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EXHIBIT 10.7
FORM OF HCRI SHORTFALL FUNDING AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of the Documentation Date
by and among Financial Care Investors of [____________], LLC, a Delaware limited
liability company (the "LESSEE"), the member of Lessee listed on Schedule A
attached hereto (collectively, and jointly and severally, the "MEMBER") and
Balanced Care Corporation, a Delaware corporation ("BCC").
WITNESSETH
WHEREAS, the Member constitutes the holder of all equity interests
in the Lessee; and
WHEREAS, Lessee executed and delivered the Lease Agreement dated
as of the Documentation Date (the "LEASE") between Lessee and [____________],
Inc., a [____________] corporation (the "LESSOR"), whereby Lessee leased from
Lessor property, together with all improvements built or to be built thereon,
located in [__________________] as more fully described in the Lease (the
"PROPERTY"); and
WHEREAS, the Lessee and Balanced Care at [_____________], Inc., a
Delaware corporation (the "MANAGEMENT FIRM") have entered into that certain
Management Agreement dated as of the Documentation Date (the "MANAGEMENT
AGREEMENT") whereby Lessee has appointed the Management Firm as the exclusive
manager and operator of the Facility; and
WHEREAS, Lessor and BCC Development and Management Co., a Delaware
corporation ("Developer") have entered into a Construction Disbursing Agreement
dated as of the Documentation Date (the "Development Agreement") for the purpose
of developing the Facility; and
WHEREAS, the Developer and the Management Firm are wholly-owned
subsidiaries of BCC; and
WHEREAS, the Member, pursuant to the Senior Credit Documents, will
borrow certain funds from Lessor, which funds will be contributed to Lessee to
be used exclusively to fund 85% of the Working Capital Reserve; and
WHEREAS, Lessee and the Member will deposit the Equity Capital
Portion, and cause to be contributed the Senior Loan Capital Portion, of the
Working Capital Reserve into the Collateral Account as specifically provided in
this Agreement to fund the Working Capital Reserve (to be used to fund
Shortfalls); and
WHEREAS, upon depletion of the Working Capital Reserve, BCC
intends to make Advances to the Lessee, on the terms and conditions herein
stated, to fund continuing Shortfalls; and
WHEREAS, BCC is willing to fund Advances to Lessee covering
Shortfalls upon depletion of the Working Capital Reserve only on the terms and
conditions provided in this Agreement.
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NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
FUNDING SHORTFALLS
SECTION 1.01 FUNDING; CAPITALIZATION OF LESSEE; WORKING CAPITAL
RESERVE. (a) The Member hereby agrees to contribute capital to the Lessee to
fund the working capital needs of the Lessee. Such funds shall be contributed as
follows: (i) 85% of the working capital needs of Lessee shall be provided from
the proceeds of loans made to the Member under the Senior Credit Documents
(which proceeds shall be contributed as equity by the Member to the capital of
Lessee and deposited in the Collateral Account as provided herein and in the
Deposit Agreement) (the "Senior Loan Capital Portion") and (ii) 15% of the
working capital needs of the Lessee shall be provided as equity contributions of
the Member to the Lessee, without the Member or its equity owner(s) in any
manner borrowing or otherwise incurring any Indebtedness to fund such portion of
the working capital (the "Equity Capital Portion"). The Equity Capital Portion
of the working capital shall be contributed by the Member to the Lessee, and the
Lessee to the Collateral Account, on a pro rata basis with the contribution of
the Senior Loan Capital Portion by the Member to the Lessee and the Lessee to
the Collateral Account. In no event shall the Equity Capital Portion and the
Senior Loan Capital Portion exceed in the aggregate $[__________]. Upon demand
and from time to time, the Member shall provide to the Lessor and BCC evidence
in reasonable form that the Member has sufficient capital to fund the Equity
Capital Portion as required in this Agreement.
In order for the foregoing to occur, BCC or the Management Firm
will from time to time request by written notice to the Member and the Lessor
that the foregoing Fundings be made into the Collateral Account to fund the
Working Capital Reserve. No Fundings may be made into the Collateral Account
until such time as BCC or the Management Firm so requests; provided, however,
such request shall be made no less than seven (7) business days prior to the
required time of making the Funding into the Collateral Account. Any notice of a
Funding requested pursuant to this subsection shall state the total amount of
the Funding being requested at that time, the date on which such Funding is to
be made, wiring instructions for placement of the Funding into the Collateral
Account, the total amount of Fundings that the Member may in the future be
required to make into the Collateral Account pursuant to this Agreement for the
Equity Capital Portion and the total amount of Fundings the Lessor may in the
future be required to make into the Collateral Account under the Senior Credit
Documents for the Senior Loan Capital Portion. The Funding request notice shall
also state in reasonable detail the uses for the Funding, which may only include
uses for the working capital needs for the Facility, including pre-opening
costs, marketing costs, rental payments, employee costs, training costs and all
other costs and expenses customarily incurred in connection with the start-up of
the operation of an assisted care facility. If the Member has an objection to
the Funding request, the Member shall inform BCC in writing of such objection,
providing reasonable detail. Such objection must be received by BCC within four
(4) business days after receipt by Member of the Funding request and all
information required to be provided. Failure by the Member to timely object to
the Funding request shall constitute a waiver on the part of the Member of any
right to object to such request, and the Member will thereafter timely make
Fundings into the Collateral Account as provided in this Agreement and the other
Transaction Documents. In no event shall the Member
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or the Lessee be liable, and no Event of Default will occur hereunder or under
the other Transaction Documents, if Lessor fails to fund loans under the Senior
Credit Documents, so long as the Member has otherwise deposited the Equity
Capital portion into the Collateral Account; and has caused to be deposited into
the Collateral Account all proceeds of loans actually funded by the Lessor
pursuant to the Senior Credit Documents.
