<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 DECEMBER 31, 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 FEBRUARY 10, 1999
----- ---------------------------------------------
<S> <C>
Common Stock, $.001 par value 34,172,847
</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 December 31, 1999 and
June 30, 1999.......................................... 3
Consolidated Statements of Operations for the three months
ended December 31, 1999 and 1998....................... 4
Consolidated Statements of Operations for the six months
ended December 31, 1999 and 1998....................... 5
Consolidated Statement of Stockholders' Equity for the six
months ended December 31, 1999......................... 6
Consolidated Statements of Cash Flows for the six months
ended December 31, 1999 and 1998....................... 7
Notes to Consolidated Financial Statements................ 8
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 13
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK...................................................... 25
PART II -- OTHER INFORMATION
ITEM 2:
CHANGES IN SECURITIES AND USE OF PROCEEDS................... 26
ITEM 6:
EXHIBITS AND REPORTS ON FORM 8-K............................ 26
(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>
DECEMBER 31 JUNE 30
1999 1999
----------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,832 $ 8,160
Receivables (net of allowance for doubtful receivables)... 15,267 11,912
Development contracts in process.......................... 1,248 2,559
Prepaid expenses and other current assets................. 1,066 973
-------- --------
Total current assets................................... 22,413 23,604
Restricted investments...................................... 1,353 2,714
Property and equipment, net................................. 79,967 24,075
Goodwill, net............................................... 15,004 15,293
Purchase option deposits.................................... 4,747 2,974
Other assets................................................ 3,387 2,395
-------- --------
Total assets........................................... $126,871 $ 71,055
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 7,783 $ 450
Accounts payable.......................................... 6,062 10,016
Accrued payroll........................................... 1,855 1,339
Accrued expenses.......................................... 5,849 4,357
-------- --------
Total current liabilities.............................. 21,549 16,162
Long-term debt, net of current portion...................... 52,288 11,773
Straight-line lease liability............................... 2,562 3,537
Deferred revenue and other liabilities...................... 715 1,225
-------- --------
Total liabilities...................................... 77,114 32,697
-------- --------
Stockholders' equity:
Common stock, $.001 par value; authorized -- 50,000,000
Shares; issued and outstanding -- 34,172,847 shares at
December 31, 1999 and 16,722,846 shares at June 30,
1999...................................................... 35 17
Additional paid-in capital.................................. 83,333 63,814
Accumulated deficit......................................... (33,611) (25,473)
-------- --------
Total stockholders' equity............................. 49,757 38,358
-------- --------
Total liabilities and stockholders' equity............. $126,871 $ 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
DECEMBER 31
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues:
Patient services.......................................... $11,145 $12,257
Resident services......................................... 7,032 5,604
Development fees.......................................... 142 411
Management fees........................................... 76 308
Other revenues............................................ 70 102
------- -------
Total revenues.............................................. 18,465 18,682
------- -------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits........................... 8,713 8,296
Other operating expenses............................... 5,587 5,614
Development, general and administrative expense........... 2,576 3,318
Provision for losses on termination of development
projects............................................... -- 2,400
Provision for losses under shortfall funding agreements... 750 2,360
Lease expense............................................. 3,463 2,407
Depreciation and amortization expense..................... 774 537
------- -------
Total operating expenses.................................... 21,863 24,932
------- -------
Loss from operations................................... (3,398) (6,250)
Other income (expense):
Interest and other income................................. 115 175
Interest expense.......................................... (423) (113)
Loss on sale of assets.................................... -- (200)
------- -------
Loss before income taxes............................... (3,706) (6,388)
Provision for income taxes.................................. 3 (1,225)
------- -------
Net loss............................................... $(3,709) $(5,163)
======= =======
Basic loss per share........................................ $ (0.18) $ (0.31)
======= =======
Diluted loss per share...................................... $ (0.18) $ (0.31)
======= =======
Weighted average shares -- basic............................ 21,166 16,709
======= =======
Weighted average shares -- diluted.......................... 21,166 16,709
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues:
Patient services.......................................... $22,190 $24,622
Resident services......................................... 13,927 11,517
Development fees.......................................... 538...... 5,674
Management fees........................................... 175 606
Other revenues............................................ 111 134
------- -------
Total revenues.............................................. 36,941 42,553
------- -------
Operating expenses:
Facility operating expenses:
Salaries, wages and benefits........................... 17,534 16,637
Other operating expenses............................... 11,016 11,533
Development, general and administrative expense........... 5,169 6,960
Provision for losses on termination of development
projects............................................... -- 2,400
Provision for losses under shortfall funding agreements... 1,550 2,360
Lease expense............................................. 6,902 4,796
Depreciation and amortization expense..................... 1,514 1,043
------- -------
Total operating expenses.................................... 43,685 45,729
------- -------
Loss from operations................................... (6,744) (3,176)
Other income (expense):
Interest and other income................................. 172 479
Interest expense.......................................... (822) (218)
Loss on sale of assets.................................... -- (200)
------- -------
Loss before income taxes and extraordinary item........ (7,394) (3,115)
Provision for income taxes.................................. 5 108
------- -------
Loss before extraordinary item......................... (7,399) (3,223)
Extraordinary loss on extinguishment of debt................ (739) --
------- -------
Net loss............................................... $(8,138) $(3,223)
======= =======
Basic loss per share:
Loss before extraordinary item............................ $ (0.39) $ (0.19)
======= =======
Net loss.................................................. $ (0.43) $ (0.19)
======= =======
Diluted loss per share:
Loss before extraordinary item............................ $ (0.39) $ (0.19)
======= =======
Net loss.................................................. $ (0.43) $ (0.19)
======= =======
Weighted average shares -- basic............................ 18,945 16,703
======= =======
Weighted average shares -- diluted.......................... 18,945 16,703
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 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
Issuance of common stock, less costs of
issuance.................................. 16,700 $17 $19,519 -- $19,536
Exercise of common stock purchase
warrants.................................. 750 1 -- -- 1
Net loss.................................... -- -- -- (8,138) (8,138)
------ --- ------- -------- -------
Balance at December 31, 1999................ 34,173 $35 $83,333 $(33,611) $49,757
====== === ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
BALANCED CARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................... $ (8,138) $(3,223)
Adjustments to reconcile net loss to net cash used for
Operating activities:
Depreciation and amortization............................. 1,514 1,043
Loss on sale of assets.................................... -- 200
Provision for losses on development activities............ -- 2,400
Provision for losses under shortfall funding agreement.... 1,550 2,360
Extraordinary loss on extinguishment of debt.............. 739 --
Changes in operating assets and liabilities, excluding
effects of acquisitions:
Increase in receivables, net........................... (3,554) (2,908)
Decrease (increase) in development contracts in
process, net.......................................... 1,311 (3,942)
Increase in prepaid expenses and other current
assets................................................ (74) (503)
Decrease in accounts payable, accrued payroll and
accrued expenses...................................... (2,878) (2,416)
-------- -------
Net cash used for operating activities............... (9,530) (6,989)
-------- -------
Cash Flows from Investing Activities:
Proceeds from sale of assets.............................. -- 2,726
Purchases of property and equipment....................... (55,886) (2,073)
Decrease (increase) in restricted investments............. 1,361 (166)
Increase in purchase options and other assets............. (2,894) (1,715)
Business acquisitions..................................... (2,457) (1,617)
-------- -------
Net cash used for investing activities............... (59,876) (2,845)
-------- -------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt.................. 53,640 535
Payments on long-term debt (including extinguishment costs
of $707)............................................... (6,499) (122)
Proceeds from issuance of common stock.................... 19,537 128
Increase in other liabilities............................. (600) (267)
-------- -------
Net cash provided by financing activities............ 66,078 274
Decrease in cash and cash equivalents..................... (3,328) (9,560)
Cash and cash equivalents at beginning of period.......... 8,160 15,481
-------- -------
Cash and cash equivalents at end of period.................. $ 4,832 $ 5,921
======== =======
Supplemental Cash Flow Information:
Cash paid for interest.................................... $ 822 $ 218
======== =======
Cash paid for income taxes................................ $ 5 $ 25
======== =======
Acquisitions:
Fair value of assets acquired.......................... (3,482) (1,617)
Liabilities assumed.................................... 1,025 --
-------- -------
Consideration paid for acquisitions.................... $ (2,457) $(1,617)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
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. At December 31, 1999, the Company owned, leased or managed 68 assisted
and independent living communities and 13 skilled nursing facilities. Also at
December 31, 1999, the Company had 6 assisted living communities under
construction. 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 and six-month periods
ended December 31, 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 and six-month periods ended December 31,
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. BUSINESS ACQUISITIONS
Acquisitions and the manner of payment are summarized as follows:
<TABLE>
<CAPTION>
LEASED CASH PAID/
MONTH TRANSACTION DESCRIPTION OR OWNED BUSINESS LOCATION TOTAL COST
----- ----------------------- -------- -------- -------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 1999 Stock of Black Box of Martinsburg Owned ALF WV $ 141
December 1999 Stock of Black Box of Peckville Owned ALF PA 322
December 1999 Stock of TC Realty of Maumelle, Inc. Owned ALF AR 499
December 1999 Stock of TC Realty of Scranton, Inc. Owned ALF PA 524
December 1999 Stock of TC Realty of Berwick, Inc. Owned ALF PA 140
December 1999 Stock of TC Realty of Lewistown, Inc. Owned ALF PA 400
December 1999 Stock of TC Realty of Mansfield, Inc. Owned ALF OH 431
------
$2,457
======
</TABLE>
Before acquiring the operations of these Black Box entities in the
transactions detailed above, the Company managed the operations for the prior
Operator/Lessee. Subsequent to the business acquisitions, the Company also
acquired the real estate assets from the REIT owner in a separate transaction.
Refer to the descriptions of these transactions in the "Recent Developments"
section ("Property Acquisition") and the "Liquidity" section ("Operation") of
Item 2 of this Current Report.
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
8
<PAGE> 9
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Also,
Black Box of Peckville d/b/a Outlook Pointe Keepsakes at Mid Valley, Black Box
of Martinsburg, Inc. d/b/a Outlook Pointe at Martinsburg, Inc., TC Realty at
Mansfield, Inc. d/b/a Outlook Pointe at Ontario, TC Realty at Maumelle, Inc.
d/b/a Outlook Pointe at Maumelle, TC Realty at Berwick, Inc. d/b/a Outlook
Pointe Commons at Berwick, TC Realty at Scranton, Inc. d/b/a Outlook Pointe
Commons at Scranton, and TC Realty at Lewistown, Inc. d/b/a Outlook Pointe at
Lewistown, Inc., were acquired in December 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>
SIX MONTHS ENDED
DECEMBER 31
------------------
1999 1998
------- -------
<S> <C> <C>
Revenue..................................................... $40,546 $45,451
======= =======
Loss before extraordinary items............................. $(6,925) $(5,624)
======= =======
Loss before extraordinary items per common
share -- diluted.......................................... $ (0.37) $ (0.34)
======= =======
</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.
3. LOSS PER SHARE
Loss per share is computed using the weighted average number of common
shares and common equivalent shares outstanding (using the treasury stock
method). For the three and six-month periods ended December 31, 1999 and 1998,
common equivalent shares from stock options and warrants are excluded from the
computation, as their effect is anti-dilutive.
4. LINE OF CREDIT AMENDMENTS AND LOSS ON EARLY EXTINGUISHMENT OF DEBT
In April 1999, the Company entered into a $15 million revolving Line of
Credit with HCFP Funding, Inc. ("HCFP"). 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 Line of Credit was increased to $20 million.
Prior to July 1999, the Line of Credit was 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 "Accounts Receivable
Borrowers"). In July 1999, the real estate of BCC at Republic Park Care Center,
Inc. and BCC at Nevada Park Care Center, Inc. (the "Skilled Nursing Facility
Borrowers") was added as security to collateralize the Line of Credit. In order
to mortgage the Skilled Nursing Facility Borrowers' real estate in favor of
HCFP, the Company repaid its $3.1 million loan to Meditrust to satisfy the
existing mortgage on this real estate. As a result of this transaction, the
Company reported a loss on the extinguishment of debt of $739,000 in the first
quarter of Fiscal 2000.
On January 12, 2000, the Company completed the sale of its Missouri assets
(see "Missouri Divestiture" discussed below), which included the real estate,
leasehold interests and operations of the Skilled Nursing Facility Borrowers and
the Accounts Receivable Borrowers (the "Missouri Borrowers"). In order for HCFP
to release the Missouri Borrowers and their respective liens and security
interests under the Line of Credit, the
9
<PAGE> 10
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company agreed to (i) repay $5.4 million on the Line of Credit attributable to
the Missouri Borrowers, (ii) pay a prepayment fee of approximately $75,000,
(iii) reset the availability under the Line of Credit to $12.0 million as of
December 31, 1999 and (iv) cross-default its obligations under the Line of
Credit with any future obligations with HCFP.
The primary component of the borrowing base for the Line of Credit consists
of 85% of the product of 8.0 to 8.5 times EBITDA of the Real Estate Borrowers
(as defined in the Line of Credit Agreement). At January 31, 2000, after the
repayment of $5.4 million attributable to the Missouri Borrowers, the borrowing
base available under the Line of Credit was approximately $12.0 million and $5.4
million was borrowed thereunder.
5. EQUITY TRANSACTION
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 (the "Transaction"). Under the first tranche of the
Transaction, 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 of the Transaction, which
was approved by the stockholders on December 15, 1999 and closed on December 21,
1999, the Company issued 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, and the outstanding shares of Series C Preferred
Stock automatically converted into 3,300,000 shares of Common Stock. At December
31, 1999, IPC owned approximately 48.87% of the outstanding shares of Common
Stock of the Company.
6. PROPERTY ACQUISITION
In December 1999, the Company acquired the real property, improvements,
furniture, fixtures and equipment of 12 assisted living facilities. The
aggregate purchase price was $52,073,054. The purchase price was paid from the
following sources: a $7,811,054 promissory note due to the seller, New Meditrust
Company LLC, a $32,000,000 loan due to Heller Healthcare Finance, Inc., a
$7,000,000 discount note due to FRR Investments Limited, an affiliate of IPC,
and $5,262,000 in cash by the Company. The Company has an option to purchase 12
additional assisted living facilities by October 31, 2000.
7. SUBSEQUENT EVENT
On January 12, 2000, the Company completed the sale of its Missouri assets
to Christian Health Care of Missouri, Inc. and certain of its affiliates
(collectively, "CHM") pursuant to an Asset Purchase Agreement dated October
15,1999 (as amended, the "Asset Purchase Agreement"). The Company sold its
leasehold interests in eight skilled nursing facilities and nine assisted and
independent living facilities, together with the operations of those facilities.
The Company sold its real property interests and operations in two skilled
nursing facilities. The aggregate consideration paid by CHM to the Company for
the assets was (i) $51,000,000 in assumed lease obligations, (ii) $6,675,000 in
cash, and (iii) $2,525,000 in notes. The Company has guaranteed the payments of
the lease obligations of the buyer until the occurrence of certain events. For a
more detailed description of these transactions, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Recent
Developments."
8. SEGMENT REPORTING
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.
10
<PAGE> 11
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The Company's 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 DECEMBER 31, 1999
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $7,178 $11,145 $ 142 $18,465
Operating expenses............................ 4,533 9,767 -- 14,300
Development, general and administrative
expenses.................................... -- -- 2,576 2,576
Provision for losses under shortfall funding
agreements.................................. 750 -- -- 750
------ ------- ------- -------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization................................ $1,895 $ 1,378 $(2,434) $ 839
====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $6,014 $12,257 $ 411 $18,682
Operating expenses............................ 3,570 10,340 -- 13,910
Development, general and administrative
expenses.................................... -- -- 3,318 3,318
Provision for losses under shortfall funding
agreements.................................. 2,360 -- -- 2,360
------ ------- ------- -------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization................................ $ 84 $ 1,917 $(2,907) $ (906)
====== ======= ======= =======
</TABLE>
11
<PAGE> 12
BALANCED CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues..................................... $ 14,213 $22,190 $ 538 $ 36,941
Operating expenses........................... 8,970 19,580 -- 28,550
Development, general and administrative
expenses................................... -- -- 5,169 5,169
Provision for losses under shortfall funding
agreements................................. 1,550 -- -- 1,550
-------- ------- ------- --------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization............................... $ 3,693 $ 2,610 $(4,631) $ 1,672
======== ======= ======= ========
Total Assets................................. $101,132 $11,325 $14,414 $126,871
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1998
------------------------------------------------------
DEVELOPMENT
RESIDENT PATIENT GENERAL AND
SERVICES SERVICES ADMINISTRATIVE CONSOLIDATED
-------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $12,257 $24,622 $ 5,674 $42,553
Operating expenses............................ 7,205 20,965 -- 28,170
Development, general and administrative
expenses.................................... -- -- 6,960 6,960
Provision for losses under shortfall funding
agreements.................................. 2,360 -- -- 2,360
------- ------- ------- -------
Income (loss) from continuing operations
before non-recurring items, lease expense,
interest (net), taxes, depreciation and
amortization................................ $ 2,692 $ 3,657 $(1,286) $ 5,063
======= ======= ======= =======
Total Assets.................................. $39,814 $16,226 $24,954 $80,994
======= ======= ======= =======
</TABLE>
12
<PAGE> 13
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 and six-month periods ended
December 31, 1999 and 1998, and the Company's liquidity and capital resources.
This information should be read in conjunction with the Company's consolidated
condensed 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 skilled nursing.
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 December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1999 1998
-------------------------------- --------------------------------
OWNED LEASED MANAGED TOTAL OWNED LEASED MANAGED TOTAL
----- ------ ------- ----- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCLUDING MISSOURI
Developed Assisted Living Facilities.... 12 1 33 46 -- 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
-- -- -- -- -- -- -- --
19 29 33 81 16 27 15 58
== == == == == == == ==
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1999 1998
-------------------------------- --------------------------------
OWNED LEASED MANAGED TOTAL OWNED LEASED MANAGED TOTAL
----- ------ ------- ----- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EXCLUDING MISSOURI
Developed Assisted Living Facilities.... 12 1 33 46 -- 1 15 16
Acquired Assisted Living Facilities..... 5 8 -- 13 13 7 -- 20
Skilled Nursing Facilities.............. -- 3 -- 3 1 2 -- 3
Independent Living Facilities........... -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
17 12 33 62 14 10 15 39
== == == == == == == ==
</TABLE>
As of December 31, 1999, the Company had operations in Pennsylvania,
Missouri, Arkansas, Virginia, Ohio, North Carolina, Tennessee, West Virginia,
Florida, Maryland and Indiana. As of December 31, 1999, these operating
facilities had a capacity for 4,077 assisted living residents, 1,304 skilled
nursing patients and 117 independent living residents. In January 2000, the
Company divested its Missouri assets, consisting of ten skilled nursing
facilities with 1,135 beds and nine assisted and independent living facilities
with 245 beds. After the divestiture, the Company's operating facilities have a
capacity for 3,949 assisted living residents and 169 skilled nursing patients.
The Company has discontinued its own rehabilitation agencies and now exclusively
utilizes independent agencies to provide therapy services.
In addition to the 46 Outlook Pointe(R) signature series assisted living
facilities opened as of December 31, 1999, the Company has signed agreements to
develop and manage an additional six assisted living facilities
13
<PAGE> 14
which were under construction at December 31, 1999. Two of these facilities
opened in January 2000, and the remaining four facilities are scheduled to open
at various dates through April 2000, thus concluding the Company's initial round
of development activity initiated over the past 2 1/2 years.
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, sub-acute care, home healthcare, and other programs provided
to patients in skilled nursing facilities as well as rehabilitation and home
health services provided to assisted living facility residents. Resident
services include all revenue earned from services provided in the Company's
assisted living facilities except for medical rehabilitation 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 a
result of the divestiture of the Missouri operations and the acquisition of the
operations of developed facilities (both discussed under "Recent Developments"
below), the mix of the Company's revenues will change and revenues from assisted
living resident services will increase as a percentage of total revenues.
The Company classifies its operating expenses into the following
categories: (i) facility operating expenses, which include labor, food,
marketing, rehabilitation therapy costs and other direct facility expenses; (ii)
development, general and administrative 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
Equity Transaction
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 (the "Transaction"). Under the first tranche of the
Transaction, 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 of the Transaction, which
was approved by the stockholders on December 15, 1999 and closed on December 21,
1999, the Company issued 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, and the outstanding shares of Series C Preferred
Stock automatically converted into 3,300,000 shares of Common Stock. At December
31, 1999, IPC owned approximately 48.87% of the outstanding shares of Common
Stock of the Company.
Property Acquisition
On December 30, 1999, the Company and 12 of its subsidiaries (collectively
the "Subsidiaries"), IPC and New Meditrust Company LLC ("Meditrust"), entered
into a Memorandum of Understanding (the "Memorandum of Understanding"), under
which the Subsidiaries acquired the real property, improvements, furniture,
fixtures and equipment of twelve Outlook Pointe(R) assisted living facilities
located in Pennsylvania (7), Arkansas (3), Ohio (1) and West Virginia (1)
(collectively, the "Tranche One Properties"). Transaction costs of the
acquisition were paid by the Company.
The aggregate purchase price for the Tranche One Properties was $52,073,054
(the "Tranche One Purchase Price"), which was determined based on arms' length
negotiations. The Tranche One Purchase Price was paid as follows: (a)
$44,262,000 in cash by the Company (the "Cash Portion") and (b) $7,811,054
pursuant to a Promissory Note dated as of December 30, 1999, as amended February
9, 2000 (the "Meditrust Note") made jointly by the Company and IPC in favor of
Meditrust.
14
<PAGE> 15
The Cash Portion of the Tranche One Purchase Price was funded as follows:
(a) $5,262,000 in cash by the Company, (b) $32,000,000 in the form of a loan
(the "Heller Loan") pursuant to a Loan Agreement dated as of December 30, 1999
(the "Heller Loan Agreement") entered into by and among the Subsidiaries and
Heller Healthcare Finance, Inc. ("Heller"), and (c) $7,000,000 pursuant to a
Series One 1999 BCC Discount Note (the "FRR Note") made by the Company in favor
of FRR Investments Limited ("FRR"). FRR is affiliated with IPC.
As an inducement for IPC to enter into the Meditrust Note, IPC, Meditrust
Mortgage Investments, Inc. ("MMI") and Meditrust Corporation ("MC", and together
with MMI, the "Meditrust Parties") entered into a Right of First Refusal
Agreement dated as of December 30, 1999 (the "Right of First Refusal
Agreement"). Under the Right of First Refusal Agreement, in the event the
Meditrust Parties desire to sell, give or otherwise transfer the 1,081,312
shares of common stock of the Company (the "Stock") owned by the Meditrust
Parties to any party other than an entity that is a direct or indirect
subsidiary of MC, the Meditrust Parties are obligated to offer in writing to
sell the Stock to IPC on the same terms. The Right of First Refusal Agreement,
unless sooner terminated in accordance with the terms thereof, will remain in
effect until December 31, 2009.
As a further inducement for IPC to enter into the Meditrust Note, the
Company entered into an Indemnification, Defense, Hold Harmless and
Reimbursement Agreement dated as of December 29, 1999 (the "Indemnification
Agreement") in favor of IPC, under which the Company has agreed to indemnify,
defend and hold harmless IPC and certain other Indemnified Parties (as defined
in the Indemnification Agreement") from any Losses (as defined in the
Indemnification Agreement") arising under or otherwise related to or in
connection with the Meditrust Note (including, without limitation, all payments
made or to be made by IPC under the Meditrust Note), except for any Losses that
arise as a result of the gross negligence or willful misconduct of any
Indemnified Party or a breach of a fiduciary duty of IPC or any affiliate of IPC
to the Company.
As an inducement for FRR to accept the FRR Note and as additional security
for the Company's obligations under the Indemnification Agreement, the Company
and the Subsidiaries have agreed to enter into a Stock Pledge Agreement (the
"Stock Pledge Agreement") with IPC and FRR, under which the Company will pledge
the stock of each of the Subsidiaries to IPC and FRR.
Notwithstanding the foregoing, the Company, the Subsidiaries, IPC, FRR and
Heller have agreed to enter into a Subordination Agreement in favor of Heller.
Under the Subordination Agreement, IPC and FRR will agree to subordinate their
respective rights under the Stock Pledge Agreement, the FRR Note and the
Indemnification Agreement in favor of Heller and will agree to refrain from
taking any action against the collateral pledged under the Stock Pledge
Agreement until the obligations under the Heller Loan Agreement are paid in
full; provided, however, the Subordination Agreement will permit IPC, FRR and
the Company, so long as no event of default exists under the Heller Loan
Agreement, to pay and to collect such sums that are owed under the FRR Note and
the Indemnification Agreement in accordance with the respective terms thereof.
In connection with the foregoing, the Company, IPC and Meditrust also
entered into an Option Agreement dated as of December 30, 1999, as amended
February 9, 2000 (the "Option Agreement"), pursuant to which the Company and IPC
have the right, but not the obligation (the "Option"), to designate various
nominees (each, a "Designee") to acquire the real property, improvements,
furniture, fixtures and equipment of an additional twelve Outlook Pointe(R)
assisted living facilities located in Pennsylvania (3), Arkansas (2), Ohio (2),
Virginia (2), and Tennessee (3) (collectively, the "Tranche Two Properties").
Hereinafter, the Company, IPC and their Designees may be referred to as the
"Buyer".
The Option is jointly exercisable by the Company and IPC upon 30 days'
prior written notice to Meditrust (the "Option Notice") for the period
commencing on January 2, 2000 and continuing up through and including October 1,
2000. The Company and IPC may not exercise the Option with respect to any single
Tranche Two Property, but rather may only exercise the Option with respect to
groups of three or more Tranche Two Properties. Therefore, the acquisition of
the Tranche Two Properties may close in a series of transactions, with the final
closing on any of the Tranche Two Properties to occur no later than October 31,
2000.
15
<PAGE> 16
The aggregate purchase price for the Tranche Two Properties is $45,530,946
(the "Tranche Two Purchase Price"), which was determined based on arms' length
negotiations. The Tranche Two Purchase Price is allocated among the Tranche Two
Properties as more specifically set forth in the Option Agreement (each, a
"Facility Purchase Price"). The Facility Purchase Price for each Tranche Two
Property for which an Option Notice has been given shall be paid to Meditrust at
closing.
The terms and conditions of the Memorandum of Understanding, the Option
Agreement, the Right of First Refusal Agreement, the Heller Loan Agreement, the
Meditrust Note, and the FRR Note are more fully described in the Exhibits hereto
and the Company's Current Report on Form 8-K dated December 15, 1999 and filed
with the SEC on January 14, 2000, which are incorporated by reference herein.
Divestiture of Missouri Assets
On January 12, 2000, the Company completed the sale of its Missouri assets
to Christian Health Care of Missouri, Inc. and certain of its affiliates
(collectively, "CHM") pursuant to an Asset Purchase Agreement dated October 15,
1999 (as amended, the "Asset Purchase Agreement"). The Company sold its
leasehold interests in eight skilled nursing facilities and nine assisted and
independent living facilities, together with the operations of those facilities.
The Company sold its real property interests and operations in two skilled
nursing facilities.
The aggregate consideration paid by CHM to the Company for the assets was
(i) $51,000,000 in assumed lease obligations, (ii) $6,675,000 in cash, (iii)
$525,000 pursuant to a First Promissory Note dated January 12, 2000 (the "First
Promissory Note"), and (iv) $2,000,000 pursuant to a Second Promissory Note
dated January 12, 2000 (the "Second Promissory Note"). The aggregate
consideration was determined based on arms' length negotiations. The terms of
the First Promissory Note and the Second Promissory Note are more fully
described in the Company's Current Report on Form 8-K dated January 12, 2000 and
filed with the SEC on January 27, 2000, which Current Report is incorporated by
reference herein.
In 1996, Meditrust Mortgage Investments, Inc. (together with its
affiliates, "MT") loaned $41,385,000 (the "Hawthorn Loan") to Hawthorn Health
Properties, Inc. and its subsidiaries (collectively, "HHP") pursuant to a Loan
Agreement dated August 30, 1996 (the "Hawthorn Loan Agreement") for HHP to
purchase seven skilled nursing facilities and three assisted/independent living
facilities (which constitute a portion of the facilities whose leasehold
interests were transferred to CHM). HHP simultaneously leased the facilities to
certain wholly-owned subsidiaries of the Company pursuant to those certain
Facility Lease Agreements dated August 30, 1996 (collectively, the "Facility
Lease Agreements").
MT required the following as conditions to its consent to the transfer of
the leasehold interests in the HHP facilities to CHM:
- The Company, CHM, HHP and MT enter into an Omnibus Assignment and
Assumption Agreement, Amendment to Loan Documents, Amendment to Lease
Documents, Termination of Lease Documents, Consent to Assignment and
Confirmation of Guaranties dated as of January 12, 2000 (the "Omnibus
Agreement").
- The Company and Dixon Management, Inc., a wholly-owned subsidiary of the
Company ("DM"), remain as guarantors of CHM's lease obligations pursuant
to the Guaranties previously given by the Company and DM in August 1996
(the "Existing Guaranties") with respect to the Facility Lease
Agreements.
- The Company enter into a Guaranty dated as of January 12, 2000 (the "BCC
Guaranty") in favor of MT to guaranty the obligations of HHP under the
Hawthorn Loan.
- The Company, Balanced Care at Stafford, Inc., a wholly-owned subsidiary
of the Company ("Stafford"), and MT enter into a Cross-Default Agreement
dated as of January 12, 2000 (the "Cross-Default Agreement") that
provides that an "Event of Default" under the Hawthorn Loan Agreement
will constitute an "Event of Default" under the Facility Lease Agreement
dated June 30, 1998 (the "Stafford Facility Lease Agreement") between MT
and Stafford.
16
<PAGE> 17
- CHM pay a $4,000,000 payment on the Hawthorn Loan on January 12, 2000
(without any prepayment penalty or premium).
The Existing Guaranties, the BCC Guaranty and the Cross-Default Agreement
will terminate in accordance with the Termination Agreement dated as of January
12, 2000 (the "Termination Agreement") entered into by and among the Company,
HHP, MT and the other parties referred to therein. Subject to the provisions of
the Termination Agreement:
- The Existing Guaranties and the BCC Guaranty will terminate on the
earlier to occur of (a) the complete payment and performance of the
obligations under the Hawthorn Loan or (b) the Termination Date (as
defined below).
- The Cross-Default Agreement will terminate on the earlier to occur of (a)
the Termination Date or (b) such time, if any, as the Leased Property (as
defined in the Stafford Facility Lease Agreement) is transferred in
accordance with the provisions of the Option Agreement dated as of
December 30, 1999 by and among MT, the Company and the other parties
thereto.
As used herein, "Termination Date" means the later to occur of (a) December
31, 2000 and (b) the date upon which the HHP facilities have achieved a combined
Debt Coverage Ratio (as defined in the Termination Agreement) for the prior
fiscal quarter equal to or greater than 1.1 to 1. The Termination Date has not
yet occurred.
In May and August 1997, the Company entered into Lease and Security
Agreements (collectively, the "Lease and Security Agreements") with Health Care
Realty Trust (together with its affiliates, "HCRT") for four
assisted/independent living facilities (which constitute a portion of the
facilities whose leasehold interests were transferred to CHM). In order to
induce HCRT to consent to the transfer of the leasehold interests of these four
facilities to CHM, the Company was required to remain as guarantor of CHM's
lease obligations pursuant to the Guaranties previously given by the Company in
1997 with respect to the Lease and Security Agreements.
OPERATING AND CENSUS TRENDS
The Company's core business continues to improve as a result of operating
and marketing changes implemented in the fiscal year ended June 30, 1999.
The following table sets forth, for the periods indicated, certain resident
capacity and occupancy data for the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------- -------------------------------
STABLE STABLE STABLE STABLE
FACILITIES(1) BEDS(1) TOTAL FACILITIES(1) BEDS(1) TOTAL
------------- ------- ----- ------------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
End of Period Capacity
Owned............................. 15 902 1,046 6 455 455
Leased............................ 9 611 611 8 491 491
Managed........................... 8 472 2,274 5 282 1,379
-- ----- ----- -- ----- -----
Total............................. 32 1,985 3,931 19 1,228 2,325
== ===== ===== == ===== =====
End of Period Occupancy
Owned............................. 91% 89% 83% 83%
Leased............................ 88% 88% 87% 87%
Managed........................... 70% 45% 69% 37%
----- ----- ----- -----
Total............................. 85% 63% 81% 56%
===== ===== ===== =====
</TABLE>
- ---------------
(1) Includes communities or expansions thereof that have (i) achieved 90%
occupancy; (ii) have been opened at least 15 months for 75 bed or less
communities; 18 months for 75 to 100 bed communities; and 24 months for 100+
bed communities; or (iii) were acquired as mature properties.
17
<PAGE> 18
The above data does not contain divested communities.
To provide information on facility operating performance, the following
table summarizes the operations of all Balanced Care facilities in operation as
of the dates indicated, including facilities owned, leased and managed for
special purpose entities and excluding recently divested Missouri operations:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999
-------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
AT QUARTER END
Facilities in Operation......................... 50 55 62
Resident Capacity............................... 3,297 3,609 4,118
Census.......................................... 1,946 2,278 2,655
FOR THE THREE MONTH PERIOD
Revenue......................................... $11,432 $13,209 $15,587
EBITDAR......................................... $ 206 $ 1,624 $ 2,335
</TABLE>
Operating highlights of the quarter ended December 31, 1999 include: (i) a
net quarterly census increase of 377, a 17% improvement; (ii) revenue increase
of 18% in owned, leased, and managed facilities; (iii) an EBITDAR increase of
44% in owned, leased, and managed facilities; and (iv) average pre-lease
deposits of 28% of total capacity on recently opened communities. Following the
quarter-end, the Company also reported census gains of 131 residents in January.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain data as
a percentage of total revenue:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
----------------
1999 1998
----- -----
<S> <C> <C>
Statement of Operations Data:
Patient services........................................... 60.1% 57.9%
Resident services.......................................... 37.7 27.1
Development fees........................................... 1.4 13.3
Management fees............................................ 0.5 1.4
Other...................................................... 0.3 0.3
----- -----
Total revenue.............................................. 100.0 100.0
Operating expenses:
Facility operating expenses.............................. 77.3 66.2
Development, general and administrative expense.......... 14.0 16.4
Charge for termination of development projects........... -- 5.6
Charges under shortfall funding agreements............... 4.2 5.5
Lease expense............................................ 18.7 11.3
Depreciation and amortization expense.................... 4.1 2.5
----- -----
Loss from operations....................................... (18.3) (7.5)
Other income (expense)..................................... (1.9) 0.2
----- -----
Loss before income taxes and extraordinary item............ (20.2) (7.3)
Provision for income taxes................................. -- 0.3
----- -----
Loss before extraordinary item............................. (20.2) (7.6)
Extraordinary loss on extinguishment of debt............... (2.0) --
----- -----
Net loss................................................... (22.2) (7.6)
===== =====
</TABLE>
18
<PAGE> 19
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998
Total Revenue. Total revenue for the three months ended December 31, 1999
decreased by $217,000 to $18,465,000 compared to $18,682,000 for the three
months ended December 31, 1998. This decrease is the result of a $1,112,000
decrease in patient service revenues, due to the change in the billing rates for
Medicare Part B charges required by the Balance Budget Act and a lower census
and decreased outpatient therapy revenues. There also was a $269,000 decrease in
development fees due to the Company's decision to reduce its development
activities and a $232,000 decrease in management fees. This decrease was
partially offset by additional resident service revenues of $1,428,000,
primarily from special purpose entities acquired subsequent to the three months
ended December 31, 1998. Patient services comprised 60% and 66% of total
revenues for the three months ended December 31, 1999 and 1998 respectively.
Operating Expenses. Facility operating expenses for the three months ended
December 31, 1999 increased by $390,000 to $14,300,000 from $13,910,000 for the
three months ended December 31, 1998. The increase resulted from increased
operating expenses of $953,000 at assisted living facilities primarily related
to the acquisition of special purpose entities. The increase was partially
offset by: (i) decreased costs of $340,000 for the skilled nursing facilities,
due primarily to cost reduction efforts in the area of therapy delivery and (ii)
a reduced facility expense from discontinuing the therapy rehab agencies of
$233,000. As a percentage of total revenue, facility operating expenses were 77%
for the three months ended December 31, 1999 and 74% for the three months ended
December 31, 1998.
Development, general and administrative expenses decreased by $742,000 to
$2,576,000 for the three months ended December 31, 1999 from $3,318,000 for the
three months ended December 31, 1998. The decrease in 1999 is primarily due to
the implementation of the Company's corporate restructuring plan. As a
percentage of total revenue, these expenses decreased to 14% for the three
months ended December 31, 1999 from 18% for the three months ended December 31,
1998.
Lease expense increased to $3,463,000 for the three months ended December
31, 1999 from $2,407,000 for the three months ended December 31, 1998, an
increase of $1,056,000. 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 19% for the three months
ended December 31, 1999 and 13% for the three months ended December 31, 1998.
Depreciation and amortization increased by $237,000 to $774,000 for the
three months ended December 31, 1999 from $537,000 for the three months ended
December 31, 1998. This increase resulted primarily from the additional
depreciation and amortization related to the acquired, leased or managed
facilities.
Provision for Income Taxes (Benefit). Income tax expense of $3,000 for
three months ended December 31, 1999 resulted from taxable income reported in
states that do not permit consolidated filings. Income tax benefit of $1,225,000
for the three months ended December 31, 1998 is the result of the Company's
revised fiscal 1999 tax position due to the development changes that occurred
during the three months ending December 31, 1998.
Net Loss. The Company's net loss decreased by $1,454,000 to a loss of
$3,709,000 for the three months ended December 31, 1999 from a net loss of
$5,163,000 for the three months ended December 31, 1998. This decrease in the
net loss resulted primarily from: (i) a decrease in the provision for losses on
termination of development projects of $2,400,000 and (ii) a decrease in the
provision for shortfall funding arrangements of $1,610,000. The decreases were
partially offset by increases from (i) lower income tax benefits of $1,222,000;
(ii) reduced contribution of $533,000 from the skilled nursing facilities
primarily due to the change in billing rates for Medicare Part B charges; (iii)
interest expense of $310,000 related to additional borrowings on the Line of
Credit and (iv) reduced contributions from development fees of $269,000.
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998
Total Revenue. Total revenue for the six months ended December 31, 1999
decreased by $5,612,000 to $36,941,000 compared to $42,553,000 for the six
months ended December 31, 1998. This decrease was the result of (i) a $5,136,000
decrease in development fees due to a reduction in development activities, and
(ii) a
19
<PAGE> 20
$2,432,000 decrease in patient service revenues, due to the change in the
billing rates for Medicare Part B charges adopted by the Balance Budget Act,
lower census and decreased outpatient therapy revenues. This decrease was
partially offset by additional resident service revenues of $2,410,000,
primarily from special purpose entities acquired subsequent to the six months
ended December 31, 1998. Patient services comprised 60% and 58% of total
revenues for the six months ended December 31, 1999 and 1998 respectively.
Operating Expenses. Facility operating expenses for the six months ended
December 31, 1999 increased by $380,000 to $28,550,000 from $28,170,000 for the
six months ended December 31, 1998. The increase resulted from increased
operating expenses at assisted living facilities of $1,755,000 primarily related
to the acquisition of special purpose entities. The increase was partially
offset by: (i) decreased costs of $1,071,000 for the skilled nursing facilities,
due primarily to cost reduction efforts in the area of therapy delivery and (ii)
a reduced facility expense from discontinuing the therapy rehab agencies of
$314,000. As a percentage of total revenue, facility operating expenses were 77%
for the six months ended December 31, 1999 and 66% for the six months ended
December 31, 1998.
Development, general and administrative expenses decreased by $1,791,000 to
$5,169,000 for the six months ended December 31, 1999 from $6,960,000 for the
six months ended December 31, 1998. The decrease in 1999 is primarily due to the
implementation of the Company's corporate restructuring plan. As a percentage of
total revenue, these expenses decreased to 14% for the six months ended December
31, 1999 from 16% for the six months ended December 31, 1998.
Lease expense increased to $6,902,000 for the six months ended December 31,
1999 from $4,796,000 for the six months ended December 31, 1998, an increase of
$2,106,000. 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 19% for the six months ended December 31,
1999 and 11% for the six months ended December 31, 1998.
Depreciation and amortization increased by $471,000 to $1,514,000 for the
six months ended December 31, 1999 from $1,043,000 for the six months ended
December 31, 1998. This increase resulted primarily from the additional
depreciation and amortization related to the acquired, leased or managed
facilities.
