any failure (including, after the Change in
Control, proportional failures affecting all
executive employees) to continue the Executive's
participation on substantially similar terms in the
Plan (as defined below) or any bonus plan in which
the Executive participated at the time of the Change
in Control or any change or amendment to any
substantive provisions of any such plan which would
materially decrease the potential benefits to the
Executive under any of such plans;
(VI) any failure (including, after the Change in
Control, a proportional failure affecting all
executive employees) to provide the Executive with
benefits at least favorable as those enjoyed by the
Executive under any of the Company's pension, life
insurance, medical, health and accident or other
employee plans in which the Executive
<PAGE> 3
participated at the time of the Change in Control, unless such
reduction relates to a reduction in benefits applicable to all
employees generally; and
(VII) in the event of any of the events described in (II) through
(VI) above, the Executive voluntarily terminates his employment
under this Agreement as a result of such events(s).
As used in this Section 2, the definition of "Change in Control" shall
expressly exclude the definition set forth in Section 4(II)(i.) below.
3. Change in Control due to the Sale of the Missouri Division. The
Executive shall be entitled to receive the Missouri Severance Payment if, within
one (1) year following a Change in Control as defined in Section 4(II)(i.)
below, there occurs any of the following events:
(I) any termination of the Executive except for Cause;
(II) any material reduction in the Executive's responsibilities or
authority, including as such responsibilities or authority may
be increased from time to time;
(III) the assignment to the Executive of duties inconsistent with the
Executive's office on the date of the Change in Control or as
same may be increased from time to time after the Change in
Control;
(IV) any material reduction (including, after the Change in Control,
proportional reductions affecting all employees or executive
employees) in the Executive's annual Base Salary in effect on
the date of the Change in Control or as same may be increased
from time to time after the Change in Control;
(V) any failure (including, after the Change in Control,
proportional failures affecting all executive employees) to
continue the Executive's participation on substantially similar
terms in any bonus plan in which the
<PAGE> 4
Executive participated at the time of the Change in Control or
any change or amendment to any substantive provisions of any
such plan which would materially decrease the potential
benefits to the Executive under such plan;
(VI) any failure (including, after the Change in Control, a
proportional failure affecting all executive employees) to
provide the Executive with benefits at least favorable as those
enjoyed by the Executive under any of the Company's pension,
life insurance, medical, health and accident or other employee
plans in which the Executive participated at the time of the
Change in Control, unless such reduction relates to a reduction
in benefits applicable to all employees generally; and
(VII) in the event of any of the events described in (II) through
(VI) above, the Executive voluntarily terminates his employment
under this Agreement as a result of such events(s).
In addition, upon the occurrence of a Change in Control as defined in
Section 4(II)(i.) below, all outstanding stock options granted to Executive as
of the date of the Change in Control, if any, under the Plan shall immediately
become vested and shall be exercisable for a one-year period following the date
of the Change in Control in accordance with the provisions of the Plan.
As used in this Section 3, the definition of "Change in Control" shall
expressly exclude the definitions set forth in Sections 4(II)(ii.) and
4(II)(iii.) below.
4. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
(I) "Cause" shall mean willful misconduct, intentional and material
failure to perform duties under this Agreement by Executive or
Executive's conviction of a felony. No termination for cause
shall be effective unless and until Executive is given written
<PAGE> 5
notice that the act or omission constitutes "Cause" under this
Agreement and Executive is given an opportunity to correct or
cure the particular act or omission within thirty (30) days
after receipt by the Executive of such written notice from the
Company.
(II) A "Change in Control" shall be deemed to have taken place if:
(i.) the Company consummates the sale of all of the stock or
all of the assets of its Missouri Division; (ii.) any person,
including a group but not excluding the Company or any current
stockholder of the Company who beneficially owns five percent
(5%) or more of the Company's outstanding shares, becomes the
beneficial owner of shares of the Company having twenty percent
(20%) or more of the total number of votes that may be cast for
the election of directors; or (iii.) there occurs any cash
tender or exchange offer for shares of the Company, merger or
other business combination, sale of assets or contested
election, or any combination of the foregoing transactions, and
as a result of or in connection with any such event persons who
were directors of the Company before the event shall cease to
constitute a majority of the Board of Directors of the Company
or any successor to Company. As used herein, the terms "person"
and "beneficial owner" have the same meaning as under Section
13(d) of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
(III) A "Severance Payment" shall include the following: (1) all
outstanding stock options granted to Executive as of the date
of termination, if any, under the Company's 1996 Stock
Incentive Plan, as such plan may be amended from time to time
(the "Plan"), shall immediately become vested and shall be
exercisable in accordance with the provisions of the Plan; and
(2) a lump sum cash payment, payable within thirty (30) days of
termination of employment, equal to
<PAGE> 6
the sum of a) the amount determined by adding Executive's
annual Base Salary then in effect on the date of termination
and b) the maximum amount of Executive's potential Annual Bonus
percentage payable for the year in which the termination took
place.
