AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1996
REGISTRATION NO. 333-05955
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GRAND COURT LIFESTYLES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8059 22-3423087
-------- ---- ----------
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial classification identification
incorporation or code number) number)
organization)
------------------------
2650 N. Military Trail
Suite 350
Boca Raton, Florida 33431
(561) 997-0323
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
------------------------
John W. Luciani, III, Executive Vice President
Grand Court Lifestyles, Inc.
2650 N. Military Trail
Suite 350
Boca Raton, Florida 33431
(561) 997-0323
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------
Copies to:
Steven L. Wasserman, Esq.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
(212) 603-2000
Approximate date of commencement of proposed distribution to the
public: As promptly as practicable after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: [ ] ____________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act of 1933, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===========================================================================
<PAGE>
GRAND COURT LIFESTYLES, INC.
Registration Statement
on Form S-1
Cross Reference Sheet
Furnished Pursuant to Item 501(b) of Regulation S-K
Form S-1 Item Number and Caption Location in Prospectus
-------------------------------- ----------------------
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus . Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus . Inside Front Cover Page; Outside
Back Cover Page
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges . . . . . Prospectus Summary; Summary
Consolidated Financial Data; Risk
Factors
4. Use of Proceeds . . . . . . Use of Proceeds
5. Determination of
Offering Price . . . . . . Plan of Distribution
6. Dilution . . . . . . . . . . Dilution
7. Selling Security Holders . . Principal and Selling Stockholders
8. Plan of Distribution . . . . Outside Front Cover Page; Plan of
Distribution
9. Description of Securities to
be Registered . . . . . . Outside Front Cover Page;
Prospectus Summary; Description of
Capital Stock
10. Interests of Named Experts and
Counsel . . . . . . . . . Legal Matters; Experts
11. Information with Respect to
Registrant . . . . . . . . . Outside Front Cover Page;
Prospectus Summary; Risk Factors;
Use of Proceeds; Dividend Policy;
Capitalization; Selected
Consolidated Financial Data;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal and Selling
Stockholders; Description of
Capital Stock; Consolidated
Financial Statements
12. Disclosures of Commission
Position on Indemnification for
Securities Act Liabilities . Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 5, 1996
PROSPECTUS
2,777,778 SHARES
GRAND COURT LIFESTYLES, INC.
COMMON STOCK
Grand Court Lifestyles, Inc. (the "Company") is offering, on a "best-
efforts" basis, a maximum of 2,777,778 shares (the "Maximum Offering") and
a minimum of 1,388,889 shares (the "Minimum Offering") of its Common Stock,
$.01 par value ("Common Stock") at $18.00 per share. Of the maximum number
of shares of Common Stock being offered hereby, 2,500,000 shares are being
offered by the Company and 277,778 shares are being offered by certain
stockholders (the "Selling Stockholders"). The number of shares to be sold
by the Selling Stockholders will equal 10% of the aggregate number of
shares to be sold in this offering. See "Principal and Selling
Stockholders."
Prior to this offering, there has been no public market for the
Company's Common Stock. The offering price for the Common Stock has been
determined arbitrarily by the Company. See "Plan of Distribution." The
Company intends to apply for listing of the Common Stock on the NASDAQ
National Market.
AN INVESTMENT IN THE COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
==========================================================================
PROCEEDS TO
SELLING
PRICE TO COMMISSIONS(1) PROCEEDS TO STOCK-
PUBLIC (2) COMPANY(2) HOLDERS(2)
-------------------------------------------------------------------------
Per Share . . $18.00 $1.08 $16.92 $16.92
-------------------------------------------------------------------------
Total Minimum
(3) . . . . . $25,000,002 $1,500,000.12 $21,150,000 $2,350,001.28
-------------------------------------------------------------------------
Total
Maximum . . . $50,000,004 $3,000,000.24 $42,300,000 $4,700,003.76
=========================================================================
(1) The shares of Common Stock offered hereby will be offered through
brokers and dealers who are members of the National Association of
Securities Dealers, Inc., as sales agents, at a commission of up to 6%
of the price at which shares are sold to the public. Brokers and
dealers also will be paid due diligence fees and non-accountable
expense allowances, in the aggregate, of up to 1% of the offering
price at which shares are sold to the public. The Company also
intends to offer shares of the Common Stock directly through the
efforts of its officers and directors. No commissions will be paid by
the Company with respect to shares of Common Stock which it sells to
investors through such efforts. See "Plan of Distribution."
(2) Assuming that a commission is paid with respect to all shares of
Common Stock offered hereby at a rate of 6%, but before deducting
expenses (which include (i) up to 1% of the gross proceeds of the
offering which is payable to participating brokers and dealers as due
diligence fees and non-accountable expense allowances and (ii) up to
1% of the gross proceeds of the offering payable as wholesalers or
finders fees), estimated at $1,860,000 if the Total Minimum is sold
and $2,360,000 if the Total Maximum is sold. All other expenses of
the Offering will be paid by the Company, except that the Selling
Stockholders will pay commissions, due diligence fees and non-
accountable expense allowances and wholesalers or finders fees with
respect to shares sold by them.
(3) Until at least 1,388,889 shares of Common Stock are sold, the proceeds
of the offering will be held in escrow by First Union National Bank.
If at least 1,388,889 shares of Common Stock are not sold within 60
days from the date of this Prospectus (subject to an extension of up
to 60 days at the sole discretion of the Company), such proceeds will
be returned to subscribers, without interest or deductions.
---------------------------
The shares of Common Stock are offered subject to prior sale, when, as
and if delivered and accepted by the Company and subject to certain other
conditions. The Company reserves the right to withdraw, cancel or modify
said offer and to reject orders in whole or in part.
---------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the consolidated financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, (i) all references herein to the "Company"
include the Company, its subsidiaries and its predecessors taken as a
whole, and (ii) all references herein to a "fiscal" year refer to the
fiscal year beginning on February 1 of that year (for example, "fiscal
1995" refers to the fiscal year beginning on February 1, 1995). All share
and per share data has been restated to give effect to a 1084.1-for-1 stock
split which will occur upon the closing of the Offering. This Prospectus
contains certain forward-looking statements which involve certain risks and
uncertainties. The Company's actual results could differ materially from
the results anticipated in these forward-looking statements as a result of
the factors set forth under "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
Grand Court Lifestyles, Inc. (the "Company") is one of the largest
operators of adult living communities in the United States, operating
communities offering both independent- and assisted-living services. The
Company currently operates 30 adult living communities containing 4,350
apartment units in 11 states in the Sun Belt and the Midwest. The Company,
a fully integrated provider of adult living accommodations and services,
acquires, finances, develops and manages adult living communities. The
Company's operating objective is to provide high-quality, personalized
living services to senior residents, primarily persons over the age of 75.
The long-term care industry encompasses a broad range of services and
accommodations that are provided primarily to seniors. Services are
provided in a variety of settings ranging from home health care to adult
living communities to nursing homes. Services offered in adult-living
communities include independent-living services and assisted-living
services. Residents who choose independent-living services typically
desire to be free from the burdens and expense of home ownership, food
shopping and meal preparation while having access to basic services in a
non-institutional community atmosphere. Independent-living services
generally consist of hotel-type amenities, including three restaurant-style
meals per day, social and recreational activities, housekeeping and laundry
services, transportation to shopping and medical appointments, 24-hour
security and emergency assistance systems. For residents who desire
additional services, assisted-living programs provide more extensive
support services, including assistance with "activities of daily living",
including eating, bathing, dressing, personal hygiene, ambulating, health
monitoring and medication management.
Current demographic trends suggest that demand for both independent-
living and assisted-living services will continue to grow. According to
U.S. Bureau of Census data, the Company's target market, people over age
75, is one of the fastest growing segments of the U.S. population and is
projected to increase by more than 32% to 17.1 million between 1990 and
2000. While the population of seniors grows, other demographic trends
suggest that an increasing number of them will choose adult living
communities as their residences. The median net worth of householders over
age 75 has increased to over $75,000. At the same time, the number of
seniors living alone has increased, while women who have been the
traditional care-givers are more likely to be working and unable to provide
care in the home. Many seniors find that adult living communities provide
them with a number of services and features that increasingly they are
unable to provide for themselves at home, including security, nutritious
meals and companionship.
Senior management formed the first predecessor of the Company over 25
years ago and, in the aggregate, have over 80 years of experience in the
acquisition, financing, development, and management of residential real
property. Prior to 1986, the Company acquired, developed, arranged for the
sale of interests in partnerships owning, and in most cases managed, multi-
family properties containing approximately 20,000 apartment units,
primarily in the Sun Belt and the Midwest. Beginning in 1986, the Company
has focused exclusively on adult living communities. The Company currently
operates one of the largest portfolios of adult living communities in the
United States and has become an experienced provider of both independent-
and assisted-living services. The Company operates 30 adult living
communities containing 4,350 apartment units. The Company also operates
one nursing home. The Company believes that its experience in the
acquisition, development and management of adult living communities
positions it to take advantage of social and economic trends that are
projected to increase demand for adult living services.
The Company has financed the acquisition and development of the 30
adult living communities that it operates by utilizing mortgage financing
and by arranging for the sale of limited partnership interests in 34
limited partnerships ("Investing Partnerships) formed to acquire interests
in the 29 other partnerships that own adult living communities ("Owning
Partnerships"). The Company is the general partner of all but one of the
Owning Partnerships and manages all of the adult living communities in its
portfolio. The Company is also the general partner of 22 of the 34
Investing Partnerships. As a result of its financing acquisitions by
arranging for the sale of partnership interests, the Company retains a
participation in the cash flow, sale proceeds and refinancing proceeds of
the properties after certain priority payments to the limited partners.
The Company intends to continue to finance its future acquisitions of
existing adult living communities by utilizing mortgage financing and by
arranging for the sale of partnership interests. The Company has derived,
and it expects to continue to derive, a substantial portion of its revenues
from sales of partnership interests in partnerships it organizes to finance
the acquisition of existing adult living centers. The Company plans to
continue to acquire existing adult living communities, and currently plans
to acquire between four to eight existing communities over the next two
years. In addition, the Company has agreed to acquire two adult living
communities from existing Owning Partnerships, and may engage in other
similar transactions. The Company intends to finance these acquisitions
through mortgage financing and the sale of limited partnership interests in
new Investing Partnerships which will own interests in new Owning
Partnerships. The Company is, and will continue to be, the managing
general partner of the new Owning Partnerships that own communities
acquired in this manner.
The Company has instituted a development plan pursuant to which it
currently intends to construct between 18 and 24 adult living communities
during the next two years containing between 2,268 and 3,458 apartment
units. The Company plans to own or operate pursuant to long-term leases or
similar arrangements the adult living communities that will be developed
under the plan. In order to finance the development and construction of
such communities, the Company has obtained a letter of intent from Fleet
Bank to provide up to $40 million for financing the construction of new
adult living communities and the acquisition of existing communities and
has obtained a letter of intent from Capstone Capital Corporation
("Capstone") to provide up to $39 million for development of up to four
adult living communities that will be operated by the Company pursuant to
long-term leases with Capstone. The Company's development plan
contemplates its first new communities being built in Texas, where, as of
June 12, 1996, it owned one site and held options to acquire seven
additional sites. The Company generally plans to concentrate on developing
projects in only a limited number of states at any given time. The Company
believes that this focus will allow it to realize certain efficiencies in
the development and management of communities.
The Company's development plan is based upon a "prototype" adult
living community that it has designed. The prototype incorporates
attributes of the various facilities managed by the Company, which it
believes appeal to the elderly. The prototype has been designed to be
built in two sizes: one containing 126 apartment units and the other 142
apartment units. In all other respects, the two sizes of the prototype are
virtually identical and both will be located on sites of up to seven acres.
The Company believes that its development prototype is larger than most
assisted-living facilities, which typically range from 40 to 80 units. The
Company believes that the greater number of units will allow the Company to
achieve economies of scale in operations, resulting in lower operating
costs per unit, without sacrificing quality of service. Each community
will offer residents a choice between independent-living and assisted-
living services. As a result, the market for each facility will be broader
than for facilities that offer only either independent-living or assisted-
living services. Due to licensing requirements and the expense and
difficulty of converting existing independent-living units to assisted-
living units, independent-living and assisted-living units generally are
not interchangeable. However, the Company's prototype is designed to
allow, at any time, for conversion of units, at minimum expense, for use as
either independent-living or assisted-living units. Each community
therefore may adjust its mix of independent-living and assisted-living
units as the market or existing residents demand. The Company believes
that part of the appeal of this type of community is that residents will be
able to "age in place" with the knowledge that they need not move to
another facility if they require assistance with "activities of daily
living." The Company believes that the ability to retain residents by
offering them higher levels of services will result in stable occupancy
with enhanced revenue streams. The Company believes that the common areas
and amenities offered by its prototype represent the state of the art for
independent-living facilities and are superior to those offered by smaller
independent-living facilities or by most assisted-living facilities. The
Company believes that this will make its prototype adult living communities
attractive to both independent-living residents who foresee their future
need for assisted-living services and residents who initially seek
assisted-living services.
The Company believes that management and marketing are critical to the
success of an adult living community. In order to attain high occupancy
rates at newly developed properties, the Company plans to continue its
marketing program which has resulted in an average occupancy rate at May
31, 1996 at its existing adult living communities of approximately 93%. In
addition, the Company plans to use the common facility design of its
prototype and its "The Grand Court" trademarked name to promote recognition
of its properties nationally. The Company focuses exclusively on "Private-
pay" residents who pay for housing or related services out of their own
funds, rather than relying on the few states that have enacted legislation
which enables assisted-living facilities to receive Medicaid funding
similar to funding generally provided to skilled nursing facilities. The
Company believes this "Private-pay" focus will allow the Company to
increase rental revenues as demographic pressure increases demand for adult
living facilities and to avoid potential financial difficulties it might
encounter if it were dependent on Medicaid or other reimbursement programs
that may be scaled back as a result of health care reform, budget deficit
reduction or other pending or future state or Federal government
initiatives.
Grand Court Lifestyles, Inc. is a Delaware corporation formed in 1996
to consolidate substantially all of the assets of its predecessors, J&B
Management Company, Leisure Centers, Inc., and their affiliates. Unless
the context otherwise indicates, all references to the Company include
Grand Court Lifestyles Inc., its subsidiaries and predecessors. The
Company's principal executive offices are located at 2650 N. Military
Trail, Suite 350, Boca Raton, Florida 33431 and its telephone number is
(561) 997-0323.
THE OFFERING
Common Stock to be sold by
the Company
Minimum offering . . . . . . . . . . 1,250,000 shares
Maximum offering . . . . . . . . . . 2,500,000 shares
Common Stock to be sold by
Selling Stockholders
Minimum offering . . . . . . . . . . 138,889 shares(1)
Maximum offering . . . . . . . . . . 277,778 shares(1)
Common Stock outstanding before
this offering . . . . . . . . . . . . 10,000,000 shares
Total Common Stock to be outstanding
after this offering assuming the
minimum number of shares of
Common Stock are sold(2) . . . . . . 11,250,000 shares
Total Common Stock to be outstanding
after this offering assuming the
maximum number of shares of
Common Stock are sold(2) . . . . . . 12,500,000 shares
Use of proceeds . . . . . . . . . . . . The net proceeds of the
Offering to be received by
the Company will be used
(i) to fund a portion of
the costs of developing
adult living communities
and (ii) for working
capital. See "Use of
Proceeds."
(1) The number of shares to be sold by the Selling Stockholders will equal
10% of the aggregate number of shares to be sold in this offering.
(2) Excludes 1,250,000 shares reserved for issuance pursuant to the
Company's stock option plans. As of the date hereof, there were not
any options granted under the Company's stock option plans. See
"Management - Stock Plans".
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data and other data)
The summary consolidated financial data have been taken or derived
from, and should be read in conjunction with, the Company's consolidated
financial statements and the related notes thereto, and the capitalization
data included elsewhere in this Prospectus. The results of operations for
an interim period have been prepared on the same basis as the year end
financial statements and, in the opinion of management, contain all
adjustments, consisting of only normally recurring adjustments, necessary
for a fair presentation of the results of operations for such period. The
results of operations for an interim period may not give a true indication
of results for the full year. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
YEARS ENDED JANUARY 31,
-----------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS
DATA:
Revenues:
Sales . . . . . . . . $23,088 $24,654 $29,461 $29,000 $41,407
Deferred profit
earned . . . . . . 253 792 6,668 3,518 9,140
Interest income . . . 25,584 13,209 13,315 9,503 12,689
Property management
fees and 449 584 4,079 4,278 5,075
other income . . . ------ ------ ------ ------ ------
49,374 39,239 53,523 46,299 68,311
------ ------ ------ ------ ------
Costs and expenses:
Cost of sales . . . . 15,983 14,685 26,548 21,249 27,112
Selling . . . . . . . 6,256 7,027 6,706 6,002 7,664
Interest . . . . . . 14,021 11,874 10,991 13,610 15,808
General and
administrative . . 5,836 5,617 5,226 6,450 7,871
Officers'
Compensation(1) . . 1,200 1,200 1,200 1,200 1,200
Depreciation and 412 975 1,433 2,290 2,620
amortization . . . ------ ------ ------ ------ ------
43,708 41,378 52,104 50,801 62,275
------ ------ ------ ------ ------
Income (loss) before
provision for income
taxes . . . . . . . . 5,666 (2,139) 1,419 (4,502) 6,036
Provision for income - - - - -
taxes . . . . . . . . ------ ------ ------ ------ ------
Net income (loss) 5,666 (2,139) 1,419 (4,502) 6,036
Pro-forma income taxes
(benefit)(2) . . . . 2,266 (856) 568 (1,801) 2,414
------ ------ ------ ------ ------
Pro-forma net income
(loss)(2) . . . . . . $3,400 $(1,283) $ 851 $(2,701) $3,622
====== ====== ====== ====== ======
Pro-forma earnings
(loss) per
common share(2) . . . $ .34 $ (.13) $ .09 $ (.27) $ .36
====== ====== ====== ====== ======
Weighted average common
shares used . . . . . 10,000 10,000 10,000 10,000 10,000
====== ====== ====== ====== ======
OTHER DATA:
Adult living
communities
operated (end of
period) . . . . . . 8 14 18 25 28
====== ====== ====== ====== ======
Number of units (end
of period) . . . . 1,503 2,336 2,834 3,683 4,164
====== ====== ====== ====== ======
Average occupancy
percentage . . . . 82.1% 90.6% 90.4% 89.3% 94.4%
====== ====== ====== ====== ======
THREE MONTHS ENDED
APRIL 30,
-----------------
1995 1996
---- ----
STATEMENT OF OPERATIONS
DATA:
Revenues:
Sales . . . . . . . . . . $ 5,847 $10,776
Deferred profit
earned . . . . . . . . 2,285 0
Interest income . . . . . 4,111 5,948
Property management
fees and 1,035 165
other income . . . . . ------- -------
13,278 16,889
------- -------
Costs and expenses:
Cost of sales . . . . . . 4,058 4,985
Selling . . . . . . . . . 1,392 1,797
Interest . . . . . . . . 4,402 4,028
General and
administrative . . . . 1,435 1,891
Officers'
Compensation(1) . . . . 300 300
Depreciation and
amortization . . . . . 563 935
------- -------
12,150 13,936
------- -------
Income (loss) before
provision for income
taxes . . . . . . . . . . 1,128 2,953
Provision for income
taxes . . . . . . . . . . - 394
------- -------
Net income (loss) . . . . . 1,128 2,559
Pro-forma income taxes
(benefit)(2) . . . . . . 451 787
------- -------
Pro-forma net income
(loss)(2) . . . . . . . . $ 677 $ 1,772
======= =======
Pro-forma earnings
(loss) per
common share(2) $ .07 $ .18
======= =======
Weighted average common
shares used . . . . . . . 10,000 10,000
======= =======
OTHER DATA:
Adult living
communities
operated (end of
period) . . . . . . . . 26 30
======= =======
Number of units (end
of period) . . . . . . 3,797 4,350
======= =======
Average occupancy
percentage . . . . . . 91.1% 94.7%
======= =======
AS OF JANUARY 31,
-----------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Balance Sheet Data:
Cash and cash
equivalents . . $ 3,477 $ 6,455 $ 9,335 $ 10,950 $ 17,961
Notes and
receivables-
net . . . . . . 230,760 234,115 227,411 220,014 223,736
Total assets . . 241,691 251,118 249,203 249,047 260,742
Total
liabilities . . 191,234 203,990 211,647 217,879 225,238
Stockholders'
equity . . . . 50,457 47,128 37,556 31,168 35,504
AS OF APRIL 30,
-------------------------------------
ADJUSTED(3) ADJUSTED(3)
ACTUAL MINIMUM MAXIMUM
------ ------- -------
Balance Sheet Data:
Cash and cash equivalents . . . $ 12,414 $ 31,754 $ 52,454
Notes and receivables-net . . . 215,974 215,974 215,974
Total assets . . . . . . . . . 246,069 265,409 286,109
Total liabilities . . . . . . . 208,255 208,255 208,255
Stockholders' equity . . . . . 37,814 57,154 77,854
----------
(1) John Luciani and Bernard M. Rodin, the Chairman of the Board and
President, respectively, of the Company received dividends and
distributions from the Company's predecessors but did not receive
compensation. Officers' Compensation is based upon the aggregate
compensation currently received by such officers. See
"Management."
(2) The Company's predecessors were Sub-chapter S corporations and a
partnership. The pro forma statement of operations data reflects
provisions for federal and state income taxes as if the Company
had been subject to federal and state income taxation as a C
corporation during each of the periods presented.
(3) "Adjusted" amounts give effect to the application by the Company
of its net proceeds of this offering (based upon an assumed
initial public offering price of $18.00 per share, after
deducting commissions and other offering expenses payable by the
Company) if both the minimum and maximum number of shares of
Common Stock are sold. See "Capitalization."
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should
consider carefully the factors set forth below, as well as other
information contained in this Prospectus, before making a decision to
purchase the Common Stock offered hereby.
POTENTIAL FOR OPERATING LOSSES
The Company has begun developing new adult living communities. The
Company anticipates that the construction of each community will require at
least 12 months and expects each newly constructed community to incur
start-up losses for at least nine months after commencing operations. In
addition, during the past ten years the Company's revenues have been
derived principally from arranging for the sale of partnership interests to
finance the acquisition of existing adult living communities. Competition
to acquire such communities has intensified, and there can be no assurance
that the Company will be able to acquire such communities on terms
favorable enough to offset the start-up losses associated with newly
developed communities and the costs and cash requirements arising from the
Company's overhead and existing debt and guaranty obligations. Such
factors could cause the Company to incur operating losses until, at least,
its newly constructed communities are completed, leased up and begin
generating positive cash flow. If the Company incurs operating losses,
this could have a material adverse effect on the Company's business,
operating results and financial condition and the market price of the
shares of Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Results of Operations" and
"-Liquidity and Capital Resources" and "Business - Growth Strategy."
DEVELOPMENT DELAYS AND COST OVERRUNS
The Company currently expects to begin construction of between 18 and
24 new adult living communities during the next two years. There can be no
assurance that the Company will not suffer delays in its development
program, which could adversely affect the Company's growth. To date, the
Company has not opened any newly developed adult living communities.
Development of adult living communities can be delayed or precluded by
various zoning, healthcare licensing and other applicable governmental
regulations and restrictions. Real estate development projects generally
are subject to various risks, including permitting, licensing and
construction delays, that may result in construction cost overruns and
longer periods of operating losses. The Company intends to rely on third-
party general contractors to construct new communities. There can be no
assurance that the Company will not experience difficulties in working with
general contractors and subcontractors, any of which difficulties also
could result in increased construction costs and delays. Furthermore,
project development is subject to a number of contingencies over which the
Company will have little control and that may adversely affect project cost
and completion time, including inability to obtain construction financing,
shortages of or the inability to obtain labor or materials, the inability
of the general contractors or subcontractors to perform under their
contracts, strikes, adverse weather conditions, delays in property lease-
ups and changes in applicable laws or regulations or in the method of
applying such laws and regulations. If the Company's development schedule
is delayed, the Company's business, operating results and financial
condition could be adversely affected. See "Business - Growth Strategy"
and "- Operations."
SUBSTANTIAL DEBT OBLIGATIONS OF THE COMPANY
At April 30, 1996 the Company had approximately $124.0 million
principal amount of debt ("Total Debt") at an average interest rate of
11.75% per annum. Of the Total Debt, $78.6 million principal amount were
debentures ("Debenture Debt") issued in ten separate series, secured by
notes owed to the Company by partnerships formed to invest in multifamily
housing (the "Multi-family Notes"), investor notes and limited partnership
interests arising from offerings arranged by the Company in connection with
acquisitions of multi-family housing (the "Purchase Note Collateral"). The
Debenture Debt has an average interest rate of 11.95% per annum and has
maturities ranging from 1996 through 2002. During the fiscal year ended
January 31, 1996 and the three months ending April 30, 1996, total interest
expense with respect to Debenture Debt was approximately $8.7 million and
$2.4 million, respectively, the Purchase Note Collateral produced
approximately $3.0 million and $700,000 of interest and related payments to
the Company, respectively, which was approximately $5.7 million and $1.7
million less than the amount required to pay interest on the Debenture
Debt, respectively. The Company paid the shortfall from cash generated by
its operations. There can be no assurance that amounts received with
respect to the Purchase Note Collateral will be sufficient to pay the
Company's future debt service obligations with respect to the Debenture
Debt. Several of the Multi-family Notes have reached their final maturity
dates and these final maturity dates have been extended by the Company.
The Company may elect to extend maturities of other Multi-family Notes.
Of the Company's Total Debt, an additional $17.8 million principal
amount was unsecured, having an average interest rate of 13.9% per annum
("Unsecured Debt") and an additional $6.8 million of such debt is mortgage
debt ("Mortgage Debt") with an average interest rate of 10.76% per annum.
The Company incurred the Mortgage Debt, which is secured by adult living
communities, in order to facilitate the acquisition financing for such
communities. At April 30, 1996, the Company had approximately $21.0
million principal amount of debt ("Investor Note Debt") secured by
promissory notes from investors in offerings of limited partnership
interests, which debt has an average interest rate of 10.43% per annum. In
each of the last five years, the collection rate with respect to such
investor notes has exceeded 99% of the principal amount thereof that became
due and such collections have been sufficient to pay interest and principal
with respect to the Company's related Investor Note Debt. The Company
intends to continue to incur Investor Note Debt, utilizing as collateral
investor notes generated by future sales of limited partnership interests
in Investing Partnerships formed in connection with acquisitions of
existing adult living communities. Although the Company currently does not
anticipate incurring additional Debenture Debt or Unsecured Debt, there can
be no assurance that this will be the case. For example, the Company may
incur additional Debenture Debt or Unsecured Debt as a means of refinancing
its existing debt or for working capital purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 4 of Notes to Consolidated Financial Statements.
DIFFICULTIES OF MANAGING RAPID EXPANSION
The Company will pursue an aggressive expansion program, and it expects
that its rate of growth will increase as it implements its development
program for new adult living communities. The Company's success will
depend in large part on identifying suitable development opportunities, and
its ability to pursue such opportunities, complete development, and lease
up and effectively operate its adult-living communities. The Company's
growth has placed a significant burden on the Company's management and
operating personnel. The Company's ability to manage its growth
effectively will require it to continue to attract, train, motivate, manage
and retain key employees. If the Company is unable to manage its growth
effectively, its business, operating results and financial condition could
be adversely affected. See "Business - Growth Strategy" and "Management -
Directors and Executive Officers."
PARTNERSHIP OFFERINGS
The Company has financed the acquisition of existing adult living
communities it operates by arranging for the private placement of limited
partnership interests in Investing Partnerships and intends to continue
this practice for all of its future acquisitions of existing adult living
communities. The limited partners typically agree to pay their capital
contributions over a five-year period. Past offerings have, and it is
anticipated that future offerings will, include a guaranty that the limited
partners will receive distributions during each of the first five years of
their investment equal to between 11% to 12% of their then paid-in capital.
The Company is required to pay to limited partners any part of such
guaranteed return not paid from cash flow from the related property.
During the fiscal year ended January 31, 1996 and the three months ended
April 30, 1996, the Company paid approximately $1,025,120 and $675,444,
respectively, with respect to its guaranteed return obligations. The
increase in the amount the Company paid with respect to its guaranteed
return obligations in the three month period ended April 30, 1996 is due to
the refinancing of a number of its adult living communities and is offset
and exceeded by an increase in interest income received by the Company
during the three months ended April 30, 1996, which was also the result of
such refinancings. The refinancings resulted in the return of over $43
million of capital to limited partners, which reduced the amount of capital
upon which the Company is obligated to guarantee a return. The
refinancings also resulted in increased debt service payments by the Owning
Partnerships which own the refinanced adult living communities. These debt
service payments reduced the cash flow available to pay the guaranteed
return to limited partners during the three months ended April 30, 1996.
The decrease in available cash flow exceeded the reduction in the Company's
guaranteed returned obligations and, therefore, increased the amount
required to be paid by the Company with respect to such guaranteed return
obligations. The aggregate amount of the Company's guaranteed return
obligations will depend upon a number of factors, including, among others,
the expiration of such obligations for certain partnerships, the cash flow
generated by the properties and the terms of future offerings by Investing
Partnerships. The Company anticipates that for at least the next two
years, the guaranteed return obligations with respect to existing and
future Investing Partnerships will exceed the cash flow generated by the
related properties, which will result in the need to utilize cash generated
by the Company to pay limited partners their guaranteed return. The
Company will attempt to structure future offerings by Investing
Partnerships to minimize the likelihood that it will be required to utilize
the cash it generates to pay limited partners their guaranteed returns, but
there can be no assurance that this will be the case. In the past, limited
partners have been allowed to prepay capital contributions. These
prepayments reduce the recorded value of the Company's note receivables and
reduce interest income received by the Company. Pursuant to the terms of
offerings, the Company, as the general partner of each Investing
Partnership, has the option not to, and may not accept, future prepayments
by limited partners of capital contributions. In addition, by financing
the acquisition of existing adult living communities through, and acting as
the general partner of, partnerships, the potential exists for claims by
limited partners for violations of the terms of the partnership or guaranty
agreements and of applicable federal and state securities and blue sky laws
and regulations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Revenues," "- Liquidity and Capital
Resources" and "Business - Partnership Offerings."
PROPERTY FINANCING
The adult living communities currently operated by the Company are
generally encumbered with mortgage financing. While these mortgage loans
are obligations of the respective partnerships that own the communities
rather than direct obligations of the Company, the Company typically
provides a guaranty of certain obligations under the mortgages including,
for example, any costs incurred for the correction of hazardous
environmental conditions. The debt service payments on such mortgage debt
reduces the cash flow available for distribution by partnerships to limited
partners to whom the Company typically guarantees an annual distribution of
between 11% and 12% of their paid-in capital during the first five years of
any partnership, to the extent not paid from cash flow from the related
property. The Company anticipates that it will continue to finance its
future acquisitions of existing adult living communities through mortgage
financing and partnership offerings. The Company intends to finance its
development of adult living communities through mortgage financing and
other types of financing, including long-term operating leases arising
through sale/leaseback transactions. The financing of Company-developed
communities will be direct obligations of the Company and, accordingly, the
amount of mortgage indebtedness is expected to increase and the Company
expects to have substantial debt service and annual lease payment
requirements in the future as the Company pursues its growth strategy. As
a result, a substantial portion of the Company's cash flow will be devoted
to debt service and fixed lease payments. There can be no assurance that
the Company will generate sufficient cash flow from operations to pay its
interest and principal obligations on its mortgage debt or to make its
lease payments. In addition, the Company arranged for the sale of limited
partnership interests in two partnerships organized to make second mortgage
loans to the Company to fund approximately 20% of the costs of developing
three new adult living communities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Liquidity and
Capital Resources," "Business - Properties," "- Partnership Offerings" and
Note 2 of Notes to the Company's Consolidated Financial Statements.
