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EXHIBIT 10.71
WORKING CAPITAL ASSURANCE AGREEMENT
(Ravenna, Ohio)
THIS AGREEMENT is made as of February 6, 1998, by and among BALANCED
CARE CORPORATION, a Delaware corporation, with a principal place of business at
0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxxxx, XX 00000 ("BCC") and Capstone
Capital Corporation, a Maryland corporation, with a principal place of business
at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000, Attn: Xxxxx X.
XxXxxxx (the "Lessor").
W I T N E S S E T H:
WHEREAS, the Lessor and BCC at Ravenna, Inc., entered into that certain
Lease Agreement dated as of March 28, 1997 (the "Lease") relating to certain
premises located in Ravenna, Ohio, which Lease was assigned to Extended Care
Operators of Ravenna, LLC, a Delaware limited liability company (the "Lessee")
pursuant to that certain Assignment, Assumption and Amendment of Lease Agreement
(the "Assignment"), and all capitalized terms used herein and not otherwise
defined herein shall have the same meanings as ascribed to such terms in the
Lease; and
WHEREAS, pursuant to a Shortfall Funding Agreement dated of even date
herewith (the "Shortfall Agreement"), and a Deposit Pledge Agreement dated of
even date herewith (the "Deposit Pledge"), each among the Members (as defined in
Appendix 1 to the Shortfall Agreement) Lessee and BCC, Lessee has or will
deposit funds into the Working Capital Reserve (as defined in the Shortfall
Agreement) to fund certain operational losses anticipated in connection with the
Project; and
WHEREAS, as additional security for the obligations of Lessee under the
Lease Documents, as defined in Appendix 1 attached to the Shortfall Funding
Agreement (the "Lease Obligations"), the Lessor has requested the execution and
delivery of this Agreement.
NOW THEREFORE, for good and valuable consideration paid by each of the
parties hereto to the other, the receipt and sufficiency of which is hereby
acknowledged and in consideration of the covenants and agreements set forth
herein, the parties hereto agree as follows:
1. Subject to the terms of Section 4 hereof, from the date hereof
until the complete payment and performance of the Lease Obligations, BCC
unconditionally agrees to loan to the Lessee, sufficient funds, by means of
working capital loans (collectively, the "Working Capital Loans"), to pay and
satisfy the amount by which the Lessee's cash requirements to meet its
obligations (including, without limitation, operating expenses, debt service and
the Lease Obligations) due and payable during any month exceed the gross
revenues received by the Lessee
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during such month (the "Shortfall"). Such Working Capital Loans shall be made
pursuant to the Shortfall Agreement.
2. Subject to the terms of Section 4 hereof, but without regard
to any bankruptcy, default, breach of condition or failure to satisfy any
condition under the Shortfall Agreement, BCC shall, without further direction,
advance to the Lessee the amount equal to the Shortfall in a timely fashion so
that the Lessee is able to meet all of its working capital obligations
(including, without limitation, the Lease Obligations) when due. Without
limiting the generality of foregoing, BCC shall make Working Capital Loans to
Lessee to fund Shortfalls even if Lessee fails to make contributions on a timely
basis to the Working Capital Reserve as provided in Section 1.01 of the
Shortfall Agreement.
3. BCC acknowledges that the covenants and agreements made
hereunder by BCC are being made to induce the Lessor to enter into and accept
the Lease and enable the Lessee, upon the complete disbursement of the Working
Capital Reserve, to fulfill its working obligations, including, without
limitation, the Lease Obligations. Accordingly, it is expressly intended by BCC
that the covenants and agreements by BCC hereunder may be relied upon and
enforced by the Lessor.
4. Notwithstanding anything to the contrary set forth herein,
BCC's obligation to provide the Working Capital Loans, and advance Shortfalls,
to the Lessee shall not commence until such time as the full amount actually
deposited by Lessee in the Working Capital Reserve has been depleted.
