BALANCED CARE CORP
SETTLEMENT AND RELEASE AGREEMENT DATED 03/31/2002
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>10
<FILENAME>w59742ex10-8.txt
<DESCRIPTION>SETTLEMENT AND RELEASE AGREEMENT DATED 03/31/2002
<TEXT>
<PAGE>
Exhibit 10.8

                        SETTLEMENT AGREEMENT AND RELEASE


         This is a Settlement Agreement and Release (the "Settlement Agreement")
entered into and made effective as of March 31, 2002 ("Effective Date") between
and amongst the following parties:

                  A.       Balanced Care Corporation ("BCC"),

                  B.       Ocwen Financial Corporation ("Ocwen"),

                  C.       Medina ALF, Inc. ("Medina ALF"), Centerville ALF,
                           Inc. ("Centerville ALF"), and Shippensburg ALF, Inc.
                           ("Shippensburg ALF") (collectively, the "Landlords,
                           and individually, "Landlord"), and

                  D.       Senior Care Operators of Ohio, LLC ("SC-Ohio"),
                           Senior Care Operators of Centerville, LLC
                           ("SC-Centerville"), and Senior Care Operators of
                           Shippensburg, LLC ("SC-Shippensburg") (collectively,
                           the "Tenants").

         WHEREAS, Medina ALF owns an assisted living facility in Medina, Ohio,
and SC-Ohio entered into a lease with Medina ALF, Inc.;

         WHEREAS, Centerville ALF owns an assisted living facility in
Centerville, Ohio, and SC-Centerville entered into a lease with Centerville ALF,
Inc.;

         WHEREAS, Shippensburg ALF owns an assisted living facility in
Shippensburg, Pennsylvania, and SC-Shippensburg entered into a lease with
Shippensburg ALF, Inc.;

         WHEREAS, Ocwen is an affiliate of each Landlord;

         WHEREAS, BCC entered into a Working Capital Assurance Agreement and a
Shortfall Funding Agreement with each Landlord, in which BCC agreed to ensure
the timely payment of all lease obligations;

         WHEREAS, the Tenants have failed to pay rent since December of 2000;
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         WHEREAS, BCC failed to advance funds to the Tenants to cover any
outstanding obligations, including without limitation the payment of rent;

         WHEREAS, the Landlords filed a complaint against BCC in Centerville
ALF, Inc., et al. v. Balanced Care Corporation, Case No. C3 01-233 in the United
States District Court for the Southern District of Ohio, Western Division
(hereinafter the "Litigation");

         WHEREAS, the parties have negotiated extensively and agreed to resolve
and settle all outstanding differences amongst them;

         NOW, THEREFORE, in consideration of the promises and covenants
contained herein and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, and with the intent to be legally
bound, the parties covenant and agree as follows:

         1. Upon execution of this Settlement Agreement by all parties, Balanced
Care shall execute the Balanced Care Corporation Promissory Note, which contains
confession of judgment provisions (the "Note"), payable to the Landlords in the
total principal amount of Nine Hundred Thirty Six Thousand, Four Hundred Forty
Five Dollars and no cents ($936,445.00). Of this amount, $331,190.45 shall be
payable to Medina ALF, $408,299.48 shall be payable to Centerville ALF, and
$196,955.07 shall be payable to Shippensburg ALF. The Note shall bear interest
during the period from the date hereof on the unpaid principal balance, until
paid in full, at a rate of two and 66/100 percent (2.66%) per annum. Interest
will be calculated on a 360-day year consisting of twelve consecutive thirty-day
months. The form of the Note is attached to this Settlement Agreement as Exhibit
A.

         2. Balanced Care hereby acknowledges and agrees that the Note shall
contain warrant of attorney and confession of judgment (i.e. cognovit)
provisions. Balanced Care hereby waives any and all defenses and/or rights under
any applicable law to invalidate such cognovit provisions.