RIGHT OF PARTNERSHIPS TO TERMINATE MANAGEMENT CONTRACTS
All of the adult living communities operated by the Company and the
nursing home operated by the Company are managed by the Company pursuant to
written management contracts, which generally have a five year term
coterminous with the Company's guaranty of annual distributions to limited
partners. This five-year guaranty obligation has terminated for four of
the 34 Investing Partnerships. After the initial five year term, the
management contracts are automatically renewed each year, but are
cancelable on 30 to 60 days notice at the election of either the Company or
the Owning Partnership. Action can be taken in each partnership by a
majority in interest of partners on such major matters as the removal of
the general partners, the request for or approval or disapproval of a sale
of a property owned by a partnership or other significant actions affecting
the properties or the partnership. The Company is the general partner of
28 of the 29 Owning Partnerships that own the adult living communities and
the nursing home operated by the Company. The Company is also the general
partner of 22 of the 34 Investing Partnerships formed to acquire 98% to 99%
of the equity interests in said Owning Partnerships. In these cases,
termination of the management contracts after their initial five-year terms
generally would require removal of the Company as general partner of the
Owning and/or Investing Partnership. Removing the Company as the general
partner of an Investing Partnership requires the vote of a majority of the
holders of limited partner interest and would result in loss of the fee
income under those contracts. See "- Conflicts of Interest" and
"Business - Partnership Offerings."
CONFLICTS OF INTEREST
Messrs. Luciani and Rodin, the Chairman of the Board and President of
the Company, respectively, and entities controlled by them serve as general
partners of partnerships directly and indirectly owning multi-family
properties and on account of such general partner status have personal
liability for recourse partnership obligations and own small equity
ownership interests in the partnerships. The Company holds notes,
aggregating $163.6 million, that are secured by the limited partnership
interests in such partnerships. These individuals have provided personal
guarantees in certain circumstances to obtain mortgage financing for
certain adult living communities operated by the Company and for certain of
the Company's Investor Note Debt, and the obligations thereunder may
continue. In addition, Messrs. Luciani and Rodin and certain employees
will devote a portion of their time to overseeing the third-party managers
of multi-family properties and one adult living community in which Messrs.
Luciani and Rodin have financial interests but the Company does not. These
activities, ownership interests and general partner interests create actual
or potential conflicts of interest on the part of these officers. See
"Certain Transactions" and Note 10 of Notes to the Company's Consolidated
Financial Statements.
The Company is the managing general partner for 28 of the 29 Owning
Partnerships which own the 30 adult living communities and one nursing home
which the Company operates. The Company also is the general partner for 22
of the 34 Investing Partnerships that own 99% partnership interests in
these owning partnerships. In addition, the Company is the managing agent
for all of the Company's 30 adult living communities and one nursing home.
The Company has financed the acquisition of adult living communities
through the sales of limited partnership interests in the investing
partnerships. By serving in all of these capacities, the Company may have
conflicts of interest in that it has both a duty to act in the best
interests of partners of various partnerships, including the limited
partners of the Investing Partnerships, and the desire to maximize earnings
for the Company's stockholders in the operation of such adult living
communities and nursing home. See "Business - Partnership Offerings" and
Note 10 of Notes to the Company's Consolidated Financial Statements.
The Company has agreed to acquire two adult living communities from
existing Owning Partnerships. The Company will finance these acquisitions
using mortgage financing and by arranging for the sale of limited
partnership interests in new Investing Partnerships. The Company has
obtained the consent to these transactions of the limited partners in the
existing Investing Partnerships that own interests in the Owning
Partnerships from which the communities will be acquired. The Company may
engage in similar transactions in the future. Potential conflicts of
interest may exist because of the Company's roles as general partner of
each of the selling and acquiring Owning Partnerships and of each of the
acquiring Investing Partnerships and, in some cases, the selling Investing
Partnerships.
The Company also may have a conflict of interest in that certain of the
adult living communities operated by the Company may face direct
competition from other communities operated by the Company. Decisions made
by the Company to benefit one such community may not be beneficial to the
other, thus exposing the Company to a claim of a breach of fiduciary duty
by limited partners. See "Business - Communities."
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL
The Company depends, and will continue to depend, on the service of its
principal executive officers. The loss of the services of one or more of
them could have a material adverse effect on the Company's operating
results and financial condition. Certain of the Company's officers or
entities controlled by them are general partners of partnerships that own
or invest in real property and they may be required to devote time to such
partnerships. The Company also depends on its ability to attract and
retain management personnel who will be responsible for the day-to-day
operations of each of its adult living communities. If the Company is
unable to hire qualified management to operate such communities, the
Company's business, operating results and financial condition could be
adversely affected. See "- Conflicts of Interest" and "Management."
COMPETITION
The long-term care industry is highly competitive, and the Company
believes that the assisted-living segment, in particular, will become even
more competitive in the future. The Company will be competing with
numerous other companies providing similar long-term care alternatives such
as home healthcare agencies, community-based service programs, adult living
communities and convalescent centers. The Company expects that, as the
provision of assisted-living services receives increased attention and the
number of states providing reimbursement for assisted-living rises,
competition will intensify as a result of new market entrants. The Company
also faces potential competition from skilled-nursing facilities that
provide long-term care services. Moreover, in implementing its growth
strategy, the Company expects to face competition in its efforts to develop
and acquire adult living communities. Some of the Company's present and
potential competitors are significantly larger and have, or may obtain,
greater financial resources than those of the Company. Consequently, there
can be no assurance that the Company will not encounter increased
competition in the future that could limit its ability to attract residents
or expand its business and therefore have a material adverse effect on its
business, operating results and financial condition. See "Business -
Competition."
STAFFING AND LABOR COSTS
The Company competes with other providers of independent- and assisted-
living services with respect to attracting and retaining qualified
personnel. The Company also is dependent upon the available labor pool of
employees. A shortage of trained or other personnel may require the
Company to enhance its wage and benefits package in order to compete. No
assurance can be given that the Company's labor costs will not increase, or
that if they do increase, they can be matched by corresponding increases in
rental or management revenue. Any significant failure by the Company to
attract and retain qualified employees, to control its labor costs or to
match increases in its labor expenses with corresponding increases in
revenues could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business - Employees."
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY
The Company currently, and for the foreseeable future, expects to rely
primarily on its residents' ability to pay the Company's fees from their
own or familial financial resources. Inflation or other circumstances that
adversely affect the ability of seniors to pay for the Company's services
could have an adverse effect on the Company. If the Company encounters
difficulty in attracting seniors with adequate resources to pay for its
services, its business, operating results and financial condition could be
adversely affected. See "Business - Operations."
GOVERNMENT REGULATION
Healthcare is heavily regulated at the Federal, state and local levels
and represents an area of extensive and frequent regulatory change.
Currently no federal rules explicitly define or regulate independent- or
assisted-living communities. A number of legislative and regulatory
initiatives relating to long-term care are proposed or under study at both
the federal and state levels that, if enacted or adopted, could have an
adverse effect on the Company's business and operating results. The
Company cannot predict whether and to what extent any such legislative or
regulatory initiative will be enacted or adopted, and therefore cannot
assess what effect any current or future initiative would have on the
Company's business and operating results. Changes in applicable laws and
new interpretations of existing laws can significantly affect the Company's
operations, as well as its revenues and expenses. The Company's adult
living communities are subject to varying degrees of regulation and
licensing by local and state health and social service agencies and other
regulatory authorities specific to their location. While regulations and
licensing requirements often vary significantly from state to state, they
typically relate to fire safety, sanitation, staff training, staffing
levels and living accommodations such as room size, number of bathrooms and
ventilation, as well as regulatory requirements relating specifically to
certain of the Company's health-related services. The Company's success
will depend in part on its ability to satisfy such regulations and
requirements and to acquire and maintain any required licenses. Federal,
state and local governments occasionally conduct unannounced
investigations, audits and reviews to determine whether violations of
applicable rules and regulations exist. Devoting management and staff time
and legal resources to such investigations, as well as any material
violation by the Company that is discovered in any such investigation,
audit or review, could have a material adverse effect on the Company's
business and operating results. See "Business - Growth Strategy" and "-
Governmental Regulation."
CONTROL BY CERTAIN STOCKHOLDERS
Each share of Common Stock is entitled to one vote on all matters
submitted to a vote of the holders of the Common Stock. After giving
effect to this Offering, John Luciani and Bernard M. Rodin will
collectively beneficially own shares of Common Stock representing
approximately 88% of the Company's Common Stock if the Minimum Offering is
sold and approximately 78% of the Company's Common Stock if the Maximum
Offering is sold. As a result, they will maintain control over the
election of a majority of the Company's directors and, thus, over the
operations and business of the Company as a whole. In addition, such
stockholders will have the ability to prevent certain types of material
transactions, including a change of control of the Company. The control by
John Luciani and Bernard M. Rodin over a substantial majority of the
Company's Common Stock may make the Company a less attractive target for a
takeover than it otherwise might be, or render more difficult or discourage
a merger proposal or a tender offer. See "Principal and Selling
Stockholders."
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property
may be held liable for the costs of removal or remediation of certain
hazardous or toxic substances, including, without limitation, asbestos-
containing materials, that could be located on, in or under such property.
Such laws and regulations often impose liability whether or not the owner
or operator knows of, or was responsible for, the presence of the hazardous
or toxic substances. The costs of any required remediation or removal of
these substances could be substantial and the liability of an owner or
operator as to any property is generally not limited under such laws and
regulations, and could exceed the property's value and the aggregate assets
of the owner or operator. The presence of these substances or failure to
remediate such substances properly may also adversely affect the owner's
ability to sell or rent the property, or to borrow using the property as
collateral. Under these laws and regulations, an owner, operator or any
entity who arranges for the disposal of hazardous or toxic substances, such
as asbestos-containing materials, at a disposal site may also be liable for
these costs, as well as certain other costs, including governmental fines
and injuries to persons or properties. As a result, the presence, with or
without the Company's knowledge, of hazardous or toxic substances at any
property held or operated by the Company could have an adverse effect on
the Company's business, operating results and financial condition. See
"Business - Government Regulation."
GENERAL REAL ESTATE RISKS
The performance of the Company's adult living communities is influenced
by factors affecting real estate investments, including the general
economic climate and local conditions, such as an oversupply of, or a
reduction in demand for, adult living communities. Other factors include
the attractiveness of properties to tenants, zoning, rent control,
environmental quality regulations or other regulatory restrictions,
competition from other forms of housing and the ability of the Company to
provide adequate maintenance and insurance and to control operating costs,
including maintenance, insurance premiums and real estate taxes. Real
estate investments also are affected by such factors as applicable laws,
including tax laws, interest rates and the availability of financing. In
addition, real estate investments are relatively illiquid and, therefore,
limit the ability of the Company to vary its portfolio promptly in response
to changes in economic or other conditions.
RESTRICTIONS IMPOSED BY LAWS BENEFITING DISABLED PERSONS
Under the Americans with Disabilities Act of 1990 (the "ADA"), all
places of public accommodation are required to meet certain federal
requirements related to access and use by disabled persons. A number of
additional Federal, state and local laws exist which also may require
modifications to existing and planned properties to create access to the
properties by disabled persons. While the Company believes that its
properties are substantially in compliance with present requirements or are
exempt therefrom, if required changes involve a greater expenditure than
anticipated or must be made on a more accelerated basis than anticipated,
additional costs would be incurred by the Company. Further legislation may
impose additional burdens or restrictions with respect to access by
disabled persons, the costs of compliance with which could be substantial.
See "Business - Government Regulation."
LIABILITY AND INSURANCE
The Company's business entails an inherent risk of liability. In
recent years, participants in the long-term care industry have become
subject to an increasing number of lawsuits alleging malpractice or related
legal claims, many of which seek large amounts and result in significant
legal costs. The Company expects that from time to time it will be subject
to such suits as a result of the nature of its business. The Company
currently maintains insurance policies in amounts and with such coverage
and deductibles as it deems appropriate, based on the nature and risks of
its business, historical experience and industry standards. There can be
no assurance, however, that claims in excess of the Company's insurance
coverage or claims not covered by the Company's insurance coverage will not
arise. A successful claim against the Company not covered by, or in excess
of, the Company's insurance could have a material adverse effect on the
Company's operating results and financial condition. Claims against the
Company, regardless of their merit or eventual outcome, may also have a
material adverse effect on the Company's ability to attract residents or
expand its business and would require management to devote time to matters
unrelated to the operation of the Company's business. In addition, the
Company's insurance policies must be renewed annually, and there can be no
assurance that the Company will be able to obtain liability insurance
coverage in the future or, if available, that such coverage will be on
acceptable terms. See "Business - Legal Proceedings."
UNILATERAL DETERMINATION OF OFFERING PRICE
The public offering price of the shares was determined unilaterally by
the Company and has not been negotiated by underwriters or other third
parties. Among the factors considered by the Company in determining the
price were the history of, and the prospects for, the Company and the
industry in which it competes, its past and present operations, its past
and present earnings and the trend of such earnings, the present state of
the Company's development, the general condition of the securities markets
at the time of this offering and the recent market prices of publicly
traded common stocks of comparable companies. There can be no assurance
that the Shares can be resold at the offering price, if at all. Purchasers
of the Shares will be exposed to a substantial risk of a decline in the
market price of the Common Stock after the offering, if a market develops.
See "Plan of Distribution."
DISCRETIONARY USE OF PROCEEDS
The Company intends to use its net proceeds from the Offering to
finance the development of new adult living communities and for working
capital and general corporate purposes. The Company's management will,
therefore, retain broad discretion in allocating all of the net proceeds of
the Offering. See "Use of Proceeds."
LACK OF UNDERWRITER
This offering will be made on a "self-underwritten" basis made under
the provisions of Rule 3a4-1 of the Exchange Act. The Company has never
engaged in the public sale of its securities, and it has no experience in
the underwriting of any public securities offerings. Accordingly, there is
no prior experience from which investors may judge the Company's ability to
consummate this offering. There can be no assurance that the Company will
be successful in selling the shares of Common Stock offered hereby. See
"Plan of Distribution."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The Company intends to apply
for listing of the Common Stock on the NASDAQ National Market. There can
be no assurance that the Common Stock will be approved for listing. After
completion of the Offering, the market price of the Common Stock could be
subject to significant fluctuations in response to various factors and
events, including the liquidity of the market for the shares of Common
Stock, variations in the Company's operating results, new statutes or
regulations or changes in the interpretation of existing statutes or
regulations affecting the healthcare industry in general or the independent
or assisted-living industry in particular. In addition, the stock market
in recent years has experienced broad price and volume fluctuations that
often have been unrelated to the operating performance of particular
companies. These market fluctuations also may adversely affect the market
price of the shares of Common Stock. See "Plan of Distribution."
ANTI-TAKEOVER CONSIDERATIONS
The Company's Board of Directors (the "Board of Directors") has the
authority, without action by the stockholders, to issue up to 1,000,000
shares of Preferred Stock par value $.0001 per share (the "Preferred
Stock"), and to fix the rights and preferences of such shares. This
authority, together with certain provisions in the Company's Restated
Certificate of Incorporation (the "Certificate") and By-Laws (including
provisions that implement staggered terms for directors, limit stockholder
ability to call a stockholders meeting or to remove directors and require a
two-thirds vote of stockholders for amendment of certain provisions of the
Certificate or approval of certain business combinations), may delay, deter
or prevent a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of, and the voting and other rights of
the holders of, the Common Stock. See "Description of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
The existing stockholders of the Company acquired their shares of
Common Stock at an average cost substantially below the assumed initial
public offering price set forth on the cover page of this Prospectus.
Therefore, purchasers of Common Stock in the Offering will experience
immediate and substantial dilution, which, assuming an initial public
offering price of $18.00 per share, will be $13.68 per share assuming the
Minimum Offering and $12.46 per share assuming the Maximum Offering. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in the public
market after the Offering or the perception that such sales could occur
could adversely affect the market price of the Common Stock and the
Company's ability to raise equity. Upon completion of the Offering, the
Company will have 11,250,000 shares of Common Stock outstanding assuming
the Minimum Offering and 12,500,000 shares of Common Stock outstanding
assuming the Maximum Offering. Of the shares outstanding after this
Offering, all shares sold in the Offering will be freely tradable without
restriction or limitation under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by "affiliates" of the
Company, as such term is defined in Rule 144 promulgated under the
Securities Act. The remaining shares are "restricted securities" within
the meaning of Rule 144. Such restricted securities may be sold subject to
the limitations of Rule 144. Furthermore, the Company intends to register
approximately 1,250,000 shares of Common Stock reserved for issuance
pursuant to the Company's stock option plans. See "Shares Eligible for
Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the Offering, after deducting
estimated commissions and offering expenses payable by the Company, are
estimated to be approximately $40.0 million if the Maximum Offering is
completed and $19.3 million if the Minimum Offering is completed. The
Company intends to use the net proceeds to finance the development of new
adult living communities and for working capital and general corporate
purposes. See "Business - Strategy".
Pending the uses outlined above, funds will be placed into short term
investments such as governmental obligations, bank certificates of deposit,
banker's acceptances, repurchase agreements, short term debt obligations,
money market funds, and interest bearing accounts. The Company will not
receive any proceeds from the sale of any shares by the Selling
Stockholders.
DIVIDEND POLICY
The Company does not currently pay dividends on its Common Stock and
does not anticipate paying dividends. It is the present policy of the
Company's Board of Directors to retain earnings, if any, to finance the
expansion of the Company's business. The payment of dividends in the
future will depend on the results of operations, financial condition,
capital expenditure plans and other cash obligations of the Company and
will be at the sole discretion of the Board of Directors. In addition,
certain provisions of proposed and future indebtedness of the Company may
prohibit or limit the Company's ability to pay dividends. During fiscal
1994, fiscal 1995 and the three months ended April 30, 1996, the Company's
predecessors paid dividends and other distributions of $1,886,000,
$1,700,000, and $249,000, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and "Certain Transactions."
CAPITALIZATION
The following table sets forth the actual consolidated capitalization
of the Company at April 30, 1996, and as adjusted to reflect (i) the sale
of the minimum and maximum number of shares of Common Stock by the Company
in this offering and (ii) the application of the estimated net proceeds
thereof. The table should be read in conjunction with the Company's
Consolidated Financial Statements and the related notes thereto included
elsewhere in this Prospectus. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
AS OF APRIL 30, 1996
---------------------------------
AS
AS ADJUSTED ADJUSTED
MINIMUM MAXIMUM
ACTUAL OFFERING OFFERING
------ ----------- --------
(IN THOUSANDS)
-------------
Bank Debt . . . . . . . . . . . . . $ 23,045 $ 23,045 $ 23,045
Other debt, principally debentures 102,083 102,083 102,083
Stockholders' equity:
Preferred Stock, $.0001 par
value; 1,000,000 shares
authorized; none issued and
outstanding . . . . . . . . . . - - -
Common Stock, $.01 par value;
30,000,000 shares authorized;
10,000,000 shares
issued and outstanding;
11,250,000 and 12,500,000
shares issued and outstanding
as adjusted for Minimum
Offering and Maximum Offering,
respectively(1) . . . . . . . . 100 113 125
Retained Earnings . . . . . . . . 343 343 343
37,371 56,698 77,386
Additional paid-in capital . . . -------- -------- --------
37,814 57,154 77,854
Total stockholders' equity . -------- -------- --------
$162,942 $182,282 $202,982
Total capitalization . . . ======== ======== ========
(1) Does not include 1,250,000 shares reserved for issuance under the
Company's stock option plans.
DILUTION
The net tangible book value of the Company's Common Stock at April 30,
1996 was approximately $29,243,000, or $2.92 per share. Net tangible book
value per share is determined by dividing the number of outstanding shares
of Common Stock into the net tangible book value of the Company (total net
assets of $37,814,000 less intangible assets of $8,571,000). After giving
effect to the Minimum Offering (based upon an assumed initial public
offering price of $18.00 per share, and after deduction of commissions and
estimated offering expenses payable by the Company), the pro forma net
tangible book value of the Common Stock at April 30, 1996 would have been
$48,583,000, or $4.32 per share, representing an immediate increase in pro
forma net tangible book value of $1.40 per share to existing stockholders
and an immediate dilution of $13.68 per share to new investors. After
giving effect to the Maximum Offering (based upon an assumed initial public
offering price of $18.00 per share and after deduction of commissions and
estimated offering expenses payable by the Company), pro forma net tangible
book value of the Common Stock of April 30, 1996 would have been
$69,283,000, or $5.54 per share, representing an immediate increase in pro
forma net tangible book value of $2.62 per share to existing shareholders
and an immediate dilution of $12.46 per share to new investors. The
following table illustrates the immediate per share dilution:
Minimum Maximum
Offering Offering
-------- --------
Assumed initial public
offering price per share . . . $18.00 $18.00
Net tangible book value per
share as of
April 30, 1996 . . . . . . . 2.92 2.92
Increase per share
attributable
to new investors . . . . . . 1.40 2.62
------ ------
Pro forma net tangible
book value per share after
offering . . . . . . . . . . . 4.32 5.54
------ ------
Net tangible book value
dilution per share to new
investors . . . . . . . . . . . $13.68 $12.46
====== ======
The following tables summarize, on a pro forma basis at April 30, 1996,
the difference between the number of shares purchased from the Company,
total consideration paid and the average price paid per share by existing
stockholders and new investors after giving effect to the Minimum Offering
and the Maximum Offering, respectively:
MINIMUM OFFERING
----------------
SHARES PURCHASED
FROM THE COMPANY
----------------------------
NUMBER PERCENT
------ -------
Selling
Stockholders(1) . . 9,861,111 88
New investors(1) . . 1,388,889 12
---------- ---
Total . . . . . . 11,250,000 100
========== ===
MINIMUM OFFERING
----------------
TOTAL
CONSIDERATION PAID
------------------------
AVERAGE
PRICE
AMOUNT PERCENT PER SHARE
------ ------- ---------
Selling
Stockholders(1) . . $37,814,000 60 $3.91
New investors(1) . . 25,000,000 40 $18.00
---------- ---
Total . . . . . . $62,814,000 100
=========== ===
(1) Upon completion of the Minimum Offering, the Selling Stockholders
will own 9,861,111 shares of Common Stock, and the new investors
will own 1,388,889 shares of Common Stock, representing 100% of
the outstanding shares of Common Stock.
MAXIMUM OFFERING
----------------
SHARES PURCHASED
FROM THE COMPANY
----------------------------
NUMBER PERCENT
------ -------
Selling
Stockholders(1) . . 9,722,222 78
New investors(1) . . 2,777,778 22
---------- ---
Total . . . . . . . 12,500,000 100
========== ===
MAXIMUM OFFERING
----------------
TOTAL
CONSIDERATION PAID
----------------------------
AVERAGE
PRICE
AMOUNT PERCENT PER SHARE
------ ------- ---------
Selling
Stockholders(1) . . $37,814,000 43 $3.89
New investors(1) . . 50,000,000 57 $18.00
----------- ---
Total . . . . . . . $87,814,000 100
=========== ===
(1) Upon completion of the Maximum Offering, the Selling Stockholders
will own 9,722,222 shares of Common Stock, and the new investors
will own 2,777,778 shares of Common Stock, representing 100% of
the outstanding shares of Common Stock.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data and other data)
The following selected consolidated financial data, except as
noted herein, have been taken or derived from the Company's consolidated
financial statements and should be read in conjunction with the
consolidated financial statements and the related notes thereto included
herein. The results of operations for an interim period have been prepared
on the same basis as the year end financial statements and, in the opinion
of management, contain all adjustments, consisting of only normally
recurring adjustments, necessary for a fair presentation of the results of
operations for such period. The results of operations for an interim
period may not give a true indication of results for the full year. See.
"Management's Discussion and Analysis of Financial Conditon and Results of
Operations."
Years Ended January 31,
-------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
STATEMENT OF
OPERATIONS DATA:
Revenues:
Sales . . . . . . $23,088 $24,654 $29,461 $29,000 $41,407
Deferred profit
earned . . . . 253 792 6,668 3,518 9,140
Interest income . 25,584 13,209 13,315 9,503 12,689
Property management
fees and 449 584 4,079 4,278 5,075
other income . ------- ------ ------ ------ ------
49,374 39,239 53,523 46,299 68,311
------- ------ ------ ------ ------
Costs and expenses:
Cost of sales . . 15,983 14,685 26,548 21,249 27,112
Selling . . . . . 6,256 7,027 6,706 6,002 7,664
Interest . . . . 14,021 11,874 10,991 13,610 15,808
General and
administrative. 5,836 5,617 5,226 6,450 7,871
Officers'
Compensation(1). 1,200 1,200 1,200 1,200 1,200
Depreciation and 412 975 1,433 2,290 2,620
amortization . . ------- ------ ------ ------ ------
43,708 41,378 52,104 50,801 62,275
------- ------ ------ ------ ------
Income (loss) before
provision for income
taxes . . . . . . . . 5,666 (2,139) 1,419 (4,502) 6,036
Provision for income - - - - -
taxes . . . . . . . . ------- ------ ------ ------ ------
Net income (loss) 5,666 (2,139) 1,419 (4,502) 6,036
Pro-forma income taxes 2,266 (856) 568 (1,801) 2,414
(benefit)(2) . . . ------- ------ ------ ------ ------
Pro-forma net income $3,400 $(1,283) $851 $(2,701) $3,622
(loss)(2) . . . . . . ======= ======= ====== ======= ======
Pro-forma earnings (loss) $.34 $(.13) $.09 $(.27) $.36
per common share(2). ======= ======= ====== ======= ======
Weighted average common 10,000 10,000 10,000 10,000 10,000
shares used . . . . ======= ======= ====== ======= ======
OTHER DATA:
Adult living
communities
operated (end of 8 14 18 25 28
period) . . . . . ======= ======= ====== ====== ======
Number of units (end 1,503 2,336 2,834 3,683 4,164
of period) . . . . ======= ======= ====== ====== ======
Average occupancy 82.1% 90.6% 90.4% 89.3% 94.4%
percentage . . . ======= ======= ====== ====== ======
Three Months Ended
April 30,
-------------------
1995 1996
----- ----
STATEMENT OF
OPERATIONS DATA:
Revenues:
Sales . . . . . . . . . . . . $5,847 $10,776
Deferred profit earned . . . 2,285 0
Interest income . . . . . . . 4,111 5,948
Property management fees and 1,035 165
other income . . . . . . . ------ ------
13,278 16,889
------ ------
Costs and expenses:
Cost of sales . . . . . . . . 4,058 4,985
Selling . . . . . . . . . . . 1,392 1,797
Interest . . . . . . . . . . 4,402 4,028
General and administrative . 1,435 1,891
Officers' Compensation(1) . . 300 300
563 935
Depreciation and amortization ------ ------
12,150 13,936
------ ------
Income (loss) before provision
for income taxes . . . . . . . 1,128 2,953
- 394
Provision for income taxes . . ------ ------
Net income (loss) 1,128 2,559
Pro-forma income taxes 451 787
(benefit)(2) . . . . . . . . ------ ------
$677 $1,772
Pro-forma net income (loss)(2) ====== ======
Pro-forma earnings (loss) per $.07 $.18
common share(2) . . . . . . . ====== ======
Weighted average common 10,000 10,000
shares used . . . . . . . . . ====== ======
OTHER DATA:
Adult living communities 26 30
operated (end of period) . ====== ======
Number of units (end of 3,797 4,350
period) . . . . . . . . . . ====== ======
Average occupancy 91.1% 94.7%
percentage . . . . . . . . ====== ======
As of
April
As of January 31, 30,
---------------------------------------- ----
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
Balance Sheet Data:
Cash and cash
equivalents . . $ 3,477 $ 6,455 $ 9,335 $ 10,950 $ 17,961 $ 12,414
Notes and
receivables-
net . . . . . . 230,760 234,115 227,411 220,014 223,736 215,974
Total assets . . 241,691 251,118 249,203 249,047 260,742 246,069
Total
liabilities . . 191,234 203,990 211,647 217,879 225,238 208,255
Stockholders'
equity . . . . 50,457 47,128 37,556 31,168 35,504 37,814
------------
(1) John Luciani and Bernard M. Rodin, the Chairman of the Board and
President, respectively, of the Company received dividends and
distributions from the Company's predecessors but did not receive
compensation. Officers' Compensation is based upon the aggregate
compensation currently received by such officers. See "Management."
(2) The Company's predecessors were Sub-chapter S corporations and a
partnership. The pro forma statement of operations data reflects
provisions for federal and state income taxes as if the Company had
been subject to federal and state income taxation as a C corporation
during each of the periods presented.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is one of the largest operators of adult living
communities in the United States, operating communities offering both
independent and assisted living services. The Company currently operates
30 adult living communities containing 4,350 apartment units in 11 states
in the Sun Belt and the Mid-West. The Company is a fully integrated
provider of adult living accommodations and services which acquires,
finances, develops and manages adult living communities. The Company also
operates one 60-bed skilled nursing facility.
Historically, the Company has financed the acquisition and
development of multi-family and adult living properties by utilizing
mortgage financing and by arranging for the sale of limited partnership
interests. The Company is the general partner of all but one of the
partnerships that owns the adult living communities in the Company s
portfolio and the Company manages all of the adult living communities in
its portfolio. The Company has a participation in the cash flow, sale
proceeds and refinancing proceeds of the properties after certain priority
payments to the limited partners. The Company intends to continue to
finance its future acquisitions of existing adult living communities by
utilizing mortgage financing and by arranging for the sale of partnership
interests, and anticipates acquiring four to eight such communities during
the next two years.
The Company has adopted a development plan pursuant to which it
intends to construct between 18 and 24 adult living communities during the
next two years containing between 2,268 and 3,408 apartment units. The
Company plans to own or operate pursuant to long-term leases or similar
arrangements the adult living communities that will be developed under the
plan. The Company will use proceeds of this Offering, mortgage financing
and long-term leases or similar arrangements to finance the development,
construction and initial operating costs.
The Company derives its revenues from sales of interests in adult
living real estate limited partnerships, recognition of deferred profits
with respect to such partnerships, interest on notes received by the
Company from such partnerships as part of the purchase price for the sale
of interests, and property management fees received by the Company:
. SALES. Sales of interests in adult living real estate partnerships are
recognized when the profit on the transaction is determinable, that is, the
collectibility of the sales price is reasonably assured and the earnings
process is virtually complete. The Company determines the collectibility
of the sales price by evidence supporting the buyers' substantial initial
and continuing investment in the adult living communities as well as other
factors such as age, location and cash flow of the underlying property.
. DEFERRED PROFIT EARNED. The Company has deferred profits on sales of
interests in limited partnerships in connection with the Company's
guarantee of cash flow to the limited partners. The Company has generally
guaranteed a 11% to 12% annual return to the limited partners on cash
invested in the respective limited partnerships for a period of
approximately five years after the date on which limited partners are
admitted to the partnership. The amount of the deferred profit is
calculated by determining the difference between the underlying property's
cash flow and the amount needed to meet the limited partners' future
guarantee and is included in deferred income. Any changes in the deferred
income either due to a passage of time or to a decrease or increase in the
underlying property's cash flow is recorded as additional income or expense
in the year determined. For properties that do not meet the Company's
revenue recognition policy, the Company accounts for the sales under the
installment method. Under the installment method the gross profit is
determined at the time of sale. The revenue recorded in any given year
would equal the cash collections multiplied by the gross profit
percentage. The Company has deferred all future income to be recognized on
these transactions. Losses on these properties are recognized
immediately upon sale.
. INTEREST INCOME. The Company has note receivables from Investing
Partnerships which were formed to acquire interests in Owning Partnerships
which own adult living communities. Such notes generally have interest
rates ranging from 11% to 13.875% per annum and are due in installments
over five years from the date the Investing Partnership acquired its
interest in the Owning Partnership. The notes represent senior
indebtedness of the related limited partnership and are collateralized by
Investing Partnership's interest in the Owning Partnership that owns the
related adult living community. These properties are generally encumbered
by mortgages. The mortgages generally bear interest at rates ranging from
8% to 9.5% per annum. The mortgages are generally collateralized by a
mortgage lien on the related adult living communities. Principal and
interest payments on each note are also collateralized by the investor
notes payable to the Investing Partnership to which the limited partners
are admitted.
