Balanced Care Corporation Promissory Note to Medina ALF, Inc., Centerville ALF, Inc., and Shippensburg ALF, Inc. dated March 31, 2002

Summary

Balanced Care Corporation, a Delaware company, promises to pay a total of $936,445 to Medina ALF, Inc., Centerville ALF, Inc., and Shippensburg ALF, Inc. by September 30, 2003, with possible extension by Ocwen Financial Corporation. The note is part of a settlement resolving a lawsuit over past due rent and is linked to the purchase of three assisted living facilities. Interest is only due if Balanced Care defaults, and the note is secured by a subordinate mortgage. Failure to pay or perform triggers default under related agreements.

EX-10.5 7 w59742ex10-5.txt BCC NOTE DATED 03/31/2002 Exhibit 10.5 BALANCED CARE CORPORATION PROMISSORY NOTE Columbus, Ohio $936,445.00 March 31, 2002 On or before September 30, 2003 (the "Initial Due Date"), which Initial Due Date may be extended by Ocwen Financial Corporation, a Florida corporation ("Ocwen"), in accordance with Section 1.3(a) of the Term Loan Agreement (defined hereinafter), for value received, the undersigned, Balanced Care Corporation, a Delaware corporation ("Balanced Care") promises to pay to the order of Seller (hereinafter defined), or its successors or assigns, the principal amount of Nine Hundred Thirty-Six Thousand Four Hundred Forty-Five Dollars ($936,445.00), together with interest on the unpaid principal balance of the loan made hereunder ("BCC Loan") until paid in full. The amount of principal owed to each respective Seller is as follows: (i) Medina ALF, Inc. = $318,391.30, (ii) Centerville ALF, Inc. = $413,908.69, and (iii) Shippensburg ALF, Inc. = $204,145.01. Both principal and interest are payable in federal funds or other immediately-available money of the United States of America at Ocwen Financial Corporation, 1675 Palm Beach Lakes Blvd., West Palm Beach, FL 33401. Section 1. Compromise and Settlement, Term Loan Agreement, Purchase Agreement, Deferred Purchase Price Note, and Subordinate Mortgage. This BCC Note is the BCC Note referred to in the Settlement Agreement and Release, executed by Seller, Balanced Care, Ocwen, Senior Care Operators of Ohio, LLC, Senior Care Operators of Centerville, LLC, and Senior Care Operators of Shippensburg, LLC, as of the date hereof, to resolve the suit filed in the United States District Court, Southern District of Ohio, Western Division, by Seller against Balanced Care for past due rent owed Seller ("Compromise and Settlement") and is provided also in connection with the Agreed Entry (as defined in the Term Loan Agreement). In connection with and as part of the Compromise and Settlement, a subsidiary of Balanced Care, Balanced Care Realty (OFC), Inc., a Delaware corporation ("Borrower"), has entered into the Agreement of Purchase and Sale, dated of even date herewith (as used hereinafter, "Purchase Agreement"), with Medina ALF, Inc., a Florida corporation ("Medina"), Centerville ALF, Inc., a Florida corporation ("Centerville"), Shippensburg ALF, Inc., a Florida corporation ("Shippensburg") (Medina, Centerville, and Shippensburg are collectively referred to hereinafter as "Seller"), and certain other parties, pursuant to which Borrower will purchase three (3) assisted living facilities from Seller. Borrower has provided the Deferred Purchase Price Note, of even date herewith, to Seller in payment of a portion of the purchase price (as used hereinafter "Purchase Price") under the Purchase Agreement ("Deferred Purchase Price Note"). Borrower will also borrow funds from Ocwen in order to finance a portion of the Purchase Price, as evidenced by the Term Note, of even date herewith, given by Borrower in favor of Ocwen ("Term Note") in connection with the Term Loan Agreement, of even date herewith, by and among Ocwen, Borrower, Balanced Care, Balanced Care at Medina, Inc., a Delaware corporation, Balanced Care at Centerville, Inc., a Delaware corporation, Balanced Care at Shippensburg, Inc., a Delaware corporation, and Senior Care Operators of Shippensburg, LLC, a Delaware LLC ("Term Loan Agreement"). This BCC Note and the Deferred Purchase Price Note are secured by the Subordinate Mortgage (as defined in the Term Loan Agreement). In the event of nonpayment or other nonperformance by Balanced Care of any of the terms and conditions set forth in this BCC Note or by Borrower with respect to the Deferred Purchase Price Note, it shall be considered an event of default under this BCC Note, the Deferred Purchase Price