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Exhibit 1
IPC Advisors S.a.r.l.
c/o Unsworth & Associates
Herengracht 483
101 BT
Amsterdam, The Netherlands
November 6, 2000
Balanced Care Corporation
c/o Special Committee of the Board of Directors
1215 Manor Drive
Mechanicsburg, PA 17055
Gentlemen:
You have requested that RH Investments Limited, HR Investments Limited
and VXM Investments Limited (collectively, the "Lenders") make loans ("Loans")
to Balanced Care Corporation (the "Company") in the amount of $8 million, on
the terms set forth on the attached term sheet. You have also requested that
IPC Advisors S.a.r.l. or one of its affiliates (collectively, "IPC") consider
making an offer to purchase the outstanding common stock of the Company. IPC
is pleased to inform you that IPC would be willing to consider making an offer
of $1.00 per common share in cash for the entire equity interest in the Company
not already owned by IPC subject, however, to our completion of due diligence,
the results of which are satisfactory to IPC in its sole discretion, and to the
negotiation and execution of mutually satisfactory definitive documentation
(the "Proposed Offer"), it being acknowledged and agreed that IPC shall have
no obligation to make the Proposed Offer.
In consideration of the Lenders making the Loans and IPC agreeing to
incur the time and expense of conducting due diligence, you hereby agree as
follows:
1. STANDSTILL AGREEMENT. Section 6.8 of the Subscription Agreement
dated as of October 8, 1999 between the Company and IPC, as amended, is
hereby amended by replacing the words "Six ($6.00) Dollars per share" to read
"One Dollar ($1.00) per share". The Company hereby represents that the
foregoing amendment has been approved by a resolution of the Board of Directors
of the Company and the IPC nominees refrained from voting thereon.
2. NO SOLICITATION. The Company shall not, and shall cause its
Subsidiaries not to, and will use its reasonable best efforts to cause its
officers, directors, employees, investment bankers, attorneys and other
advisors and representatives not to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as hereinafter
defined) or (ii) participate in any discussions, negotiations or other
communications regarding, or furnish to any person any information with respect
to, any Acquisition Proposal or otherwise cooperate in any way, assist or
participate in, facilitate or encourage any effort or attempt by any other
person or entity, to seek to do any of the foregoing. The Company shall, and
shall cause its Subsidiaries to, immediately cease and cause to be terminated,
and will use
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reasonable best efforts to cause, and will not authorize, its officers,
directors, employees, investment bankers, attorneys and other advisors and
representatives to, immediately cease and cause to be terminated, any of the
actions specified in (i) and (ii) above. Notwithstanding the provisions of
the preceding two sentences, the Company, any of its Subsidiaries or any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its Subsidiaries may, (i)
following receipt of a request for information which was not solicited,
initiated or encouraged by the Company, any of its Subsidiaries or any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries after the
date of this Agreement, furnish information, provided the person requesting the
information has executed a confidentiality agreement with customary terms and
conditions with the Company, and (ii) following receipt of an unsolicited
Acquisition Proposal, participate in discussions or negotiations regarding, and
furnish information with respect to, and take other actions to facilitate, such
Acquisition Proposal, if, in the case of (i) and (ii) above, the Special
Committee determines in its good faith judgment (after receiving the advice of
counsel) that if the Company fails to participate in such discussions or
negotiations with, or provide such information to, the person or entity
making the Acquisition Proposal or requesting information, there is a reasonable
probability that the Board of Directors of the Company would be in violation of
its fiduciary duties under applicable law. From and after the date hereof, the
Company shall promptly advise IPC orally and in writing of the receipt by it
(or any of the other entities or persons referred to above) of any Acquisition
Proposal, or any inquiry which the Board of Directors determines is reasonably
likely to lead to any Acquisition Proposal, the material terms and conditions
of such Acquisition Proposal or inquiry, and the identity of the person making
any such Acquisition Proposal or inquiry. The Company will keep IPC fully
informed of the status and details of any such Acquisition Proposal or inquiry.
If an Acquisition Proposal is approved by the Board of Directors of the Company
prior to January 31, 2001, the Company shall concurrently therewith reimburse
IPC all of its documented costs and expenses (including, without limitation,
reasonable attorneys' fees) in connection with the transactions contemplated by
this letter (including the Loans and the Proposed Offer), provided that in
no event shall the Company be obligated to reimburse IPC for more than $500,000
of such costs and expenses in the aggregate. For purposes of this Agreement,
"Acquisition Proposal" means any proposal with respect to a merger,
consolidation, share exchange, tender offer or similar transaction involving the
Company or any significant portion of the assets of the Company and its
Subsidiaries, taken as a whole, other than the transactions contemplated hereby.