(IV) The "Missouri Severance Payment" shall include the following:
(1) a lump sum cash payment, payable within thirty (30) days of
termination of employment, equal to the sum of a) the amount
determined by adding Executive's annual Base Salary then in
effect on the date of termination and b) the maximum amount of
Executive's potential Annual Bonus percentage payable for the
year in which the termination took place.
5. Notice of Termination. Any notice of termination of Employment
Rights of Executive shall be given by the Company in writing and delivered by
hand delivery or by registered or certified mail, return receipt requested,
postage prepaid, at such address as Executive shall have furnished to the
Company in writing.
6. Non-Competition and Non-Solicitation. As further consideration for
Company's provision of this Agreement to Executive, Executive agrees as follows:
(a) Restrictions on Competition. While employed by Company and for a
period of one (1) year following termination of Executive's employment,
Executive agrees that he will not directly or indirectly own an
interest in, manage or control, or provide consulting services or
services as an employee or partner, to a business engaged in managing,
leasing, owning or operating assisted living facilities, nursing home
or sub-acute operations (the "Business Activities") within a sixty (60)
mile radius of a Company facility existing or under active development
at the time of such termination.
(b) Restriction on Solicitation. While employed by Company and for a
period of one (1) year following termination of Executive's employment,
Executive agrees that he will not: (i) directly or indirectly solicit
or encourage the Company's customers to deal
<PAGE> 7
with Executive or any other third party other than the Company or (ii)
directly or indirectly solicit for Executives benefit or for the
benefit of any third party the employment or services of any then
current employee of Company.
(c) Listed Stock Ownership Exception. Nothing in this Section 6 shall
prohibit Executive from owning stock in a public traded company as a
passive investor provided that Executive shall not own more than five
percent (5%) of the equity of a publicly traded competing enterprise of
the Company's.
7. Successors.
(a) This Agreement is personal to Executive and shall not be assignable
by the Executive otherwise than by his will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that Company would be required to perform it if
no such succession had taken place. As used in this Agreement, the
Company shall mean the Company as hereinbefore defined, together with
its wholly-owned subsidiaries, and any successor to the business and/or
assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law or otherwise.
8. Entire Agreement. This writing represents the entire agreement and
understanding between the parties with respect to the subject matter contained
herein and may not be altered or amended except in a writing signed by both
parties.
9. Unenforceability. If any provision of this Agreement shall be
adjudged by any court of competent
<PAGE> 8
jurisdiction to be invalid or unenforceable for any reason, such judgment shall
not affect, impair or invalidate the remainder of this Agreement.
10. Waiver. The failure of the parties to insist upon strict compliance
with any provision hereof or the failure to assert any right the parties may
have hereunder shall not be deemed to be a waiver of such provision or right or
any other provision or right thereof by the parties.
11. Counterparts. This Agreement may be executed by the parties in two
or more counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute one and the same instrument.
12. Headings. The headings of the sections and subsections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction or limit the scope or intent of any of the provisions of this
Agreement.
13. Governing Law. This Agreement has been negotiated and executed
within the Commonwealth of Pennsylvania and shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: BALANCED CARE CORPORATION
/s/ Robin L. Barber By: /s/ Brad E. Hollinger
Robin L. Barber Brad E. Hollinger
Assistant Secretary Chief Executive Officer
WITNESS: EXECUTIVE
/s/ Kurt A. Meyer By: /s/ Alfred I. Lovitz
Alfred I. Lovitz
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,731
<SECURITIES> 0
<RECEIVABLES> 11,544
<ALLOWANCES> 2,339
<INVENTORY> 0
<CURRENT-ASSETS> 19,235
<PP&E> 25,202
<DEPRECIATION> 3,303
<TOTAL-ASSETS> 69,131
<CURRENT-LIABILITIES> 16,175
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> 33,912
<TOTAL-LIABILITY-AND-EQUITY> 69,131
<SALES> 18,477
<TOTAL-REVENUES> 18,477
<CGS> 0
<TOTAL-COSTS> 21,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> (3,688)
<INCOME-TAX> 2
<INCOME-CONTINUING> (3,690)
<DISCONTINUED> 0
<EXTRAORDINARY> (739)
<CHANGES> 0
<NET-INCOME> (4,429)
<EPS-BASIC> (.26)
<EPS-DILUTED> (.26)
</TABLE>