Time is of the essence with respect to each contribution of the Equity Capital
Portion and the Senior Loan Capital Portion described in this Section 1.01(a).
(b) The contributions described in Section 1.01 (a) shall be made
directly into the Collateral Account. Each contribution of funds into the
Collateral Account as provided in this Section 1.01 (both the Equity Capital
Portion and the Senior Loan Capital Portion) is referred to herein as a
"FUNDING", and the aggregate of all Fundings required to be made hereunder is
collectively referred to as the "WORKING CAPITAL RESERVE").
(c) In the event that the Member defaults in the timely payment of
Fundings for the Equity Capital Portion into the Working Capital Reserve as
provided in Section 1.01 (a), BCC shall have the right (in addition to all other
rights hereunder and under the other Transaction Documents in the case of a
Default or Event of Default) at any time thereafter, but not the obligation, to
require that the Member sell all of the Equity Interests to BCC or its designee
in the manner provided for in the Option Agreement; provided, however, the
purchase price for the Equity Interests shall be the amount of Fundings actually
deposited by the Member into the Collateral Account, plus the Current Yield (as
defined in the Option Agreement) calculated on a pro-rata basis on the amount of
funds actually contributed into the Senior Loan Capital Portion or the Equity
Capital Portion of the Working Capital Reserve, as the case may be, from the
date of deposit through the date of Closing. In such event, all terms and
conditions of the sale applicable to the Option, including concurrent compliance
with Article 18 of the Lease, (provided that BCC or a BCC Affiliate acquires the
equity or assets of the Lessee) shall be equally applicable to the sale under
this Section 1.01(c), and the failure by the Member to close on such sale within
3 days after written notice from BCC (time being of the essence) shall
constitute an Event of Default. All amounts borrowed by the Member under the
Senior Credit Documents shall be repaid to the Lessor from the proceeds of the
purchase described in this subsection (c).
(d) The Member and the Lessee acknowledge and agree that (i) each
Funding constitutes the capital contribution of the Member to the Lessee
(provided, that BCC acknowledges that the Senior Loan Capital Portion of such
Funding constitutes Indebtedness of the Member pursuant to the Senior Credit
Documents), (ii) each Funding is not in any way to be construed as Indebtedness
of Lessee nor to be construed as evidence of a loan from any Member to the
Lessee, (iii) Lessor, BCC, and the Management Firm may (without notice to Lessee
or Member, and whether acting alone or together) withdraw funds from the Working
Capital Reserve in the Collateral Account to fund Shortfalls with respect to the
Facility in accordance with the Transaction Documents and the Lease Documents
and (iv) the Working Capital Reserve may be used only for the funding of
Shortfalls.
SECTION 1.02 ADVANCES. Upon complete depletion of the Working
Capital Reserve, and to the extent thereafter of any Shortfall, BCC hereby
agrees to advance from time to time funds to the Lessee upon no less than three
(3) days prior written notice, upon the terms and conditions provided herein
(each advance being an "ADVANCE" and collectively, the
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"ADVANCES"). Advances shall be evidenced by one or more promissory notes issued
by the Lessee in the form attached hereto as Exhibit A (the "NOTES"). The Notes
shall mature on the Maturity Date. Interest shall accrue on the Notes at the
Prime Rate as announced from time to time in the Wall Street Journal (or, in the
event of the discontinuance of the publishing of the Prime Rate in the Wall
Street Journal, such other source as the parties may agree), and shall be
payable on the Maturity Date. All sums owed under the Notes and hereunder to
BCC, and all other obligations and covenants under the Transaction Documents
applicable to Lessee and the Member (including the obligations of the Member
under the Option Agreement), together with all interest payable under the
Transaction Documents and all other costs and expenses payable by Lessee or any
Member to or for the benefit of BCC or any BCC Affiliate (including
indemnification and defense obligations) are referred to herein as the
"OBLIGATIONS".
SECTION 1.03 ASSET PURCHASE OPTION. The Lessee and the Member
hereby grant to BCC an option (the "ASSET PURCHASE OPTION") to purchase all of
the assets of the Lessee (including the option to take an assignment of the
Lease) for the Asset Purchase Price. The Asset Purchase Option may be exercised
by BCC by providing written notice to the Lessee at any time during the term of
the Lease. The closing of the purchase of the assets of the Lessee shall take
place within 30 days after BCC exercises the Asset Purchase Option at such
location in Pennsylvania as BCC may designate. At the closing of the asset
purchase, the Lessee shall transfer, assign and convey to BCC (or its designee)
all assets of Lessee, free and clear of all Liens and restrictions of any kind
or nature, except for Liens or restrictions in favor of the Lessor pursuant to
the Lease Documents or in favor of BCC pursuant to the Transaction Documents
(provided, however, Liens in favor of BCC securing Advances or other Obligations
shall be paid in full by Lessee and the Member at the closing of the asset
purchase). The Lessee (and the Member if requested by BCC) shall execute and
deliver at the closing of the asset purchase an assignment of lease (assigning
the Lease to the purchaser), a xxxx of sale conveying all other assets of the
Lessee and such other documents and instruments as BCC may reasonably request,
all in form and substance reasonably satisfactory to BCC. The "ASSET PURCHASE
PRICE" as used herein shall mean (i) all amounts actually funded into the
Working Capital Reserve (including amounts funded with borrowings by the Member
under the Senior Credit Documents), plus (ii) an amount (calculated as a yearly
return) equal to the Current Yield, calculated pro-rata, of the Working Capital
Reserve actually funded through Fundings, compounded annually through the
closing date, plus (iii) the aggregate amount of all Advances and all other
Obligations due and payable by Lessee or the Member to BCC or a BCC Affiliate
through the closing date (exclusive of the Management Fee), minus (iv) any
payments made to the Member under the Option Agreement through the closing date
of the asset purchase. All Senior Loan Obligations shall be paid in full from
the Asset Purchase Price on the closing date. All Advances and all other
Obligations due and payable by Lessee or the Member to BCC or a BCC Affiliate
through the closing date of the asset purchase shall be payable from the Asset
Purchase Price to BCC or the BCC Affiliate, as appropriate. The right of BCC to
exercise the Asset Purchase Option is subject in every case to full compliance
with the provisions of Section 10 of the Option Agreement and Article 18 of the
Lease. Notwithstanding any provision to the contrary contained in the
Transaction Documents, the provisions of this Section 1.03 shall be subject in
all respects to the terms and conditions of Section 7(c) of the Option
Agreement.
