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EXHIBIT 10.64
OPTION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of February 6, 1998, between
Extended Care Operators, LLC, a Delaware limited liability company and Oakhaven
Senior Living, Inc., a California corporation (collectively, the "OPTIONOR") and
Balanced Care Corporation, a Delaware corporation, or its successors and assigns
("BCC").
W I T N E S S E T H
WHEREAS, Optionor is the owner of 100% of the equity interests (the
"EQUITY INTERESTS") of Extended Care Operators of Ravenna, LLC, a Delaware
limited liability company (the "COMPANY"), which Equity Interests are evidenced
by certificate numbers __& __ of the Company, and represent 100% of the equity
interests in the Company; and
WHEREAS, the Company, Lessor, Senior Care Operators, LLC and Management
Firm (hereinafter defined) executed and delivered an Assignment, Assumption and
Amendment of Lease Agreement dated as of February 6, 1998 wherein Management
Firm assigned to Lessee that certain Lease dated as of March 28, 1997 (the
"LEASE") between Lessee and Lessor, whereby Lessee leased from Lessor property,
together with all improvements built or to be built thereon, located in Dauphin
County, Pennsylvania, as more fully described in the Lease (the "PROPERTY"); and
WHEREAS, the Company and Balanced Care at Ravenna, Inc., a Delaware
corporation (the "MANAGEMENT FIRM") have entered into that certain Management
Agreement dated as of February 6, 1998 (the "MANAGEMENT AGREEMENT") whereby the
Company has appointed the Management Firm as the exclusive manager and operator
of the Facility; and
WHEREAS, BCC, Optionor and the Company have entered into that certain
Shortfall Funding Agreement dated as of February 6, 1998 (the "SHORTFALL
AGREEMENT") whereby, among other matters, BCC has agreed to fund certain
Shortfalls by making loans to the Company, as more fully provided in the
Shortfall Agreement; and
WHEREAS, BCC is willing to enter into the Shortfall Agreement, and all
other Transaction Documents of which BCC is a party, only if Optionor executes
and delivers an option agreement whereby BCC or its successors and assigns may
acquire all of the Equity Interests of the Optionor, on the terms and conditions
provided herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. GRANT OF OPTION/CONSIDERATION. (a) Optionor hereby grants to
BCC an option (the "OPTION") to purchase all of Optionor's right, title and
interest in and to the Equity Interests on the terms and conditions provided
herein. The Purchase Price for the Equity Interests shall be paid to Optionor on
the Closing Date in immediately available funds. The Option shall be exercisable
by providing written notice to Optionor on or before the ninth anniversary after
the date of this Agreement (the "OPTION TERM").
(b) In consideration of the grant of the Option to BCC, BCC shall
make the
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following payments (the "OPTION PAYMENTS") to Optionor, which Option Payments
shall be payable over a nine year period (until the exercise of the Option) in
quarterly installments, as follows: on the first day of each calendar quarter,
beginning on July 1, 1998, and for so long as this Agreement is in effect (but
ending in all events at the time of exercise of the Option), one-fourth of an
amount calculated as 27.5% per annum of the Working Capital Reserve actually
funded by the Optionor, compound on an annual basis; provided, however, BCC
shall pay on April 1, 1998 a pro rata amount calculated as 27.5% per annum of
the Working Capital Reserve actually funded by Optionor from the date hereof
through April 1, 1998, plus one-fourth of an amount equal to 27.5% per annum of
the Working Capital Reserve actually funded as of April 1, 1998, which payment
represents Option Payments through the end of the second calendar quarter of
1998. Notwithstanding anything to the contrary contained herein, if the Option
is exercised, BCC's obligation to make Option Payments thereafter shall cease.
Option Payments shall be made to Optionors without demand or notice, except as
expressly provided herein.
(c) Until BCC provides written notice of its exercise of the
Option, BCC shall be under no obligation whatsoever to purchase the Equity
Interests or exercise the Option, and shall not otherwise have any liability
whatsoever hereunder in connection with Option Payments or the purchase of the
Equity Interests.
