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Balanced Care - Bridge Loan Agreement
This BRIDGE LOAN AGREEMENT (this "Agreement") is made and entered into as of this 4th day of April, 2001, among Balanced Care Corporation, a Delaware corporation (the "Company"), VXM Investments Limited, a Cayman Islands corporation ("VXM"), HR Investments Limited, a Cayman Islands corporation, and RH Investments Limited, a Cayman Islands corporation (each, a "Lender" and collectively, the "Lenders"), and VXM, as agent for the Lenders (in such capacity, the "Agent").
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following definitions shall apply for purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" of any Person means any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person. For the purposes of this definition, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal state law for the relief of debtors.
"Business Day" means a day other than (i) a Saturday, a Sunday or a day on which banking institutions in the City of New York, New York are authorized by law, regulation or executive order to remain closed or (ii) any of the first, second, seventh or eighth day of Passover, the first or second day of Shavouth, the first or second day of Rosh Hashanah or Yom Kippur, the first or second day of Sukkoth, Shemini Azereth or Simchas Torah, and the day prior to any of the foregoing days. 2 If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day.
"Collateral" means (i) any and all shares of capital stock of the entities identified on Schedule I hereto beneficially owned or otherwise held from time to time, directly or indirectly, by the Company including, without limitation, the shares of capital stock set forth on Schedule I hereto (the "Pledged Stock") and (ii) all proceeds of the Pledged Stock, including, without limitation, all cash, securities or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for any of or all such Pledged Stock.
"Common Stock" means the common stock, par value $0.001 per share, of the Company.
"Contract" means any contract, agreement, obligation, promise, undertaking or commitment (written or oral, express or implied, formal or informal, firm or contingent) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets are bound, and which has current operative or executory effect.
"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"Event of Default" has the meaning set forth in Section 3.5.
"GAAP" means United States generally accepted accounting principles applied on a consistent basis.
"Governmental Authority" means any (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); (c) multi-national organization or body; or (d) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature that has jurisdiction over the Company, the Subsidiaries or their respective assets and operations.
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"Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange or interest rates.
"Holder" means the Agent and any subsequent holder of any Note.
"Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing obligations in respect of a lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP or the balance deferred and unpaid of the purchase price of any property (other than contingent or "earnout" payment obligations) or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the guarantee, whether or not conditional, by such Person of any indebtedness of any other Person.
"Lien" means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
"Loan" has the meaning set forth in Section 2.1.
"Loan Commitment" means an aggregate amount equal to $27,853,524
"Maturity Date" has the meaning set forth in Section 3.2.
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"Note" has the meaning set forth in Section 2.1.
"Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, association, joint-stock company, estate, trust, labor union, organization, government or any agency or political subdivision thereof or any other entity.
"SEC" means the Securities and Exchange Commission.
"Security Documents" has the meaning set forth in Section 4.1(b)(ii).
"Subsidiary" means any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Company or one or more of its Subsidiaries.
ARTICLE II
LOANS; NOTES
1.1. Loans; Notes. On the terms and conditions set forth in this Agreement, the Lenders agree to make Loans to the Company in the aggregate amounts and on the dates set forth below (each, an "Advance Date"):
Advance Date: Amount of Loan:
April 4, 2001 $26,003,524
May 1, 2001 $ 750,000
June 1, 2001 $ 1,100,000
Notwithstanding the foregoing, the aggregate principal amount of Loans outstanding at any time shall not exceed the Loan Commitment. The aggregate amount of each Loan shall be made by the Lenders, allocated among the Lenders in such proportions as the Lenders may determine in their sole discretion, on each Advance Date against delivery of a note in the form of Exhibit 2 hereto in the original principal amount of the Loan made on such Advance Date, payable to the order of the Agent and dated such
4 5 Advance Date (each, a "Note"). The Lenders shall make the Loans on each Advance Date by advancing the amount of the applicable Loan by wire transfer of immediately available funds to an account specified by the Company. The outstanding principal balance of each Loan plus accrued and unpaid interest thereon shall mature and be payable on the Maturity Date. Each Note shall bear interest from its date on the outstanding principal balance thereof, as provided in Section 3.1. The proceeds of the Loans shall be used for the purposes set forth on Schedule 2.
ARTICLE III
TERM OF LOANS AND NOTES
3.1 Interest Rate; Payment; Usury.
(a) Provided that no Event of Default has occurred and is continuing beyond any applicable cure period and subject to the other provisions of this Agreement, during the period from and after each Advance Date until the principal and all interest on the Loan made on such Advance Date is paid in full, each Loan shall bear and accrue interest at the rate of 12% per annum. The outstanding principal amount of each Loan plus all accrued and unpaid interest thereon shall be due and payable by the Company to the Agent on the Maturity Date, by wire transfer of immediately available funds to an account specified by the Agent.