The Company also has note receivables from limited partnerships which
were formed to acquire controlling interests in multi-family properties.
The notes have maturity dates ranging from ten to fifteen years from the
date the partnership interests were sold. Several notes have reached their
final maturity dates and these final maturity dates have been extended by
the Company. The notes represent senior indebtedness of the related
limited partnership and are collateralized by a 99% partnership interest in
the partnership that owns the related multi-family property. These
properties are encumbered by mortgages, which generally bear interest rates
ranging from 7% to 12% per annum. The mortgages are collateralized by a
mortgage lien on the related multi-family property. Interest payments on
each note also are collateralized by the investor notes.
. MANAGEMENT FEES. Property management fees are recognized as revenue when
related services have been performed.
REVENUES
Revenues for the three months ended April 30, 1996 were $16.9 million
compared to $13.3 million for the three months ended April 30, 1995, an
increase of $3.6 million or 27.1%. Revenues for the fiscal year ended
January 31, 1996 ("Fiscal 1995") were $68.3 million compared to $46.3
million for the year ending January 31, 1995 ("Fiscal 1994"), representing
an increase of $22.0 million or 47%. Revenues for Fiscal 1994 were $46.3
million compared to $53.5 million for the year ended January 31, 1994
("Fiscal 1993"), representing a decrease of $7.2 million or 13.5%.
Sales for the three months ended April 30, 1996 were $10.8 million
compared to $5.8 million for the three months ending April 30, 1995, an
increase of $5.0 million or 86.2%. This increase is attributable to the
sale of partnership interests relating to two adult living communities in
the three months ending April 30, 1996 as compared to one adult living
community in the three months ending April 30, 1995. Sales for Fiscal 1995
were $41.4 million compared to $29.0 million for Fiscal 1994, representing
an increase of $12.4 million or 42.7%. The increase is attributable to the
sale of partnership interests relating to six adult living communities in
Fiscal 1995 compared to four in Fiscal 1994. Sales for Fiscal 1994 were
$29.0 million compared to $29.5 million for Fiscal 1993, representing a
decrease of $500,000 or 1.7%. In both Fiscal 1994 and 1993, the Company
arranged for the sale of partnership interests relating to four adult
living communities.
There was no Deferred profit earned in the three months ended April
30, 1996 compared to $2.3 million for the three months ended April 30,
1995, a decrease of $2.3 million or 100.0%. The Company refinanced a
number of adult living communities in March 1996, which resulted in the
return of over $43.0 million of capital to limited partners and which
reduced the Company's obligations with respect to the guarantee of annual
returns to such limited partners. Because the refinancings were completed
or committed to before the completion of the Company's financial statements
for Fiscal 1995, the Company recognized deferred profit with respect to
such refinanced properties in Fiscal 1995 rather than in the three months
ended April 30, 1996. Deferred profit earned increased to $9.1 million in
Fiscal 1995 from $3.5 million in Fiscal 1994, representing an increase of
$5.6 million or 160%. The increase in the recognition of deferred profits
earned is primarily as a result of increased cash flows from adult living
communities and the refinancing of a number of adult living communities in
March 1996, as described above. Deferred profits earned in Fiscal 1994
were $3.5 million compared to $6.7 million for Fiscal 1993, representing a
decrease of $3.2 million or 47.8%. This decrease is principally due to the
high amount of deferred profits earned in Fiscal 1993 because of a
significant increase in the cash flow of a number of adult living
communities in that year as compared to previous years, thus allowing for
the realization of a substantial amount of deferred income in Fiscal 1993.
While cash flow from adult living communities continued to increase in
Fiscal 1994, it did not increase at the same rate as in Fiscal 1993,
resulting in the realization of less deferred income in Fiscal 1994 than in
Fiscal 1993.
Interest income for the three months ended April 30, 1996 was $6.0
million compared to $4.1 million for the three months ended April 30, 1995,
an increase of $1.9 million or 46.3%. The increase is primarily due to the
refinancing of a number of adult living communities in March 1996 which
resulted in the return of over $43.0 million of capital to limited partners
in the three months ending April 30, 1996, thereby accelerating the receipt
of scheduled interest payments received by the Company. Interest income
for Fiscal 1995 was $12.6 million compared to $9.5 million for Fiscal 1994,
representing an increase of $3.1 million or 32.6%. Such increase reflects
the increased aggregate interest received on notes from limited
partnerships as a result of an increase in the aggregate principal amount
of such notes. The increase in aggregate principal amount reflects an
increase in the number of existing adult living communities operated by the
Company and in the number of offerings in connection with acquisitions of
adult living communities to six in Fiscal 1995, compared to four in Fiscal
1994. The increase in interest income in Fiscal 1995 also reflects an
interest payment realized in connection with a mortgage debt restructuring
for a multi-family property. Interest income for Fiscal 1994 was $9.5
million compared to $13.3 million for Fiscal 1993, representing a decrease
of $3.8 million or 28.5%. This decrease was primarily attributable to the
continuing decline in the amounts receivable and collected of investor
notes relating to offerings in connection with acquisitions of multi-family
properties (which decline reflects the Company's discontinuance of multi-
family property acquisitions and offerings after 1986), which investor note
collections were applied as interest payments under their respective
limited partnership note payable to the Company.
Property management fees and other income were $200,000 for the three
months ended April 30, 1996 compared to $1.0 million for the three months
ended April 30, 1995, a decrease of $800,000 or 80%. The decrease is
primarily due to the increased debt service on various adult living
communities due to the refinancing of such properties in March 1996, which
reduced the cash flow produced by such properties and the incentive
management fees these properties generate. Property management fees and
other income were $5.1 million in Fiscal 1995 compared to $4.3 million in
Fiscal 1994, representing an increase of $800,000 or 18.6%. The increase is
attributable to additional properties under management as well as higher
property cash flows for existing properties which generated increased
incentive management fees. Property management fees and other income
increased to $4.3 million in Fiscal 1994 compared to $4.1 million in Fiscal
1993, representing an increase of $200,000 or 4.9%. The increase is
attributable to additional properties under management during the period.
COST OF SALES
Cost of sales, which include the cash portion of the purchase price
for properties plus related transaction costs and expenses, for the three
months ended April 30, 1996 were $5.0 million compared to $4.1 million for
the three months ended April 30, 1995, an increase of $900,000 or 22%. The
increase is due to the acquisition by the Company of two properties in the
three months ended April 30, 1996 with combined purchase prices of $9.8
million as compared to the acquisition of one property in the three months
ended April 30, 1995 with a purchase price of $5.0 million. Cost of sales
as a percent of sales decreased from 69.4% for the three months ended April
30, 1995 to 46.3% for the three months ended April 30, 1996. This decrease
can be attributed principally to the Company's ability to acquire
properties on more favorable terms and to obtain more favorable mortgage
financings for its acquisitions (i.e. - higher loan-to-value ratios). Cost
of sales for Fiscal 1995 was $27.1 million compared to $21.2 million in
Fiscal 1994, representing an increase of $5.9 million or 27.8%. The
increase is due to the acquisition by the Company of six properties in
Fiscal 1995 with combined purchase prices of $35 million as compared to the
acquisition of four properties in Fiscal 1994 with combined purchase prices
of $22.3 million. The increase in the aggregate purchase price of
properties acquired was partially offset by an increased use of mortgage
financing for acquisitions in Fiscal 1995 from levels of mortgage financing
for Fiscal 1994, which reduced cash expenditures by the Company for such
acquisitions. Cost of sales as a percent of sales decreased from 73.2% in
Fiscal 1994 to 65.5% in Fiscal 1995. The decrease can be attributed
principally to the Company's ability to obtain more favorable mortgage
financing for its acquisitions (i.e. - higher loan-to-value ratios and
preferred interest rates), which has contributed to the decrease in the
cost of sales, and has enabled the Company to also obtain more favorable
pricing when arranging for the sale of partnership interests, which has
contributed to the increase in sales, thus creating larger gross margins.
Cost of sales for Fiscal 1994 were $21.2 million compared to $26.5 million
for Fiscal 1993, a decrease of $5.3 million or 20%. This decrease was due
primarily to the use of mortgage financing for property acquisitions in
Fiscal 1994, which reduced cash expenditures by the Company for property
acquisitions from such expenditures for Fiscal 1993 where no such mortgage
financing was used. Cost of sales as a percent of sales decreased from 90%
in Fiscal 1993 to 73.2% in Fiscal 1994. This decrease is principally due
to the use of mortgage financing for property acquisitions in Fiscal 1994,
which reduced cash expenditures by the Company for property acquisitions
from such expenditures for Fiscal 1993, in which mortgage financing was not
used.
Several factors, including the collapse of the real estate market in
the late 1980's and early 1990's, which resulted in a number of distressed
property sales and limited competition from other prospective purchasers,
allowed the Company to acquire properties on relatively favorable terms.
Mortgage financing, however, was generally either not available or
available only on relatively unattractive terms during this period, which
made acquisitions more difficult because they either required large outlays
of cash or the use of mortgage financing on relatively unfavorable terms.
During the last several years, several factors have contributed towards a
trend to less favorable terms for acquisitions of adult living communities,
including a recovery in the market for adult living communities and
increased competition from other prospective purchasers of adult living
communities. Although the Company has been able to acquire properties on
more favorable terms in the three months ending April 30, 1996, there can
be no assurance that this nascent trend towards improving acquisition terms
will continue. The Company, however, has been able to obtain mortgage
financing on increasingly favorable terms (i.e. - the Company has obtained
mortgages for a greater percentage of the purchase price and at preferred
rates). These factors, combined with an overall reduction of interest
rates, have partially offset the factors that have led to more unfavorable
acquisition terms. A significant change in these or other factors
(including, in particular, a significant rise in interest rates) could
prevent the Company from acquiring communities on terms favorable enough to
offset the start-up losses of newly-developed communities as well as the
Company's debt service obligations, guaranty obligations and the Company's
selling, general and administrative expenses.
SELLING EXPENSES
Selling expenses for the three months ended April 30, 1996 were $1.8
million compared to $1.4 million for the three months ended April 30, 1995,
an increase of $400,000 or 28.6%. The increase was attributable to
additional commissions paid for assistance in the sale of limited
partnership interests and related selling costs in connection with the sale
of limited partnership interests in partnerships that acquired two adult
living communities in the three months ended April 30, 1996 compared to the
sale of limited partnership interests in partnerships that acquired one
adult living community in the three months ended April 30, 1995 and was
partially offset by reductions in the rate of commissions paid to brokers
selling limited partnership interests and reductions in commissions payable
relating to the sale of limited partnership interests in partnerships that
acquired multi-family properties prior to 1986. Selling expenses for
Fiscal 1995 were $7.6 million compared to $6.0 million in Fiscal 1994,
representing an increase of $1.6 million or 26.6%. The increase was
attributable to additional commissions paid for assistance in the sale of
limited partnership interests and related selling costs in connection with
the sale of limited partnership interests in partnerships that acquired six
adult living communities in Fiscal 1995 for $41.4 million compared to the
sale of limited partnership interests in partnerships that acquired four
adult living communities in Fiscal 1994 for $29.0 million. Selling expenses
for Fiscal 1994 were $6.0 million compared to $6.7 million in Fiscal 1993,
representing a decrease of $700,000 or 10.4%. This decrease is due
primarily to reductions in the rate of commissions paid to brokers selling
limited partnership interests.
INTEREST EXPENSE
Interest expense for the three months ending April 30, 1996 was $4.0
million compared to $4.4 million for the three months ended April 30, 1995,
a decrease of $400,000 or 9.1%. The decrease is primarily due to the
refinancing of two adult living communities in March 1996. Until the
refinancings, the mortgages on the communities were direct obligations of
the Company and the corresponding interest payments were included in the
Company's interest expense. These mortgages are now direct obligations of
the Owning Partnerships that own these properties and the corresponding
interest payments are no longer included in interest expense. Interest
expense for Fiscal 1995 was $15.8 million compared to $13.6 million for
Fiscal 1994, representing an increase of $2.2 million or 16.2%. Interest
Expense included interest payments on Debenture Debt which had an average
interest rate of 11.95% per annum and was secured by the Purchase Note
Collateral. During Fiscal 1995, total interest expense with respect to
Debenture Debt was approximately $8.7 million, Purchase Note Collateral
produced approximately $3.0 million of interest and related payments to the
Company, which was $5.7 million less than the amount required to pay
interest on the Debenture Debt. Interest expense for Fiscal 1994 was $13.6
million compared to $11.0 million for Fiscal 1993, an increase of $2.6
million or 23.6%. The increases can be attributed to increases in debt
during the periods and was somewhat offset by reductions in interest rates
during the periods. See "Liquidity and Capital Resources."
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $1.9 million for the three
months ended April 30, 1996 as compared to $1.4 million for the three
months ended April 30, 1995, an increase of $500,000 or 35.7%. The
increase primarily reflects additional salary costs incurred in instituting
the Company's new development program and in managing and financing the
Company's portfolio of properties, which increased by two in the three
months ended April 30, 1996. General and administrative expenses were $7.8
million in Fiscal 1995 compared to $6.5 million in Fiscal 1994,
representing an increase of $1.3 million or 20%. The increase primarily
reflects additional salary costs incurred in instituting the Company's new
development program and in managing and financing the Company's portfolio
of properties, which increased by six in Fiscal 1995, and also reflects
increases in various office expenses. General and administrative expenses
were $6.5 million in Fiscal 1994 compared to $5.2 million in Fiscal 1993 or
an increase of 23%. The increase primarily reflects the write-off in Fiscal
1993 of previously existing accounts payable and accrued expenses that the
Company determined would not be paid.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the three months ended April 30,
1996 was $900,000 compared to $0.6 million for the three months ended April
30, 1995, an increase of $0.3 million or 50%. The increase is attributable
to the issuance of additional Debenture Debt and Unsecured Debt in Fiscal
1995. Depreciation and amortization for Fiscal 1995 was $2.6 million
compared to $2.3 million for Fiscal 1994. Depreciation and amortization
consists of amortization of deferred debt expense incurred in connection
with debt issuance. Depreciation and amortization for Fiscal 1994 was $2.3
million compared to $1.4 million in Fiscal 1993. Depreciation and
amortization consists of amortization of deferred debt expense incurred
with debt issuance. The increase can be attributable to the issuance of
additional Debenture Debt in Fiscal 1993 which had its full amortization
impact in Fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed operations through cash flow
generated by operations, by arranging for the sale of partnership interests
and through borrowings consisting of Investor Note Debt, Unsecured Debt,
Mortgage Debt and Debenture Debt. The Company's principal liquidity
requirements are for payment of operating expenses, costs associated with
development of new adult living communities, debt service obligations and
guaranteed return obligations to limited partners of Investing Partnerships
to the extent that guaranteed returns cannot be funded from the cash flow
of such partnerships.
The Company's cash and cash equivalents were $18.0 million at January
31, 1996, $11.0 million at January 31, 1995 and $9.3 million at January
31, 1994. The increase in cash and cash equivalents at January 31, 1996
reflects, among other things, (i) net income of $6.0 million for Fiscal
1995, compared to a loss of $4.5 million for Fiscal 1994, (ii) increases in
loans and accrued interest payable by $52.0 million, and (iii) amortization
and depreciation for Fiscal 1995 of $2.6 million, offset in part by, among
other things, (i) a decrease in loans payable by $39.3 million, (ii)
distributions of $1.7 million and (iii) payments of other notes payable of
$1.6 million. The increase in cash and equivalents at January 31, 1995
reflects, among other things, (i) increases in loans and accrued interest
payable by $44.0 million and (ii) amortization and depreciation of $2.3
million offset, in part, by (i) a loss of $4.5 million for Fiscal 1994,
(ii) a decrease in loans payable by $31.3 million, (iii) distributions of
$1.9 million and (iv) payments of notes payable of $2.6 million.
At January 31, 1996, the Company had total indebtedness of $140.0
million, consisting of $78.3 million of Debenture Debt, $18.9 million of
Unsecured Debt, $12.0 million of Mortgage Debt and $30.0 million of
Investor Note Debt. Subsequent to January 31, 1996, the Company has
reduced outstanding Investor Note Debt from $30 million to $21 million,
Unsecured Debt from $18.9 million to $17.8 million, and Mortgage Debt from
$12 million to $6.9 million. Since that date, Debenture Debt increased
from $78.3 million to $78.7 million. As a result, total indebtedness,
decreased from $140.0 million to $125.2 million and the Company had cash
and cash equivalents at April 30, 1996 of $12.4 million. Contributing to
this debt repayment was the refinancing in March 1996 of certain adult
living communities the Company manages resulting in the return of over $43
million of capital to limited partners and the reduction of both Investor
Note Debt and Mortgage Debt.
At January 31, 1996, the Company had approximately $37.2 million
principal amount of debt that matures during the year ending January 31,
1997. Of this amount, $6.8 million is Investor Note Debt which the Company
anticipates will be repaid through the collection of investor notes. The
balance, approximately $30.4 million, included $9.9 million of Debenture
Debt, $5.2 million of Mortgage Debt and $15.3 million of Unsecured Debt.
The Company repaid the entire $5.2 million of Mortgage Debt due by January
31, 1997 by refinancing said debt, which refinanced debt became obligations
of the partnerships that own the properties and ceased being obligations of
the Company. The Company anticipates that the balance of $9.9 million of
Debenture Debt and $15.3 million of Unsecured Debt that matures during the
current fiscal year, together with interest on outstanding debt, will be
repaid from the Company s existing cash and cash equivalents, which
amounted to $12.4 million on April 30, 1996, along with the cash flow that
will be generated by property operations and by arranging for the sale of
partnership interests to finance the acquisition of additional existing
adult living communities. However, competition to acquire such communities
has intensified and there can be no assurance that the Company will be able
to acquire such communities on terms favorable enough to offset start-up
costs of newly developed communities and the cash requirements of the
Company's existing operations and debt service.
The Company has financed the acquisition of the adult living
communities it operates by arranging for the private placement of limited
partnership interests, and intends to continue this practice for all of its
future acquisitions of existing communities. Past offerings have included,
and it is anticipated that future offerings will include, a guaranty from
the Company that the limited partners will receive during a five-year
period an annual return generally equal to 11% to 12% of their then paid-in
capital. The Company is required to pay to limited partners any part of
such guaranteed return not paid from cash flow from the related property.
During Fiscal 1995 and the three months ended April 30, 1996, the Company
paid approximately $1,025,120 and $675,444, respectively, with respect to
its guaranteed return obligations. The increase in the amount the Company
paid with respect to its guaranteed return obligations in the three month
period ended April 30, 1996 is due to the refinancing of a number of its
adult living communities and is offset and exceeded by an increase in
interest income received by the Company during the three months ended April
30, 1996, which was also the result of such refinancings. The refinancings
resulted in the return of over $43 million of capital to limited partners,
which reduced the amount of capital upon which the Company is obligated to
guarantee a return. The refinancings also resulted in increased debt
service payments by the Owning Partnerships which own the refinanced adult
living communities. These debt service payments reduced the cash flow
available to pay the guaranteed return to limited partners during the three
months ended April 30, 1996. The decrease in available cash flow exceeded
the reduction in the Company's guaranteed returned obligations and,
therefore, increased the amount required to be paid by the Company with
respect to such guaranteed return obligations. The aggregate amount of the
Company's guaranteed return obligations will depend upon a number of
factors, including, among others, the expiration of such obligations for
certain partnerships, the cash flow generated by the properties and the
terms of future offerings by Investing Partnerships. The Company
anticipates that for at least two years the guaranteed return obligations
with respect to existing and future Investing Partnerships will exceed the
cash flow generated by the related properties, which will result in the
need to utilize cash generated by the Company to pay limited partners in
such partnerships their guaranteed return. The Company will attempt to
structure future offerings to minimize the likelihood that it will be
required to utilize the cash it generates to pay guaranteed returns to
limited partners, but there can be no assurance that this will be the case.
In addition, in the past, limited partners have been allowed to prepay
capital contributions. These prepayments reduce the recorded value of the
Company's note receivables and reduce interest income received by the
Company. Pursuant to the terms of offerings, the Company, as the general
partner of each Investing Partnership, has the option not to accept and may
not accept, future prepayments by limited partners of capital
contributions.
The future growth of the Company will be based upon the continued
acquisition of existing adult living communities and the development of
newly-constructed adult living communities. The Company anticipates that
it will acquire between four and eight existing adult living communities
over the next two years. It is anticipated that future acquisitions of
existing adult living communities will be financed by a combination of
mortgage financing and by arranging for the sale of partnership interests.
The Company regularly obtains such acquisition financing from three
different commercial mortgage lenders and, in view of its ready access to
such mortgage financing, has not sought any specific commitments or letters
of intent with regard to future , unidentified acquisitions. Similarly,
the Company believes that it has sufficient ability to finance its future
acquisitions in part by arranging for the sale of partnership interests.
Limited partners typically agree to pay their capital contributions over a
five-year period, and deliver notes representing the portion of their
capital contribution that has not been paid in cash. The Company borrows
against the notes delivered by investors to generate cash when needed,
including to pursue its development plan and to repay debt. The Company s
present Investor Note Debt lenders do not have sufficient lending capacity
to meet all of the Company s future requirements. However, the Company
currently is negotiating with several new Investor Note Debt lenders which
the Company believes will have sufficient lending capacity to meet all of
the Company s foreseeable Investor Note Debt borrowing requirements.
The Company also has implemented a new development plan pursuant to
which it currently intends to construct between 18 and 24 new adult living
communities during the next two years. The Company will utilize the
proceeds of this offering plus mortgage financing to construct, own and
operate new communities. The Company has obtained a letter of intent from
Fleet Bank to provide up to $40.0 million in financing, including up to
$20.0 million for the construction of new adult living communities. The
Company also intends to utilize long-term lease financing arrangements to
develop and operate new communities. The Company has obtained a letter of
intent from Capstone for up to $39.0 million for the development of four
adult living communities that will be operated by the Company pursuant to
long-term leases with Capstone. These arrangements are anticipated to be
sufficient to finance the Company s development plan through the end of its
current fiscal year. The Company is actively engaged in negotiations with
other mortgage and long-term lease lenders to provide additional
construction financing for future years.
BUSINESS
GENERAL
Grand Court Lifestyles, Inc. (the "Company") is one of the largest
operators of adult living communities in the United States, operating
facilities offering both independent- and assisted-living services. The
American Seniors Housing Association ranks the Company as one of the top
ten owners and operators of adult living communities. The Company
currently operates 30 adult living communities containing 4,350 apartment
units in 11 states in the Sun Belt and the Midwest. The Company also
operates one skilled nursing facility containing 60 beds and one of the
adult living facilities it operates contains 70 skilled nursing beds. The
facilities operated by the Company had an average occupancy rate of
approximately 93% at May 31, 1996. The Company is a fully integrated
provider of adult living accommodations and services which acquires,
finances, develops and manages adult living communities. The Company's
operating objective is to provide high-quality, personalized living
services to senior residents, primarily persons over the age of 75.
Current demographic trends suggest that demand for both independent-
living and assisted-living services will continue to grow. According to
U.S. Bureau of Census data, the Company's target market, people over age
75, is one of the fastest growing segments of the U.S. population and is
projected to increase by more than 32% to 17.1 million between 1990 and
2000. While the population of seniors grows, other demographic trends
suggest that an increasing number of them will choose adult living centers
as their residences. The median net worth of householders over age 75 has
increased to over $75,000. At the same time, the number of seniors living
alone has increased, while women, who have been the traditional care-
givers, are more likely to be working and unable to provide care in the
home. Many seniors find that adult living centers provide them with a
number of services and features that increasingly they are unable to find
at home, including security, good nutritious food and companionship.
Furthermore, a recent Federal study indicates that, despite the growth in
the elderly population, the percentage of elderly that are disabled and
need assistance with activities of daily living ("ADLs") has decreased
substantially and is expected to continue to decrease. This suggests that
demand for independent living communities will increase in the future.
Assisted-living supplements independent-living services with
assistance with ADLs in a cost effective manner while maintaining
residents' independence, dignity and quality of life. Such assistance
consists of personalized support services and health care in a non-
institutional setting designed to respond to the individual needs of the
elderly who need assistance but who do not need the level of health care
provided in a skilled nursing facility.
The Company has instituted a development plan which will result in
the new construction of between 18 and 24 adult living communities during
the next two years which it will own or will operate pursuant to long-term
leases or similar arrangements. The Company anticipates that each new
community to be developed by it will offer both independent- and assisted-
living. The Company's development plan contemplates its first new
communities being built in Texas, where, as of June 12, 1996, it owns one
site and holds options to acquire seven additional sites. The Company
generally plans to concentrate on developing projects in only a limited
number of states at any given time. The Company believes that this focus
will allow it to realize certain efficiencies in the development and
management of communities. The Company also plans to expand its portfolio
of adult living communities by acquiring between four and eight communities
during the next two years and to finance the acquisitions by arranging for
the sale of partnership interests in limited partnerships. The Company is
the managing general partner of the partnerships that own all but one of
the 30 adult living centers and one nursing home in its current portfolio
and will continue to act in this capacity for all future properties which
it acquires. All of the adult living communities and the one nursing home
are managed by the Company pursuant to written management contracts.
The Company's adult living communities offer personalized assistance,
supportive services and selected health care services in a professionally
managed group living environment. Residents may receive individualized
assistance which is available 24 hours a day, and is designed to meet their
scheduled and unscheduled needs. The services for independent-living
generally include three restaurant-style meals per day served in a common
dining room, weekly housekeeping and flat linen service, social and
recreational activities, transportation to shopping and medical
appointments, 24 hour security and emergency call systems in each unit.
The services for assisted-living residents generally include those provided
to independent-living residents, as supplemented by assistance with ADLs
including eating, bathing, dressing, grooming, personal hygiene and
ambulating; health monitoring; medication management; personal laundry
services; and daily housekeeping services.
The Company focuses exclusively on "private-pay" residents, who pay
for housing or related services out of their own funds or through private
insurance, rather than relying on the few states that have enacted
legislation enabling assisted-living facilities to receive Medicaid funding
similar to funding generally provided to skilled nursing facilities. The
Company intends to continue its "private-pay" focus as it believes this
market segment is, and will continue to be, the most profitable. This
focus will enable the Company to increase rental revenues as demographic
pressure increases demand for adult living facilities and avoid potential
financial difficulties it might encounter if it were dependent on Medicaid
or other government reimbursement programs that may suffer from health care
reform, budget deficit reduction or other pending or future government
initiatives.
THE LONG TERM CARE MARKET
The long-term care services industry encompasses a broad range of
accommodations and healthcare services that are provided primarily to
seniors. Independent-living communities attract seniors who desire to be
freed from the burdens and expense of home ownership, food shopping and
meal preparation and who are interested in the companionship and social and
recreational opportunities offered by such communities. As a senior's need
for assistance increases, the provision of assisted-living services in a
community setting is more cost-effective than care at home or in a nursing
home. A community which offers its residents assisted-living services can
provide assistance with various ADLs (such as bathing, dressing, personal
hygiene, grooming, ambulating and eating), support services (such as
housekeeping and laundry services) and health-related services (such as
medication supervision and health monitoring), while allowing seniors to
preserve a high degree of autonomy. Generally, residents of assisted-
living communities require higher levels of care than residents of
independent-living facilities, but require lower levels of care than
residents of skilled-nursing facilities.
FAVORABLE TRENDS
The Company believes its business benefits from significant trends
affecting the long-term care industry. The first is an increase in the
demand for elder care resulting from the continued aging of the U.S.
population, with the average age of the Company's residents (83 years old)
falling within the fastest growing segments of the U.S. population. While
increasing numbers of Americans are living longer and healthier lives, many
choose community living as a cost-effective method of obtaining the
services and life-style they desire. Adult living facilities that offer
both independent and assisted-living services give seniors the comfort of
knowing that they will be able to "age in place" -- something they are
increasingly unable to do at home.
The primary consumers of long-term care services are persons over the
age of 65. This group represents one of the fastest growing segments of
the population. According to U.S. Bureau of the Census data, the number of
people in the U.S. age 65 and older increased by more than 27% from 1981 to
1994, growing from 26.2 million to 33.2 million. The segment of the
population over 85 years of age, which comprises the largest percentage of
residents at long-term care facilities, is projected to increase by more
than 37% between the years 1990 and 2000, growing from 3.0 million to 4.1
million. The Company believes that these trends depicted in the graph
below will contribute to continued strong demand for adult living
communities.
PROJECTED PERCENTAGE CHANGE IN THE ELDERLY POPULATION OF THE U.S.
1981 1990 1995 2000 2005 2010
---- ---- ---- ---- ---- ----
65-84 0 17.5% 25.2% 26.2% 27.3% 34.6%
85+ 0 28.4% 54.3% 76.3% 94.1% 112.7%
Source: U.S. Bureau of the Cencus
Other trends benefiting the Company include the increased financial
net worth of the elderly population, the changing role of women and the
increase in the population of individuals living alone. As the number of
elderly in need of assistance has increased, so too has the number of the
elderly able to afford residences in communities which offer independent
and/or assisted-living services. According to U.S. Bureau of the Census
data, the median net worth of householders age 75 or older has increased
from $55,178 in 1984 and $61,491 in 1988 to $76,541 in 1991. Furthermore,
according to the same source, the percentage of people 65 years and older
below the poverty line has decreased from 24.6% in 1970 to 15.7% in 1980 to
12.2% in 1990. Historically, unpaid women (mostly daughters or daughters-
in-law) represented a large portion of the care givers of the non-
institutionalized elderly. The increased number of women in the labor
force, however, has reduced the supply of care givers, and led many seniors
to choose adult living communities as an alternative. Since 1960, the
population of individuals living alone has increased significantly as a
percentage of the total elderly population. This increase has been the
result of an aging population in which women outlive men by an average of
6.8 years, rising divorce rates, and an increase in the number of unmarried
individuals. The increase in the number of the elderly living alone has
also led many seniors to choose to live in adult living communities.
The increased financial net worth of the elderly population is
illustrated by the following chart:
MEDIAN NET WORTH
1988 1991
---- ----
45-54 57,466 58,250
55-64 80,032 83,041
65+ 73,471 88,192
A trend benefiting the Company, and especially its provision of
independent-living services, is that as the population of seniors swells,
the percentage of seniors that are disabled and need assistance with ADLs
has steadily declined. According to the National Long Term Care Surveys, a
federal study, disability rates for persons aged 65 and older have declined
by 1 to 2 percent each year since 1982, the year the study was commenced.
In 1982, approximately 21% of the 65 and over population was disabled and
in 1995 only 10% was disabled. This trend suggests that demand for
independent living services will increase in the future.
Another trend benefiting the Company, and especially its provision of
assisted-living services, is the effort by the government, private insurers
and managed care organizations to contain health care costs by limiting
lengths of stay, services, and reimbursement amounts. This has resulted in
hospitals discharging patients earlier and referring them to nursing homes.
At the same time, nursing home operators continue to focus on providing
services to sub-acute patients requiring significantly higher levels of
skilled nursing care. The Company believes that this "push down" effect
has and will continue to increase demand for assisted-living facilities
that offer the appropriate levels of care in a non-institutional setting in
a more cost-effective manner. The Company believes that all of these
trends have, and will continue to, result in an increasing demand for adult
living facilities which provide both independent and assisted-living
services.
STRATEGY
GROWTH. The Company's growth strategy focuses on the development of
communities offering both independent and assisted-living apartment units
and on continued intensive communities management. The Company believes
that there are numerous markets that are not served or are underserved by
existing adult living communities and intends to take advantage of these
circumstances, plus the present availability of construction financing on
favorable terms, to develop new communities of its own design in desirable
markets. Historically, the Company has expanded by acquisition of existing
communities. The Company has taken advantage of the inexperience and
operating inefficiencies of the previous owners of these communities and
has improved the financial performance of these properties by implementing
its own management and marketing techniques. The Company's sophistication
in management and marketing is evidenced by its approximate 93% occupancy
rate at May 31, 1996 at its existing communities.