SECTION 1.04 TRANSACTION DOCUMENTS. In addition to the Notes, and
to better secure the performance of Lessee hereunder and under the other
Transaction Documents, Lessee and the Member (as applicable) have executed and
delivered to Lessor or BCC (as applicable) the following:
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(i) the Lease and the other Lease Documents to which it is
a party;
(ii) {REVOLVING CREDIT/FUTURE ADVANCES LEASEHOLD MORTGAGE}
{OPEN END LEASEHOLD MORTGAGE}in the form attached hereto as
Exhibit B encumbering the Property in favor of BCC (the "LEASEHOLD
MORTGAGE");
(iii) the Deposit Pledge Agreement and the Pledge Agreement;
and
(iv) such other documents, certificates, powers, affidavits
and instrument as BCC may reasonably request.
In addition to the foregoing documents, the Member has executed
and delivered to BCC the Option Agreement (the "OPTION AGREEMENT")
substantially in the form attached hereto as Exhibit C, whereby
each Member has agreed that BCC shall have an option to purchase
the equity interest of each Member in Lessee, on the terms and
conditions provided therein.
SECTION 1.05 INTEREST PAYMENTS. In no event shall the amount of
interest due or payable pursuant to any Transaction Document exceed the maximum
rate of interest allowed by Law and, in the event any such payment is
inadvertently paid by the Lessee or the Member or inadvertently received by BCC
or any BCC Affiliate, then such excess sum shall be credited as a payment of
principal due to BCC or any BCC Affiliate. It is the express intention of the
parties hereto that neither the Lessee nor the Member pay to BCC, directly or
indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Lessee.
SECTION 1.06 INTENTION. It is the intention of BCC, the Member and
Lessee that (i) the Management Firm operate the Facility pursuant to the
Management Agreement and that Lessee act as a passive investor with respect to
the Facility (provided, however, nothing contained herein or in any other
Transaction Document shall limit the Member from taking a position that, for
purposes of Federal and State income taxes, the Member is actively participating
in the operations of the Facility such that taxable income and losses arising in
connection with the Member's participation in the operations of the Facility,
together with the Member's participation in the operations of other facilities
that are similar to the Facility, will qualify as non-passive taxable income or
loss for purposes of Section 469 of the Internal Revenue Code of 1986, as
amended, and any corresponding State tax Law), (ii) Lessee include on its
financial statements all revenue and losses with respect to the Facility during
the term of this Agreement for financial accounting purposes, and (iii) Advances
made hereunder and all other obligations of Lessee and the Member under the
Transaction Documents be secured by the Leasehold Mortgage and Pledge Agreement,
but subject to the rights of Lessor under the Lease, regardless of any
bankruptcy, insolvency, receivership or similar proceedings instituted by or
against Lessee. BCC, each Member and Lessee agree to take no position
inconsistent with the intention of the parties as herein stated.
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ARTICLE II
CONDITIONS TO ADVANCES
SECTION 2.01 CONDITIONS PRECEDENT TO ADVANCES. The obligations of
BCC to accept delivery of the Transaction Documents and make Advances are
subject to the condition precedent that BCC receives the following five days
prior to the making of any Advance, in form and substance satisfactory to BCC:
(a) the Note(s);
(b) the Working Capital Assurance Agreement;
(c) the Leasehold Mortgage;
(d) the Option Agreement;
(e) the Management Agreement;
(f) a certificate of the Secretary of State of the State of
Delaware stating that the Lessee is duly organized, validly existing and in good
standing in such state; and a certificate of the Secretary of State of the
jurisdiction in which the Facility is located stating that Lessee has duly
qualified to conduct business and is in good standing in such state;
(g) a certified copy of the Operating Agreement of the Lessee and
the Member, together with certified resolutions or authorizations of the Lessee
and the Member granting the power to Lessee and the Member to enter into and
perform the Transaction Documents;
(h) all other Transaction Documents;
(i) the Lease and all other Lease Documents; and
(i) such other affidavits, documents, certificates, statements and
instruments as BCC may reasonably request.