Provision for Income Taxes (Benefit). Income tax expense decreased by
$103,000 to $5,000 for six months ended December 31, 1999 from $108,000 for the
six months ended December 31, 1998. The income taxes result from taxable income
reported on individual state corporate tax returns in states that do not permit
consolidated filings.
Net Loss. The Company's net loss increased by $4,915,000 to a loss of
$8,138,000 for the six months ended December 31, 1999 from a net loss of
$3,223,000 for the six months ended December 31, 1998. The increase was the
result of: (i) a decrease in pretax contribution of $3,576,000 related to
reduced development activities; (ii) decreased contribution of $1,040,000 from
the skilled nursing facilities primarily due to the change in billing rates for
Medicare Part B charges; (iii) a charge for the early extinguishment of debt of
$739,000; (iv) increased interest expense of $604,000 related primarily to
interest on the Line of Credit and (v) reduced management fees of $431,000. The
increases were partially offset by a decrease in (i) the provision for losses on
termination of development projects of $2,400,000 and (ii) a decrease in the
shortfall funding arrangements of $810,000.
LIQUIDITY AND CAPITAL RESOURCES
Equity Transaction
During the quarter ended December 31, 1999, the Company received
approximately $19.5 million in cash (net of costs) from the Transaction with
IPC. The Company used $7.5 million (including $2.2 million of closing costs) to
acquire 12 assisted living facilities from Meditrust (see "Meditrust
Transaction" discussed below). The remaining $12 million will be used primarily
to support the Company's young portfolio of assisted living facilities,
including acquiring the leasehold interests of profitable, stabilized assisted
living facilities that the Company currently manages for Black Box operators.
The Company may also use the cash to pursue
20
<PAGE> 21
additional real estate acquisitions from REITs or selective development and
acquisition opportunities that would enhance the Company's existing portfolio
from a geographic, marketing and operating standpoint.
Working Capital Line of Credit
In April 1999, the Company entered into a $15 million revolving Line of
Credit with HCFP Funding, Inc ("HCFP"). 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 Line of Credit was increased to $20 million.
Prior to July 1999, the Line of Credit was 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 "Accounts Receivable
Borrowers"). In July 1999, the real estate of BCC at Republic Park Care Center,
Inc. and BCC at Nevada Park Care Center, Inc. (the "Skilled Nursing Facility
Borrowers") was added as security to collateralize the Line of Credit. In order
to mortgage the Skilled Nursing Facility Borrowers' real estate in favor of
HCFP, the Company repaid its $3.1 million loan to Meditrust to satisfy the
existing mortgage on this real estate. 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.
On January 12, 2000, the Company completed the sale of its Missouri assets
(see "Missouri Divestiture" discussed below), which included the real estate,
leasehold interests and operations of the Skilled Nursing Facility Borrowers and
the Accounts Receivable Borrowers (the "Missouri Borrowers"). In order for HCFP
to release the Missouri Borrowers and their respective liens and security
interests under the Line of Credit, the Company agreed to (i) repay $5.4 million
on the Line of Credit attributable to the Missouri Borrowers, (ii) pay a
prepayment fee of approximately $75,000, (iii) reset the availability under the
Line of Credit to $12.0 million as of December 31, 1999 and (iv) cross-default
its obligations under the Line of Credit with future obligations to HCFP,
including the Company's obligations under the Heller Loan (discussed under the
"Meditrust Transaction" section below).
The primary component of the borrowing base for the Line of Credit consists
of 85% of the product of 8.0 to 8.5 times EBITDA of the Real Estate Borrowers
(as defined in the Line of Credit Agreement). At January 31, 2000, after the
repayment of $5.4 million attributable to the Missouri Borrowers, the borrowing
base available under the Line of Credit was approximately $12.0 million and
approximately $5.4 million was borrowed thereunder.
Meditrust Transaction
On December 30, 1999 the Company completed the acquisition of the 12
Tranche One Properties from Meditrust. The Tranche One Properties had a cost
basis of approximately $52 million and were acquired for (i) approximately $44.3
million in cash (plus $2.2 million in closing costs) and (ii) approximately $7.8
million under the Meditrust Note, including transaction costs. The $46.5 million
(including closing costs) was funded by (i) the Heller Loan ($32 million), (ii)
the FRR Note ($7 million) and (iii) cash ($7.5 million) from the Company.
The Meditrust Note has a maturity date of April 3, 2001. No interest will
accrue on the Meditrust Note unless the note is not prepaid in full on or before
October 31, 2000, at which time interest will accrue as follows: (i) 12% from
November 1, 2000 through December 31, 2000 and (ii) 14% from January 1, 2001
through April 3, 2001. Payments under the Meditrust Note are discussed below.
The Heller Loan has a maturity date of December 31, 2001. Interest on the
Heller Loan accrues at a floating rate per annum equal to the Base Rate (as
defined in the Heller Loan Agreement) plus 3.75%. Commencing on February 1,
2000, the Company will pay interest monthly in arrears. In addition, commencing
on November 20, 2000, the Company will pay 100% of the Excess Cash Flow (as
defined in the Heller Loan Agreement), which will be applied to the principal
balance. Although the Heller Loan has a two-year term, the exit fee due upon
payoff increases from 1% to 3% after September 30, 2000. The Company's
obligations under the Heller Loan are cross-defaulted with its obligations under
the Line of Credit.
21
<PAGE> 22
The FRR Note has a maturity date of June 26, 2000. The FRR Note is a
discount note with an issue price of $7,000,000, a maturity value of $7,424,580,
and a yield of 12.6829% per annum. Except as otherwise provided in the FRR Note,
no interest accrues on the outstanding balance of the note.
It is the Company's intention to refinance the Heller Loan and the FRR Note
(collectively, the "Tranche One Debt") by June 30, 2000. Based on the
operational performance of the Tranche One Properties, management believes the
Tranche One Debt can be refinanced for approximately $45 - $50 million, at a
lower interest rate and over a longer amortization period. Proceeds from the
refinancing will be used to repay the Tranche One Debt, with any remaining funds
being used by the Company for the purposes discussed under the "Equity
Transaction" section above.
As part of the Meditrust transaction, the Company obtained an Option to
purchase the real estate of an additional 12 Tranche Two Properties owned by
Meditrust and managed by the Company. The Option may not be exercised with
respect to any single Tranche Two Property, but rather only with respect to
groups of three or more Tranche Two Properties. Therefore, the acquisition of
the Tranche Two Properties may close in a series of transactions, with the final
closing to occur no later than October 31, 2000. If, after exercising the
Option, the Company fails to close, Meditrust may (i) accelerate the amount due
under the Meditrust Note, (ii) receive reimbursement of all reasonable
out-of-pocket expenses (including attorneys' fees and expenses) and (iii)
terminate the Option Agreement.
The Tranche Two Properties have a cost basis of approximately $66 million
and an aggregate purchase price of approximately $46 million. Each time the
Option is exercised for a Tranche Two Property, a preset prepayment is required
under the Meditrust Note. If the Company exercises its Option and closes on all
12 of the Tranche Two Properties, the Meditrust Note will be fully repaid by the
prepayments. The Company expects to exercise the Option on the Tranche Two
Properties with financing to be provided from yet-to-be determined lenders, IPC
or an affiliate, and Company funds.
The Tranche Two Properties are generally newer assisted living facilities
then the Tranche One Properties, which are essentially stabilized as of December
31, 1999. Two of the Tranche Two Properties have just opened in January 2000.
Management expects the Tranche Two Properties to experience significant lease up
and operational improvements over the next six to nine months. Management
believes these operational improvements will allow for reasonable financing to
be obtained for the Tranche Two Properties in the June to September 2000
timeframe.
Missouri Sale
In January 2000 the Company sold certain of its Missouri assets to
Christian Health Care of Missouri Inc. and its affiliates for $6.7 million in
cash, $2.5 million in notes, and $51 million in assumed lease obligations. The
$6.7 million was used primarily to pay down debt and to pay closing and
severance costs associated with the Missouri facilities. Management expects the
cash received on the collection of receivables to offset the operating costs to
wind down the business operations over the next several months. As the notes
receivable are collected, the proceeds are expected to be used for general
corporate purposes.
22
<PAGE> 23
To facilitate the understanding of the effect of the Missouri sale on the
continuing operations of the Company, the following table summarizes the results
of the Missouri operations over the past two quarters:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
DECEMBER 31 SEPTEMBER 30
1999 1999
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Patient services......................................... $ 8,959 $ 8,806
Resident services........................................ 913 919
Other revenues........................................... 21 18
------- -------
Total revenues............................................. 9,893 9,743
------- -------
Operating expenses:
Facility operating expenses.............................. 8,262 8,177
Development, general and administrative expense.......... 537 425
Lease expense............................................ 1,516 1,483
Depreciation and amortization expense.................... 70 102
------- -------
Total operating expenses................................... 10,385 10,187
------- -------
Loss from operations....................................... (492) (444)
======= =======
</TABLE>
Operations
The Company has opened 46 of its Outlook Pointe(R) signature series
assisted living facilities as of December 31, 1999. Two facilities opened in
January 2000, and the Company has adequate financing to complete construction on
the remaining four facilities currently under construction, which are expected
to open on various dates through April 2000. This will conclude the Company's
initial round of development activity initiated 2 1/2 years ago.
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 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 12 projects financed under the Black Box Structure for a total
purchase price of approximately $5.4 million. In conjunction with the purchase
transactions, the Company increased the lease base of 11 of the 12 facilities by
$6.5 million. These 11 facilities were part of the property acquisition
discussed under "Recent Developments" of this Current Report. The Company
estimates it will require approximately $35 - $40 million to buy the equity of
the 40 Outlook Pointe(R) 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 $20
million of the estimated
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<PAGE> 24
$35-$40 million capital requirement. The balance will be funded with the cash
from the IPC transaction, with cash raised from other financing transactions
discussed above, new financing transactions, possible asset divestitures and
cash to be provided from operations. The Company exercised its option to
purchase seven of its managed facilities this quarter and expects to exercise
its option on an additional nine projects by the end of this fiscal year
assuming a refinancing of the Tranche One Debt as discussed above. The capital
required to exercise the option for these additional nine projects is expected
to range from approximately $3.0-$3.5 million. The Company will be making option
payments in future quarters to maintain its purchase options for certain Outlook
Pointe(R) facilities.
As previously discussed, the Company has incurred a cumulative charge of
$6.2 million representing advances made for the operations of facilities
financed under the Black Box Structure under existing Shortfall Funding
Agreements. The Company estimates additional shortfall funding requirements of
approximately $2.0 to $2.5 million to stabilize its existing portfolio of
properties.
The Company currently is using approximately $1 million each month to
support corporate overhead and fund facility operating shortfalls. 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 $15-$20 million required to make option payments
and buy back Black Box operations through fiscal 2002. Management estimates that
the Company's current cash, the funds available under current credit
arrangements, and the cash expected to be generated by the Tranche One Debt
refinancing discussed above, will be adequate to meet the Company's cash
requirements.
Many of the facilities operated or managed by the Company are leased under
long-term operating leases. Excluding the Missouri operations, lease obligations
for the next 12 months are approximately $5,800,000. The lease documents contain
financial covenants and other restrictions which: (i) require the Company to
meet certain financial tests and maintain certain escrow funds, (ii) limit,
among other things, the ability of the Company and certain of its subsidiaries
to borrow additional funds, dispose of assets or engage in mergers or other
business combinations, (iii) cross-default certain of the Company's obligations
and (iv) 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.
Other
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.
Operating Activities
Cash used by operations increased by $2,541,000 to $9,530,000 for the six
months ended December 31, 1999 from cash used by operations of $6,989,000 for
the six months ended December 31, 1998. The increase in cash used was due to
increased operating losses, an increase in receivables, and partially offset by
a decrease in development contracts in process.
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<PAGE> 25
Investing and Financing Activities
Cash used for investing activities increased by $57,031,000 to $59,876,000
for the six months ended December 31, 1999 from $2,845,000 for the six months
ended December 31, 1998. Cash provided by financing activities increased by
$65,804,000 to $66,078,000 for the six months ended December 31, 1999 from
$274,000 for the six months ended December 31, 1998. Cash used for financing
activities and provided by investing activities was the result of the property
acquisitions, the equity transaction, and the seven Black Box acquisitions
discussed above, and repayment on the Line of Credit.
YEAR 2000 READINESS DISCLOSURE
In response to concerns that computer software and/or hardware that was
designed to define the year with a two digit date field rather than a four digit
field might fail or miscalculate data in the year 2000, causing disruption to
the operations or business activities of the Company, the Company had previously
formed a committee to research and assess the potential risk to the Company's
internal operations systems and to test its hardware and software systems for
compliance. The costs incurred by the Company relating to this project were
immaterial. To date, no significant disruptions to the operations of the Company
or computer hardware and software systems have been experienced.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company did not have any investment securities subject to market risk
as of, or during the six months ended, December 31, 1999.
25
<PAGE> 26
PART II -- OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not Applicable
(b) Not Applicable
(c) Securities Sold; Purchaser; Consideration; Terms of Conversion
During the fiscal quarter ended December 31, 1999, the Company issued to
IPC an aggregate of 16,700,000 shares of Common Stock at a price of $1.25 per
share, or a total of $20,875,000, pursuant to the Subscription Agreement between
the Company and IPC. The shares were issued in two tranches:
- On October 11, 1999, the Company issued to IPC 3,300,000 shares of Series
C Preferred Stock at a price of $1.25 per share, or a total of
$4,125,000. The powers, designations, preferences and rights of the
Series C Preferred Stock are contained in the Certificate of Designations
filed by the Company with the Delaware Secretary of State on October 8,
1999. In accordance with the Certificate of Designations, the Series C
Preferred Stock automatically converted into Common Stock at the
conversion rate of one share of Series C Preferred Stock for one share of
Common Stock on December 21, 1999.
- On December 21, 1999, the Company issued to IPC 13,400,000 shares of
Common Stock at a price of $1.25 per share, or a total of $16,750,000.
Descriptions of the transaction documents (i.e., the Subscription
Agreement, the Certificate of Designations, the Voting Agreement and the
Registration Rights Agreement) are contained in the following reports and
statements filed by the Company with the SEC, which are incorporated herein by
reference: (i) Current Report on Form 8-K dated October 8, 1999 and filed
October 21, 1999; (ii) Definitive Proxy Statement dated November 15, 1999; and
(iii) Current Report on Form 8-K dated December 15, 1999 and filed January 14,
2000.
The 16,700,000 shares of Common Stock issued by the Company to IPC were
intended to be exempt from registration under the Securities Act in accordance
with Section 4(2) of the Securities Act. IPC is entitled to certain demand and
piggyback registrations rights with respect to the 16,700,000 shares of Common
Stock pursuant to the Registration Rights Agreement between the Company and IPC.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.1 Amendment No. 3 to Loan and Security Agreement among
Balanced Care Corporation and certain of its wholly-owned
subsidiaries and Heller Healthcare Finance, Inc. formerly
known as HCFP Funding, Inc. dated as of December 31, 1999
(filed herewith)
10.2 Senior Housing Rider among Heller Healthcare Finance, Inc.,
Balanced Care Realty at State College, Inc., Balanced Care
Realty at Altoona, Inc., Balanced Care Realty at Lewistown,
Inc., Balanced Care Realty at Reading, Inc., Balanced Care
Realty at Berwick, Inc., Balanced Care Realty at Peckville,
Inc., Balanced Care Realty at Scranton, Inc., Balanced Care
Realty at Martinsburg, Inc., Balanced Care Realty at
Maumelle, Inc., Balanced Care Realty at Sherwood, Inc.,
Balanced Care Realty at Mountain Home, Inc., and Balanced
Care Realty at Mansfield, Inc. dated as of December 30,1999
(filed herewith)
10.3 Promissory Note A made by Balanced Care Realty at State
College, Inc., Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Lewistown, Inc., Balanced Care
Realty at Reading, Inc., Balanced Care Realty at Berwick,
Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
Realty at Scranton, Inc., Balanced Care Realty at
Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. in favor of Heller Healthcare Financing,
Inc. dated December 30, 1999(filed herewith)
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.4 Subordinated Promissory Note B by Balanced Care Realty at
State College, Inc., Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Lewistown, Inc., Balanced Care
Realty at Reading, Inc., Balanced Care Realty at Berwick,
Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
Realty at Scranton, Inc., Balanced Care Realty at
Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. in favor of Heller Healthcare Financing,
Inc. dated December 30, 1999 (filed herewith)
10.5 Hazardous Materials Indemnity among Heller Healthcare
Finance, Inc., Balanced Care Corporation, Balanced Care
Realty at State College, Inc., Balanced Care Realty at
Altoona, Inc., Balanced Care Realty at Lewistown, Inc.,
Balanced Care Realty at Reading, Inc., Balanced Care Realty
at Berwick, Inc., Balanced Care Realty at Peckville, Inc.,
Balanced Care Realty at Scranton, Inc., Balanced Care Realty
at Martinsburg, Inc., Balanced Care Realty at Maumelle,
Inc., Balanced Care Realty at Sherwood, Inc., Balanced Care
Realty at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. dated as of December 30, 1999 (filed
herewith)
10.6 Guaranty by Balanced Care Corporation in favor of Heller
Healthcare Finance, Inc. dated as of December 30, 1999(filed
herewith)
10.7 Form of Open-End Mortgage, Assignment of Rents, Leases and
Security Agreement in favor of Heller Healthcare Finance,
Inc. dated as of December 30, 1999 (filed herewith)
10.8 Schedule to Form of Open-End Mortgage, Assignment of Rents,
Leases and Security Agreement in favor of Heller Healthcare
Finance, Inc. (filed herewith)
10.9 Form of Mortgage, Assignment of Rents and Security Agreement
in favor of Heller Healthcare Finance, Inc. dated as of
December 30, 1999 (filed herewith)
10.10 Schedule to Form of Mortgage, Assignment of Rents and
Security Agreement in favor of Heller Healthcare Finance,
Inc. (filed herewith)
10.11 A Credit Line Deed of Trust, Assignment of Rents and
Security Agreement in favor of Heller Healthcare Finance,
Inc. dated as of December 30, 1999 (filed herewith)
10.12 Open-End Mortgage, Assignment of Rents and Security
Agreement in favor of Heller Healthcare Finance, Inc. dated
as of December 30, 1999 (filed herewith)
10.13 Subscription Agreement dated October 8, 1999, as amended and
restated October 11, 1999, between the Company and IPC
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated October 8, 1999)
10.14 Memorandum of Understanding by and among New Meditrust
Company LLC, IPC Advisors S.a.r.l., Balanced Care
Corporation, and Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Berwick, Inc., Balanced Care Realty
at Lewistown, Inc., Balanced Care Realty at Martinsburg,
Inc., Balanced Care Realty at Maumelle, Inc., Balanced Care
Realty at Mountain Home, Inc., Balanced Care Realty at
Peckville, Inc., Balanced Care Realty at Reading, Inc.,
Balanced Care Realty at Scranton, Inc., Balanced Care Realty
at Sherwood, Inc., and Balanced Care Realty at State
College, Inc. dated as of December 30, 1999 (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K dated December 15, 1999)
10.15 Option Agreement by and among New Meditrust Company LLC, IPC
Advisors S.a.r.l., and Balanced Care Corporation dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.16 Promissory Note made by Balance Care Corporation and IPC
Advisors S.a.r.l. in favor of New Meditrust Company LLC
dated December 30, 1999 (incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K
dated December 15, 1999)
10.17 Loan Agreement by and among Heller Healthcare Finance, Inc.,
Balanced Care Realty at Berwick, Inc., Balanced Care at
Lewistown, Inc., Balanced Care Realty at Mansfield, Inc.,
Balanced Care Realty at Martinsburg, Inc., Balanced Care
Realty at Maumelle, Inc., Balanced Care Realty at Mountain
Home, Inc., Balanced Care Realty at Peckville, Inc.,
Balanced Care Realty at Reading, Inc., Balanced Care Realty
at Scranton, Inc., Balanced Care Realty at Sherwood, Inc.,
and Balanced Care Realty at State College, Inc. dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.4
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.18 Series One 1999 BCC Discount Note made by Balanced Care
Corporation in favor of FRR Investments Limited dated
December 29, 1999 (incorporated by reference to Exhibit 10.5
to the Company's Current Report on Form 8-K dated December
15, 1999)
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.19 Indemnification Defense, Hold Harmless and Reimbursement
Agreement by and between Balanced Care Corporation and IPC
Advisors S.a.r.l. dated as of December 29, 1999
(incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 8-K dated December 15, 1999)
10.20 Right of First Refusal Agreement by and among Meditrust
Mortgage Investments, Inc., Meditrust Corporation, and IPC
Advisors S.A.R.L. dated as December 30, 1999 (incorporated
by reference to Exhibit 10.7 to the Company's Current Report
on Form 8-K dated December 15, 1999)
10.21 Asset Purchase Agreement dated October 15, 1999 by and
between Balanced Care Corporation and certain subsidiaries
and Christian Health Care of Missouri, Inc. (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K dated January 12, 2000)
10.22 First Amendment to Asset Purchase Agreement dated October
21, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.23 Second Amendment to Asset Purchase Agreement dated November
30, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.24 Third Amendment to Asset Purchase Agreement dated December
31, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.25 Fourth Amendment to Asset Purchase Agreement dated January
7, 2000 by and between Balanced Care Corporation and certain
subsidiaries and Christian Health Care of Missouri, Inc.
(incorporated by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K dated January 12, 2000)
10.26 Promissory Note (First) dated January 12, 2000 made by
Christian Health Care of Missouri, Inc., Christian Health
Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
Care of Republic, LLC and Cornerstone Health Care, Inc. in
favor of Balanced Care Corporation (incorporated by
reference to Exhibit 10.6 to the Company's Current Report on
Form 8-K dated January 12, 2000)
10.27 Promissory Note (Second) dated January 12, 2000 made by
Christian Health Care of Missouri, Inc., Christian Health
Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
Care of Republic, LLC and Cornerstone Health Care, Inc. in
favor of Balanced Care Corporation (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on
Form 8-K dated January 12, 2000)
10.28 Omnibus Assignment and Assumption Agreement, Amendment of
Loan Documents, Amendment of Lease Documents, Termination of
Lease Documents, Consent to Assignment and Confirmation of
Guaranties dated as of January 12, 2000 by and among
Hawthorn Health Properties, Inc., National Care Centers of
Hermitage, Inc., National Care Centers, Inc., National Care
Centers of Lebanon, Inc., Springfield Retirement Village,
Inc., National Care Centers of Nixa, Inc. National Care
Centers of Springfield, Inc., Mt. Vernon Park Care Center
West, Inc., BCC at Lebanon Care Center, Inc., BCC at Lebanon
Park Manor, Inc., BCC at Nixa Park Center, Inc., BCC at
Springfield Care Center, Inc., BCC at Mt. Vernon Park Care
Center, Inc., BCC at Mt. Vernon Park Care Center West, Inc.,
Hermitage Park Care Center, Inc., Balanced Care Corporation,
Dixon Management, Inc., Meditrust Mortgage Investments,
Inc., Christian Health Care of Missouri, Inc., Cornerstone
Properties Investment II, LLC, Cornerstone Health Care,
Inc., Christian Health Care Personnel Services, Inc.,
Christian Health Care, Inc., Christian Health Care of
Hermitage, Inc., Christian Health Care of Lebanon North,
Inc., Christian Health Care of Springfield West Park, Inc.,
Christian Health Care of Springfield West, Inc., Christian
Health Care of Lebanon South, Inc., Christian Health Care of
Springfield East, Inc., Christian Health Care of Nixa, Inc.
and Alington D. Kilgore (filed herewith)
10.29 Guaranty (BCC) dated as of January 12, 2000 given by
Balanced Care Corporation in favor of Meditrust Mortgage
Investments, Inc. (incorporated by reference to Exhibit 10.9
to the Company's Current Report on Form 8-K dated January
12, 2000)
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.30 Termination Agreement dated as of January 12, 2000 by and
among Meditrust Mortgage Investments, Inc., New Meditrust
Company LLC, Hawthorn Health Properties, Inc., National Care
Centers of Hermitage, Inc., National Care Centers, Inc.,
National Care Centers of Lebanon, Inc., Springfield
Retirement Village, Inc., National Care Centers of Nixa,
Inc., National Care Centers of Springfield, Inc., Mt. Vernon
Park Care Center West, Inc., Balanced Care Corporation,
Dixon Management, Inc. and Balanced Care at Stafford, Inc.
(incorporated by reference to Exhibit 10.10 to the Company's
Current Report on Form 8-K dated January 12, 2000)
10.31 Cross Default Agreement dated as of January 12, 2000 by and
among Balanced Care at Stafford, Inc., New Meditrust Company
LLC, Meditrust Mortgage Investments, Inc. and Balanced Care
Corporation (incorporated by reference to Exhibit 10.11 of
the Company's Current Report on Form 8-K dated January 12,
2000)
10.32 Option Agreement by and among New Meditrust Company LLC, IPC
Advisors S.a.r.l. and Balanced Care Corporation dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.33 Letter Agreement dated February 9, 2000 by and among New
Meditrust Company LLC, Balanced Care Corporation and IPC
Advisors S.a.r.l. (filed herewith)
</TABLE>
(B) Reports on Form 8-K
1. Current Report on Form 8-K dated October 8, 1999 regarding the
Subscription Agreement entered into between the Company and IPC Advisors
S.a.r.l. for an equity investment of approximately $21 million.
2. Current Report on Form 8-K dated December 15, 1999 regarding the
acquisition of certain assets by the Company from New Meditrust Company
LLC, the sale by the Company of its Missouri assets to certain
affiliates of Christian Health Care of Missouri, Inc., and the closing
on the $21 million equity investment with IPC Advisors S.a.r.l.
3. Current Report on Form 8-K dated January 12, 2000 regarding the sale by
the Company of its Missouri assets to certain affiliates of Christian
Health Care of Missouri, Inc.. including a pro forma Consolidated
Balance Sheet as of September 30, 1999 and pro forma Consolidated
Statements of Operations for the year ended June 30, 1999 and the three
months ended September 30, 1999.
29
<PAGE> 30
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
By: /s/ CLINT T. FEGAN
------------------------------------
Clint T. Fegan
Chief Financial Officer
Date: February 14, 2000
30
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Amendment No. 3 to Loan and Security Agreement among
Balanced Care Corporation and certain of its wholly-owned
subsidiaries and Heller Healthcare Finance, Inc. formerly
known as HCFP Funding, Inc. dated as of December 31, 1999
(filed herewith)
10.2 Senior Housing Rider among Heller Healthcare Finance, Inc.,
Balanced Care Realty at State College, Inc., Balanced Care
Realty at Altoona, Inc., Balanced Care Realty at Lewistown,
Inc., Balanced Care Realty at Reading, Inc., Balanced Care
Realty at Berwick, Inc., Balanced Care Realty at Peckville,
Inc., Balanced Care Realty at Scranton, Inc., Balanced Care
Realty at Martinsburg, Inc., Balanced Care Realty at
Maumelle, Inc., Balanced Care Realty at Sherwood, Inc.,
Balanced Care Realty at Mountain Home, Inc., and Balanced
Care Realty at Mansfield, Inc. dated as of December 30,1999
(filed herewith)
10.3 Promissory Note A made by Balanced Care Realty at State
College, Inc., Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Lewistown, Inc., Balanced Care
Realty at Reading, Inc., Balanced Care Realty at Berwick,
Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
Realty at Scranton, Inc., Balanced Care Realty at
Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. in favor of Heller Healthcare Financing,
Inc. dated December 30, 1999(filed herewith)
10.4 Subordinated Promissory Note B by Balanced Care Realty at
State College, Inc., Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Lewistown, Inc., Balanced Care
Realty at Reading, Inc., Balanced Care Realty at Berwick,
Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
Realty at Scranton, Inc., Balanced Care Realty at
Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. in favor of Heller Healthcare Financing,
Inc. dated December 30, 1999 (filed herewith)
10.5 Hazardous Materials Indemnity among Heller Healthcare
Finance, Inc., Balanced Care Corporation, Balanced Care
Realty at State College, Inc., Balanced Care Realty at
Altoona, Inc., Balanced Care Realty at Lewistown, Inc.,
Balanced Care Realty at Reading, Inc., Balanced Care Realty
at Berwick, Inc., Balanced Care Realty at Peckville, Inc.,
Balanced Care Realty at Scranton, Inc., Balanced Care Realty
at Martinsburg, Inc., Balanced Care Realty at Maumelle,
Inc., Balanced Care Realty at Sherwood, Inc., Balanced Care
Realty at Mountain Home, Inc., and Balanced Care Realty at
Mansfield, Inc. dated as of December 30, 1999 (filed
herewith)
10.6 Guaranty by Balanced Care Corporation in favor of Heller
Healthcare Finance, Inc. dated as of December 30, 1999(filed
herewith)
10.7 Form of Open-End Mortgage, Assignment of Rents, Leases and
Security Agreement in favor of Heller Healthcare Finance,
Inc. dated as of December 30, 1999 (filed herewith)
10.8 Schedule to Form of Open-End Mortgage, Assignment of Rents,
Leases and Security Agreement in favor of Heller Healthcare
Finance, Inc. (filed herewith)
10.9 Form of Mortgage, Assignment of Rents and Security Agreement
in favor of Heller Healthcare Finance, Inc. dated as of
December 30, 1999 (filed herewith)
10.10 Schedule to Form of Mortgage, Assignment of Rents and
Security Agreement in favor of Heller Healthcare Finance,
Inc. (filed herewith)
10.11 A Credit Line Deed of Trust, Assignment of Rents and
Security Agreement in favor of Heller Healthcare Finance,
Inc. dated as of December 30, 1999 (filed herewith)
10.12 Open-End Mortgage, Assignment of Rents and Security
Agreement in favor of Heller Healthcare Finance, Inc. dated
as of December 30, 1999 (filed herewith)
10.13 Subscription Agreement dated October 8, 1999, as amended and
restated October 11, 1999, between the Company and IPC
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated October 8, 1999)
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.14 Memorandum of Understanding by and among New Meditrust
Company LLC, IPC Advisors S.a.r.l., Balanced Care
Corporation, and Balanced Care Realty at Altoona, Inc.,
Balanced Care Realty at Berwick, Inc., Balanced Care Realty
at Lewistown, Inc., Balanced Care Realty at Martinsburg,
Inc., Balanced Care Realty at Maumelle, Inc., Balanced Care
Realty at Mountain Home, Inc., Balanced Care Realty at
Peckville, Inc., Balanced Care Realty at Reading, Inc.,
Balanced Care Realty at Scranton, Inc., Balanced Care Realty
at Sherwood, Inc., and Balanced Care Realty at State
College, Inc. dated as of December 30, 1999 (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K dated December 15, 1999)
10.15 Option Agreement by and among New Meditrust Company LLC, IPC
Advisors S.a.r.l., and Balanced Care Corporation dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.16 Promissory Note made by Balance Care Corporation and IPC
Advisors S.a.r.l. in favor of New Meditrust Company LLC
dated December 30, 1999 (incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K
dated December 15, 1999)
10.17 Loan Agreement by and among Heller Healthcare Finance, Inc.,
Balanced Care Realty at Berwick, Inc., Balanced Care at
Lewistown, Inc., Balanced Care Realty at Mansfield, Inc.,
Balanced Care Realty at Martinsburg, Inc., Balanced Care
Realty at Maumelle, Inc., Balanced Care Realty at Mountain
Home, Inc., Balanced Care Realty at Peckville, Inc.,
Balanced Care Realty at Reading, Inc., Balanced Care Realty
at Scranton, Inc., Balanced Care Realty at Sherwood, Inc.,
and Balanced Care Realty at State College, Inc. dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.4
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.18 Series One 1999 BCC Discount Note made by Balanced Care
Corporation in favor of FRR Investments Limited dated
December 29, 1999 (incorporated by reference to Exhibit 10.5
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.19 Indemnification Defense, Hold Harmless and Reimbursement
Agreement by and between Balanced Care Corporation and IPC
Advisors S.a.r.l. dated as of December 29, 1999
(incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 8-K dated December 15, 1999)
10.20 Right of First Refusal Agreement by and among Meditrust
Mortgage Investments, Inc., Meditrust Corporation, and IPC
Advisors S.A.R.L. dated as December 30, 1999 (incorporated
by reference to Exhibit 10.7 to the Company's Current Report
on Form 8-K dated December 15, 1999)
10.21 Asset Purchase Agreement dated October 15, 1999 by and
between Balanced Care Corporation and certain subsidiaries
and Christian Health Care of Missouri, Inc. (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K dated January 12, 2000)
10.22 First Amendment to Asset Purchase Agreement dated October
21, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.23 Second Amendment to Asset Purchase Agreement dated November
30, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.24 Third Amendment to Asset Purchase Agreement dated December
31, 1999 by and between Balanced Care Corporation and
certain subsidiaries and Christian Health Care of Missouri,
Inc. (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K dated January 12, 2000)
10.25 Fourth Amendment to Asset Purchase Agreement dated January
7, 2000 by and between Balanced Care Corporation and certain
subsidiaries and Christian Health Care of Missouri, Inc.
(incorporated by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K dated January 12, 2000)
10.26 Promissory Note (First) dated January 12, 2000 made by
Christian Health Care of Missouri, Inc., Christian Health
Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
Care of Republic, LLC and Cornerstone Health Care, Inc. in
favor of Balanced Care Corporation (incorporated by
reference to Exhibit 10.6 to the Company's Current Report on
Form 8-K dated January 12, 2000)
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.27 Promissory Note (Second) dated January 12, 2000 made by
Christian Health Care of Missouri, Inc., Christian Health
Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
Care of Republic, LLC and Cornerstone Health Care, Inc. in
favor of Balanced Care Corporation (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on
Form 8-K dated January 12, 2000)
10.28 Omnibus Assignment and Assumption Agreement, Amendment of
Loan Documents, Amendment of Lease Documents, Termination of
Lease Documents, Consent to Assignment and Confirmation of
Guaranties dated as of January 12, 2000 by and among
Hawthorn Health Properties, Inc., National Care Centers of
Hermitage, Inc., National Care Centers, Inc., National Care
Centers of Lebanon, Inc., Springfield Retirement Village,
Inc., National Care Centers of Nixa, Inc. National Care
Centers of Springfield, Inc., Mt. Vernon Park Care Center
West, Inc., BCC at Lebanon Care Center, Inc., BCC at Lebanon
Park Manor, Inc., BCC at Nixa Park Center, Inc., BCC at
Springfield Care Center, Inc., BCC at Mt. Vernon Park Care
Center, Inc., BCC at Mt. Vernon Park Care Center West, Inc.,
Hermitage Park Care Center, Inc., Balanced Care Corporation,
Dixon Management, Inc., Meditrust Mortgage Investments,
Inc., Christian Health Care of Missouri, Inc., Cornerstone
Properties Investment II, LLC, Cornerstone Health Care,
Inc., Christian Health Care Personnel Services, Inc.,
Christian Health Care, Inc., Christian Health Care of
Hermitage, Inc., Christian Health Care of Lebanon North,
Inc., Christian Health Care of Springfield West Park, Inc.,
Christian Health Care of Springfield West, Inc., Christian
Health Care of Lebanon South, Inc., Christian Health Care of
Springfield East, Inc., Christian Health Care of Nixa, Inc.
and Alington D. Kilgore (filed herewith)
10.29 Guaranty (BCC) dated as of January 12, 2000 given by
Balanced Care Corporation in favor of Meditrust Mortgage
Investments, Inc. (incorporated by reference to Exhibit 10.9
to the Company's Current Report on Form 8-K dated January
12, 2000)
10.30 Termination Agreement dated as of January 12, 2000 by and
among Meditrust Mortgage Investments, Inc., New Meditrust
Company LLC, Hawthorn Health Properties, Inc., National Care
Centers of Hermitage, Inc., National Care Centers, Inc.,
National Care Centers of Lebanon, Inc., Springfield
Retirement Village, Inc., National Care Centers of Nixa,
Inc., National Care Centers of Springfield, Inc., Mt. Vernon
Park Care Center West, Inc., Balanced Care Corporation,
Dixon Management, Inc. and Balanced Care at Stafford, Inc.
(incorporated by reference to Exhibit 10.10 to the Company's
Current Report on Form 8-K dated January 12, 2000)
10.31 Cross Default Agreement dated as of January 12, 2000 by and
among Balanced Care at Stafford, Inc., New Meditrust Company
LLC, Meditrust Mortgage Investments, Inc. and Balanced Care
Corporation (incorporated by reference to Exhibit 10.11 of
the Company's Current Report on Form 8-K dated January 12,
2000)
10.32 Option Agreement by and among New Meditrust Company LLC, IPC
Advisors S.a.r.l. and Balanced Care Corporation dated as of
December 30, 1999 (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated December
15, 1999)
10.33 Letter Agreement dated February 9, 2000 by and among New
Meditrust Company LLC, Balanced Care Corporation and IPC
Advisors S.a.r.l. (filed herewith)
</TABLE>
<PAGE> 1
Exhibit 10.1
AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
originally dated as of April 22, 1999
by and among
BALANCED CARE CORPORATION,
BCC AT HERMITAGE PARK CARE CENTER, INC.,
BCC AT LEBANON CARE CENTER, INC.,
BCC AT LEBANON PARK MANOR, INC.,
BCC AT MT. VERNON PARK CARE CENTER, INC.,
BCC AT MT. VERNON PARK CARE CENTER WEST, INC.,
BCC AT NEVADA PARK CARE CENTER, INC.,
BCC AT NIXA PARK CENTER, INC.,
BCC AT REPUBLIC PARK CENTER, INC.,
BCC AT SPRINGFIELD CARE CENTER, INC.,
DIXON MANAGEMENT INC.,
BCC AT DARLINGTON, INC.,
BALANCED CARE AT EYERS GROVE, INC.,
BALANCED CARE AT BUTLER, INC.,
BALANCED CARE AT SARVER, INC.,
BALANCED CARE AT NORTH RIDGE, INC.
and
HELLER HEALTHCARE FINANCE, INC.,
Formerly known as
HCFP FUNDING, INC.
Amended as of December 31, 1999
<PAGE> 2
AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of this 31st day of December, 1999, by and among BALANCED CARE
CORPORATION, a Delaware corporation (the "Parent"), BCC AT HERMITAGE PARK CARE
CENTER, INC., a Delaware corporation, BCC AT LEBANON CARE CENTER, INC., a
Delaware corporation, BCC AT LEBANON PARK MANOR, INC., a Delaware corporation,
BCC AT MT. VERNON PARK CARE CENTER, INC., a Delaware corporation, BCC AT MT.
VERNON PARK CARE CENTER WEST, INC., a Delaware corporation, BCC AT NEVADA PARK
CARE CENTER, INC., a Delaware corporation, BCC AT NIXA PARK CENTER, INC., a
Delaware corporation, BCC AT REPUBLIC PARK CENTER, INC., a Delaware corporation,
BCC AT SPRINGFIELD CARE CENTER, INC., a Delaware corporation, DIXON MANAGEMENT
INC., a Missouri corporation, BCC AT DARLINGTON, INC., a Delaware corporation,
BALANCED CARE AT EYERS GROVE, INC., a Delaware corporation, BALANCED CARE AT
BUTLER, INC., a Delaware corporation, BALANCED CARE AT SARVER, INC., a Delaware
corporation, BALANCED CARE AT NORTH RIDGE, INC., a Delaware corporation
(collectively and individually, the "Borrower"), and HELLER HEALTHCARE FINANCE,
INC., a Delaware corporation formerly known as HCFP FUNDING, INC., a Delaware
corporation (the "Lender").
RECITALS
A. The Lender agreed to make available to the Borrower a revolving credit
facility in the maximum principal amount of $20,000,000 (the "Loan") pursuant to
that certain Loan and Security Agreement dated April 22, 1999 by and among
Borrower and Lender, as amended pursuant to (i) that certain Amendment No. 1 to
Loan and Security Agreement dated July 1, 1999 made by and between the Borrower
and the Lender (the "First Amendment"), and (ii) that certain Amendment No. 2 to
Loan and Security Agreement dated July 29, 1999 made by and between the Lender
and the Borrower (the "Second Amendment", and as further amended from time to
time, collectively the "Loan Agreement") . Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings assigned to such terms in
the Loan Agreement.
B. The Parent has entered into that certain Asset Purchase Agreement dated
October 15th, 1999 (as amended, modified and restated from time to time, the
"Asset Purchase Agreement"), pursuant to which the Parent has agreed, on its
behalf and on behalf of the Skilled Nursing Facility Borrowers and the Accounts
<PAGE> 3
Receivable Borrowers to sell all of its ownership and leasehold rights in the
facilities and businesses owned, leased and/or operated by Nevada Park, Republic
Park and the other Accounts Receivable Borrowers. For purposes of this
Agreement, the Facilities and Accounts Receivable Borrowers listed on Exhibit A
attached hereto and made a part hereof shall be hereinafter collectively
referred to as the "Missouri Facilities" and the "Missouri Borrowers",
respectively).