The Company will continue to acquire existing communities and intends
to finance these acquisitions, in part, by arranging for the sale of
partnership interests in such communities. The Company believes that its
continuing acquisition and financing of adult living communities will
provide additional cash flow to help the Company pursue its development
program. The Company also believes its established ability to privately
place equity and debt securities will help insure its ability to pursue its
development plan regardless of changes in the economy that may make
conventional and sale/leaseback construction financing unavailable or
available on only unfavorable terms.
Senior management, collectively, has over 80 years of experience in
the acquisition, financing, development and management of multi-family
housing, having acquired or developed and, in most cases, managed a
property portfolio consisting of approximately 20,000 multi-family
apartment units. In addition, senior management of the Company has over 40
years experience in the long-term care industry including independent-
living, assisted-living and, to a lesser extent, skilled-nursing
communities.
NEW DEVELOPMENT. The Company's development plan emphasizes a
"prototype" adult living community that it has designed. The prototype
incorporates attributes of the various communities managed by the Company,
which it believes appeal to the elderly. The prototype has been designed
to be built in two sizes: one containing 126 apartment units and the other
142 apartment units. In all other respects, the two sizes of the prototype
are identical and both will be located on sites of up to seven acres. The
Company believes that its development prototype is larger than many
independent-living and most assisted-living communities, which typically
range from 40 to 80 units. The Company believes that the greater number of
units will allow the Company to achieve economies of scale in operations,
resulting in lower operating costs per unit, without sacrificing quality of
service. The Company designed its prototype to achieve economics of scale
in management and operations. These savings primarily are achieved through
lower staffing, maintenance and food preparation costs per unit, without
sacrificing quality of service. In that the time and effort required to
develop a community (including site selection, land acquisition, zoning
approvals, financing, and construction) do not vary materially for a larger
community than for a smaller one, developmental economics of sale are also
realized in that more apartment units are being produced for each community
that is developed.
Common areas will include recreation areas, dining rooms, a kitchen,
administrative offices, an arts and crafts room, a multi-purpose room,
laundry rooms for each floor, a beauty salon/barber shop, a library reading
area, card rooms, a billiards room, a health center to monitor residents'
medical needs and covered and assigned parking. The Company believes that
the common areas and amenities offered by prototype represent the state of
the art for independent-living communities and are superior to those
offered by smaller independent-living communities or by most communities
that offer only assisted living services. Unit sizes will range from 432
square feet for a studio to 1,062 square feet for a two bedroom/two bath
unit. The Company's 126-unit prototype contains 15 studio apartments, 105
one bedroom/one bathroom units and six two bedroom/two bathroom units. The
126-unit prototype will encompass approximately 110,000 square feet. The
142 unit prototype contains 46 studio apartments, 92 one bedroom/one
bathroom apartments and 4 two bedroom/two bathroom apartments. The 142-
unit prototype will encompass approximately 120,000 square feet. Each
apartment unit will be a full apartment, including a kitchen or
kitchenette.
Each community will offer residents a choice between independent-
living and assisted-living services. As a result, the market for each
community will be broader than for communities that offer only either
independent-living or assisted-living services. Due to licensing
requirements and the expense and difficulty of converting existing
independent-living units to assisted-living units, independent-living and
assisted-living units in many communities generally are not
interchangeable. However, the prototype is designed to allow, at any time,
for conversion of units, at minimum expense, for use as either independent-
living or assisted-living units. Each community therefore may adjust its
mix of independent-living and assisted-living units as the market or
existing residents demand. The Company believes that part of the appeal
of this type of community is that residents will be able to "age in place"
with the knowledge that they need not move to another community if they
require assistance with ADLs. The Company believes that the ability to
retain residents by offering them higher levels of services will result in
stable occupancy with enhanced revenue streams.
MARKET SELECTION PROCESS. In selecting geographic markets for
potential expansion, the Company considers such factors as a potential
market's population, demographics and income levels, including the existing
and anticipated future population of seniors who may benefit from the
Company's services, the number of existing long-term care communities in
the market area and the income level of the target population. While the
Company does not apply its market selection criteria mechanically or
inflexibly, it generally seeks to select adult living community locations
that are non-urban with populations of no more than 100,000 people and
containing 3,000 elderly households within a 20-mile radius with an annual
income of at least $35,000, and have a regulatory climate that the Company
considers favorable toward development. The Company has found that
communities with these characteristics, so-called "secondary markets,"
generally have a receptive population of seniors who desire and can afford
the services offered in the Company's adult living communities. In
focusing on secondary markets, the Company believes it will avoid
overdevelopment to which primary markets are prone and obtain the benefit
of demographic concentrations that do not exist in yet smaller markets.
While not limiting itself to any specific geographic market, the
Company generally plans to concentrate its development projects to only a
limited number of states at any given time. This focus will allow the
Company to realize certain efficiencies in the development process and in
the management of the communities. For 1996, the Company anticipates that
its development efforts will be focused primarily in the State of Texas.
The Company currently owns one development site in Corpus Christi, Texas
and has obtained a letter of intent from Fleet Bank for $40.0 million of
financing for the construction of new adult living communities and the
acquisition of existing communities and a letter of intent from Capstone
for $39 million of sale/leaseback construction financing. Construction is
expected to commence in July 1996. The Company also has obtained options
to acquire seven additional sites in Amarillo, El Paso, Round Rock, San
Angelo, Temple, Tyler and Wichita Falls, Texas. The Company anticipates
that it will commence construction on between 18 and 24 new communities in
the next two years. The Company also anticipates developing adult living
communities in one or more of the following states: New Mexico, North
Carolina, South Carolina, and Kentucky.
CENTRALIZED MANAGEMENT. The adult living business is a highly
management intensive one. While the location of a community and its
physical layout are extremely important, another key to the success of an
adult living community lies in the ability to maximize its financial
potential through sophisticated, experienced management. Such success
requires the establishment and supervision of programs involving the
numerous facets of an adult living community, including menu planning, food
and supply purchasing, meal preparation and service, assistance with
"activities of daily living," recreational activities, social events,
health care services, housekeeping, maintenance and security. The Company's
strategy emphasizes centralized management in order to achieve operational
efficiencies and ensure consistent quality of services. The Company has
established standardized policies and procedures governing, among other
things, social activities, maintenance and housekeeping, health care
services, and food services. An annual budget is established by the
Company for each community against which performance is tested each month.
MARKETING. Marketing is critical to the rent up and continued high
occupancy of a community. The Company's marketing strategy focuses on
enhancing the reputation of the Company's communities and creating
awareness of the Company and its services among potential referral sources.
The Company's experience is that satisfied residents and their families are
an important source of referrals for the Company. In addition, the Company
plans to use its common community design and its "The Grand Court"
trademarked name to promote national brand-name recognition.
SERVICES
It is important to identify the specific tastes and needs of the
residents of an adult living community, which can vary from region to
region and from one age group to the next. Residents who are 70 years old
have different needs than those who are 85. The Company has retained a
gerontologist to insure that programs and activities are suitable for all
of the residents in a community and that they are adjusted as these
residents "age in place". Both independent and assisted-living services
will be offered at all of the Company's newly, developed communities.
BASIC SERVICE AND CARE PACKAGE. The Company provides four levels of
service at its adult-living communities:
Level I is Independent Living which includes three meals per day,
weekly housekeeping, activities program, 24-hour security and
transportation for shopping and medical appointments.
Level II or Catered Living offers all of the amenities of Level I in
addition to all utilities, personal laundry and daily housekeeping.
Level III is Assisted Living, which offers three meals per day, daily
housekeeping, 24-hour security, all utilities, medication management,
activities and nurse's aides to assist the residents in daily bathing and
dressing.
Level IV is especially designed to meet the needs of our assisted
living residents who require increased assistance with the activities of
daily living. We are able to accommodate residents with walkers or
wheelchairs, or who suffer from the early stages of Alzheimer's.
Rehabilitative services such as physical and speech therapy are also
provided by licensed third party home health care providers. Each resident
can design a package of services that will be monitored by his or her own
physician.
The Company charges an average fee of $1,400 per month for Level One
services, $1,700 per month for Level Two services, $2,000 per month for
Level Three services, and $2,500 per month for Level IV services, but the
fee levels vary from community to community. As the residents of the
communities managed by the Company continue to age, the Company expects
that an increasing number of residents will utilize Level Three and Level
Four services. The Company's internal growth plan is focused on increasing
revenue by continuing to expand the number and diversity of its tiered
additional assisted-living services and the number of residents using these
services.
COMMUNITIES
The Company currently operates 30 communities containing 4,350 units
and one nursing home containing 60 beds. One of the Company's adult living
communities contains 70 nursing home beds. The following chart sets forth
information regarding the communities operated by the Company:
Occupancy
Number Year % at
of Acquired May 31,
Community (1) State Units (2) 1996
------------ ----- ----- ------- -------
The Grand Court Arizona 136 1991 98%
Phoenix
The Grand Court Fort Florida 184 1989 95%
Myers
The Grand Court Florida 126 1996 85%
Lakeland
The Grand Court Lake Florida 170 1992 91%
Worth
The Grand Court North Florida 189 1995 60%
Miami
The Grand Court Florida 60 1994 91%
Pensacola
The Grand Court I Florida 72 1994 87%
Pompano Beach(3)
The Grand Court II Florida 42 1994 88%
Pompano Beach(3)
The Grand Court Florida 94 1995 97%
Tavares
The Grand Court Illinois 76 1993 100%
Belleville
The Grand Court II Kansas 127 1994 97%
Kansas City
The Grand Court Kansas 275 1990 97%
Overland Park
The Grand Court Michigan 164 1993 95%
Farmington Hills
The Grand Court Novi Michigan 114 1994 98%
The Grand Court I Missouri 167 1989 97%
Kansas City
The Grand Court III Missouri 217 1991 80%
Kansas City
The Grand Court IV Missouri 237 1990 69%
Kansas City
The Grand Court Las Nevada 152 1991 100%
Vegas
The Grand Court Ohio 120 1994 100%
Columbus
The Grand Court Ohio 185 1994 99%
Dayton
The Grand Court Ohio 73 1992 99%
Findlay
The Grand Court Ohio 77 1992 100%
Springfield
The Grand Court I Tennessee 143(4) 1995 99%
Chattanooga
The Grand Court II Tennessee 146 1995 99%
Chattanooga
The Grand Court Tennessee 197 1992 98%
Memphis
The Grand Court Bryan Texas 180 1993 98%
The Grand Court Texas 132 1990 96%
Longview
The Grand Court Texas 139 1991 99%
Lubbock
The Grand Court I San Texas 198 1993 98%
Antonio
The Grand Court II San Texas 60(5) 1995 87%
Antonio
The Grand Court Texas 60 1996 98%
Weatherford
The Grand Court Virginia 98 1995 97%
Bristol
------------
(1) In certain cases, more than one Investing Partnership owns
an interest in one Owning Partnership. There are
therefore, more Investing Partnerships than there are
Owning Partnership. One of the Owning Partnerships owns
two adult living communities, one Owning Partnership owns
one adult living community and one nursing home. In
addition, the Company's properties in Pompano Beach,
Florida are adjacent to one another and are counted as one
property. As a result, there are 32 communities listed,
but only 29 Owning Partnerships. See " Partnership
Offerings."
(2) Represents year in which an affiliate of the Company
acquired the community.
(3) These are adjacent properties and are counted as one adult
living community.
(4) Grand Court I Chattanooga's unit count includes a 70-bed
nursing wing.
(5) Grand Court II San Antonio is a 60-bed licensed nursing
facility.
All 30 adult living communities and the nursing home are
managed by the Company in its capacity as property manager and,
for all but one of the related owning partnerships, as managing
general partner. Because the Company serves as both the managing
general partner and the property manager, it receives partnership
administration fees and property management fees. As the managing
general partner of these partnerships, the Company generally has
full authority and power to act for the partnerships as if it
were the sole general partner. The Company has fiduciary
responsibility for the management and administration of these
partnerships and, subject to certain matters requiring the
consent of the other partners such as a sale of the related
property, may generally, on behalf of the partnerships, borrow
money, execute contracts, employ persons and services, compromise
and settle claims, determine and pay distributions, prepare and
distribute reports, and take such other actions which are
necessary or desirable with respect to matters affecting the
partnerships or individual partners. See " Partnership
Offerings."
OPERATIONS
CORPORATE. Over the past ten years the Company has
developed extensive policies, procedures and systems for the
operation of its adult-living communities. The Company also has
adopted a formal quality assurance program. In connection with
this program the Company requires a minimum of two full-day
annual quality assurance reviews at each community. The entire
regional staff team participates in the review which thoroughly
examines all aspects of the long-term care community from the
provision of services to the maintenance of the physical
buildings. The reports generated from these quality assurance
reviews are then implemented by the community administrator.
Corporate headquarters also provides human resources services, a
licensing facilitator, and in-house accounting and legal support
systems.
REGIONAL. The Company has nine regional administrators:
one responsible for three communities in Florida, one responsible
for six communities in Tennessee, Texas, Arizona and Nevada, one
responsible for five communities in Texas and Virginia, one
responsible for five communities in Ohio and Tennessee, one
responsible for five communities in Missouri, Kansas, and
Michigan, one responsible for four communities in Florida, one
responsible for three communities in Missouri and Illinois and
one who oversees the food division. In addition, one regional
administrator and various other Company personnel oversee the
third-party managing agents that operate multi-family properties
in which the equity interests are pledged to the Company to
secure notes owed to it. Each regional administrator is reported
to by the manager of those communities he oversees.
COMMUNITY. The management team at each community consists
of an administrator, who has overall responsibility for the
operation of the community, an activity director, a marketing
director and, at certain larger communities, one or two assistant
administrators. Each community which offers assisted-living
services has a staff responsible for the assisted-living care
giving services. This staff consists of a lead resident aide, a
medication room aide, certified nurse aides and trained aides,
and, in those states which so require, registered nurses. At
least one staff member is on duty 24 hours per day to respond to
the emergency or scheduled 24-hour assisted-living services
available to the residents. Each community has a kitchen staff, a
housekeeping staff and a maintenance staff. The average community
currently operated by the Company has 40 to 50 full-time
employees depending on the size of the community and the extent
of services provided in that community.
The Company places emphasis on diet and nutrition, as well
as preparing attractively presented healthy meals which can be
enjoyed by the residents. The Company's in-house food service
program is led by a regional administrator who reviews all menus
and recipes for each community. The menus and recipes are
reviewed and changed based on consultation with the food director
and input from the residents. The Company provides special meals
for residents who require special diets.
EMPLOYEES. The Company emphasizes maximizing each
employee's potential through support and training. The Company's
training program is conducted on three levels. Approximately six
times per year, corporate headquarters staff conduct training
sessions for the management staff in the areas of supervision and
management skills, and caring for the needs of an aging
population. At the regional level, regional staff train the
community staff on issues such as policies, procedures and
systems, activities for the elderly, the administration and
provision of specific services, food service, maintenance,
reporting systems and other operational areas of the business.
At the community level, the administrators of each community
conduct training sessions on at least a monthly basis relating to
various practical areas of care-giving at the community. These
monthly sessions cover, on an annual basis, all phases of the
community's operations, including special areas such as safety,
fire and disaster procedures, resident care, and policies and
procedures.
PARTNERSHIP OFFERINGS
Historically, the Company has financed the acquisition and
development of adult living properties by utilizing mortgage
financing and by arranging for the sale of limited partnership
interests in Investing Partnerships formed to acquire controlling
interests in Owning Partnerships. The Company is the general
partner of all but one of the Owning Partnerships that own the
adult living communities currently included in the Company's
portfolio and the Company manages all of the adult living
communities in its portfolio. The Company is also the general
partner of 22 of the 34 Investing Partnerships. As the general
partner of such partnerships the Company has a participation in
the cash flow, sale proceeds and refinancing proceeds of the
properties after certain priority payments to the limited
partners. Typically, an Owning Partnership is organized by the
Company to acquire a property which the Company has identified
and selected based on a broad range of factors. Generally, 99%
to 100% of the partnership interests in an Operating Partnership
initially are owned by the Company. An Investing Partnership is
formed as a limited partnership for the purpose of acquiring all
or a portion of the total partnership interests owned by the
Company. Limited partnership interests in the Investing
Partnership are sold to investors in exchange for (i) all cash or
(ii) a cash down payment and full recourse promissory notes (an
"Investor Note"). In the case of an investor that does not
purchase a limited partnership interest for all cash, the
investor's limited partnership interest (a "Limited Partnership
Interest") serves as collateral security for that investor's
Investor Note. Under the terms of an agreement (a "Purchase
Agreement"), the Investing Partnership purchases from the Company
the partnership interests in the Operating Partnership partially
with cash raised from the cash down payment made by its investors
and the balance by the delivery of the Investing Partnership's
promissory note (a "Purchase Note"). The Purchase Notes executed
by Investing Partnerships prior to 1986 have balloon payments of
principal due on maturity. The Purchase Notes executed since
January 1, 1987 are self-liquidating (without balloon payments).
The Investing Partnership, as collateral security for its
Purchase Note, pledges to the Company the Investor Notes received
from its investors, its interest in the Limited Partnership
Interests securing the Investor Notes, as well as the entire
partnership interest it holds in the Owning Partnership which it
purchased from the Company.
The limited partners in Investing Partnerships typically
agree to pay their capital contributions over a five-year period.
Past offerings have, and it is anticipated that future offerings
will, include a guaranty that the limited partners will receive
distributions during each of first five years of their investment
equal to between 11% to 12% of their paid-in capital. The
Company is required to pay to limited partners any part of such
guaranteed return not paid from cash flow from the related
property. During Fiscal 1995 and the three months ended April
30, 1996, the Company paid approximately $1,025,120 and $675,444,
respectively, with respect to its guaranteed return obligations.
The increase in the amount the Company paid with respect to its
guaranteed return obligations in the three month period ended
April 30, 1996 is due to the refinancing of a number of its adult
living communities and is offset and exceeded by an increase in
interest income received by the Company during the three months
ended April 30, 1996, which was also the result of such
refinancings. The refinancings resulted in the return of over
$43 million of capital to limited partners, which reduced the
amount of capital upon which the Company is obligated to
guarantee a return. The refinancings also resulted in increased
debt service payments by the Owning Partnerships which own the
refinanced adult living communities. These debt service payments
reduced the cash flow available to pay the guaranteed return to
limited partners during the three months ended April 30, 1996.
The decrease in available cash flow exceeded the reduction in the
Company's guaranteed returned obligations and, therefore,
increased the amount required to be paid by the Company with
respect to such guaranteed return obligations. The aggregate
amount of the Company's guaranteed return obligations will depend
upon a number of factors, including, among others, the expiration
of such obligations for certain partnerships, the cash flow
generated by the properties and the terms of future offerings by
Investing Partnerships. The Company anticipates that for at
least the next two years, the guaranteed return obligations with
respect to existing and future Investing Partnerships will exceed
the cash flow generated by the related properties, which will
result in the need to utilize cash generated by the Company to
pay limited partners their guaranteed return. The Company will
attempt to structure future offerings to minimize the likelihood
that it will be required to utilize the cash it generates to pay
limited partners their guaranteed returns, but there can be no
assurance that this will be the case. In the past, limited
partners have been allowed to prepay capital contributions.
These prepayments reduce the recorded value of the Company's note
receivables and reduce interest income received by the Company.
Pursuant to the terms of offerings, the Company has the option
not to accept, and may not accept, future prepayments by limited
partners of capital contributions.
All of the adult living communities operated by the Company
are managed by the Company pursuant to written management
contracts, which generally have a five year term coterminous with
the Company's guaranty of annual distributions to limited
partners. This five-year guaranty obligation has terminated for
four of the 34 Investing Partnerships. After the initial five
year term, the management contracts are automatically renewed
each year, but are cancelable on 30 to 60 days notice at the
election of either the Company or the related Owning Partnership.
Action can be taken in each partnership by a majority in interest
of partners on such major matters as the removal of the general
partners, the request for or approval or disapproval of a sale of
a property owned by a partnership or other significant actions
affecting the properties or the partnership. In these cases,
termination of the management contracts after their initial five-
year terms generally would require removal of the Company as
general partner of the owning and/or investing partnership.
Removing the Company as the general partner of an investing
partnership requires the vote of a majority of the holders of
limited partner interest and would result in loss of the fee
income under those contracts.
The Company intends to continue to finance its future
acquisitions of existing adult living communities by utilizing
mortgage financing and by arranging for the sale of partnership
interests. The Company has derived, and it expects to continue
to derive, a substantial portion of its revenues from sales of
partnership interests in partnerships it organizes to finance the
acquisition of existing adult living communities. The Company
plans to continue to acquire existing adult living communities,
and currently plans to acquire between four to eight existing
communities over the next two years. However, competition to
acquire such communities has intensified, and there can be no
assurance that the Company will be able to acquire such
communities on terms favorable enough to offset the start-up
losses associated with newly developed communities and the costs
and cash requirements arising from the Company's overhead and
existing debt and guarantee obligations. The Company is, and
will continue to be, the managing general partner of the
partnerships that own acquired communities.
In addition, the Company arranged for the sale of limited
partnership interests in two partnerships organized to make
second mortgage loans to the Company to fund approximately 20% of
the costs of developing three new adult living communities.
COMPETITION
The senior housing and health care industries are highly
competitive and the Company expects that both the independent-
living business, and assisted-living businesses in particular,
will become more competitive in the future. The Company will
continue to face competition from numerous local, regional and
national providers of long-term care whose communities and
services are on either end of the senior care continuum. The
Company will compete in providing independent-living services
with home health care providers and other providers of
independent-living services, primarily on the basis of quality
and cost of communities and services offered. The Company will
compete in providing assisted-living with other providers of
assisted-living services, skilled nursing communities and acute
care hospitals primarily on the bases of cost, quality of care,
array of services provided and physician referrals. The Company
also will compete with companies providing home based health
care, and even family members, based on those factors as well as
the reputation, geographic location, physical appearance of
communities and family preferences. In addition, the Company
expects that as the provision of long-term care receives
increased attention, competition from new market entrants,
including, in particular, companies focused on independent and
assisted-living, will grow. Some of the Company's competitors
operate on a not-for-profit basis or as charitable organizations,
while others have, or may obtain, greater financial resources
than those of the Company. However, the Company anticipates that
its most significant competition will come from other adult
living communities within the same geographic area as the
Company's communities because management's experience indicates
that senior citizens frequently elect to move into communities
near their homes.
Moreover, in the implementation of the Company's expansion
program, the Company expects to face competition for the
development of adult living communities. Some of the Company's
present and potential competitors are significantly larger or
have, or may obtain, greater financial resources than those of
the Company. Consequently, there can be no assurance that the
Company will not encounter increased competition in the future
which could limit its ability to attract residents or expand its
business and could have a material adverse effect on the
Company's financial condition, results of operations and
prospects.
COMPANY HISTORY
The predecessors of Grand Court Lifestyles, Inc. are J&B
Management Company, Leisure Centers, Inc. and their affiliates.
J&B Management Company is a private partnership founded in 1969
with a successful history in the development and management of
multi-family real estate and adult living communities. J&B's
headquarters are in Fort Lee, New Jersey and it conducted its
property development and management operations through its
affiliate, Leisure Centers, Inc., located in Boca Raton, Florida.
Grand Court Lifestyles, Inc., its subsidiaries, J&B Management
Company and Leisure Centers, Inc. and their affiliates are
collectively referred to as the "Company".
Through the 1970's and early 1980's, the Company's primary
focus was on the acquisition, development, finance and management
of multi-family properties. Senior management, collectively, has
over 80 years of experience in multi-family housing, having had
interests in properties containing approximately 20,000 apartment
units located in 22 states, primarily in the sun-belt. Beginning
in the mid-1980's, the Company's sole focus has been on the
acquisition, finance and management of adult living communities
building one of the largest operating portfolios of adult living
communities in the nation, encompassing the entire spectrum of
the long-term care industry, from independent-living to assisted-
living, with a limited involvement in nursing homes. Senior
management, collectively, has over 40 years of experience in the
adult living field. The Company is ranked by the American
Seniors Housing Association in the top ten owners and managers of
adult living properties and currently has ownership interests in
and manages 30 adult living communities containing 4,350
apartment units (including 70 skilled nursing beds) and one
nursing home containing 60 skilled nursing beds in 11 states.
GOVERNMENT REGULATION
Regulations applicable to the Company's operations vary
among the types of communities operated by the Company and from
state to state. Independent-living communities generally do not
have any licensing requirements. Assisted-living communities are
subject to less regulation than other licensed health care
providers but more regulation than independent-living
communities. However, the Company anticipates that additional
regulations and licensing requirements will likely be imposed by
the states and the federal government. Currently, California,
New Jersey, Ohio, Massachusetts, Texas and Florida require
licenses to provide the assisted-living services provided by the
Company. The licensing statutes typically establish physical
plant specifications, resident care policies and services,
administration and staffing requirements, financial requirements
and emergency service procedures. The licensing process can take
from two months to one year. New Jersey requires Certificates of
Need for assisted-living communities. The Company's communities
must also comply with the requirements of the Americans With
Disabilities Act and are subject to various local building codes
and other ordinances, including fire safety codes. While the
Company relies almost exclusively on private pay residents, the
Company operates a nursing home containing 60 beds and one adult
living community operated by the Company contains 70 nursing home
beds in which some residents rely on Medicaid. As a provider of
services under the Medicaid program, the Company would be subject
to Medicaid regulations designed to limit fraud and abuse,
violations of which could result in civil and criminal penalties
and exclusion from participation in the Medicaid program.
Revenues derived from Medicaid comprise less than 1% of the
Company's revenues. The Company does not intend to expand its
nursing home activities and intends to pursue an exclusively
"private-pay" clientele. The Company believes it is in
substantial compliance with all applicable regulatory
requirements. No actions are pending against the Company for
non-compliance with any regulatory requirement.
Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or
operator of real property may be held liable for the costs of
removal or remediation of certain hazardous or toxic substances,
including, without limitation, asbestos-containing materials,
that could be located on, in or under such property. Such laws
and regulations often impose liability whether or not the owner
or operator knows of, or was responsible for, the presence of the
hazardous or toxic substances. The costs of any required
remediation or removal of these substances could be substantial
and the liability of an owner or operator as to any property is
generally not limited under such laws and regulations, and could
exceed the property's value and the aggregate assets of the owner
or operator. The presence of these substances or failure to
remediate such substances properly may also adversely affect the
owner's ability to sell or rent the property, or to borrow using
the property as collateral. Under these laws and regulations, an
owner, operator or any entity who arranges for the disposal of
hazardous or toxic substances, such as asbestos-containing
materials, at a disposal site may also be liable for these costs,
as well as certain other costs, including governmental fines and
injuries to persons or properties. As a result, the presence,
with or without the Company's knowledge, of hazardous or toxic
substances at any property held or operated by the Company could
have an adverse effect on the Company's business, operating
results and financial condition.
Under the ADA, all places of public accommodation are
required to meet certain federal requirements related to access
and use by disabled persons. A number of additional Federal,
state and local laws exist which also may require modifications
to existing and planned properties to create access to the
properties by disabled persons. While the Company believes that
its properties are substantially in compliance with present
requirements or are exempt therefrom, if required changes involve
a greater expenditure than anticipated or must be made on a more
accelerated basis than anticipated, additional costs would be
incurred by the Company. Further legislation may impose
additional burdens or restrictions with respect to access by
disabled persons, the costs of compliance with which could be
substantial.
EMPLOYEES
As of the date hereof, the Company employs approximately
1,500 persons, including 25 in the Company's corporate
headquarters. None of the Company's employees is covered by
collective bargaining agreements. The Company believes its
employee relations are good.
LEGAL PROCEEDINGS
J&B Management Company, a predecessor of the Company ("J&B
Management Company") that managed certain multi-family properties
for which the United States Department of Housing and Urban
Development ("HUD") provided mortgage insurance, was the subject
of an audit and investigation by HUD during 1990 and 1991.
Pending the conclusion of the inquiry, J&B Management Company,
its partners and key employees were suspended by HUD from the
management of such multi-family properties. On April 10, 1991,
HUD and J&B Management Company entered into a Settlement
Agreement which provided, among other things, that HUD vacate the
suspension retroactively. Certain conditions were imposed in the
Settlement Agreement, including that J&B Management Company and
such principals and employees not engage in the management of
HUD-insured properties for an indefinite period of time.
Pursuant to a letter agreement dated January 11, 1994, (i) J & B
Management Company agreed to reimburse various properties for
certain expenses, aggregating approximately $445,000, deemed not
eligible by HUD, (ii) J & B Management Company agreed to pay
HUD's costs for the audit, and to reimburse HUD for certain
subsidy overpayments, aggregating approximately $861,000, and
(iii) all issues relating to the audit and investigation were
concluded and fully resolved.
In 1993, the SEC informed J&B Management Company that it
had instituted an investigation in connection with the offer and
sale of securities issued or sponsored by J&B Management Company
(the "Securities"). The SEC has indicated that this
investigation should not be construed as an indication by the SEC
that any violation has occurred or as a reflection upon any
person, entity or security. The investigation is made pursuant
to the general authority of the SEC to monitor and assure
compliance with Federal laws and regulations involving
securities. The investigation appears to be focused on issues
pertaining to the payment or receipt of commissions relating to
the Securities. To date, to the Company's knowledge, there have
been no findings resulting from this investigation.
The Company is involved in various lawsuits and other
matters arising in the normal course of business. In the opinion
of management of the Company, although the outcomes of these
claims and suits are uncertain, in the aggregate they should not
have a material adverse effect on the Company's financial
position or results of operations. The Company business entails
an inherent risk of liability. In recent years, participants in
the long-term care industry have become subject to an increasing
number of lawsuits alleging malpractice or related legal claims,
many of which seek large amounts and result in significant legal
costs. The Company expects that from time to time it will be
subject to such suits as a result of the nature of its business.
The Company currently maintains insurance policies in amounts and
with such coverage and deductibles as it deems appropriate, based
on the nature and risks of its business, historical experience
and industry standards. There can be no assurance, however, that
claims in excess of the Company's insurance coverage or claims
not covered by the Company's insurance coverage will not arise.
A successful claim against the Company not covered by, or in
excess of, the Company's insurance could have a material adverse
effect on the Company's operating results and financial
condition. Claims against the Company, regardless of their merit
or eventual outcome, may also have a material adverse effect on
the Company's ability to attract residents or expand its business
and would require management to devote time to matters unrelated
to the operation of the Company's business. In addition, the
Company's insurance policies must be renewed annually, and there
can be no assurance that the Company will be able to obtain
liability insurance coverage in the future or, if available, that
such coverage will be on acceptable terms.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as
follows:
Name Age Position
---- --- --------
John Luciani(1) 64 Chairman of the Board and
Chief Executive Officer
Bernard M. Rodin(2) 65 Chief Operating Officer,
President and Director
John W. Luciani III 43 Executive Vice President and
Director
Paul Jawin 40 Chief Financial Officer
Dorian Luciani 40 Senior Vice President -
Acquisition and Construction
Deborah Luciani 39 Vice President - New Business
Development and Acquisitions
Edward J. Glatz 52 Vice President - Construction
Catherine V. Merlino 31 Treasurer
Keith Marlowe 33 Secretary
Walter Feldesman(1)(2) 78 Director
Leslie E. Goodman(1)(2) 53 Director
--------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
JOHN LUCIANI, Chief Executive Officer and Chairman of the
Board of Directors, founded the earliest predecessor of the
Company in 1969 and has been engaged in a number of business
activities and investments since 1952. Commencing in 1960, he
entered into the real estate development and construction
business, concentrating initially on the development,
construction and sale of residential high-rise apartment
buildings and single-family homes and subsequently on the
acquisition and development of multi-family rental housing
complexes. Since 1986, he has concentrated on the acquisition,
development and financing of adult living communities for the
elderly. Mr. Luciani founded the earliest predecessor of the
Company with Bernard M. Rodin in 1969.
