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Exhibit 10.22
FORM OF SECOND SERIES OPTION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of the Documentation
Date, between THE PARTIES LISTED ON Schedule 1 attached hereto (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, collectively, Optionor is the owner of 100% of the
equity interests (the "EQUITY INTERESTS") of _________________________________,
a Delaware limited liability company (the "COMPANY"), which Equity Interests are
evidenced by certificate number 1 of the Company, and represent 100% of the
equity interests in the Company; and
WHEREAS, the Company executed and delivered that certain Lease
and Security Agreement dated as of the Documentation Date (the "LEASE") whereby
the Company leased from Nationwide Health Properties, Inc., a Maryland
corporation (the "LESSOR") property, together with all improvements built or to
be built thereon, located in ___________________________, as more fully
described in the Lease (the "PROPERTY"); and
WHEREAS, the Company and _________________________________, a
Delaware corporation (the "MANAGEMENT FIRM") have entered into that certain
Management Agreement dated as of the Documentation Date (the "MANAGEMENT
AGREEMENT") whereby the Company has appointed the Management Firm as the
exclusive manager and operator of the Facility; and
WHEREAS, BCC, Optionor and the Company have entered into that
certain Shortfall Funding Agreement dated as of the Documentation Date (the
"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").
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(b) In consideration of the grant of the Option to BCC, BCC
shall make the following payments (the "OPTION PAYMENTS") to Optionor: (1) on
the earlier of one day after the issuance of the certificate of occupancy for
the Facility or twelve months following the Documentation Date (the "First
Payment Date"), an amount equal to the Current Yield (as hereinafter defined) on
the Working Capital Reserve actually funded under the Senior Note to or for the
benefit of the Company through such date, payable in arrears for the period
commencing on such funding date or dates through the First Payment Date, plus an
amount equal to the Current Yield on the Working Capital Reserve actually funded
under the Senior Note to or for the benefit of the Company through the First
Payment Date for the next succeeding 12 month period, payable in advance, (2) on
that date which is twelve months after the First Payment Date (the "Second
Payment Date"), an amount calculated as 25% of the Current Yield on the Working
Capital Reserve actually funded under the Senior Note to or for the benefit of
the Company through the Second Payment Date, representing the first quarterly
installment of the annual Current Yield for the following 12 month period,
payable in advance, and (3) thereafter, on the first day of the month of each
calendar quarter following the Second Payment Date (i.e. January 1, April 1,
July 1 and October 1, as applicable) and for so long as this Agreement is in
effect (but ending in all events at the time of exercise of the Option), 25% of
the Current Yield on the Working Capital Reserve actually funded from time to
time under the Senior Note to or for the benefit of the Company, compounded on
an annual basis, representing quarterly installments of the annual Current
Yield, payable in advance. "Current Yield" as used in this Agreement means an
annual return equal to 27.5% of the Working Capital Reserve actually funded from
time to time through the date of such calculation. 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 pursuant to the
Senior Note to or for the benefit of the Company, plus (ii) an amount calculated
as the Current Yield on the Working Capital Reserve actually funded under the
Senior Note to or for the benefit of the Company, compounded annually through
the Closing Date (as defined below), plus (iii) the aggregate amount of all
Advances and all other obligations due and payable by the Company or 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. The aggregate amount of all Advances and all
other obligations due and payable by the Company 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. To
avoid any doubt, BCC shall receive a credit against the Purchase Price for
Option Payments paid as Current Yield in advance, to the extent that such
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advanced Option Payments are attributable to Current Yield accruing after the
Closing Date.
2. CLOSING. (a) The closing of the purchase of the Equity
Interests (the "CLOSING"), pursuant to the exercise of the Option, shall take
place at such time and location in Pennsylvania as shall be designated by BCC
upon three (3) days prior written notice to Optionor (the "CLOSING DATE"). At
the Closing (i) BCC shall deliver the Purchase Price and (ii) Optionor shall
deliver to BCC (A) the certificates representing the original Equity Interests,
together with such powers and other instruments as BCC may request and (B) the
certificate of an appropriate officer of the Company stating that the transfer
of the Equity Interests to BCC has been recorded on the books and records of the
Company, and affirming to BCC such additional matters as BCC may reasonably
request. Additionally, both BCC and Optionor shall take such further actions and
execute and deliver such further documents and instruments as either party may
reasonably request. The Equity Interests shall be transferred to BCC free and
clear of all Liens and restrictions of any kind or nature, except for Liens in
favor of BCC as expressly provided herein and Liens in favor of Lessor as
expressly provided in the Lease.