Note, and under the Subordinate Mortgage. In addition, such failure to pay and/or otherwise perform shall also be considered an Event of Default under the Term Loan Agreement. Section 2. Maturity Date; Extension. This BCC Note shall mature, by acceleration or otherwise, on the same date of maturity as the Term Note. In the absence of an Event of Default occurring under the Term Loan Agreement, it is anticipated that maturity of the Term Note will occur on the Initial Due Date. Section 1.3(a) of the Term Loan Agreement contains the terms and provisions pursuant to which an extension of the Initial Due Date may be granted by Ocwen for the Term Note. In the event that the Term Note is extended pursuant to Section 1.3(a) of the Term Loan Agreement, then this BCC Note shall be similarly extended, without further action required of either Balanced Care or Seller, and at no cost to Balanced Care. In such case, subject to the provisions of Section 6 below, the BCC Loan evidenced by this BCC Note shall be due and payable in full on the Extended Due Date (as defined in the Term Loan Agreement). Section 3. Interest Rate. This BCC Note shall bear interest during the period from the date hereof on the unpaid principal - 2 - balance of the BCC Loan made hereunder, until paid in full, at a fixed rate of two and 66/100 percent (2.66%) per annum. Such interest shall be computed on the basis of a 360-day year consisting of twelve (12) consecutive thirty (30) day months. Section 4. Interest Payment; Event of Default. No interest payments will be due under this BCC Note unless and until an Event of Default (as defined in the Term Loan Agreement) occurs and continues beyond any applicable cure period. In the event such an Event of Default shall occur and continue beyond any applicable cure period, and therefore interest shall become due hereunder, Balanced Care shall pay interest to each respective Seller on the amount of the total principal balance owed to each Seller, as set forth in the introductory paragraph hereof, from the date hereof (March 31, 2002) until the date that this BCC Note is paid in full, whether by acceleration or otherwise. Monthly interest payments shall be required after an Event of Default (as defined in the Term Loan Agreement) has occurred and is continuing beyond any applicable cure period. Such interest payments for the prior month (provided, however, that interest for the first month shall be calculated from the date hereof (March 31, 2002) to the end of the month in which the Event of Default occurs) shall be payable on the eleventh (11th) day of each month commencing the month after the month in which the Event of Default (which continues beyond any applicable cure period) occurs, and thereafter payable on the eleventh (11th) day of each month during the term of the BCC Loan. If a monthly interest payment is not made by Balanced Care and received by each respective Seller by the sixteenth (16th) day of any month during the term of the BCC Loan, including during any Extension (as defined in the Term Loan Agreement), Balanced Care shall pay to each Seller a late fee equal to five percent (5%) of the monthly interest payment that was due on the 11th day of the month. All interest payments received by a Seller shall be applied in the inverse order of their maturity. That is, the most recent payment received shall be credited to the first of the payments due and owing by Balanced Care to any Seller. If an Event of Default has occurred, and Balanced Care has made all of the monthly interest payments required hereunder as a result of the occurrence of such Event of Default, but such Event of Default has been cured and is not continuing, except for any Event of Default that continues until a payoff of the Term Note is received by Ocwen, then, Balanced Care's obligation to make monthly payments of interest hereunder shall cease upon the effective date of the accepted cure of the Event of Default. - 3 - Balanced Care shall make a partial interest payment to each Seller if the date of cure is other than the last day of the month. In no event shall Balanced Care be entitled to any refund of interest payments made to any Seller pursuant to this Section 4. As indicated above, in the event that Balanced Care fails to pay or otherwise perform any obligation of Balanced Care set forth herein, such default shall be considered a default and breach of this BCC Note, the Deferred Purchase Price Note, and the Subordinate Mortgage, as well as an Event of Default under the