C. The Borrower has asked the Lender to release the Missouri Borrowers and
Missouri Facilities from the liens and security interests granted hereunder and
under the other Loan Documents, as contemplated by Sections 2.10(f) (as
described in the Second Amendment) and 2.12 of the Loan Agreement.
D. The Lender has agreed to release the Missouri Borrowers and the
Missouri Facilities and to make certain changes to the terms of the Loan
Agreement, provided (among other things) that Borrower executes and delivers
this Amendment and otherwise complies with the agreements set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the terms and
conditions set forth in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower hereby agree as follows:
Section 1. Effectiveness of this Amendment. This Amendment shall not be
effective until the date all of the following shall have occurred (such date
being hereinafter referred to as the "Effective Date"):
(a) Lender (or an escrow agent approved by Lender) shall have
received immediately available funds in an amount equal to (i) the Skilled
Nursing Obligations described in Section 2.10(f)(iii) of the Loan Agreement (as
described in the Second Amendment); (ii) the release fee described in Section
2.10(f)(iv) of the Loan Agreement (as described in the Second Amendment); (iii)
any additional amounts which may be required to reduce the outstanding principal
balance to no more than $12,000,000; (iv) fees of Lender's counsel; and (v) all
other amounts set forth in Lender's payoff letter attached hereto as Exhibit B
and made a part hereof (such amounts being hereinafter collectively referred to
as the "Payoff Amount").
(b) Lender (or an escrow agent approved by Lender) shall have
received this Agreement executed by all Borrowers.
2
<PAGE> 4
(c) Lender (or an escrow agent approved by Lender) shall have
received updated versions of any Schedules to the Loan Agreement which no longer
contain accurate current information.
(d) Lender and Borrower shall have executed and delivered this
Amendment to an escrow agent approved by Lender and Borrower (the "Escrow
Agent").
(e) Lender shall have executed and delivered to the Escrow Agent
such releases and termination statements as may be required to release and
terminate the liens and security interests granted by the Missouri Borrowers
hereunder and under the other Loan Documents.
(f) All Borrowers other than the Missouri Borrowers, as described in
Exhibit C attached hereto and made a part hereof (hereinafter, the "Remaining
Borrowers"), shall have executed and delivered to Lender the Amended and
Restated Revolving Credit Note described below.
(g) Lender and Meditrust Mortgage Investment, Inc. shall have
executed and delivered to the Escrow Agent a Termination of Accounts Receivable
Intercreditor Agreement originally made as of April 22, 1999, as amended on July
29, 1999 by First Amendment to Accounts Receivable Agreement.
(h) Lender shall have confirmed that (i) no Event of Default has
occurred and is continuing, and (ii) upon such release of the Missouri Borrowers
and the Missouri Facilities, the Borrower shall be in compliance with the
Borrowing Base.
Section 2. Amendments to the Loan Agreement. Borrower and Lender hereby
agree to amend and modify the provisions of the Loan Agreement as follows:
(a) Definitions. Commencing on the Effective Date, the following terms
shall be amended as follows:
(i) The term "Borrower" shall not include any of the Missouri
Borrowers, and shall be construed for all purposes in the Loan
Agreement and all other Loan Documents to include only the
Remaining Borrowers.
(ii) The term "Collateral" shall not include any Collateral of any
of the Missouri Borrowers, and shall be construed for all
purposes in the Loan
3
<PAGE> 5
Agreement and all other Loan Documents to include only the
Remaining Borrowers.
(iii) The term "Facility" shall not include the Missouri Facilities
and shall be construed for all purposes in the Loan Agreement
and all other Loan Documents to include only the Facilities
owned and operated by the Remaining Borrowers.
(iv) The term "Mortgage" shall not include the Mortgages covering
either Skilled Nursing Property (ie., the Property owned by
Nevada Park and the Property owned by Republic Park), and
shall be construed for all purposes in the Loan Agreement and
all other Loan Documents to include only the Mortgages
covering the Property owned by the Remaining Borrowers.
(v) The term "Note" shall include the Amended and Restated
Revolving Credit Note of even date herewith made by the
Remaining Borrowers payable to Lender in the principal amount
of $15,000,0000.
(vi) The term "Property" shall not include the Property owned by
Nevada Park or Republic Park, and shall be construed for all
purposes in the Loan Agreement and all other Loan Documents to
include only the Property owned by the Remaining Borrowers.
(vii) The term "Real Estate Borrower" shall not include Nevada Park,
Republic Park or any of the other Missouri Borrowers, and
shall be construed for all purposes in the Loan Agreement and
all other Loan Documents to include only the Remaining
Borrowers.
(viii)The term "Accounts Receivable Borrower"shall not include
Nevada Park, Republic Park or any of the other Missouri
Borrowers, and shall be construed for all purposes in the Loan
Agreement and all other Loan Documents to include only the
Remaining Borrowers.
(ix) The term "Accounts Receivable Facility" shall not include
Nevada Park, Republic Park or any of the other Missouri
Borrowers, and shall be construed
4
<PAGE> 6
for all purposes in the Loan Agreement and all other Loan
Documents to include only the Remaining Borrowers.
(viii)The term "Skilled Nursing Borrower" shall be
deleted.
(ix) The term "Skilled Nursing Property" shall be deleted.
(b) Application of Terms within Provisions of Loan Agreement. Commencing
on the Effective Date, all terms, conditions, agreements, promises, covenants
and references set forth in the Loan Agreement and other Loan Documents
containing the terms "Borrower", "Collateral", "Facility", "Mortgage",
"Property", "Real Estate Borrower", "Accounts Receivable Borrower" and "Accounts
Receivable Facility" in the Loan Agreement shall not apply, nor refer to, nor be
construed to include or refer to Nevada Park, Republic Park or any of the other
Missouri Borrowers or the other Missouri Facilities, and such terms, conditions,
agreements, promises, covenants and references shall only apply to the Remaining
Borrowers. In addition, the terms "Skilled Nursing Facility Borrower" and
Skilled Nursing Borrower" shall be deleted and all provisions with respect
thereto shall be disregarded and no longer have effect under the Loan Agreement.
Section 3. Release of Liens and Security Interests. Commencing on the
Effective Date, (a) Lender hereby releases, relinquishes, terminates and
discharges all of the liens and security interests granted by the Missouri
Borrowers under the Loan Agreement and the other Loan Documents, and (b) Lender
hereby releases each Missouri Borrower from its Obligations under the Loan
Documents. Borrower and Lender hereby acknowledge and agree that such releases
by Lender are not intended, nor shall such releases be construed, as (i) a
release, termination, relinquishment or discharge of any of the liens on and
security interests in any Collateral or Property of the Remaining Borrowers;
(ii) a novation, discharge, extinquishment or impairment of the Obligations of
the Remaining Borrowers that remain outstanding under the Loan Agreement; (iii)
a waiver of any requirement, covenant, agreement set forth in the Loan Documents
and applicable to the Remaining Borrowers; (iv) a waiver of any default or Event
of Default, whether now existing or hereafter arising; or (v) any remedy of
Lender under the Loan Documents or applicable law.
5
<PAGE> 7
Section 4. Sublimit to the Maximum Loan Amount. Borrower and Lender hereby
agree that Section 2.4(a) is hereby deleted in its entirety and the following
new section is inserted in its place:
"(a) Notwithstanding anything in the Loan Agreement to the contrary, the
Maximum Loan Amount will be subject to a cap in the principal amount of Twelve
Million Dollars ($12,000,000) (the "Cap"). Any advance of Loan proceeds above
the Cap shall be subject to approval of Lender's Credit Committee exercising its
sole credit judgment, and Lender shall be under no obligation whatsoever to
advance funds above $12,000,000 in aggregate outstanding Revolving Credit Loans,
irrespective of the Borrowing Base at any time. The Cap shall be applicable to
the calculation of the Termination Fee."
Section 5. Monthly Usage Fee. Borrower and Lender hereby agree that
Section 2.4 (b) is hereby deleted in its entirety and the following new section
is inserted in lieu thereof:
"(b) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly usage fee (the "Usage Fee") equal
to .021% of the average amount by which the Cap of $12,000,000 exceeds the
average amount of the outstanding principal balance of the Revolving Credit
Loans during the preceding month. The Usage Fee shall be payable monthly in
arrears on the first Business Day of each successive calendar month."
Section 6. Cross Collateralization Provisions. Each Borrower hereby
acknowledges and agrees that (a) its grant of liens on and security interests in
the Pledgor Collateral set forth in Section 3.1A of the Loan Agreement shall
also collateralize the obligations of the Parent and certain of its Affiliates
more particularly described in Exhibit D attached hereto (collectively, the
"Outlooke Pointe Affiliates") in connection with a credit facility made or to be
made by Lender in the approximate principal amount of $32,000,000 (the "Outlook
Pointe Loan"), and (b) such agreement by Borrower is a condition precedent to
Lender's agreements set forth herein. Accordingly, Borrower and Lender hereby
agree that Section 3.1A shall be amended and restated as follows:
"Section 3.1A Parent's and Real Estate Borrower's Pledge. As security for
the payment of the following obligations (which
6
<PAGE> 8
obligations shall be collectively referred to herein as the "Obligations"): (a)
all liabilities of Borrower to Lender under the Note, this Agreement and all
other Loan Documents, including but not limited to any extensions,
modifications, substitutions, increases and renewals thereof, (b) the payment of
all amounts advanced by Lender to preserve, protect, defend, and enforce its
rights hereunder and in the Collateral (as hereinafter defined) in accordance
with the terms of this Agreement and all other Loan Documents, including
(without limitation) the Mortgage, (c) the payment of all reasonable expenses
incurred by Lender in connection therewith, (d) the payment of all obligations
of the Outlook Pointe Affiliates (the "Outlook Pointe Obligations") under any
and all notes, mortgages, security interests, guaranties, assignments and other
loan documents executed and delivered in connection with the Outlook Pointe Loan
(collectively, the "Outlook Pointe Documents"), each Real Estate Borrower and
the Parent (hereinafter called a "Pledgor" or a "Remaining Borrower") hereby
assigns and grants to Lender a continuing first priority lien on and security
interest in, upon, and to each and every portion of the following property (the
"Pledgor Collateral"):
(i) All of the Pledgor's now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description, and all of Borrower's contract rights, chattel paper, documents and
instruments with respect thereto, and all of the Pledgor's rights, remedies,
security and liens, in, to and in respect of the Accounts, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any Account Debtor, and credit
and other insurance;
(ii) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in possession of,
or under the control of Lender or a bailee or Affiliate of Lender, from or for
the Pledgor, whether for safekeeping, pledge, custody, transmission, collection
or otherwise, and all of the Pledgor's deposits (general or special), balances,
sums and credits with Lender at any time existing;
(iii)All of the Pledgor's right, title and interest in, to and in
respect of all goods relating to, or which by sale have
7
<PAGE> 9
resulted in, Accounts, including, without limitation, all goods described in
invoices or other documents or instruments with respect to, or otherwise
representing or evidencing, any Account, and all returned, reclaimed or
repossessed goods;
(iv) All of the Pledgor's now or hereafter acquired deposit accounts
into which Accounts are deposited;
(v) All of the Pledgor's now owned and hereafter acquired or arising
general intangibles and other property of every kind and description with
respect to, evidencing or relating to its Accounts, accounts receivable and
other rights to payment, including, but not limited to, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts; and
(vi) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing."
Section 7. Cross Default Provisions.
(a) Borrower and Lender hereby agree that a new Section 8.1(s) is hereby
added to the Loan Agreement, as follows:
"(s) A Material Event of Default (as hereinafter defined) occurs
under any other loan agreement, promissory note, mortgage, deed of trust,
security agreement, guaranty agreement, letter agreement, or other
instrument, document or agreement executed and delivered by the Parent,
any Remaining Borrower or any Affiliate of the Parent or any Remaining
Borrower, in connection with any other loan, line of credit or other
financing provided by Lender to any such party, whether now existing or
hereafter arising, including (without limitation) the loan evidenced and
secured by the Outlook Pointe Documents. As used herein, "Material
Default" shall mean and include any Event of Default (1) which occurs as a
result of the failure of any Borrower or any Affiliate of any Borrower to
pay monetary obligations to Lender beyond any applicable cure or grace
period; (2) which occurs as a result of the occurrence of any of the
events described in
8
<PAGE> 10
Section 8.1(f) or 8.1(g) hereof with respect to any Borrower or any
Affiliate of any Borrower; (3) gives rise to Lender's acceleration of the
indebtedness of any Borrower, or any Affiliate of Borrower, to Lender; or
(4) gives rise to Lender's exercise of any other remedies against any
Borrower or any Affiliate of Borrower, including (without limitation) the
remedies of foreclosure, collection and the appointment of a receiver. As
used herein, "Material Event of Default" shall not be applicable to, or
include, any Event of Default under this Loan Agreement or any other Loan
Document.
(b) Borrower and Lender agree that Section 8.1(l) is hereby deleted in its
entirety.
Section 8. Remedies. Borrower and Lender hereby agree to add a new
subsection (vi) to Section 8.3(a) of the Loan Agreement, as follows:
"(vi) The right to exercise its rights and remedies under the Outlook
Pointe Documents, including the right to foreclose its liens
thereunder."
Section 9. Representations and Warranties; No Event of Default. Each
Remaining Borrower hereby confirms that all of the representations and
warranties set forth in the Loan Agreement and all other Loan Documents are true
and correct, except as set forth in Exhibit E attached hereto and made a part
hereof by this reference. To the Borrower's best knowledge, no Event of Default
has occurred and is continuing. Each Remaining Borrower hereby reaffirms and
restates all of the Obligations and all of its promises, agreements and other
covenants set forth in the Loan Documents, and each Remaining Borrower ratifies
and confirms the Loan Documents to which it is a party. Each Remaining Borrower
reaffirms that the Collateral and Property of each Remaining Borrower continues
to secure the Obligations,
Section 10. Enforceability. This Amendment constitutes the legal, valid
and binding obligation of each Borrower, and is enforceable against each
Borrower in accordance with its terms.
Section 11. Reference to the Effect on the Loan Agreement. Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of similar import shall
mean and
9
<PAGE> 11
be a reference to the Loan Agreement as previously amended and as amended by
this Amendment.
Section 12. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Maryland.
Section 13. Headings. Section headings in this Amendment are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
Section 14. Counterparts. This Amendment may be executed in counterparts,
and both counterparts taken together shall be deemed to constitute one and the
same instrument.
[SIGNATURES BEGIN ON PAGE 11]
10
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
ATTEST: HELLER HEALTHCARE FINANCE, INC.
a Delaware corporation (formerly known as
HCFP Funding, Inc.)
By:/s/Diana Pennington By:/s/Kevin J. McMeen
Name:Diana Pennington Name:Kevin J. McMeen
Title:Senior Counsel Title:Sr. V.P.
[SIGNATURES OF BORROWERS ON FOLLOWING PAGES]
11
<PAGE> 13
REMAINING BORROWERS:
ATTEST: BALANCED CARE CORPORATION
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:Clint T. Fegan
Title: Title:VP. CFO
ATTEST: BCC AT DARLINGTON, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BALANCED CARE AT EYERS GROVE, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BALANCED CARE AT BUTLER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BALANCED CARE AT SARVER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
12
<PAGE> 14
ATTEST: BALANCED CARE AT NORTH RIDGE, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
MISSOURI BORROWERS:
ATTEST: BCC AT HERMITAGE PARK CARE CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT LEBANON CARE CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT LEBANON PARK MANOR, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
13
<PAGE> 15
ATTEST: BCC AT MT. VERNON PARK CARE CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT MT. VERNON PARK CARE CENTER
WEST, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT NEVADA PARK CARE CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT NIXA PARK CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: BCC AT REPUBLIC PARK CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
14
<PAGE> 16
ATTEST: BCC AT SPRINGFIELD CARE CENTER, INC.
a Delaware corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
ATTEST: DIXON MANAGEMENT, INC.
a Missouri corporation
By: By:/s/Clint T. Fegan [SEAL]
Name: Name:
Title: Title:
15
<PAGE> 17
EXHIBIT A
MISSOURI BORROWERS and MISSOURI FACILITIES
BCC AT HERMITAGE PARK CARE CENTER, INC., doing business as
Balanced Care, Hermitage
Highway 54 and 1st Street
Hermitage, MO 65668
BCC AT LEBANON CARE CENTER, INC., doing business as
Balanced Care, Lebanon North
596 Morton Road
Lebanon, MO 65536
BCC AT LEBANON PARK MANOR, INC., doing business as
Balanced Care, Lebanon South
514 W. Fremont Road
Lebanon, MO 65536
BCC AT MT. VERNON PARK CARE CENTER, INC., doing business as
Balanced Care, Springfield West II
3403 West Mt. Vernon
Springfield, MO 65802
BCC AT MT. VERNON PARK CARE CENTER WEST, INC., doing business as
Balanced Care, Springfield West I
3403 West Mt. Vernon
Springfield, MO 65802
BCC AT NEVADA PARK CARE CENTER, INC., doing business as
Balanced Care, Nevada
700 East Highland
Nevada, MO 64772
BCC AT NIXA PARK CENTER, INC., doing business as
Balanced Care, Nixa
1104 North Main
Nixa, MO 65714
BCC AT REPUBLIC PARK CENTER, INC., doing business as
Balanced Care, Republic
901 East Highway 174
Republic, MO 65738
16
<PAGE> 18
BCC AT SPRINGFIELD CARE CENTER, INC., doing business as
Balanced Care, Springfield East
3535 East Cherokee
Springfield MO 65809
DIXON MANAGEMENT INC., doing business as
Balanced Care, Dixon
301 East 10th Street
Dixon, MO 65459
17
<PAGE> 1
Exhibit 10.2
Loan No. 99-407
SENIOR HOUSING RIDER
THIS SENIOR HOUSING RIDER is attached to and made a part of that
certain Loan Agreement dated as of the 30th day of December, 1999, among
BALANCED CARE REALTY AT STATE COLLEGE, INC., a Delaware corporation, BALANCED
CARE REALTY AT ALTOONA, INC., a Delaware corporation, BALANCED CARE REALTY AT
LEWISTOWN, INC., a Delaware corporation, BALANCED CARE REALTY AT READING, INC.,
a Delaware corporation, BALANCED CARE REALTY AT BERWICK, INC., a Delaware
corporation, BALANCED CARE REALTY AT PECKVILLE, INC., a Delaware corporation,
BALANCED CARE REALTY AT SCRANTON, INC., a Delaware corporation, BALANCED CARE
REALTY AT MARTINSBURG, INC., a Delaware corporation, BALANCED CARE REALTY AT
MAUMELLE, INC., a Delaware corporation, BALANCED CARE REALTY AT SHERWOOD, INC.,
a Delaware corporation, BALANCED CARE REALTY AT MOUNTAIN HOME, INC., a Delaware
corporation, and BALANCED CARE REALTY AT MANSFIELD, INC., a Delaware corporation
(collectively, "Borrower"), the undersigned operators and HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation (Heller Healthcare Finance, Inc. and its
successors and assigns are hereinafter referred to as "Lender"). To the extent
of any conflict between the terms and provisions of this Rider and the terms and
provisions of the Loan Agreement, the terms and provisions of this Rider shall
govern and control the rights and obligations of the parties.
R-1. All terms not defined in this Rider shall have the meanings
ascribed to such terms as set forth in the Loan Agreement.
R-2. The following representations, warranties and covenants are
hereby added to the representations, warranties and covenants contained in the
Loan Agreement.
Each Borrower represents, covenants, and warrants, as of the date
hereof and through the term of Loan, as follows:
(a) Each Borrower, together with the Balanced Care Corporation
Affiliate which is the Manager of each of the Properties and the
Improvements thereon, and if applicable, the Master Lessee of each
Property in whose name the Licenses are issued (collectively, the
"Operator"), are using and operating their respective the Properties and
Improvements (collectively, the "Facilities") as assisted and/or
independent senior housing and/or Alzheimer's facilities, together with
<PAGE> 2
outpatient rehabilitation services, each Facility having the number of
beds/units set forth on Exhibit A to the Loan Agreement (as modified from
time to time with Lender's consent, which consent shall not be
unreasonably withheld, the "Licensed Use"). Operator and each Borrower
complies, and throughout the term of the Loan will comply in all material
respects, with all federal, state and local laws, regulations, quality and
safety standards, accreditation standards and requirements of the
applicable state department of health or other applicable state regulatory
agency (each a "DOH") and all other federal, state or local governmental
authorities including those relating to the quality and adequacy of
medical care, distribution of pharmaceuticals, rate setting, equipment,
personnel, operating policies, additions to facilities and services and
fee splitting. Each Facility which is owned, leased or operated by a
Borrower or Operator shall be operated at all times in compliance in all
material respects with such laws and requirements.
(b) All governmental licenses, permits, regulatory agreements or
other approvals or agreements necessary or desirable for the Licensed Use
of each Facility are held by a Borrower or Operator in the name of the
Borrower or Operator as required under applicable law and are in full
force and effect, including, if required, a valid certificate of need
("CON") or similar certificate, license, or approval issued by the DOH for
the requisite number of beds and units in each Facility, and a provider
agreement or other required documentation of approved provider status for
each provider payment or reimbursement program listed in Exhibit R-1
hereto, if applicable; provided, however, rehabilitation services are
provided at some or all of the Facilities by third parties, each of whom
has the necessary licenses to perform such services at a Facility. All
required permits, certificates, licenses and governmental approvals
necessary for operation of each Facility for the Licensed Use are listed
on Exhibit R-1 hereto (collectively, the "Licenses"). So long as the Loan
remains outstanding, each Borrower (and Operator) shall operate its
Facility or cause its Facility to be operated in a manner such that the
Licenses shall remain in full force and effect. True and complete copies
of the Licenses have been delivered to Lender.
(c) The Licenses for each Facility, including without limitation, if
applicable, the CON:
<PAGE> 3
(i) May not be, and have not been, and will not be transferred
to any location other than that Facility; provided, however, the
CON's for the Arkansas Facilities were acquired from other
facilities;
(ii) Are not now and will not be pledged as collateral
security for any other loan or indebtedness; and
(iii) Are held free and will remain free from restrictions or
known conflicts which would materially impair the use or operation
of the Facility for the Licensed Use, and shall not be provisional,
probationary or restricted in any way.
(d) Neither any Borrower nor Operator shall:
(i) Rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of the Licenses for any
Facility;
(ii) Amend or otherwise change any Facility's authorized
units/beds capacity and/or the number of units/beds approved by the
DOH; except that, subject to Lender's consent, which consent shall
not be unreasonably withheld or delayed, a Borrower may change the
allocation of beds/units between assisted living and independent
living;
(iii) Replace or transfer all or any part of a Facility's
units or beds to another site or location; or
(iv) Voluntarily transfer or encourage the transfer of any
resident of a Facility to any other facility not subject to a
Mortgage, unless such transfer is at the request of the resident or
is for reasons relating to the health, required level of medical
care or safety of the resident to be transferred.
(e) If and when a Borrower or Operator participates in any Medicare
or Medicaid or other third party payor program with respect to a Facility,
that Facility will remain in compliance in all material respects with all
requirements for participation in Medicare and Medicaid, including the
Medicare and Medicaid Patient Protection Act of 1987. Each Facility is and
will remain in conformance in all material
<PAGE> 4
respects with all insurance, reimbursement and cost reporting
requirements, and, if applicable, has a current provider agreement which
is in full force and effect under Medicare and Medicaid.
(f) There is no, and during the term of the Loan there shall be no,
threatened, existing or pending revocation, suspension, termination,
probation, material restriction, material limitation, or nonrenewal
affecting any Borrower, Operator or any Facility or any participation or
provider agreement with any third-party payor, including Medicare,
Medicaid, Blue Cross and/or Blue Shield, and any other private commercial
insurance managed care and employee assistance program (such programs, the
"Third-Party Payors' Programs") to which a Borrower or Operator may
presently be subject with respect to a Facility, or at any time hereafter
is subject. All Medicaid, Medicare, and private insurance cost reports and
financial reports submitted by a Borrower or Operator, if any, are and
will be materially accurate and complete and have not been and will not be
misleading in any material respects. No cost reports for any Facility
remain open or unsettled.
(g) None of the Borrowers, Operator, or any Facility is or will be
the subject of any proceeding by any governmental agency, and no notice of
any violation has been or will be issued by a governmental agency that
would, directly or indirectly, or with the passage of time:
(i) Have a material adverse impact on a Borrower's or
Operator's ability to accept and/or retain patients or operate any
Facility for its Licensed Use or result in the imposition of a
material fine, a sanction having a material impact on a Borrower, a
lower rate certification or a lower reimbursement rate for services
rendered to eligible patients;
(ii) Modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of
the Licenses; or
(iii) If applicable, affect a Borrower's or Operator's
continued participation in the Medicaid or Medicare programs or any
other of the Third-Party Payors' Programs, or any successor programs
thereto, at current rate certifications.
<PAGE> 5
(h) Each Facility and the use thereof complies and will continue to
comply in all material respects with all applicable local, state and
federal building codes, fire codes, health care, senior housing and other
regulatory requirements (the "Physical Plant Standards") and no waivers of
Physical Plant Standards exist at any Facility, except those that are
described on Exhibit R-2 attached hereto.
(i) No Facility has received a "Level A" (or equivalent) violation,
and no statement of charges or deficiencies has been made or penalty
enforcement action has been undertaken against any Facility, Operator or a
Borrower, or against any officer, director, partner, member or stockholder
of Operator or a Borrower by any governmental agency during the last three
calendar years, and there have been no violations over the past three
years which have threatened any Facility's, any Operator's or a Borrower's
certification for participation in Medicare or Medicaid or the other
Third-Party Payors' Programs.
(j) There are no current, pending or outstanding Medicaid, Medicare
or Third-Party Payors' Programs reimbursement audits or appeals pending at
any Facility, and there are no years that are subject to audit.
(k) There are no current or pending Medicaid or Medicare or
Third-Party Payors' Programs recoupment efforts at any Facility. No
Borrower is a participant in any federal program whereby any governmental
agency may have the right to recover funds by reason of the advance of
federal funds, including those authorized under the Hill-Burton Act (42
U.S.C. 291, et seq.).
(l) No Borrower will pledge its receivables as collateral security
for any other loan or indebtedness.
(m) There are no and there will remain no patient or resident care
agreements with patients or residents which deviate in any material
adverse respect from the form agreements which have been delivered to and
approved by Lender pursuant to Section 3.7 of the Loan Agreement.
(n) All patient or resident records at each Facility, including
patient or resident trust fund accounts, are true and correct in all
material respects, and will remain true and correct in all material
respects.
<PAGE> 6
(o) Any agreement relating to the general management, and operation
of any Facility (each a "Management and Operating Agreement") and the
manager or operator thereunder shall be subject to Lender's reasonable
approval and no Management and Operating Agreement shall be modified,
amended or terminated without Lender's prior consent, which consent shall
not be unreasonably withheld. In the event any Management and Operating
Agreement is terminated or in the event of foreclosure or other
acquisition of a Facility by Lender or its designee or any purchaser at a
foreclosure sale, Borrower, Lender, any subsequent operator or any
subsequent purchaser need not obtain a CON prior to applying for and
receiving Medicare or Medicaid payments.
(p) No Borrower shall, nor shall any Facility or Operator, other
than in the normal course of business, change the terms of any of the
Third-Party Payors' Programs now or hereinafter in effect or their normal
billing payment or reimbursement policies and procedures with respect
thereto (including the amount and timing of finance charges, fees and
write-offs).
(q) From time to time, upon the request of Lender, regardless of
whether or not an Event of Default has occurred hereunder or under the
other Loan Documents, each Borrower shall, and shall cause Operator to
complete, execute and deliver to Lender any applications, notices,
documentation, and other information necessary or desirable, in Lender's
judgment, to permit Lender or its designee (including a receiver) to
obtain, maintain or renew any one or more of the Licenses for a Facility
(or to become the owner of the existing Licenses for a Facility) and to
the extent permitted by applicable law to obtain any other provider
agreements, licenses or governmental authorizations then necessary or
desirable for the operation of a Facility by Lender or its designee for
its Licensed Use (including, without limitation, any applications for
change of ownership of the existing Licenses or change of control of the
owner of the existing Licenses). Upon an occurrence of an Event of
Default, to the extent permitted by applicable law, (i) Lender is hereby
authorized (without the consent of any Borrower or Operator) to submit any
such applications, notices, documentation or other information which a
Borrower caused to be delivered to Lender in accordance with the above
provisions to the applicable governmental authorities, or to take such
other steps
<PAGE> 7
as Lender may deem advisable to obtain, maintain or renew any License or
other license or governmental authorization in connection with the
operation of any Facility for its Licensed Use, and each Borrower agrees
to cooperate and to cause Operator to cooperate with Lender in connection
with the same and (ii) each Borrower, upon demand by Lender, shall take
any action and cause Operator to take any action necessary or desirable,
in Lender's sole judgment, to permit Lender or its designee (including a
receiver) to use, operate and maintain each Facility for its Licensed Use.
If any Borrower fails to comply with the provisions of this subsection (q)
for any reason whatsoever, such Borrower hereby irrevocably appoints
Lender and its designee as such Borrower's attorney-in-fact, with full
power of substitution, to take any action and execute any documents and
instruments necessary or desirable in Lender's sole judgment to permit
Lender or its designee to undertake Borrower's obligations under this
subsection (q), including without limitation, obtaining any licenses or
governmental authorizations then required for the operation of a Facility
by Lender or its designee for its Licensed Use. The foregoing power of
attorney is coupled with an interest and is irrevocable and Lender may
exercise its rights thereunder in addition to any other remedies which
Lender may have against any Borrower or Guarantor as a result of a
Borrower's breach of the obligations contained in this subsection (q).
(r) Each Borrower and Operator shall at all times comply in all
material respects with all obligations under the contracts and leases with
residents of each Facility, and no Borrower shall commit or permit any
default by a Borrower or Operator thereunder. Each Borrower hereby
indemnifies and holds harmless Lender and agrees to defend Lender (with
counsel reasonably acceptable to Lender) from and against (collectively,
the "Indemnified Claims") any (i) claims, proceedings or causes of action
brought by any resident of a Facility, and (ii) loss, damage, cost or
expense, including reasonable attorneys' fees, incurred or suffered by
Lender as a result of any (x) breach by a Borrower or Operator of any
contract or lease with a resident of a Facility or (y) violation of any
license or any federal, state or local law governing a Facility or the
use, operation or maintenance thereof for its Licensed Use.
<PAGE> 8
(s) Notwithstanding the foregoing or any other provision of this
Senior Housing Rider to the contrary, if through the exercise of Lender's
rights under the Loan Documents or otherwise, Lender or an affiliate of
Lender shall take permanent possession and control of any Facility,
Borrower shall not be liable to Lender for any Indemnified Claims which
first arose after the date ("Transfer Date") Lender or an affiliate of
Lender took permanent possession and control of that Facility if (but only
if) the following conditions are fully satisfied:
(i) None of any Borrower, Guarantor, any Affiliate of Borrower
or Guarantor or any agent, employee or contractor of any of the
foregoing contributed, by act or omission, to the cause, existence,
or occurrence of such Indemnified Claims; and
(ii) The events or state of facts resulting (or with the
passage of time eventually permanently resulting) in any such
Indemnified Claims did not exist prior to the Transfer Date.
(t) Notwithstanding any of the foregoing provisions of this Senior
Housing Rider to the contrary, Lender, Borrower and Operator agree that
with respect to each of the seven Facilities located in Pennsylvania (the
"Pennsylvania Facilities"),
(i) at the Closing, the Licenses for such Facility will be in
the name of the Master Lessee thereof, not in the name of the
Manager thereof or the Borrower which owns such Facility (an
"Owner");
(ii) promptly after Closing, each Owner and Master Lessee of
such Facility will seek a determination from the DOH that the
Licenses for each Facility do not need to be transferred to the
Owner as a result of (A) the termination of the Master Lease of such
Facility and the existing Management Agreement with respect to such
Facility, concurrently with (B) the execution of a new Management
Agreement in substantially the same form as has been approved by
Lender and exists as of the date hereof at the Facilities which are
not Pennsylvania Facilities (a "New Management Agreement"), whereby
the Master Lessee will be the Manager of such Facility and will
continue as the holder of the Licenses for such Facility;
<PAGE> 9
(iii) if the DOH indicates that it will not provide the
requested determination (or fails to provide it in a timely manner),
then such Owner will use diligent efforts to have the Licenses for
such Facility reissued in the name of such Owner, at which time the
Master Lease and existing Management Agreement with respect to such
Facility shall be terminated, and a New Management Agreement entered
into between the Owner and either the former Master Lessee or the
prior Manager;
(iv) simultaneously with an Owner entering into a New
Management Agreement, it (and the Manager thereunder) shall enter
into an Agreement Regarding Management Agreement and Waiver of
Property Management and Broker's Liens in favor of Lender in
substantially the form entered into by the Borrowers and Managers
which own or manage the Facilities which are not Pennsylvania
Facilities on the date hereof (each, an "ARM Agreement");
(v) if by March 15, 2000,
(A) all seven of the Master Leases have not been
terminated, or
(B) there have not been seven New Management Agreements
and seven new ARM Agreements entered into as contemplated
above, or
(C) the DOH has not either issued a new License in the
Owner's name or issued the determination described in clause
(ii) above, for each of the seven Pennsylvania facilities,
then, such circumstances shall constitute an Event of Default under
the Loan Agreement.
BORROWER:
BALANCED CARE REALTY AT STATE COLLEGE, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its VP-CFO
<PAGE> 10
BALANCED CARE REALTY AT ALTOONA, INC., a
Delaware corporation
By/s/Clint T. Fegan
Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT LEWISTOWN, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT READING, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT BERWICK, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT PECKVILLE, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT SCRANTON, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
<PAGE> 11
BALANCED CARE REALTY AT MARTINSBURG, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT MAUMELLE, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT SHERWOOD, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT MOUNTAIN HOME, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE REALTY AT MANSFIELD, INC., a
Delaware corporation
By/s/Clint T. Fegan
Its
OPERATORS:
BCC AT STATE COLLEGE, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
<PAGE> 12
TC REALTY OF ALTOONA, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
TC REALTY OF LEWISTOWN, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
TC REALTY OF READING, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
TC REALTY OF BERWICK, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
BLACK BOX OF PECKVILLE, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
TC REALTY CORPORATION III,
a Delaware corporation
By/s/Clint T. Fegan
Its
<PAGE> 13
BALANCED CARE AT MARTINSBURG, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT MAUMELLE, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT SHERWOOD, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT MOUNTAIN HOME, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its
TC REALTY CORPORATION II,
a Delaware corporation
By/s/Clint T. Fegan
Its
BCC DEVELOPMENT AND MANAGEMENT CO., a
Delaware corporation
By/s/Clint T. Fegan
Its
<PAGE> 14
BCC AT ALTOONA, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT LEWISTOWN, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
BCC AT READING, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT BERWICK, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
BALANCED CARE AT PECKVILLE, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
BCC AT SCRANTON, INC., a Delaware
corporation
By/s/Clint T. Fegan
Its
<PAGE> 1
Exhibit 10.3 Loan No. 99-407
PROMISSORY NOTE A
$25,600,000.00 December 30, 1999
1. Promise to Pay.
FOR VALUE RECEIVED, BALANCED CARE REALTY AT STATE COLLEGE, INC., a
Delaware corporation, BALANCED CARE REALTY AT ALTOONA, INC., a Delaware
corporation, BALANCED CARE REALTY AT LEWISTOWN, INC., a Delaware corporation,
BALANCED CARE REALTY AT READING, INC., a Delaware corporation, BALANCED CARE
REALTY AT BERWICK, INC., a Delaware corporation, BALANCED CARE REALTY AT
PECKVILLE, INC., a Delaware corporation, BALANCED CARE REALTY AT SCRANTON, INC.,
a Delaware corporation, BALANCED CARE REALTY AT MARTINSBURG, INC., a Delaware
corporation, BALANCED CARE REALTY AT MAUMELLE, INC., a Delaware corporation,
BALANCED CARE REALTY AT SHERWOOD, INC., a Delaware corporation, BALANCED CARE
REALTY AT MOUNTAIN HOME, INC., a Delaware corporation and BALANCED CARE REALTY
AT MANSFIELD, INC., a Delaware corporation (collectively "Maker"), each of which
has its address c/o Balanced Care Corporation, 1215 Manor Drive, Mechanicsburg,
Pennsylvania 17055, Attention: Clint Fegan, Chief Financial Officer, jointly and
severally promises to pay to the order of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation, and its successors and assigns ("Holder") the sum of
Twenty-Five Million Six Hundred Thousand and No/100 Dollars ($25,600,000.00),
together with all other amounts added thereto pursuant to this Note or otherwise
payable to Holder under the Loan Documents (as hereinafter defined), including,
but not limited to, the "Exit Fee" as defined and set forth in the Loan
Agreement (as hereinafter defined) (or so much thereof as may from time to time
be outstanding), together with interest thereon as hereinafter set forth, all
payable in lawful money of the United States of America (collectively, the
"Loan"). Payments shall be made to Holder at 2 Wisconsin Circle, Suite 400,
Chevy Chase, Maryland 20815 (or such other address as Holder may hereafter
designate in writing to Maker).
This Note is secured by, among other things, the Mortgages encumbering
the Project. This Note, the Subordinated Promissory Note B made by Maker in
favor of Holder dated the date hereof in the original principal amount of Six
Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00) ("Note B"), the
Mortgages, the Loan Agreement of even date herewith between Maker and Holder
(the "Loan Agreement") and any other documents evidencing or securing the Loan
or executed in connection
<PAGE> 2
therewith, and any modification, renewal or extension of any of the foregoing
are collectively called the "Loan Documents". Except as otherwise provided
herein, capitalized terms used in this Note shall have the same meanings as are
assigned to such terms in the Loan Agreement.
2. Interest.
So long as no Event of Default (as hereinafter defined) exists,
interest shall accrue on the principal balance hereof from time to time
outstanding and Maker shall pay interest thereon at a rate equal to a floating
rate per annum equal to three and seventy-five hundredths percent (3.75%) plus
the Base Rate (the aggregate rate referred to as the "Interest Rate"). "Base
Rate" shall mean the rate published each business day in the Wall Street Journal
for notes maturing three (3) months after issuance under the caption "Money
Rates, London Interbank Offered Rates (LIBOR)". The Interest Rate for each
calendar month shall be fixed based upon the Base Rate published prior to and in
effect on the first (1st) business day of such month; provided, however, the
Interest Rate from and including the date hereof through December 31, 1999 shall
be fixed based upon the Base Rate in effect on December 30, 1999. Interest shall
be calculated based on a 360 day year and charged for the actual number of days
elapsed.
3. Payment.
(a) Commencing on February 1, 2000, Maker shall pay interest
computed at the Interest Rate monthly in arrears on the first (1st) day
of each month; provided, however, interest for the period from and
after the date hereof through December 31, 1999 shall be paid in
advance on the date hereof.
(b) In addition to monthly payments of interest, commencing
November 20, 2000, and on the twentieth (20th) day after the end of
each calendar month thereafter until the Repayment Date, Maker shall
pay Holder one hundred percent (100%) of the Excess Cash Flow
corresponding to such calendar month then ended, to be applied in
repayment of the principal balance hereof.
(c) This Note shall be due and payable on or before December
31, 2001, or any earlier date on which this Note shall be required to
be paid in full, whether by acceleration or otherwise (the "Maturity
Date").
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<PAGE> 3
4. Intentionally Omitted.
5. Prepayment.
Maker may prepay this Note in full or in part at any time; provided
Maker gives Holder at least thirty (30) days prior written notice thereof and
pays the Exit Fee (as defined in the Loan Agreement) then due Lender.
6. Exit Fee.
As additional consideration for entering into the Loan Agreement and
making the Loan pursuant thereto, Borrower shall pay to Holder the Final Exit
Fee and, if applicable, the Proportionate Exit Fees, all as provided in the Loan
Agreement.
7. Default.
7.1. Events of Default.
Any of the following shall constitute an "Event of Default" under this
Note: (a) failure to pay any amounts owed pursuant to this Note or Note B within
ten (10) calendar days after such payment is due; or (b) the occurrence of any
default under any of the other Loan Documents, which, continues uncured default
beyond any applicable grace or cure period.