(b) During any period that an Event of Default shall have occurred and be continuing beyond any applicable cure period, interest on each Loan shall accrue at a rate equal to 14% per annum (the "Default Interest Rate"). Notwithstanding anything contained herein to the contrary, in no event shall the interest rate on any Loan, including the Default Interest Rate, exceed the highest rate permitted by applicable law. Interest on each Loan, including interest at the Default Interest Rate, shall be based on a 360 day year and interest shall accrue and be payable for the actual number of calendar days elapsed.
(c) It is the intention of the Company and the Lenders to conform strictly to applicable usury laws now or hereafter in force, and any interest payable under this Agreement or any Note shall be subject to reduction to an amount not to exceed the maximum non-usurious amount for commercial loans allowed under such applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. In the event such interest (whether designated as
5 6 interest, service charges, points or otherwise) does exceed the maximum legal rate, it shall be (i) canceled automatically to the extent that such interest exceeds the maximum legal rate; (ii) if already paid, at the option of the applicable Holder, either be rebated to the Company or credited to the outstanding aggregate principal amount of the applicable Loan; or (iii) if the Loans have been prepaid in full, then such excess shall be rebated to the Company. It is further agreed, without limiting the foregoing, that all calculations of the rate of interest contracted for, charged or received under this Agreement and the Notes that are made for the purpose of determining whether such rate exceeds the maximum legal rate shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading throughout the full stated term of each of the Loans (and any extensions of such term that may be hereafter granted) all such interest at any time contracted for, charged or received from the Company or otherwise by the Holders so that the rate of interest on account of the Loans as so calculated is uniform throughout the term thereof. If the Company is exempt or hereafter becomes exempt from applicable usury statutes or for any other reason the rate of interest to be charged on the Loans is not limited by law, none of the provisions of this paragraph shall be construed so as to limit or reduce the interest or other consideration payable under this Agreement or the Notes or under the instruments securing payment thereof.
3.2 Maturity. Unless the same shall become due earlier as a result of acceleration of the maturity, the Loans shall mature on August 4, 2001 (the "Maturity Date"), at which time the outstanding principal balance of all Loans and all accrued and unpaid interest shall become due and payable.
3.3 Prepayments. The Company may from time to time prepay any Loan, in whole or in part, at any time without penalty or the payment of any fee or charge. Any partial prepayment shall be applied first to interest which is accrued and unpaid and then to principal.
3.4 Manner of Payment. The Company shall make payments in respect of the Loans (including principal and interest) by wire transfer of immediately available funds to the account specified by the applicable Holder by notice given to the Company.
3.5 Events of Default. Each of the following constitutes an "Event of Default":
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(i) default in payment when due of the principal of or accrued interest on any Note;
(ii) failure by the Company for 15 days after notice from any Holder to comply with the provisions described in Article VI hereof;
(iii) failure by the Company for 30 days after notice from any Holder to comply with any of its other covenants or agreements in this Agreement or any Note or any of the Security Documents;
(iv) any of the representations or warranties of the Company set forth in this Agreement or any of the Security Documents or incorporated herein or therein by reference or set forth in any statement or schedule delivered pursuant to this Agreement or any of the Security Documents was untrue or incorrect in any material respect as of the date of execution of this Agreement or as of any Advance Date as if made on such date;
(v) default by the Company or any of its Subsidiaries under any mortgage, indenture or instrument, other than those previously disclosed by the Company in a periodic report heretofore filed by the Company with the SEC under the 1934 Act or which are in excess of $25,000 and not covered by insurance (the "Disclosed Defaults"), under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries, whether such Indebtedness now exists, or is created after the date hereof, which default results in the acceleration of such Indebtedness prior to its express maturity and the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates more than $10,000,000;
(vi) other than the Disclosed Defaults, default by the Company or any of its Subsidiaries under any lease, which default results in the acceleration of Indebtedness prior to its express maturity and the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates more than $10,000,000;
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(vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $1,000,000, which judgments are not paid, discharged or stayed;
(viii) the Company or any of its Subsidiaries pursuant to or within the meaning of Bankruptcy Law:
(A) commences a voluntary proceeding or files any petition
seeking relief,
(B) consents to the institution of, or fails to contravene in
a timely and appropriate manner, any such proceeding or the filing of
any such petition,
(C) applies for or consents to the appointment of a receiver,
trustee, custodian, sequestrator or similar official,
(D) files an answer admitting the material allegations of a
petition filed against it in such proceeding,
(E) makes a general assignment for the benefit of its
creditors;
(F) becomes unable, admits in writing its inability or fails
generally to pay its debts as they become due or
(G) takes corporate action for the purpose of effecting any of
the foregoing; or
(ix) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction against the Company or any of its Subsidiaries seeking:
(A) relief under any Bankruptcy Law,
(B) the appointment of a receiver, trustee, custodian,
sequestrator or similar official, or
(C) winding-up or liquidation; and
such proceeding or petition shall continue undismissed for 90 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 60 days.