BERNARD M. RODIN, Chief Operating Officer, President and
Director, has been engaged, since the formation of the earliest
predecessor of the Company in 1969, in the financing of property
acquisitions by arranging for the sale of partnership interests
and in property management. This activity initially focused on
the Company's multi-family housing portfolio and, since 1986, on
the Company's adult living communities. Mr. Rodin is a certified
public accountant and was actively engaged in the practice of
public accounting prior to founding the earliest predecessor of
the Company with John Luciani in 1969.
JOHN W. LUCIANI III, Executive Vice President and Director,
a son of John Luciani, joined the Company in 1975 and has since
been actively involved in the management and operation of the
Company's property portfolios, initially focusing on multi-family
housing and later on the Company's adult-living communities.
PAUL JAWIN, Chief Financial Officer, a son-in-law of Bernard
M. Rodin, joined the Company in May 1991. His activities
primarily involve the various financial aspects of the Company's
business including its debt financing and matters involving the
Company's equity and debt securities. Mr. Jawin is an attorney
and was actively engaged in a real estate/corporate practice
prior to joining the Company.
DORIAN LUCIANI, Senior Vice President - Acquisition and
Construction, a son of John Luciani, joined the Company in 1977
and was initially involved in the acquisition, development and
management of the Company's multi-family housing portfolio.
Later, Mr. Luciani focused exclusively on the acquisition and
development of the Company's adult living communities.
DEBORAH LUCIANI, Vice President - New Business Development
and Acquisitions, a daughter of John Luciani, joined the Company
in January 1992. Ms. Luciani is primarily involved in new
business development, acquisitions, obtaining financing and
various marketing responsibilities for the Company's existing and
new adult living communities. Prior to joining the Company,
Ms. Luciani worked for Prudential Bache Securities as an oil
futures trader from November 1988 to December 1991.
EDWARD J. GLATZ, Vice President - Construction, joined the
Company in September 1992 and has been actively involved in the
design, site selection and construction for the new "Grand Court"
adult living communities. Additionally, Mr. Glatz supervises the
capital improvements of the Company's real estate holdings.
Prior to joining the Company, Mr. Glatz performed asset
management duties for Kovens Enterprises from June 1988 until
September 1992.
CATHERINE V. MERLINO, Vice President and Treasurer, joined
the Company in September 1993, and has since been actively
involved in the financial reporting and analysis needs of the
Company. Prior to joining the Company, Mrs. Merlino was a Senior
Accountant from June 1989 through June 1993 and a Supervisor from
June 1993 through September 1993 at Feldman Radin & Co., P.C., a
public accounting firm located in New York City.
KEITH MARLOWE, Secretary of the Company, joined the Company
in August 1994. From 1987 through August 1994, Mr. Marlowe, an
attorney, was an associate in the tax department at the law firm
of Reid & Priest LLP where he was involved in a general
transactional tax practice.
WALTER FELDESMAN, Director, has been Of Counsel to the law
firm of Baer Marks & Upham LLP since March 1993 and for more than
five years prior thereto was a partner of Summit, Rovins and
Feldesman. Mr. Feldesman is currently a Director and Chairman of
the Audit Committee of Sterling Bancorp and a Director of its
subsidiary, Sterling National Bank & Trust Co. Mr. Feldesman is
a member of the Board of Advisors of the National Institute on
Financial Services for Elders, the National Academy of Elder Law
Attorneys, the American Association of Homes for the Aging, the
National Council on the Aging and American Society on Aging. He
has authored an article entitled "Long-Term Care Insurance Helps
Preserve an Estate," and a soon-to-be published work entitled the
Eldercare Primer Series.
-----------------------
LESLIE E. GOODMAN, Director, is the Area President for the
North Jersey Region for First Union National Bank and a Senior
Executive Vice President of First Union Corporation. From
September 1990 through January 1994, he served as President and
Chief Executive Officer of First Fidelity Bank, N.A., New Jersey.
From January 1994 to December 1995, Mr. Goodman served as a
Senior Executive Vice President and a Director of First Fidelity
Bank, National Association until it was merged into First Union.
From January 1990 until December 1995, he also served as Senior
Executive Vice President, member of the Office of the Chairman
and a Director of First Fidelity Bancorporation. Mr. Goodman
served as the Chairman of the New Jersey Bankers Association from
March 1995 to March 1996. He is a member of the Board of
Directors and Chairman of the Audit Committee of Wawa Inc.
DIRECTOR COMPENSATION
The Company will pay each Director who is not an employee of
the Company $1000 per Board meeting attended and $500 per
Committee meeting attended. All Directors are reimbursed by the
Company for their out-of-pocket expenses incurred in connection
with attendance at meetings of, and other activities related to
service on, the Board of Directors or any Board Committee.
AUDIT COMMITTEE
The Board of Directors established an Audit Committee in
June 1996. The Audit Committee is currently composed of Messrs.
Rodin, Feldesman and Goodman. The Audit Committee's duties
include reviewing internal financial information, monitoring cash
flow, budget variances and credit arrangements, reviewing the
audit program of the Company, reviewing with the Company's
independent accountants the results of all audits upon their
completion, annually selecting and recommending independent
accountants, overseeing the quarterly unaudited reporting process
and taking such other action as may be necessary to assure the
adequacy and integrity of all financial information distributed
by the Company.
COMPENSATION COMMITTEE
The Board of Directors established a Compensation Committee
in June 1996. The Compensation Committee is currently composed
of Messrs. John Luciani, Feldesman and Goodman. The Compensation
Committee recommends compensation levels of senior management and
works with senior management on benefit and compensation programs
for Company employees. In addition, the Compensation Committee
will administer the Company's 1996 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer
and each of the four other most highly compensated executive
officers information concerning compensation accrued for services
to the Company in all capacities during the fiscal year ended
January 31, 1996.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------
SALARY BONUS
NAME AND PRINCIPAL POSITION YEAR ($) ($)
------------------------------- ------- ------------ --------
John Luciani, Chairman of the
Board and Chief Executive fiscal
Officer(1) . . . . . . . . . . 1995 $1,228,750 ---
Bernard M. Rodin, Chief
Operating Officer, President fiscal
and Director(1) . . . . . . . . 1995 $1,228,750 ---
John W. Luciani, III, Executive fiscal
Vice President and Director . . 1995 $315,000 ---
Dorian Luciani, Senior Vice fiscal
President . . . . . . . . . . . 1995 $315,000 ---
Paul Jawin, Chief Financial fiscal
Officer . . . . . . . . . . . . 1995 $289,050 ---
ANNUAL
COMPENSATION
--------------
OTHER ALL
ANNUAL OTHER
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($)
------------------------------- --------------- -------------
John Luciani, Chairman of the
Board and Chief Executive
Officer(1) . . . . . . . . . . --- ---
Bernard M. Rodin, Chief
Operating Officer, President and
Director(1) . . . . . . . . . . --- ---
John W. Luciani, III, Executive
Vice President and Director . . --- ---
Dorian Luciani, Senior Vice
President . . . . . . . . . . . --- ---
Paul Jawin, Chief Financial
Officer . . . . . . . . . . . . --- ---
---------------------------------------
(1) As of April 1, 1996 the salary of each of Messrs. Luciani
and Rodin has been reduced to $600,000 per year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee
in June 1996. The Compensation Committee currently consists of
Messrs. John Luciani, Feldesman and Goodman. None of the
executive officers of the Company currently serves on the
compensation committee of another entity or on any other
committee of the board of directors of another entity performing
similar functions. For a description of transactions between the
Company and members of the Compensation Committee or their
affiliates, see "Certain Transactions."
STOCK PLANS
1996 Stock Option and Performance Award Plan
The Company has adopted the 1996 Stock Option and
Performance Award Plan (the "Plan"), which authorizes the grant
to officers and key employees of the Company and any parent or
subsidiary of the Company and the directors, franchisees,
licensees and other independent contractors, of incentive or non-
qualified stock options, performance shares, restricted shares
and performance units. Under the Plan, directors may be granted
non-qualified stock options. The Company plans to reserve
1,250,000 shares of Common Stock for issuance pursuant to the
Plan. As of the date hereof, no options had been granted under
the Plan.
The Plan will be administered by the Compensation Committee
which consists of Messrs. John Luciani, Feldesman and Goodman.
The Compensation Committee will determine the prices and terms at
which options may be granted. Options may be exercisable in
installments over the option period, but no options may be
exercised after ten years from the date of grant.
The exercise price of any incentive stock option granted to
an eligible employee may not be less than 100% of the fair market
value of the shares underlying such option on the date of grant,
unless such employee owns more than 10% of the outstanding Common
Stock or stock of any subsidiary or parent of the Company, in
which case the exercise price of any incentive stock option may
not be less than 110% of such fair market value. No option may
be exercisable more than ten years after the date of grant and,
in the case of an incentive stock option granted to an eligible
employee owning more than 10% of the outstanding Common Stock or
stock of any subsidiary or parent of the Company, no more than
five years from its date of grant. Options are not transferable,
except upon the death of the optionee. In general, upon
termination of employment of an optionee (other than due to death
or disability), all options granted to such person which are not
exercisable on the date of such termination immediately expire,
and any options that are so exercisable will expire three months
following termination of employment in the case of incentive
stock options, but not until the date the options otherwise would
expire in the case of non-qualified stock options. However, all
options will be forfeited immediately upon an optionee's
termination of employment for good cause.
Upon an optionee's death or termination of employment due to
disability, all options will become 100% vested and will be
exercisable (i) in the case of death, by the estate or other
beneficiary of the optionee at any time prior to the date the
option otherwise would expire and (ii) in the case of the
disability of the optionee, by the optionee within one year of
the date of such termination of employment in the case of
incentive stock options, or at any time prior to the date the
option otherwise would expire in the case of non-qualified stock
options.
At the time each grant of restricted shares or performance
shares or units is made, the Compensation Committee will
determine the duration of the performance or restriction period,
if any, the performance targets, if any, for earning performance
shares or units, and the times at which restrictions placed on
restricted shares shall lapse.
CERTAIN TRANSACTIONS
In the first quarter of 1996, the Selling Stockholders
reorganized their businesses by consolidating them into the
Company. The Selling Stockholders transferred all of the issued
and outstanding stock of each of 16 Sub-chapter S corporations
along with various other assets to the Company in exchange for
2,168,257 shares of the Company's Common Stock. A partnership in
which the Selling Stockholders are the sole partners transferred
to the Company substantially all of its assets, subject to
substantially all of its liabilities, in exchange for 1,084,128
shares of the Company's Common Stock. The partnership
distributed the shares received to the Selling Stockholders. Six
Sub-chapter S corporations which were wholly-owned by the Selling
Stockholders were merged into the Company. Pursuant to the
mergers the shares of the four merged companies were converted
into an aggregate of 6,747,615 shares of the Company's Common
Stock. After the reorganization was complete, the Selling
Stockholders owned an aggregate of 10,000,000 shares of the
Company's Common Stock.
Prior to the reorganization discussed above, the business of
the Selling Stockholders was conducted through a partnership and
various Sub-chapter S corporations. These entities made
distributions to each of the Selling Stockholders of $5,495,500,
$943,000, $850,000 and $124,500 in Fiscal 1993, 1994 and 1995 and
the first quarter of the current fiscal year, respectively.
During Fiscal 1995 and the first quarter of the current
fiscal year, the Company paid to Francine Rodin, the wife of
Bernard M. Rodin, the Company's Chief Operating Officer,
President and a Director, $121,876 and $30,500, respectively, as
fees for introducing to the Company broker/dealers that have
assisted the Company in the sale of limited partnership interests
in Investing Partnerships. Mrs. Rodin will receive a fee with
respect to any future sales of such limited partnership interests
and other securities offered by the Company, including shares of
Common Stock offered hereby, by such broker/dealers. During
Fiscal 1995 and the first quarter of the current fiscal year,
Francine Rodin received consulting fees of $51,510 and $23,322,
respectively, in connection with coordinating the Company's
travel arrangements and marketing efforts.
Michele R. Jawin, the daughter of Mr. Rodin and wife of Paul
Jawin, the Company's Chief Financial Officer, is Of Counsel to
Reid & Priest LLP, which acts as securities counsel to the
Company, including in connection with this offering.
Messrs. Luciani and Rodin, the Chairman of the Board and
President of the Company, respectively, and entities controlled
by them serve as general partners of partnerships directly and
indirectly owning multi-family properties and on account of such
general partner status have personal liability for recourse
partnership obligations and own small equity ownership interests
in the partnerships. The Company holds notes, aggregating $163.6
million, that are secured by the limited partnership interests in
such partnerships. These individuals have provided personal
guarantees in certain circumstances to obtain mortgage financing
for certain adult living communities operated by the Company and
for certain of the Company's Investor Note Debt, and the
obligations thereunder may continue. In addition, Messrs.
Luciani and Rodin and certain employees will devote a portion of
their time to overseeing the third-party managers of multi-family
properties and one adult living community in which Messrs.
Luciani and Rodin have financial interests but the Company does
not.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of
June 14, 1996, before and after giving effect to the Minimum
Offering and the Maximum Offering, regarding the beneficial
ownership of the Company's Common Stock by (i) each executive
officer and director of the Company, (ii) each stockholder known
by the Company to beneficially own 5% or more of such Common
Stock, (iii) each Selling Stockholder and (iv) all directors and
officers as a group. Except as otherwise indicated, the address
of each beneficial holder of 5% or more of such Common Stock is
the same as the Company.
BEFORE OFFERING
---------------
SHARES
BENEFICIAL OWNER NUMBER % OFFERED(1)
---------------- ------ --- ----------
John Luciani . . . . . . 5,000,000 50% 138,889
Bernard M. Rodin . . . . 5,000,000 50% 138,889
All directors and
officers
as a group . . . . . . 10,000,000 100% 277,778
AFTER AFTER
MINIMUM MAXIMUM
OFFERING OFFERING
--------------- --------------
BENEFICIAL OWNER NUMBER % NUMBER %
---------------- ------ - ------ -
John Luciani . . . . . . 4,930,555.5 44% 4,861,111 39%
Bernard M. Rodin . . . . 4,930,555.5 44% 4,861,111 39%
All directors and officers
as a group . . . . . . 9,861,111.0 88% 9,722,222 78%
---------------
(1) The number of shares to be sold by the Selling Stockholders
will equal 10% of the aggregate number of shares to be sold
in this Offering.
DESCRIPTION OF CAPITAL STOCK
There are currently 30,000,000 authorized shares of Common
Stock. The Company also currently has authorized 1,000,000
shares of Preferred Stock, par value $.0001 per share (the
"Preferred Stock"). Upon completion of the Minimum Offering,
there will be outstanding: (a) 11,250,000 shares of Common
Stock, consisting of (i) the 9,861,111 shares currently owned by
the Selling Stockholders and not offered hereby; (ii) the
1,250,000 shares to be sold by the Company hereby; and (iii) the
138,889 shares to be sold by the Selling Stockholders hereby; and
(b) no shares of Preferred Stock. Upon completion of the Maximum
Offering, there will be outstanding: (a) 12,500,000 shares of
Common Stock, consisting of (i) 9,722,222 shares currently owned
by the Selling Stockholders and not offered hereby; (ii)
2,500,000 shares to be sold by the Company hereby; (iii) the
277,778 shares to be sold by the Selling Stockholders hereby and
(b) no shares of Preferred Stock.
The following summary description relating to the Common
Stock, and the Preferred Stock does not purport to be complete.
A description of the Company's capital stock is contained in the
Certificate of Incorporation of the Company (the "Certificate"),
which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Reference is made to such
exhibit for a detailed description of the provisions thereof
summarized below.
COMMON STOCK
The Certificate authorizes the Company to issue 30,000,000
shares of Common Stock. All shares outstanding upon completion
of this offering will be validly issued, fully paid and non-
assessable.
Stockholders of the Company have no preemptive rights or
other rights to subscribe for additional shares. Subject to the
rights of holders of Preferred Stock and Long-term Debt all
holders of Common Stock, regardless of class, are entitled to
share equally on a share-for-share basis in any assets available
for distribution to stockholders on liquidation, dissolution or
winding up of the Company. No shares of any class of Common
Stock have conversion rights or are subject to redemption.
Holders of Common Stock are entitled to receive such
dividends, if any, as may be declared by the Company's Board of
Directors out of funds legally available therefor, but only if
all dividends due on the outstanding Preferred Stock have been
paid.
PREFERRED STOCK
The authorized capital stock of the Company includes
1,000,000 shares of Preferred Stock. The Board of Directors is
authorized to fix the rights, preferences, privileges and
restrictions of any series of Preferred Stock, including the
dividend rights, original issue price, conversion rights, voting
rights, terms of redemption, liquidation preferences and sinking
fund terms thereof, and the number of shares constituting any
such series and the designation thereof and to increase or
decrease the number of shares of such series subsequent to the
issuance of shares of such series (but not below the number of
shares of such series then outstanding). Because the terms of
the Preferred Stock can be fixed by the Board of Directors
without stockholder action, the Preferred Stock could be issued
quickly with terms calculated to defeat a proposed takeover of
the Company or to make the removal of management more difficult.
The Board of Directors, without stockholder approval, could issue
Preferred Stock with dividend, voting and conversion rights which
could adversely affect the rights of the holders of Common Stock.
At present, the Company has no plans to issue any Preferred
Stock.
CERTAIN DELAWARE LAW PROVISIONS
Section 203 of the Delaware Law prevents an "interested
stockholder" (defined in Section 203, generally, as a person
owning 15% or more of a corporation's outstanding voting stock)
from engaging in a "business combination" (as defined in Section
203) with a publicly held Delaware corporation for three years
following the date such person became an interested stockholder
unless: (i) before such person became an interested stockholder,
the board of directors of the corporation approved the
transaction in which the interested stockholder became an
interested stockholder or approved the business combination; (ii)
upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide
employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) following the date on which such person
became an interested stockholder, the business combination is
approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote
of the holders of 66-2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. Section 203
may have a depressive effect on the market price of the Common
Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S CERTIFICATE
OF INCORPORATION AND BY-LAWS
Certain provisions of the Certificate and By-Laws of the
Company summarized in the following paragraphs will become
operative immediately prior to consummation of this offering and
may be deemed to have an anti-takeover effect and may delay or
prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including those attempts
that might result in a premium over the market price for the
shares held by stockholders. These provisions may have a
depressive effect on the market price of the Common Stock.
SPECIAL MEETING OF STOCKHOLDERS. The Certificate provides
that special meetings of stockholders of the Company may be
called only by the Board of Directors. This provision will make
it more difficult for stockholders to take action opposed by the
Board of Directors. This provision of the Certificate may not be
amended or repealed by the stockholders of the Company, except
with the approval of the holders of two-thirds of the Company's
outstanding Common Stock.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate
provides that no action required or permitted to be taken at any
annual or special meeting of the stockholders of the Company may
be taken without a meeting, and the power of stockholders of the
Company to consent in writing, without a meeting, to the taking
of any action is specifically denied. Such provision limits the
ability of any stockholders to take action immediately and
without prior notice to the Board of Directors. Such a
limitation on a majority stockholder's ability to act might
impact such person's or entity's decision to purchase voting
securities of the Company. This provision of the Certificate may
not be amended or repealed by the stockholders of the Company,
except with the approval of the holders of two-thirds of the
Company's outstanding Common Stock.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS. The By-Laws provide that stockholders
seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors
at an annual or special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the
principal executive offices of the Company (a) in the case of an
annual meeting that is called for a date that is within 30 days
before or after the anniversary date of the immediately preceding
annual meeting of stockholders, not fewer than 60 days nor more
than 90 days prior to such anniversary date and (b) in the case
of the annual meeting to be held during the first complete fiscal
year following the date of this Prospectus and in the case of an
annual meeting that is called for a date that is not within 30
days before or after the anniversary date of the immediately
preceding annual meeting, or in the case of a special meeting of
stockholders called for the purpose of electing directors, not
later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever
occurs first. The By-Laws also specify certain requirements for
a stockholder's notice to be in proper written form. These
provisions may preclude some stockholders from bringing matters
before the stockholders at an annual or special meeting or from
making nominations for directors at an annual or special meeting.
As set forth below, the By-Laws may not be amended or repealed by
the stockholders of the Company, except with the approval of
holders of two-thirds of the Company's outstanding Common Stock.
ADJOURNMENT OF MEETINGS OF STOCKHOLDERS. The By-Laws
provide that when a meeting of stockholders of the Company is
convened, the presiding officer, if directed by the Board of
Directors, may adjourn the meeting, if no quorum is present for
the transaction of business or if the Board of Directors
determines that adjournment is necessary or appropriate to enable
the stockholders to consider fully information the Board of
Directors determines has not been made sufficiently or timely
available to stockholders or to otherwise effectively exercise
their voting rights. This provision will, under certain
circumstances, make more difficult or delay actions by the
stockholders opposed by the Board of Directors. The effect of
such provision could be to delay the timing of a stockholders'
meeting, including in cases where stockholders have brought
proposals before the stockholders that are in opposition to those
brought by the Board of Directors and therefore may provide the
Board of Directors with additional flexibility in responding to
such stockholder proposals. As set forth below, the By-Laws may
not be amended or repealed by the stockholders of the Company,
except with the approval of holders of two-thirds of the
Company's outstanding Common Stock.
AMENDMENT OF THE BY-LAWS. The Certificate provides that
the By-Laws may be amended or repealed by the Board of Directors
and may not be amended or repealed by the stockholders of the
Company, except with the consent of holders of two-thirds of the
Company's outstanding Common Stock. This provision will make it
more difficult for stockholders to make changes to the By-Laws
that are opposed by the Board of Directors. This provision of
the Certificate may not be amended or repealed by the
stockholders of the Company, except with the approval of the
holders of two-thirds of the Company's outstanding Common Stock.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar will be First
Union National Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for
securities of the Company. No prediction can be made as to the
effect, if any, that market sales of shares of Common Stock or
the availability of shares of Common Stock for sale will have on
the market price prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock of the Company in
the public market after the lapse of the restrictions described
below could adversely affect the prevailing market price and the
ability of the Company to raise equity capital in the future at a
time and price it deems appropriate.
Upon completion of the Minimum Offering, the Company will
have outstanding 11,250,000 shares of Common Stock. Upon
completion of the Maximum Offering, the Company will have
outstanding 12,500,000 shares of Common Stock. Of these shares,
1,388,889 shares of Common Stock, representing all of the shares
sold in the Minimum Offering, or 2,777,778 shares of Common
Stock, representing all of the shares sold in the Maximum
Offering, as the case may be, will be freely tradeable without
restriction or limitation under the Securities Act, except for
shares, if any, purchased by an "affiliate" of the Company (as
defined in the rules and regulations of the Commission under the
Securities Act) which shares will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining
outstanding shares are "restricted" shares within the meaning of
Rule 144 (the "Restricted Shares"). The Restricted Shares
outstanding on the date hereof were issued and sold by the
Company in private transactions in reliance upon exemptions from
registration under the Securities Act and may be sold only if
they are registered under the Securities Act or unless an
exemption from registration, such as the exemption provided by
Rule 144 under the Securities Act, is available.
In general, under Rule 144, as currently in effect, any
person (or persons whose shares are aggregated), including an
affiliate, who has beneficially owned Restricted Shares for at
least a two-year period (as computed under Rule 144) is entitled
to sell within any three-month period a number of such shares
that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 112,500 shares
after giving effect to the Minimum Offering and approximately
125,000 shares after giving effect to the Maximum Offering) and
(ii) the average weekly trading volume in the Company's Common
Stock during the four calendar weeks immediately preceding such
sale. Sales under Rule 144 are also subject to certain
provisions relating to the manner and notice of sale and the
availability of current public information about the Company. A
person (or persons whose shares are aggregated) who is not deemed
an affiliate of the Company at any time during the 90 days
immediately preceding a sale, and who has beneficially owned
Restricted Shares for at least a three-year period (as computed
under Rule 144), would be entitled to sell such shares under Rule
144(k) without regard to the volume limitation and other
conditions described above.
PLAN OF DISTRIBUTION
The shares of Common Stock are being offered on a "best-
efforts" basis through Participating Dealers ("Participating
Dealers") who are members of the National Association of
Securities Dealers, Inc. (the "NASD"). The Company has agreed to
indemnify all Participating Dealers against certain liabilities,
including liabilities under the Securities Act of 1933. The
Company will pay the Participating Dealers a selling commission
of up to 6% of the offering price ($1.08 per share) for all
shares of Common Stock sold. The foregoing will be paid upon the
closing of the offering. In addition, the Company will reimburse
Participating Dealers for due diligence expenses and provide a
non-accountable expense allowance in the aggregate amount of up
to 1% per share ($.18 per share) and will pay wholesalers or
finders fees in the aggregate amount of up to 1% per share ($.18
per share). No Participating Dealers are affiliated with the
Company.
There is no lead underwriter for this offering.
Participating Dealers will execute Selling Agency Agreements with
the Company; however, such Participating Dealers will be under no
obligation to sell any or all of the Shares of Common Stock
offered hereby. The Division of Corporation Finance of the U.S.
Securities and Exchange Commission has taken the position that
any broker/dealer that sells shares of Common Stock in the
offering may be deemed an underwriter as defined in Section 2(11)
of the Securities Act of 1933, as amended. The Company currently
has not entered into Selling Agency Agreements with any brokers
or dealers. The Company anticipates that it will enter into
Selling Agency Agreements with Participating Dealers. The
Company reserves the right to enter into Selling Agency
Agreements with Participating Dealers after the commencement of
this offering. There is no assurance that, even if any
Participating Dealers sell the shares of Common Stock offered
hereby, a court of competent jurisdiction or arbitration panel
would deem any such Participating Dealer to be an underwriter as
so defined.
The shares of Common Stock are being offered subject to
prior sale, withdrawal, cancellation or modification of the
offer, including its structure, terms and conditions, without
notice. The Company reserves the right, in its sole discretion,
to reject, in whole or in part, any offer to purchase the shares
of Common Stock.
The Company intends to sell the shares of Common Stock in
this offering only in the states in which the offering is
qualified. An offer to purchase may only be made and the
purchase of the shares of Common Stock may only be negotiated and
consummated in such states. The Subscription Agreement for the
shares of Common Stock must be executed, and the shares of Common
Stock may be delivered only in, such states. Resale or transfer
of the shares of Common Stock may be restricted under state law.
If the Company does not terminate the offering earlier,
which it may, in its sole discretion, the offering of shares of
Common Stock will continue until the Company raises an aggregate
of $50,000,000, provided that the offering period for all of the
shares of Common Stock of the Company will not exceed 120 days
from the date of this Prospectus.
The Participating Dealers have agreed in accordance with
the provisions of Rule 15c2-4 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended, to cause all funds received upon subscription for shares
of Common Stock to be forwarded to the Escrow Agent upon the
receipt of the executed Subscription Agreement and related funds
by the Participating Dealer by or before noon of the next
business day following the subscription for said shares of Common
Stock.
Prior to this offering, there has been no public market for
the Common Stock. The initial public offering price has been
unilaterally determined by the Company without being negotiated
with an underwriter or other third party. Among the factors
considered by the Company in determining the price were the
history of, and the prospects for, the Company and the industry
in which it competes, its past and present operations, its past
and present earnings and the trend of such earnings, the
prospects for future earnings, the present state of the Company's
development, the general condition of the securities markets at
the time of this offering, and the recent market prices of
publicly traded common stocks of comparable companies.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will
be passed upon for the Company by Reid & Priest LLP.
EXPERTS
The consolidated financial statements and financial
statement schedule of the Company as of January 31, 1995 and 1996
and for each of the three years in the period ended January 31,
1996, included in this Prospectus and Registration Statement have
been audited by DELOITTE & TOUCHE LLP, independent accountants,
as set forth in their reports thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-1 under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain
of the information contained in the Registration Statement and
the exhibits and schedules thereto on file with the Commission
pursuant to the Securities Act and the rules and regulations of
the Commission thereunder. For further information with respect
to the Company and the Common Stock, reference is made to the
Registration Statement and the exhibits and schedules thereto.
The Registration Statement, including exhibits and schedules
thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies may be obtained
at the prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C.
Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in
all respects by such reference.
The Company intends to furnish to its stockholders annual
reports containing financial statements audited by an independent
certified public accounting firm and quarterly reports containing
unaudited financial information for the first three quarters of
each fiscal year.
<PAGE>
GRAND COURT LIFESTYLES, INC. and SUBSIDIARIES
__________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
__________
Page
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of January 31, 1995
and 1996 and April 30, 1996 F-3
Consolidated Statements of Operations for the Years
ended January 31, 1994, 1995 and 1996 and the Three
Months ended April 30, 1995 and 1996 F-4
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended January 31, 1994, 1995 and
1996 and the Three Months ended April 30, 1996 F-5
Consolidated Statements of Cash Flows for the Years
Ended January 31, 1994, 1995 and 1996 and the Three
Months ended April 30, 1996 F-6
Notes to Consolidated Financial Statements F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Grand Court Lifestyles, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets of
Grand Court Lifestyles, Inc. and subsidiaries as of January 31,
1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended January 31, 1996. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Grand Court Lifestyles, Inc. and subsidiaries as of
January 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended January 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
April 26, 1996, except for Note 11, which is as of June 11, 1996
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, except per share data)
-----------------------------------------------------------------
JANUARY 31, APRIL 30,
--------------------- -----------
(UNAUDITED)
1995 1996 1996
-------- --------- ----------
ASSETS
Cash and cash equivalents . . $ 10,950 $ 17,961 $ 12,414
Notes and receivables - net . 220,014 223,736 215,974
Investments in partnerships . 3,002 3,794 3,676
15,081 15,251 14,005
Other assets - net . . . . . -------- -------- --------
$249,047 $260,742 $246,069
Total assets . . . . . . . . ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Loans and accrued interest
payable . . . . . . . . . . . $127,355 $140,094 $125,128
Notes and commissions
payable . . . . . . . . . . . 3,569 1,684 1,291
Other liabilities . . . . . . 2,000 4,018 3,264
84,955 79,442 78,572
Deferred income . . . . . . . -------- -------- --------
Total liabilities . . . . . . 217,879 225,238 208,255
Commitments and
contingencies
Stockholders' equity
Common Stock, $.10 par value
- authorized, 10,000
shares; issued and
outstanding, 9,224 shares. . 1 1 1
Paid-in capital . . . . . . 31,167 35,503 37,470
-- -- 343
Retained earnings . . . . . -------- -------- --------
31,168 35,504 37,814
TOTAL STOCKHOLDERS' EQUITY . -------- -------- --------
Total liabilities and $249,047 $260,742 $246,069
stockholders' equity . . . . ========= ======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
-----------------------------------------------------------------
THREE MONTHS
YEARS ENDED ENDED
JANUARY 31, APRIL 30,
----------- ------------
(UNAUDITED)
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
Revenues:
Sales . . . . . . . $29,461 $29,000 $41,407 $ 5,847 $10,776
Deferred profit
earned . . . . . . 6,668 3,518 9,140 2,285 0
Interest income . . 13,315 9,503 12,689 4,111 5,948
Property management
fees and other 4,079 4,278 5,075 1,035 165
income . . . . . . ------- ------- ------- ------- ------
53,523 46,299 68,311 13,278 16,889
------- ------- ------- ------- ------
Cost and Expenses:
Cost of sales . . . 26,548 21,249 27,112 4,058 4,985
Selling . . . . . . 6,706 6,002 7,664 1,392 1,797
Interest . . . . . 10,991 13,610 15,808 4,402 4,028
General and
administrative . . 5,226 6,450 7,871 1,435 1,891
Officers'
Compensation . . . 1,200 1,200 1,200 300 300
Depreciation and 1,433 2,290 2,620 563 935
amortization . . . ------ ------ ------ ------ ------
52,104 50,801 62,275 12,150 13,936
------ ------ ------ ------ ------
Income (loss) before
provision for income
taxes . . . . . . . 1,419 (4,502) 6,036 1,128 2,953
Provision for income -- -- -- -- 394
taxes . . . . . . . ------- ------- ------ ------ ------
Net income (loss) 1,419 (4,502) 6,036 1,128 2,559
Pro forma income tax 568 (1,801) 2,414 451 787
provision (benefit) ------ ------- ------- ------ ------
Pro forma net income $ 851 $(2,701) $ 3,622 $ 677 $ 1,772
(loss) . . . . . . . ======== ======= ======= ======= =======
Pro forma earnings
(loss) per common $ .09 $ (.27) $ .36 $ .07 $ .18
share . . . . . . . ======== ======= ======= ====== ======
See Notes to Consolidated Financial Statements.