7.2. Remedies.
So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare this Note immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the Mortgages
or any other Loan Documents. Holder's rights, remedies and powers, as provided
in this Note and the other Loan Documents, are cumulative and concurrent, and
may be pursued singly, successively or together against Maker, any guarantor of
the Loan, the security described in the Loan Documents, and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Holder. Additionally, Holder may resort to every other right or remedy available
at law or in equity without first exhausting the rights and remedies contained
herein, all in Holder's sole discretion. Failure of Holder, for any period of
time or on more than one occasion, to exercise its option to accelerate the
Maturity Date shall not constitute a waiver of the right to exercise the same at
any time during the continued
-3-
<PAGE> 4
existence of any Event of Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Loan Documents, whether or not legal proceedings are thereafter
instituted by Holder; (ii) to represent Holder in any bankruptcy,
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens of any
Mortgage or any of the Loan Documents; (iv) to represent Holder in any other
proceedings whatsoever in connection with any Mortgage or any of the Loan
Documents including post judgment proceedings to enforce any judgment related to
the Loan Documents; or (v) in connection with seeking an out-of-court workout or
settlement of any of the foregoing, then Maker shall pay to Holder all
reasonable costs, attorneys' fees and expenses in connection therewith, in
addition to all other amounts due hereunder.
8. Late Charge.
If payments of principal or interest due under this Note, or any other
amounts due under the other Loan Documents, are not timely made and remain
overdue for a period of ten (10) days, Maker, without notice or demand by
Holder, promptly shall pay an amount ("Late Charge") equal to four percent (4%)
of each delinquent payment.
9. Governing Law; Severability.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
10. Waiver.
Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their respective heirs, legal representatives, successors and assigns,
hereby waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor, notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and agrees that their
respective liability shall be unconditional and without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or
-4-
<PAGE> 5
consented to by Holder. Maker, for itself and all endorsers, guarantors and
sureties of this Note and their respective heirs, legal representatives,
successors and assigns, hereby consents to every extension of time, renewal,
waiver or modification that may be granted by Holder with respect to the payment
or other provisions of this Note, and to the release of any makers, endorsers,
guarantors or sureties, and their heirs, legal representatives, successors and
assigns, and of any collateral given to secure the payment hereof, or any part
hereof, with or without substitution, and agrees that additional makers,
endorsers, guarantors or sureties and their heirs, legal representatives,
successors and assigns, may become parties hereto without notice to Maker or to
any endorser, guarantor or surety and without affecting the liability of any of
them.
11. Security, Application of Payments.
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein. Payments will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to current interest
due on this Note, third to any past due interest payable under this Note, fourth
to current interest due on Note B, fifth to any past due interest payable under
Note B, sixth to the outstanding principal balance of this Note, seventh to the
outstanding principal balance of Note B and eighth to the Exit Fee.
12. Miscellaneous.
12.1. Amendments.
This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.
12.2. Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid or agreed to
be paid to Holder pursuant to this Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which a
court of competent jurisdiction may deem applicable hereto ("Excess Interest"),
then ipso facto, the obligation to be fulfilled shall be reduced to the highest
lawful
-5-
<PAGE> 6
rate of interest permissible under such law and if, for any reason whatsoever,
Holder shall receive, as interest, an amount which would be deemed unlawful
under such applicable law, such interest shall be applied to the Loan (whether
or not due and payable), and not to the payment of interest, or refunded to
Maker if such Loan has been paid in full. Neither Maker nor any guarantor,
endorser or surety nor their heirs, legal representatives, successors or assigns
shall have any action against Holder for any damages whatsoever arising out of
the payment or collection of any such Excess Interest.
12.3. Captions.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
12.4. Notices.
Notices shall be given under this Note in conformity with the terms and
conditions of the Loan Agreement.
12.5. Intentionally Omitted.
12.6. Time of Essence.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.
13. Intentionally Omitted.
14. Sale of Loan.
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Mortgages and the
other Loan Documents, any guaranties given in connection with the Loan and any
collateral given to secure the Loan.
15. Consent to Jurisdiction.
MAKER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES
THAT, SUBJECT TO HOLDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS NOTE OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. MAKER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
-6-
<PAGE> 7
CONVENIENS. MAKER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON MAKER BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO MAKER, AT THE ADDRESS
SET FORTH IN THIS NOTE AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER
THE SAME HAS BEEN POSTED.
16. Jury Trial Waiver.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR
NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER HAVE
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF THEM
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. MAKER AND
HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same
to be executed by its duly authorized representatives as of the date first set
forth above.
MAKER:
BALANCED CARE REALTY AT STATE
COLLEGE, INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT ALTOONA,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
-7-
<PAGE> 8
BALANCED CARE REALTY AT LEWISTOWN,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT READING,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT BERWICK,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT PECKVILLE,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT SCRANTON,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MARTINSBURG,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
-8-
<PAGE> 9
BALANCED CARE REALTY AT MAUMELLE,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT SHERWOOD,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MOUNTAIN
HOME, INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MANSFIELD,
INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
-9-
<PAGE> 1
Exhibit 10.4 Loan No. 99-407
SUBORDINATED PROMISSORY NOTE B
$6,400,000.00 December 30, 1999
1. Promise to Pay.
FOR VALUE RECEIVED, BALANCED CARE REALTY AT STATE COLLEGE, INC., a
Delaware corporation, BALANCED CARE REALTY AT ALTOONA, INC., a Delaware
corporation, BALANCED CARE REALTY AT LEWISTOWN, INC., a Delaware corporation,
BALANCED CARE REALTY AT READING, INC., a Delaware corporation, BALANCED CARE
REALTY AT BERWICK, INC., a Delaware corporation, BALANCED CARE REALTY AT
PECKVILLE, INC., a Delaware corporation, BALANCED CARE REALTY AT SCRANTON, INC.,
a Delaware corporation, BALANCED CARE REALTY AT MARTINSBURG, INC., a Delaware
corporation, BALANCED CARE REALTY AT MAUMELLE, INC., a Delaware corporation,
BALANCED CARE REALTY AT SHERWOOD, INC., a Delaware corporation, BALANCED CARE
REALTY AT MOUNTAIN HOME, INC., a Delaware corporation and BALANCED CARE REALTY
AT MANSFIELD, INC., a Delaware corporation (collectively "Maker"), each of which
has its address c/o Balanced Care Corporation, 1215 Manor Drive, Mechanicsburg,
Pennsylvania 17055, Attention: Clint Fegan, Chief Financial Officer, jointly and
severally promises to pay to the order of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation, and its successors and assigns ("Holder") the sum of Six
Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00), together with
all other amounts added thereto pursuant to this Note or otherwise payable to
Holder under the Loan Documents (as hereinafter defined), including, but not
limited to, the "Exit Fee" as defined and set forth in the Loan Agreement (as
hereinafter defined) (or so much thereof as may from time to time be
outstanding), together with interest thereon as hereinafter set forth, all
payable in lawful money of the United States of America (collectively, the
"Loan"). Payments shall be made to Holder at 2 Wisconsin Circle, Suite 400,
Chevy Chase, Maryland 20815 (or such other address as Holder may hereafter
designate in writing to Maker).
This Note is secured by, among other things, the Mortgages
encumbering the Project. This Note, the Promissory Note A made by Maker in favor
of Holder dated the date hereof in the original principal amount of Twenty-Five
Million Six Hundred Thousand and No/100 Dollars ($25,600,000.00) ("Note A"), the
Mortgages, the Loan Agreement of even date herewith among Maker and Holder (the
"Loan Agreement") and any other documents evidencing or securing the Loan or
executed in connection therewith, and any modification, renewal or extension of
any of
<PAGE> 2
the foregoing are collectively called the "Loan Documents". Except as otherwise
provided herein, capitalized terms used in this Note shall have the same
meanings as are assigned to such terms in the Loan Agreement.
2. Interest.
So long as no Event of Default (as hereinafter defined) exists,
interest shall accrue on the principal balance hereof from time to time
outstanding and Maker shall pay interest thereon at a rate equal to a floating
rate per annum equal to three and seventy-five hundredths percent (3.75%) plus
the Base Rate (the aggregate rate referred to as the "Interest Rate"). "Base
Rate" shall mean the rate published each business day in the Wall Street Journal
for notes maturing three (3) months after issuance under the caption "Money
Rates, London Interbank Offered Rates (LIBOR)". The Interest Rate for each
calendar month shall be fixed based upon the Base Rate published prior to and in
effect on the first (1st) business day of such month; provided, however, the
Interest Rate from and including the date hereof through December 31, 1999 shall
be fixed based upon the Base Rate in effect on December 30, 1999. Interest shall
be calculated based on a 360 day year and charged for the actual number of days
elapsed.
3. Payment.
(a) Commencing on February 1, 2000, Maker shall pay interest
computed at the Interest Rate monthly in arrears on the first (1st) day of
each month; provided, however, interest for the period from and after the
date hereof through December 31, 1999 shall be paid in advance on the date
hereof.
(b) In addition to monthly payments of interest, commencing November
20, 2000, and on the twentieth (20th) day after the end of each calendar
month thereafter until the Repayment Date, Maker shall pay Holder an
amount equal to (i) one hundred percent (100%) of the Excess Cash Flow (as
defined in the Loan Agreement) corresponding to such calendar month then
ended, less (ii) the amount of Excess Cash Flow paid by Maker pursuant to
Section 3(b) of Note A, said amount to be applied as provided in Section
11 below.
(c) This Note shall be due and payable on or before December 31,
2001, or any earlier date on which
-2-
<PAGE> 3
this Note shall be required to be paid in full, whether by acceleration or
otherwise (the "Maturity Date").
4. Intentionally Omitted.
5. Prepayment.
Maker may prepay this Note in full or in part at any time; provided
Maker gives Holder at least thirty (30) days prior written notice thereof, Maker
also prepays Note A in full and pays the Exit Fee (as defined in the Loan
Agreement) then due Lender.
6. Exit Fee.
As additional consideration for entering into the Loan Agreement and
making the Loan pursuant thereto, Borrower shall pay to Holder the Final Exit
Fee and, if applicable, the Proportionate Exit Fees, as provided in the Loan
Agreement.
7. Default.
7.1. Events of Default.
Any of the following shall constitute an "Event of Default" under
this Note: (a) failure to pay any amounts owed pursuant to this Note or Note A
within ten (10) calendar days after such payment is due; or (b) the occurrence
of any default under any of the other Loan Documents, which default continues
uncured beyond any applicable grace or cure period.
7.2. Remedies.
So long as an Event of Default remains outstanding: (a) interest
shall accrue at a rate equal to the Interest Rate plus four percent (4%) per
annum (the "Default Rate"); (b) Holder may, at its option and without notice
(such notice being expressly waived), declare this Note immediately due and
payable; and (c) Holder may pursue all rights and remedies available under the
Mortgages or any other Loan Documents. Holder's rights, remedies and powers, as
provided in this Note and the other Loan Documents, are cumulative and
concurrent, and may be pursued singly, successively or together against Maker,
any guarantor of the Loan, the security described in the Loan Documents, and any
other security given at any time to secure the payment hereof, all at the sole
discretion of Holder. Additionally, Holder may resort to every other right or
remedy available at law or in equity without first exhausting the rights and
remedies contained herein, all in
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<PAGE> 4
Holder's sole discretion. Failure of Holder, for any period of time or on more
than one occasion, to exercise its option to accelerate the Maturity Date shall
not constitute a waiver of the right to exercise the same at any time during the
continued existence of any Event of Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Loan Documents, whether or not legal proceedings are thereafter
instituted by Holder; (ii) to represent Holder in any bankruptcy,
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens of any
Mortgage or any of the Loan Documents; (iv) to represent Holder in any other
proceedings whatsoever in connection with any Mortgage or any of the Loan
Documents including post judgment proceedings to enforce any judgment related to
the Loan Documents; or (v) in connection with seeking an out-of-court workout or
settlement of any of the foregoing, then Maker shall pay to Holder all
reasonable costs, attorneys' fees and expenses in connection therewith, in
addition to all other amounts due hereunder.
8. Late Charge.
If payments of principal or interest due under this Note, or any
other amounts due under the other Loan Documents, are not timely made and remain
overdue for a period of ten (10) days, Maker, without notice or demand by
Holder, promptly shall pay an amount ("Late Charge") equal to four percent (4%)
of each delinquent payment.
9. Governing Law; Severability.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
10. Waiver.
Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their respective heirs, legal representatives, successors and assigns,
hereby waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor, notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of
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<PAGE> 5
this Note, and agrees that their respective liability shall be unconditional and
without regard to the liability of any other party and shall not be in any
manner affected by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by Holder. Maker, for itself and all
endorsers, guarantors and sureties of this Note and their respective heirs,
legal representatives, successors and assigns, hereby consents to every
extension of time, renewal, waiver or modification that may be granted by Holder
with respect to the payment or other provisions of this Note, and to the release
of any makers, endorsers, guarantors or sureties, and their heirs, legal
representatives, successors and assigns, and of any collateral given to secure
the payment hereof, or any part hereof, with or without substitution, and agrees
that additional makers, endorsers, guarantors or sureties and their heirs, legal
representatives, successors and assigns, may become parties hereto without
notice to Maker or to any endorser, guarantor or surety and without affecting
the liability of any of them.
11. Security, Application of Payments.
This Note is secured by the liens, encumbrances and obligations
created hereby and by the other Loan Documents and the terms and provisions of
the other Loan Documents are hereby incorporated herein. Payments will be
applied, at Holder's option, first to any fees, expenses or other costs Maker is
obligated to pay under this Note or the other Loan Documents, second to current
interest due on Note A, third to any past due interest payable under Note A,
fourth to current interest due on this Note, fifth to any past due interest
payable under this Note, sixth to the outstanding principal balance of Note A,
seventh to the outstanding principal balance of this Note and eighth to the Exit
Fee.
12. Miscellaneous.
12.1. Amendments.
This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.
12.2. Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid or agreed
to be paid to Holder pursuant to this Note or any of the Loan Documents exceed
the highest lawful rate of interest permissible under applicable law. If, from
any circumstances whatsoever, fulfillment of any provision of this Note and the
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<PAGE> 6
other Loan Documents shall involve exceeding the lawful rate of interest which a
court of competent jurisdiction may deem applicable hereto ("Excess Interest"),
then ipso facto, the obligation to be fulfilled shall be reduced to the highest
lawful rate of interest permissible under such law and if, for any reason
whatsoever, Holder shall receive, as interest, an amount which would be deemed
unlawful under such applicable law, such interest shall be applied to the Loan
(whether or not due and payable), and not to the payment of interest, or
refunded to Maker if such Loan has been paid in full. Neither Maker nor any
guarantor, endorser or surety nor their heirs, legal representatives, successors
or assigns shall have any action against Holder for any damages whatsoever
arising out of the payment or collection of any such Excess Interest.
12.3. Captions.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
12.4. Notices.
Notices shall be given under this Note in conformity with the terms
and conditions of the Loan Agreement.
12.5. Intentionally Omitted.
12.6. Time of Essence.
Time is of the essence of this Note and the performance of each of
the covenants and agreements contained herein.
13. Intentionally Omitted.
14. Sale of Loan.
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Mortgages and the
other Loan Documents, any guaranties given in connection with the Loan and any
collateral given to secure the Loan.
15. Consent to Jurisdiction.
MAKER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY
AGREES THAT, SUBJECT TO HOLDER'S
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<PAGE> 7
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE OR
THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. MAKER EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. MAKER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON MAKER
BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO MAKER,
AT THE ADDRESS SET FORTH IN THIS NOTE AND SERVICE SO MADE SHALL BE COMPLETE TEN
(10) DAYS AFTER THE SAME HAS BEEN POSTED.
16. Jury Trial Waiver.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR
NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER HAVE
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF THEM
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. MAKER AND
HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has caused the
same to be executed by its duly authorized representatives as of the date first
set forth above.
MAKER:
BALANCED CARE REALTY AT STATE COLLEGE, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
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<PAGE> 8
BALANCED CARE REALTY AT ALTOONA, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT LEWISTOWN, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT READING, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT BERWICK, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT PECKVILLE, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT SCRANTON, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
-8-
<PAGE> 9
BALANCED CARE REALTY AT MARTINSBURG, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MAUMELLE, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT SHERWOOD, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MOUNTAIN HOME, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT MANSFIELD, INC., a
Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
-9-
<PAGE> 1
Exhibit 10.5
Loan No. 99-407
HAZARDOUS MATERIALS INDEMNITY AGREEMENT
This HAZARDOUS MATERIALS INDEMNITY AGREEMENT (this "Agreement") is
made as of December 30, 1999 by and among BALANCED CARE REALTY AT STATE COLLEGE,
INC., a Delaware corporation, BALANCED CARE REALTY AT ALTOONA, INC., a Delaware
corporation, BALANCED CARE REALTY AT LEWISTOWN, INC., a Delaware corporation,
BALANCED CARE REALTY AT READING, INC., a Delaware corporation, BALANCED CARE
REALTY AT BERWICK, INC., a Delaware corporation, BALANCED CARE REALTY AT
PECKVILLE, INC., a Delaware corporation, BALANCED CARE REALTY AT SCRANTON, INC.,
a Delaware corporation, BALANCED CARE REALTY AT MARTINSBURG, INC., a Delaware
corporation, BALANCED CARE REALTY AT MAUMELLE, INC., a Delaware corporation,
BALANCED CARE REALTY AT SHERWOOD, INC., a Delaware corporation, BALANCED CARE
REALTY AT MOUNTAIN HOME, INC., a Delaware corporation and BALANCED CARE REALTY
AT MANSFIELD, INC., a Delaware corporation (collectively, "Borrower"), and
BALANCED CARE CORPORATION, a Delaware corporation ("BCC") in favor of HELLER
HEALTHCARE FINANCE, INC., a Delaware corporation ("Lender"), whose address is 2
Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815.
RECITALS
A. Each Borrower is the owner in fee simple of that certain real
property described in Exhibit A attached hereto (collectively called the
"Properties") and together with all rights and appurtenances thereto and all
improvements presently located or hereafter constructed thereon are hereinafter
collectively called the "Project").
B. Concurrently herewith, Lender is making a loan to Borrower in the
principal sum of Thirty-Two Million and No/100 Dollars ($32,000,000.00) (the
"Loan").
C. To evidence the Loan, Borrower has executed and delivered to
Lender a Promissory Note A of even date herewith in the face amount of
Twenty-Five Million Six Hundred Thousand and No/100 Dollars ($25,600,000.00) and
a Subordinated Promissory Note B of even date herewith in the face amount of Six
Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00) (said notes and
any and all renewals, amendments, modifications, increases and extensions
thereof are hereinafter collectively
<PAGE> 2
called the "Note") and a Loan Agreement of even date herewith (as amended from
time to time, the "Loan Agreement").
D. Concurrently herewith, each Borrower has granted to Lender a
first mortgage or deed of trust (as amended from time to time, the "Mortgages")
encumbering its Property. The Notes, the Loan Agreement, the Mortgages, and any
other documents evidencing or securing the Loan or executed in connection
therewith, and any modification, renewal or extension of any of the foregoing
are collectively called the "Loan Documents".
E. BCC owns, directly or indirectly, one hundred percent (100%) of
all issued and outstanding capital stock of each Borrower.
F. Lender, as a condition to making the Loan, has requested that
Borrower and BCC enter into this Agreement to indemnify Lender against
liabilities arising from Hazardous Materials (as hereinafter defined) used or
located on, or affecting the Project or any part thereof, and that Borrower and
BCC acknowledge and agree that their execution and delivery of this Agreement
and their performance of the covenants contained herein are material inducements
for Lender's agreement to make the Loan.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and BCC hereby represent, warrant, covenant and agree as
follows:
1. No Hazardous Materials on Project. Borrower and BCC represent and
warrant to the best of their knowledge, and covenant that there are no, nor will
there be, for as long as any indebtedness or obligations remain outstanding
under the Loan, any Hazardous Materials generated, released, stored, buried or
deposited over, beneath, in or upon the Project or any part thereof or on or
beneath the surface of adjacent property, except as such Hazardous Materials may
be generated, used, stored or transported in connection with the permitted uses
of the Project or any part thereof and then only to the extent permitted by law
after obtaining all necessary permits and licenses therefor. "Hazardous
Materials" shall mean and include any pollutants, flammables, explosives,
petroleum (including crude oil) or any fraction thereof, radioactive materials,
hazardous wastes, dangerous or toxic substances or related materials, including
substances defined as or included in the definition of toxic or hazardous
substances, wastes or materials under any federal, state or local laws,
ordinances, regulations or guidances which relate
<PAGE> 3
to pollution, the environment or the protection of public health and safety, or
limiting, prohibiting or otherwise regulating the presence, sale, recycling,
generation, manufacture, use, transportation, disposal, release, storage,
treatment of, or response or exposure to, toxic or hazardous substances, wastes
or materials. Such laws, ordinances and regulations, now or hereafter in effect,
and as the same may be amended from time to time, are hereinafter collectively
referred to as the "Hazardous Materials Laws."
2. Compliance with Laws. For as long as any indebtedness or
obligations remain outstanding under the Loan Documents, Borrower and BCC shall,
and shall cause their respective employees, agents, tenants, contractors and
subcontractors and any other persons from time to time present on or occupying
the Project or any part thereof to, keep and maintain the Project in compliance
with, and not cause or knowingly permit the Project or any part thereof to be in
violation of, any applicable Hazardous Materials Laws. None of Borrower, BCC or
any of their respective employees, agents, tenants, contractors or
subcontractors or any other persons occupying or present on the Project or any
part thereof shall generate, use, store, manufacture or dispose of on, under or
about any part of the Project or transport to or from the Project or any part
thereof any Hazardous Materials, except such Hazardous Materials as may be
generated, used, stored or transported in connection with the permitted uses of
the Project or any part thereof and then only to the extent permitted by law
after obtaining all necessary permits and licenses therefor.
3. Hazardous Materials Claims. Borrower and BCC shall immediately
advise Lender in writing of: (a) any notices received by Borrower or BCC or
their Affiliates (as defined in the Loan Agreement) (whether such notices are
from the Environmental Protection Agency, or any other federal, state or local
governmental agency or regional office thereof) of the violation or potential
violation of any applicable Hazardous Materials Laws occurring on, under or
about the Project or any part thereof; (b) any and all enforcement, cleanup,
removal or other governmental or regulatory actions instituted, completed or
threatened against Borrower, BCC or the Project or any part thereof pursuant to
any Hazardous Materials Laws; (c) all claims made or threatened by any third
party against Borrower, BCC or the Project or any part thereof relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
any Hazardous Materials (the matters set forth in clauses (a), (b) and (c) above
are hereinafter referred to as "Hazardous Materials Claims"); and (d) the
discovery by Borrower or BCC or their Affiliates of any occurrence or condition
on the Project or any part thereof or any
<PAGE> 4
real property adjoining or in the vicinity of the Project or any part thereof
that could cause the Project or any part thereof or any part thereof to be
subject to any Hazardous Materials Claims. Lender shall have the right but not
the obligation to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims and Borrower and BCC shall pay to Lender, upon demand, all attorneys' and
consultants' fees incurred by Lender in connection therewith.
4. Other Hazardous Materials Laws. Borrower and BCC hereby
represent, warrant and certify to the best of their knowledge, based on due
inquiry, that (a) there are no underground storage tanks located on, under or
about the Project or any part thereof that are subject to the notification
requirements under Section 9002 of the Solid Waste Disposal Act, as now or
hereafter amended (42 U.S.C. Section 6991); and (b) there is no facility located
on the Project or any part thereof that is subject to the reporting requirements
of Section 312 of the Federal Emergency Planning and Community Right to Know Act
of 1986 and the Federal regulations promulgated thereunder (42 U.S.C. Section
11022).
5. Inspection and Testing. Lender may require Borrower and BCC, at
their sole cost and expense, from time to time (but not more than once each
calendar year for each Property, unless an Event of Default (as defined in the
Loan Agreement) is then continuing) to perform or cause to be performed, such
studies or assessments of the Project or any part thereof, as Lender may
reasonably deem necessary, appropriate or desirable, to determine the status of
environmental conditions on, under and about the Project or any part thereof,
which studies and assessments shall be for the benefit of Lender and shall be
prepared in accordance with the specifications established by Lender.
6. Removal of Hazardous Materials. Borrower and BCC, at their sole
cost and expense, shall, with due care, in a safe manner and in accordance with
all Hazardous Materials Laws, detain the spread of, ameliorate and remove from
the Project and every part thereof (and from any other property as required by
any Hazardous Materials Laws) any Hazardous Materials contamination located on,
under or about any such property in violation of Hazardous Materials Laws and
monitor or cause to be monitored the levels of such Hazardous Materials on,
under or about any such property or in the ground water in accordance with the
terms and procedures required by any federal, state or local governmental agency
having jurisdiction including, without limitation, any Regional Water Quality
Control Board and the Environmental Protection Agency.
<PAGE> 5
7. Indemnification. Borrower and BCC shall jointly and severally
indemnify, defend and save harmless Lender and its officers, directors,
shareholders, agents, attorneys, representatives and employees, their successors
and assigns (individually and collectively "Indemnitee"), from and against any
and all claims, demands, causes of action, damages, costs, expenses, lawsuits
and liabilities, at law or in equity, of every kind or nature whatsoever,
directly or indirectly arising out of or attributable to the generation, use,
storage, release, threatened release, discharge, disposal or presence of
Hazardous Materials on, under or about the Project or any part thereof (whether
occurring prior to or during or after the term of the Loan or otherwise and,
except as provided below, regardless of by whom caused, whether by Borrower, BCC
or any predecessor in title or any owner of land adjacent to any part of the
Project or any other third party, or any employee, agent, tenant, contractor or
subcontractor of Borrower, BCC or any predecessor in title or any such adjacent
land owner or any third person) including, without limitation:
(a) Claims of third parties (including governmental agencies) for
injury to or death of any person or for damage to or destruction of any
property;
(b) Claims for response costs, clean-up costs, costs and expenses of
removal and restoration, including fees of attorneys and experts, and costs of
determining the existence of Hazardous Materials and reporting same to any
governmental agency;
(c) Any and all other claims for expenses or obligations, including
attorneys' fees, costs, and other expenses related to Hazardous Materials on,
under or about any part of the Project;
(d) Any and all penalties threatened, sought or imposed on account
of a violation of any Hazardous Materials Laws;
(e) All reasonable fees of any consultants, attorneys, and
engineering firms retained in connection with monitoring the obligations of
Borrower and BCC under this Agreement and the Loan Documents; and
(f) Any loss occasioned by diminution in the value of any of the
Properties which may result from any of the foregoing;
provided, however, no Indemnitee shall be entitled to indemnification hereunder
for any claim arising from any Indemnitee's gross negligence or intentional
misconduct.
<PAGE> 6
8. Defense or Settlement of Claims.
(a) To assert an indemnity claim under this Agreement, Indemnitee
shall notify Borrower and BCC in writing as soon as reasonably practical under
the circumstances stating the facts which entitle Indemnitee to make a claim for
indemnification.
(b) Borrower and BCC shall, at their own cost, expense and risk:
(i) defend all suits, actions, or other legal or administrative
proceedings that may be threatened, brought or instituted against an
Indemnitee on account of any matter or matters described in Section 7
above;
(ii) pay or satisfy any judgment, decree or settlement that may be
rendered against or agreed to by an Indemnitee in any such suit, action or
other legal or administrative proceeding;
(iii) reimburse Indemnitee for any and all reasonable expenses,
including, without limitation, all legal expenses incurred in connection
with any of the matters described in Section 7 above or in connection with
enforcing this Agreement; and
(iv) reimburse Indemnitee for any loss occasioned by the diminution
in the value of any of the Properties caused by the presence of Hazardous
Materials or the breach of any representation, warranty or obligation of
Borrower or BCC.
(c) Any law firm selected by Borrower or BCC to defend an
indemnified claim shall be subject to the approval of Indemnitee which approval
shall not be unreasonably withheld or delayed; provided that upon thirty (30)
days prior written notice, Indemnitee may elect to defend, using a law firm
selected by such Indemnitee, any such claim, loss, action, legal or
administrative proceeding at the cost and expense of Borrower and BCC, if, in
the reasonable judgment of Indemnitee: (i) the defense is not proceeding or
being conducted in a satisfactory manner or (ii) there is a conflict of interest
between any of the parties to such lawsuit, action, legal or administrative
proceeding.
(d) If Indemnitee exercises its right to designate counsel pursuant
to the preceding clause, all costs and expenses thereof shall be paid by
Borrower and BCC within ten (10) days following written demand by such
Indemnitee.
<PAGE> 7
(e) In the event Borrower or BCC shall pay to Indemnitee any claim
under this Agreement, then Borrower or BCC (as applicable) shall be subrogated
to any rights of such Indemnitee relating thereto, and such Indemnitee will
cooperate with Borrower and BCC, at the cost and expense of Borrower and BCC, in
enforcing such rights; provided, that such subrogation shall not be in
derogation of any rights of the Indemnitee under this Agreement, and shall not
be construed to limit the obligations of Borrower or BCC hereunder.
9. Binding Effect. All the covenants and agreements of each Borrower
or BCC contained in this Agreement shall apply to and bind their respective
heirs, legal representatives, successors and assigns and shall inure to the
benefit of each Indemnitee and its successors and assigns.
10. Indemnification Separate from the Loan.
(a) Borrower and BCC agree that this Agreement is separate,
independent of and in addition to the undertakings of Borrower and BCC pursuant
to the Loan, the Note, the Loan Agreement and the other Loan Documents. A
separate action may be brought to enforce the provisions hereof, which shall in
no way be deemed to be an action on the Note, whether or not the Loan has been
repaid and whether or not Lender would be entitled to a deficiency judgment
following a judicial foreclosure, trustee's sale or UCC sale. The obligations of
Borrower and BCC hereunder shall not be affected by any exculpatory provisions,
if any, contained in the Note, the Loan Agreement or any of the other Loan
Documents. This Agreement, and all rights and obligations hereunder, shall
survive performance and repayment of the obligations evidenced by and arising
under the Loan Documents, surrender of the Note, reconveyance of the Mortgages,
release of other security provided in connection with the Loan, trustee's sale
or foreclosure under the Mortgages and/or any of the other Loan Documents
(whether by deed or other assignment in lieu of foreclosure, or otherwise,
acquisition of any or all of the Properties by Lender, any other transfer of any
or all of the Properties, and transfer of all of Lender's rights in the Loan,
the Loan Documents, and any or all of the Properties.
(b) Borrower and BCC waive all rights to require Lender to (i)
proceed against or exhaust any security for the Loan or (ii) pursue any remedy
in Lender's power whatsoever. Borrower waives all defenses by reason of any
disability or other defense under the Loan or by reason of the cessation from
any cause whatsoever of its liability under the Loan, or that it may acquire by
reason of Lender's election of any remedy against it
<PAGE> 8
including, without limitation, Lender's exercise of its rights to foreclose
under any or all of the Mortgages.
11. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Illinois.
12. Amendments. This Agreement may not be modified, amended, waived
or terminated, except by a written instrument executed by the parties hereto.
13. Parties in Interest. Except as expressly set forth herein,
nothing in this Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on any persons other
than the parties to it and their respective successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement.
14. Personal Liability. Borrower and BCC hereby acknowledge and
agree that notwithstanding any other provisions of this Agreement, the Note, the
Loan Agreement or the other Loan Documents which may be to the contrary, the
obligations of Borrower and BCC under this Agreement shall be the unlimited
personal obligations of Borrower and BCC.
15. Joint and Several Obligations. The obligations of each of the
undersigned hereunder shall be joint and several.
16. Counterparts. This Agreement may be executed in two or more
counterparts.
17. Consent To Jurisdiction. BORROWER AND BCC HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER AND BCC EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. BORROWER AND BCC HEREBY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON BORROWER AND BCC BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO BORROWER AND BCC, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
<PAGE> 9
18. Jury Trial Waiver. BORROWER AND BCC, AND LENDER BY ITS
ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER
OF THIS AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER, BCC AND
LENDER, AND BORROWER AND BCC ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON
ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR
NULLIFY ITS EFFECT. BORROWER, BCC AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT BORROWER BCC AND
LENDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND
THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. BORROWER, BCC AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
Borrower and BCC have executed this Agreement or have caused the
same to be executed as of the date first set forth above.
BORROWER:
BALANCED CARE REALTY AT STATE
COLLEGE, INC., a Delaware corporation
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
BALANCED CARE REALTY AT ALTOONA,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT LEWISTOWN,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
<PAGE> 10
BALANCED CARE REALTY AT READING,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT BERWICK,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT PECKVILLE,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT SCRANTON,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT MARTINSBURG,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT MAUMELLE,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
<PAGE> 11
BALANCED CARE REALTY AT SHERWOOD,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT MOUNTAIN
HOME, INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BALANCED CARE REALTY AT MANSFIELD,
INC., a Delaware corporation
By/s/Clint T. Fegan
Name
Its
BCC:
BALANCED CARE CORPORATION,
a Delaware corporation
By/s/Clint T. Fegan
Name
Its
<PAGE> 1
Exhibit 10.6
Loan No. 99-407
GUARANTY
THIS GUARANTY (this "Guaranty") made this 30th day of December,
1999, by Balanced Care Corporation, a Delaware corporation ("Guarantor") in
favor of Heller Healthcare Finance, Inc., a Delaware corporation ("Lender").
RECITALS
A. Financial Accommodations. Lender and Balanced Care Realty
at State College, Inc., a Delaware corporation, Balanced Care Realty at
Altoona, Inc., a Delaware corporation, Balanced Care Realty at Lewistown,
Inc., a Delaware corporation, Balanced Care Realty at Reading, Inc., a
Delaware corporation, Balanced Care Realty at Berwick, Inc., a Delaware
corporation, Balanced Care Realty at Peckville, Inc., a Delaware corporation,
Balanced Care Realty at Scranton, Inc., a Delaware corporation, Balanced Care
Realty at Martinsburg, Inc., a Delaware corporation, Balanced Care Realty at
Maumelle, Inc., a Delaware corporation, Balanced Care Realty at Sherwood,
Inc., a Delaware corporation, Balanced Care Realty at Mountain Home, Inc., a
Delaware corporation, and Balanced Care Realty at Mansfield, Inc., a Delaware
corporation, (collectively "Borrower") are concurrently herewith entering
into that certain Loan Agreement (the "Loan Agreement") of even date herewith
pursuant to which Lender shall extend financial accommodations to Borrower.
B. Inducement. To induce Lender to extend to Borrower the
financial accommodations set forth in the Loan Agreement, Guarantor is
willing to execute and deliver this Guaranty.
In consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. DEFINED TERMS
All capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Loan Agreement.
2. THE GUARANTY
<PAGE> 2
2.1 Guaranty of Obligations. Guarantor unconditionally and
absolutely guarantees the full and prompt payment and performance when due,
whether at maturity or earlier, by reason of acceleration or otherwise, and at
all times thereafter, of the indebtedness, liabilities and obligations of every
kind and nature of Borrower to Lender arising under or in any way relating to
the Loan Agreement or any of the other Loan Documents, howsoever created,
incurred or evidenced, whether direct or indirect, absolute or contingent, now
or hereafter existing, due or to become due, and howsoever owned, held or
acquired by Lender (collectively, the "Obligations"). Without limitation to the
foregoing, the Obligations shall include (a) all reasonable attorneys' and
paralegals' fees, including the cost of inside attorneys and paralegals, costs
and expenses and all court costs and costs of appeal incurred by Lender in
collecting any amount due Lender under this Guaranty or in prosecuting any
action against Borrower, Guarantor or any other guarantor with respect to all or
any part of the Obligations (collectively, the "Enforcement Costs"), and (b) all
interest, fees, costs and expenses due Lender after the filing of a bankruptcy
petition by or against Borrower regardless of whether such amounts can be
collected during the pendency of the bankruptcy proceedings.
2.2 Continuing Guaranty; Guaranty of Payment. This Guaranty is a
continuing guaranty of the Obligations, and Guarantor agrees that the
obligations of Guarantor to Lender hereunder shall be primary obligations, shall
not be subject to any counterclaim, set-off, abatement, deferment or defense
based upon any claim that Guarantor may have against Lender, Borrower or any
other person or entity.
2.3 Liability of Guarantor Not Affected. This Guaranty shall remain
in full force and effect without regard to, and shall not be released,
discharged or affected in any way by, any circumstances or condition, including,
without limitation:
(a) the attempt or the absence of any attempt by Lender to obtain
payment or performance by Borrower or any other guarantor (this being a
guaranty of payment and performance and not of collection);
(b) Lender's delay in enforcing Guarantor's obligations hereunder or
of any other party under the Loan Documents, or any prior partial exercise
by Lender of any right or remedy hereunder or under any of the other Loan
Documents;
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<PAGE> 3
(c) any renewal, extension, substitution, modification, replacement
of or indulgence with respect to, the Obligations, all of which Lender is
hereby authorized to make;
(d) the fact that Borrower is not liable for the payment or
performance of the Obligations, or any portion thereof, for any reason
whatsoever, Guarantor being liable for the Obligations notwithstanding
that Borrower may not be;
(e) any sale, exchange, release, surrender or other disposition of,
or realization upon, any collateral securing the Obligations, or any
settlement or compromise of any guaranties of the Obligations, or any
other obligation of any person or entity with respect to the Loan
Documents;
(f) the acceptance by Lender of any additional security for the
Obligations;
(g) the lack of validity or enforceability of, or Lender's waiver or
consent with respect to, any provision of any instrument evidencing,
securing or otherwise relating to the Obligations, or any part thereof,
including without limitation the Loan Documents;
(h) the failure by Lender to take any steps to perfect, maintain, or
enforce its security interests or remedies under the Loan Documents, or to
preserve its rights to or protect any security or collateral, for the
Obligations;
(i) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets
and liabilities or similar event or proceedings with respect to Borrower
or Guarantor, as applicable, or any of their respective properties (each,
an "Insolvency Proceeding"), or any action taken by Lender, any trustee or
receiver or by any court in any such proceeding;
(j) the failure by Lender to file or enforce a claim against the
estate (either in an Insolvency Proceeding or other proceeding) of
Borrower or Guarantor;
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<PAGE> 4
(k) in any proceeding under Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended (the "Bankruptcy Code"): (i) any
election by Lender under Section 1111(b)(2) of the Bankruptcy Code, (ii)
any borrowing or grant of a security interest by Borrower as
debtor-in-possession under Section 364 of the Bankruptcy Code, (iii) the
inability of Lender to enforce the Obligations against Borrower by
application of the automatic stay provisions of Section 362 of the
Bankruptcy Code, or (iv) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of Lender's claim(s) against
Borrower for repayment of the Obligations;
(l) the failure of Guarantor to receive notice of any intended
disposition of the collateral for the Obligations;
(m) any merger or consolidation of Borrower into or with any other
entity, or any sale, lease or transfer of any of the assets of Borrower or
Guarantor to any other person or entity;
(n) any change in the ownership of Borrower or any change in the
relationship between Borrower and Guarantor, or any termination of any
such relationship;
(o) the death, incapacity, insanity, disability, dissolution or
other change in states of Borrower or Guarantor;
(p) the making of additional loans to Borrower, the increase or
reduction of the maximum principal amount of the Obligations, the increase
or reduction in the interest rate provided in the Note, or any other
modification, amendment, release or waiver of the terms of the Loan
Documents;
(q) the absence, impairment or loss of any right of reimbursement or
subrogation or other right or remedy of Guarantor; and
(r) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of Borrower, Guarantor or any other
guarantor.
Guarantor hereby expressly waives and surrenders any defense to
its liability under this Guaranty based upon any of the foregoing acts,
omissions, agreements, waivers or matters,
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<PAGE> 5
whether or not Guarantor had notice or knowledge of same. It is the purpose and
intent of this Guaranty that the obligations of Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
2.4 Rights of Lender. Lender is hereby authorized, without notice to
or demand of Guarantor and without affecting the liability of Guarantor
hereunder, to take any of the following actions from time to time: (a) increase
or decrease the amount of, or renew, extend, accelerate or otherwise change the
time for payment of, or other terms relating to, the Obligations, or otherwise
modify, amend or change the terms of any promissory note or other agreement
evidencing, securing or otherwise relating to any of the Obligations, including,
without limitation, the making of additional advances thereunder; (b) accept and
apply any payments on or recoveries against the Obligations from any source, and
any proceeds of any security therefor, to the Obligations in such manner, order
and priority as Lender may elect in its sole discretion; (c) take, hold, sell,
release or otherwise dispose of all or any security for the Obligations or the
payment of this Guaranty; (d) settle, release, compromise, collect or otherwise
liquidate the Obligations or any portion thereof; (e) accept, hold, substitute,
add or release any other guaranty or endorsements of the Obligations; and (f) at
any time after maturity of the Obligations, appropriate and apply toward payment
of the Obligations (i) any indebtedness due or to become due from Lender to
Guarantor, and (ii) any moneys, credits, or other property belonging to
Guarantor at any time held by or coming into the possession of Lender or any
affiliates thereof, whether for deposit or otherwise.