(d) The "PURCHASE PRICE" as used herein shall mean (i) an amount
equal to the Working Capital Reserve actually funded by the Optionor under the
Shortfall Agreement, plus (ii) an amount calculated as 27.5% per annum of the
Working Capital Reserve actually funded by the Optionor under the Shortfall
Agreement, compounded annually through the Closing Date (as defined below), plus
(iii) the aggregate amount of all Advances and all other obligations due and
payable by Lessee or the Optionor to BCC or a BCC Affiliate under the
Transaction Documents through the Closing Date (exclusive of the Management Fee
under the Management Agreement), minus (iv) any Option Payments (including, for
purposes of this Subsection, payments made pursuant to Subsection (ii) of this
Section 1(d)). The aggregate amount of all Advances and all other obligations
due and payable by Lessee or the Optionor through the Closing Date to BCC or a
BCC Affiliate under the Transaction Documents as provided in Subsection (iii) of
this Section 1(d), shall be paid to BCC or the BCC Affiliate (as appropriate) on
the Closing Date from the Purchase Price.
2. CLOSING. (a) The closing of the purchase of the Equity
Interests (the "CLOSING") shall take place at such time and location in
Pennsylvania as shall be designated by BCC upon three (3) days prior written
notice to Optionor (the "CLOSING DATE"). At the Closing (i) BCC shall deliver
the Purchase Price and (ii) Optionor shall deliver to BCC (A) the certificates
representing the original Equity Interests, together with such powers and other
instruments as BCC may request and (B) the certificate of an appropriate officer
of the Company stating that the transfer of the Equity Interests to BCC has been
recorded on the books and records of the Company, and affirming to BCC such
additional matters as BCC may reasonably request. Additionally, both BCC and
Optionor shall take such further actions and execute and deliver such further
documents and instruments as either party may reasonably request. The Equity
Interests shall be transferred to BCC free and clear of all Liens and
restrictions of any kind or nature, except for Liens in favor of BCC as
expressly provided herein and Liens in favor of Lessor as expressly provided in
the Lease.
(b) Notwithstanding anything to the contrary contained herein or
in the other Transaction Documents and without in any way implying that such
actions are permissible under the Transaction Documents, if and to the extent
that the funding of the Working Capital Reserve is advanced in the form of a
loan to the Company (such advances, together with all interest,
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penalties and other costs and fees assessed or incurred in connection therewith,
are referred to herein as the "BORROWINGS"), the Borrowings shall be repaid in
full from the Purchase Price at the Closing. Optionor shall give BCC prior
written notice before authorizing the Company to make any Borrowings, detailing
the amount thereof. BCC shall have the right at the Closing to pay to the holder
of any note evidencing Borrowings from the Purchase Price the total amount
outstanding with respect to the Borrowings.
3. COVENANTS OF OPTIONOR/LEGEND/PLEDGE. (a) Optionor shall not
(i) sell, assign, convey, pledge (except as expressly provided herein), encumber
or otherwise transfer (by operation of law or otherwise) any of Optionor's
rights, title or interest under, in or to the Equity Interests, (ii) cause or
permit the Company to merge, consolidate, dissolve, liquidate, change its
capital structure, issue new or substitute Equity Interests (including the
issuance of warrants) or sell, convey, assign or otherwise transfer all or any
portion of the Company's assets or (iii) cause or permit the Company to
otherwise take any action that with the passage of time and/or the giving of
notice would constitute a default under or a breach of any covenant or provision
of the Shortfall Agreement or the other Transaction Documents.
(b) Optionor shall cause the Company to place the following legend
on all certificates representing Equity Interests:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION TO PURCHASE IN FAVOR OF BALANCED CARE CORPORATION
AND ITS SUCCESSORS AND ASSIGNS, AS MORE FULLY SET FORTH IN
THAT CERTAIN OPTION AGREEMENT DATED AS OF FEBRUARY 6, 1998.