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3.6 Acceleration.
(a) Declaration of Acceleration. If any Event of Default occurs and is continuing beyond any applicable cure period, any Holder may, upon written notice to the Company, declare the Note held by such Holder to be due and payable immediately; and upon any such declaration all principal and interest on such Note shall become immediately due and payable; provided, however, in the case of an Event of Default arising from any event described in clauses (viii) or (ix) of Section 3.5 hereof, all Loans and Notes shall automatically become due and payable without further action or notice on the part of any Holder.
(b) Rescission. At any time after a declaration of acceleration with respect to a Note, the Holder holding such Note may, in its sole discretion, rescind and cancel such declaration and its consequences. No such rescission shall affect any subsequent Default or impair any right with respect thereto.
3.7 Other Remedies. If an Event of Default occurs and is continuing beyond any applicable cure period, each Holder may pursue any available remedy to collect the payment of principal and interest (including interest at the Default Interest Rate) on the Note held by it or to enforce the performance of any provision of such Note or this Agreement. A delay or omission by a Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
3.8 Waiver of Past Defaults. Each Holder may waive any existing Default or Event of Default and its consequences under this Agreement. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Agreement; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
3.9 Priorities. Any sums collected by a Holder hereunder or under the Note held by it shall be applied first to all costs and expenses of collection, including reasonable attorneys' fees, then to accrued and unpaid interest (including
9 10 at the Default Interest Rate to the extent applicable) and then to principal due on the applicable Note. 1.1.
ARTICLE IV
CONDITIONS TO LENDERS' OBLIGATIONS
4.1 Conditions. The Lenders' obligations to make Loans on each Advance Date shall be subject to the satisfaction on or prior to each such Advance Date of the following conditions, except to the extent waived by the Agent in writing:
(a) The Company shall have reimbursed the Agent for its fees and expenses pursuant to the terms of Section 8.3 below;
(b) With respect to the Collateral:
(i) The Collateral shall not be subject to any Lien unacceptable to the Agent in its sole discretion, acting reasonably;
(ii) The Company and its applicable Subsidiaries shall have executed and delivered and caused to be duly filed or recorded security agreements, pledge agreements, financing statements, collateral assignments and other related agreements in favor of the Agent (collectively, the "Security Documents") in forms reasonably acceptable to the Agent and its counsel granting the Lenders a first priority perfected security interest in the Collateral;
(c) The Agent shall have received an opinion of Kirkpatrick & Lockhart LLP, counsel to the Company, in form and substance reasonably acceptable to the Agent and its counsel;
(d) Each of the representations and warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement shall have been true and correct in all material respects as of the date of execution of this Agreement and as of each Advance Date as if made on such date;
(e) The Company shall not be in default with respect to any of its covenants and agreements set forth in Article VI of this Agreement or set forth elsewhere in this Agreement;
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(f) No Default or Event of Default shall have occurred and be continuing beyond any applicable cure period;
(g) Each of the consents identified in Schedule 5.1(b) shall have been obtained and shall be in full force and effect;
(h) Other than as set forth on Schedule 4.1(h), since the date of this Agreement, there must not have been commenced or threatened against the Company, or against any Affiliate of the Company, any action, suit or proceeding (i) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby, or (ii) that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated hereby;
(i) Neither the consummation nor the performance of any of the transactions contemplated hereby will, directly or indirectly (with or without notice or lapse of time or both), contravene, conflict with or result in a violation of, or cause the Company or any Affiliate of the Company to suffer any material adverse consequence under, any applicable law or order;
(j) Since December 31, 2000, there shall not have been a material adverse change in the assets, properties, liabilities, condition (financial or otherwise), results of operations or business of the Company and its Subsidiaries, taken as a whole, and no event shall have occurred or circumstance exist that may result in such a material adverse change; and
(k) Between the date hereof and each Advance Date, there shall have been no declaration of war by the Government of the United States; at any Advance Date there shall not have occurred any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or other calamity or crisis, the effect of which is such as to make it, in the reasonable judgment of the Agent, impracticable to make a Loan; and no event shall have occurred resulting in (i) trading in securities generally on the American Stock Exchange or in the Common Stock on the principal securities exchange or market in which the Common Stock is then listed or quoted being suspended or limited or minimum or maximum prices being generally
11 12 established on such exchanges or market, or (ii) additional material governmental restrictions, not in force on the date of this Agreement, being imposed upon trading in securities generally by the American Stock Exchange or in the Common Stock on the principal securities exchange or market in which the Common Stock is then listed or quoted or by order of the SEC or any court or other governmental authority or (iii) a general banking moratorium being declared by either federal or New York authorities.