SECTION 2.02 ADDITIONAL CONDITIONS PRECEDENT TO ADVANCES. The
obligation of BCC to accept delivery of the Transaction Documents and consummate
this transaction, and to make any Advance, shall be further subject to the
condition precedent that:
The following statements shall be true and correct (and the
delivery by the Lessee and the Member of the Transaction Documents shall be
deemed to constitute a representation and warranty by the Lessee and the Member
that such statements are true on such date):
(i) The representations and warranties contained in Article
III of this Agreement and the other Transaction Documents are true
and correct in all material respects on and as of date of the
execution and delivery of this Agreement, at the time of each
Advance, and as of each date until the Obligations are satisfied
in full; and
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(ii) No event has occurred and is continuing which
constitutes a Default or an Event of Default under any of the
Transaction Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE LESSEE. The
Lessee and the Member represent and warrant as follows:
(a) ORGANIZATION; QUALIFICATION. The Lessee is a limited liability
company, duly formed, validly existing and in good standing under the laws of
State of Delaware, has qualified to do business in the State in which the
Facility is located, and has the power and authority to own its properties and
to carry on its business as now being and hereafter proposed to be conducted.
(b) POWER; AUTHORITY. The execution, delivery and performance by
the Lessee of this Agreement and the other Transaction Documents to which it is
a party are within the Lessee's power and have been duly authorized by all
necessary action, and this Agreement and the other Transaction Documents to
which Lessee is a party have been duly executed and delivered by the duly
authorized Manager of the Lessee.
(c) APPROVAL OR CONSENTS. No approval or consent of any foreign,
domestic, federal, state or local authority is required for the due execution,
delivery and performance by each of Lessee and the Member of this Agreement or
any other Transaction Document to which it is a party and the execution,
delivery and performance by each of Lessee and the Member of this Agreement and
the other Transaction Documents to which it is a party do not conflict with, and
will not result in the breach of or default under, any contract, agreement or
other document or instrument to which the Lessee or the Member are a party or by
which their properties are bound.
(d) BINDING OBLIGATIONS. This Agreement and the other Transaction
Documents to which each of Lessee and the Member is a party are legal, valid and
binding obligations of the Lessee and the Member enforceable against each of
Lessee and the Member in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting generally the enforcement of creditors' rights.
(e) LITIGATION. To Lessee's and the Member's knowledge, there is
no pending or threatened action, suit or proceeding against or affecting the
Lessee before any court, governmental agency or arbitrator.
(f) APPLICABLE LAW. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Lessee is a
party, and the borrowings hereunder, do not and will not, by the passage of
time, the giving of notice or otherwise, violate any Law applicable to the
Lessee.
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(g) TITLE AND CONDITION OF ASSETS. Except for Lessee's leasehold
interest in the Lease and except as otherwise provided in the Senior Credit
Documents, the Lessee has good, marketable and legal title to its properties and
assets. The Lessee has a good and valid leasehold interest in the Lease.
(h) LIENS. None of the properties and assets of the Lessee are
subject to any Lien or other charge other than Liens in favor of Lessor pursuant
to the Lease and the Senior Loan Documents, BCC as provided herein, or a BCC
Affiliate ("PERMITTED LIENS"), and the execution, delivery and performance by
the Lessee of this Agreement and the other Transaction Documents to which it is
a party will neither result in the creation of any Lien or other charge upon any
of the Lessee's properties or assets, nor cause a default under any agreements
to which Lessee is a party.
(i) SECURITY. Upon the consummation of this transaction, BCC will
have a valid and perfected mortgage lien in the Lease, and a valid and perfect
security interest in the Equity Interest.
(j) TAX RETURNS AND PAYMENTS. All federal, state and other tax
returns of the Lessee required by Law to be filed have been duly filed, and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Lessee and its properties, income, profits and assets which are
due and payable have been paid.
(k) NO EMPLOYEES. The Lessee has no employees for which it is
required to comply with the Employment Retirement Income Security Act of 1974.
(l) ABSENCE OF DEFAULTS. To the knowledge of the Lessee and
Member, no event has occurred, which has not been remedied, cured or waived,
which constitutes, or with the passage of time or giving of notice or both would
constitute, a Default or an Event of Default under any Transaction Document or
Lease Document or which constitutes or which with the passage of time or giving
of notice or both would constitute a default or event of default by the Lessee
under any agreement or judgment, decree or order, to which the Lessee is a party
or by which the Lessee or any of its properties may be bound.
(m) SUBSIDIARIES. The Lessee does not own, directly or indirectly,
of record or beneficially, any of the voting stock of any class or classes of,
or any other voting interests of, any Entity.
(n) INVESTMENT COMPANY. Neither the Lessee nor the Member is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
(o) PUBLIC UTILITY COMPANY. Neither the Lessee nor the Member is a
"holding company" or a "subsidiary company", or an "affiliate" of a "holding
company", within the meaning of the Public Holding Company Act of 1935, as
amended.
(o) SECURITIES REPRESENTATIONS. Neither the Lessee, the Member nor
any agent, broker, dealer or other person or entity has offered or sold any
equity interests in Lessee or the Member in violation of the 1933 Act or any
state securities laws.
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(q) CAPITAL CONTRIBUTIONS. All Indebtedness (if any) incurred by
any Member or equity owner of any Member to fund the capital contributions to
Lessee or any Member (including Indebtedness used to make Fundings) constitutes
full recourse Indebtedness against such Member or equity owners (as
appropriate), and such Indebtedness is not limited in collection to any
particular asset of the person or Entity incurring such Indebtedness.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF BCC. BCC represents
and warrants as follows: (i) this Agreement and all other Transaction Documents
to which BCC is a party constitute legal, valid and binding obligations of BCC,
were duly authorized, executed and delivered by BCC, and are fully enforceable
against BCC in accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors' rights, (ii) BCC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly authorized and qualified to do all things required of it
under this Agreement and the other Transaction Documents to which BCC is a
party; (iii) neither this Agreement nor any agreement, document or instrument
executed or to be executed in connection herewith, violates the terms of any
other agreement to which BCC is a party, (iv) no approval or consent of any
foreign, domestic, federal, state or local authority is required for the due
execution, delivery and performance by BCC of this Agreement or any other
Transaction Document to which BCC is a party and the execution, delivery and
performance by BCC of this Agreement and the other Transaction Documents to
which BCC is a party do not conflict with, and will not result in the breach of
or default under, any contract, agreement or other document or instrument to
which BCC is a party or by which its properties are bound, (v) there is no
pending or (to BCC's knowledge) threatened action, suit or proceeding against or
affecting BCC before any court, governmental agency or arbitrator that would
materially and adversely affect BCC's ability to perform its obligations
hereunder or under the other Transaction Documents to which BCC is a party and
(vi) the execution, delivery and performance of this Agreement and the other
Transaction Documents to which BCC is a party do not and will not, by the
passage of time, the giving of notice or otherwise, violate any Law applicable
to BCC.