2.5 Subordination. All indebtedness now or hereafter owing by
Borrower to Guarantor, or any one of them, for borrowed money or otherwise is
hereby subordinated to the payment of the Obligations, and, subsequent to a
default hereunder or under any of the other Loan Documents which default
continues uncured beyond any applicable notice and cure periods, Guarantor shall
not accept payment of all or any portion of such subordinated indebtedness until
satisfaction in full of the Obligations or, if Lender does not accelerate the
Obligations following an Event of Default (as defined in the Loan Agreement),
until all such defaults have been cured and such cure has been accepted by
Lender. All security interests, liens and encumbrances which Guarantor, or any
one of them, now or hereafter may have upon any of the assets of Borrower, or
any one of them, are hereby subordinated to all security interests, liens and
encumbrances heretofore, now or hereafter granted to Lender pursuant to the Loan
Documents.
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<PAGE> 6
3. GUARANTOR'S WAIVERS
3.1 Statutes of Limitation. Guarantor irrevocably waives all
statutes of limitation as a defense to any action or proceeding brought against
Guarantor by Lender, to the fullest extent permitted by law.
3.2 Election of Remedies. Guarantor irrevocably waives any defense
based upon an election of remedies made by Lender or any other election afforded
to Lender pursuant to applicable law, including, without limitation, (a) any
election to proceed by judicial or nonjudicial foreclosure or by Uniform
Commercial Code sale or by deed or assignment in lieu thereof, or any election
of remedies which destroys or otherwise impairs the subrogation rights of the
Guarantor or the rights of the Guarantor to proceed against Borrower for
reimbursement, or both, (b) the waiver by Lender, either by action or inaction
of Lender or by operation of law, of a deficiency judgment against Borrower, and
(c) any election pursuant to an Insolvency Proceeding.
3.3 Rights of Subrogation and Other Rights. Guarantor irrevocably
waives (a) all rights at law or in equity to seek subrogation, contribution,
indemnification or any other form of reimbursement or repayment from Borrower or
any other person or entity now or hereafter primarily or secondarily liable for
any of the Obligations for any disbursements made by any Guarantor under or in
connection with this Guaranty, (b) all claims of any kind or type against
Borrower as a result of any payment made by Guarantor to Lender, and (c) any
right to participate in any security now or hereafter held by Lender. In
furtherance, and not in limitation, of the foregoing, Guarantor agrees that any
payment to Lender pursuant to this Guaranty shall be deemed a contribution to
the capital of Borrower or other obligated party and shall not constitute
Guarantor a creditor of Borrower or such other party. Guarantor further agrees
that to the extent the waiver of its rights of subrogation as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation Guarantor may have against Borrower or against
any collateral or security for any of the Obligations shall be junior and
subordinate to any rights Lender may have against Borrower and to all right,
title and interest Lender may have in such collateral or security.
3.4 Demands and Notices. Guarantor irrevocably waives all
presentments, demands for performance, protests, notices of protest, notices of
dishonor, notices of acceptance of this Guaranty and of the existence, creation
or incurring of new or
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<PAGE> 7
additional Obligations, notices of defaults by Borrower or any other person
liable for the Obligations and demands and notices of every kind that may be
required to be given by any statute or rule or law.
3.5 Borrower Information. Guarantor irrevocably waives (a) any duty
of Lender to advise Guarantor of any information known to Lender regarding the
financial condition of Borrower (it being the obligation of Guarantor to keep
informed regarding such condition), and (b) any defense based on any claim that
Guarantor's obligations exceed or are more burdensome than those of Borrower.
3.6 Limitation of Liability. Guarantor irrevocably waives any
impairment, modification, change, release or limitation of the liability of, or
stay of actions or lien enforcement proceedings against, Borrower or Guarantor,
their property, or their estate in bankruptcy, resulting from the operation of
any provision of the state or federal bankruptcy laws, or from the decision of
any court.
3.7 Lack of Diligence. Guarantor irrevocably waives any and all
claims or defenses based upon lack of diligence in: (a) collection of any
Obligations; (b) protection of any collateral or other security for the
Indebtedness or Obligations; or (c) realization upon the other Loan Documents.
3.8 Other Defenses. Guarantor irrevocably waives any other defenses,
set-offs or counterclaims which may be available to Borrower or any other
Guarantor if there are more than one, and any and all other defenses now or at
any time hereafter available to Guarantor (including without limitation those
given to sureties) at law or in equity.
4. REPRESENTATIONS AND WARRANTS
Guarantor represents and warrants to Lender as follows:
4.1 Existence: Authority; Execution. Guarantor hereby represents and
warrants that: (a) it is a duly organized Delaware corporation, validly
existing, and in good standing under the laws of the state of its incorporation
or formation; and (b) this Guaranty has been duly and validly authorized,
executed and delivered and constitutes the binding obligation of Guarantor,
enforceable in accordance with its terms except as such enforceability may be
limited by bankruptcy and similar laws and general principles of equity.
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<PAGE> 8
4.2 Financial Statements. All financial statements and other
financial information furnished or to be furnished to Lender (a) are or will be
true and correct and do or will fairly represent the financial condition of
Guarantor (including all contingent liabilities), and (b) were or will be
prepared in accordance with generally accepted accounting principles, or such
other accounting principles as may be acceptable to Lender at the time of their
preparation, consistently applied. There has been no material adverse change in
Guarantor's financial condition since the dates of the statements most recently
furnished Lender, except as disclosed on Exhibit D to the Loan Agreement.
4.3 No Defaults. There is no existing event of default, and no event
has occurred which with the passage of time and/or the giving of notice or both
will constitute an event of default, under any agreement to which Guarantor is a
party, the effect of which event of default will materially impair performance
by Guarantor of the Obligations pursuant to and as contemplated by the terms of
this Guaranty, and neither the execution and delivery of this Guaranty nor
compliance with the terms and provisions hereof will violate any presently
existing provision of law or any presently existing regulation, order, writ,
injunction or decree of any court or governmental department, commission, board,
bureau, agency or instrumentality, or constitute a default under, any agreement
to which Guarantor is a party or by which Guarantor is bound.
4.4 No Litigation. There are no actions, suits or proceedings
pending or to Guarantor's knowledge, threatened against the Guarantor before any
court or any governmental, administrative, regulatory, adjudicatory or
arbitrational body or agency of any kind that will materially adversely affect
performance by the Guarantor of Guarantor's obligations pursuant to and as
contemplated by the terms and provisions of this Guaranty.
4.5 Accuracy. Neither this Guaranty nor any document, financial
statement, credit information, certificate or statement heretofore furnished or
required herein to be furnished to Lender by Guarantor contains any untrue
statement of fact or omits to state a fact material to this Guaranty.
4.6 Net Worth. Guarantor has a net worth greater than zero dollars.
5. EVENTS OF DEFAULT
Upon the occurrence of any of the following events, Lender may,
without notice to Borrower or Guarantor, declare any
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<PAGE> 9
or all of the Obligations, whether or not then due, immediately due and payable
by Guarantor under this Guaranty, and Lender shall be entitled to enforce the
obligations of Guarantor hereunder.
5.1 Default by Borrower. Borrower shall default in the payment or
performance of any of the Obligations guaranteed hereby, after giving effect to
any applicable notice and cure provisions set forth in the Loan Documents.
5.2 Failure to Perform. Guarantor fails to perform any of its
obligations under this Guaranty or any agreement under which security is given
herefor, or this Guaranty is revoked or terminated by Guarantor, or any
representation or warranty made or given by Guarantor to Lender proves to be
false or misleading in any material respect.
5.3 Insolvency Proceeding. The making by Guarantor of any assignment
for the benefit of creditors, or a trustee or receiver being appointed for
Guarantor or for any property of Guarantor, or Guarantor becoming insolvent or
the subject of any Insolvency Proceeding and, in the case of such a proceeding
being commenced against Guarantor, such proceeding is not dismissed within sixty
(60) days following the commencement date thereof.
5.4 Dissolution. Guarantor dissolves or liquidates, or the business
of Guarantor is suspended or terminated for any reason.
5.5 Net Worth. Following a sale or transfer of any substantial
portion of Guarantor's business or assets or any merger, Guarantor's net worth
is less than Forty-Five Million Dollars ($45,000,000.00), excluding goodwill.
6. MISCELLANEOUS
6.1 Revival and Reinstatement. If at any time all or any part of any
payment theretofore applied by Lender to any of the Obligations is or must be
rescinded or returned by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower), such
Obligations shall, for the purposes of this Guaranty, to the extent such payment
is or must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by Lender, and this Guaranty shall continue to
be effective or be reinstated, as the case may be, as to such Obligations, and
Guarantor shall be fully liable therefore, all as though such application by
Lender had not been made.
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<PAGE> 10
6.2 No Marshaling. Lender has no obligation to marshal any assets in
favor of Guarantor, or against or in payment of (a) any of the Obligations, or
(b) any other obligation owed to Lender by Guarantor, Borrower, or any other
person.
6.3 No Modification, Waiver or Release Without Writing. Except as
may otherwise be expressly set forth herein, this Guaranty may not be modified,
amended, revised, revoked, terminated, changed or varied in any way whatsoever,
nor shall any waiver of any of the provisions of this Guaranty be binding upon
Lender, except as expressly set forth in a writing duly executed by Lender. No
waiver by Lender of any default shall operate as a waiver of any other default
or the same default on a future occasion, and no action by Lender permitted
hereunder shall in any way affect or impair Lender's rights or the obligations
of Guarantor under this Guaranty.
6.4 Assignment; Successors and Assigns. Guarantor may not assign
Guarantor's obligations or liability under this Guaranty. Subject to the
preceding sentence, this Guaranty shall be binding upon the parties hereto and
their respective heirs, executors, successors, representatives and assigns and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Lender may, without notice to anyone, sell or assign the
Obligations, the Note or Loan Documents or any part thereof, or grant
participations therein, and in any such event each and every assignee or holder
of, or participant in, all or any of the Obligations shall have the right to
enforce this Guaranty, by suit or otherwise for the benefit of such assignee,
holder, or participant, as fully as if herein by name specifically given such
right, but Lender shall have an unimpaired right, prior and superior to that of
any such assignee, holder or participant, to enforce this Guaranty for the
benefit of Lender.
6.5 Integration. This Guaranty is the entire agreement of Guarantor
with respect to the subject matter of this Guaranty, provided that this Guaranty
shall not in any way limit or abrogate the obligations of Guarantor under the
other Loan Documents, including, without limitation, the Hazardous Materials
Indemnity Agreement of even date herewith.
6.6 Rights Cumulative. All of Lender's rights under this Guaranty
and the other Loan Documents are cumulative. The exercise of any one right does
not exclude the exercise of any other right given in this Guaranty or the
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<PAGE> 11
other Loan Documents or any other right of Lender not set forth in this Guaranty
or the other Loan Documents. If there is more than one guarantor of the
Obligations, Lender may exercise its rights and remedies against any one or more
such guarantors and the failure of Lender to proceed against one or more of such
guarantors shall not affect the liability of the Guarantor under this Guaranty.
6.7 Severability. Whenever possible each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
6.8 Material Inducement; Consideration. Guarantor acknowledges and
agrees that Lender is specifically relying upon the representations, warranties,
agreements and waivers contained herein and that such representations,
warranties, agreements and waivers constitute a material inducement to Lender to
accept this Guaranty and to enter into the Loan Agreement and the transaction
contemplated therein. Guarantor further acknowledges that it expects to benefit
from Lender's extension of financing accommodations to Borrower because of its
relationship to Borrower, and that it is executing this Guaranty in
consideration of that anticipated benefit.
6.9 Indemnification. Guarantor agrees to indemnify, pay and hold
Lender and its officers, directors, employees, agents, and attorneys
(collectively called the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Guaranty or the
exercise of any right or remedy hereunder or under the other documents
pertaining to the Obligations (the "Indemnified Liabilities"); provided that
Guarantor shall have no obligation to an Indemnitee under this subsection with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of that Indemnitee as determined by a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Guarantor shall contribute the maximum
portion
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<PAGE> 12
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
6.10 Counterparts. This Guaranty may be executed in counterparts,
each of which shall be deemed an original, but all of which, when taken
together, shall be deemed one and the same agreement.
6.11 Governing Law. This Guaranty shall be governed by and construed
in accordance with the internal laws of the State of Illinois, without regard to
conflicts of law provisions.
6.12 Intentionally Omitted.
6.13 Venue. GUARANTOR, IN ORDER TO INDUCE LENDER TO ACCEPT THIS
GUARANTY, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH HEREBY IS ACKNOWLEDGED, AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT
OF, RELATED TO OR FROM THIS GUARANTY SHALL BE LITIGATED, AT LENDER'S SOLE
DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF
COOK, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND
STATE. GUARANTOR HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION
SYSTEM, WHOSE ADDRESS IS GUARANTOR, C/O CT CORPORATION SYSTEM, 208 SOUTH LASALLE
STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF
LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON CT CORPORATION SHALL
CONSTITUTE PERSONAL SERVICE OF PROCESS UPON GUARANTOR AND EACH OF THEM. IN THE
EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS
IN CHICAGO, ILLINOIS, GUARANTOR SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S
REQUEST, APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON GUARANTOR'S BEHALF
AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE
AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE
RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS' NOTICE TO GUARANTOR.
GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON THIS GUARANTY IN ACCORDANCE WITH
THIS PARAGRAPH.
6.14 Waiver of Jury Trial. GUARANTOR, AND BY ITS ACCEPTANCE OF THIS
GUARANTY, LENDER, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
GUARANTY AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS
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WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY GUARANTOR, AND BY
GUARANTOR'S ACCEPTANCE OF THIS GUARANTY, LENDER, AND GUARANTOR ACKNOWLEDGE THAT
NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY
ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
6.15 Waivers. THE WAIVERS SET FORTH IN THIS GUARANTY (INCLUDING,
WITHOUT LIMITATION, SECTIONS 6.13 AND 6.14 ABOVE) ARE KNOWINGLY, INTENTIONALLY,
AND VOLUNTARILY MADE BY GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER
LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF
FACT TO INDUCE THESE WAIVERS OR IN ANY WAY TO MODIFY OR NULLIFY THEIR EFFECT.
GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING
OF THESE WAIVERS BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL,
AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THESE WAIVERS WITH COUNSEL.
The undersigned has duly executed this Guaranty as of the date
and year first above written.
BALANCED CARE CORPORATION,
a Delaware corporation
By/s/Clint T. Fegan
Its Clint T. Fegan
Title VP CFO
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<PAGE> 1
Exhibit 10.7
THIS DOCUMENT PREPARED BY (WITH
THE ASSISTANCE OF AN ATTORNEY
LICENSED IN THIS STATE), AND AFTER
RECORDING SHOULD BE RETURNED TO:
Gary N. Ruben, Esq.
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
SPACE ABOVE THIS LINE FOR RECORDER'S USE
THIS INSTRUMENT IS AN OPEN-END MORTGAGE AND SECURES PRESENT AND FUTURE
INDEBTEDNESS, OBLIGATIONS AND ADVANCES UP TO A MAXIMUM AMOUNT OF
$64,000,000.00 PLUS INTEREST THEREON, PURSUANT TO 42 PA. C.S. SECTIONS
8143-8144.
THE ADDRESS TO WHICH ANY NOTICES TO THE LENDER PERMITTED BY 42 PA. C.S.
SECTION 8143 ARE TO BE DELIVERED IS SET FORTH IN THE INTRODUCTORY
PARAGRAPH HEREOF.
THIS INSTRUMENT IS ALSO A FINANCING STATEMENT FILED AS A FIXTURE FILING
PURSUANT TO SECTIONS 9313 AND 9402 OF THE PENNSYLVANIA UNIFORM
COMMERCIAL CODE.
Loan No. 99-407
FORM OF OPEN-END MORTGAGE,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This OPEN-END MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this
"Mortgage") is made as of this 30th day of December, 1999, between BALANCED CARE
REALTY AT SCRANTON, INC., a Delaware corporation, ("Borrower"), whose address is
1215 Manor Drive, Mechanicsburg, Pennsylvania 17055 and HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation ("Lender"), whose address is 2 Wisconsin
Circle, Suite 400, Chevy Chase, Maryland 20815.
<PAGE> 2
RECITALS
A. Lender has agreed, subject to the terms and conditions of that
certain Loan Agreement dated the date hereof, executed by and among Borrower,
certain affiliates of Borrower (Borrower and such affiliates being referred to
collectively as "Borrower Parties") and Lender (the "Loan Agreement"), to make a
loan (the "Loan") to Borrower Parties. The Loan is evidenced by (i) that certain
Promissory Note A executed by Borrower Parties of even date herewith in the
original principal amount of Twenty-Five Million Six Hundred Thousand and No/100
Dollars ($25,600,000.00) (which note, together with all notes issued in
substitution or exchange therefor and all amendments thereto, is hereinafter
referred to as "Note A") and (ii) that certain Subordinated Promissory Note B
executed by Borrower Parties of even date herewith in the original principal
amount of Six Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00)
(which note, together with all notes issued in substitution or exchange therefor
and all amendments thereto, is hereinafter referred to as "Note B"; Note A and
Note B being collectively referred to as the "Notes"), providing for monthly
payments as set forth in the Notes, with the balance thereof, due and payable on
December 31, 2001 (said date, or any earlier date on which the entire unpaid
principal amount shall be paid or required to be paid in full, whether by
prepayment, acceleration or otherwise is hereinafter called the "Maturity
Date"). The terms and provisions of the Loan Agreement and Notes are hereby
incorporated by reference in this Mortgage.
B. Lender wishes to secure: (i) the payment of the Notes, together
with all interest, the "Exit Fee" (as defined in the Loan Agreement), and other
amounts, if any, due in accordance with the terms of the Notes, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Notes,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Notes, the Loan Agreement, this
Mortgage, the Environmental Indemnity (as defined in the Loan Agreement) and any
other documents evidencing or securing the Loan or executed in connection
therewith (such documents together with any modifications, renewals, extensions
or replacements thereof are collectively referred to as the "Loan Documents");
and (iii) the payment and performance of any and all other debts, claims,
obligations, demands, monies, liabilities and indebtedness of any kind or nature
now or hereafter owing, arising, due or payable to Lender from any or all of
Borrower, Borrower Parties, Guarantor
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<PAGE> 3
and the Affiliates of Guarantor and each of the Borrower Parties, including
without limitation all indebtedness due and obligations arising under the Other
Finance Documents ("Guarantor," "Affiliates" and "Other Finance Documents"
having the meanings ascribed thereto in the Loan Agreement). All payment
obligations of Borrower Parties, Guarantor and the Affiliates of Guarantor and
each of the Borrower Parties, including without limitation all indebtedness due
under the Loan Documents and the Other Finance Documents, to Lender, whether now
existing or hereafter arising, are hereinafter sometimes collectively referred
to as the "Indebtedness," and all other obligations of Borrower Parties,
Guarantor and the Affiliates of Guarantor and each of the Borrower Parties under
the Loan Documents and the Other Finance Documents are hereinafter sometimes
collectively referred to as the "Obligations".
NOW, THEREFORE, TO SECURE the repayment of the Indebtedness and the
performance of the Obligations, Borrower has executed this Mortgage and does
hereby irrevocably mortgage, convey, assign, warrant, transfer, pledge and grant
to Lender a security interest in all of Borrower's right, title and interest in
and to the following described property and all proceeds thereof (which property
is hereinafter sometimes collectively referred to as the "Property"):
A. The real estate described on Exhibit A attached hereto (the
"Land");
B. All of the following (collectively, the "Improvements"): all
buildings, improvements and fixtures now or in the future located or to be
constructed on the Land; to the extent not owned by tenants of the Property, all
machinery, appliances, equipment, furniture, fixtures and all other personal
property of every kind or nature located in or on, or attached to, or used or to
be used in connection with the Land, buildings, improvements or fixtures and all
leases of any of the foregoing (subject, however, as to such personal property
which does not constitute building machinery or fixtures (the "Movable Personal
Property"), to purchase money security interests of vendors and lenders and the
lessor's interest in any Movable Personal Property leased by Borrower, which
interests are referred to collectively as the "Senior Movable Personal Property
Interests"); all building materials and goods procured for use or in connection
with the foregoing; and all additions, substitutions and replacements to any of
the foregoing;
C. To the extent assignable, all plans, specifications,
architectural renderings, drawings, soil test
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<PAGE> 4
reports, other reports of examination or analysis of the Land or the
Improvements;
D. All easements, rights-of-way, water courses, mineral rights,
water rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("Appurtenances");
E. All agreements affecting the use, enjoyment or occupancy of the
Land and/or Improvements, including patient and residential care agreements,
leases, licenses and other occupancy agreements, now or hereafter entered into
(the "Leases") and all rents, prepayments, security deposits, termination
payments, royalties, profits, issues and revenues from the Land and/or
Improvements from time to time accruing under the Leases (the "Rents"),
reserving to Borrower, however, so long as no Event of Default (hereinafter
defined) has occurred hereunder, the right to receive and apply the Rents in
accordance with the terms and conditions of Section 8 of this Mortgage;
F. All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits (except any deposit that is not pursuant to a Lease but is
held by Borrower as an accommodation to a resident), rights of action, awards of
damages, compensation, settlements and other rights to the payment of money
hereafter made resulting from or relating to (i) the taking of the Land or the
Improvements or any part thereof under the power of eminent domain, (ii) any
damage (whether caused by such taking, by casualty or otherwise) to the Land,
Improvements or Appurtenances or any part thereof, or (iii) the ownership or
operation of the Property;
G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
H. All accounts, contract rights, general intangibles, chattel
paper, documents, instruments, inventory, goods, equipment (subject to the
Senior Movable Personal Property Interests) and all books and records relating
to the foregoing;
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<PAGE> 5
I. Any monies on deposit with or for the benefit of Lender,
including deposits for the payment of real estate taxes and any cash collateral
account;
J. All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property of the types described in the preceding granting clauses; and
K. Any and all after-acquired right, title or interest of Borrower
in and to any property of the types described in the preceding granting clauses.
TO HAVE AND TO HOLD the Property and all parts thereof together with
the rents, issues, profits and proceeds thereof, unto Lender and its successors
and assigns, to their own proper use, benefit, and advantage forever, subject,
however, to the terms, covenants, and conditions herein.
PROVIDED ALWAYS, and these presents are upon the express condition
that, if the Obligations shall have been satisfied in full and all obligations
of the Lender under the Loan Documents have been terminated then this Mortgage
and the estate hereby granted shall cease and become void. Upon the occurrence
of such event, the Lender will, if requested to do so by the Borrower and at the
Borrower's expense, execute and deliver to the Borrower such documents as the
Borrower shall reasonably request to evidence or otherwise effect such event.
Borrower covenants and agrees with Lender as follows:
1. Payment of Indebtedness; Performance of Obligations. Borrower
shall promptly pay or cause to be paid when due the Indebtedness and shall
promptly perform or cause to be performed all Obligations.
2. Taxes and Other Obligations. Borrower shall pay, when due, and
before any interest, collection fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and obligations, which may
become a lien on or charge against the Property (collectively, "Charges").
Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges, so long as: (a)
Borrower has given prior written notice to Lender of Borrower's intent to so
contest or object to any such Charges; (b) such contest stays the enforcement or
collection of the Charges or any lien created; and (c) if the amount of the
Charges exceeds $25,000.00, Borrower has obtained an endorsement, in form and
substance satisfactory to Lender, to the loan policy of title
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<PAGE> 6
insurance issued to Lender insuring over any such lien, or Borrower has
deposited with Lender a bond or other security reasonably satisfactory to Lender
in the amount of 150% of the amount of such Charges.
Should Borrower fail to make any of such payments, Lender may, at
its option and at the expense of Borrower, pay the amounts due for the account
of Borrower. Upon the request of Lender, Borrower shall immediately furnish to
Lender copies of all notices of amounts due and receipts evidencing payment.
Borrower shall promptly notify Lender of any lien on all or any part of the
Property and shall promptly discharge any unpermitted lien or encumbrance.
3. Reserves for Taxes. At the time of and in addition to the monthly
installments of principal and interest due under the Notes, Borrower shall pay
to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to
be sufficient to pay at least thirty (30) days before they become due and
payable all taxes, assessments and other similar charges levied against the
Property (collectively, the "Taxes"). So long as no Event of Default exists
hereunder, Lender shall apply the sums to pay the Taxes. These sums may be
commingled with the general funds of Lender, and no interest shall be payable
thereon nor shall these sums be deemed to be held in trust for the benefit of
Borrower. If Lender at any time reasonably determines that such amount on
deposit is insufficient to fully pay such Taxes, Borrower shall, within ten (10)
days following notice from Lender, deposit such additional sum as may be
reasonably required by Lender. On the Maturity Date, the moneys then remaining
on deposit with Lender or its agent shall, at Lender's option, be applied
against the Indebtedness or so long as no Event of Default is then continuing,
be refunded to Borrower. The obligation of Borrower to pay the Taxes is not
affected or modified by the provisions of this Section 3.
4. Insurance and Condemnation.
(a) Insurance.
(i) Borrower shall keep the Improvements insured, and shall maintain
general liability coverage and such other coverages reasonably requested
by Lender, by carrier(s), in amounts and in form at all times reasonably
satisfactory to Lender, which carrier(s), amounts and form shall not be
changed without the prior written consent of Lender, such consent not to
be unreasonably withheld.
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<PAGE> 7
(ii) In case of loss or damage by fire or other casualty, Borrower
shall give immediate written notice thereof to the insurance carrier(s)
and to Lender. Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is
coupled with an interest), at its option, to make or file proofs of loss
or damage and to settle and adjust any claim under insurance policies
which insure against such risks, or to direct Borrower, in writing, to
agree with the insurance carrier(s) on the amount to be paid in regard to
such loss.
(iii) Provided no Event of Default then exists and Borrower
certifies as to same, the net insurance proceeds (after deduction of
Lender's reasonable costs and expenses, if any, in collecting the same)
shall be made available for the restoration or repair of the Property if,
in Lender's reasonable judgment: (a) restoration or repair and the
continued operation of the Property is economically feasible; (b) the
value of Lender's security is not reduced; (c) the casualty loss is not
more than twenty-five percent (25%) of the Loan Allocation amount
attributable to the Property set forth on Exhibit A of the Loan Agreement;
(d) the loss does not occur in the six (6) month period preceding the
stated Maturity Date and Lender's independent consultant certifies that
the restoration of the Property can be completed at least ninety (90) days
prior to the Maturity Date; and (e) Borrower deposits with Lender from
time-to-time an amount, in cash, which Lender, in its sole but reasonable
discretion, determines is necessary, in addition to the net insurance
proceeds to pay in full the cost of the restoration or repair (Borrowers'
deposit shall be disbursed prior to any disbursement of insurance proceeds
held by Lender). Any excess proceeds remaining after completion of such
repair shall be distributed first to Borrower to the extent Borrower has
deposited funds with Lender for such repair with the balance applied
against the Indebtedness. Notwithstanding the foregoing, it shall be a
condition precedent to any disbursement of insurance proceeds held by
Lender hereunder that Lender shall have approved in its reasonable
discretion (x) all plans and specifications for any proposed repair or
restoration, (y) the construction schedule and (z) the architect's and
general contractor's contract for all restoration that exceeds $250,000.00
in the aggregate. Lender may
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<PAGE> 8
establish other conditions it deems reasonably necessary to assure the
work is fully completed in a good and workmanlike manner free of all liens
or claims by reason thereof, and in compliance with all applicable laws,
rules and regulations. At Lender's option, the net insurance proceeds
shall be disbursed pursuant to a construction escrow acceptable to Lender.
If an Event of Default then exists, or any of the conditions set forth in
clauses (a) through (f) of this Section 4(a)(iii) have not been met or
satisfied, the net insurance proceeds shall be applied to the Indebtedness
in such order and manner as provided in the Note.
(iv) In the event Borrower fails to provide Lender with evidence of
the insurance coverage required by this Mortgage, Lender may purchase
insurance at Borrower's expense (subject to Section 3 above) to protect
Lender's interests in the Property. This insurance may, but need not,
protect Borrower's interests. The coverage purchased by Lender may not pay
any claim made by Borrower or any claim that is made against Borrower in
connection with the Property. Borrower may later cancel any insurance
purchased by Lender, but only after providing Lender with evidence that
Borrower has obtained insurance as required by this Mortgage. If Lender
purchases insurance for the Property, Borrower will (subject to Section 3
above) be responsible for the costs of that insurance, including interest
and other charges imposed by Lender in connection with the placement of
the insurance, until the effective date of the cancellation or expiration
of the insurance. The costs of the insurance may be added to the
Obligations. The costs of the insurance may be more than the cost of
insurance Borrower is able to obtain on its own.
(b) Condemnation.
(i) Borrower shall within three (3) business days of its receipt of
notice thereof, notify Lender of any action or proceeding relating to any
condemnation or other taking, whether direct or indirect, of the Property,
or part thereof, and Borrower shall, after consultation with and subject
to Lender's approval, appear in and prosecute any such action or
proceeding. Upon Borrower's failure to act in accordance with Lender's
prior approval, Borrower authorizes Lender, at
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<PAGE> 9
Lender's option, as attorney-in-fact for Borrower (such appointment as
attorney-in-fact is coupled with an interest), to commence, appear in and
prosecute, in Lender's or Borrower's name, any action or proceeding
relating to any condemnation or other taking of the Property, and to
settle or compromise any claim in connection with such condemnation or
other taking. The proceeds of any award, payment or claim for damages,
direct or consequential, in connection with any condemnation or other
taking of the Property, or part thereof, or for conveyances in lieu of
condemnation, are hereby assigned to and shall be paid to Lender and in
accordance with the provisions of Section 4(b)(ii) below. Lender is
authorized (but is under no obligation) to collect any such proceeds.
(ii) Lender may, in its sole discretion, elect to (y) apply the net
proceeds of any condemnation award (after deduction of Lender's reasonable
costs and expenses, if any, in collecting the same) in reduction of the
Indebtedness in such order and manner as provided in the Note, whether due
or not or (z) make the proceeds available to Borrower for the restoration
or repair of the Property. If the net proceeds of the condemnation award
are made available to Borrower for restoration or repair, the net proceeds
of the condemnation award shall be disbursed upon satisfaction of and in
accordance with the terms and conditions set forth in Section 4(a)(iii)
above. Lender is authorized (but is under no obligation) to collect any
such proceeds.
5. Preservation and Maintenance of Property. Borrower shall: (a) not
commit waste or permit impairment or deterioration of the Property; (b) not
abandon the Property; (c) keep the Property in good repair and restore or repair
promptly, in a good and workmanlike manner, all or any part of the Property to
the equivalent of its original condition, or such other condition as Lender may
approve in writing, upon any damage or loss thereto; (d) comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property; (e) provide for management of the Property by a property manager
reasonably satisfactory to Lender pursuant to a contract in form and substance
reasonably satisfactory to Lender; and (f) give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security granted by
the Loan Documents or the rights or powers of Lender. Neither
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<PAGE> 10
Borrower nor any tenant or other person shall remove, demolish or materially
alter any Improvement on the Land except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like kind.
6. Protection of Lender's Security. If (a) Borrower fails to pay the
Indebtedness or to perform the Obligations, (b) any action or proceeding is
commenced which materially adversely affects or could materially adversely
affect the Property or Lender's interest therein, including any loss, damage,
cost, expense or liability incurred by Lender with respect to (i) any
environmental matters relating to the Property or (ii) the preparation of the
commencement or defense of any action or proceeding or any threatened action or
proceeding affecting the Loan Documents or the Property, then Lender, at
Lender's option, may make such appearances, disburse such sums and take such
lawful action, taking into account the rights of residents at the Property, as
Lender deems necessary, in its sole discretion, to protect the Property or
Lender's interest therein, including entry upon the Property to take such
actions Lender determines appropriate to preserve, protect or restore the
Property. Any amounts disbursed by Lender pursuant to this Section 6 (including
attorneys' fees, costs and expenses), together with interest thereon at the
"Default Rate" (defined in the Notes) from the date of disbursement, shall
become additional Indebtedness of Borrower secured by the lien of this Mortgage
and the other Loan Documents and shall be due and payable on demand. Nothing
contained in this Section 6 shall require Lender to incur any expense or take
any action hereunder.
7. Actions. Borrower shall warrant title and appear in and defend
any claim or any action or other proceeding purporting to affect title or other
interests relating to any part of the Property, the security of this Mortgage or
the rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower, appear in and
defend any such claim, action or proceeding and any claim, action or other
proceeding asserted or brought against Lender in connection with or relating to
any part of the Property or this Mortgage.
8. Leases; Assignment of Rents.
Borrower shall not, without Lender's prior written consent (which
consent shall not be unreasonably withheld), execute, modify, amend, surrender
or terminate any non-residential Lease, except as expressly permitted by the
Loan Agreement. All Leases shall be on forms previously approved by
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<PAGE> 11
Lender. Borrower shall not be authorized to enter into any ground lease of the
Property without Lender's prior written approval. If Lender's consent to any
non-residential Lease or the renewal of any existing non-residential Lease is
required under the Loan Agreement, at Lender's request, Borrower shall cause the
tenant thereunder to execute a subordination and attornment agreement in form
and substance satisfactory to Lender. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases. Borrower shall furnish
Lender within twenty (20) days following Lender's request, with a rent roll, in
form reasonable acceptable to Lender, and executed copies of all Leases.
Borrower absolutely and unconditionally assigns and transfers to
Lender, all of Borrower's right, title and interest in and to the Rents;
provided, however, so long as there shall not have occurred an Event of Default,
Borrower shall have a license, revocable immediately upon an Event of Default,
to collect all Rents, and shall hold the same, in trust, to be applied first to
the payment of all impositions, levies, taxes, assessments and other charges
upon the Property, second to maintenance of insurance policies upon the Property
required hereby, third to the expenses of Property operations, including
maintenance and repairs required hereby, fourth to the payment of that portion
of the Indebtedness then due and payable, and fifth, the balance, if any, to or
as directed by Borrower. If an Event of Default has occurred and is continuing,
Borrower's right to collect and secure the Rents shall cease and Lender shall
have the sole right, with or without taking possession of the Property to
collect all Rents. Borrower has executed and delivered to Lender an Assignment
of Leases and Rents of even date herewith, and, to the extent the provisions of
this Section 8 are inconsistent with the provisions of said Assignment of Leases
and Rents, the provisions of said Assignment of Leases and Rents shall control.
9. Statements by Borrower. Borrower shall within ten (10) days after
Lender's request, furnish Lender with a written statement, duly acknowledged,
setting forth the sums, according to Borrower's books and records, secured by
the Loan Documents and any right of set-off, counterclaim or other defense which
exists against such sums and the Obligations.
10. Transfers of the Property. Except for Leases entered into in
compliance with the other provisions of this Mortgage and the Loan Agreement,
Borrower shall not transfer all or any part of the Property, or any interest
therein, unless and until Borrower has fully complied with all of the provisions
of
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<PAGE> 12
Section 2.2 of the Loan Agreement such that Borrower would be entitled to cause
Lender to release the lien of this Mortgage pursuant to that Section 2.2. There
shall be no transfer, sale, assignment, encumbrance, or disposition of any of
the capital stock of Borrower.
11. No Additional Liens, Encumbrances or Indebtedness. Borrower
covenants not to execute any mortgage, security agreement, assignment of leases
and rents or other agreement granting a lien (except the liens granted to Lender
by the Loan Documents and Senior Movable Personal Property Interests) against or
encumbrance on the Property or take or fail to take any other action which would
result in a lien against the Property or the interest of Borrower in the
Property without the prior written consent of Lender; provided, however,
Borrower may in good faith, by appropriate proceeding, contest the validity or
amount of any asserted lien and, pending such contest, Borrower shall not be
deemed to be in default hereunder if the amount secured by such lien is not more
than $25,000.00, or, if it is more than $25,000.00, then Borrower shall first
obtain an endorsement, in form and substance satisfactory to Lender to the loan
policy of title insurance issued to Lender insuring over such lien, or, if no
such loan policy shall have been issued, then Borrower shall deposit with Lender
a bond or other security satisfactory to Lender in the amount of 150% of the
amount of such lien to assure payment of the same as and when due.
12. Borrower and Lien Not Released. Without affecting the liability
of Borrower or any other person liable for the payment of the Indebtedness, and
without affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and without notice to
any junior lien holder or holder of any right or other interest in and to the
Property: (a) release any person so liable; (b) waive or modify any provision of
this Mortgage or the other Loan Documents or grant other indulgences; (c)
release all or any part of the Property; (d) take additional security for any
obligation herein mentioned; (e) subordinate the lien or charge of this
Mortgage; (f) consent to the granting of any easement; or (g) consent to any map
or plan of the Property.
13. Uniform Commercial Code Security Agreement.
(a) This Mortgage shall constitute a security agreement pursuant to
the Uniform Commercial Code (the "UCC") for any portion of the Property which,
under applicable law, may be subject to a security interest pursuant to the UCC
(such portion of the Property is hereinafter called the "Personal Property")
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<PAGE> 13
and, subject to the Senior Movable Personal Property Interests, Borrower hereby
grants to Lender a security interest in the Personal Property. Lender shall have
all of the rights and remedies of a secured party under the UCC as well as all
other rights and remedies available at law or in equity.
(b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property. Borrower hereby
authorizes and empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file, on Borrower's behalf, all financing
statements and refilings and continuations thereof as Lender deems necessary or
advisable to create, preserve and protect such lien. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
of any record searches for financing statements as Lender may reasonably
require.
(c) Borrower shall not, without the prior written consent of Lender
(which consent will not be unreasonably withheld), sell, assign, transfer,
encumber, remove or permit to be removed from the Property any of the Personal
Property. So long as no Event of Default exists, Borrower may sell or otherwise
dispose of the Personal Property when obsolete, worn out, inadequate,
unserviceable or unnecessary for use in the operation of the Property, but only
upon replacing the same with other Personal Property at least equal in value and
utility to the disposed Personal Property. Any replacement or substituted
Personal Property shall be, subject to the Senior Movable Personal Property
Interests, subject to the security interest granted herein.
(d) To the extent permitted by law, Borrower and Lender agree that
with respect to all items of Personal Property which are or will become fixtures
on the Land, this Mortgage, upon recording or registration in the real estate
records of the proper office, shall constitute a "fixture filing" within the
meaning of the UCC.
14. Events of Default; Acceleration of Indebtedness. The occurrence
of any one or more of the following events shall constitute an "Event of
Default" under this Mortgage:
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<PAGE> 14
(a) failure of Borrower to pay, within ten (10) days of the due
date, any of the Indebtedness, including any payment due under either or both of
the Notes; or
(b) failure of Borrower to strictly comply with Sections 4(a)(i)
(insurance), 8 (Leases), 10 (prohibition on transfers), and 11 (no additional
liens) of this Mortgage; or
(c) failure of Borrower, within thirty (30) days after written
notice and demand, to satisfy each and every Obligation not set forth in the
subsections above; provided, however, if such Obligation cannot by its nature be
cured within thirty (30) days, and if Borrower commences to cure such failure
promptly after written notice thereof and thereafter diligently pursues the
curing thereof (and then in all events cures such failure within ninety (90)
days after the original notice thereof), Borrower shall not be in default
hereunder during such period of diligent curing; or
(d) the occurrence of an Event of Default under the Loan Agreement,
or
(e) Borrower delivering or causing to be delivered to Lender a
notice pursuant to 42 Pa. C.S. Section 8143 electing to limit the indebtedness
secured by this Mortgage.
Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
15. Entry; Foreclosure. Upon the occurrence of an Event of Default,
Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual
possession of the Property, or to the extent permitted by law, Lender or a
receiver appointed by a court of competent jurisdiction, may enter and take
possession of all or any part of the Property, and may exclude Borrower and its
respective agents and employees wholly therefrom, and may have joint access with
Borrower to the books, papers and accounts of Borrower. If Borrower shall for
any reason fail to surrender or deliver the Property or any part thereof after
such demand by Lender, Lender or such receiver may obtain a judgment or decree
conferring on Lender or such receiver, the right to immediate possession of the
Property or requiring the delivery of the
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<PAGE> 15
Property to Lender or such receiver, and Borrower specifically consents to the
entry of such judgment or decree. Upon every such entering upon or taking of
possession, Lender or such receiver may hold, store, use, operate, manage and
control the Property and conduct the business thereof, and Lender or such
receiver may take any action required by applicable law or which Lender or such
receiver believes necessary to enforce compliance with the environmental
provisions contained herein or in the other Loan Documents, and negotiate with
governmental authorities with respect to the Property's environmental compliance
and remedial measures in connection therewith. Lender and such receiver and
their representatives shall have no liability for any loss, damage, injury, cost
or expense resulting from any action or omission which was taken or omitted in
good faith.