Term Loan Agreement. Section 5. Principal Payments. Subject to the provisions of Section 6 below, the entire principal balance and any accrued interest under this BCC Note shall be due and payable on the Initial Due Date, unless Borrower elects and properly exercises an Extension (as defined in the Term Loan Agreement) of the Term Note, in accordance with the provisions of Section 1.3(a) of the Term Loan Agreement, in which case the term of this BCC Note shall be similarly extended until the Extended Due Date (as defined in the Term Loan Agreement), when the entire principal balance and any accrued interest thereon is due and payable in full. Principal payments should be made to each respective Seller in accordance with its allocated portion of the total outstanding principal, as set forth in the introductory paragraph hereof. Section 6. BCC Loan Forgiveness. In the event that (i) the Term Note is paid in full, whether on the Initial Due Date, the Extended Due Date (as defined in the Term Loan Agreement), or by prepayment, and (ii) an Event of Default (as defined in the Term Loan Agreement), which constitutes a monetary default or breach of any payment obligation, has not occurred and is not continuing until the payoff is received by Ocwen (e.g., the payoff is not made pursuant to an acceleration of the Term Note as a result of an Event of Default constituting a monetary default or breach of any payment obligation under the Term Loan Agreement having occurred), then the entire outstanding principal amount due under this BCC Note as well as any and all interest accrued hereunder, shall be forgiven. Provided, however, that in no event shall any Seller be required, and Balanced Care shall not be entitled, to a return of any interest payment made by Balanced Care hereunder. Section 7. Setoff. Any and all moneys now or at any time hereafter owing to Balanced Care from the holder hereof, are hereby pledged for the security of this and all other Indebtedness (as defined in the Term Loan Agreement) from Balanced Care to the holder hereof, and may, upon the occurrence of any Event of - 4 - Default (as defined in the Term Loan Agreement) that continues beyond any applicable cure period, be paid and applied thereon whether such Indebtedness be then due or is to become due. Section 8. Effect on Other Agreements. Nothing set forth in this BCC Note is intended or shall be construed to (i) release, mitigate, or limit any obligation or duty of any party to the Purchase Agreement, Term Loan Agreement, Term Note, Compromise and Settlement, Deferred Purchase Price Note, Management Agreements, Security Documents, Subordinate Mortgage, Ancillary Documents, the Agreed Entry, or the documents executed in connection with the transactions contemplated by the Purchase Agreement, which is set forth in any of said documents, or (ii) waive, discharge or abrogate any right or interest of any party to such documents of any right or interest set forth therein. In the event of any conflict between the express terms of this BCC Note and the express terms of the Compromise and Settlement, or any of the other documents listed above, the terms of this BCC Note shall control. Section 9. Jury Waiver. BALANCED CARE AND SELLER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THEM ARISING OUT OF OR IN ANY WAY RELATED TO, IN CONNECTION WITH, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS BCC NOTE OR THE TRANSACTIONS CONTEMPLATED BY THIS BCC NOTE. THIS PROVISION IS A MATERIAL INDUCEMENT TO SELLER TO PROVIDE THE FINANCING EVIDENCED BY THIS BCC NOTE AND ENTER INTO THE COMPROMISE AND SETTLEMENT WITH BALANCED CARE. THIS PROVISION SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY SELLER'S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THIS BCC NOTE. Section 10. Warrant of Attorney. Balanced Care hereby authorizes any attorney at law to appear for Balanced Care in any action on any or all of the monetary obligations of Balanced Care set forth herein at any time after such obligations become due, whether by acceleration or otherwise, in any federal court or court of record in or of the State of Ohio or elsewhere, to waive the issuing and service of process against, and to confess judgment against Balanced Care in favor of Seller for the amount that may be due, including interest, late charges, collection costs, attorneys' fees and the like, and costs of suit, and to waive and release all errors in said proceedings and judgments, and all petitions in error and rights of appeal from the