ARTICLE IV
COVENANTS OF THE LESSEE
SECTION 4.01 AFFIRMATIVE COVENANTS. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation owed to it hereunder or under
the other Transaction Documents, the Lessee will and the Member shall cause the
Lessee to:
(a) COMPLIANCE WITH LAWS; ETC. {INTENTIONALLY OMITTED}
(b) MAINTENANCE OF INSURANCE. {INTENTIONALLY OMITTED}
(c) NOTICE OF LITIGATION AND OTHER MATTERS. Promptly give notice
to BCC of the following: (i) any actions, suits or proceedings instituted
against the Lessee or the Member; (ii) any change in the chief executive office,
principal place of business or location of the books and records of the Lessee
or the Member and (iii) the occurrence of a Default or an Event of Default.
(d) MAINTENANCE OF PROPERTY. {INTENTIONALLY OMITTED}
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(e) PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Preserve and
maintain Lessee's and Member's existence under the Laws of the state of
formation, and preserve and maintain Lessee's and Member's rights, franchises,
licenses and privileges in such state as a limited liability company, and
qualify and remain qualified and authorized to do business in such state.
(f) BUSINESS. {INTENTIONALLY OMITTED}
(g) FURTHER ASSURANCES. At BCC's request, from time to time,
execute, acknowledge or take such further action as BCC may reasonably require
to effectuate the purposes of this Agreement and the purposes of the other
Transaction Documents.
Provided, however, notwithstanding any provision to the contrary contained in
this Section 4.01, Lessee shall not be in Default hereunder to the extent that
the obligations described in this Section 4.01 are required to be performed by
the Management Firm under the Management Agreement.
SECTION 4.02 NEGATIVE COVENANTS. So long as BCC or any BCC
Affiliate shall have any commitment or Obligation owed to it hereunder or under
the other Transaction Documents, the Lessee will not, and no Member will cause
the Lessee to, without the prior written consent of BCC:
(a) LIENS CREATED BY LESSEE. Create or suffer to exist any Lien or
any other type of preferential arrangement, upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, other than Permitted Liens.
(b) DISTRIBUTIONS. Until the Senior Loan Obligations are paid in
full, make any distribution of cash or other property to the Member or declare
or pay any dividend or distribution on any securities of Lessee.
(c) OTHER BUSINESS. Engage in any business venture or enter into
any agreement with respect to any business venture, except as expressly provided
in the Transaction Documents with respect to the Facility.
(d) TRANSFER OF ASSETS. Except as expressly contemplated in the
Transaction Documents to BCC or an Entity designated by BCC or otherwise as
expressly permitted in Section 18.3 of the Lease, convey, transfer, lease,
sublease, assign or otherwise dispose of (whether in one transaction or in a
series of transactions) any of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any person
or Entity. The restrictions of this Subsection shall include a prohibition on
any assignment, pledge, hypothecation or other transfer of the Lease (including
by operation of Law) or sublease or license of the Facility, except to BCC or a
BCC Affiliate in accordance with the terms and conditions of the Lease or
otherwise as expressly permitted in Section 18.3 of the Lease.
(e) INDEBTEDNESS FOR BORROWED MONEY. Create, assume, guaranty or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding, any Indebtedness,
except Indebtedness incurred to
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BCC or a BCC Affiliate under the Transaction Documents or Indebtedness incurred
to Lessor as expressly provided in the Lease Documents and the Senior Credit
Documents.
(f) CREATION OF AFFILIATES. Form, organize or participate in the
formation or organization of any Entity, or make any investment in any newly
formed or existing Entity.
(g) LOANS. Extend credit to or make any advance, loan,
contribution or payment of money or goods to any person or Entity.
(h) GOVERNANCE DOCUMENTS. Amend, supplement or otherwise modify
the terms of the Articles of Organization or the Operating Agreement of the
Lessee in any way.
(i) OTHER TRANSACTIONS WITH LESSOR. Enter into any transaction
with Lessor or any affiliate or related party to or with Lessor, other than
pursuant to the Transaction Documents.
(j) TRANSFERS OF EQUITY INTERESTS. Other than pursuant to the
Option Agreement, permit the Member to transfer all or any portion of the
Member's Equity Interest in Lessee to a party that does not as of the date
hereof hold an equity interest in the Lessee.
(k) AMEND TRANSACTION DOCUMENTS. (i) Amend, terminate, supplement
or otherwise modify any Lease Document or Senior Credit Document, (ii) waive any
default or potential event of default by Lessor under any Lease Document, (iii)
declare a default or event of default under any Lease Document, (iv) exercise
any right to extend the term of the Lease, (v) exercise any right to purchase
the Facility or exercise a right of refusal with respect thereto or (vi)
exercise any right to cancel the Lease as a result of a casualty or condemnation
with respect to the Facility, or otherwise.