5. The obligations of BCC hereunder shall not be affected by the
termination, discontinuance, release or modification of any agreement from any
endorser, surety or guarantor of the Lease Obligations. Notwithstanding anything
to the contrary contained herein or in the Lease, the Lessor hereby covenants
and agrees with BCC that the Lessor shall not amend, modify or otherwise alter
the Lease or any other document executed in connection therewith (collectively,
the "Lease Documents") without BCC's prior written consent, in each instance,
which consent, shall not be unreasonably withheld, conditioned or delayed.
In addition, the Lessor hereby covenants and agrees with BCC that,
except in connection with the exercise of any of its rights and/or remedies
under the Lease Documents, the Lessor shall not terminate the Lease without the
prior written consent of BCC, which consent shall not be unreasonably withheld,
conditioned or delayed.
6. The obligations of BCC hereunder shall not be affected by any
change in the beneficial ownership of the Lessee or by reason of any disability
of the Lessee. This Agreement shall be in addition to any guaranty or other
security for the Lease Obligations, and it shall not be prejudiced or rendered
unenforceable by the invalidity of any such guaranty or security. This Agreement
shall continue to be effective or be reinstated, as the case may be, if, at any
time, any payment of the Lease Obligations is rescinded or must otherwise be
returned by the Lessor upon the insolvency, bankruptcy or reorganization of the
Lessee or otherwise, all as though such payment had not been made.
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7. (a) Without limiting BCC's obligation to provide the
Working Capital Loans, upon the occurrence of any default under any of the Lease
Documents, BCC shall have the right, but not the obligation, to cure such
default within any applicable notice and grace periods (or in the event of no
grace period, within 3 days after receipt by BCC of notice of such default) and,
to the extent permitted by law, enter upon the Property, if necessary, for such
purpose and take all such actions as BCC may deem necessary or appropriate to
remedy such default. The Lessor agrees to give written notice to BCC of any
default by Lessee under the Lease or any other Lease Document for which Lessor
becomes aware. The Lessor agrees to accept any remedy performed by BCC as if the
same had been performed by the Lessee.
(b) Lessor acknowledges that BCC has the right to acquire
all of the assets of Lessee pursuant to the Shortfall Agreement or all of the
Equity Interests (as defined in the Shortfall Agreement) pursuant to the Option
Agreement (as defined in the Shortfall Agreement).. In the event that BCC or an
affiliate of BCC exercises its rights to acquire either the assets or the Equity
Interests, (A) Lessor hereby consents to the transfer of the Lease to BCC or the
BCC Affiliate, and shall recognize such purchaser as Lessee under the Lease and
other Lease Documents so long as (i) such purchaser executes and delivers to
Lessor such documents, instruments, affidavits and opinions as Lessor may
reasonably request and (ii) in the event the purchaser is an affiliate of BCC,
BCC shall provide a guaranty of the Lease Obligations in form and substance
reasonably satisfactory to Lessor and (B) Lessor shall release Lessee and any
guarantor of Lessee's obligations upon the consummation of such transfer.
8. Any notice, request, demand, statement or consent made
hereunder shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally recognized commercial overnight delivery service with provisions for
a receipt, postage or delivery charges prepaid, and shall be deemed given when
postmarked or placed in the possession of such mail or delivery service and
addressed as follows:
IF TO BCC: Balanced Care Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
Attn: President
WITH COPIES TO: Balanced Care Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
Attn: General Counsel
and
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
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IF TO THE LESSOR: Capstone Capital Corporation
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. XxXxxxx
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to BCC or the
Lessee by the Lessor at any time shall not imply that such notice or any further
or similar notice was or is required.
9. This Agreement shall be construed, and the rights and
obligations of the Lessor and BCC shall be determined, in accordance with the
laws of the State of Maryland.
10. This Agreement and BCC's obligations hereunder shall
automatically terminate upon BCC's purchase of all of the issued and outstanding
equity of the Lessee or substantially all of the assets of Lessee.