(c) To secure the obligations of the Optionor hereunder, Optionor
hereby grants and pledges to BCC a first priority lien and security interest in
the Equity Interests. Such pledge sgall be further memorialized by the Stock
Pledge Agreement. For purposes of perfecting the security interest in the Equity
Interests, Optionor shall deliver herewith to BCC possession of all
certificates, instruments, documents and other evidence of Optionor's ownership
of the Equity Interests accompanied by undated powers of attorney or other
appropriate duly executed blank transfer powers. Optionor shall take such
further actions, and execute such further documents, as may be requested by BCC
to effect the pledge and grant of a security interest in the Equity Interests.
(d) In addition to the other covenants stated herein, each
Optionor covenants and agrees that each Optionor shall not, and shall not cause
the Company to, without the prior written consent of BCC: (i) except as
otherwise expressly permitted under the Transaction Documents or the Lease
Documents, create or suffer to exist any Lien or any other type of preferential
arrangement, upon or with respect to any of the properties of Optionor or the
Company, whether now owned or hereafter acquired, or assign any right to receive
income, (ii) make any distribution of cash or other property or declare or pay
any dividend or distribution on any securities issued by the Company or Optionor
(provided, however, this restrictions shall not be construed to prohibit
Optionor's Members or shareholders from receiving Option Payments in accordance
with the terms and conditions of this Agreement), (iii) engage in any business
venture or enter into any agreement with respect to any business venture, except
as expressly provided in the Transaction Documents and the Lease Documents with
respect to the Facility, (iv) except as otherwise expressly permitted under the
Transaction Documents and the Lease Documents, convey, transfer, lease,
sublease, assign or otherwise dispose of (whether in
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one transaction or in a series of transactions) any of the assets of Optionor or
the Company (whether now owned or hereafter acquired) to, or acquire all or
substantially all of the assets of, any person or Entity, (v) create, assume,
guaranty or otherwise become or remain obligated in respect of, or permit or
suffer to exist or to be created, assumed or incurred or to be outstanding, any
Indebtedness, except as expressly provided in the Lease Documents or the
Transaction Documents, (vi) form, organize or participate in the formation or
organization of any Entity, or make any investment in any newly formed or
existing Entity, (vii) amend, supplement or otherwise modify the terms of the
Articles of Organization or the Operating Agreement of the Company in any way,
(viii) enter into any transaction with Lessor or any affiliate or related party
to or with Lessor, other than pursuant to the Transaction Documents and the
Lease Documents, (ix) merger or consolidate with, purchase all or any
substantial part of the assets of, or otherwise acquire any Entity, (x) issue
any equity interests or options, warrants or other rights to purchase any equity
interests or any securities convertible or exchangeable for equity interests, or
commit to do any of the foregoing, other than in favor of BCC in accordance with
the Transaction Documents or (xi) enter into any administrative or other similar
agreement with any party relating to the provision of administrative or
management service for the benefit of either Optionor or the Company.
4. REPRESENTATIONS AND WARRANTIES. Optionor represents and
warrants to BCC that (i) Optionor is the sole and exclusive owners of the Equity
Interests free and clear of all Liens and restrictions (except Permitted Liens),
and Optionor's ownership interest in the Equity Interests is appropriately noted
and documented on the books and records of the Company, (ii) each Optionor is
validly organized and in good standing under the jurisdiction of its formation,
this Agreement and the other Transaction Documents to which the Optionors are a
party have been duly authorized by all requisite action and this Agreement and
the other Transaction Documents to which each Optionor is a party constitutes
the legal, valid and binding obligation of each Optionor, subject only to
bankruptcy and creditor's rights laws, (iii) no Person or Entity holds any
Equity Interests in the Company, other than the Optionor, (iv) the Equity
Interests have been duly issued to Optionor, are fully paid and nonassessable,
(v) Optionor has the full right and power to transfer and convey the Equity
Interests, enter into this Option Agreement and sell the Equity Interests to BCC
without the need to obtain the consent or joinder of any Person or Entity, (vi)
Optionor (and each person or Entity that has an ownership in Optionor) has had
the opportunity to ask all questions of BCC, the Company and any other person or
entity necessary or desirable concerning Optionor's investment in the Equity
Interests, (vii) Optionor (and each person or Entity that has an ownership
interest in Optionor) has the requisite knowledge and sophistication to make
informed decisions regarding the risks and merits of an investment in the
Company, and has not relied on any oral or written statements of BCC or any BCC
Affiliate in connection with Optionor's investment in the Company and (viii)
Optionor (and each person or Entity that has an ownership interest in Optionor)
understands that the Equity Interests will be deemed restricted securities
within the meaning of the 1933 Act (and state securities laws), the Equity
Interests are non-transferable and Optionor (and each person or Entity that has
an ownership interest in Optionor) must be able to bear the economic risks of
ownership of the Equity Interests for an indefinite period of time. The
provisions of this Section shall survive the Closing and purchase of the Equity
Interests.