(l) MERGERS AND CONSOLIDATIONS. Merger or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire any
Entity.
(m) ISSUANCE OF SECURITIES. Except for the Equity Interests of the
Lessee that have been issued to the Member and are outstanding as of the date
hereof, issue any equity interests or options, warrants or other rights to
purchase any equity interests or any securities convertible or exchangeable for
equity interests, or commit to do any of the foregoing.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 EVENTS OF DEFAULT. Each of the following events shall
constitute an event of default hereunder ("SHORTFALL EVENT OF DEFAULT"),
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
nongovernmental body:
(a) The Lessee shall fail to make any payment of principal or
interest, as stated in the Notes, when due, or the Member shall fail to make
payments in connection with
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Fundings (as provided in Section 1.01 hereof) when due or the Member or Lessee
shall fail to contribute Fundings when due into the Collateral Account (each a
"MONETARY DEFAULT"); or
(b) Any representation or warranty made by the Lessee or the
Member under or in connection with any Transaction Document shall prove to have
been incorrect or misleading in any material respect when made; or
(c) The Lessee or the Member shall fail to perform or observe any
material term, covenant or agreement contained in this Agreement, or in any
other Transaction Document, on its or their part to be performed or observed
beyond the express applicable cure period, if any; or
(d) The Lessee or any Member shall generally not pay its debts
when due; or
(e) The Lessee or any Member shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Lessee or
any Member seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of the Lessee or any Member of any of its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for the Lessee or any Member or for any
substantial part of its property; or the Lessee or any Member shall take any
action to authorize any of the actions set forth above in this subsection; or
(f) Any material provision of any Transaction Document to which
the Lessee or the Member is a party shall for any reason cease to be valid and
binding on the Lessee or the Member, or the Lessee or the Member shall so state
in writing; or
(g) The Leasehold Mortgage shall for any reason cease to create a
valid and perfected security interest in any of the collateral covered thereby,
subject in priority only to the Permitted Liens; or
(h) an Option Agreement Event of Default, a Mortgage Event of
Default, a Lease Event of Default, a Deposit Pledge Event of Default, a Phase
Lease Event of Default, a Management Agreement Event of Default or any other
default or event of default within the meaning of the definition of Event of
Default shall occur and be continuing beyond the express applicable cure period,
if any.
ARTICLE VI
REMEDIES
SECTION 6.01 APPLICABLE PROVISIONS UPON OCCURRENCE OF AN EVENT OF
DEFAULT. Upon the occurrence of a Shortfall Event of Default, the following
provisions shall apply:
(a) ACCELERATOR AND TERMINATION:
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(i) Automatic. Upon the occurrence of a Shortfall Event of
Default specified in Section 5.01(e), the principal of, and the
interest on, the Notes at the time outstanding, and all other
amounts owed to BCC under this Agreement and any of the other
Transaction Documents, shall become automatically due and payable
without presentment, demand, dishonor, protest, or any notice of
any kind all of which are expressly waived, anything in this
Agreement or the other Transaction Documents to the contrary
notwithstanding.
(ii) Optional. If any other Shortfall Event of Default shall
have occurred, and in every such event, BCC may do the following:
declare the principal of, and interest on, the Notes at the time
outstanding, and all other amounts owed to BCC under this
Agreement and the other Transaction Documents, to be forthwith due
and payable, whereupon the same shall immediately become due and
payable without presentment, demand, dishonor, protest or notice
of any kind, all of which are expressly waived, anything in this
Agreement or the other Transaction Documents to the contrary
notwithstanding.
(b) BCC'S RIGHT TO ENTER PROPERTY. BCC may enter upon the Property
and any premises on which collateral may be located and, without resistance or
interference by the Lessee, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part thereof
to such other place or places as BCC shall choose, without being liable to the
Lessee on account of any loss, damage or depreciation that may occur as a result
thereof.
(c) USE OF PREMISES. BCC may, without payment of any rent or any
other charge to Lessee, enter the Property and, without breach of peace, take
possession of the Property or place custodians in exclusive control thereof,
remain on such premises and use the same and any of the Lessee's equipment, for
the purpose of (i) operating the Facility and (ii) collecting any accounts
receivable.
(d) OTHER RIGHTS. BCC may exercise any and all of its rights and
remedies available under the other Transaction Documents, as well as those
available in Law or in equity.
(e) RIGHT TO FORECLOSE. BCC may foreclose upon the Lease, take
immediate possession of the Facility and Property and operate the Property, all
in accordance with the terms and conditions of the Leasehold Mortgage.
(f) The exercise of the remedies under Sections 6.01(b), (c)
and (e) above are subject to concurrent compliance with Article 18 of the Lease.
SECTION 6.02 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.
(a) RIGHTS CUMULATIVE. The rights and remedies of BCC under this
Agreement and each of the other Transaction Documents shall be cumulative and
not exclusive of any rights or remedies which it would otherwise have. In
exercising its rights and remedies BCC may be selective and no failure or delay
by BCC in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise of any other power or right.
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(b) WAIVER OF MARSHALLING. The Lessee and Member hereby waives any
right to require any marshalling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this Article VI
or elsewhere in this Agreement or in any other Transaction Documents shall be
construed as requiring or obligating BCC or any agent or designee thereof to
make any demand, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim or notice or take any
action, with respect to any account or any other Collateral or the moneys due or
to become due under the Notes or any other Transaction Documents or in
connection therewith, or to take any steps necessary to preserve any rights
against prior parties and neither BCC nor any of its agents or designees shall
have any liability to the Lessee for actions taken pursuant to this Article VI,
any other provision of this Agreement or any other Transaction Documents, except
as otherwise provided by Law.