(b) Notwithstanding 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, including advances made under the Senior Note to or for the
benefit of the Company (such advances, together with all interest, penalties and
other costs and fees assessed or incurred in connection therewith, are referred
to herein as the "BORROWINGS"), the Borrowings shall be repaid in full from the
Purchase Price at the Closing. Optionor shall give BCC prior written notice
before authorizing the Company to make any Borrowings, detailing the amount
thereof. BCC shall have the right at the Closing to pay to the holder of any
note evidencing Borrowings from the Purchase Price the total amount outstanding
with respect to the Borrowings.
3. COVENANTS OF OPTIONOR/LEGEND/PLEDGE. (a) Optionor shall not
(i) sell, assign, convey, pledge (except as expressly provided herein), encumber
or otherwise transfer (by operation of law or otherwise) any of Optionor's
rights, title or interest under, in or to the Equity Interests, (ii) cause or
permit the Company to merge, consolidate, dissolve, liquidate, change its
capital structure, issue new or substitute Equity Interests (including the
issuance of warrants) or sell, convey, assign or otherwise transfer all or any
portion of the Company's assets or (iii) cause or permit the Company to
otherwise take any action that with the passage of time and/or the giving of
notice would constitute a default under or a breach of any covenant or provision
of the Shortfall Agreement or the other Transaction Documents.
(b) Optionor shall cause the Company to place the following
legend on all certificates representing Equity Interests:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION TO PURCHASE IN FAVOR OF BALANCED CARE CORPORATION
AND ITS SUCCESSORS AND ASSIGNS, AS MORE FULLY SET
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FORTH IN THAT CERTAIN OPTION AGREEMENT DATED AS OF JUNE 26,
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 shall be further memorialized by
the Pledge Agreement. For purposes of perfecting the security interest in the
Equity Interests, Optionor shall deliver herewith to BCC possession of all
certificates, instruments, documents and other evidence of Optionor's ownership
of the Equity Interests accompanied by undated powers of attorney or other
appropriate duly executed blank transfer powers. Optionor shall take such
further actions, and execute such further documents, as may be requested by BCC
to effect the pledge and grant of a security interest in the Equity Interests.
(d) In addition to the other covenants stated herein, each
Optionor covenants and agrees that each Optionor shall not cause the Company to,
without the prior written consent of BCC: (i) except as otherwise expressly
permitted under the Transaction Documents or the Lease Documents, create or
suffer to exist any Lien or any other type of preferential arrangement, upon or
with respect to any of the properties of the Company, whether now owned or
hereafter acquired, or assign any right to receive income, (ii) except as
otherwise expressly permitted under the Transaction Documents or the Lease
Documents, make any distribution of cash or other property or declare or pay any
dividend or distribution on any securities issued by the Company or Optionor
(provided, however, this restrictions shall not be construed to (A) prohibit
Optionor from receiving Option Payments in accordance with the terms and
conditions of this Agreement and distributing Option Payments without
restriction or (B) prohibit distributions for the purpose of paying tax
liabilities as provided in Section 1 of the Management Agreement), (iii) engage
in any business venture or enter into any agreement with respect to any business
venture, except as expressly provided in the Transaction Documents and the Lease
Documents with respect to the Facility, (iv) except as otherwise expressly
permitted under the Transaction Documents and the Lease Documents, convey,
transfer, lease, sublease, assign or otherwise dispose of (whether in one
transaction or in a series of transactions) any of the assets of the Company
(whether now owned or hereafter acquired) to, or acquire all or substantially
all of the assets of, any person or Entity, (v) create, assume, guaranty or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding, any Indebtedness,
except as expressly provided in the Lease Documents or the Transaction
Documents, (vi) form, organize or participate in the formation or organization
of any Entity, or make any investment in any newly formed or existing Entity,
(vii) amend, supplement or otherwise modify the terms of the Articles of
Organization or the Operating Agreement of the Company in any way, (viii) enter
into any transaction with Lessor or any affiliate or related party to or with
Lessor, other than pursuant to the Transaction Documents and the Lease
Documents, (ix) merge or consolidate with, purchase all or any substantial part
of the assets of, or otherwise acquire any Entity, (x) issue any equity
interests in the Company or options, warrants or other rights to purchase any
equity interests in the Company or any securities convertible or exchangeable
for equity interests in the Company, or commit to do any of the foregoing, other
than in favor of BCC in accordance with the Transaction Documents or (xi) enter
into any administrative or other similar agreement with any party relating to
the provision of administrative
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or management service for the benefit of the Company.