5. BINDING EFFECT. The rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their heirs, personal representatives, successors and assigns.
6. ASSIGNMENT. Optionor may not assign, pledge, hypothecate or
otherwise transfer its rights, obligations and duties hereunder without the
prior written consent of BCC.
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BCC shall have the right to transfer and assign its rights, obligations and
duties hereunder to any affiliate or third party without the consent of the
Optionor; provided, however, BCC shall nonetheless remain primarily liable to
Optionors for all obligation hereunder.
7. DEFAULT. (a) In the case of default by Optionor hereunder, BCC
shall be entitled, after ten (10) days prior written notice to Optionor, to (a)
seek an action in specific performance and/or (b) seek such other relief,
including without limitation an action at law for damages, as may be available.
Optionor shall pay all reasonable counsel fees of BCC in connection with
enforcing any rights or benefits of BCC hereunder or under the other Transaction
Documents. The rights and remedies of BCC under this Option Agreement are
cumulative and not exclusive of any rights or remedies which it may otherwise
have.
(b) In the case of default by BCC hereunder, Optionor shall be
entitled, after ten (10) days prior written notice to BCC, to seek such relief,
including without limitation an action at law for damages, as may be available
to Optionors. Without limiting the foregoing, in the case of a default by BCC
hereunder, after applicable notice, BCC shall not be permitted to exercise the
Option. BCC shall pay all reasonable counsel fees of Optionor in connection with
enforcing any rights or benefits of Optionor hereunder. The rights and remedies
of Optionor under this Option Agreement are cumulative and not exclusive of any
rights or remedies which they may otherwise have.
8. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered in
person, Federal Express or other recognized overnight courier or sent by
registered or certified U.S. mail, return receipt requested or sent by facsimile
or telecopy transmission and addressed:
(i) If to the Optionor, at:
0000 Xxx Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: F. Xxxxx Xxxx
(ii) If to BCC at
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto.
9. DEFINITIONS; INTERPRETATION; MISCELLANEOUS. Capitalized terms
used but not otherwise defined in this Agreement have the respective meanings
specified in Appendix 1 hereto; the rules of interpretation and other provisions
set forth in Appendix 1 hereto shall apply to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first above written.
WITNESS: EXTENDED CARE OPERATORS, LLC
By: /s/ Signature Illegible
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Title:
--------------------------------
ATTEST: OAKHAVEN SENIOR LIVING, INC.
By: /s/ Signature Illegible By: /s/ Signature Illegible
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Title: Title:
--------------------------- --------------------------------
BALANCED CARE CORPORATION
By: /s/ Signature Illegible
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Title:
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Schedule to Exhibit 10.64 filed pursuant to Instruction 2 to Item
601(a) of Regulation S-K
Option Agreement
Location Entities
Ravenna, OH BCC at Ravenna, Inc.;
Extended Care Operators of Ravenna LLC
Harrisburg, PA BCC at Harrisburg, Inc.;
Extended Care Operators of Harrisburg LLC
Greensboro, NC BCC at Greensboro, Inc.
Extended Care Operators of Greensboro LLC