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THREE MONTHS
ENDED APRIL 30, 1996
(In Thousands)
-----------------------------------------------------------------
Stockholders' equity,
January 31, 1993 . . . . . . . $47,128
Net income . . . . . . . . . 1,419
Dividends . . . . . . . . . . (10,991)
-------
Stockholders' equity,
January 31, 1994 . . . . . . . 37,556
Net loss . . . . . . . . . . (4,502)
Dividends . . . . . . . . . . (1,886)
------
Stockholders' equity,
January 31, 1995 . . . . . . . 31,168
Net income . . . . . . . . . 6,036
Dividends . . . . . . . . . . (1,700)
-------
Stockholders' equity,
January 31, 1996 . . . . . . . $35,504
Net income (unaudited) . . . 2,559
Dividends (unaudited) . . . . (249)
-------
Stockholders' equity,
April 30, 1996 (unaudited) . . $37,814
=======
See Notes to Consolidated Financial Statements.
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
--------------------------------------------------------------------------
YEARS ENDED JANUARY 31,
--------------------------
1994 1995 1996
---- ---- ----
Cash flows from operating
activities:
Net income (loss) . . . . . . . $ 1,419 $ (4,502) $ 6,036
------- --------- -------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Amortization and
depreciation . . . . . . . . 1,433 2,290 2,620
Adjustment for changes
in assets and
liabilities:
Accrued interest income
on notes receivable
and receipt of notes
receivable . . . . . . . . . (1,241) 174 (2,560)
(Increase) decrease in
notes and receivables . . . 7,945 7,223 (1,162)
Increase in commissions
payable . . . . . . . . . . 7,016 5,242 9,239
Increase (decrease) in
other liabilities . . . . . (1,278) (506) 2,018
Increase (decrease) in
deferred income . . . . . . 4,401 632 3,627
-------- ------- -------
18,276 15,055 13,782
-------- ------- -------
Net cash provided (used)
by operating
activities . . . . . . . . 19,695 10,553 19,818
-------- ------- -------
Cash flows from investing
activities:
(Increase) decrease in other
assets . . . . . . . . . . . . (2,701) (7,180) (2,790)
(Increase) decrease in
investments . . . . . . . . . (641) (736) (792)
------- ------ -------
Net cash from investing
activities . . . . . . . . (3,342) (7,916) (3,582)
------- ------ -------
Cash flows used in financing
activities:
Decrease in loans payable . . . (21,629) (31,311) (39,326)
Increase in loans and
accrued interest payable . . . 34,429 44,014 52,065
Payments of commissions
payable . . . . . . . . . . . (6,005) (5,743) (9,483)
Payments of notes payable . . . (2,609) (2,578) (1,641)
Deferred income earned . . . . (6,668) (3,518) (9,140)
(Dividends) Contributions . . . (10,991) (1,886) (1,700)
-------- ------- -------
Net cash used in
financing activities . . . (13,473) (1,022) (9,225)
-------- ------- -------
Increase (decrease) in cash
and cash equivalents . . . . . . 2,880 1,615 7,011
Cash and cash equivalents,
beginning of period . . . . . . 6,455 9,335 10,950
-------- ------- -------
Cash and cash equivalents,
end of period . . . . . . . . . $ 9,335 $10,950 $17,961
======== ======== ========
Supplemental information:
Interest paid . . . . . . . . . $10,710 $12,914 $16,922
======== ======== ========
THREE MONTHS ENDED APRIL 30,
----------------------------
(UNAUDITED)
1995 1996
---- ----
Cash flows from operating
activities:
Net income (loss) . . . . . . . $1,128 $02,559
------ -------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Amortization and
depreciation . . . . . . . . 563 935
Adjustment for changes in
assets and liabilities:
Accrued interest income
on notes receivable
and receipt of notes
receivable . . . . . . . . . 4,776 7,503
(Increase) decrease in
notes and receivables . . . (9,586) 259
Increase in commissions
payable . . . . . . . . . . 237 377
Increase (decrease) in
other liabilities . . . . . (232) (754)
Increase (decrease) in (185) (870)
deferred income . . . . . . ------- -------
(4,427) 7,450
------- -------
Net cash provided (used)
by operating activities . (3,299) 10,009
------- -------
Cash flows from investing
activities:
(Increase) decrease in other
assets . . . . . . . . . . . . 670 311
(Increase) decrease in
investments . . . . . . . . . (65) 118
------- --------
Net cash from investing
activities . . . . . . . . 605 429
------- --------
Cash flows used in financing
activities:
Decrease in loans payable . . . (13,512) (27,752)
Increase in loans and accrued
interest payable . . . . . . . 13,683 12,786
Payments of commissions payable (950) (731)
Payments of notes payable . . . (59) (39)
Deferred income earned . . . . (2,285) 0
(Dividends) Contributions . . . 621 (249)
------- --------
Net cash used in financing
activities . . . . . . . . (2,502) (15,985)
-------- --------
Increase (decrease) in cash
and cash equivalents . . . . . . (5,196) (5,547)
Cash and cash equivalents,
beginning of period . . . . . . 10,950 17,961
-------- --------
Cash and cash equivalents,
end of period . . . . . . . . . $5,754 $12,414
======== ========
Supplemental information:
Interest paid . . . . . . . . . $3,587 $03,976
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THREE MONTHS ENDED APRIL
30, 1996
(Information pertaining to the period April 30, 1996 is unaudited)
(In Thousands)
--------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Grand Court Lifestyles, Inc. (the "Company"), was formed pursuant to
the merger into the Company of various affiliated Sub-chapter S
corporations owned by the Selling Stockholders and the transfer of
certain assets from and assumption of certain liabilities of the
Selling Stockholders and a partnership owned by the Selling
Stockholders (these transactions are, collectively, the
"Reorganization"). The Reorganization was effective as of April 1,
1996. The Company, a fully integrated provider of adult living
accommodations and services, acquires, finances, develops and manages
adult living communities. As a result of the Company's financing
activities, limited partnerships ("Investing Partnerships") are
formed whereby the Company retains a 1% to 2.5% general partnership
interest.
LINE OF BUSINESS - The Company is involved in acquiring, financing,
developing and managing adult living communities. The Company
receives a significant portion of its income from the sale of
partnership interests in partnerships which own adult living
communities ("Owning Partnerships"). Another source of income is
interest income on notes receivable.
The adult living communities and multi-family properties are located
throughout the United States. The Company as of January 31, 1996
manages approximately 28 adult living centers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - The Company considers cash and cash
equivalents to include cash on hand, demand deposits and highly
liquid investments with maturities of three months or less.
REVENUE RECOGNITION - Revenue from sales of interests in Owning
Partnerships as discussed in Note 1, is recognized under the full
accrual method of accounting when the profit on the transaction is
determinable, that is, the collectibility of the sales price is
reasonably assured and the earnings process is virtually complete.
The Company determines the collectibility of the sales price by
evidence supporting the buyers' substantial initial and continuing
investment in the adult living communities as well as other factors
such as age, location and cash flow of the underlying property.
The Company has deferred revenue on the above transactions in
connection with the Company's guarantee of cash flow to the
investors. The Company has generally guaranteed an 11% to 12% return
to the investors on cash invested in the respective limited
partnerships for a period of approximately 5 years from the date the
respective partnership interests are sold. The amount of the
deferred revenue is calculated by determining the difference between
the underlying property's cash flow and the amount needed to meet the
investors' future guarantee and is included in deferred income. Any
changes in the deferred income either due to a passage of time or to
a decrease or increase in the underlying property's cash flow is
recorded as additional income or expense in the year determined.
For properties that do not meet the Company's revenue recognition
policy the Company accounts for such sales under the installment
method. Under the installment method the gross profit is determined
at the time of sale. The revenue recorded in any given year would
equal the cash collections multiplied by the gross profit percentage.
The Company has deferred all future income to be recognized on these
transactions. Losses on these projects are recognized immediately
upon sale.
ALLOWANCE ON NOTES RECEIVABLE - In the event that the facts and
circumstances indicate that the collectibility of a note may be
impaired, an evaluation of recoverability is performed. If an
evaluation is performed the Company compares the recorded value of
the note to the value of the underlying property less any
encumbrances to determine if a write-down to market value is
required.
ACCOUNTING ESTIMATES - The preparation of financial statements in
accordance with generally accepted accounting principles requires
management to make significant estimates and assumptions that affect
the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
DEFERRED FINANCING AND DEBT EXPENSE - Costs incurred in connection
with obtaining long-term financing have been capitalized and are
amortized over the term of the financing.
INVESTMENTS - The Company accounts for its interest in limited
partnerships under the equity method of accounting. The Company uses
this method because as the general partner it can exercise
significant influence over the operating and financial policies of
such partnerships. Under this method the Company records its share
of income and loss of the entity as well as any distributions or
contributions as an increase or decrease to the investment account.
The carrying amount of the investments in limited partnerships
differs from the Company's underlying equity interest based upon its
stated ownership percentages. Such differences are attributable to
the disproportionate amount of money and notes invested in the
entities by the Company for its equity interest as compared to the
other investors. This difference is being amortized over the life of
the underlying partnership assets.
MANAGEMENT FEES - Property management fees are recognized as revenue
when related services have been performed.
PRO FORMA INCOME TAXES - The Reorganization occurred subsequent to
year end and, as such, income tax provisions at a combined Federal
and state tax rate of 40% have been provided on a pro forma basis.
The various Sub-chapter S corporations which were either merged into
or acquired by the Company and the partnership which transferred
assets to the Company were not required to pay taxes because any
taxes were the responsibility of the Seller Stockholders who were the
sole shareholders and partners of those entities.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
In December 1991, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 107, "Disclosure
about Fair Value of Financial Instruments." The Company is unable to
determine the fair value of its notes and receivables as such
instruments do not have a ready market. Other financial instruments
are believed to be stated at approximately their fair value.
4. NOTES AND RECEIVABLES
Notes and other receivables consist of the following:
January 31, April
30,
---------- -----
1995 1996 1996
---- ---- ----
Notes and accrued interest
receivable (a) and (b) . . . . . $168,339 $165,986 $163,317
Loans receivable . . . . . . . . 10,367 10,417 10,508
Other receivables(c) . . . . . . 46,984 53,145 53,125
Mortgages(d) . . . . . . . . . . 7,324 7,188 2,024
-------- -------- --------
233,014 236,736 228,974
Less allowance for uncollectible 13,000 13,000 13,000
receivables . . . . . . . . . . . -------- ------- -------
$220,014 $223,736 $215,974
======== ======== ========
(a) The Company has notes receivable from the Investing Partnerships,
which were formed to acquire controlling interests in Owning
Partnerships which own adult living communities. Such notes
generally have interest rates ranging from 11% to 13.875% and are
due in installments over five years from the date of acquisition
of the respective controlling interests. The notes represent
senior indebtedness of the related Investing Partnerships, and
are collateralized by the respective interests in the Owning
Partnerships. These properties are generally encumbered by
mortgages. Principal and interest payments on each note are also
collateralized by the investor notes payable to the Investing
Partnerships to which the investors are admitted. The Company
has recorded the notes receivable net of the investor note
collections.
(b) The Company has notes receivable from the Investing Partnerships
which were formed to acquire controlling interests in Owning
Partnerships which own multi-family properties. The notes have
maturity dates ranging from ten to fifteen years from the date of
the acquisition of the respective controlling interests. Several
notes have reached their final maturity dates and these final
maturity dates have been extended by the Company. It is the
Company's intention to collect the principal and interest
payments on the aforementioned notes from the cash flows
distributed by the related multi-family properties and the
proceeds in the event of a sale or refinancing.
(c) Other receivables represent reimbursable expenses and advances
made to the limited partnerships. These amounts do not bear
interest and have no specific repayment date.
(d) The mortgages bear interest at rates ranging from 8% to 9%. The
mortgages are generally collateralized by a mortgage lien on the
related adult living communities.
5. OTHER ASSETS
a. Financing costs of $2,410, $3,578 and $589 were capitalized
during the years ended January 31, 1995 and 1996 and the period
ended April 30, 1996, respectively. These costs are being
amortized over periods ranging from one to ten years. The
unamortized balance at January 31, 1995 and 1996 and April 30,
1996 amounted to $6,910, $7,994, and $7,694, respectively.
b. The Company has approximately a 50% equity interest in Caton
Associates, a limited partnership which owns a mortgage loan
collateralized by interests in a cooperative apartment building.
The Company's equity interest in this partnership totaled $466 at
January 31, 1995 and 1996 and April 30, 1996. Additionally, the
Company owns certain cooperative apartments recorded at $1,388 at
January 31, 1995 and 1996 and April 30, 1996.
c. The Company has capitalized $595 and $179 of remaining costs
associated with the financing of the acquisition of adult living
communities by arranging for the sale of partnership interests,
which were substantially sold at January 31, 1996 and April 30,
1996 respectively. Upon completion of these transactions such
costs will be charged to cost of sales.
6. LOANS AND ACCRUED INTEREST PAYABLE
Loans payable consists of the following:
January 31, April 30,
----------------- ---------
1995 1996 1996
---- ---- ----
Banks (including mortgages)
(a) and (b) . . . . . . . . $39,261 $41,361 $23,045
Other, principally 88,094 98,733 102,083
debentures (c) . . . . . . ------- ------ -------
$127,355 $140,094 $125,127
======= ======== ========
(a) The bank loans bear interest per annum at the banks' prime rate plus
1% to 2%. The bank loans generally have terms of at least one year,
but in the event a particular bank elects not to renew or extend the
credit, the entire unpaid balance is converted to a term loan which
self-liquidates in four to five years. Generally the bank loans are
collateralized by the Company's entitlement to the assigned limited
partner investor notes which serve as collateral for the respective
purchase notes.
(b) In addition to the aforementioned bank loans, the Company has three
additional loans from banks. Each of the loans are collateralized by
an assignment of the first mortgage loans payable to the Company.
Two of the loans bear interest at rates varying from 8% to 9% per
annum and come due on various dates through 1996. In March 1996, the
partnerships that own these properties refinanced two of these
mortgages, which eliminated them as obligations of the Company. The
third loan bears interest at the rate of 9.5% per annum and matures
on March 31, 1997.
(c) Debentures are collateralized by various purchase notes and investor
notes related to multi-family property financing. They mature in
1996 through 2003 and bear interest rates of 11% to 12% per annum.
Future annual maturities, excluding interest, over the next five years and
thereafter, are as follows:
Year Ending
January 31
-----------
1997 . . . . . . . . . . . . . $ 37,170
1998 . . . . . . . . . . . . . 12,887
1999 . . . . . . . . . . . . . 29,660
2000 . . . . . . . . . . . . . 15,426
2001 . . . . . . . . . . . . . 17,428
Thereafter . . . . . . . . . . 26,628
--------
139,199
Accrued interest . . . . . . . 895
--------
$140,094
========
7. OTHER LIABILITIES
a. Other liabilities include advances and certain expenses. These
amounts do not bear interest and have no specific repayment date.
b. Unearned income of $963 and $367 was recorded for the amount of
unsubscribed partnership interests in adult living communities
financed during the year ended January 31, 1996 and the period
ended April 30, 1996, respectively. Upon full subscription these
amounts will be recognized as income.
8. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amount used for income taxes
purposes. The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below:
Deferred tax assets:
Notes and receivables . . . . $ 8,920
Accrued expenses and other 1,257
liabilities . . . . . . . . ------
Total gross deferred tax
assets . . . . . . . . . . 10,177
Less valuation allowance . . 2,760
-----
Deferred tax assets net of 7,417
valuation allowance . . . . . . -----
Deferred tax liabilities:
Deferred income . . . . . . . 4,560
Other assets . . . . . . . . 2,492
Investment in partnerships . 365
-----
Total gross deferred tax 7,417
liabilities . . . . . . . -----
Net deferred tax assets $ --
(liabilities) . . . . . . . . . ======
As discussed in footnote 1, the Company became a taxable entity as of
April 1, 1996,therefore the current and prior year tax provision
(benefit) is presented on a pro forma basis at an effective tax rate
of approximately 40%. The Company has recorded a valuation allowance
of $2,760, because it was uncertain that such deferred tax assets in
excess of deferred tax liabilities would be realizable in future
years.
9. COMMITMENTS AND CONTINGENCIES
a. The Company and its principals have guaranteed $6,800 of
indebtedness relating to a refinanced first mortgage on a
property acquired by an Owning Partnership in 1988.
b. The Company rents office space under a lease expiring February
1997. Annual base rent under such lease is approximately $178.
The Company entered into a ten year lease for additional office
space, commencing September 1, 1991. The annual base rent is
approximately $113 and will increase 5% each year for ten years.
10. RELATED PARTY TRANSACTIONS
The Company has transactions with related parties that are
unconsolidated affiliates of the Company. The Company provides
management, accounting and bookkeeping services to such affiliates.
The Company receives a monthly fee in return for such management
services rendered on behalf of its affiliates for each of their adult
living communities. Aggregate fees for such services for the years
ended January 31, 1994, 1995 and 1996 and the period ended April 30,
1996 totaled $1,010, $898 and $1,873 and $600, respectively.
In addition, the Company has amounts due from unconsolidated
affiliates of $413, $248 and $402 as of January 31, 1995 and 1996 and
the period ended April 30, 1996, respectively.
The Chairman of the Board and President of the Company and entities
controlled by them serve as general partners of partnerships directly
and indirectly owning multi-family properties and on account of such
general partner status have personal liability for recourse
partnership obligations and own small equity ownership interests in
the partnerships. The Company holds note receivables, aggregating
$163,608, that are secured by the equity interests in such
partnerships. These individuals have provided personal guarantees in
certain circumstances to obtain mortgage financing for certain adult
living properties operated by the Company and for certain of the
Company's Investor Note Debt, and the obligations thereunder may
continue. In addition, such officers and certain employees will
devote a portion of their time to overseeing the third-party managers
of multi-family properties and one adult living community in which
such officers have financial interests but the Company does not.
These activities, ownership interests and general partner interests
create actual or potential conflicts of interest on the part of these
officers.
The Company is the managing general partner for 28 of the 29 owning
partnerships which own the 30 adult living communities and one
nursing home which the Company operates. The Company also is the
general partner for 22 of the 34 investing partnerships that own 99%
partnership interests in these owning partnerships. In addition, the
Company is the managing agent for all of the Company's 30 adult
living communities and one nursing home. The Company has financed
the acquisition of adult living communities through the sales of
limited partnership interests in the investing partnerships. By
serving in all of these capacities, the Company may have conflicts of
interest in that it has both a duty to act in the best interests of
partners of various partnerships, including the limited partners of
the investing partnerships, and the desire to maximize earnings for
the Company's stockholders in the operation of such adult living
communities and nursing home.
11. SUBSEQUENT EVENTS
a. Refinancings
Subsequent to January 31, 1996, the Company completed refinancings of ten
adult living communities. These transactions resulted in a return of
capital to the investors of $43,717. This refinancing reduced the
Company's obligations to guarantee the investors' returns as discussed in
Note 2. The Company was also able to reduce its overall indebtedness by
$8,900.
b. Letters of Intent
The Company has obtained a letter of intent, dated June 3, 1996, from
Fleet Bank to provide up to $40 million for financing of the construction
and the acquisition of existing communities and has obtained a letter of
intent, dated April 25, 1996, from Capstone Capital Corporation
("Capstone") to provide up to $39 million for the development of up to
four adult living communities that will be operated by the Company
pursuant to long-term leases with Capstone.
c. Capitalization
The Board of Directos and the stockholders have approved, to be
effective immediately prior to the closing of the proposed public
offering of the Company's Common Stock, (i) the filing of a Restated
Certificate of Incorporation that would provide for, among other
things, the authorization of 30,000,000 shares of Common Stock and
1,000,000 shares of Preferred Stock and an approximate 1084.1284-for-1
stock split of the issued and outstanding Common Stock and (ii) a Stock
Option Plan reserving for issuance up to 1,250,000 shares of Common
Stock pursuant to stock options and other stock awards. The following
sets forth the pro forma effect of the stock split.
April 30
-----------
January 31 (unaudited)
-----------
1995 1996 1996
------ ------ ------
Preferred Stock,
$.0001 par value; -- -- --
1,000,000 shares
authorized; none
issued and
outstanding
Common Stock, $.01
par value; authorized 100 100 100
authorized, 30,000,000
shares; issued and
outstanding, 10,000
shares
Paid-in capital 31,068 35,404 37,371
<PAGE>
======================================= =================================
Until _____, 1996 (25 days after the
commencement of this offering), all
dealers effecting transactions in the 2,777,778 SHARES
registered securities, whether or not
participating in this distribution, may
be required to deliver a Prospectus.
This is in addition to the obligation
of dealers to deliver a Prospectus when
acting as Underwriters and with respect GRAND COURT
to their unsold allotments or LIFESTYLES, INC.
subscriptions.
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . 1
Risk Factors . . . . . . 7
Use of Proceeds . . . . . 15
Dividend Policy . . . . . 15
Capitalization . . . . . 16
Dilution . . . . . . . . 17
Selected Consolidated
Financial
Data . . . . . . . . . 18
Management's Discussion
and Analysis
of Financial
Condition and
Results of Operations . 20 COMMON STOCK
Business . . . . . . . . 27
Management . . . . . . . 40
Certain Transactions . . 44
Principal and Selling
Stockholders . . . . . 45
Description of Capital
Stock . . . . . . . . . 46
Shares Eligible for Future
Sale . . . . . . . . . 48
Plan of Distribution . . 50 --------------
Legal Matters . . . . . . 51
Experts . . . . . . . . . 51 PROSPECTUS
Additional Information . 51
Index to Consolidated --------------
Financial
Statements . . . . . . F-1
----------
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE
SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. UNDER NO
CIRCUMSTANCES SHALL THE DELIVERY OF
THIS PROSPECTUS, OR ANY SALE MADE __________, 1996
PURSUANT TO THIS PROSPECTUS, CREATE ANY
IMPLICATION THAT THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE
OF THIS PROSPECTUS.
======================================= =================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred
in connection with the issuance and distribution of the Common Stock being
registered assuming both the Minimum Offering and the Maximum Offering.
All expenses will be borne by the Company, except that the Selling
Stockholders will pay a 10% pro rata share of the non-accountable expense
allowances and the wholesalers or finders fees.
MINIMUM MAXIMUM
------- -------
Securities and Exchange
Commission registration
fee . . . . . . . . . . $17,241.38 $17,241.38
NASDAQ National Market
listing fee . . . . . . 50,000 50,000
Accounting fees and expenses 900,000 * 900,000 *
Legal fees and expenses . . 250,000 * 250,000 *
Printing and engraving
expenses . . . . . . . 99,000 * 99,000 *
Nonaccountable expense allowances
Minimum . . . . . . . 250,000 * --
Maximum . . . . . . . -- 500,000 *
Wholesalers or finders fees
Minimum . . . . . . . 250,000 * --
Maximum . . . . . . . -- 500,000 *
Blue Sky fees and expenses. 21,000 * 21,000 *
Transfer agent and registrar
fees and expenses. . . . 3,000 * 3,000 *
Escrow agent . . . . . . . 5,000 * 5,000 *
Miscellaneous . . . . . . . 14,758.62* 14,758.62*
------------- -------------
Total
Minimum . . . . . $1,860,000 *
==========
Maximum . . . . . $2,360,000 *
==========
----------------
* estimated
Item 14. Indemnification of Directors and Officers
Article IX of the Company's Restated Certificate of Incorporation
provides that:
"The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or complete
action, suit or proceeding, whether civil, criminal, administrative or
investigative, or by or in the right of the Corporation to procure judgment
in its favor, by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, in accordance with and to the full extent permitted by
statute. Expenses incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this section. The
indemnification provided by this section shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled
under this Restated Certificate of Incorporation or any agreement or vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Article X of the Company's By-Laws provides that:
"Any person made or threatened to be made a party to or involved
in any action, suit or proceeding, whether civil or criminal,
administrative or investigative (hereinafter, "proceeding") by reason of
the fact that he, his testator or intestate, is or was a director, officer
or employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended (but in the case of any such
amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against all expense, loss
and liability (including, without limitation, judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys' fees),
actually and necessarily incurred or suffered by him in connection with the
defense of or as a result of such proceeding, or in connection with any
appeal therein. The Corporation shall have the power to purchase and
maintain insurance for the indemnification of such directors, officers and
employees to the full extent permitted under the laws of the State of
Delaware from time to time in effect. Such right of indemnification shall
not be deemed exclusive of any other rights of indemnification to which
such director, officer or employee may be entitled.
The right to indemnification conferred in this By-Law shall be a
contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that if the General Corporation Law
-------- -------
of the State of Delaware requires, the payment of such expenses incurred by
a director or officer in his or her capacity as a director or officer (and
not in any other capacity in which services were or are rendered by such
person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this By-Law or
otherwise."
Statutory
Generally, Section 145 of the General Corporation Law of the
State of Delaware authorizes Delaware corporations, under certain
circumstances, to indemnify their officers and directors against all
expenses and liabilities (including attorneys' fees) incurred by them as a
result of any suit brought against them in their capacity as a director or
an officer, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, if they had no
reasonable cause to believe their conduct was unlawful. A director or
officer may also be indemnified against expenses incurred in connection
with a suit by or in the right of the corporation if such director or
officer acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was
adjudged liable to the corporation.
Item 15. Recent Sales of Unregistered Securities
Since January 31, 1993, the Company issued Debentures in ten
series, with interest rates ranging from 11% to 12%, and maturity dates
from 1996 to 2004 in an aggregate principal amount of $68,927,157.08. Each
series was issued in reliance on exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "1933 Act")
under Sections 3(b) and 4(2) of such act and Regulation D promulgated
thereunder to accredited investors and up to 35 non-accredited investors.
In connection with such issuances, the Company paid commissions to
qualified broker dealers of between 10% and 15%.
In connection with offerings of limited partnership interests in
limited partnerships organized to invest in adult living communities and
for which the Company has acted as general partner, the terms of the
partnership offerings guarantee that limited partners will receive
distributions during each of the first five years equal to between 11% and
12% of their paid-in capital. The Company is required to pay to limited
partners any part of such guaranteed return not paid from cash flow from
the related property. Since January 31, 1993, there were 14 such limited
partnership offerings for an aggregate of $138,500,000. Each such offering
was issued in reliance on exemptions from the registration requirements
under the 1933 Act under Sections 3(b) and 4(2) of such act and Regulation
D promulgated thereunder to accredited investors and up to 35 non-
accredited investors. In connection with such issuances, the Company paid
commissions to qualified brokers and dealers of between 10% and 15%.
Two limited partnerships for which the Company is general partner
have issued limited partnership interests for, in the aggregate,
$9,250,000, the net proceeds of which have been used to make second
mortgage loans to the Company to fund approximately 20% of the costs of
developing three new adult living communities. Each such offering was
issued in reliance on exemptions from the registration requirements under
the 1933 Act under Sections 3(b) and 4(2) of such act and Regulation D
promulgated thereunder to accredited investors and up to 35 non-accredited
investors. In connection with such issuances, the Company paid commissions
to qualified brokers and dealers of between 10% and 15%.
In connection with the reorganization of the Company's
businesses, the Company issued 10,000,000 shares of Common Stock to Messrs.
Luciani and Rodin in exchange for assets having an aggregate value of
$35,504,000. This offering was issued in reliance on exemptions from the
registration requirements under the 1933 Act under Sections 3(b) and 4(2)
of such act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1 - Form of Selling Agency Agreement.
*2.1 - Consolidation Agreement dated as of April 1, 1996 among John
Luciani, Bernard M. Rodin, J&B Management Company and the
Company.
2.1(a) - First Amendment dated as of April 1, 1996 to Consolidation
Agreement dated as of April 1, 1996 among John Luciani,
Bernard M. Rodin, J&B Management Company and the Company.
*2.2(a) - Merger Agreement dated as of April 1, 1996 between Leisure
Centers, Inc. and the Company.
*2.2(b) - Merger Agreement dated as of April 1, 1996 between Leisure
Centers Development, Inc. and the Company.
*2.2(c) - Merger Agreement dated as of April 1, 1996 between J&B
Management Corp. and the Company.
*2.2(d) - Merger Agreement dated as of April 1, 1996 between Wilmart
Development Corp. and the Company.
*2.2(e) - Merger Agreement dated as of April 1, 1996 between Sulgrave
Realty Corporation and the Company.
*2.2(f) - Merger Agreement dated as of April 1, 1996 between Riv
Development Inc. and the Company.
3.1 - Form of Restated Certificate of Incorporation of the
Company.
3.2 - By-Laws of the Company.
**4 - Form of Stock Certificate.
**5 - Form of Opinion of Reid & Priest LLP.
10.1 - 1996 Stock Option and Performance Award Plan.
*10.2 - Letter of Intent dated June 3, 1996 from Fleet Bank to the
Company.
*10.3 - Letter of Intent dated April 25, 1996 from Capstone Capital
Corp. to the Company.
*10.4(a) - Form of 12% Debenture due June 16, 2000 - Series 1.
*10.4(b) - Form of 12% Debenture due April 15, 1999 - Series 2.
*10.4(c) - Form of 11% Debenture due December 31, 1996 - Series 3.
*10.4(d) - Form of 11.5% Debenture due April 15, 2000 - Series 4.
*10.4(e) - Form of 12% Debenture due January 15, 2003 - Series 5.
*10.4(f) - Form of 12% Debenture due April 15, 2003 - Series 6.
*10.4(g) - Form of 11% Debenture due January 15, 2002 - Series 7.
*10.4(h) - Form of 11% Debenture due January 15, 2002 - Series 8.
*10.4(i) - Form of 12% Debenture due September 15, 2001 - Series 9.
*10.4(j) - Form of 12% Debenture due January 15, 2004 - Series 10.
10.5(a) - Bank Agreement dated August 14, 1990 between The Bank of New
York and the Company with respect to 12% Debentures,
Series 1.
*10.5(b) - First Amendment dated as of August 21, 1992 to Bank Agreement
dated August 14, 1990 between The Bank of New York and the
Company with respect to 12% Debentures, Series 1.
10.5(c) - Bank Agreement dated October 11, 1991 between The Bank of New
York and the Company with respect to 12% Debentures,
Series 2.
10.5(d) - Bank Agreement dated October 17, 1991 between The Bank of New
York and the Company with respect to 11% Debentures,
Series 3.
10.5(e) - Bank Agreement dated April 1, 1992 between The Bank of New
York and the Company with respect to 11.5% Debentures, Series
4.
*10.5(f) - Bank Agreement dated October 30, 1992 between The Bank of New
York and the Company with respect to 12% Debentures,
Series 5.
*10.5(g) - Bank Agreement dated May 24, 1993 between The Bank of New
York and the Company with respect to 12% Debentures,
Series 6.
10.5(h) - Bank Agreement dated October 27, 1993 between The Bank of New
York and the Company with respect to 11% Debentures,
Series 7.
*10.5(i) - First Amendment dated November 29, 1993 to Bank Agreement
dated October 27, 1993 between The Bank of New York and the
Company with respect to 11% Debentures,Series 7.
*10.5(j) - Bank Agreement dated November 29, 1993 between The Bank of
New York and the Company with respect to 11% Debentures,
Series 8.
*10.5(k) - Bank Agreement dated September 12, 1994 between The Bank of
New York and the Company with respect to 12% Debentures,
Series 9.
*10.5(l) - Bank Agreement dated July 12, 1995 between The Bank of New
York and the Company with respect to 12% Debentures, Series
10.