When the Indebtedness or any part thereof shall become due, whether
by acceleration or otherwise, Lender may, either with or without entry or taking
possession as herein provided or otherwise, proceed by suit or suits at law or
in equity or by any other appropriate proceeding or remedy to: (a) enforce
payment of the Notes or the performance of any term, covenant, condition or
agreement of Borrower under any of the Loan Documents; (b) foreclose the lien
hereof for the Indebtedness or part thereof and sell the Property as an entirety
or otherwise, as Lender may determine; (c) exercise its rights under Section 13
with respect to all or any portion of the Personal Property in accordance with
the provisions of the UCC; and/or (d) pursue any other right or remedy available
to it under or by the law and decisions of the State in which the Land is
located. Notwithstanding any statute or rule of law to the contrary, the failure
to join any tenant or tenants of the Property as party defendant or defendants
in any foreclosure action or the failure of any such order or judgment to
foreclose their rights shall not be asserted by Borrower as a defense in any
civil action instituted to collect (a) the Indebtedness, or any part thereof or
(b) any deficiency remaining unpaid after foreclosure and sale of the Property.
Upon any foreclosure sale, Lender may bid for and purchase the
Property and shall be entitled to apply all or any part of the Indebtedness as a
credit to the purchase price.
16. Appointment of Receiver or Mortgagee in Possession. If an Event
of Default is continuing or if Lender shall have accelerated the Indebtedness,
Lender, upon application to a court of competent jurisdiction, shall be entitled
as a matter of strict right, without notice, and without regard to the occupancy
or value of any security for the Indebtedness or the
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<PAGE> 16
insolvency of any party bound for its payment, to the appointment, at its
option, of itself as mortgagee in possession, or of a receiver to take
possession of and to operate the Property, and to collect and apply the Rents.
17. Expenditures and Expenses. In any action to foreclose the lien
hereof or otherwise enforce Lender's rights and remedies hereunder, there shall
be allowed and included as additional Indebtedness all Costs (as defined in the
Loan Agreement) which may be paid or incurred by or on behalf of Lender. All
Costs and such other costs, expenses and fees as may be incurred by Lender in
the protection of the Property and the maintenance of the lien of this Mortgage,
including, attorneys' fees and costs in any litigation or proceeding affecting
this Mortgage, the Notes, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by this Mortgage.
18. Application of Proceeds of Foreclosure Sale. The proceeds of any
foreclosure sale of the Property shall be distributed and applied in the order
of priority set forth in the Notes with the excess, if any, being applied, to
any party entitled thereto as their rights may appear.
19. Future Advances. This Mortgage is given to secure not only the
existing Indebtedness, but also future advances (whether such advances are
obligatory or are made at the option of Lender, or otherwise) ("Future
Advances") made by Lender under the notes securing the Indebtedness (including
the Notes), the Other Finance Documents, or this Mortgage, to the same extent as
if such future advances were made on the date of the execution of this Mortgage.
The total amount of indebtedness that may be so secured may decrease or increase
from time to time, but all Indebtedness secured hereby shall in no event exceed
$64,000,000.00.
20. Waiver of Statute of Limitations. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien created by any of the Loan Documents or to any action brought to enforce
the Notes or any other obligation secured by any of the Loan Documents.
21. Waiver of Homestead and Redemption. Borrower hereby waives, to
the extent permitted by applicable law, all
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<PAGE> 17
right of homestead exemption in the Property. Borrower hereby waives, to the
extent permitted by applicable law, all right of redemption on behalf of
Borrower and on behalf of all other persons acquiring any interest or title in
the Property subsequent to the date of this Mortgage, except decree or judgment
creditors of Borrower.
22. Governing Law; Severability. This Mortgage shall be governed by
and construed in accordance with the internal laws of the State of Illinois
except that the provisions of the laws of the jurisdiction in which the Land is
located shall be applicable to the creation, perfection and enforcement of the
lien created by this Mortgage. The invalidity, illegality or unenforceability of
any provision of this Mortgage shall not affect or impair the validity, legality
or enforceability of the remainder of this Mortgage, and to this end, the
provisions of this Mortgage are declared to be severable.
23. Notice. Notices shall be given under this Mortgage in conformity
with the terms and conditions of the Loan Agreement and in conformity with
applicable law.
24. Successors and Assigns Bound; Joint and Several Liability;
Agents; Captions. The covenants and agreements contained in the Loan Documents
shall bind, and the rights thereunder shall inure to, the respective successors
and assigns of Lender and Borrower, subject to the provisions of Section 10
hereof. All covenants and agreements of Borrower shall be joint and several. In
exercising any rights under the Loan Documents or taking any actions provided
for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
25. Release. Upon payment of all sums secured by this Mortgage, or
as otherwise provided in Section 2.2 of the Loan Agreement, Lender shall release
this Mortgage in adequate recordable form (including delivering to Borrower
UCC-3 termination statements). Borrower shall pay Lender's reasonable costs
incurred in releasing this Mortgage and any financing statements related hereto.
26. Loss of Notes. Upon notice from Lender of the loss, theft, or
destruction of the Notes and upon receipt of an affidavit of lost note and an
indemnity reasonably satisfactory to Borrower from Lender, or in the case of
mutilation of the Notes, upon surrender of the mutilated Note, Borrower shall
make and
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<PAGE> 18
deliver a new note of like tenor in lieu of the then to be superseded Note.
27. Easements and Rights of Way. Lender agrees to execute such
documents and instruments (in form reasonably satisfactory to Lender) as
Borrower may reasonably request in connection with the granting by Borrower of
easements and rights of way to public or quasi public authorities, utility
companies and others in, over, through and under the Property, including without
limitation affirming to the grantee of such easements and rights of way that
this Mortgage will be subordinate to the grantee's interest therein; provided,
however, no such document, instrument or grant shall decrease (in Lender's
reasonable discretion) the value of the Property.
28. Senior Personal Property Interests. Lender agrees that Borrower,
from time to time, may refinance or otherwise incur indebtedness in connection
with financing (on a purchase money basis, on an operating lease basis or on a
capital lease basis) items of Movable Personal Property which Borrower desires
to acquire (or acquire the use of) for the operation of the Property by the
granting of one or more Senior Personal Property Interests to third parties.
Lender acknowledges that Movable Personal Property in the Property are or may
currently be subject to Senior Personal Property Interests. Lender shall from
time to time at the request of Borrower execute and deliver to the holder(s) of
such Senior Personal Property Interests subordination agreements in form and
substance reasonably acceptable to Lender and such holder(s) of Senior Personal
Property Interests. At Lender's request from time to time, Borrower shall
provide Lender with copies of any lease, and of all documents, instruments and
agreements pertaining to such Senior Personal Property Interests.
29. Open-end Mortgage. This Mortgage is intended to be an "Open-End
Mortgage" as defined in 42 Pa. C.S. Sections 8143(f) and, as such, is intended
to have the benefit of such Pennsylvania laws relating to open-end mortgages as
may be in effect from time to time, including without limitation 42 Pa. C.S.
Section 8143-8144. This Mortgage secures present and future indebtedness,
obligations and advances, including Future Advances, up to a maximum amount of
$64,000,000.00 plus interest thereon. Without limiting the generality of the
foregoing, this Mortgage secures unpaid balances of advances made with respect
to the Property for the payment of taxes, assessments, maintenance charges,
insurance premiums and costs incurred for the protection of this Mortgage and
the lien and security hereof and expenses
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<PAGE> 19
incurred by the Lender by reason of default by the Borrower hereunder.
30. CONFESSION OF JUDGMENT IN EJECTMENT. FOR THE PURPOSE OF
OBTAINING POSSESSION OF THE PROPERTY AT ANY TIME WHEN AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY PROTHONOTARY OR CLERK OR ANY COURT OF RECORD IN THE
COMMONWEALTH OR ELSEWHERE, AS ATTORNEY FOR THE BORROWER AND ALL PERSON CLAIMING
UNDER OR THROUGH THE BORROWER, AS OF ANY TERM OR TIME, TO COMMENCE AN AMICABLE
ACTION IN EJECTMENT FOR POSSESSION OF THE PROPERTY AND TO APPEAR IN SUCH COURT
FOR AND TO CONFESS JUDGMENT AGAINST THE BORROWER AND AGAINST ALL PERSONS
CLAIMING UNDER OR THROUGH THE BORROWER IN FAVOR OF THE LENDER, FOR RECOVERY BY
THE LENDER OF POSSESSION THEREOF, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF
VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF
POSSESSION MAY IMMEDIATELY BE ISSUED FOR POSSESSION OF THE PROPERTY, WITHOUT ANY
PRIOR WRIT OR PROCEEDING WHATSOEVER, AND WITHOUT ANY STAY OF EXECUTION. THE
BORROWER HEREBY IRREVOCABLY WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS
AND IN THE ENTRY OF ANY JUDGMENT RESULTING THEREFROM, STAY OF EXECUTION, THE
RIGHT OF INQUISITION AND EXTENSION OF TIME OF PAYMENT IF FOR ANY REASON AFTER
SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE
PROPERTY SHALL REMAIN IN OR BE RESTORED TO THE BORROWER, THE LENDER SHALL HAVE
THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE
FURTHER AMICABLE ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE
PROPERTY. THE LENDER MAY BRING AN AMICABLE ACTION IN EJECTMENT AND CONFESS
JUDGMENT THEREIN BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE
THIS MORTGAGE, OR AFTER ENTRY OF JUDGMENT THEREIN, OR AFTER SHERIFF SALE OF THE
PROPERTY IN WHICH THE LENDER IS THE SUCCESSFUL BIDDER. THE AUTHORIZATION TO
PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND TO CONFESS JUDGMENT THEREIN
IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE AND SHALL
SURVIVE ANY EXECUTION SALE TO THE LENDER.
31. Consent to Jurisdiction and Service of Process. For purposes of
confession of judgment and the foreclosure of this Mortgage, Borrower hereby:
(a) irrevocably submits to the jurisdiction of the Court of Common Pleas of
[_____________________] County, Pennsylvania, and to the jurisdiction of the
United States Court for the [_____________] District of Pennsylvania for the
purposes of any action or proceeding arising in relation to confession of
judgment or arising out of or relating to this Mortgage or the subject matter
hereof and brought by any other party; (b) waives and agrees not to assert, by
way of motion, as a defense or otherwise, in any such action or proceeding, any
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<PAGE> 20
claim that (i) Borrower is not personally subject to the jurisdiction of such
courts, (ii) the action or proceeding is brought in an inconvenient forum or
(iii) the venue of the action or proceeding is improper; and (b) agrees that,
notwithstanding any right or privilege Borrower may possess at any time,
Borrower and its property are and shall be generally subject to suit on account
of the obligations assumed by Borrower hereunder. Borrower hereby agrees that
service either in person or by certified or registered U.S. mail in accordance
with the provisions of Section 23 hereof shall constitute valid in personam
service upon Borrower and its successors and assigns in any action or proceeding
with respect to any matter as to which Borrower has submitted to jurisdiction
hereunder.
32. Coal Notice. THIS DOCUMENT MAY NOT SELL, CONVEY, TRANSFER,
MORTGAGE, INCLUDE, OR INSURE THE TITLE TO THE COAL AND RIGHT OF SUPPORT
UNDERNEATH THE SURFACE LAND DESCRIBED OR REFERRED TO HEREIN, AND THE OWNER OR
OWNERS OF SUCH COAL MAY HAVE THE COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL
AND IN THAT CONNECTION DAMAGE MAY RESULT TO THE SURFACE OF THE LAND AND ANY
HOUSE, BUILDING, OR OTHER STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS
NOTICE DOES NOT ENLARGE, RESTRICT, OR MODIFY ANY LEGAL RIGHTS OR ESTATES
OTHERWISE CREATED, TRANSFERRED, EXCEPTED, OR RESERVED BY THIS INSTRUMENT. (This
notice is set forth in the manner provided in Section 1 of the Act of July 17,
1957, P.L. 984, as amended, and is not intended as notice of unrecorded
instruments, if any.)
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<PAGE> 21
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has
caused the same to be executed by its duly authorized representatives as of the
date first above written.
BORROWER ACKNOWLEDGES THAT THIS MORTGAGE CONTAINS A CONFESSION OF
JUDGMENT, BY WHICH BORROWER WAIVES IMPORTANT LEGAL RIGHTS, AND BORROWER HAS
DISCUSSED THE CONFESSION OF JUDGMENT WITH ITS LEGAL COUNSEL.
BORROWER:
BALANCED CARE REALTY AT SCRANTON, INC.,
WITNESS: a Delaware corporation
/s/Patricia Caraballo By /s/Clint T. Fegan
Name: Patricia Caraballo Its VP-CFO
CERTIFICATE OF ADDRESS:
Lender hereby certifies that the precise and complete address of the mortgagee
(Lender) under the foregoing Mortgage is as follows:
500 West Monroe Street, Chicago, Illinois 60661
LENDER:
HELLER FINANCIAL, INC.,
a Delaware corporation
By:/s/Kevin J. McMeen
Its:
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<PAGE> 22
ACKNOWLEDGMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Kerri A. Dobson, a Notary Public in and for and residing in said
County and State, DO HEREBY CERTIFY THAT Clint T. Fegan, the VP-CFO of BALANCED
CARE REALTY AT SCRANTON, INC., a Delaware corporation, personally known to me to
be the same person whose name is subscribed to the foregoing instrument appeared
before me this day in person and acknowledged that s/he signed and delivered
said instrument as his/her own free and voluntary act and as the free and
voluntary act of said corporation for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 29th day of December,
1999.
/s/Kerri A. Dobson
Notary Public
My Commission Expires:
01/24/01
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<PAGE> 1
Exhibit 10.8
Schedule to Form of Open-End Mortgage,
Assignment of Rents, Leases and Security Agreement
<TABLE>
<CAPTION>
Borrower County District
<S> <C> <C>
Balanced Care Realty at Blair Western
Altoona, Inc.
Balanced Care Realty at Columbia Middle
Berwick, Inc.
Balanced Care Realty at Mifflin Middle
Lewistown, Inc.
Balanced Care Realty at Lackawanna Middle
Peckville, Inc.
Balanced Care Realty at Berks Eastern
Reading, Inc.
Balanced Care Realty at Lackawanna Middle
Scranton, Inc.
Balanced Care Realty at Centre Middle
State College, Inc.
</TABLE>
<PAGE> 1
Exhibit 10.9
PREPARED BY* AND RETURN TO:
Gary N. Ruben, Esq.
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
* PREPARED WITH THE
ASSISTANCE OF AN ATTORNEY
LICENSED IN THE STATE OF ARKANSAS
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Loan No. 99-407
FORM OF MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this "Mortgage") is
made as of this 30th day of December, 1999, between [ ]("Borrower"), a
Delaware corporation whose address is 1215 Manor Drive, Mechanicsburg,
Pennsylvania 17055 and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation
("Lender"), whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase,
Maryland 20815.
RECITALS
A. Lender has agreed, subject to the terms and conditions of that
certain Loan Agreement dated the date hereof, executed by and among Borrower,
certain affiliates of Borrower (Borrower and such affiliates being referred to
collectively as "Borrower Parties") and Lender (the "Loan Agreement"), to make a
loan (the "Loan") to Borrower Parties. The Loan is evidenced by (i) that certain
Promissory Note A executed by Borrower Parties of even date herewith in the
original principal amount of Twenty-Five Million Six Hundred Thousand and No/100
Dollars ($25,600,000.00) (which note, together with all notes issued in
substitution or exchange therefor and all amendments thereto, is hereinafter
referred to as "Note A") and (ii) that certain Subordinated Promissory Note B
executed by Borrower Parties of even date herewith in the original principal
amount of Six Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00)
(which note, together with all notes issued in substitution or exchange therefor
and all amendments thereto, is hereinafter
<PAGE> 2
referred to as "Note B"; Note A and Note B being collectively referred to as the
"Notes"), providing for monthly payments as set forth in the Notes, with the
balance thereof, due and payable on December 31, 2001 (said date, or any earlier
date on which the entire unpaid principal amount shall be paid or required to be
paid in full, whether by prepayment, acceleration or otherwise is hereinafter
called the "Maturity Date"). The terms and provisions of the Loan Agreement and
Notes are hereby incorporated by reference in this Mortgage.
B. Lender wishes to secure: (i) the payment of the Notes, together
with all interest, the "Exit Fee" (as defined in the Loan Agreement), and other
amounts, if any, due in accordance with the terms of the Notes, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Notes,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Notes, the Loan Agreement, this
Mortgage, the Environmental Indemnity (as defined in the Loan Agreement) and any
other documents evidencing or securing the Loan or executed in connection
therewith (such documents together with any modifications, renewals, extensions
or replacements thereof are collectively referred to as the "Loan Documents");
and (iii) the payment and performance of any and all other debts, claims,
obligations, demands, monies, liabilities and indebtedness of any kind or nature
now or hereafter owing, arising, due or payable to Lender from any or all of
Borrower, Borrower Parties, Guarantor and the Affiliates of Guarantor and each
of the Borrower Parties, including without limitation all indebtedness due and
obligations arising under the Other Finance Documents ("Guarantor," "Affiliates"
and "Other Finance Documents" having the meanings ascribed thereto in the Loan
Agreement). All payment obligations of Borrower Parties, Guarantor and the
Affiliates of Guarantor and each of the Borrower Parties, including without
limitation all indebtedness due under the Loan Documents and the Other Finance
Documents, to Lender, whether now existing or hereafter arising, are hereinafter
sometimes collectively referred to as the "Indebtedness," and all other
obligations of Borrower Parties, Guarantor and the Affiliates of Guarantor and
each of the Borrower Parties under the Loan Documents and the Other Finance
Documents are hereinafter sometimes collectively referred to as the
"Obligations".
NOW, THEREFORE, TO SECURE the repayment of the Indebtedness and the
performance of the Obligations, Borrower has executed this Mortgage and does
hereby mortgage, assign, warrant, transfer, pledge, grant, bargain, sell and
convey to Lender and
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<PAGE> 3
its successors and assigns, and does hereby pledge and grant to Lender a
security interest in, all of Borrower's right, title and interest in and to the
following described property and all proceeds thereof (which property is
hereinafter sometimes collectively referred to as the "Property"):
A. The real estate described on Exhibit A attached hereto (the
"Land");
B. All of the following (collectively, the "Improvements"): all
buildings, improvements and fixtures now or in the future located or to be
constructed on the Land; to the extent not owned by tenants of the Property, all
machinery, appliances, equipment, furniture, fixtures and all other personal
property of every kind or nature located in or on, or attached to, or used or to
be used in connection with the Land, buildings, improvements or fixtures and all
leases of any of the foregoing (subject, however, as to such personal property
which does not constitute building machinery or fixtures (the "Movable Personal
Property"), to purchase money security interests of vendors and lenders and the
lessor's interest in any Movable Personal Property leased by Borrower, which
interests are referred to collectively as the "Senior Movable Personal Property
Interests"); all building materials and goods procured for use or in connection
with the foregoing; and all additions, substitutions and replacements to any of
the foregoing;
C. To the extent assignable, all plans, specifications,
architectural renderings, drawings, soil test reports, other reports of
examination or analysis of the Land or the Improvements;
D. All easements, rights-of-way, water courses, mineral rights,
water rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("Appurtenances");
E. All agreements affecting the use, enjoyment or occupancy of the
Land and/or Improvements, including patient and residential care agreements,
leases, licenses and other occupancy agreements, now or hereafter entered into
(the "Leases") and all rents, prepayments, security deposits, termination
payments, royalties, profits, issues and revenues from the Land and/or
Improvements from time to time accruing under the Leases (the "Rents"),
reserving to Borrower, however, so long as no Event of Default (hereinafter
defined) has occurred hereunder, the right to receive and apply the Rents in
accordance with the terms and conditions of Section 8 of this Mortgage;
-3-
<PAGE> 4
F. All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits (except any deposit that is not pursuant to a Lease but is
held by Borrower as an accommodation to a resident), rights of action, awards of
damages, compensation, settlements and other rights to the payment of money
hereafter made resulting from or relating to (i) the taking of the Land or the
Improvements or any part thereof under the power of eminent domain, (ii) any
damage (whether caused by such taking, by casualty or otherwise) to the Land,
Improvements or Appurtenances or any part thereof, or (iii) the ownership or
operation of the Property;
G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
H. All accounts, contract rights, general intangibles, chattel
paper, documents, instruments, inventory, goods, equipment (subject to the
Senior Movable Personal Property Interests) and all books and records relating
to the foregoing;
I. Any monies on deposit with or for the benefit of Lender,
including deposits for the payment of real estate taxes and any cash collateral
account;
J. All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property of the types described in the preceding granting clauses; and
K. Any and all after-acquired right, title or interest of Borrower
in and to any property of the types described in the preceding granting clauses.
TO HAVE AND TO HOLD the Property and all parts thereof together with
the rents, issues, profits and proceeds thereof, unto Lender to its own proper
use, benefit, and advantage forever, subject, however, to the terms, covenants,
and conditions herein.
Borrower covenants and agrees with Lender as follows:
1. Payment of Indebtedness; Performance of Obligations. Borrower
shall promptly pay or cause to be paid when
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<PAGE> 5
due the Indebtedness and shall promptly perform or cause to be performed all
Obligations.
2. Taxes and Other Obligations. Borrower shall pay, when due, and
before any interest, collection fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and obligations, which may
become a lien on or charge against the Property (collectively, "Charges").
Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges, so long as: (a)
Borrower has given prior written notice to Lender of Borrower's intent to so
contest or object to any such Charges; (b) such contest stays the enforcement or
collection of the Charges or any lien created; and (c) if the amount of the
Charges exceeds $25,000.00, Borrower has obtained an endorsement, in form and
substance satisfactory to Lender, to the loan policy of title insurance issued
to Lender insuring over any such lien, or Borrower has deposited with Lender a
bond or other security reasonably satisfactory to Lender in the amount of 150%
of the amount of such Charges.
Should Borrower fail to make any of such payments, Lender may, at
its option and at the expense of Borrower, pay the amounts due for the account
of Borrower. Upon the request of Lender, Borrower shall immediately furnish to
Lender copies of all notices of amounts due and receipts evidencing payment.
Borrower shall promptly notify Lender of any lien on all or any part of the
Property and shall promptly discharge any unpermitted lien or encumbrance.
3. Reserves for Taxes. At the time of and in addition to the monthly
installments of principal and interest due under the Notes, Borrower shall pay
to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to
be sufficient to pay at least thirty (30) days before they become due and
payable all taxes, assessments and other similar charges levied against the
Property (collectively, the "Taxes"). So long as no Event of Default exists
hereunder, Lender shall apply the sums to pay the Taxes. These sums may be
commingled with the general funds of Lender, and no interest shall be payable
thereon nor shall these sums be deemed to be held in trust for the benefit of
Borrower. If Lender at any time reasonably determines that such amount on
deposit is insufficient to fully pay such Taxes, Borrower shall, within ten (10)
days following notice from Lender, deposit such additional sum as may be
reasonably required by Lender. On the Maturity Date, the moneys then remaining
on deposit with Lender or its agent shall, at Lender's option, be applied
against the Indebtedness or so long as no Event of Default is then continuing,
be refunded to Borrower. The obligation of
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<PAGE> 6
Borrower to pay the Taxes is not affected or modified by the provisions of this
Section 3.
4. Insurance and Condemnation.
(a) Insurance.
(i) Borrower shall keep the Improvements insured, and shall maintain
general liability coverage and such other coverages reasonably requested
by Lender, by carrier(s), in amounts and in form at all times reasonably
satisfactory to Lender, which carrier(s), amounts and form shall not be
changed without the prior written consent of Lender, such consent not to
be unreasonably withheld.
(ii) In case of loss or damage by fire or other casualty, Borrower
shall give immediate written notice thereof to the insurance carrier(s)
and to Lender. Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is
coupled with an interest), at its option, to make or file proofs of loss
or damage and to settle and adjust any claim under insurance policies
which insure against such risks, or to direct Borrower, in writing, to
agree with the insurance carrier(s) on the amount to be paid in regard to
such loss.
(iii) Provided no Event of Default then exists and Borrower
certifies as to same, the net insurance proceeds (after deduction of
Lender's reasonable costs and expenses, if any, in collecting the same)
shall be made available for the restoration or repair of the Property if,
in Lender's reasonable judgment: (a) restoration or repair and the
continued operation of the Property is economically feasible; (b) the
value of Lender's security is not reduced; (c) the casualty loss is not
more than twenty-five percent (25%) of the Loan Allocation amount
attributable to the Property set forth on Exhibit A to the Loan Agreement;
(d) the loss does not occur in the six (6) month period preceding the
stated Maturity Date and Lender's independent consultant certifies that
the restoration of the Property can be completed at least ninety (90) days
prior to the Maturity Date; and (e) Borrower deposits with Lender from
time-to-time an amount, in cash, which Lender, in its sole but reasonable
discretion, determines is necessary, in addition to the net insurance
proceeds to pay in full the cost of the
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<PAGE> 7
restoration or repair (Borrowers' deposit shall be disbursed prior to any
disbursement of insurance proceeds held by Lender). Any excess proceeds
remaining after completion of such repair shall be distributed first to
Borrower to the extent Borrower has deposited funds with Lender for such
repair with the balance applied against the Indebtedness. Notwithstanding
the foregoing, it shall be a condition precedent to any disbursement of
insurance proceeds held by Lender hereunder that Lender shall have
approved in its reasonable discretion (x) all plans and specifications for
any proposed repair or restoration, (y) the construction schedule and (z)
the architect's and general contractor's contract for all restoration that
exceeds $250,000.00 in the aggregate. Lender may establish other
conditions it deems reasonably necessary to assure the work is fully
completed in a good and workmanlike manner free of all liens or claims by
reason thereof, and in compliance with all applicable laws, rules and
regulations. At Lender's option, the net insurance proceeds shall be
disbursed pursuant to a construction escrow acceptable to Lender. If an
Event of Default then exists, or any of the conditions set forth in
clauses (a) through (f) of this Section 4(a)(iii) have not been met or
satisfied, the net insurance proceeds shall be applied to the Indebtedness
in such order and manner as provided in the Note.
(iv) In the event Borrower fails to provide Lender with evidence of
the insurance coverage required by this Mortgage, Lender may purchase
insurance at Borrower's expense (subject to Section 3 above) to protect
Lender's interests in the Property. This insurance may, but need not,
protect Borrower's interests. The coverage purchased by Lender may not pay
any claim made by Borrower or any claim that is made against Borrower in
connection with the Property. Borrower may later cancel any insurance
purchased by Lender, but only after providing Lender with evidence that
Borrower has obtained insurance as required by this Mortgage. If Lender
purchases insurance for the Property, Borrower will (subject to Section 3
above) be responsible for the costs of that insurance, including interest
and other charges imposed by Lender in connection with the placement of
the insurance, until the effective date of the cancellation or expiration
of the insurance. The costs of the insurance may be
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<PAGE> 8
added to the Obligations. The costs of the insurance may be more than the
cost of insurance Borrower is able to obtain on its own.
(b) Condemnation.
(i) Borrower shall within three (3) business days of its receipt of
notice thereof, notify Lender of any action or proceeding relating to any
condemnation or other taking, whether direct or indirect, of the Property,
or part thereof, and Borrower shall, after consultation with and subject
to Lender's approval, appear in and prosecute any such action or
proceeding. Upon Borrower's failure to act in accordance with Lender's
prior approval, Borrower authorizes Lender, at Lender's option, as
attorney-in-fact for Borrower (such appointment as attorney-in-fact is
coupled with an interest), to commence, appear in and prosecute, in
Lender's or Borrower's name, any action or proceeding relating to any
condemnation or other taking of the Property, and to settle or compromise
any claim in connection with such condemnation or other taking. The
proceeds of any award, payment or claim for damages, direct or
consequential, in connection with any condemnation or other taking of the
Property, or part thereof, or for conveyances in lieu of condemnation, are
hereby assigned to and shall be paid to Lender and in accordance with the
provisions of Section 4(b)(ii) below. Lender is authorized (but is under
no obligation) to collect any such proceeds.
(ii) Lender may, in its sole discretion, elect to (y) apply the net
proceeds of any condemnation award (after deduction of Lender's reasonable
costs and expenses, if any, in collecting the same) in reduction of the
Indebtedness in such order and manner as provided in the Note, whether due
or not or (z) make the proceeds available to Borrower for the restoration
or repair of the Property. If the net proceeds of the condemnation award
are made available to Borrower for restoration or repair, the net proceeds
of the condemnation award shall be disbursed upon satisfaction of and in
accordance with the terms and conditions set forth in Section 4(a)(iii)
above. Lender is authorized (but is under no obligation) to collect any
such proceeds.
5. Preservation and Maintenance of Property. Borrower shall: (a) not
commit waste or permit impairment or deterioration of the Property; (b) not
abandon the Property;
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<PAGE> 9
(c) keep the Property in good repair and restore or repair promptly, in a good
and workmanlike manner, all or any part of the Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
upon any damage or loss thereto; (d) comply with all laws, ordinances,
regulations and requirements of any governmental body applicable to the
Property; (e) provide for management of the Property by a property manager
reasonably satisfactory to Lender pursuant to a contract in form and substance
reasonably satisfactory to Lender; and (f) give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security granted by
the Loan Documents or the rights or powers of Lender. Neither Borrower nor any
tenant or other person shall remove, demolish or materially alter any
Improvement on the Land except when incident to the replacement of fixtures,
equipment, machinery and appliances with items of like kind.
6. Protection of Lender's Security. If (a) Borrower fails to pay the
Indebtedness or to perform the Obligations, (b) any action or proceeding is
commenced which materially adversely affects or could materially adversely
affect the Property or Lender's interest therein, including any loss, damage,
cost, expense or liability incurred by Lender with respect to (i) any
environmental matters relating to the Property or (ii) the preparation of the
commencement or defense of any action or proceeding or any threatened action or
proceeding affecting the Loan Documents or the Property, then Lender, at
Lender's option, may make such appearances, disburse such sums and take such
lawful action, taking into account the rights of residents at the Property, as
Lender deems necessary, in its sole discretion, to protect the Property or
Lender's interest therein, including entry upon the Property to take such
actions Lender determines appropriate to preserve, protect or restore the
Property. Any amounts disbursed by Lender pursuant to this Section 6 (including
attorneys' fees, costs and expenses), together with interest thereon at the
"Default Rate" (defined in the Notes) from the date of disbursement, shall
become additional Indebtedness of Borrower secured by the lien of this Mortgage
and the other Loan Documents and shall be due and payable on demand. Nothing
contained in this Section 6 shall require Lender to incur any expense or take
any action hereunder.
7. Actions. Borrower shall warrant title and appear in and defend
any claim or any action or other proceeding purporting to affect title or other
interests relating to any part of the Property, the security of this Mortgage or
the rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower,
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<PAGE> 10
appear in and defend any such claim, action or proceeding and any claim, action
or other proceeding asserted or brought against Lender in connection with or
relating to any part of the Property or this Mortgage.
8. Leases; Assignment of Rents.
Borrower shall not, without Lender's prior written consent (which
consent shall not be unreasonably withheld), execute, modify, amend, surrender
or terminate any non-residential Lease, except as expressly permitted by the
Loan Agreement. All Leases shall be on forms previously approved by Lender.
Borrower shall not be authorized to enter into any ground lease of the Property
without Lender's prior written approval. If Lender's consent to any
non-residential Lease or the renewal of any existing non-residential Lease is
required under the Loan Agreement, at Lender's request, Borrower shall cause the
tenant thereunder to execute a subordination and attornment agreement in form
and substance satisfactory to Lender. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases. Borrower shall furnish
Lender within twenty (20) days following Lender's request, with a rent roll, in
form reasonable acceptable to Lender, and executed copies of all Leases.
Borrower absolutely and unconditionally assigns and transfers to
Lender, all of Borrower's right, title and interest in and to the Rents;
provided, however, so long as there shall not have occurred an Event of Default,
Borrower shall have a license, revocable immediately upon an Event of Default,
to collect all Rents, and shall hold the same, in trust, to be applied first to
the payment of all impositions, levies, taxes, assessments and other charges
upon the Property, second to maintenance of insurance policies upon the Property
required hereby, third to the expenses of Property operations, including
maintenance and repairs required hereby, fourth to the payment of that portion
of the Indebtedness then due and payable, and fifth, the balance, if any, to or
as directed by Borrower. If an Event of Default has occurred and is continuing,
Borrower's right to collect and secure the Rents shall cease and Lender shall
have the sole right, with or without taking possession of the Property to
collect all Rents. Borrower has executed and delivered to Lender an Assignment
of Leases and Rents of even date herewith, and, to the extent the provisions of
this Section 8 are inconsistent with the provisions of said Assignment of Leases
and Rents, the provisions of said Assignment of Leases and Rents shall control.
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<PAGE> 11
9. Statements by Borrower. Borrower shall within ten (10) days after
Lender's request, furnish Lender with a written statement, duly acknowledged,
setting forth the sums, according to Borrower's books and records, secured by
the Loan Documents and any right of set-off, counterclaim or other defense which
exists against such sums and the Obligations.
10. Transfers of the Property. Except for Leases entered into in
compliance with the other provisions of this Mortgage and the Loan Agreement,
Borrower shall not transfer all or any part of the Property, or any interest
therein, unless and until Borrower has fully complied with all of the provisions
of Section 2.2 of the Loan Agreement such that Borrower would be entitled to
cause Lender to release the lien of this Mortgage pursuant to that Section 2.2.
There shall be no transfer, sale, assignment, encumbrance, or disposition of any
of the capital stock of Borrower.
11. No Additional Liens, Encumbrances or Indebtedness. Borrower
covenants not to execute any mortgage, security agreement, assignment of leases
and rents or other agreement granting a lien (except the liens granted to Lender
by the Loan Documents and Senior Movable Personal Property Interests) against or
encumbrance on the Property or take or fail to take any other action which would
result in a lien against the Property or the interest of Borrower in the
Property without the prior written consent of Lender; provided, however,
Borrower may in good faith, by appropriate proceeding, contest the validity or
amount of any asserted lien and, pending such contest, Borrower shall not be
deemed to be in default hereunder if the amount secured by such lien is not more
than $25,000.00, or, if it is more than $25,000.00, then Borrower shall first
obtain an endorsement, in form and substance satisfactory to Lender to the loan
policy of title insurance issued to Lender insuring over such lien, or, if no
such loan policy shall have been issued, then Borrower shall deposit with Lender
a bond or other security satisfactory to Lender in the amount of 150% of the
amount of such lien to assure payment of the same as and when due.
12. Borrower and Lien Not Released. Without affecting the liability
of Borrower or any other person liable for the payment of the Indebtedness, and
without affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and without notice to
any junior lien holder or holder of any right or other interest in and to the
Property: (a) release any person so liable; (b) waive or modify any provision of
this Mortgage or the other Loan Documents or grant other indulgences; (c)
release all or any part of the Property; (d) take additional security for any
obligation
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<PAGE> 12
herein mentioned; (e) subordinate the lien or charge of this Mortgage; (f)
consent to the granting of any easement; or (g) consent to any map or plan of
the Property.
13. Uniform Commercial Code Security Agreement.
(a) This Mortgage shall constitute a security agreement pursuant to
the Uniform Commercial Code (the "UCC") for any portion of the Property which,
under applicable law, may be subject to a security interest pursuant to the UCC
(such portion of the Property is hereinafter called the "Personal Property")
and, subject to the Senior Movable Personal Property Interests, Borrower hereby
grants to Lender a security interest in the Personal Property. Lender shall have
all of the rights and remedies of a secured party under the UCC as well as all
other rights and remedies available at law or in equity.
(b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property. Borrower hereby
authorizes and empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file, on Borrower's behalf, all financing
statements and refilings and continuations thereof as Lender deems necessary or
advisable to create, preserve and protect such lien. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
of any record searches for financing statements as Lender may reasonably
require.
(c) Borrower shall not, without the prior written consent of Lender
(which consent will not be unreasonably withheld), sell, assign, transfer,
encumber, remove or permit to be removed from the Property any of the Personal
Property. So long as no Event of Default exists, Borrower may sell or otherwise
dispose of the Personal Property when obsolete, worn out, inadequate,
unserviceable or unnecessary for use in the operation of the Property, but only
upon replacing the same with other Personal Property at least equal in value and
utility to the disposed Personal Property. Any replacement or substituted
Personal Property shall be, subject to the Senior Movable Personal Property
Interests, subject to the security interest granted herein.
(d) To the extent permitted by law, Borrower and Lender agree that
with respect to all items of Personal Property which are or will become fixtures
on the Land, this Mortgage, upon
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<PAGE> 13
recording or registration in the real estate records of the proper office, shall
constitute a "fixture filing" within the meaning of the UCC.
14. Events of Default; Acceleration of Indebtedness. The occurrence
of any one or more of the following events shall constitute an "Event of
Default" under this Mortgage:
(a) failure of Borrower to pay, within ten (10) days of the due
date, any of the Indebtedness, including any payment due under either or both of
the Notes; or
(b) failure of Borrower to strictly comply with Sections 4(a)(i)
(insurance), 8 (Leases), 10 (prohibition on transfers), and 11 (no additional
liens) of this Mortgage; or
(c) failure of Borrower, within thirty (30) days after written
notice and demand, to satisfy each and every Obligation not set forth in the
subsections above; provided, however, if such Obligation cannot by its nature be
cured within thirty (30) days, and if Borrower commences to cure such failure
promptly after written notice thereof and thereafter diligently pursues the
curing thereof (and then in all events cures such failure within ninety (90)
days after the original notice thereof), Borrower shall not be in default
hereunder during such period of diligent curing; or
(d) the occurrence of an Event of Default under the Loan Agreement.
Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
15. Entry; Foreclosure. Upon the occurrence of an Event of Default,
Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual
possession of the Property, or to the extent permitted by law, Lender or a
receiver appointed by a court of competent jurisdiction, may enter and take
possession of all or any part of the Property, and may exclude Borrower and its
respective agents and employees wholly therefrom, and may have joint access with
Borrower to the books, papers and accounts of Borrower. If Borrower shall for
any reason fail to surrender or deliver the Property or any part thereof after
such demand by
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<PAGE> 14
Lender, Lender or such receiver may obtain a judgment or decree conferring on
Lender or such receiver, the right to immediate possession of the Property or
requiring the delivery of the Property to Lender or such receiver, and Borrower
specifically consents to the entry of such judgment or decree. Upon every such
entering upon or taking of possession, Lender or such receiver may hold, store,
use, operate, manage and control the Property and conduct the business thereof,
and Lender or such receiver may take any action required by applicable law or
which Lender or such receiver believes necessary to enforce compliance with the
environmental provisions contained herein or in the other Loan Documents, and
negotiate with governmental authorities with respect to the Property's
environmental compliance and remedial measures in connection therewith. Lender
and such receiver and their representatives shall have no liability for any
loss, damage, injury, cost or expense resulting from any action or omission
which was taken or omitted in good faith.
When the Indebtedness or any part thereof shall become due, whether
by acceleration or otherwise, Lender may, either with or without entry or taking
possession as herein provided or otherwise, proceed by suit or suits at law or
in equity or by any other appropriate proceeding or remedy to: (a) enforce
payment of the Notes or the performance of any term, covenant, condition or
agreement of Borrower under any of the Loan Documents; (b) foreclose the lien
hereof for the Indebtedness or part thereof and sell the Property as an entirety
or otherwise, as Lender may determine; (c) exercise its rights under Section 13
with respect to all or any portion of the Personal Property in accordance with
the provisions of the UCC; and/or (d) pursue any other right or remedy available
to it under or by the law and decisions of the State in which the Land is
located. Notwithstanding any statute or rule of law to the contrary, the failure
to join any tenant or tenants of the Property as party defendant or defendants
in any foreclosure action or the failure of any such order or judgment to
foreclose their rights shall not be asserted by Borrower as a defense in any
civil action instituted to collect (a) the Indebtedness, or any part thereof or
(b) any deficiency remaining unpaid after foreclosure and sale of the Property.
Upon any foreclosure sale, Lender may bid for and purchase the
Property and shall be entitled to apply all or any part of the Indebtedness as a
credit to the purchase price.