judgments - 5 - rendered. The foregoing warrants of attorney shall survive any judgment, and, if any judgment be vacated for any reason, the holder hereof nevertheless may thereafter use the foregoing warrant of attorney to obtain an additional judgment or judgments against Balanced Care. Balanced Care hereby waives any conflict of interest in Seller's attorney confessing judgment against Balanced Care pursuant to the foregoing warrant of attorney and further agrees that the attorney confessing judgment pursuant to the foregoing warrant of attorney may receive a legal fee or other thing of value from Seller. Section 11. Pennsylvania Cognovit Provisions. The following provisions in this Section 11 shall apply only in the event that Seller elects to seek a judgment on this BCC Note in any court in Pennsylvania, as opposed to Ohio, and are included herein for no other purpose. In the event that Seller so elects, Seller agrees to provide any notice required by Pennsylvania law with respect to the exercise by Seller of its rights under the following provisions. (i) POWER TO CONFESS JUDGMENT: BORROWER HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE TO APPEAR FOR BORROWER, AND, WITH OR WITHOUT DECLARATION FILED, CONFESS JUDGMENT AGAINST BORROWER AND IN FAVOR OF SELLER, AS OF ANY TERM, FOR THE UNPAID OBLIGATIONS HEREUNDER, INCLUDING WITHOUT LIMITATION ALL ACCRUED AND UNPAID CHARGES PAYABLE HEREUNDER, WHETHER BY ACCELERATION OR OTHERWISE, WITH COSTS OF SUIT AND A REASONABLE ATTORNEY'S COMMISSION OF 15%, WITH RELEASE OF ALL ERRORS, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION, TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED. NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS SELLER SHALL ELECT, UNTIL SUCH TIME AS ALL AMOUNTS AND ALL OTHER MATERIAL OBLIGATIONS OF BORROWER HEREUNDER SHALL HAVE BEEN SATISFIED. BY SIGNING THIS INSTRUMENT, BORROWER HEREBY ACKNOWLEDGES THAT BORROWER HAS READ THIS AGREEMENT (INCLUDING WITHOUT LIMITATION THE CONFESSION OF JUDGMENT SET FORTH HEREIN), HAS HAD THE OPPORTUNITY TO HAVE THE SAME REVIEWED BY LEGAL COUNSEL, UNDERSTANDS THE SAME, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING, WITHOUT LIMITATION, THE CONFESSION OF JUDGMENT PROVISIONS AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT CONSTITUTES A WAIVER OF RIGHTS BORROWER OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE - 6 - A JUDGMENT IS ENTERED AGAINST BORROWER AND WHICH MAY RESULT IN A COURT JUDGMENT AGAINST BORROWER WITHOUT PRIOR NOTICE OR HEARING AND THAT THE OBLIGATIONS MAY BE COLLECTED FROM BORROWER REGARDLESS OF ANY CLAIM BORROWER MAY HAVE AGAINST SELLER OR OTHERWISE. /s/Robin L. Barber ------------------------------- SIGNATURE (ii) POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING: BORROWER HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD OR THE SHERIFF (OR THE LAWFUL DESIGNEE OF THE SHERIFF) WITHIN ANY COUNTY OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE ON ANY JUDGMENT ENTERED AGAINST BORROWER PURSUANT TO THE CONFESSION OF JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY NATURE WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED. NO SINGLE EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENTS WITHOUT A HEARING SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS SELLER SHALL ELECT. BY SIGNING THIS AGREEMENT, BORROWER HEREBY ACKNOWLEDGES THAT BORROWER HAS READ THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE CONFESSION OF JUDGMENT AND THE POWER TO EXECUTE ON A JUDGMENT WITHOUT A HEARING), HAS HAD THE OPPORTUNITY TO HAVE THIS AGREEMENT REVIEWED BY LEGAL COUNSEL, UNDERSTANDS AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING, WITHOUT LIMITATION, THE POWERS TO EXECUTE ON JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO EXECUTE ON A JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS BORROWER OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A JUDGMENT, AND THAT THE OBLIGATIONS MAY BE COLLECTED FROM BORROWER REGARDLESS OF ANY CLAIM THAT BORROWER MAY HAVE AGAINST SELLER OR OTHERWISE. /s/Robin L. Barber ------------------------------- SIGNATURE - 7 - IN WITNESS WHEREOF, Balanced Care has caused this BALANCED CARE CORPORATION PROMISSORY NOTE to be duly executed and delivered by its duly authorized representative as of the date first above written. WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. BALANCED CARE CORPORATION By:/s/Robin L. Barber Print Name: Robin L. Barber Its: Senior Vice President, Legal Counsel and Assistant Secretary - 8 -