11. The Lessor covenants and agrees with BCC that the Lessor shall
not consent to any assignment of the Lessee's interest under the Lease (except
to BCC or an affiliate of BCC, or as otherwise expressly provided in Section
7(b) of this Agreement) or any transfer of substantially all of the Lessee's
assets or any transfer of the issued and outstanding equity of the Lessee
without the prior written consent of BCC, which consent, BCC may withhold in its
sole and absolute discretion. In addition, in the event that, in violation of
the terms of the Lease, (A) the Lessee attempts to assign its interest in the
Lease (or transfer substantially all of its assets), (B) the current holders of
the issued and outstanding equity of the Lessee attempt to transfer any such
equity or (C) if any of the events described in Section {ADD SECTION IN LEASE ON
BANKRUPTCY AS DEFAULT) of the Lease occurs with respect to Lessee, the Lessor
covenants and agrees with BCC that, subject to applicable law, the Lessor shall
terminate the Lease (in accordance with the terms thereof) and shall enter into
a new lease of the Property with BCC (or any of its wholly-owned subsidiaries,
provided, that, BCC executes and delivers a guaranty of any such lease, in form
and substance acceptable to the Lessor), in form and substance acceptable to the
Lessor; provided, however, that any such lease shall be substantially similar to
the Lease. In connection with the execution and delivery of any such lease, (Y)
BCC and its Subsidiaries shall execute and deliver any additional documents that
the Lessor may request, in form and substance similar to the Lease Documents and
(Z) BCC shall deliver to the Lessor such evidence as Lessor shall request, in
form and substance acceptable to the Lessor, that the new lease and all other
documents executed and delivered in connection therewith have been duly
authorized, executed and delivered and are enforceable. BCC agrees to pay all of
the costs and expenses reasonably incurred by the Lessor (including, without
limitation, attorneys' fees and expenses) in connection with the performance of
the Lessor's obligations under this Section 11.
12. (a) Entire Agreement . This Agreement contains the entire
understanding among the parties hereto with respect to its subject matter and
supersedes any prior understandings or agreements between the parties with
respect to such subject matter.
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(b) Amendments. This Agreement may be modified or amended
only by a written instrument executed by the Lessor, the Lessee and BCC.
(c) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
(d) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which together shall constitute but a single instrument.
(e) Future Cooperation. Each party covenants and agrees
to take such further action and execute such further documents as may be
necessary or appropriate to carry out the intention of this Agreement.
(f) Successors and Assigns. This Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
(g) Certain Covenants. BCC and BCC's Affiliates shall
maintain, on a consolidated basis, the following:
(i) a ratio of consolidated current assets to
consolidated current liabilities equal to or greater than 1.0 to 1.0;
(ii) a tangible net worth equal to or greater
than $5,000,000, unless otherwise approved or waived by Lessor, approval or
waiver of which shall not be unreasonably withheld (and for purposes of this
Subsection, the line item identified as "Mandatorily Redeemable Preferred B
Stock" reflected on BCC's consolidated financial statements shall be included in
BCC's shareholder equity; and
(iii) a Consolidated Cash Flow Coverage not less
than 1.0 to 1.0, where "Consolidated Cash Flow Coverage" shall mean a ratio of
(A) earnings before interest, taxes, depreciation, amortization, rent and its
home expense minus an assumed {five} percent (5%) management fee to (B) all
interest and rent payments.
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EXECUTED as a sealed instrument as of the date first written above.
WITNESS: BCC:
BALANCED CARE CORPORATION, a
Delaware corporation
/s/ Signature Illegible By: /s/ Signature Illegible
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Name: Name:
Title:
WITNESS: LESSOR:
CAPSTONE CAPITAL CORPORATION
/s/ Signature Illegible By: /s/ Signature Illegible
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Name: Name:
Title:
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Schedule to Exhibit 10.71 filed pursuant to Instruction 2 to Item
601(a) of Regulation S-K
Working Capital Assurance Agreement
Location Entities
Harrisburg, PA BCC at Harrisburg, Inc.;
Extended Care Operators of Harrisburg LLC
Greensboro, NC BCC at Greensboro, Inc.;
Extended Care Operators of Greensboro LLC