16. Appointment of Receiver or Mortgagee in Possession. If an Event
of Default is continuing or if Lender shall have accelerated the Indebtedness,
Lender, upon application to a court of competent jurisdiction, shall be entitled
as a
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<PAGE> 15
matter of strict right, without notice, and without regard to the occupancy or
value of any security for the Indebtedness or the insolvency of any party bound
for its payment, to the appointment, at its option, of itself as mortgagee in
possession, or of a receiver to take possession of and to operate the Property,
and to collect and apply the Rents.
17. Expenditures and Expenses. In any action to foreclose the lien
hereof or otherwise enforce Lender's rights and remedies hereunder, there shall
be allowed and included as additional Indebtedness all Costs (as defined in the
Loan Agreement) which may be paid or incurred by or on behalf of Lender. All
Costs and such other costs, expenses and fees as may be incurred by Lender in
the protection of the Property and the maintenance of the lien of this Mortgage,
including, attorneys' fees and costs in any litigation or proceeding affecting
this Mortgage, the Notes, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by this Mortgage.
18. Application of Proceeds of Foreclosure Sale. The proceeds of any
foreclosure sale of the Property shall be distributed and applied in the order
of priority set forth in the Notes with the excess, if any, being applied, to
any party entitled thereto as their rights may appear.
19. Future Advances. This Mortgage is given to secure not only the
existing Indebtedness, but also future advances (whether such advances are
obligatory or are made at the option of Lender, or otherwise) made by Lender
under the notes evidencing the Indebtedness (including the Notes), the Other
Financing Documents, or this Mortgage, to the same extent as if such future
advances were made on the date of the execution of this Mortgage. The total
amount of indebtedness that may be so secured may decrease or increase from time
to time, but all Indebtedness secured hereby shall in no event exceed
$64,000,000.00.
20. Waiver of Statute of Limitations. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien created by any of the Loan Documents or to any action brought to enforce
the Notes or any other obligation secured by any of the Loan Documents.
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<PAGE> 16
21. Waiver of Exemption and Redemption. Borrower hereby waives all
rights of exemption pertaining to real or personal property as to any
indebtedness secured by (or that may be secured by) this Mortgage, and Borrower
waives the benefit of any statute regulating the obtaining of a deficiency
judgment or requiring that the value of the Property be set off against any part
of the indebtedness secured by this Mortgage. Borrower hereby waives all rights
of appraisal, sale and redemption allowed under any law or laws of the State of
Arkansas, or the laws of any other state or jurisdiction, and especially
redemption under Act No. 153 of the General Assembly of the State of Arkansas
approved May 8, 1899, and acts amendatory thereto.
22. Governing Law; Severability. This Mortgage shall be governed by
and construed in accordance with the internal laws of the State of Illinois
except that the provisions of the laws of the jurisdiction in which the Land is
located shall be applicable to the creation, perfection and enforcement of the
lien created by this Mortgage. The invalidity, illegality or unenforceability of
any provision of this Mortgage shall not affect or impair the validity, legality
or enforceability of the remainder of this Mortgage, and to this end, the
provisions of this Mortgage are declared to be severable.
23. Notice. Notices shall be given under this Mortgage in conformity
with the terms and conditions of the Loan Agreement and in conformity with
applicable law.
24. Successors and Assigns Bound; Joint and Several Liability;
Agents; Captions. The covenants and agreements contained in the Loan Documents
shall bind, and the rights thereunder shall inure to, the respective successors
and assigns of Lender and Borrower, subject to the provisions of Section 10
hereof. All covenants and agreements of Borrower shall be joint and several. In
exercising any rights under the Loan Documents or taking any actions provided
for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
25. Release. Upon payment of all sums secured by this Mortgage, or
as otherwise provided in Section 2.2 of the Loan Agreement, Lender shall release
this Mortgage in adequate recordable form (including delivering to Borrower
UCC-3 termination statements). Borrower shall pay Lender's reasonable costs
incurred in releasing this Mortgage and any financing statements related hereto.
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<PAGE> 17
26. Loss of Notes. Upon notice from Lender of the loss, theft, or
destruction of the Notes and upon receipt of an affidavit of lost note and an
indemnity reasonably satisfactory to Borrower from Lender, or in the case of
mutilation of the Notes, upon surrender of the mutilated Note, Borrower shall
make and deliver a new note of like tenor in lieu of the then to be superseded
Note.
27. Easements and Rights of Way. Lender agrees to execute such
documents and instruments (in form reasonably satisfactory to Lender) as
Borrower may reasonably request in connection with the granting by Borrower of
easements and rights of way to public or quasi public authorities, utility
companies and others in, over, through and under the Property, including without
limitation affirming to the grantee of such easements and rights of way that
this Mortgage will be subordinate to the grantee's interest therein; provided,
however, no such document, instrument or grant shall decrease (in Lender's
reasonable discretion) the value of the Property.
28. Senior Personal Property Interests. Lender agrees that Borrower,
from time to time, may refinance or otherwise incur indebtedness in connection
with financing (on a purchase money basis, on an operating lease basis or on a
capital lease basis) items of Movable Personal Property which Borrower desires
to acquire (or acquire the use of) for the operation of the Property by the
granting of one or more Senior Personal Property Interests to third parties.
Lender acknowledges that Movable Personal Property in the Property are or may
currently be subject to Senior Personal Property Interests. Lender shall from
time to time at the request of Borrower execute and deliver to the holder(s) of
such Senior Personal Property Interests subordination agreements in form and
substance reasonably acceptable to Lender and such holder(s) of Senior Personal
Property Interests. At Lender's request from time to time, Borrower shall
provide Lender with copies of any lease, and of all documents, instruments and
agreements pertaining to such Senior Personal Property Interests.
29. Consent to Jurisdiction and Service of Process. For purposes of
the foreclosure of this Mortgage, Borrower hereby: (a) irrevocably submits to
the jurisdiction of any court situated in [ ] County, Arkansas, and to the
jurisdiction of the federal district court with jurisdiction in [ ]County,
Arkansas, for the purposes of any action or proceeding arising out of or
relating to this Mortgage or the subject matter hereof and brought by any other
party; (b) waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action or proceeding, any claim that (i)
-17-
<PAGE> 18
Borrower is not personally subject to the jurisdiction of such courts, (ii) the
action or proceeding is brought in an inconvenient forum or (iii) the venue of
the action or proceeding is improper; and (b) agrees that, notwithstanding any
right or privilege Borrower may possess at any time, Borrower and its property
are and shall be generally subject to suit on account of the obligations assumed
by Borrower hereunder. Borrower hereby agrees that service either in person or
by certified or registered U.S. mail in accordance with the provisions of
Section 23 hereof shall constitute valid in personam service upon Borrower and
its successors and assigns in any action or proceeding with respect to any
matter as to which Borrower has submitted to jurisdiction hereunder.
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused
the same to be executed by its duly authorized representatives as of the date
first above written.
BORROWER:
BALANCED CARE REALTY AT MOUNTAIN HOME,
INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its VP-CFO
-18-
<PAGE> 19
ACKNOWLEDGMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this December 29, 1999, before me, duly commissioned, qualified
and acting, within and for the said County and State, appeared in person the
within named Clint T. Fegan, to me personally well known, who stated that he was
the VP-CFO of BALANCED CARE REALTY AT MOUNTAIN HOME, INC., a Delaware
corporation, and that s/he, as such officer, being authorized so to do, executed
the foregoing instrument for the purpose therein contained by signing the name
of the corporation thereto and affixing its seal.
GIVEN under my hand and notarial seal this 29th day of December,
1999.
/s/Kerri A. Dobson
Notary Public
My Commission Expires:
01/24/01
-19-
<PAGE> 1
Exhibit 10.10
Schedule to Form of Mortgage,
Assignment of Rents and Security Agreement
<TABLE>
<CAPTION>
Borrower County
<S> <C>
Balanced Care Realty at Puliski
Maumelle, Inc.
Balanced Care Realty at Baxter
Mountain Home, Inc.
Balanced Care Realty at Puliski
Sherwood, Inc.
</TABLE>
<PAGE> 1
Exhibit 10.11
PREPARED* BY AND RETURN TO:
Gary N. Ruben, Esq.
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
* PREPARED WITH THE
ASSISTANCE OF AN ATTORNEY
LICENSED IN THE STATE OF WEST VIRGINIA
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Loan No. 99-407
THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE AND
DECREASE FROM TIME TO TIME.
A CREDIT LINE DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This CREDIT LINE DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this
"Mortgage") is made as of this 30th day of December, 1999, between BALANCED CARE
REALTY AT MARTINSBURG, INC., a Delaware corporation ("Borrower"), whose address
is 1215 Manor Drive, Mechanicsburg, Pennsylvania 17055, JOHN LUKENS, a resident
of Kanawha County, West Virginia, as trustee ("Trustee"), and HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation ("Lender"), whose address is 2 Wisconsin
Circle, Suite 400, Chevy Chase, Maryland 20815.
THIS MORTGAGE IS A CREDIT LINE DEED OF TRUST FOR THE PURPOSES OF W. VA. CODE
Section 38-1-14, AND SECURES A MAXIMUM AMOUNT NOT TO EXCEED $64,000,000.00, and
this Mortgage is also security for the payment of interest on such principal
sums and for taxes, insurance premiums and other obligations, including interest
thereon, undertaken by Lender or Trustee pursuant to the provisions of this
Mortgage, the other Loan Documents, and the Other Finance Documents. This
Mortgage secures future advances that are intended to be obligatory and that
Lender has agreed to make in accordance with the provisions of the notes
securing the Indebtedness (including the Notes), the Loan Agreement, and the
Other Finance Documents.
<PAGE> 2
RECITALS
A. Lender has agreed, subject to the terms and conditions of that
certain Loan Agreement dated the date hereof, executed by and among Borrower,
certain affiliates of Borrower (Borrower and such affiliates being referred to
collectively as "Borrower Parties") and Lender (the "Loan Agreement"), to make a
loan (the "Loan") to Borrower Parties. The Loan is evidenced by and Lender is
beneficial owner of (i) that certain Promissory Note A executed by Borrower
Parties of even date herewith in the original principal amount of Twenty-Five
Million Six Hundred Thousand and No/100 Dollars ($25,600,000.00) (which note,
together with all notes issued in substitution or exchange therefor and all
amendments thereto, however changed in form, matter, or amount, is hereinafter
referred to as "Note A") and (ii) that certain Subordinated Promissory Note B
executed by Borrower Parties of even date herewith in the original principal
amount of Six Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00)
(which note, together with all notes issued in substitution or exchange therefor
and all amendments thereto, however changed in form, matter, or amount, is
hereinafter referred to as "Note B"; Note A and Note B being collectively
referred to as the "Notes"), providing for monthly payments as set forth in the
Notes, with the balance thereof, due and payable on December 31, 2001 (said
date, or any earlier date on which the entire unpaid principal amount shall be
paid or required to be paid in full, whether by prepayment, acceleration or
otherwise is hereinafter called the "Maturity Date"). The Notes are made payable
to the order of Lender at its principal office at the top of this Mortgage. The
terms and provisions of the Loan Agreement and Notes are hereby incorporated by
reference in this Mortgage.
B. Lender wishes to secure: (i) the payment of the Notes, together with
all interest, the "Exit Fee" (as defined in the Loan Agreement), and other
amounts, if any, due in accordance with the terms of the Notes, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Notes,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Notes, the Loan Agreement, this
Mortgage, the Environmental Indemnity (as defined in the Loan Agreement) and any
other documents evidencing or securing the Loan or executed in connection
therewith (such documents together with any modifications, renewals, extensions
or replacements thereof are collectively referred to as the "Loan Documents");
and (iii) the payment and performance of any and all other debts, claims,
obligations, demands, monies, liabilities and indebtedness of any kind or nature
now or hereafter owing, arising, due or payable to
<PAGE> 3
Lender from any or all of Borrower, Borrower Parties, Guarantor and the
Affiliates of Guarantor and each of the Borrower Parties, including without
limitation all indebtedness due and obligations arising under the Other Finance
Documents ("Guarantor," "Affiliates" and "Other Finance Documents" having the
meanings ascribed thereto in the Loan Agreement). All payment obligations of
Borrower Parties, Guarantor and the Affiliates of Guarantor and each of the
Borrower Parties, including without limitation all indebtedness due under the
Loan Documents and the Other Finance Documents, to Lender, whether now existing
or hereafter arising, are hereinafter sometimes collectively referred to as the
"Indebtedness," and all other obligations of Borrower Parties, Guarantor and the
Affiliates of Guarantor and each of the Borrower Parties under the Loan
Documents and the Other Finance Documents are hereinafter sometimes collectively
referred to as the "Obligations". Copies of the notes evidencing the
Indebtedness, including the Notes, are available for review from Lender at the
address shown in the introductory paragraph of this Mortgage.
NOW, THEREFORE, TO SECURE the repayment of the Indebtedness
and the performance of the Obligations and for and in consideration of the
trusts hereinafter set forth and the sum of $10.00 cash in hand paid, the
receipt and sufficiency of which are hereby acknowledged, Borrower has executed
this Mortgage and does hereby assign, grant, and convey unto Trustee all of
Borrower's right, title and interest in and to the following described property
and all proceeds thereof (which property is hereinafter sometimes collectively
referred to as the "Property"):
A. The real estate described on Exhibit A attached hereto (the "Land");
B. All of the following (collectively, the "Improvements"): all
buildings, improvements and fixtures now or in the future located or to be
constructed on the Land; to the extent not owned by tenants of the Property, all
machinery, appliances, equipment, furniture, fixtures and all other personal
property of every kind or nature located in or on, or attached to, or used or to
be used in connection with the Land, buildings, improvements or fixtures and all
leases of any of the foregoing (subject, however, as to such personal property
which does not constitute building machinery or fixtures (the "Movable Personal
Property"), to purchase money security interests of vendors and lenders and the
lessor's interest in any Movable Personal Property leased by Borrower, which
interests are referred to collectively as the "Senior Movable Personal Property
Interests"); all building materials and goods procured for use or
<PAGE> 4
in connection with the foregoing; and all additions, substitutions and
replacements to any of the foregoing;
C. To the extent assignable, all plans, specifications, architectural
renderings, drawings, soil test reports, other reports of examination or
analysis of the Land or the Improvements;
D. All easements, rights-of-way, water courses, mineral rights, water
rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("Appurtenances");
E. All agreements affecting the use, enjoyment or occupancy of the Land
and/or Improvements, including patient and residential care agreements, leases,
licenses and other occupancy agreements, now or hereafter entered into (the
"Leases") and all rents, prepayments, security deposits, termination payments,
royalties, profits, issues and revenues from the Land and/or Improvements from
time to time accruing under the Leases (the "Rents"), reserving to Borrower,
however, so long as no Event of Default (hereinafter defined) has occurred
hereunder, the right to receive and apply the Rents in accordance with the terms
and conditions of Section 8 of this Mortgage;
F. All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits (except any deposit that is not pursuant to a Lease but is
held by Borrower as an accommodation to a resident), rights of action, awards of
damages, compensation, settlements and other rights to the payment of money
hereafter made resulting from or relating to (i) the taking of the Land or the
Improvements or any part thereof under the power of eminent domain, (ii) any
damage (whether caused by such taking, by casualty or otherwise) to the Land,
Improvements or Appurtenances or any part thereof, or (iii) the ownership or
operation of the Property;
G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
H. All accounts, contract rights, general intangibles, chattel paper,
documents, instruments, inventory, goods, equipment (subject to the Senior
Movable Personal Property Interests) and all books and records relating to the
foregoing;
<PAGE> 5
I. Any monies on deposit with or for the benefit of Lender, including
deposits for the payment of real estate taxes and any cash collateral account;
J. All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property of the types described in the preceding granting clauses; and
K. Any and all after-acquired right, title or interest of Borrower in
and to any property of the types described in the preceding granting clauses.
TO HAVE AND TO HOLD the Property and all parts thereof together with
the rents, issues, profits and proceeds thereof, unto Trustee and its successors
in the trust forever, subject, however, to the terms, covenants, and conditions
herein. Borrower hereby covenants to and with Trustee and Lender that Borrower
will warrant generally the Property, that Borrower has the right to convey the
Property to Trustee, that the Property is free from any and all liens and
encumbrances other than real estate taxes assessed but not yet due and payable
and other exceptions, if any, stated in any policy of title insurance insuring
Lender's interest in the Property, that Trustee shall have quiet possession of
the Property, and that Borrower will execute such further assurances of the
Property as may be requisite, including but not limited to the execution and
delivery of financing statements and such other instruments as Lender may
require to impose the lien hereof more specifically upon any of the Property.
Borrower covenants and agrees with Trustee and Lender as follows:
1. Payment of Indebtedness; Performance of Obligations. Borrower shall
promptly pay or cause to be paid when due the Indebtedness and shall promptly
perform or cause to be performed all Obligations.
2. Taxes and Other Obligations. Borrower shall pay, when due, and
before any interest, collection fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and obligations, which may
become a lien on or charge against the Property (collectively, "Charges").
Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges, so long as: (a)
Borrower has given prior written notice to Lender of Borrower's intent to so
contest or object to any such Charges; (b) such contest stays the enforcement or
collection of the Charges or any lien created; and (c) if the amount of the
Charges exceeds $25,000.00, Borrower has obtained an endorsement, in form
<PAGE> 6
and substance satisfactory to Lender, to the loan policy of title insurance
issued to Lender insuring over any such lien, or Borrower has deposited with
Lender a bond or other security reasonably satisfactory to Lender in the amount
of 150% of the amount of such Charges.
Should Borrower fail to make any of such payments, Lender may,
at its option and at the expense of Borrower, pay the amounts due for the
account of Borrower. Upon the request of Lender, Borrower shall immediately
furnish to Lender copies of all notices of amounts due and receipts evidencing
payment. Borrower shall promptly notify Lender of any lien on all or any part of
the Property and shall promptly discharge any unpermitted lien or encumbrance.
3. Reserves for Taxes. At the time of and in addition to the monthly
installments of principal and interest due under the Notes, Borrower shall pay
to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to
be sufficient to pay at least thirty (30) days before they become due and
payable all taxes, assessments and other similar charges levied against the
Property (collectively, the "Taxes"). So long as no Event of Default exists
hereunder, Lender shall apply the sums to pay the Taxes. These sums may be
commingled with the general funds of Lender, and no interest shall be payable
thereon nor shall these sums be deemed to be held in trust for the benefit of
Borrower. If Lender at any time reasonably determines that such amount on
deposit is insufficient to fully pay such Taxes, Borrower shall, within ten (10)
days following notice from Lender, deposit such additional sum as may be
reasonably required by Lender. On the Maturity Date, the moneys then remaining
on deposit with Lender or its agent shall, at Lender's option, be applied
against the Indebtedness or so long as no Event of Default is then continuing,
be refunded to Borrower. The obligation of Borrower to pay the Taxes is not
affected or modified by the provisions of this Section 3.
4. Insurance and Condemnation.
(a) Insurance.
(i) Borrower shall keep the Improvements insured, and shall maintain
general liability coverage and such other coverages reasonably requested by
Lender, by carrier(s), in amounts and in form at all times reasonably
satisfactory to Lender, which carrier(s), amounts and form shall not be
changed without the prior written consent of Lender, such consent not to be
unreasonably withheld.
<PAGE> 7
(ii) In case of loss or damage by fire or other casualty, Borrower
shall give immediate written notice thereof to the insurance carrier(s) and
to Lender. Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is
coupled with an interest), at its option, to make or file proofs of loss or
damage and to settle and adjust any claim under insurance policies which
insure against such risks, or to direct Borrower, in writing, to agree with
the insurance carrier(s) on the amount to be paid in regard to such loss.
(iii) Provided no Event of Default then exists and Borrower certifies
as to same, the net insurance proceeds (after deduction of Lender's
reasonable costs and expenses, if any, in collecting the same) shall be made
available for the restoration or repair of the Property if, in Lender's
reasonable judgment: (a) restoration or repair and the continued operation
of the Property is economically feasible; (b) the value of Lender's security
is not reduced; (c) the casualty loss is not more than twenty-five percent
(25%) of the Loan Allocation amount attributable to the Property set forth
on Exhibit A to the Loan Agreement; (d) the loss does not occur in the six
(6) month period preceding the stated Maturity Date and Lender's independent
consultant certifies that the restoration of the Property can be completed
at least ninety (90) days prior to the Maturity Date; and (e) Borrower
deposits with Lender from time-to-time an amount, in cash, which Lender, in
its sole but reasonable discretion, determines is necessary, in addition to
the net insurance proceeds to pay in full the cost of the restoration or
repair (Borrowers' deposit shall be disbursed prior to any disbursement of
insurance proceeds held by Lender). Any excess proceeds remaining after
completion of such repair shall be distributed first to Borrower to the
extent Borrower has deposited funds with Lender for such repair with the
balance applied against the Indebtedness. Notwithstanding the foregoing, it
shall be a condition precedent to any disbursement of insurance proceeds
held by Lender hereunder that Lender shall have approved in its reasonable
discretion (x) all plans and specifications for any proposed repair or
restoration, (y) the construction schedule and (z) the architect's and
general contractor's contract for all restoration that exceeds $250,000.00
in the aggregate. Lender may establish other conditions it deems reasonably
necessary to assure the work is fully completed in a
<PAGE> 8
good and workmanlike manner free of all liens or claims by reason thereof,
and in compliance with all applicable laws, rules and regulations. At
Lender's option, the net insurance proceeds shall be disbursed pursuant to a
construction escrow acceptable to Lender. If an Event of Default then
exists, or any of the conditions set forth in clauses (a) through (f) of
this Section 4(a)(iii) have not been met or satisfied, the net insurance
proceeds shall be applied to the Indebtedness in such order and manner as
provided in the Note.
(iv) In the event Borrower fails to provide Lender with evidence of the
insurance coverage required by this Mortgage, Lender may purchase insurance
at Borrower's expense (subject to Section 3 above) to protect Lender's
interests in the Property. This insurance may, but need not, protect
Borrower's interests. The coverage purchased by Lender may not pay any claim
made by Borrower or any claim that is made against Borrower in connection
with the Property. Borrower may later cancel any insurance purchased by
Lender, but only after providing Lender with evidence that Borrower has
obtained insurance as required by this Mortgage. If Lender purchases
insurance for the Property, Borrower will (subject to Section 3 above) be
responsible for the costs of that insurance, including interest and other
charges imposed by Lender in connection with the placement of the insurance,
until the effective date of the cancellation or expiration of the insurance.
The costs of the insurance may be added to the Obligations. The costs of the
insurance may be more than the cost of insurance Borrower is able to obtain
on its own.
(b) Condemnation.
(i) Borrower shall within three (3) business days of its receipt of
notice thereof, notify Lender of any action or proceeding relating to any
condemnation or other taking, whether direct or indirect, of the Property,
or part thereof, and Borrower shall, after consultation with and subject to
Lender's approval, appear in and prosecute any such action or proceeding.
Upon Borrower's failure to act in accordance with Lender's prior approval,
Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower (such appointment as attorney-in-fact is coupled with an interest),
to commence, appear in and prosecute, in Lender's or Borrower's name, any
action or proceeding
<PAGE> 9
relating to any condemnation or other taking of the Property, and to settle
or compromise any claim in connection with such condemnation or other
taking. The proceeds of any award, payment or claim for damages, direct or
consequential, in connection with any condemnation or other taking of the
Property, or part thereof, or for conveyances in lieu of condemnation, are
hereby assigned to and shall be paid to Lender and in accordance with the
provisions of Section 4(b)(ii) below. Lender is authorized (but is under no
obligation) to collect any such proceeds.
(ii) Lender may, in its sole discretion, elect to (y) apply the net
proceeds of any condemnation award (after deduction of Lender's reasonable
costs and expenses, if any, in collecting the same) in reduction of the
Indebtedness in such order and manner as provided in the Note, whether due
or not or (z) make the proceeds available to Borrower for the restoration or
repair of the Property. If the net proceeds of the condemnation award are
made available to Borrower for restoration or repair, the net proceeds of
the condemnation award shall be disbursed upon satisfaction of and in
accordance with the terms and conditions set forth in Section 4(a)(iii)
above. Lender is authorized (but is under no obligation) to collect any such
proceeds.
5. Preservation and Maintenance of Property. Borrower shall: (a) not commit
waste or permit impairment or deterioration of the Property; (b) not abandon the
Property; (c) keep the Property in good repair and restore or repair promptly,
in a good and workmanlike manner, all or any part of the Property to the
equivalent of its original condition, or such other condition as Lender may
approve in writing, upon any damage or loss thereto; (d) comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property; (e) provide for management of the Property by a property manager
reasonably satisfactory to Lender pursuant to a contract in form and substance
reasonably satisfactory to Lender; and (f) give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security granted by
the Loan Documents or the rights or powers of Lender. Neither Borrower nor any
tenant or other person shall remove, demolish or materially alter any
Improvement on the Land except when incident to the replacement of fixtures,
equipment, machinery and appliances with items of like kind.
<PAGE> 10
6. Protection of Lender's Security. If (a) Borrower fails to pay the
Indebtedness or to perform the Obligations, (b) any action or proceeding is
commenced which materially adversely affects or could materially adversely
affect the Property or Lender's interest therein, including any loss, damage,
cost, expense or liability incurred by Lender with respect to (i) any
environmental matters relating to the Property or (ii) the preparation of the
commencement or defense of any action or proceeding or any threatened action or
proceeding affecting the Loan Documents or the Property, then Lender, at
Lender's option, may make such appearances, disburse such sums and take such
lawful action, taking into account the rights of residents at the Property, as
Lender deems necessary, in its sole discretion, to protect the Property or
Lender's interest therein, including entry upon the Property to take such
actions Lender determines appropriate to preserve, protect or restore the
Property. Any amounts disbursed by Lender pursuant to this Section 6 (including
attorneys' fees, costs and expenses), together with interest thereon at the
"Default Rate" (defined in the Notes) from the date of disbursement, shall
become additional Indebtedness of Borrower secured by the lien of this Mortgage
and the other Loan Documents and shall be due and payable on demand. Nothing
contained in this Section 6 shall require Lender to incur any expense or take
any action hereunder.
7. Actions. Borrower shall warrant title and appear in and defend any claim
or any action or other proceeding purporting to affect title or other interests
relating to any part of the Property, the security of this Mortgage or the
rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower, appear in and
defend any such claim, action or proceeding and any claim, action or other
proceeding asserted or brought against Lender in connection with or relating to
any part of the Property or this Mortgage.
8. Leases; Assignment of Rents.
Borrower shall not, without Lender's prior written consent (which consent
shall not be unreasonably withheld), execute, modify, amend, surrender or
terminate any non-residential Lease, except as expressly permitted by the Loan
Agreement. All Leases shall be on forms previously approved by Lender. Borrower
shall not be authorized to enter into any ground lease of the Property without
Lender's prior written approval. If Lender's consent to any non-residential
Lease or the renewal of any existing non-residential Lease is required under the
Loan Agreement, at Lender's request, Borrower shall cause the tenant thereunder
to execute a subordination and attornment agreement in form and substance
satisfactory to
<PAGE> 11
Lender. Borrower shall comply with and observe Borrower's
obligations as landlord under all Leases. Borrower shall furnish Lender within
twenty (20) days following Lender's request, with a rent roll, in form
reasonable acceptable to Lender, and executed copies of all Leases.
Borrower absolutely and unconditionally assigns and transfers
to Lender, all of Borrower's right, title and interest in and to the Rents;
provided, however, so long as there shall not have occurred an Event of Default,
Borrower shall have a license, revocable immediately upon an Event of Default,
to collect all Rents, and shall hold the same, in trust, to be applied first to
the payment of all impositions, levies, taxes, assessments and other charges
upon the Property, second to maintenance of insurance policies upon the Property
required hereby, third to the expenses of Property operations, including
maintenance and repairs required hereby, fourth to the payment of that portion
of the Indebtedness then due and payable, and fifth, the balance, if any, to or
as directed by Borrower. If an Event of Default has occurred and is continuing,
Borrower's right to collect and secure the Rents shall cease and Lender shall
have the sole right, with or without taking possession of the Property to
collect all Rents. Borrower has executed and delivered to Lender an Assignment
of Leases and Rents of even date herewith, and, to the extent the provisions of
this Section 8 are inconsistent with the provisions of said Assignment of Leases
and Rents, the provisions of said Assignment of Leases and Rents shall control.
9. Statements by Borrower. Borrower shall within ten (10) days after
Lender's request, furnish Lender with a written statement, duly acknowledged,
setting forth the sums, according to Borrower's books and records, secured by
the Loan Documents and any right of set-off, counterclaim or other defense which
exists against such sums and the Obligations.
10. Transfers of the Property. Except for Leases entered into in compliance
with the other provisions of this Mortgage and the Loan Agreement, Borrower
shall not transfer all or any part of the Property, or any interest therein,
unless and until Borrower has fully complied with all of the provisions of
Section 2.2 of the Loan Agreement such that Borrower would be entitled to cause
Lender to release the lien of this Mortgage pursuant to that Section 2.2. There
shall be no transfer, sale, assignment, encumbrance, or disposition of any of
the capital stock of Borrower.
11. No Additional Liens, Encumbrances or Indebtedness. Borrower covenants
not to execute any mortgage, security agreement, assignment of leases and rents
or other agreement
<PAGE> 12
granting a lien (except the liens granted to Lender by the Loan Documents and
Senior Movable Personal Property Interests) against or encumbrance on the
Property or take or fail to take any other action which would result in a lien
against the Property or the interest of Borrower in the Property without the
prior written consent of Lender; provided, however, Borrower may in good faith,
by appropriate proceeding, contest the validity or amount of any asserted lien
and, pending such contest, Borrower shall not be deemed to be in default
hereunder if the amount secured by such lien is not more than $25,000.00, or, if
it is more than $25,000.00, then Borrower shall first obtain an endorsement, in
form and substance satisfactory to Lender to the loan policy of title insurance
issued to Lender insuring over such lien, or, if no such loan policy shall have
been issued, then Borrower shall deposit with Lender a bond or other security
satisfactory to Lender in the amount of 150% of the amount of such lien to
assure payment of the same as and when due.
12. Borrower and Lien Not Released. Without affecting the liability of
Borrower or any other person liable for the payment of the Indebtedness, and
without affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and without notice to
any junior lien holder or holder of any right or other interest in and to the
Property: (a) release any person so liable; (b) waive or modify any provision of
this Mortgage or the other Loan Documents or grant other indulgences; (c)
release all or any part of the Property; (d) take additional security for any
obligation herein mentioned; (e) subordinate the lien or charge of this
Mortgage; (f) consent to the granting of any easement; or (g) consent to any map
or plan of the Property.
13. Uniform Commercial Code Security Agreement.
(a) This Mortgage shall constitute a security agreement pursuant to the
Uniform Commercial Code (the "UCC") for any portion of the Property which, under
applicable law, may be subject to a security interest pursuant to the UCC (such
portion of the Property is hereinafter called the "Personal Property") and,
subject to the Senior Movable Personal Property Interests, Borrower hereby
grants to Lender a security interest in the Personal Property. Lender shall have
all of the rights and remedies of a secured party under the UCC as well as all
other rights and remedies available at law or in equity.
(b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property. Borrower hereby
authorizes and
<PAGE> 13
empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file, on Borrower's behalf, all financing
statements and refilings and continuations thereof as Lender deems necessary or
advisable to create, preserve and protect such lien. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
of any record searches for financing statements as Lender may reasonably
require.
(c) Borrower shall not, without the prior written consent of Lender (which
consent will not be unreasonably withheld), sell, assign, transfer, encumber,
remove or permit to be removed from the Property any of the Personal Property.
So long as no Event of Default exists, Borrower may sell or otherwise dispose of
the Personal Property when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the operation of the Property, but only upon replacing
the same with other Personal Property at least equal in value and utility to the
disposed Personal Property. Any replacement or substituted Personal Property
shall be, subject to the Senior Movable Personal Property Interests, subject to
the security interest granted herein.
(d) To the extent permitted by law, Borrower and Lender agree that with
respect to all items of Personal Property which are or will become fixtures on
the Land, this Mortgage, upon recording or registration in the real estate
records of the proper office, shall constitute a "fixture filing" within the
meaning of Section 9-313 of the UCC.
14. Events of Default; Acceleration of Indebtedness. The occurrence of any
one or more of the following events shall constitute an "Event of Default" under
this Mortgage:
(a) failure of Borrower to pay, within ten (10) days of the due date, any of
the Indebtedness, including any payment due under either or both of the Notes;
or
(b) failure of Borrower to strictly comply with Sections 4(a)(i)
(insurance), 8 (Leases), 10 (prohibition on transfers), and 11 (no additional
liens) of this Mortgage; or
(c) failure of Borrower, within thirty (30) days after written notice and
demand, to satisfy each and every Obligation not set forth in the subsections
above; provided, however, if such Obligation cannot by its nature be cured
within thirty (30) days, and if Borrower commences to cure such failure promptly
after written notice thereof and thereafter diligently pursues the curing
thereof (and then in all events cures such failure within ninety (90) days after
the original notice thereof), Borrower
<PAGE> 14
shall not be in default hereunder during such period of diligent curing; or
(d) the occurrence of an Event of Default under the Loan Agreement.
Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
15. Entry; Foreclosure. Upon the occurrence of an Event of Default,
Borrower, upon demand of Lender or Trustee, shall forthwith surrender to Lender
or to Trustee (as Lender chooses) the actual possession of the Property, or to
the extent permitted by law, Lender, Trustee, or a receiver appointed by a court
of competent jurisdiction, may enter and take possession of all or any part of
the Property, and may exclude Borrower and its respective agents and employees
wholly therefrom, and may have joint access with Borrower to the books, papers
and accounts of Borrower. If Borrower shall for any reason fail to surrender or
deliver the Property or any part thereof after such demand by Lender or Trustee,
Lender, Trustee, or such receiver may obtain a judgment or decree conferring on
Lender, Trustee, or such receiver, the right to immediate possession of the
Property or requiring the delivery of the Property to Lender, Trustee, or such
receiver, and Borrower specifically consents to the entry of such judgment or
decree. Upon every such entering upon or taking of possession, Lender, Trustee,
or such receiver may hold, store, use, operate, manage and control the Property
and conduct the business thereof, and Lender, Trustee, or such receiver may take
any action required by applicable law or which Lender, Trustee, or such receiver
believes necessary to enforce compliance with the environmental provisions
contained herein or in the other Loan Documents, and negotiate with governmental
authorities with respect to the Property's environmental compliance and remedial
measures in connection therewith. Lender, Trustee, and such receiver and their
representatives shall have no liability for any loss, damage, injury, cost or
expense resulting from any action or omission which was taken or omitted in good
faith.
When the Indebtedness or any part thereof shall become due,
whether by acceleration or otherwise, Trustee may (upon written request of
Lender) or Lender may, either with or without entry or taking possession as
herein provided or otherwise,
<PAGE> 15
proceed by suit or suits at law or in equity or by any other appropriate
proceeding or remedy to: (a) enforce payment of the Notes or the performance of
any term, covenant, condition or agreement of Borrower under any of the Loan
Documents; (b) foreclose the lien hereof for the Indebtedness or part thereof
and sell the Property as an entirety or otherwise, as Lender may determine; (c)
exercise the rights, remedies, and powers of a secured party under Section 13
with respect to all or any portion of the Personal Property in accordance with
the provisions of the UCC of West Virginia; and/or (d) pursue any other right or
remedy available to it under or by the law and decisions of the State in which
the Land is located. Notwithstanding any statute or rule of law to the contrary,
the failure to join any tenant or tenants of the Property as party defendant or
defendants in any foreclosure action or the failure of any such order or
judgment to foreclose their rights shall not be asserted by Borrower as a
defense in any civil action instituted to collect (a) the Indebtedness, or any
part thereof or (b) any deficiency remaining unpaid after foreclosure and sale
of the Property.
Upon any foreclosure sale, Lender may bid for and purchase the
Property and shall be entitled to apply all or any part of the Indebtedness as a
credit to the purchase price. Any sale may be adjourned from time to time by
oral proclamation by Trustee.
A copy of any notice of foreclosure sale and any other notices
hereunder shall be served on Borrower by certified mail, return receipt
requested at the address in the introductory paragraph of this Mortgage or at
such other address as may be given to Lender in writing by Borrower subsequent
to the execution and delivery of this Mortgage. Any notice of a subordinate
lien, any notice of other liens pursuant to W. Va.
Code Section 38-1-14 will be effective upon receipt by Lender.
16. Appointment of Receiver or Mortgagee in Possession. If an Event of
Default is continuing or if Lender shall have accelerated the Indebtedness,
Lender or Trustee at Lender's written request, upon application to a court of
competent jurisdiction, shall be entitled as a matter of strict right, without
notice, and without regard to the occupancy or value of any security for the
Indebtedness or the insolvency of any party bound for its payment, to the
appointment, at its option, of itself as mortgagee in possession, or of a
receiver to take possession of and to operate the Property, and to collect and
apply the Rents.
17. Expenditures and Expenses. In any action to foreclose the lien hereof or
otherwise enforce Trustee's and
<PAGE> 16
Lender's rights and remedies hereunder, there shall be allowed and included as
additional Indebtedness all Costs (as defined in the Loan Agreement) which may
be paid or incurred by or on behalf of Lender and Trustee. All Costs and such
other costs, expenses and fees as may be incurred by Lender or Trustee in the
protection of the Property and the maintenance of the lien of this Mortgage,
including, attorneys' fees and costs in any litigation or proceeding affecting
this Mortgage, the Notes, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender or Trustee, as applicable, with interest thereon at the
Default Rate, and shall be secured by this Mortgage.
18. Application of Proceeds of Foreclosure Sale. The proceeds of any
foreclosure sale of the Property shall be distributed and applied in the order
of priority set forth in the Notes with the excess, if any, being applied, to
any party entitled thereto as their rights may appear.
19. Future Advances. This Mortgage is a credit line deed of trust and is
given to secure not only the existing Indebtedness, but also future advances
(whether such advances are obligatory or are made at the option of Lender, or
otherwise) made by Lender under the notes evidencing the Indebtedness (including
the Notes), the Other Finance Documents, or this Mortgage, to the same extent as
if such future advances were made on the date of the execution of this Mortgage.
The total amount of indebtedness that may be so secured may decrease or increase
from time to time, but all Indebtedness secured hereby shall in no event exceed
$64,000,000.00.
20. Waiver of Statute of Limitations. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien
created by any of the Loan Documents or to any action brought to enforce the
Notes or any other obligation secured by any of the Loan Documents.
21. Waiver of Homestead and Redemption. Borrower hereby waives all right of
homestead exemption in the Property. Borrower hereby waives all right of
redemption on behalf of Borrower and on behalf of all other persons acquiring
any interest or title in the Property subsequent to the date of this Mortgage,
except decree or judgment creditors of Borrower.
22. Governing Law; Severability. This Mortgage shall be governed by and
construed in accordance with the internal laws of the State of Illinois except
that the provisions of the laws of
<PAGE> 17
the jurisdiction in which the Land is located shall be applicable to the
creation, perfection and enforcement of the lien created by this Mortgage. The
invalidity, illegality or unenforceability of any provision of this Mortgage
shall not affect or impair the validity, legality or enforceability of the
remainder of this Mortgage, and to this end, the provisions of this Mortgage are
declared to be severable.
23. Notice. Notices shall be given under this Mortgage in conformity with
the terms and conditions of the Loan Agreement and in conformity with applicable
law.
24. Successors and Assigns Bound; Joint and Several Liability; Agents;
Captions. The covenants and agreements contained in the Loan Documents shall
bind, and the rights thereunder shall inure to, the respective successors and
assigns of Lender and Borrower, subject to the provisions of Section 10 hereof.
All covenants and agreements of Borrower shall be joint and several. In
exercising any rights under the Loan Documents or taking any actions provided
for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
25. Release. Upon payment of all sums secured by this Mortgage, or as
otherwise provided in Section 2.2 of the Loan Agreement, Lender shall release
this Mortgage in adequate recordable form (including delivering to Borrower
UCC-3 termination statements). Borrower shall pay Lender's reasonable costs
incurred in releasing this Mortgage and any financing statements related hereto.
26. Loss of Notes. Upon notice from Lender of the loss, theft, or
destruction of the Notes and upon receipt of an affidavit of lost note and an
indemnity reasonably satisfactory to Borrower from Lender, or in the case of
mutilation of the Notes, upon surrender of the mutilated Note, Borrower shall
make and deliver a new note of like tenor in lieu of the then to be superseded
Note.
27. Easements and Rights of Way. Lender agrees to execute such documents and
instruments (in form reasonably satisfactory to Lender) as Borrower may
reasonably request in connection with the granting by Borrower of easements and
rights of way to public or quasi public authorities, utility companies and
others in, over, through and under the Property, including without limitation
affirming to the grantee of such easements and rights of way that this Mortgage
will be subordinate to the grantee's interest therein; provided, however, no
such document,
<PAGE> 18
instrument or grant shall decrease (in Lender's reasonable discretion) the value
of the Property.