The provisions of this paragraph 2 shall terminate on the earlier of the
termination of this letter agreement pursuant to paragraph 7 hereof and January
15, 2001.
3. DUE DILIGENCE. The Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of IPC, reasonable access, during
normal business hours, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records and, during such period, the Company shall
use its commercially reasonable efforts to afford IPC access to its lessors
and lenders and shall (and shall cause each of its Subsidiaries to) furnish
promptly to IPC (i) a copy of each report, schedule, registration statement and
other document filed or received by it pursuant to the requirements of the
federal securities laws and (ii) all other information concerning its
business, properties and personnel as IPC may reasonably request. IPC will
hold
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any such information which is nonpublic in confidence in accordance with the
provisions of the confidentiality agreement, dated November 6, 2000, between the
Company and IPC Advisors S.a.r.l.
4. PUBLICITY. So long as this letter is in effect, neither the
Company nor IPC nor their affiliates shall issue or cause the publication of
any press release or other public statement or announcement with respect to
this letter, the Proposed Offer or the other matters contemplated hereby
without prior consultation with the other party, except as may be required
by law or by obligations pursuant to any listing agreement with a national
securities exchange, and in such case shall use all reasonable efforts to
consult with the other party prior to such release or announcement being issued.
5. FAIRNESS OPINION. The Special Committee confirms that it has
received an oral opinion (which will be confirmed in writing) from an
independent investment bank that, subject to stated assumptions, limitations
and qualifications, including, without limitation, assumptions regarding the
terms and conditions of definitive agreements relating to the Proposed Offer,
the Proposed Offer is fair to the stockholders of the Company (other than
IPC and its affiliates) from a financial point of view. The Special Committee
further confirms that it has determined that the consideration of $1.00 per
share in cash for each share of the Company's outstanding common stock not
owned by IPC and its affiliates is advisable and fair to the stockholders of
the Company and, subject to negotiation of definitive agreements relating to
the Proposed Offer acceptable to the Special Committee, the Special Committee
will recommend that the Board of Directors of the Company approve and adopt
such definitive agreements and the Special Committee will recommend that
stockholders of the Company tender into and/or vote to approve and adopt such
definitive agreements, as applicable, and once recommended, the Special
Committee will not modify, amend or withdraw such recommendations, unless the
Special Committee determines, in its good faith judgment (after receiving
the advice of counsel), that if the Special Committee fails to modify, amend or
withdraw such recommendations, there is a reasonable probability that the
Special Committee would be in violation of its fiduciary duties under
applicable law.
6. BINDING EFFECT. This letter is intended to be legally binding and
enforceable upon the parties hereto. Notwithstanding the foregoing, no
legally binding agreement shall arise or exist with respect to any Proposed
Offer unless and until a definitive agreement is executed and delivered
containing such terms, provisions, representations, warranties, covenants and
conditions, as are approved by IPC and the Company.
7. TERMINATION. This letter may be terminated at any time upon mutual
written consent of the parties. In addition, numbered paragraphs 2 through 5 of
this letter may be terminated at the option of the Company or IPC, if a
definitive agreement reflecting the Proposed Offer shall not have been
executed on or prior to January 31, 2001, unless the Company and IPC agree
to an extension of such date.
8. GOVERNING LAW. This letter shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
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9. COUNTERPARTS. This letter may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same letter.
10 SECURITY. The Company hereby agrees to provide the Lenders, if
requested by the Lenders, with additional security for the Loans and all other
existing and future obligations of the Company or any of its subsidiaries to the
Lenders, IPC or any or their respective affiliates (including, without
limitation, the $14 million 9.5% convertible debentures), in the form of (i) a
pledge of the shares in the capital of the owners of properties to be designated
by IPC, subject to the approval of Heller Healthcare Finance Inc. ("Heller"),
and (ii) a second charge on the Meditrust Tranche I properties after Heller has
been repaid out of a refinancing of these properties.
Very truly yours,
Accepted and agreed this 6th day
of November, 2000:
BALANCED CARE CORPORATION
By: /s/ Brad E. Hollinger
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Its: Chairman
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SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF
BALANCED CARE CORPORATION
By: /s/ David L. Goldsmith
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Its: Chairman
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