         3. No sooner than ninety-one (91) days after the execution of the Note
by Balanced Care, nor later than 120 days after the execution of the Note by
Balanced Care, provided that the events contemplated by Section 9 hereof shall
not have occurred during such 91 days, the Landlords shall cause their counsel
to file in the Litigation a Notice of Dismissal With Prejudice substantially
identical to the form attached to this Settlement


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Agreement as Exhibit B ("Notice"). The Notice shall dismiss all claims against
Balanced Care with prejudice and shall state that Balanced Care shall be liable
for all costs.

         4. Subject to Paragraphs 6 and 9 hereof, BCC, SC-Ohio, SC-Centerville,
and SC-Shippensburg, on behalf of, and together with their shareholders, owners,
principals, directors, officers, managers, attorneys, employees, parents,
partners, fiduciaries, assigns, successors, affiliates, insurers, and agents,
hereby RELEASE, ACQUIT, AND FOREVER DISCHARGE Ocwen, Medina ALF, Centerville
ALF, and Shippensburg ALF, together with their shareholders, owners, principals,
directors, officers, managers, attorneys, employees, parents, partners,
fiduciaries, assigns, successors, affiliates, insurers, and agents, from any and
all liabilities, manners of action, causes of action, claims and/or demands,
both known and unknown, in law or in equity, including, but not limited to, any
and all claims for breach of contract, fraud, emotional distress, negligence,
economic loss, damage to reputation, intentionally tortious conduct, and/or
other misconduct concerning the subject matter of the Litigation.

         5. Subject to Paragraphs 6 and 9 hereof, Ocwen, Medina ALF, Centerville
ALF, and Shippensburg ALF, together with their shareholders, owners, principals,
directors, officers, managers, attorneys, employees, parents, partners,
fiduciaries, assigns, successors, affiliates, insurers, and agents, hereby
RELEASE, ACQUIT, AND FOREVER DISCHARGE BCC, SC-Ohio, SC-Centerville, and
SC-Shippensburg, on behalf of, and together with their shareholders, owners,
principals, directors, officers, managers, attorneys, employees, parents,
partners, fiduciaries, assigns, successors, affiliates, insurers, and agents,
from any and all liabilities, manners of action, causes of action, claims and/or
demands, both known and unknown, in law or in equity, including, but not limited
to, any and all claims for breach of contract, fraud, emotional distress,
negligence, economic loss, damage to reputation, intentionally tortious conduct,
and/or other misconduct concerning the subject matter of the Litigation.

         6. If the release by BCC and its affiliated and related companies in
Paragraph 4 of this Settlement Agreement is ever voided, then the release by
Landlords and its affiliated and related companies provided in Paragraph 5 of
this Settlement Agreement shall be void in the event that BCC and/or its
affiliated and related companies prosecute or assert a claim against Landlords
and/or their affiliates and/or related companies or otherwise seeks a recovery
against Landlords and/or their affiliates and/or related companies. If the
release by


                                      -3-
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the Landlords and their affiliated and related companies in Paragraph 5 of this
Settlement Agreement is ever voided, then the release by BCC and its affiliated
and related companies provided in Paragraph 4 of this Settlement Agreement shall
be void in the event that the Landlords and/or their affiliated and related
companies prosecute or assert a claim against BCC and/or their affiliated and
related companies or otherwise seeks a recovery against BCC and/or their
affiliated and/or related companies.

         7. This Settlement Agreement is entered into in conjunction with a
compromise and settlement of all controversies arising in or resulting from the
Litigation. The promises and covenants herein are not, and cannot be construed
as, an admission or acknowledgement on the part of any party of any liability,
wrongdoing, merit, or lack thereof in connection with the allegations made in
the Litigation.

         8. Subject to Paragraph 9 below, nothing set forth in this Settlement
Agreement (specifically including, but not limited to, the release provided in
Section 5 hereof) is intended or shall be construed to release, mitigate, or
limit any obligation or duty of any party to the (i) Note, (ii) the Agreement of
Purchase and Sale among Ocwen, BCC, the Landlords, Balanced Care Realty (OFC),
Inc., a subsidiary of Balanced Care, and certain other parties, dated of even
date herewith ("Purchase Agreement"), (iii) any document, instrument,
certificate or agreement executed by any party in connection with the
consummation of the transactions contemplated by the Purchase Agreement, or (iv)
the documents, instruments, certificates, or agreements executed in connection
with the Term Loan Agreement, dated of even date herewith, by and among BCC,
Ocwen, Balanced Care Realty (OFC), Inc., and certain other parties, including
but not limited to the Term Loan Agreement itself ("Term Loan Agreement").