*10.6(a) - Form of Short-term Step-up Bond due March 15, 2001 -
Series 1.
*10.6(b) - Form of 12.375% Bond due April 15, 2003 - Series 2.
*10.7(a) - Bank Agreement between The Bank of New York and the Company
with respect to Short-term Step-up Bonds - Series 1.
*10.7(b) - Bank Agreement between The Bank of New York and the Company
with respect to 12.375% Bonds -Series 2.
*10.8 - Revolving Credit Agreement dated as of May 7, 1985 between
Sterling National Bank & Trust Company and the Company.
*21 - List of Subsidiaries of the Company.
**23.1 - Consent of Reid & Priest LLP (to be included in Exhibit 5
hereto).
23.2 - Consent of DELOITTE & TOUCHE LLP.
*24 - Power of Attorney.
27 - Financial Data Schedule.
_______________
* Previously filed.
** To be filed by amendment.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) The undersigned registrant hereby undertakes to provide to the
Transfer Agent at the closing certificates in such denominations and
registered in such names as required by the Transfer Agent to permit prompt
delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted
to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on
behalf by the undersigned, thereunto duly authorized, in the town of Fort
Lee, the State of New Jersey, on June 28, 1996.
GRAND COURT LIFESTYLES, Inc.
By: /s/ Paul Jawin
-----------------------------
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated:
Signature Title Date
--------- ----- -----
/s/ John Luciani * Chairman of the Board June 28, 1996
------------------------- of Directors and
John Luciani Chief Executive Officer
(Principal Executive
Officer)
/s/ Bernard M. Rodin* President and Chief June 28, 1996
------------------------- Operating Officer and
Bernard M. Rodin Director (Principal
Executive Officer)
/s/ John W. Luciani, III * Executive Vice June 28, 1996
-------------------------- President and Director
John W. Luciani, III
/s/ Paul Jawin Chief Financial Officer June 28, 1996
-------------------------- (Principal Financial
Paul Jawin Officer and Principal
Accounting Officer)
/s/ Walter Feldesman * Director June 28, 1996
--------------------------
Walter Feldesman
/s/ Leslie E. Goodman * Director June 28, 1996
--------------------------
Leslie E. Goodman
----------------
* Paul Jawin, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
1 - Form of Selling Agency Agreement.
*2.1 - Consolidation Agreement dated as of April 1, 1996
among John Luciani, Bernard M. Rodin, J&B
Management Company and the Company.
2.1(a) - First Amendment dated as of April 1, 1996 to
Consolidation Agreement dated as of April 1, 1996
among John Luciani, Bernard M. Rodin, J&B
Management Company and the Company.
*2.2(a) - Merger Agreement dated as of April 1, 1996 between
Leisure Centers, Inc. and the Company.
*2.2(b) - Merger Agreement dated as of April 1, 1996 between
Leisure Centers Development, Inc. and the Company.
*2.2(c) - Merger Agreement dated as of April 1, 1996 between
J&B Management Corp. and the Company.
*2.2(d) - Merger Agreement dated as of April 1, 1996 between
Wilmart Development Corp. and the Company.
*2.2(e) - Merger Agreement dated as of April 1, 1996 between
Sulgrave Realty Corporation and the Company.
*2.2(f) - Merger Agreement dated as of April 1, 1996 between
Riv Development Inc. and the Company.
3.1 - Form of Restated Certificate of Incorporation of
the Company.
3.2 - By-Laws of the Company.
**4 - Form of Stock Certificate.
**5 - Form of Opinion of Reid & Priest LLP.
10.1 - 1996 Stock Option and Performance Award Plan.
*10.2 - Letter of Intent dated June 3, 1996 from Fleet
Bank to the Company.
*10.3 - Letter of Intent dated April 25, 1996 from
Capstone Capital Corp. to the Company.
*10.4(a) - Form of 12% Debenture due June 16, 2000 - Series
1.
*10.4(b) - Form of 12% Debenture due April 15, 1999 - Series
2.
*10.4(c) - Form of 11% Debenture due December 31, 1996 -
Series 3.
*10.4(d) - Form of 11.5% Debenture due April 15, 2000 -
Series 4.
*10.4(e) - Form of 12% Debenture due January 15, 2003 -
Series 5.
*10.4(f) - Form of 12% Debenture due April 15, 2003 - Series
6.
*10.4(g) - Form of 11% Debenture due January 15, 2002 -
Series 7.
*10.4(h) - Form of 11% Debenture due January 15, 2002 -
Series 8.
*10.4(i) - Form of 12% Debenture due September 15, 2001 -
Series 9.
*10.4(j) - Form of 12% Debenture due January 15, 2004 -
Series 10.
10.5(a) - Bank Agreement dated August 14, 1990 between The
Bank of New York and the Company with respect to
12% Debentures, Series 1.
*10.5(b) - First Amendment dated as of August 21, 1992 to
Bank Agreement dated August 14, 1990 between The
Bank of New York and the Company with respect to
12% Debentures, Series 1.
10.5(c) - Bank Agreement dated October 11, 1991 between The
Bank of New York and the Company with respect to
12% Debentures, Series 2.
10.5(d) - Bank Agreement dated October 17, 1991 between The
Bank of New York and the Company with respect to
11% Debentures, Series 3.
10.5(e) - Bank Agreement dated April 1, 1992 between The
Bank of New York and the Company with respect to
11.5% Debentures, Series 4.
*10.5(f) - Bank Agreement dated October 30, 1992 between The
Bank of New York and the Company with respect to
12% Debentures, Series 5.
*10.5(g) - Bank Agreement dated May 24, 1993 between The Bank
of New York and the Company with respect to 12%
Debentures, Series 6.
10.5(h) - Bank Agreement dated October 27, 1993 between The
Bank of New York and the Company with respect to
11% Debentures, Series 7.
*10.5(i) - First Amendment dated November 29, 1993 to Bank
Agreement dated October 27, 1993 between The Bank
of New York and the Company with respect to 11%
Debentures,Series 7.
*10.5(j) - Bank Agreement dated November 29, 1993 between The
Bank of New York and the Company with respect to
11% Debentures, Series 8.
*10.5(k) - Bank Agreement dated September 12, 1994 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 9.
*10.5(l) - Bank Agreement dated July 12, 1995 between The
Bank of New York and the Company with respect to
12% Debentures, Series 10.
*10.6(a) - Form of Short-term Step-up Bond due March 15, 2001
- Series 1.
*10.6(b) - Form of 12.375% Bond due April 15, 2003 - Series
2.
*10.7(a) - Bank Agreement between The Bank of New York and
the Company with respect to Short-term Step-up
Bonds - Series 1.
*10.7(b) - Bank Agreement between The Bank of New York and
the Company with respect to 12.375% Bonds -Series
2.
*10.8 - Revolving Credit Agreement dated as of May 7, 1985
between Sterling National Bank & Trust Company and
the Company.
*21 - List of Subsidiaries of the Company.
**23.1 - Consent of Reid & Priest LLP (to be included in
Exhibit 5 hereto).
23.2 - Consent of DELOITTE & TOUCHE LLP.
*24 - Power of Attorney.
27 - Financial Data Schedule.
_______________
* Previously filed.
** To be filed by amendment.
Exhibit 1
---------------------------------
SELLING AGENCY AGREEMENT
---------------------------------
Grand Court Lifestyles, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Gentlemen:
1. General. We understand that Grand Court Lifestyles, Inc., a
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Delaware corporation (the "Company") is entering into this Selling Agency
Agreement with us in connection with the proposed offering (the "Offering")
to the public of a minimum of 1,388,889 shares and a maximum of 2,777,778
shares of common stock ("Shares") of the Company, pursuant to a
registration statement on Form S-1 filed with the Securities and Exchange
Commission on June 14, 1996 (the "Registration Statement") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). It is
anticipated that the Company will file one or more amendments to the
Registration Statement prior to its effectiveness. The Company has
provided to us a copy of the preliminary prospectus dated June 13, 1996,
which includes a description of the Offering. The Company has advised us
it has reserved the right to enter into similar or different arrangements
with other soliciting dealers in respect of the offer and sale of Shares.
We understand that the Company and First Union National Bank of North
Carolina ("First Union") shall enter into an escrow agreement pursuant to
which First Union will act as escrow agent for the Company in connection
with the Offering. We agree to use our best efforts, in accordance with
the following terms and conditions, to solicit indications of interest and,
after the effective date of the Registration Statement ("Effective Date"),
subscriptions, for the purchase of the Shares. We understand that no offer
to buy the securities can be accepted and no part of the purchase price can
be received until the Registration Statement has become effective, and any
such offer may be withdrawn or revoked without obligation or commitment of
any kind, at any time prior to notice of its acceptance by the Company
given after the Effective Date. We further understand that an indication
of interest will involve no obligation or commitment of any kind by a
potential investor.
Upon your acceptance hereof, this Selling Agency Agreement shall
become binding upon us and upon the Company, with respect to our
participation in the Offering. We understand that any indications of
interest or, after the Effective Date, subscription for Shares may be
rejected in whole or in part for any reason or for no reason by the Company
and that our obligations hereunder and the obligations of other soliciting
dealers under similar agreements will be several and not joint.
2. Commissions. We will receive from the Company sales commissions
-----------
in the amounts and upon the occurrence of the events specified in Annex A
hereto (the "Commissions"), based upon the aggregate cash purchase price of
Shares sold to investors whose subscriptions for Shares were solicited by
us and accepted by the Company.
3. Prospectus. The Company has furnished to us the preliminary
----------
prospectus dated June 13, 1996, and will furnish to us as soon as
practicable copies of any subsequent preliminary prospectuses (together
with the preliminary prospectus dated June 13, 1996, the "Preliminary
Prospectus") and its final prospectus and any amendments or supplements
thereto (the "Prospectus") to be used in connection with the Offering. As
contemplated by Rule 15c2-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company agrees to mail a copy of the
Preliminary Prospectus or the Prospectus to any person making a written
request therefor during the period referred to in the rules and regulations
adopted under such Act, the mailing to be made to the address given in the
request.
4. Representations, Warranties and Covenants: We hereby represent,
-----------------------------------------
warrant and covenant that:
(a) We are registered as a broker-dealer under the Exchange Act,
are a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"), are in compliance with all rules and regulations
under the Exchange Act, the NASD Rules of Fair Practice and the applicable
limitations set forth in our restriction letter from the NASD, and are
registered as a broker-dealer, without the imposition of limitations or
conditions relating to categories of securities, under the state securities
or "blue sky" laws of each jurisdiction identified on the list attached
hereto as Annex B. We will not solicit indications of interest or, after
the Effective Date, offer or sell the Shares in any jurisdiction other than
as set forth on Annex B and in accordance with the provisions of 4(g)
herein.
(b) Each individual who, on our behalf, may solicit indications
of interest or, after the Effective Date, subscriptions to purchase Shares
from investors is registered with the NASD as an associated person of this
firm, is authorized to sell the Shares and is registered or licensed as an
agent of this firm under the state securities or "blue sky" laws of each
state in which such individual will solicit indications of interest or,
after the Effective Date, subscriptions to purchase Shares.
(c) Neither we nor any of our officers, directors, principals or
controlling persons:
(i) has been convicted within the past ten years of any
felony or misdemeanor (A) in connection with the offer,
purchase or sale of any security, (B) in connection
with the making of any false filing with the United
States Securities Exchange Commission (the
"Commission") or any state securities administrator,
(C) arising out of the conduct of the business of an
underwriter, broker or dealer, or (D) involving
racketeering or a transaction in securities, or of
which fraud is an essential element;
(ii) has been convicted within the past ten years of any
felony (A) involving fraud or deceit, including but not
limited to forgery, embezzlement, obtaining money under
false pretenses, theft by conversion, theft by
deception, larceny, or conspiracy to defraud, or (B)
which is a violation of the securities laws or
regulations of any state or of the United States or any
foreign jurisdiction, or (C) which is a violation of
statutes designed to protect consumers against unlawful
practices involving insurance, securities, commodities,
or commodity futures, real estate, franchises, business
opportunities, consumer goods or other goods and
services;
(iii) is currently subject to (A) any administrative
enforcement order or judgment entered within the past
five years by any state's securities administrator, (B)
any state's administrative enforcement order or
judgment entered with the past five years, in which
fraud or deceit, including but not limited to making
untrue statements of material facts or omitting to
state material facts, was found, or (C) any state
administrative order or judgment, including an
injunction, entered within the past five years where a
state banking, insurance, real estate or securities law
is the ground for the order or judgment;
(iv) is subject to a U.S. Postal Service false
representation order entered within the past five
years, or is subject to a temporary restraining order
or preliminary injunction entered under section 3007 of
title 39, United States Code with respect to conduct
alleged in violation of section 3005 of title 39,
United States Code;
(v) is subject to any state or federal administrative order
having the effect of enjoining such person from
activities subject to state and federal statutes
designed to protect investors or consumers from
unlawful or deceptive activities involving securities,
insurance, commodities, commodity futures, real estate,
franchise, business opportunities or goods and
services;
(vi) is subject to any state's administrative order or
judgement which prohibits, denies or revokes the use of
any exemption from registration in connection with the
offer, purchase or sale of securities;
(vii) is subject to an order of the Commission entered
pursuant to sections 15(b), 15(B)(a), or 15(B)(c) of
the Exchange Act or are subject to an order of the
Commission entered pursuant to section 203(e) or (f) of
the Investment Advisers Act of 1940;
(viii) has been suspended or expelled from membership in, or
suspended or barred from association with a member of,
an exchange registered as a national securities
exchange pursuant to section 6 of the Exchange Act, an
association registered as a national securities
association under section 15A of the Exchange Act or a
foreign securities exchange or association; or
(ix) is currently subject to any order, judgment, or decree
of any court of competent jurisdiction, entered in the
past five years, temporarily, preliminarily or
permanently restraining or enjoining such party from
(A) engaging in or continuing any conduct or practice
in connection with the purchase or sale of any
securities or involving the making of any false filing
with any state or with the Commission or arising out of
the conduct of the business of an underwriter, broker
or dealer, or (B) engaging in activities subject to
federal or state statutes designed to protect consumers
against unlawful or deceptive practices involving
insurance, commodities or commodity futures, real
estate, franchises, business opportunities, consumer
goods or other goods and services.
(d) We will comply with all applicable laws of the United States
and of the several states in which we will solicit indications of interest
and, after the Effective Date, offer the Shares, including the Securities
Act and the Exchange Act, and the rules and regulations thereunder, and
with all applicable rules and regulations of any self-regulatory
organization or national securities exchange, including the NASD, of which
we are a member.
(e) Neither we nor any person acting on our behalf will solicit
indications of interest or, after the Effective Date, offer any of the
Shares for sale, or solicit any offers to subscribe for or buy any Shares,
or otherwise provide information to any person with respect to the Shares,
on the basis of any communications or documents except the Preliminary
Prospectus, Prospectus and any other written information provided to us by
the Company specifically for use in offering the Shares.
(f) In soliciting such indications of interest or making offers,
we will comply with the provisions of the Securities Act, the Exchange Act
and the securities or "blue sky" laws of the jurisdictions in which we or
any persons acting on our behalf solicit indications of interest or, after
the Effective Date, make or solicit such offers.
(g) We will solicit indications of interest or, after the
Effective Date, offer Shares for sale only in those jurisdictions where
such offer may lawfully be made by broker-dealers registered or licensed
therein, as identified in a blue sky memorandum provided by the Company,
which may be amended from time to time. The Company assumes no obligations
or responsibility to qualify or register the Shares under the laws of any
jurisdiction. On or after the Effective Date, we will request from the
Company the status of registration, qualification or exemption procedures
prior to making any offer or sale in any jurisdiction. All persons acting
on our behalf will solicit indications of interest or, after the Effective
Date, offer to sell, or solicit offers to subscribe for, Shares only in
those jurisdictions in which the Company has advised us that it believes
such solicitations of interest, offers and sales may lawfully be solicited
or made and provided we and the person acting on our behalf are permitted
to make solicitations of interest, offers and sales of securities therein.
(h) This Selling Agency Agreement has been duly and validly
authorized, executed and delivered by and on our behalf and constitutes our
valid and legally binding agreement.
(i) The execution and delivery of this Selling Agency Agreement,
the observance and performance hereof, and the consummation of the
transactions contemplated herein do not and will not constitute a breach of
or a default under any instrument or agreement by which we are bound, and
do not and will not contravene any existing law, decree or order applicable
to us.
(j) Acceptance by us of the Commissions provided for herein will
constitute a representation that we have complied with all the terms and
conditions contained herein. Nothing contained herein shall constitute us
to be partners with the Company or with one another. We are not authorized
to act as agent of the Company.
(k) In accordance with the provisions of Rule 15c2-4 promulgated
by the Commission under the Exchange Act, we shall cause all funds received
for the sale of any Shares to be forwarded to First Union, as escrow agent
for the Company, upon receipt by us of such funds, by noon of the next
business day following the receipt of such funds. We shall forward, or
cause to be forwarded, to the Company, promptly upon receipt by us all
subscription forms received for the sale of any Shares.
5. Conditions of the Company's Obligations. The obligations of the
---------------------------------------
Company hereunder are subject to the accuracy of and compliance by us with
the representations, warranties and covenants made by us herein in all
material respects as of the date hereof, during any period during which we
participate in the Offering and as of the closing date of the Offering (the
"Closing"), to the observance and performance by us of our obligations
hereunder in all material respects, and to the following further conditions
(any of which may be waived in writing in whole or in part by the Company):
(a) The Company's counsel shall have been furnished promptly
upon request with such instruments and other documents as they may
reasonably require for the purpose of enabling them to pass upon the sale
of the Shares as contemplated herein and in the Preliminary Prospectus and
the Prospectus, as the case may be, and related proceedings and in order to
evidence the accuracy and completeness of any and all of the
representations or warranties, or the fulfillment of any and all of the
conditions, contained in this Selling Agency Agreement or in the
Preliminary Prospectus or the Prospectus, as the case may be, and all such
instruments and other documents shall be reasonably satisfactory in form
and substance to such counsel. All actions taken by us in connection with
the solicitation of interest and sale of the Shares as contemplated herein
and in the Preliminary Prospectus and the Prospectus, as the case may be,
shall be reasonably satisfactory to the Company and its counsel.
(b) If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Selling Agency
Agreement to be fulfilled, all of the Company's obligations under this
Selling Agency Agreement may be terminated in writing or by telegram at any
time at or prior to the Closing, and any such termination shall be without
liability to the Company, provided that the obligations under Section 6
hereof shall nevertheless survive and continue thereafter.
6. Indemnification. By execution of this Selling Agency Agreement:
---------------
(a) We hereby agree to indemnify and hold harmless the Company
and its respective officers, directors, agents, employees and controlling
persons:
(i) against any and all loss, liability, claim, damage and
expenses, including reasonable attorney's fees,
whatsoever arising out of our breach of any of our
representations, warranties or covenants made hereunder
or of any of our other obligations hereunder or out of
the solicitation of indications of interest by us or
any offer by us to sell the Shares;
(ii) against any and all loss, liability, claim, damage, and
expenses, including reasonable attorney's fees,
whatsoever arising out of any untrue statement or
alleged untrue statement of material fact by us, our
agents or persons acting on our behalf, or any omission
or alleged omission of a material fact by any of such
persons;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate
amount paid in settlement of any litigation, commenced
or threatened, or of any claim whatsoever, arising out
of any breach or action of the type referred to in
clause (i) above, or based upon any untrue statement or
omission referred to in clause (ii) above, if such
settlement is effected without the written consent of
the Company; and
(iv) against any and all expenses whatsoever incurred in
investigating, preparing or defending against any
litigation, commenced or threatened, or any claim
whatsoever, based upon any breach or action of the type
referred to in clause (i) above, or based upon any
untrue statement or omission referred to in clause (ii)
above, to the extent that any such expense is not paid
under clause (i) or (ii).
(b) The Company agrees to indemnify and hold us harmless from
and against any and all losses, claims, damages and liabilities to which we
may become subject insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and to reimburse us in accordance with Section 6(c)
hereof.
(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party, notify in
writing the indemnifying party of the commencement thereof within 30 days
from such commencement; and the omission so to notify the indemnifying
party will relieve it from any liability as to the particular item for
which indemnification is then being sought, but not from any other
liability which it may have to any indemnified party; and if the
indemnified party notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein,
and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel who
shall be reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless
incurred at the written request of the indemnifying party or the
indemnifying party shall not have employed counsel to have charge of the
defense of such action or proceeding or such indemnified party shall have
reasonably concluded that there may be defenses available to it which
conflict with those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of such
action or proceeding on behalf of the indemnified party), in any of which
events all such reasonable legal or other expenses shall be borne by the
indemnifying party. In no event shall the indemnifying party be liable for
the fees and expenses of more than one counsel for all indemnified parties
in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
obligations or circumstances.
7. Miscellaneous.
-------------
(a) The Offering is subject to withdrawal, cancellation or
modification by the Company.
(b) This Selling Agency Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed therein.
(c) The locale of any judicial proceedings hereunder shall be in
a state court in the State of New Jersey or in the Federal courts located
in the State of New Jersey and not in any other Federal court in the United
States nor in any court in any foreign jurisdiction.
(d) This Selling Agency Agreement may be terminated by either
party at any time by telegraphic or other written notice to that effect
sent to the other party at the address shown in this Selling Agency
Agreement. Any attempted assignment of our rights and obligations under
this Selling Agency Agreement shall result in automatic termination
thereof.
(e) All communications hereunder shall be in writing and shall
be mailed (by U.S. registered or certified mail, return receipt requested),
delivered, telecopied, telexed or telegraphed to any party at the address
shown in this Selling Agency Agreement, or to any party at such other
address as such party shall designate by notice given as hereinabove
provided.
(f) The representations and warranties contained herein shall
survive the Closing and shall survive the termination of this Selling
Agency Agreement.
[INTENTIONALLY LEFT BLANK]
<PAGE>
(g) This Selling Agency Agreement may be executed in any number
of counterparts, all of which shall constitute one Agreement binding on the
parties hereof, notwithstanding that all parties are not signatory to the
same counterpart.
, 199
------------------- -
----------------------------------------
Name
----------------------------------------
----------------------------------------
By:
-------------------------------------
Name
Title
ACCEPTED BY:
GRAND COURT LIFESTYLES, INC.
By:
-------------------------------------
Name:
Title:
<PAGE>
ANNEX A
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COMMISSIONS
-----------
The commission agreement referred to in section 2 of this Selling
Agency Agreement is as follows:
(i) A commission equal to six (6%) percent and (ii) a due
diligence fee and non-accountable expense allowance equal to one (1%)
percent of the purchase price for Shares will be paid in full upon the
-------
Closing of the Offering, for each Share issued and for which the registered
broker-dealer solicited the subscription.
<PAGE>
ANNEX B
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STATES IN WHICH BROKER DEALER IS REGISTERED
--------------------------------------------
The registered broker-dealer which has executed the Selling
Agency Agreement to which this Annex B is attached is registered in the
jurisdictions set forth below. (Copy of most recent NASD Status Report may
be substituted):
Exhibit 2.1(a)
FIRST AMENDMENT TO CONSOLIDATION AGREEMENT
This first amendment (the "First Amendment") to the
consolidation agreement (the "Agreement") dated as of the 1st day
of April, 1996, between Grand Court Lifestyles, Inc., a Delaware
corporation ("Grand Court"), party of the first part, and John
Luciani and Bernard M. Rodin (the "Transferring Shareholders")
and J&B Management Company, a New Jersey partnership (hereinafter
the "Company"), parties of the second part, is made as of the 1st
day of April, 1996. Capitalized terms not otherwise defined
herein shall have the meanings as such terms have in the
Agreement.
W I T N E S S E T H:
Whereas, Grand Court, the Transferring Shareholders and the
Company entered into the Agreement;
Whereas, Schedule 1.3 of the Agreement is amended by this
First Amendment to include additional interests being transferred
by the Company to Grand Court;
Whereas, Schedule 2.1 of the Agreement is amended by this
First Amendment to include additional obligations to be assumed
by Grand Court;
Accordingly, the parties hereto agree as follows:
ARTICLE I
Interests Acquired by Grand Court
Schedule 1.3 is amended to include the receivables currently held
by the Company from the following entities and individuals:
(i) Cedarwood Associates, Ltd.,
(ii) Villa Americana Associates, Ltd.,
(iii) The Conquistador Apts. Company,
(iv) The Bridges,
(v) Rockmont Apartments Ltd.,
(vi) Gary Hoffson, and
(vii) the reimbursement for expenses incurred in the
syndication of interests in (A) Retirement
Financing Associates, L.P.-I or (B) Retirement
Financing Associates, L.P.-II.
Schedule 1.3 is amended to include the Company's entitlement to
be reimbursed for expenses incurred and classified as
"construction in progress."
Paragraph (h) of Schedule 1.3 is amended to insert the following
as (iv)
"(iv) all rights, subject to any
obligations, relating to (A) the
Proprietary Leases enterred into
between Company and Caton Corp. and
(B) any subleases enterred into
between Company and its subtenants
which are subject to the terms of
the Proprietary Leases
ARTICLE II
Obligations
Schedule 2.1 is amended to include the obligations and
liabilities currently owed by the Company to the following
individuals:
(i) the obligations payable to William A. Thomas relating
to (A) Grand View Heights LP, (B) Lucas Heights III, LP, (C)
College Hill Apartments, L.P. and Lucas Heights Village I, LTD,
and
(ii) the obligations payable to Messrs. Fred and Jerry
Modell relating to (A) The Pines Ltd and (B) The Habitat Ltd.
ARTICLE III
Miscellaneous
Except as herein specifically amended, all of the terms,
provisions and conditions of the Agreement shall continue to
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
/s/John Luciani /s/Bernard M. Rodin
-------------------------- -----------------------------
John Luciani Bernard M. Rodin
J&B Management Company
/s/John Luciani /s/Bernard M. Rodin
--------------------------- -----------------------------
By: John Luciani By: Bernard M. Rodin
Partner Partner
Grand Court Lifestyles, Inc.
/s/John Luciani /s/Bernard M. Rodin
--------------------------- -----------------------------
By: John Luciani By: Bernard M. Rodin
President Vice-President
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRAND COURT LIFESTYLES, INC.
(Pursuant to Section 245 of the General
Corporation Law of the State of Delaware)
GRAND COURT LIFESTYLES, INC., a corporation
organized and existing under the laws of the State of
Delaware, hereby certifies as follows:
1. The original Certificate of Incorporation of
the Corporation was filed with the Secretary of State of the
State of Delaware on January 25, 1996.
2. The original Certificate of Incorporation of
the Corporation was amended by a Certificate of Amendment
filed with the Secretary of State of the State of Delaware
on February 20, 1996.
3. The original Certificate of Incorporation of
the Corporation was further amended by a Certificate of
Amendment filed with the Secretary of State of Delaware on
May 21, 1996.
4. This Amended and Restated Certificate of
Incorporation amends restates and integrates the provisions
of the original Certificate of Incorporation of the
Corporation as amended to the date hereof, and was duly
adopted in accordance with the provisions of Section 245 of
the General Corporation Law of the State of Delaware.
5. The text of the Certificate of Incorporation
is hereby restated to read in its entirety as follows:
ARTICLE I
---------
The name of the Corporation is Grand Court Lifestyles, Inc.
ARTICLE II
----------
The address of the Corporation's registered office
in the State of Delaware is 9 East Loockerman Street, City
of Dover, County of Kent, Delaware 19901. The name of its
registered agent at such address is National Corporate
Research, Ltd.
ARTICLE III
-----------
The nature of the business or purposes to be
conducted or promoted by the Corporation are to engage in
any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
----------
Section 4.1. Authorized Capital. The total
------------------
number of shares of all classes of stock which the
Corporation shall have authority to issue is Thirty-One
Million (31,000,000) shares, consisting of:
(a) One Million (1,000,000) shares of
preferred stock, $.0001 par value (the "Preferred Stock"),
and
(b) Thirty Million (30,000,000) shares of
common stock, $.01 par value ("Common Stock").
Section 4.2. Preferred Stock. Shares of the
---------------
preferred stock of the Corporation may be issued by the
Board of Directors, without stockholder approval, from time
to time in one or more classes or series, each of which
class or series shall have such distinctive designation or
title as shall be fixed by the Board of Directors of the
Corporation prior to the issuance of any shares thereof.
Each such class or series of preferred stock shall have such
voting powers, full or limited, or no voting powers, and
such other relative rights, powers and preferences,
including, without limitation, the dividend rate, conversion
rights, if any, redemption price and liquidation preference,
and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution or
resolutions providing for the issuance of such class or
series of preferred stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any
shares thereof pursuant to the authority hereby expressly
vested in it, all in accordance with the laws of the State
of Delaware.
Section 4.3. Common Stock. The powers, rights
------------
and other matters relating to the Common Stock are as
follows:
(a) Dividends. Subject to the limitations
---------
set forth in this Article IV, dividends may be paid on
Common Stock out of any funds legally available for that
purpose, when, as and if declared by the Board of Directors.
(b) Liquidation Rights. In the event of any
------------------
liquidation, dissolution or winding up of the Corporation,
after there shall have been paid to or set aside for the
holders of outstanding shares having superior liquidation
preferences to Common Stock the full preferential amounts to
which they are respectively entitled, the holders of
outstanding shares of all classes of Common Stock shall be
entitled to receive pro rata, according to the number of
shares held by them, the remaining assets of the Corporation
legally available for distribution to the stockholders.
(c) Voting Rights. (1) Except as set forth
-------------
in this Article IV or as by statute or otherwise mandatorily
provided, the holders of the outstanding shares of Common
Stock shall exclusively possess full voting powers for the
election of directors of the Corporation and for all other
corporate purposes.
(2) Any action required or permitted to be
taken at any annual or special meeting of stockholders may
be taken only upon the vote of the stockholders at an annual
or special meeting duly noticed and called, as provided in
the By-Laws of the Corporation, and may not be taken by a
written consent of the stockholders pursuant to the General
Corporation Law of the State of Delaware.
(3) Special meetings of the stockholders of
the Corporation for any purpose or purposes may be called at
any time by the Board of Directors or the Chairman of the
Board of Directors. Special meetings of the stockholders of
the Corporation may not be called by any other Person or
Persons.
(d) Definitions. For purposes of Article IV
-----------
of this Amended and Restated Certificate of Incorporation:
"Person" means an individual, a
------
partnership, a joint venture, a
corporation, an association, a trust, or
any other entity or organization.
ARTICLE V
---------
In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the
Corporation is expressly authorized to adopt, alter or
repeal its By-Laws. In addition, the By-Laws may be made,
altered, amended, changed or repealed by the stockholders of
the Corporation upon the affirmative vote of the holders of
at least 66-2/3% of the outstanding Common Stock entitled to
vote thereon.
ARTICLE VI
----------
Election of directors need not be by written
ballot unless the By-Laws of the Corporation shall so
provide.
ARTICLE VII
-----------
Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of
them and/or between the Corporation and its stockholders or
any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or
receivers appointed for the Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions
of Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization
of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which
the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation,
as the case may be, and also on the Corporation.
ARTICLE VIII
------------
A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for injury resulting from a breach of his
fiduciary duty as a director, except for liability (i) for
injury resulting from a breach of his duty of loyalty to the
Corporation and its stockholders, (ii) for injury resulting
from acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law,
as the same exists or hereafter may be amended, or (iv) for
injury resulting from any transaction from which the
director derives an improper personal benefit. If the
Delaware General Corporation Law hereafter is amended so as
to authorize the further elimination or limitation of the
liability of directors to the Corporation or its
stockholders for monetary damages for breach of fiduciary
duty as a director, then the liability of a director of the
Corporation for monetary damages, in addition to the
limitation on personal liability provided in the preceding
sentence, shall automatically, by virtue hereof and without
any further action on the part of the Corporation or its
stockholders, be further limited so as to be limited to the
fullest extent permitted by the Delaware General Corporation
Law. Any repeal or modification of this Section by the
stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the
personal liability of a director of the Corporation with
regard to actions taken or omitted before such repeal or
modification.