4.2 Waiver; Termination. The Agent may waive in writing any of the conditions to its obligations set forth in Section 4.1 with respect to each Advance Date in its sole discretion. If the conditions to the Lenders' obligations set forth in Section 4.1 shall not have been satisfied or waived by the Agent on or before the applicable Advance Date, the Agent may, in its sole discretion, terminate the Lenders' obligations and benefits pursuant to this Agreement without any liability on the part of the Agent or any Lender to any other Person. 1.2.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. In order to induce the Lenders to enter into this Agreement, the Company represents and warrants to the Lenders on the date hereof, which representations and warranties shall be unaffected by any investigation or lack of investigation of Company made by or on behalf of the Lenders, as follows:
(a) Organization and Standing. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own or lease its properties and assets and to conduct its business as it has been and is proposed to be conducted. The Company is qualified to do business and in good standing in each jurisdiction in which the failure to so qualify could have a material adverse effect upon its assets, properties, liabilities, condition (financial or otherwise), results of operations or business.
(b) Authority of the Company; Consents; Execution of Agreements. The Company has all necessary corporate right, power and authority to execute and deliver this Agreement, each Note, the Security Documents and the other agreements contemplated hereby and thereby and to perform the
12 13 transactions and obligations to be performed by the Company hereunder and thereunder. Except as described on Schedule 5.1(b) hereto, no consent, authorization, approval, license, permit or order of, or filing with, any Person or Governmental Authority is required in connection with the execution and delivery of this Agreement, the Notes, the Security Documents and the other agreements contemplated hereby and thereby, or the performance by the Company of the transactions and obligations to be performed by it hereunder and thereunder. The execution and delivery of this Agreement, the Notes, the Security Documents and the other agreements contemplated hereby and thereby by the Company, and the performance of the transactions and obligations contemplated hereby and thereby by the Company, have been duly authorized by all requisite corporate action of the Company, including, without limitation, by the approval of a Special Committee of the Board of Directors of the Company consisting of independent directors. This Agreement has been, and the Notes, the Security Documents and the other agreements contemplated hereby will be, duly executed and delivered by a duly authorized officer of the Company and constitutes, or when executed and delivered will constitute, a valid and legally binding agreement of the Company, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles or principles equivalent or similar to equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(c) Valid Issuance. The Notes to be issued hereunder, when issued by the Company to the Agent pursuant to the terms of this Agreement, will be duly authorized and validly issued.
(d) Conflicts; Defaults. The execution and delivery of this Agreement, the Notes, the Security Documents and the other agreements contemplated hereby and thereby by the Company, and the performance by the Company of the transactions and obligations contemplated hereby and thereby to be performed will not, directly or indirectly (i) contravene, conflict with, or result in a violation of (A) any provision of the certificate or articles of incorporation or by-laws or other organizational documents of the Company or any Subsidiary, or (B) any resolution adopted by the board of directors or the stockholders of the Company or any Subsidiary; (ii) except as set forth on Schedule 5.1(b), contravene, conflict with, or result in a violation of, or give any Governmental Authority or other Person
13 14 the right to challenge any of the transactions contemplated hereby or to exercise any remedy or obtain any relief under, any law or order to which the Company or any Subsidiary, or any of the assets owned or used by the Company or any Subsidiary, may be subject; (iii) contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any permit, license or other governmental authorization that is held by the Company or any Subsidiary or that otherwise relates to the business of, or any of the assets owned or used by, the Company or any Subsidiary; (iv) other than those in favor of the Lenders, result in the creation or imposition of any Liens or claims upon the assets of the Company or any Subsidiary or their issued and outstanding shares of capital stock; or (v) constitute an event which, after notice or lapse of time or both, would result in any of the foregoing. The Company is not presently in violation of any provision of its certificate of incorporation.
(e) Periodic Reports. The Company has furnished to the Lenders true and complete copies of each statement, report, registration statement (with the prospectus in the form filed pursuant to Rule 424(b) of the 1933 Act), definitive proxy statement and other filings filed with the SEC by the Company since January 1, 2000 and, prior to each Advance Date, the Company will have furnished the Agent with true and complete copies of any additional statements, reports and documents filed with the SEC by the Company prior to each Advance Date (collectively, the "SEC Documents"). All documents required to be filed as exhibits to the SEC Documents have been filed. The SEC Documents include all statements, reports and documents required to be filed by the Company pursuant to the 1933 Act and the 1934 Act since January 1, 2000. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1933 Act and the 1934 Act, as applicable, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed SEC Document. The financial statements of the Company and its Subsidiaries, including the notes thereto, included in the SEC Documents (the "Financial Statements"),