         9. BCC and Tenants hereby represent that none of them are entering into
this Settlement Agreement in contemplation of insolvency, a filing of
bankruptcy, whether voluntary or involuntary, or with an intent to hinder, delay
or defraud their respective equityholders or creditors. In the event that (a)
within 91 days after the Effective Date (i) BCC or any Tenant makes an
assignment for the benefit of creditors of all or substantially all of its
assets, (ii) BCC or any Tenant petitions or applies to any tribunal for the
appointment of a trustee or receiver for BCC or such Tenant, or of any
substantial part of the assets of BCC or such Tenant, (iii) BCC or any Tenant
commences any proceeding relating to BCC or Tenant


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under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction whether now or
hereinafter in effect, (iv) any petition or application is filed, or any
proceedings are commenced against BCC or any Tenant, and BCC or such Tenant by
any act indicates its approval thereof, consent thereto, or acquiescence
therein, or any order is entered appointing a trustee or receiver, or
adjudicating BCC or a Tenant bankrupt or insolvent, or approving the petition at
any such proceedings and such order remains unstayed or undischarged for more
than sixty (60) days, (v) any order is entered in any proceedings against BCC or
any Tenant decreeing the dissolution of BCC or any Tenant and such order remains
unstayed or undischarged for more than sixty (60) days, or (vi) any claim is
asserted that any of the Loan Documents (as defined in the Term Loan Agreement),
the Note, the Deferred Purchase Price Note (as defined in the Term Loan
Agreement), this Settlement Agreement, the Purchase Agreement, and/or the
Purchase Documents (as defined in the Term Loan Agreement) were made as part of
or constitute a fraudulent conveyance, and (b) as a result of the foregoing, the
transactions contemplated by the Purchase Agreement and the Purchase Documents,
the Term Loan Agreement and other Loan Documents, and this Settlement Agreement
and the Note, are set aside, rescinded, voided or unwound in whole (but not in
part), then the Landlords shall return the $5,030,456.45 down payment to BCC,
BCC shall ensure that the Borrower (as defined in the Term Loan Agreement)
reconveys the Project Properties (as defined in the Term Loan Agreement) to the
Landlords, all Notes issued under the Term Loan Agreement shall be marked
cancelled and returned to the makers thereof, Ocwen shall release and terminate
the Security Documents (as defined in the Term Loan Agreement), the parties
shall take whatever other action is required in order to place all affected
parties in substantially the same position as such parties occupied prior to the
date that the Term Loan Agreement, Purchase Agreement, and this Settlement
Agreement were entered into by the parties thereto, the releases provided in
Paragraphs 4 and 5 hereof shall be void ab initio, and shall be of no force and
effect, and Ocwen and the Landlords shall have the right to bring any action or
claim of any nature or type against BCC or any Tenant in connection with the
subject matter of the Litigation.

         10. In the event of any conflict between the express terms of this
Settlement Agreement and the express terms of the Note, the terms of the Note
shall control.


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         11. The parties hereby warrant that no part of the claims they have
respectively compromised herein, including without limitation any claim set
forth by any pleading in the Litigation, has been assigned to any other person,
firm or corporation.

         12. The parties shall maintain the terms of the settlement and the
allegations respecting the Litigation in the strictest confidence, except as
required by law or any applicable reporting requirements.

         13. This Agreement shall be binding upon, inure to the benefit of and
be enforceable by and against the partners, heirs, personal representatives,
successors, assigns and transferors of each of the parties.

         14. This Agreement shall be governed by the law of the State of Ohio,
and the parties hereby consent to be subject to the jurisdiction of the United
States District Court for the Southern District of Ohio, Western Division, or
any other court sitting in Montgomery County, Ohio, with respect to any matter
arising out of this Settlement Agreement.