4. REPRESENTATIONS AND WARRANTIES. Optionor represents and
warrants to BCC that (i) Optionor is the sole and exclusive owner of the Equity
Interests free and clear of all Liens and restrictions (except Permitted Liens),
and Optionor's ownership interest in the Equity Interests is appropriately noted
and documented on the books and records of the Company, (ii) this Agreement and
the other Transaction Documents to which 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; provided, however, notwithstanding any provision to the
contrary contained herein or in the other Transaction Documents, if the
foregoing is false or misleading (through no fault of Optionor or the Company),
in no event shall BCC fail to fund Advances under the Shortfall Agreement as and
when required or raise as a defense to the consequences of failing to make
Option Payments that the foregoing was not true and correct, but neither the
Company nor the Optionor shall raise as a defense to the obligations of the
Company or the Optionor hereunder or under any other Transaction Document the
failure of the foregoing from being true and correct in all material respects,
(iii) no Person or Entity holds any Equity Interests in the Company, other than
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 transferability of the Equity Interests is
restricted and Optionor (and each person or Entity that has an ownership
interest in Optionor) must be able to bear the economic risks of ownership of
the Equity Interests for an indefinite period of time. The provisions of this
Section shall survive the Closing and purchase of the Equity Interests.
5. BINDING EFFECT. The rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their heirs, personal representatives, successors and assigns.
6. ASSIGNMENT. Optionor may not assign, pledge, hypothecate or
otherwise transfer its rights, obligations and duties hereunder without the
prior written consent of BCC; provided, however, Optionor shall be entitled to
assign all or a portion of its rights to receive payments hereunder, but such
assignment shall in no event relieve Optionor from its liabilities and
obligations hereunder. BCC shall have the right to transfer and assign its
rights, obligations and duties hereunder to any affiliate or third party without
the consent of the Optionor; provided,
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however, no such transfer or assignment shall relieve BCC of its obligations
hereunder.
7. DEFAULT. (a) In the case of default by Optionor hereunder,
BCC shall be entitled, after ten (10) days prior written notice to Optionor, to
(a) seek an action in specific performance and/or (b) seek such other relief,
including without limitation an action at law for damages, as may be available.
Optionor shall pay all reasonable counsel fees of BCC in connection with
enforcing any rights or benefits of BCC hereunder or under the other Transaction
Documents. The rights and remedies of BCC under this 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. 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.
(c) Notwithstanding the provisions of Section 7(b) and so long
as no Event of Default has occurred under any Transaction Document or Lease
Document which was caused by either Optionor or the Company, in the event that
BCC fails to make Option Payments as provided hereunder, after ten (10) days
prior written notice of such failure sent by Optionor to BCC, Optionor shall
have the following remedies and rights, which remedies and rights shall be the
sole and exclusive remedies and rights of Optionor in the case of such failure:
(i) BCC shall no longer have any right to exercise the Option or the Asset
Purchase Option, (ii) all Notes issued by the Company pursuant to the Shortfall
Agreement shall automatically be amended to provide that interest due under the
Notes will accrue and not be due and payable until the date which is the fifth
(5th) anniversary of the date of issuance of the first Note so issued by the
Company pursuant to the Shortfall Agreement and (iii) the lien encumbering the
Equity Interests and other assets in favor of BCC arising hereunder and under
the Pledge Agreement and the Leasehold Mortgage shall automatically be released
and terminated. BCC agrees, after the failure to make Option Payments and an
opportunity to cure as provided herein, to execute such documents and
instruments, and accept delivery of such replacement Notes (returning the Notes
to be replaced) as Optionors may reasonably request to effect the provisions of
Subsections (c)(i), (c)(ii) and (c)(iii) above.
8. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person, Federal Express or other recognized overnight courier or sent by
registered or certified U.S. mail, return receipt requested or sent by facsimile
or telecopy transmission and addressed:
(i) If to the Optionor, at:
Sherry, Coleman & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
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Xxxxxxx Xxxxx, XX 00000
(ii) If to BCC at
c/o BCC Development and Management Co.
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: OPTIONORS:
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WITNESS:
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ATTEST/WITNESS: BALANCED CARE CORPORATION
By: By:
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Title: Title:
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OMITTED SCHEDULE
LIST OF MEMBERS/OPTIONORS