(d) WAIVER OF DEFENSES. Each of Lessee and the Member hereby
waives any and all defenses, either by way of set-off as to matters arising
prior to the date hereof or any other defenses, which Lessee presently believes
it has or which Lessee may have in the future relating to monetary defaults
under this Agreement or any other Transaction Document.
SECTION 6.03 BCC EVENTS OF DEFAULT. Should BCC breach any
covenant, agreement, or obligation of BCC in any Transaction Document, or should
BCC breach any representation or warranty made to Lessee or the Member in any
Transaction Document in any material way or should any BCC Affiliate breach any
covenant, agreement or obligation of such BCC Affiliate in any Transaction
Document to which such BCC Affiliate is a party, then, subject in all events to
the provisions of Section 7.03 below, any such event shall constitute a BCC
Default. In the event of a BCC Default, the Lessee and Member shall have the
following remedies: (i) to pursue any remedy whatsoever in Law or in equity
against BCC and/or (ii) to terminate all obligations of the Member and the
Lessee to BCC and any BCC Affiliate under any or all Transaction Documents,
including obligations of the Member under the Option Agreement. Such remedies
may be exercised concurrently, and no remedy shall be exclusive of any other
remedy available to the Member and the Lessee. Notwithstanding the foregoing, in
no event shall BCC or any BCC Affiliate be liable for any consequential,
incidental, special or similar form of damages to the Lessee or the Member.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 RIGHT TO CURE DEFAULTS UNDER TRANSACTION DOCUMENTS.
The Member and Lessee shall promptly give BCC a copy of any notice of a default
or event of default under any Lease Document or Senior Credit Document received
from Lessor. BCC shall have the right, but not the obligation, to cure such
default or event of default in accordance with the Working Capital Assurance
Agreement.
SECTION 7.02 CONFIDENTIALITY.
(a) Lessee and the Member hereby covenant and agree, on behalf of
Lessee, the Member and all Lessee Affiliates, that all Confidential Information
(as hereinafter defined) will be held and treated by Lessee, the Member, Lessee
Affiliates and the agents and employees of
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Lessee, the Member and Lessee Affiliates in confidence and will not, except as
explicitly consented to by BCC in its sole discretion, be disclosed by Lessee,
the Member, Lessee Affiliates or the agents and employees of Lessee, the Member
or Lessee Affiliates, in any manner whatsoever, in whole or in part, and will
not be used by the Member, Lessee, Lessee Affiliates or the agents and employees
of Lessee, the Member or Lessee Affiliates for any purpose whatsoever. Lessee
and the Member further agree on behalf of Lessee, the Member and Lessee
Affiliates (i) to disclose Confidential Information only to Lessee's employees
who need to know the Confidential Information for purposes related to the
Facility, (ii) to employ all reasonable procedures to ensure that neither the
Lessee, the Member, or Lessee Affiliates, nor any of their respective agents or
employees use the Confidential Information in connection with trading in the
securities of BCC or communicate such information to others who so trade in such
securities and (iii) that any Confidential Information not returned to BCC or
the Management Firm, as applicable, will be held by Lessee and kept subject to
the terms of this Section or destroyed.
(b) As used in this Section, "Confidential Information" means all
information and data containing or otherwise reflecting information concerning
BCC or any BCC Affiliate, or any Phase Facility, which is not available to the
general public but is material to the business, financial condition, or
prospects of BCC and BCC Affiliates or otherwise would be material to making an
investment decision with respect to the publicly traded securities of BCC,
together with analyses, compilations, studies or other documents, whether
prepared by BCC or any other Entity, which contain or otherwise reflect such
information; provided, however, Confidential Information shall in no event
include information that has become public through no wrongful action of Lessee
or the Member or matters for which the Lessee or the Member are required to
disclose pursuant to Laws.
SECTION 7.03 CURE PERIOD FOR BCC. With respect to all obligations
of BCC or a BCC Affiliate under the Transaction Documents, in no event shall BCC
or such BCC Affiliate be in default regarding any such obligations unless and
until Lessee and/or the Member provides notice to BCC of such default and a
period of no less than ten (10) days (or such longer period as may be provided
in the Transaction Documents) to cure such default.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 DEFINITIONS; INTERPRETATION; MISCELLANEOUS.
Capitalized terms used but not otherwise defined in this Agreement have the
respective meanings specified in Appendix 1 hereto; the rules of interpretation
and other provisions set forth in Appendix 1 hereto shall apply to this
Agreement.
SECTION 8.02 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, or by Federal Express or other recognized overnight courier
or sent by registered or certified U.S. mail, return receipt requested or sent
by facsimile or telecopy transmission and addressed:
(i) If to the Lessee or any Member, at:
Financial Care Investors of Loyalsock, LLC
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
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(ii) If to BCC, at
c/o BCC Development and Management Co.
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
Att: Legal Department
Fax: (000) 000-0000
with a copy to
Xxxxxx X. Xxxxxxxx
Xxxxxxxxxxx & Xxxxxxxx, LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
or to such other address or facsimile number as a party may designate by notice
to the other parties hereto. Each notice given hereunder shall simultaneously be
provided (by the party giving such notice) to Lessor and its counsel at the
address for such parties identified in the Lease.