         15. The failure of any party at any time to require performance by any
other party of any provision of this Settlement Agreement or the Note shall not
affect in any way the full rights of that party to require performance at any
time thereafter, nor shall the waiver by any party of a breach of any provision
of this Settlement Agreement or the Note be taken or held to be a waiver of the
provision.

         16. Except as otherwise provided in Paragraph 6 of this Settlement
Agreement, if any provision of this Settlement Agreement, or its application to
any person, party or circumstance, is held invalid, the remainder of this
Settlement Agreement and its application to all other persons, parties and
circumstances shall not be affected adversely thereby unless the provision or
provisions held invalid or inapplicable will, if not enforced, substantially
impair the benefits and fairness of the remaining Settlement Agreement.

         17. This Settlement Agreement may be executed in any number of
counterparts, and each such counterpart shall for all purposes be deemed to be
an original. All such counterparts shall together constitute but one and the
same instrument. The effective date of this Settlement Agreement shall not be
altered or otherwise affected by the date upon which the Settlement Agreement is
executed by one or more of the parties.

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         18. Ocwen and the Landlords represent and warrant to BCC that (a) other
than a loan from Manufacturers and Traders Trust Company ("M&T") to Ocwen (the
"Mortgage Loan"), the Project Properties (as defined in the Term Loan Agreement)
are not pledged for or otherwise encumbered by any lien or encumbrance securing
any Indebtedness (as defined in the Term Loan Agreement) and (b) the Landlords
have not incurred any Indebtedness, whether secured or unsecured. As of the
Effective Date, the Mortgage Loan will not be secured by the Project Properties
(or any personal property contained therein) but instead will be secured by
(among other collateral) an assignment of the Mortgages (as defined in the Term
Loan Agreement), the other Loan Documents, and certain other documents executed
in connection with the Loan (as defined in the Term Loan Agreement) transaction
and the transactions contemplated by the Purchase Documents.

         IN WITNESS WHEREOF, the parties have hereunto set their hands.

BCC:

BALANCED CARE CORPORATION


By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Senior Vice President and Legal Counsel &
            Assistant Secretary


COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Senior Vice President, Legal Counsel
and Assistant Secretary and a duly authorized representative for Balanced Care
Corporation, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires:8-20-02



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OCWEN:

OCWEN FINANCIAL CORPORATION


By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Ocwen Financial Corporation, this 4th day of
April, 2002.

                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires: 11/16/03

LANDLORDS:

MEDINA ALF, INC.


By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President


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<PAGE>
STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Medina ALF, Inc., this 4th day of April, 2002.


                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03

CENTERVILLE ALF, INC.


By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Centerville ALF, Inc., this day of April, 2002.



                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03




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<PAGE>
SHIPPENSBURG ALF, INC.


By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )


         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Medina ALF, Inc., this 4th day of April, 2002.


                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03




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TENANTS:

SENIOR CARE OPERATORS OF OHIO, LLC

By:      Balanced Care at Medina, Inc., its Manager

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Medina, Inc., the acting manager of Senior Care Operators of
Ohio, LLC, a Delaware limited liability company, on behalf of Senior Care
Operators of Ohio, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires: 8/20/02




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<PAGE>
SENIOR CARE OPERATORS OF CENTERVILLE, LLC

By:      Balanced Care at Centerville, Inc., its Manager

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Centerville, Inc., the acting manager of Senior Care Operators
of Centerville, LLC, a Delaware limited liability company, on behalf of Senior
Care Operators of Centerville, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires:8-20-02




                                      -12-
<PAGE>
SENIOR CARE OPERATORS OF SHIPPENSBURG, LLC

By:      Balanced Care at Shippensburg, Inc.,
         its Manager


By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Shippensburg, Inc., the acting manager of Senior Care Operators
of Shippensburg, LLC, a Delaware limited liability company, on behalf of Senior
Care Operators of Shippensburg, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires: 8-20-02




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