28. Senior Personal Property Interests. Lender agrees that Borrower, from
time to time, may refinance or otherwise incur indebtedness in connection with
financing (on a purchase money basis, on an operating lease basis or on a
capital lease basis) items of Movable Personal Property which Borrower desires
to acquire (or acquire the use of) for the operation of the Property by the
granting of one or more Senior Personal Property Interests to third parties.
Lender acknowledges that Movable Personal Property in the Property are or may
currently be subject to Senior Personal Property Interests. Lender shall from
time to time at the request of Borrower execute and deliver to the holder(s) of
such Senior Personal Property Interests subordination agreements in form and
substance reasonably acceptable to Lender and such holder(s) of Senior Personal
Property Interests. At Lender's request from time to time, Borrower shall
provide Lender with copies of any lease, and of all documents, instruments and
agreements pertaining to such Senior Personal Property Interests.
29. Consent to Jurisdiction and Service of Process. For purposes of the
foreclosure of this Mortgage, Borrower hereby: (a) irrevocably submits to the
jurisdiction of the Circuit Court of Berkeley County, West Virginia, and to the
jurisdiction of the United States Court for the Northern District of West
Virginia for the purposes of any action or proceeding arising out of or relating
to this Mortgage or the subject matter hereof and brought by any other party;
(b) waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action or proceeding, any claim that (i) Borrower is not
personally subject to the jurisdiction of such courts, (ii) the action or
proceeding is brought in an inconvenient forum or (iii) the venue of the action
or proceeding is improper; and (b) agrees that, notwithstanding any right or
privilege Borrower may possess at any time, Borrower and its property are and
shall be generally subject to suit on account of the obligations assumed by
Borrower hereunder. Borrower hereby agrees that service either in person or by
certified or registered U.S. mail in accordance with the provisions of Section
23 hereof shall constitute valid in personam service upon Borrower and its
successors and assigns in any action or proceeding with respect to any matter as
to which Borrower has submitted to jurisdiction hereunder.
30. Trustee. Trustee may act by agent or attorney, and it is not necessary
for Trustee to be personally present at any foreclosure sale.
<PAGE> 19
31. Substitute Trustee. Lender may from time to time, for any reason or for
no reason, substitute another trustee or trustees, corporations or persons, in
place of Trustee or any trustee herein named. Upon each such appointment, the
substituted trustee or trustees shall be vested with all the rights, titles,
interests, powers, duties and trusts conferred upon the Trustee herein named.
Each appointment and substitution shall be evidenced by an instrument in
writing, executed and acknowledged by Lender, which when recorded in the office
of the Clerk of the County Commission of the County where the Property is
located, shall be conclusive proof of the proper substitution and appointment
and notice to all parties in interest.
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused the
same to be executed by its duly authorized representatives as of the date first
above written.
BORROWER:
BALANCED CARE REALTY AT MARTINSBURG, INC.,
a Delaware corporation
By/s/Clint T. Fegan
Its VP-CFO
<PAGE> 20
ACKNOWLEDGMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Kerri A. Dobson, a Notary Public in and for and residing in said County
and State, DO HEREBY CERTIFY THAT Clint T. Fegan, the VP-CFO of BALANCED CARE
REALTY AT MARTINSBURG, INC., a Delaware corporation, personally known to me to
be the same person whose name is subscribed to the foregoing instrument appeared
before me this day in person and acknowledged that s/he signed and delivered
said instrument as his/her own free and voluntary act and as the free and
voluntary act of said corporation for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 29th day of December, 1999.
/s/Kerri A. Dobson
Notary Public
My Commission Expires:
01/24/01
<PAGE> 1
Exhibit 10.12
THIS DOCUMENT PREPARED BY (WITH
THE ASSISTANCE OF AN ATTORNEY
LICENSED IN THIS STATE) AND AFTER
RECORDING SHOULD BE RETURNED TO:
Gary N. Ruben, Esq.
Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Loan No. 99-407
OPEN-END MORTGAGE,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
IN THE MAXIMUM AMOUNT OF $64,000,000.00
This OPEN-END MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this
"Mortgage") is made as of this 30th day of December, 1999, between BALANCED CARE
REALTY AT MANSFIELD, INC., a Delaware corporation, ("Borrower"), whose address
is 1215 Manor Drive, Mechanicsburg, Pennsylvania 17055 and HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation ("Lender"), whose address is 2 Wisconsin
Circle, Suite 400, Chevy Chase, Maryland 20815.
RECITALS
A. Lender has agreed, subject to the terms and conditions of that
certain Loan Agreement dated the date hereof, executed by and among Borrower,
certain affiliates of Borrower (Borrower and such affiliates being referred to
collectively as "Borrower Parties") and Lender (the "Loan Agreement"), to make a
loan (the "Loan") to Borrower Parties. The Loan is evidenced by (i) that certain
Promissory Note A executed by Borrower Parties of even date herewith in the
original principal amount of Twenty-Five Million Six Hundred Thousand and No/100
Dollars ($25,600,000.00) (which note, together with all notes issued in
substitution or exchange therefor and all amendments thereto, is hereinafter
referred to as "Note A") and (ii) that certain Subordinated Promissory Note B
executed by Borrower Parties of even date herewith in the original principal
amount of Six
<PAGE> 2
Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00) (which note,
together with all notes issued in substitution or exchange therefor and all
amendments thereto, is hereinafter referred to as "Note B"; Note A and Note B
being collectively referred to as the "Notes"), providing for monthly payments
as set forth in the Notes, with the balance thereof, due and payable on December
31, 2001 (said date, or any earlier date on which the entire unpaid principal
amount shall be paid or required to be paid in full, whether by prepayment,
acceleration or otherwise is hereinafter called the "Maturity Date"). The terms
and provisions of the Loan Agreement and Notes are hereby incorporated by
reference in this Mortgage.
B. Lender wishes to secure: (i) the payment of the Notes, together with
all interest, the "Exit Fee" (as defined in the Loan Agreement), and other
amounts, if any, due in accordance with the terms of the Notes, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Notes,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Notes, the Loan Agreement, this
Mortgage, the Environmental Indemnity (as defined in the Loan Agreement) and any
other documents evidencing or securing the Loan or executed in connection
therewith (such documents together with any modifications, renewals, extensions
or replacements thereof are collectively referred to as the "Loan Documents");
and (iii) the payment and performance of any and all other debts, claims,
obligations, demands, monies, liabilities and indebtedness of any kind or nature
now or hereafter owing, arising, due or payable to Lender from any or all of
Borrower, Borrower Parties, Guarantor and the Affiliates of Guarantor and each
of the Borrower Parties, including without limitation all indebtedness due and
obligations arising under the Other Finance Documents ("Guarantor," "Affiliates"
and "Other Finance Documents" having the meanings ascribed thereto in the Loan
Agreement). All payment obligations of Borrower Parties, Guarantor and the
Affiliates of Guarantor and each of the Borrower Parties, including without
limitation all indebtedness due under the Loan Documents and the Other Finance
Documents and all unpaid advances made by Lender with respect to the Property
(defined below) for the payment of taxes, assessments, insurance premiums or
costs incurred for the protection of any part of the Property as provided in
Section 5301.233 of the Ohio Revised Code, to Lender, whether now existing or
hereafter arising, are hereinafter sometimes
- 2 -
<PAGE> 3
collectively referred to as the "Indebtedness," and all other obligations of
Borrower Parties, Guarantor and the Affiliates of Guarantor and each of the
Borrower Parties, under the Loan Documents and the Other Finance Documents are
hereinafter sometimes collectively referred to as the "Obligations".
NOW, THEREFORE, TO SECURE the repayment of the Indebtedness and the
performance of the Obligations, Borrower has executed this Mortgage and does
hereby mortgage, convey, assign, warrant, transfer, pledge and grant to Lender a
security interest in all of Borrower's right, title and interest in and to the
following described property and all proceeds thereof (which property is
hereinafter sometimes collectively referred to as the "Property"):
A. The real estate described on Exhibit A attached hereto (the "Land");
B. All of the following (collectively, the "Improvements"): all
buildings, improvements and fixtures now or in the future located or to be
constructed on the Land; to the extent not owned by tenants of the Property, all
machinery, appliances, equipment, furniture, fixtures and all other personal
property of every kind or nature located in or on, or attached to, or used or to
be used in connection with the Land, buildings, improvements or fixtures and all
leases of any of the foregoing (subject, however, as to such personal property
which does not constitute building machinery or fixtures (the "Movable Personal
Property"), to purchase money security interests of vendors and lenders and the
lessor's interest in any Movable Personal Property leased by Borrower, which
interests are referred to collectively as the "Senior Movable Personal Property
Interests"); all building materials and goods procured for use or in connection
with the foregoing; and all additions, substitutions and replacements to any of
the foregoing;
C. To the extent assignable, all plans, specifications, architectural
renderings, drawings, soil test reports, other reports of examination or
analysis of the Land or the Improvements;
D. All easements, rights-of-way, water courses, mineral rights, water
rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("Appurtenances");
E. All agreements affecting the use, enjoyment or occupancy of the Land
and/or Improvements, including patient and
- 3 -
<PAGE> 4
residential care agreements, leases, licenses and other occupancy agreements,
now or hereafter entered into (the "Leases") and all rents, prepayments,
security deposits, termination payments, royalties, profits, issues and revenues
from the Land and/or Improvements from time to time accruing under the Leases
(the "Rents"), reserving to Borrower, however, so long as no Event of Default
(hereinafter defined) has occurred hereunder, the right to receive and apply the
Rents in accordance with the terms and conditions of Section 8 of this Mortgage;
F. All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits (except any deposit that is not pursuant to a Lease but is
held by Borrower as an accommodation to a resident), rights of action, awards of
damages, compensation, settlements and other rights to the payment of money
hereafter made resulting from or relating to (i) the taking of the Land or the
Improvements or any part thereof under the power of eminent domain, (ii) any
damage (whether caused by such taking, by casualty or otherwise) to the Land,
Improvements or Appurtenances or any part thereof, or (iii) the ownership or
operation of the Property;
G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
H. All accounts, contract rights, general intangibles, chattel paper,
documents, instruments, inventory, goods, equipment (subject to the Senior
Movable Personal Property Interests) and all books and records relating to the
foregoing;
I. Any monies on deposit with or for the benefit of Lender, including
deposits for the payment of real estate taxes and any cash collateral account;
J. All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property of the types described in the preceding granting clauses; and
K. Any and all after-acquired right, title or interest of Borrower in
and to any property of the types described in the preceding granting clauses.
- 4 -
<PAGE> 5
TO HAVE AND TO HOLD the Property and all parts thereof together with
the rents, issues, profits and proceeds thereof, unto Lender to its own proper
use, benefit, and advantage forever, subject, however, to the terms, covenants,
and conditions herein.
Borrower covenants and agrees with Lender as follows:
1. Payment of Indebtedness; Performance of Obligations. Borrower shall
promptly pay or cause to be paid when due the Indebtedness and shall promptly
perform or cause to be performed all Obligations.
2. Taxes and Other Obligations. Borrower shall pay, when due, and
before any interest, collection fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and obligations, which may
become a lien on or charge against the Property (collectively, "Charges").
Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges, so long as: (a)
Borrower has given prior written notice to Lender of Borrower's intent to so
contest or object to any such Charges; (b) such contest stays the enforcement or
collection of the Charges or any lien created; and (c) if the amount of the
Charges exceeds $25,000.00, Borrower has obtained an endorsement, in form and
substance satisfactory to Lender, to the loan policy of title insurance issued
to Lender insuring over any such lien, or Borrower has deposited with Lender a
bond or other security reasonably satisfactory to Lender in the amount of 150%
of the amount of such Charges.
Should Borrower fail to make any of such payments, Lender may, at its
option and at the expense of Borrower, pay the amounts due for the account of
Borrower. Upon the request of Lender, Borrower shall immediately furnish to
Lender copies of all notices of amounts due and receipts evidencing payment.
Borrower shall promptly notify Lender of any lien on all or any part of the
Property and shall promptly discharge any unpermitted lien or encumbrance.
3. Reserves for Taxes. At the time of and in addition to the monthly
installments of principal and interest due under the Notes, Borrower shall pay
to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to
be sufficient to pay at least thirty (30) days before they become due and
payable all taxes, assessments and other similar charges levied against the
Property (collectively, the "Taxes"). So long as no Event of Default exists
hereunder, Lender shall apply the sums to
- 5 -
<PAGE> 6
pay the Taxes. These sums may be commingled with the general funds of Lender,
and no interest shall be payable thereon nor shall these sums be deemed to be
held in trust for the benefit of Borrower. If Lender at any time reasonably
determines that such amount on deposit is insufficient to fully pay such Taxes,
Borrower shall, within ten (10) days following notice from Lender, deposit such
additional sum as may be reasonably required by Lender. On the Maturity Date,
the moneys then remaining on deposit with Lender or its agent shall, at Lender's
option, be applied against the Indebtedness or so long as no Event of Default is
then continuing, be refunded to Borrower. The obligation of Borrower to pay the
Taxes is not affected or modified by the provisions of this Section 3.
4. Insurance and Condemnation.
(a) Insurance.
(i) Borrower shall keep the Improvements insured, and shall maintain
general liability coverage and such other coverages reasonably requested by
Lender, by carrier(s), in amounts and in form at all times reasonably
satisfactory to Lender, which carrier(s), amounts and form shall not be
changed without the prior written consent of Lender, such consent not to be
unreasonably withheld.
(ii) In case of loss or damage by fire or other casualty, Borrower
shall give immediate written notice thereof to the insurance carrier(s) and
to Lender. Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is
coupled with an interest), at its option, to make or file proofs of loss or
damage and to settle and adjust any claim under insurance policies which
insure against such risks, or to direct Borrower, in writing, to agree with
the insurance carrier(s) on the amount to be paid in regard to such loss.
(iii) Provided no Event of Default then exists and Borrower certifies
as to same, the net insurance proceeds (after deduction of Lender's
reasonable costs and expenses, if any, in collecting the same) shall be
made available for the restoration or repair of the Property if, in
Lender's reasonable judgment: (a) restoration or repair and the continued
operation of the Property is economically feasible; (b) the value of
Lender's security is not reduced; (c) the casualty
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<PAGE> 7
loss is not more than twenty-five percent (25%) of the Loan Allocation
amount attributable to the Property set forth on Exhibit A to the Loan
Agreement; (d) the loss does not occur in the six (6) month period
preceding the stated Maturity Date and Lender's independent consultant
certifies that the restoration of the Property can be completed at least
ninety (90) days prior to the Maturity Date; and (e) Borrower deposits with
Lender from time-to-time an amount, in cash, which Lender, in its sole but
reasonable discretion, determines is necessary, in addition to the net
insurance proceeds to pay in full the cost of the restoration or repair
(Borrowers' deposit shall be disbursed prior to any disbursement of
insurance proceeds held by Lender). Any excess proceeds remaining after
completion of such repair shall be distributed first to Borrower to the
extent Borrower has deposited funds with Lender for such repair with the
balance applied against the Indebtedness. Notwithstanding the foregoing, it
shall be a condition precedent to any disbursement of insurance proceeds
held by Lender hereunder that Lender shall have approved in its reasonable
discretion (x) all plans and specifications for any proposed repair or
restoration, (y) the construction schedule and (z) the architect's and
general contractor's contract for all restoration that exceeds $250,000.00
in the aggregate. Lender may establish other conditions it deems reasonably
necessary to assure the work is fully completed in a good and workmanlike
manner free of all liens or claims by reason thereof, and in compliance
with all applicable laws, rules and regulations. At Lender's option, the
net insurance proceeds shall be disbursed pursuant to a construction escrow
acceptable to Lender. If an Event of Default then exists, or any of the
conditions set forth in clauses (a) through (f) of this Section 4(a)(iii)
have not been met or satisfied, the net insurance proceeds shall be applied
to the Indebtedness in such order and manner as provided in the Note.
(iv) In the event Borrower fails to provide Lender with evidence of the
insurance coverage required by this Mortgage, Lender may purchase insurance
at Borrower's expense (subject to Section 3 above) to protect Lender's
interests in the Property. This insurance may, but need not, protect
Borrower's interests. The coverage purchased by Lender may not
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<PAGE> 8
pay any claim made by Borrower or any claim that is made against Borrower
in connection with the Property. Borrower may later cancel any insurance
purchased by Lender, but only after providing Lender with evidence that
Borrower has obtained insurance as required by this Mortgage. If Lender
purchases insurance for the Property, Borrower will (subject to Section 3
above) be responsible for the costs of that insurance, including interest
and other charges imposed by Lender in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of
the insurance. The costs of the insurance may be added to the Obligations.
The costs of the insurance may be more than the cost of insurance Borrower
is able to obtain on its own.
(b) Condemnation.
(i) Borrower shall within three (3) business days of its receipt of
notice thereof, notify Lender of any action or proceeding relating to any
condemnation or other taking, whether direct or indirect, of the Property,
or part thereof, and Borrower shall, after consultation with and subject to
Lender's approval, appear in and prosecute any such action or proceeding.
Upon Borrower's failure to act in accordance with Lender's prior approval,
Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower (such appointment as attorney-in-fact is coupled with an
interest), to commence, appear in and prosecute, in Lender's or Borrower's
name, any action or proceeding relating to any condemnation or other taking
of the Property, and to settle or compromise any claim in connection with
such condemnation or other taking. The proceeds of any award, payment or
claim for damages, direct or consequential, in connection with any
condemnation or other taking of the Property, or part thereof, or for
conveyances in lieu of condemnation, are hereby assigned to and shall be
paid to Lender and in accordance with the provisions of Section 4(b)(ii)
below. Lender is authorized (but is under no obligation) to collect any
such proceeds.
(ii) Lender may, in its sole discretion, elect to (y) apply the net
proceeds of any condemnation award (after deduction of Lender's reasonable
costs and expenses, if any, in collecting the same) in reduction of the
Indebtedness in such order and manner as
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provided in the Note, whether due or not or (z) make the proceeds available
to Borrower for the restoration or repair of the Property. If the net
proceeds of the condemnation award are made available to Borrower for
restoration or repair, the net proceeds of the condemnation award shall be
disbursed upon satisfaction of and in accordance with the terms and
conditions set forth in Section 4(a)(iii) above. Lender is authorized (but
is under no obligation) to collect any such proceeds.
5. Preservation and Maintenance of Property. Borrower shall: (a) not
commit waste or permit impairment or deterioration of the Property; (b) not
abandon the Property; (c) keep the Property in good repair and restore or repair
promptly, in a good and workmanlike manner, all or any part of the Property to
the equivalent of its original condition, or such other condition as Lender may
approve in writing, upon any damage or loss thereto; (d) comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property; (e) provide for management of the Property by a property manager
reasonably satisfactory to Lender pursuant to a contract in form and substance
reasonably satisfactory to Lender; and (f) give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security granted by
the Loan Documents or the rights or powers of Lender. Neither Borrower nor any
tenant or other person shall remove, demolish or materially alter any
Improvement on the Land except when incident to the replacement of fixtures,
equipment, machinery and appliances with items of like kind.
6. Protection of Lender's Security. If (a) Borrower fails to pay the
Indebtedness or to perform the Obligations, (b) any action or proceeding is
commenced which materially adversely affects or could materially adversely
affect the Property or Lender's interest therein, including any loss, damage,
cost, expense or liability incurred by Lender with respect to (i) any
environmental matters relating to the Property or (ii) the preparation of the
commencement or defense of any action or proceeding or any threatened action or
proceeding affecting the Loan Documents or the Property, then Lender, at
Lender's option, may make such appearances, disburse such sums and take such
lawful action, taking into account the rights of residents at the Property, as
Lender deems necessary, in its sole discretion, to protect the Property or
Lender's interest therein, including entry upon the Property to take such
actions Lender determines appropriate to preserve, protect or restore the
Property. Any
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<PAGE> 10
amounts disbursed by Lender pursuant to this Section 6 (including attorneys'
fees, costs and expenses), together with interest thereon at the "Default Rate"
(defined in the Notes) from the date of disbursement, shall become additional
Indebtedness of Borrower secured by the lien of this Mortgage and the other Loan
Documents and shall be due and payable on demand. Nothing contained in this
Section 6 shall require Lender to incur any expense or take any action
hereunder.
7. Actions. Borrower shall warrant title and appear in and defend any
claim or any action or other proceeding purporting to affect title or other
interests relating to any part of the Property, the security of this Mortgage or
the rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower, appear in and
defend any such claim, action or proceeding and any claim, action or other
proceeding asserted or brought against Lender in connection with or relating to
any part of the Property or this Mortgage.
8. Leases; Assignment of Rents.
Borrower shall not, without Lender's prior written consent (which
consent shall not be unreasonably withheld), execute, modify, amend, surrender
or terminate any non-residential Lease, except as expressly permitted by the
Loan Agreement. All Leases shall be on forms previously approved by Lender.
Borrower shall not be authorized to enter into any ground lease of the Property
without Lender's prior written approval. If Lender's consent to any
non-residential Lease or the renewal of any existing non-residential Lease is
required under the Loan Agreement, at Lender's request, Borrower shall cause the
tenant thereunder to execute a subordination and attornment agreement in form
and substance satisfactory to Lender. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases. Borrower shall furnish
Lender within twenty (20) days following Lender's request, with a rent roll, in
form reasonable acceptable to Lender, and executed copies of all Leases.
Borrower absolutely and unconditionally assigns and transfers to
Lender, all of Borrower's right, title and interest in and to the Rents;
provided, however, so long as there shall not have occurred an Event of Default,
Borrower shall have a license, revocable immediately upon an Event of Default,
to collect all Rents, and shall hold the same, in trust, to be applied first to
the payment of all impositions, levies, taxes, assessments and other charges
upon the Property, second to
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<PAGE> 11
maintenance of insurance policies upon the Property required hereby, third to
the expenses of Property operations, including maintenance and repairs required
hereby, fourth to the payment of that portion of the Indebtedness then due and
payable, and fifth, the balance, if any, to or as directed by Borrower. If an
Event of Default has occurred and is continuing, Borrower's right to collect and
secure the Rents shall cease and Lender shall have the sole right, with or
without taking possession of the Property to collect all Rents. Borrower has
executed and delivered to Lender an Assignment of Leases and Rents of even date
herewith, and, to the extent the provisions of this Section 8 are inconsistent
with the provisions of said Assignment of Leases and Rents, the provisions of
said Assignment of Leases and Rents shall control.
9. Statements by Borrower. Borrower shall within ten (10) days after
Lender's request, furnish Lender with a written statement, duly acknowledged,
setting forth the sums, according to Borrower's books and records, secured by
the Loan Documents and any right of set-off, counterclaim or other defense which
exists against such sums and the Obligations.
10. Transfers of the Property. Except for Leases entered into in
compliance with the other provisions of this Mortgage and the Loan Agreement,
Borrower shall not transfer all or any part of the Property, or any interest
therein, unless and until Borrower has fully complied with all of the provisions
of Section 2.2 of the Loan Agreement such that Borrower would be entitled to
cause Lender to release the lien of this Mortgage pursuant to that Section 2.2.
There shall be no transfer, sale, assignment, encumbrance, or disposition of any
of the capital stock of Borrower.
11. No Additional Liens, Encumbrances or Indebtedness. Borrower
covenants not to execute any mortgage, security agreement, assignment of leases
and rents or other agreement granting a lien (except the liens granted to Lender
by the Loan Documents and Senior Movable Personal Property Interests) against or
encumbrance on the Property or take or fail to take any other action which would
result in a lien against the Property or the interest of Borrower in the
Property without the prior written consent of Lender; provided, however,
Borrower may in good faith, by appropriate proceeding, contest the validity or
amount of any asserted lien and, pending such contest, Borrower shall not be
deemed to be in default hereunder if the amount secured by such lien is not more
than $25,000.00, or, if it is more than $25,000.00, then Borrower shall first
obtain an endorsement, in form and substance satisfactory to Lender to the loan
policy of
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<PAGE> 12
title insurance issued to Lender insuring over such lien, or, if no such loan
policy shall have been issued, then Borrower shall deposit with Lender a bond or
other security satisfactory to Lender in the amount of 150% of the amount of
such lien to assure payment of the same as and when due. Lender is authorized to
do all matters permitted and sanctioned by Ohio Revised Code Section 1311.14 as
now existing or hereafter amended.
12. Borrower and Lien Not Released. Without affecting the liability of
Borrower or any other person liable for the payment of the Indebtedness, and
without affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and without notice to
any junior lien holder or holder of any right or other interest in and to the
Property: (a) release any person so liable; (b) waive or modify any provision of
this Mortgage or the other Loan Documents or grant other indulgences; (c)
release all or any part of the Property; (d) take additional security for any
obligation herein mentioned; (e) subordinate the lien or charge of this
Mortgage; (f) consent to the granting of any easement; or (g) consent to any map
or plan of the Property.
13. Uniform Commercial Code Security Agreement.
(a) This Mortgage shall constitute a security agreement pursuant to the
Uniform Commercial Code (the "UCC") for any portion of the Property which, under
applicable law, may be subject to a security interest pursuant to the UCC (such
portion of the Property is hereinafter called the "Personal Property") and,
subject to the Senior Movable Personal Property Interests, Borrower hereby
grants to Lender a security interest in the Personal Property. Lender shall have
all of the rights and remedies of a secured party under the UCC as well as all
other rights and remedies available at law or in equity.
(b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property. Borrower hereby
authorizes and empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file, on Borrower's behalf, all financing
statements and refilings and continuations thereof as Lender deems necessary or
advisable to create, preserve and protect such lien. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
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<PAGE> 13
of any record searches for financing statements as Lender may reasonably
require.
(c) Borrower shall not, without the prior written consent of Lender
(which consent will not be unreasonably withheld), sell, assign, transfer,
encumber, remove or permit to be removed from the Property any of the Personal
Property. So long as no Event of Default exists, Borrower may sell or otherwise
dispose of the Personal Property when obsolete, worn out, inadequate,
unserviceable or unnecessary for use in the operation of the Property, but only
upon replacing the same with other Personal Property at least equal in value and
utility to the disposed Personal Property. Any replacement or substituted
Personal Property shall be, subject to the Senior Movable Personal Property
Interests, subject to the security interest granted herein.
(d) To the extent permitted by law, Borrower and Lender agree that with
respect to all items of Personal Property which are or will become fixtures on
the Land, this Mortgage, upon recording or registration in the real estate
records of the proper office, shall constitute a "fixture filing" within the
meaning of the UCC.
14. Events of Default; Acceleration of Indebtedness. The occurrence of
any one or more of the following events shall constitute an "Event of Default"
under this Mortgage:
(a) failure of Borrower to pay, within ten (10) days of the due date,
any of the Indebtedness, including any payment due under either or both of the
Notes; or
(b) failure of Borrower to strictly comply with Sections 4(a)(i)
(insurance), 8 (Leases), 10 (prohibition on transfers), and 11 (no additional
liens) of this Mortgage; or
(c) failure of Borrower, within thirty (30) days after written notice
and demand, to satisfy each and every Obligation not set forth in the
subsections above; provided, however, if such Obligation cannot by its nature be
cured within thirty (30) days, and if Borrower commences to cure such failure
promptly after written notice thereof and thereafter diligently pursues the
curing thereof (and then in all events cures such failure within ninety (90)
days after the original notice thereof), Borrower shall not be in default
hereunder during such period of diligent curing; or
(d) the occurrence of an Event of Default under the Loan Agreement.
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<PAGE> 14
Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
15. Entry; Foreclosure. Upon the occurrence of an Event of Default,
Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual
possession of the Property, or to the extent permitted by law, Lender or a
receiver appointed by a court of competent jurisdiction, may enter and take
possession of all or any part of the Property, and may exclude Borrower and its
respective agents and employees wholly therefrom, and may have joint access with
Borrower to the books, papers and accounts of Borrower. If Borrower shall for
any reason fail to surrender or deliver the Property or any part thereof after
such demand by Lender, Lender or such receiver may obtain a judgment or decree
conferring on Lender or such receiver, the right to immediate possession of the
Property or requiring the delivery of the Property to Lender or such receiver,
and Borrower specifically consents to the entry of such judgment or decree. Upon
every such entering upon or taking of possession, Lender or such receiver may
hold, store, use, operate, manage and control the Property and conduct the
business thereof, and Lender or such receiver may take any action required by
applicable law or which Lender or such receiver believes necessary to enforce
compliance with the environmental provisions contained herein or in the other
Loan Documents, and negotiate with governmental authorities with respect to the
Property's environmental compliance and remedial measures in connection
therewith. Lender and such receiver and their representatives shall have no
liability for any loss, damage, injury, cost or expense resulting from any
action or omission which was taken or omitted in good faith.
When the Indebtedness or any part thereof shall become due, whether by
acceleration or otherwise, Lender may, either with or without entry or taking
possession as herein provided or otherwise, proceed by suit or suits at law or
in equity or by any other appropriate proceeding or remedy to: (a) enforce
payment of the Notes or the performance of any term, covenant, condition or
agreement of Borrower under any of the Loan Documents; (b) foreclose the lien
hereof for the Indebtedness or part thereof and sell the Property as an entirety
or otherwise, as Lender may determine; (c) exercise its rights under Section 13
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<PAGE> 15
with respect to all or any portion of the Personal Property in accordance with
the provisions of the UCC; and/or (d) pursue any other right or remedy available
to it under or by the law and decisions of the State in which the Land is
located. Notwithstanding any statute or rule of law to the contrary, the failure
to join any tenant or tenants of the Property as party defendant or defendants
in any foreclosure action or the failure of any such order or judgment to
foreclose their rights shall not be asserted by Borrower as a defense in any
civil action instituted to collect (a) the Indebtedness, or any part thereof or
(b) any deficiency remaining unpaid after foreclosure and sale of the Property.
Upon any foreclosure sale, Lender may bid for and purchase the Property
and shall be entitled to apply all or any part of the Indebtedness as a credit
to the purchase price.
16. Appointment of Receiver or Mortgagee in Possession. If an Event of
Default is continuing or if Lender shall have accelerated the Indebtedness,
Lender, upon application to a court of competent jurisdiction, shall be entitled
as a matter of strict right, without notice, and without regard to the occupancy
or value of any security for the Indebtedness or the insolvency of any party
bound for its payment, to the appointment, at its option, of itself as mortgagee
in possession, or of a receiver to take possession of and to operate the
Property, and to collect and apply the Rents.
17. Expenditures and Expenses. In any action to foreclose the lien
hereof or otherwise enforce Lender's rights and remedies hereunder, there shall
be allowed and included as additional Indebtedness all Costs (as defined in the
Loan Agreement) which may be paid or incurred by or on behalf of Lender. All
Costs and such other costs, expenses and fees as may be incurred by Lender in
the protection of the Property and the maintenance of the lien of this Mortgage,
including, attorneys' fees and costs in any litigation or proceeding affecting
this Mortgage, the Notes, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by this Mortgage.
18. Application of Proceeds of Foreclosure Sale. The proceeds of any
foreclosure sale of the Property shall be
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<PAGE> 16
distributed and applied in the order of priority set forth in the Notes with the
excess, if any, being applied, to any party entitled thereto as their rights may
appear.
19. Open-end Mortgage; Future Advances. In addition to any other
obligations and indebtedness secured hereby, including, without limitation,
obligations and indebtedness evidenced by the notes (including the Notes) and
outstanding as of the date hereof, this Mortgage shall secure unpaid balances of
loan advances that Lender may make after this Mortgage is delivered to the
Richland County, Ohio, Recorder for record. The maximum amount of the unpaid
principal balance of said loan advances that may be outstanding at any time, in
the aggregate and exclusive of interest accrued thereon and any other amounts
disbursed hereunder, under the notes (including the Notes), under the Other
Finance Documents, or otherwise, is $64,000,000.00. Borrower further covenants
and agrees to repay all such loan advances with interest, and that the covenants
contained in this Mortgage shall apply to such loan advances as well.
20. Waiver of Statute of Limitations. Borrower hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien
created by any of the Loan Documents or to any action brought to enforce the
Notes or any other obligation secured by any of the Loan Documents.
21. Waiver of Homestead and Redemption. Borrower hereby waives all
right of homestead exemption in the Property. Borrower hereby waives all right
of redemption on behalf of Borrower and on behalf of all other persons acquiring
any interest or title in the Property subsequent to the date of this Mortgage,
except decree or judgment creditors of Borrower.
22. Governing Law; Severability. This Mortgage shall be governed by and
construed in accordance with the internal laws of the State of Illinois except
that the provisions of the laws of the jurisdiction in which the Land is located
shall be applicable to the creation, perfection and enforcement of the lien
created by this Mortgage. The invalidity, illegality or unenforceability of any
provision of this Mortgage shall not affect or impair the validity, legality or
enforceability of the remainder of this Mortgage, and to this end, the
provisions of this Mortgage are declared to be severable.
23. Notice. Notices shall be given under this Mortgage in conformity
with the terms and conditions of the Loan Agreement and in conformity with
applicable law.
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<PAGE> 17
24. Successors and Assigns Bound; Joint and Several Liability; Agents;
Captions. The covenants and agreements contained in the Loan Documents shall
bind, and the rights thereunder shall inure to, the respective successors and
assigns of Lender and Borrower, subject to the provisions of Section 10 hereof.
All covenants and agreements of Borrower shall be joint and several. In
exercising any rights under the Loan Documents or taking any actions provided
for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
25. Release. Upon payment of all sums secured by this Mortgage, or as
otherwise provided in Section 2.2 of the Loan Agreement, Lender shall release
this Mortgage in adequate recordable form (including delivering to Borrower
UCC-3 termination statements). Borrower shall pay Lender's reasonable costs
incurred in releasing this Mortgage and any financing statements related hereto.
26. Loss of Notes. Upon notice from Lender of the loss, theft, or
destruction of the Notes and upon receipt of an affidavit of lost note and an
indemnity reasonably satisfactory to Borrower from Lender, or in the case of
mutilation of the Notes, upon surrender of the mutilated Note, Borrower shall
make and deliver a new note of like tenor in lieu of the then to be superseded
Note.
27. Easements and Rights of Way. Lender agrees to execute such
documents and instruments (in form reasonably satisfactory to Lender) as
Borrower may reasonably request in connection with the granting by Borrower of
easements and rights of way to public or quasi public authorities, utility
companies and others in, over, through and under the Property, including without
limitation affirming to the grantee of such easements and rights of way that
this Mortgage will be subordinate to the grantee's interest therein; provided,
however, no such document, instrument or grant shall decrease (in Lender's
reasonable discretion) the value of the Property.
28. Senior Personal Property Interests. Lender agrees that Borrower,
from time to time, may refinance or otherwise incur indebtedness in connection
with financing (on a purchase money basis, on an operating lease basis or on a
capital lease basis) items of Movable Personal Property which Borrower desires
to acquire (or acquire the use of) for the operation of the Property by the
granting of one or more Senior Personal Property
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<PAGE> 18
Interests to third parties. Lender acknowledges that Movable Personal Property
in the Property are or may currently be subject to Senior Personal Property
Interests. Lender shall from time to time at the request of Borrower execute and
deliver to the holder(s) of such Senior Personal Property Interests
subordination agreements in form and substance reasonably acceptable to Lender
and such holder(s) of Senior Personal Property Interests. At Lender's request
from time to time, Borrower shall provide Lender with copies of any lease, and
of all documents, instruments and agreements pertaining to such Senior Personal
Property Interests.
29. Consent to Jurisdiction and Service of Process. For purposes of the
foreclosure of this Mortgage, Borrower hereby: (a) irrevocably submits to the
jurisdiction of any court situated in Richland County, Ohio, and to the
jurisdiction of the federal district court with jurisdiction in Richland County,
Ohio, for the purposes of any action or proceeding arising out of or relating to
this Mortgage or the subject matter hereof and brought by any other party; (b)
waives and agrees not to assert, by way of motion, as a defense or otherwise, in
any such action or proceeding, any claim that (i) Borrower is not personally
subject to the jurisdiction of such courts, (ii) the action or proceeding is
brought in an inconvenient forum or (iii) the venue of the action or proceeding
is improper; and (b) agrees that, notwithstanding any right or privilege
Borrower may possess at any time, Borrower and its property are and shall be
generally subject to suit on account of the obligations assumed by Borrower
hereunder. Borrower hereby agrees that service either in person or by certified
or registered U.S. mail in accordance with the provisions of Section 23 hereof
shall constitute valid in personal service upon Borrower and its successors and
assigns in any action or proceeding with respect to any matter as to which
Borrower has submitted to jurisdiction hereunder.
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<PAGE> 19
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused
the same to be executed by its duly authorized representatives as of the date
first above written.
BORROWER:
Signed and acknowledged BALANCED CARE REALTY AT
in the presence of: MANSFIELD, INC.,
a Delaware corporation
WITNESS:
/s/Patricia Caraballo
Printed Name:Patricia Caraballo
By/s/Clint T. Fegan
Printed Name Clint T. Fegan
Its VP-CFO
WITNESS:
/s/Kelly S. Caner
Printed Name:Kelly S. Caner
- 19 -
<PAGE> 20
ACKNOWLEDGMENT
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Kerri A. Dobson, a Notary Public in and for and residing in said
County and State, DO HEREBY CERTIFY THAT Clint T. Fegan, the VP-CFO of BALANCED
CARE REALTY AT MANSFIELD, INC., a Delaware corporation, personally known to me
to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free and voluntary act and as the free and
voluntary act of said corporation for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 29th day of December, 1999.
/s/Kerri A. Dobson
Notary Public
My Commission Expires:
01/24/01
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<PAGE> 1
Exhibit 10.33
[MEDITRUST LETTERHEAD]
February 9, 2000
BY FACSIMILE
Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania 17055
Attn: Mr. Brad Hollinger
IPC Advisors S.a.r.l.
38-40 Rue Saint Zithe
Luxembourg L-2763
Attn: Mr. J.B. Unsworth
Re: Meditrust/Balanced Care/IPC Transaction
Gentlemen:
Reference is made to that certain Option Agreement, dated as of
December 30, 1999 (the "Option Agreement"), by and among New Meditrust Company
LLC (the "Seller"), IPC Advisors S.a.r.l. ("IPC") and Balanced Care Corporation
("BCC"). Reference is further made to that certain Promissory Note, dated as of
December 30, 1999, in the original principal amount of SEVEN MILLION EIGHT
HUNDRED ELEVEN THOUSAND FIFTY-FOUR DOLLARS ($7,811,054), made by IPC and
Balanced Care (collectively, the "Buyer") to the order of the Seller (the
"Note").
The Buyer has requested that certain modifications be made to the Note
and, in response to such request, the Seller and the Buyer have agreed to the
following:
1. The Maturity Date (as defined in the Note) shall be extended from November
30, 2000 to April 3, 2001.
2. In the event that the Note is not prepaid in full on or before October 31,
2000, except as otherwise provided in Paragraphs 4 and 5 of the Note, interest
shall accrue under the Note as follows: (i) from November 1, 2000 through
December 31, 2000, interest shall accrue at 12% per annum and (ii) from January
1, 2001 through April 3, 2001, interest shall accrue at 14% per annum.
3. In the event that the Note is not prepaid in full on or before October 31,
2000, then, thereafter, the Buyers may not make any partial prepayments of the
Note. The Buyers may, however, prepay the Note in whole at any time without
prepayment penalty, fee or premium.
<PAGE> 2
Balanced Care Corporation
IPC Advisors S.a.r.l.
February 9, 2000
Page 2
4. The Exercise Period (as defined under the Option Agreement) shall be modified
to mean the period from and including January 2, 2000 through and including
October 1, 2000.
5. The Buyer shall execute and deliver such documents as may be reasonably
requested by the Seller to reflect the modifications to the Option Agreement and
the Note outlined above.
If this letter accurately describes the general terms agreed to by the
parties, kindly sign a duplicate copy of this letter in the space provided below
and return it to me, via facsimile, by February 10, 2000.
Very truly yours,
NEW MEDITRUST COMPANY LLC
By: /s/ Michael S. Benjamin
-----------------------
Name: Michael S. Benjamin
Title: Senior Vice President
Cc: Michael F. Bushee
Kathryn A. Arnone, Esq.
Marianne Ajemian, Esq.
Robin L. Barber, Esq.
Steven J. Adelkoff, Esq.
Stephen Pincus, Esq.
Confirmed and Agreed:
BALANCED CARE CORPORATION
By: /s/ Brad E. Hollinger
---------------------
Name: Brad E. Hollinger
Title: President and CEP
IPC ADVISORS S.A.R.L.
By: /s/ J.B. Unsworth
---------------------
Name: J.B. Unsworth
Title: Manager