SECTION 8.03 JURISDICTION. THE LESSEE AND THE MEMBER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY PENNSYLVANIA COURT OR
FEDERAL COURT SITTING IN PENNSYLVANIA IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO WHICH
THE LESSEE IS A PARTY, AND THE LESSEE AND THE MEMBER HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN SUCH PENNSYLVANIA COURT OR IN SUCH FEDERAL COURT. THE LESSEE AND
THE MEMBER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE LESSEE AND THE MEMBER IRREVOCABLY CONSENT TO THE SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
LESSEE AT ITS ADDRESS SPECIFIED IN SECTION 8.02. THE LESSEE AND THE MEMBER AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF BCC TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
BCC TO BRING ANY ACTION OR PROCEEDING AGAINST THE LESSEE OR ITS PROPERTY (OR THE
MEMBER OR THE MEMBER'S PROPERTY) IN THE COURTS OF OTHER JURISDICTIONS.
SECTION 8.04 PERFORMANCE OF DUTIES. The Lessee's obligations, and
the obligation of the Member, under this Agreement and the other Transaction
Documents shall be
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performed by the Lessee and the Member at their sole cost and expense. If the
Lessee or the Member shall fail to do any act or thing which it or they have
covenanted to do under this Agreement or any of the other Transaction Documents,
BCC may, but shall not be obligated to, do the same or cause it to be done
either in the name of BCC or in the name and on behalf of the Lessee or the
Member, and the Lessee and the Member hereby irrevocably authorizes BCC to so
act.
SECTION 8.05 INDEMNIFICATION. The Lessee and the Member agree to
reimburse BCC for all costs and expenses, including reasonable counsel fees and
disbursements, incurred, and to indemnify and hold BCC harmless from and against
all losses suffered by BCC in connection with any breach by Lessee or the Member
of any covenant, agreement, representation or warranty under any Transaction
Document,
The Lessee shall indemnify BCC as provided herein upon demand and
in immediately available funds.
SECTION 8.06 INJUNCTIVE RELIEF. All parties recognize that, in the
event BCC, the Lessee or the Member fails to perform, observe or discharge any
of its or their obligations or liabilities under this Agreement or any of the
other Transaction Documents, any remedy of Law may prove to be inadequate
relief, therefore, BCC, the Lessee and the Member agree that the non-defaulting
party(ies) shall be entitled to temporary and permanent equitable relief in any
such case without the necessity of proving actual damages.
SECTION 8.07 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Lessee, the Member and BCC and their respective
personal representatives, heirs, successors and assigns, except that Lessee
shall have no right to assign its rights hereunder or any interest herein.
SECTION 8.08 WAIVERS.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN THE LESSEE, THE MEMBER AND BCC WOULD BE BASED ON DIFFICULT AND COMPLEX
ISSUES OF LAW AND FACT. ACCORDINGLY THE LESSEE, EACH MEMBER AND BCC, HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY
COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE LESSEE
AND/OR THE MEMBER ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE
LESSEE, THE MEMBER AND BCC OF ANY KIND OR NATURE, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE, AND WHETHER NOW EXISTING OR HEREAFTER ARISING, AND LESSEE
AND THE MEMBER HEREBY AGREE AND CONSENT THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE DECIDED BY A COURT TRIAL, IF BCC SO CHOOSES, WITHOUT JURY AND BCC MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE LESSEE AND THE MEMBERS TO THE WAIVER OF THE RIGHT TO TRIAL
BY JURY.
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(b) FURTHER, THE LESSEE AND THE MEMBER WAIVE THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 8.09 CONFLICT WITH LEASE DOCUMENTS
This Agreement is subject to the covenants and agreements
contained in the Lease and other Lease Documents. In the event of any conflict
between the provisions of this Agreement and the Lease Documents, the provisions
of the Lease Documents shall control.
SECTION 8.10 THIRD PARTY BENEFICIARY
BCC, the Member and the Lessee each acknowledge and agree that
this Agreement and the rights hereunder are intend to benefit, in addition to
the parties hereto, the Lessor, who shall be deemed to be a third party
beneficiary hereof. Without limiting the generality of the foregoing, (i) the
representations, warranties, affirmative covenants and negative covenants of
Lessee and the Member contained herein shall inure to the benefit of Lessor
(together with BCC) and (ii) the Lessor may enforce any or all of the provisions
herein contained. BCC hereby acknowledges and agrees that any security interest
BCC acquires in personal, intangible and other property of the Lessee, including
the Collateral Account (but not the Equity Interests) or the Leasehold Mortgage
pursuant to this Agreement shall be and is subordinate to the security interests
of Lessor created under the Lease and the Senior Credit Documents.
SECTION 8.11 NO AMENDMENT
BCC, Lessee and the Member hereby agree that no Transaction
Document shall be amended, modified, terminated (except for terminations
resulting from the Option or the Asset Purchase Option) or altered in any manner
without the prior written consent of the Lessor.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Shortfall Funding Agreement to be executed by their
respective officers or authorized agents as of the date first above written.
ATTEST: FINANCIAL CARE INVESTORS OF
[______________], LLC,
a Delaware Limited Liability Company,
____________________________________ By:______________________________________
Name:____________________________________
Title:___________________________________
ATTEST: BALANCED CARE CORPORATION
____________________________________ By:______________________________________
Title:___________________________________
ATTEST: FINANCIAL CARE INVESTORS, LLC.,
A Delaware Limited Liability Company,
____________________________________ By:______________________________________
Title:___________________________________
S-2
[Shortfall Funding Agreement]
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OMITTED SCHEDULE AND EXHIBITS
SCHEDULE 1: MEMBER OF LESSEE
EXHIBIT A: FORM OF NOTE ATTACHED
EXHIBIT B: FORM OF LEASEHOLD MORTGAGE ATTACHED
EXHIBIT C: FORM OF OPTION AGREEMENT