ARTICLE IX
----------
The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or complete action, suit or proceeding,
whether civil, criminal, administrative or investigative, or
by or in the right of the Corporation to procure judgment in
its favor, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the Corporation, in accordance with and to the
full extent permitted by statute. Expenses incurred in
defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized
by the Board of Directors in the specific case upon receipt
of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this
section. The indemnification provided by this section shall
not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under this Amended
and Restated Certificate of Incorporation or any agreement
or vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
ARTICLE X
---------
Notwithstanding anything contained in this Amended
and Restated Certificate of Incorporation to the contrary,
the affirmative vote of the holders of at least 66-2/3% of
the outstanding shares of Common Stock shall be required to
amend, repeal, or adopt any provision inconsistent with
Sections 4.3(c)(2) or 4.3(c)(3) of Article IV, Article V or
this Article X of this Amended and Restated Certificate of
Incorporation.
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated
Certificate of Incorporation has been executed on behalf of
the Corporation this _____ day of _____, 1996.
GRAND COURT LIFESTYLES, INC.
By:
---------------------------
Bernard M. Rodin, President
Attest:
---------------------------
Keith E. Marlowe, Secretary
Exhibit 3.2
BY-LAWS OF
GRAND COURT LIFESTYLES, INC.
(a Delaware corporation)
---------------------------------------------------
ARTICLE I
Meetings of Stockholders
------------------------
SECTION 1. Annual Meeting. The annual meeting of the
--------------
stockholders of Grand Court Lifestyles, Inc. (hereinafter
referred to as the "Corporation") for the election of directors
and for the transaction of such other business as may properly
come before the meeting shall be held on such date and at such
time as may be fixed by the Board of Directors (hereinafter
referred to as the "Board") at the office of the Corporation or
at such other place and at such hour as shall be designated by
the Board, or, if no such time be fixed, then at 10:00 o'clock in
the forenoon.
SECTION 2. Special Meetings. Special meetings of the
----------------
stockholders may be called at any time by the Board to be held at
such place within or without the State of Delaware, on such date
and at such hour as shall be designated in the notice or waiver
of notice thereof.
Only such business as is stated in the written notice
of a special meeting may be acted upon thereat.
SECTION 3. Notice of Meetings. Notice of the place,
------------------
date and hour of each annual and special meeting of the
stockholders and the purpose or purposes thereof shall be given
personally or by mail in a postage prepaid envelope, not less
than ten or more than sixty days before the date of such meeting,
to each stockholder entitled to vote at such meeting, and, if
mailed, it shall be directed to such stockholder at his address
as it appears on the record of stockholders, unless he shall have
filed with the Secretary of the Corporation a written request
that notices to him be mailed to some other address. Any such
notice for any meeting other than the annual meeting shall
indicate that it is being issued at the direction of the Board.
Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in person
or by proxy and shall not, prior to the conclusion of such
meeting, protest the lack of notice thereof, or who shall, either
before or after the meeting, submit a signed waiver of notice, in
person or by proxy. Unless the Board shall fix a new record date
for an adjourned meeting, notice of such adjourned meeting need
not be given if the time and place to which the meeting shall be
adjourned were announced at the meeting at which the adjournment
is taken.
SECTION 4. Quorum. At all meetings of the stock-
------
holders the holders of the majority of the shares of Common Stock
of the Corporation, issued and outstanding and entitled to vote,
shall be present in person or by proxy to constitute a quorum for
the transaction of business. In the absence of a quorum, the
holders of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote may adjourn the meeting
from time to time. At any such adjourned meeting at which a
quorum may be present any business may be transacted which might
have been transacted at the meeting as originally called.
SECTION 5. Adjournments. When a meeting is adjourned
------------
to another date, hour or place, notice need not be given of the
adjourned meeting if the date, hour and place thereof are
announced at the meeting at which the adjournment is taken. If
the adjournment is for more than 30 calendar days, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
At the adjourned meeting any business may be transacted which
might have been transacted at the original meeting.
When any meeting is convened the presiding officer, if
directed by the Board, may adjourn the meeting if (a) no quorum
is present for the transaction of business, or (b) the Board
determines that adjournment is necessary or appropriate to enable
the stockholders (i) to consider fully information which the
Board determines has not been made sufficiently or timely
available to stockholders or (ii) otherwise to exercise
effectively their voting rights.
SECTION 6. Organization. At each meeting of the
------------
stockholders, the Chairman of the Board or in his absence the
President or any Vice President of the Corporation, shall act as
chairman of the meeting or, if no one of the foregoing officers
is present, a chairman shall be chosen at the meeting by the
stockholders. The Secretary, or in his absence or inability to
act, the person whom the chairman of the meeting shall appoint
secretary of the meeting, shall act as secretary of the meeting
and keep the minutes thereof.
SECTION 7. Order of Business. The order of business
-----------------
at all meetings of the stockholders shall be as determined by the
chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by
------
statute or the Restated Certificate of Incorporation, each holder
of record of shares of stock of the Corporation having voting
power shall be entitled at each meeting of the stockholders to
one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of
Section 5 of Article IV of these By-Laws as the record date
for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting; or
(b) if such record date shall not have been so fixed,
then at the close of business on the day next preceding the
day on which notice thereof shall be given.
Each stockholder entitled to vote at any meeting of stockholders
may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. Any such
proxy shall be delivered to the secretary of such meeting at or
prior to the time designated in the order of business for so
delivering such proxies. Except as otherwise required by statute
or by the Restated Certificate of Incorporation, any corporate
action to be taken by vote of the stockholders shall require the
vote of a majority of the votes cast at a meeting of the holders
of the Common Stock of the Corporation entitled to vote thereon.
Unless required by statute, or determined by the chairman of the
meeting to be advisable, the vote on any question need not be by
ballot. On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 9. List of Stockholders. A list of
--------------------
stockholders as of the record date, certified by the Secretary of
the Corporation or by the transfer agent for the Corporation,
shall be produced at any meeting of the Stockholders upon the
request of any stockholder made at or prior to such meeting.
SECTION 10. Inspectors. The Board may, in advance of
----------
any meeting of stockholders, appoint one or more inspectors to
act at such meeting or any adjournment thereof. If the
inspectors shall not be so appointed or if any of them shall fail
to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality
and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be
stockholders.
SECTION 11. Advance Notice of Business to be
--------------------------------
Transacted at Stockholder Meetings. No business may be
----------------------------------
transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board (or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction
of the Board (or any duly authorized committee thereof) or (c)
otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this
Section 11 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who
complies with the notice procedures set forth in this Section 11.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
--------
however, that (i) in the event that the annual meeting is called
-------
for a date that is not within 30 days before or after such
anniversary date, or (ii) in the case of the annual meeting of
stockholders held during the fiscal year of the Corporation
beginning February 1, 1997, notice by the stockholder in order to
be timely must be so received not later than the close of
business on the tenth day following the day on which such notice
of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth as to each matter such stockholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (b) the name and record address of such
stockholder, (c) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or
of record by such stockholder, (d) a description of all
arrangements or understandings between such stockholder and any
other person or persons (including their names) in connection
with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (e) a
representation that such stockholder intends to appear in person
or by proxy at the annual meeting to bring such business before
the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 11,
provided, however, that, once business has been properly brought
-------- -------
before the annual meeting in accordance with such procedures,
nothing in this Section 11 shall be deemed to preclude discussion
by any stockholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE II
Board of Directors
------------------
SECTION 1. General Powers. The business and affairs
--------------
of the Corporation shall be managed under the direction of the
Board. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not
by statute or the Restated Certificate of Incorporation directed
or required to be exercised or done by the stockholders.
SECTION 2. Number, Increase or Decrease Thereto and
----------------------------------------
Term of Office. The Board of Directors shall consist of five (5)
--------------
directors. By vote of a majority of the entire Board, the number
of directors may be increased to not more than ten or reduced to
not less than three. Vacancies occurring by reason of any such
increase shall be filled in accordance with Section 13 of this
Article II. Any such reduction shall not affect the term of
office of any director. Each director shall hold office until
the later of the annual meeting of stockholders of the
Corporation next succeeding his election or until his successor
is duly elected and qualified. Directors need not be
stockholders.
SECTION 3. Nomination of Directors and Advance Notice
------------------------------------------
Thereof. Only persons who are nominated in accordance with the
-------
following procedures shall be eligible for election as directors
of the Corporation, except as may be otherwise provided in the
Restated Certificate of Incorporation with respect to the right
of holders of preferred stock of the Corporation to nominate and
elect a specified number of directors in certain circumstances.
Nominations of persons for election to the Board of Directors may
be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing
directors, (a) by or at the direction of the Board (or any duly
authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 3 and on the
record date for the determination of stockholders entitled to
vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 3.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must
have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation (a) in the case of an annual
meeting, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that (i) in the event that the
-------- -------
annual meeting is called for a date that is not within 30 days
before or after such anniversary date, or (ii) in the case of the
annual meeting of stockholders held during the fiscal year of the
Corporation beginning February 1, 1997, notice by the stockholder
in order to be timely must be so received not later than the
close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made,
whichever first occurs; and (b) in the case of a special meeting
of stockholders called for the purpose of electing directors, not
later than the close of business on the tenth day following the
day on which notice of the date of the special meeting was mailed
or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth (a) as to each person whom the
stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of
record by the person and (iv) any other information relating to
the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class
or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee
and any other person or persons (including their names) pursuant
to which the nomination(s) are to be made by such stockholder,
(iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named
in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated hereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the
procedures set forth in this Section 3. If the Chairman of the
meeting determines that a nomination was not made in accordance
with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective
nomination shall be disregarded.
SECTION 4. Place of Meeting. Meetings of the Board
----------------
shall be held at the principal office of the Corporation in the
State of Delaware or at such other place, within or without such
state, as the Board may from time to time determine or as shall
be specified in the notice of any such meeting.
SECTION 5. Annual Meeting. The Board shall meet for
--------------
the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each
annual meeting of the stockholders, on the same day and at the
same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any
other time or place (within or without the State of Delaware)
which shall be specified in a notice thereof given as hereinafter
provided in Section 8 of this Article II.
SECTION 6. Regular Meeting. Regular meetings of the
---------------
Board shall be held at such time as the Board may fix. If any
day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same
hour on the next succeeding business day. Notice of regular
meetings of the Board need not be given except as otherwise
required by statute or these By-Laws.
SECTION 7. Special Meetings. Special meetings of the
----------------
Board may be called by the President or by a majority of the
entire Board.
SECTION 8. Notice of Meetings. Notice of each
------------------
special meeting of the Board (and of each regular meeting
for which notice shall be required) shall be given by the
Secretary as hereinafter provided in this Section 8, in which
notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice
need not state the purposes of such meeting. Notice of each
such meeting shall be mailed, postage prepaid, to each director,
addressed to him at his residence or usual place of business,
by first-class mail, at least two days before the day on which
such meeting is to be held, or shall be sent addressed to him
at such place by facsimile telegraph, telex, cable or wireless,
or be delivered to him personally or by telephone, at least
24 hours before the time at which such meeting is to be held.
A written waiver of notice, signed by the director entitled to
notice, whether before or after the time stated therein shall
be deemed equivalent to notice. Notice of any such meeting need
not be given to any director who shall, either before or after
the meeting, submit a signed waiver of notice or who shall
attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him.
SECTION 9. Quorum and Manner of Acting. Except as
---------------------------
hereinafter provided, a majority of the entire Board shall be
present in person or by means of a conference telephone or
similar communications equipment which allows all persons
participating in the meeting to hear each other at the same time
at any meeting of the Board in order to constitute a quorum for
the transaction of business at such meeting; and, except as
otherwise required by statute or the Restated Certificate of
Incorporation, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the
Board. In the absence of a quorum at any meeting of the Board, a
majority of the directors present thereat may adjourn such
meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless such
time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and
the individual directors shall have no power as such.
SECTION 10. Action Without a Meeting. Any action
------------------------
required or permitted to be taken by the Board at a meeting may
be taken without a meeting if all members of the Board consent in
writing to the adoption of the resolutions authorizing such
action. The resolutions and written consents thereto shall be
filed with the minutes of the Board.
SECTION 11. Telephonic Participation. One or more
------------------------
members of the Board may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 12. Organization. At each meeting of the
------------
Board, the President or, in his absence, another director chosen
by a majority of the directors present shall act as chairman of
the meeting and preside thereat. The Secretary (or, in his
absence, any person who shall be an Assistant Secretary, if any
of them shall be present at such meeting appointed by the
chairman) shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 13. Resignations. Any director of the
------------
Corporation may resign at any time by giving written notice of
his resignation to the Board or the President or the Secretary.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt, and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. The vacancy in the
Board of Directors caused by any such resignation shall be filled
by the affirmative vote of the stockholders of the Corporation.
SECTION 14. Vacancies. Vacancies and newly created
---------
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director. If there are no directors in office, then a
special meeting of stockholders for the election of directors may
be called and held in the manner provided by statute.
SECTION 15. Removal of Directors. Any director may be
--------------------
removed, either with or without cause, at any time, by the
affirmative vote of the stockholders of the Corporation. The
vacancy in the Board of Directors caused by any such removal
shall be filled by the affirmative vote of the stockholders of
the Corporation.
SECTION 16. Compensation. The Board shall have
------------
authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity.
ARTICLE III
Executive and Other Committees
------------------------------
SECTION 1. Executive and Other Committees. The Board
------------------------------
may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of
two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent
provided in the resolution shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such
committee or committees, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any
such absent or disqualified member. Each committee shall keep
written minutes of its proceedings and shall report such minutes
to the Board when required. All such proceedings shall be
subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such
revision or alteration.
SECTION 2. General. A majority of any committee may
-------
determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. Notice of such meeting
shall be given to each member of the committee in the manner
provided for in Article II, Section 7. The Board shall have any
power at any time to fill vacancies in, to change the membership
of, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board.
SECTION 3. Action Without a Meeting. Any action
------------------------
required or permitted to be taken by any committee at a meeting
may be taken without a meeting if all of the members of the
committee consent in writing to the adoption of the resolutions
authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.
SECTION 4. Telephone Participation. One or more
-----------------------
members of a committee may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV
Officers
--------
SECTION 1. Number of Qualifications. The officers of
------------------------
the Corporation shall include the Chief Executive Officer, the
President, one or more Vice Presidents, the Chief Financial
Officer, the Treasurer and the Secretary. Any two or more
offices may be held by the same person; except the offices of
President and Secretary; provided that when all of the issued and
outstanding stock of the Corporation is held by one person, such
person may hold all or any combination of offices. Such officers
shall be elected from time to time by the Board, each to hold
office until the meeting of the Board following the next annual
meeting of the stockholders, or until his successor shall have
been duly elected and shall have qualified or until his death, or
until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws. The Board may from time
to time elect, or delegate to the Chief Executive Officer or the
President the power to appoint, such other officers (including
one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents, as may be necessary or desirable
for the business of the Corporation. Such other officers and
agents shall have such duties and shall hold their offices for
such terms as may be prescribed by the Board or by the appointing
authority.
SECTION 2. Resignations. Any officer of the
------------
Corporation may resign at any time by giving written notice of
his resignation to the Board, the President or the Secretary.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3. Removal. Any officer or agent of the
-------
Corporation may be removed, either with or without cause, at any
time, by the Board at any meeting of the Board or, except in the
case of an officer or agent elected or appointed by the Board, by
the President.
SECTION 4. Vacancies. A vacancy in any office,
---------
whether arising from death, resignation, removal or any other
cause, may be filled for the unexpired portion of the term of the
office which shall be vacant, in the manner prescribed in these
By-Laws for the regular election or appointment to such office.
SECTION 5. The Chief Executive Officer. The Chief
---------------------------
Executive Officer of the Corporation shall have, together with
the President, general and active management of the business and
affairs of the Corporation and general and active supervision and
direction over the other officers, agents and employees and shall
see that their duties are properly performed, subject, however,
to control of the Board. He shall perform all duties incident to
the office of Chief Executive Officer and such other duties as
from time to time may be assigned to him by the Board or these
By-Laws.
SECTION 6. The President. The President shall be the
-------------
chief operating officer of the Corporation and shall have,
together with the Chief Executive Officer, general and active
management of the business and affairs of the Corporation and
general and active supervision and direction over the other
officers, agents and employees and shall see that their duties
are properly performed subject, however, to the control of the
Board. He shall perform all duties incident to the office of
President and such other duties as from time to time may be
assigned to him by the Board or these By-Laws.
SECTION 7. Vice Presidents and Chief Financial
-----------------------------------
Officer. Each Vice President, including any Executive Vice
-------
President, and the Chief Financial Officer shall perform all such
duties as from time to time may be assigned to each of them by
the Board.
SECTION 8. The Treasurer. The Treasurer shall
-------------
(a) have charge and custody of, and be
responsible for, all the funds and securities of the
Corporation;
(b) keep full and accurate accounts of receipts
and disbursements in books belonging to the
Corporation;
(c) deposit all monies and other valuables to the
credit of the Corporation in such depositaries as may
be designated by the Board;
(d) receive, and give receipts for, monies due
and payable to the Corporation from any source
whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or
authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident
to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board
or the President.
SECTION 9. The Secretary. The Secretary shall
-------------
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings
of the Board, the committees of the Board and the
stockholders;
(b) see that all notices are duly given in
accordance with the provisions of these By-Laws and as
required by law;
(c) be the custodian of the records and the seal
of the Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal
of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed
on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required
by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident
to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board
or the President.
SECTION 10. Officers' Bonds or Other Security. If
---------------------------------
required by the Board, any officer of the Corporation shall give
a bond or other security for the faithful performance of his
duties, in such amount and with such surety or sureties as the
Board may require.
SECTION 11. Compensation. The compensation of the
------------
officers of the Corporation for their services as such officers
shall be fixed from time to time by the Board; provided, however,
that the Board may delegate to the Chief Executive Officer and
the President the power to fix the compensation of officers and
agents appointed by each of them. An officer of the Corporation
shall not be prevented from receiving compensation by reason of
the fact that he is also a director of the Corporation, but any
such officer who shall also be a director (except in the event
that there is only one director of the Corporation) shall not
have any vote in the determination of the amount of compensation
paid to him.
ARTICLE V
Shares, Etc.
------------
SECTION 1. Stock Certificates. Each owner of stock of
------------------
the Corporation shall be entitled to have a certificate, in such
form as shall be approved by the Board, certifying the number of
shares of stock of the Corporation owned by him. The
certificates representing shares of stock shall be signed in the
name of the Corporation by the President or a Vice President and
by the Secretary, Treasurer or an Assistant Secretary and sealed
with the seal of the Corporation (which seal may be a facsimile,
engraved or printed). In case any officer who shall have signed
such certificates shall have ceased to be such officer before
such certificates shall be issued, they may nevertheless be
issued by the Corporation with the same effect as if such officer
were still in office at the date of their issue.
SECTION 2. Books of Account and Record of
------------------------------
Stockholders. There shall be kept correct and complete books and
------------
records of account of all the business and transactions of the
Corporation. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares
-------------------
of stock of the Corporation shall be made on the stock records of
the Corporation only upon authorization by the registered holder
thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the
certificate or certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. The person in whose name shares of
stock shall stand on the record of stockholders of the
Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation. Whenever any transfers of shares shall
be made for collateral security and not absolutely and written
notice thereof shall be given to the Secretary or to such
transfer agent or transfer clerk, such fact shall be stated in
the entry of the transfer.
SECTION 4. Regulations. The Board may make such
-----------
additional rules and regulations, not inconsistent with these
By-Laws, as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of stock of the
Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. Fixing of Record Date. The Board may fix,
---------------------
in advance, a date not more than sixty nor less than ten days
before the date then fixed for the holding of any meeting of the
stockholders as the time as of which the stockholders entitled to
notice of and to vote at such meeting, shall be determined, and
all persons who were stockholders of record of capital stock
entitled to vote at such time, and no others, shall be entitled
to notice of and to vote at such meeting. The Board may fix, in
advance, a date not more than sixty nor less than ten days
preceding the date fixed for the payment of any dividend or the
making of any distribution or the allotment of rights to
subscribe for securities of the Corporation, or for the delivery
of evidence of rights or evidences of interest arising out of any
change, conversion or exchange of capital stock or other
securities, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution,
allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or
interests.
SECTION 6. Lost, Destroyed or Mutilated Certificate.
----------------------------------------
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of such certificate, and the
Corporation may issue a new certificate of stock in the place of
any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have
been mutilated, and the Board may, in its discretion, require
such owner or his legal representative to give to the Corporation
a bond in such sum, limited or unlimited, and in such form and
with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged
loss or destruction of any such certificate, or the issuance of
such new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
ARTICLE VI
Contracts, Checks, Drafts, Bank Accounts, Etc.
----------------------------------------------
SECTION 1. Execution of Contracts. Except as
----------------------
otherwise required by statute, the Restated Certificate of
Incorporation or these By-Laws, any contract or other instrument
may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant
officer) of the Corporation as the Board may from time to time
direct. Such authority may be general or confined to specific
instances as the Board may determine. Unless authorized by the
Board or expressly permitted by these By-Laws, no officer or
agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
or to render it pecuniarily liable for any purpose or to any
amount.
SECTION 2. Loans. Unless the Board shall otherwise
-----
determine, the Chief Executive Officer, the President or any
Vice-President may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or
from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or
other certificates or evidences of indebtedness of the
Corporation, but no officer or officers shall mortgage, pledge,
hypothecate or transfer any securities or other property of the
Corporation other than in connection with the purchase of
chattels for use in the Corporation's operations, except when
authorized by the Board.
SECTION 3. Checks, Drafts, Etc. All checks, drafts,
--------------------
bills of exchange or other orders for the payment of money out of
the funds of the Corporation, and all notes or other evidence of
indebtedness of the Corporation, shall be signed in the name and
on behalf of the Corporation by such persons and in such manner
as shall from time to time be authorized by the Board.
SECTION 4. Deposits. All funds of the Corporation not
--------
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositaries as the Board may from time to time designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks,
drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned
and delivered by any officer or agent of the Corporation.
SECTION 5. General and Special Bank Accounts. The
---------------------------------
Board may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust
companies or other depositaries as the Board may designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. The Board may make such special rules
and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-Laws, as it may deem
expedient.
ARTICLE VII
Offices
-------
SECTION 1. Registered Office. The registered office
-----------------
of the Corporation shall be as specified in the Restated
Certificate of Incorporation.
SECTION 2. Other Offices. The Corporation may also
-------------
have such offices, both within or without the State of Delaware,
as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall be so
determined by the Board of Directors.
ARTICLE IX
Seal
----
The seal of the Corporation shall be circular in form,
shall bear the name of the Corporation and shall include the
words and numbers "Corporate Seal", "Delaware" and the year of
incorporation.
ARTICLE X
Indemnification
---------------
Any person made or threatened to be made a party to or
involved in any action, suit or proceeding, whether civil or
criminal, administrative or investigative (hereinafter,
"proceeding") by reason of the fact that he, his testator or
intestate, is or was a director, officer or employee of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against all
expense, loss and liability (including, without limitation,
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees), actually and necessarily
incurred or suffered by him in connection with the defense of or
as a result of such proceeding, or in connection with any appeal
therein. The Corporation shall have the power to purchase and
maintain insurance for the indemnification of such directors,
officers and employees to the full extent permitted under the
laws of the State of Delaware from time to time in effect. Such
right of indemnification shall not be deemed exclusive of any
other rights of indemnification to which such director, officer
or employee may be entitled.
The right to indemnification conferred in this By-Law
shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
--------
however, that if the General Corporation Law of the State of
-------
Delaware requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which services were or
are rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall
be made only upon delivery to the Corporation of an undertaking
by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
By-Law or otherwise.
ARTICLE XI
Amendments
----------
These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted, either by the
Board or by the stockholders of the Corporation upon the
affirmative vote of the holders of at least 66-2/3% of the
outstanding capital stock entitled to vote thereon.
Exhibit 10.1
GRAND COURT LIFESTYLES, INC.
1996 STOCK OPTION AND PERFORMANCE AWARD PLAN
-----------
EFFECTIVE AS OF JUNE 12, 1996
<PAGE>
GRAND COURT LIFESTYLES, INC.
1996 STOCK OPTION AND PERFORMANCE AWARD PLAN
INTRODUCTION
Grand Court Lifestyles, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), hereby
establishes an incentive compensation plan to be known as the
"Grand Court Lifestyles, Inc. 1996 Stock Option and Performance
Award Plan" (hereinafter referred to as the "Plan"), as set forth
in this document. The Plan permits the grant of Non-Qualified
Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Units and Performance
Shares.
The Plan shall become effective as of June 12, 1996.
However, it shall be rendered null and void and have no effect,
and all Plan Awards granted hereunder shall be canceled, if the
Plan is not approved by a majority vote of the Corporation's
stockholders within twelve (12) months of such date.
The purpose of the Plan is to promote the success and
enhance the value of the Corporation by linking the personal
interests of Participants to those of the Corporation's
stockholders, customers and employees, by providing Participants
with an incentive for outstanding performance. The Plan is
further intended to provide flexibility to the Corporation in its
ability to motivate, and retain the services of, Participants
upon whose judgment, interest and special effort the successful
conduct of its operations is largely dependent.
The Plan also provides pay systems that support the
Corporation's business strategy and emphasizes pay-for-
performance by tying reward opportunities to carefully determined
and articulated performance goals at corporate, operating unit,
business unit and/or individual levels.
DEFINITIONS
For purposes of this Plan, the following terms shall be
defined as follows unless the context clearly indicates
otherwise:
(a) "Code" shall mean the Internal Revenue Code of
----
1986, as amended, and the rules and regulations thereunder.
(b) "Committee" shall mean the Compensation Committee
---------
of the Board of Directors of the Corporation.
(c) "Common Stock" shall mean the common stock, par
------------
value $0.01 per share, of the Corporation.
(d) "Corporation" shall mean Grand Court Lifestyles,
-----------
Inc., a Delaware corporation.
(e) "Disability" shall have the same meaning as the
----------
term "permanent and total disability" under Section 22(e)(3) of
the Code.
(f) "Exchange Act" shall mean the Securities Exchange
------------
Act of 1934, as amended, and the rules and regulations
thereunder.
(g) "Fair Market Value" of the Corporation's Common
-----------------
Stock on a Trading Day shall mean the last reported sale price
for Common Stock or, in case no such reported sale takes place on
such Trading Day, the average of the closing bid and asked prices
for the Common Stock for such Trading Day, in either case on the
principal national securities exchange on which the Common Stock
is listed or admitted to trading, or if the Common Stock is not
listed or admitted to trading on any national securities
exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, if no sale is publicly
reported, the average of the closing bid and asked quotations for
the Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or any
comparable system or, if the Common Stock is not listed on NASDAQ
or a comparable system, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the
closing bid and asked prices, as furnished by two members of the
National Association of Securities Dealers, Inc. who make a
market in the Common Stock selected from time to time by the
Corporation for that purpose. In addition, for purposes of this
definition, a "Trading Day" shall mean, if the Common Stock is
listed on any national securities exchange, a business day during
which such exchange was open for trading and at least one trade
of Common Stock was effected on such exchange on such business
day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market,
a business day during which the over-the-counter market was open
for trading and at least one "eligible dealer" quoted both a bid
and asked price for the Common Stock. An "eligible dealer" for
any day shall include any broker-dealer who quoted both a bid and
asked price for such day, but shall not include any broker-dealer
who quoted only a bid or only an asked price for such day. In
the event the Corporation's Common Stock is not publicly traded,
the Fair Market Value of such Common Stock shall be determined by
the Committee in good faith.
(h) "Freestanding SAR" shall mean an SAR that is
----------------
granted independently of any Option.
(i) "Good Cause" shall mean (i) a Participant's
----------
willful or gross misconduct or willful or gross negligence in the
performance of his duties for the Corporation or for any Parent
or Subsidiary after prior written notice of such misconduct or
negligence and the continuance thereof for a period of 30 days
after receipt by such Participant of such notice, (ii) a
Participant's intentional or habitual neglect of his duties for
the Corporation or for any Parent or Subsidiary after prior
written notice of such neglect, or (iii) a Participant's theft or
misappropriation of funds of the Corporation or of any Parent or
Subsidiary or commission of a felony.
(j) "Incentive Stock Option" shall mean a stock option
----------------------
satisfying the requirements for tax-favored treatment under
Section 422 of the Code.
(k) "Non-Qualified Option" shall mean a stock option
--------------------
which does not satisfy the requirements for, or which is not
intended to be eligible for, tax-favored treatment under Section
422 of the Code.
(l) "Option" shall mean an Incentive Stock Option or a
------
Non-Qualified Stock Option granted pursuant to the provisions of
Section V hereof.
(m) "Optionee" shall mean a Participant who is
--------
granted an Option under the terms of this Plan.
(n) "Parent" shall mean a parent corporation of the
------
Corporation within the meaning of Section 424(e) of the Code.
(o) "Participant" shall mean any employee
-----------
participating under the Plan.
(p) "Performance Share" shall mean a Plan Award
-----------------
granted pursuant to the provisions of Section VII hereof, with
each such Award being denominated in terms of one share of Common
Stock and nominally being based upon the performance of the
Corporation's Common Stock, or any other factor as determined by
the Committee.
(q) "Performance Unit" shall mean a Plan Award granted
----------------
pursuant to the provisions of Section VII hereof, which Award may
be based upon any performance factor established by the
Committee, as set forth under such Section.
(r) "Plan Award" shall mean an Option, Performance
----------
Share, Performance Unit Stock Appreciation Right or share of
Restricted Stock granted pursuant to the terms of this Plan.
(s) "Restricted Stock" shall mean a grant of one or
----------------
more shares of Common Stock subject to certain restrictions as
provided under Section VII hereof.
(t) "Section 16" shall mean Section 16 of the Exchange
----------
Act and the rules and regulations promulgated thereunder.
(u) "Securities Act" shall mean the Securities Act of
--------------
1933, as amended, and the rules and regulations thereunder.
(v) "Stock Appreciation Right" or "SAR" shall mean a
------------------------ ---
right, granted alone or in connection with a related Option,
designated as a SAR, to receive a payment on the day the right is
exercised, pursuant to the terms of Section VI hereof. Each SAR
shall be denominated in terms of one share of Common Stock.
(w) "Subsidiary" shall mean a subsidiary corporation
----------
of the Corporation within the meaning of Section 424(f) of the
Code.
(x) "Tandem SAR" shall mean an SAR that is granted in
----------
connection with a related Option, the exercise of which shall
require forfeiture of the right to purchase a share of Common
Stock under the related Option (and when a share of Common Stock
is purchased under such Option, the Tandem SAR being similarly
canceled).
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which
shall be composed of at least two directors who meet the
requirements of disinterested administration under Section 16
(but only to the extent disinterested administration is required
under Rule 16b-3). Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations,
provisions, proceedings and conditions of awards which, in its
opinion, may be advisable in the administration of the Plan. A
majority of the Committee shall constitute a quorum, and, subject
to the provisions of Section IV of the Plan, the acts of a
majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the
Committee, shall be the acts of the Committee as a whole. The
references to Section 16 contained herein are intended to apply
only to the extent necessary for the Plan to comply with Rule
16b-3 under Section 16 and only as to those insiders of the
Corporation who are deemed to be Section 16 insiders.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section X of the
Plan, the aggregate number of shares of the Common Stock which
may be granted for all purposes under the Plan shall be one
million two hundred fifty thousand (1,250,000) shares. Shares of
Common Stock underlying awards of securities (derivative or not)
and shares of Common Stock awarded hereunder (whether or not on a
restricted basis) shall be counted against the limitation set
forth in the immediately preceding sentence and may be reused
(e.g., in the event that an Option or an award of shares of
----
Common Stock on a restricted basis under the Plan to any
individual expires, is terminated unexercised, or is forfeited as
to any shares covered thereby), however, with respect to Plan
Awards made to Section 16 insiders, shares of Common Stock may be
reused to the extent not prohibited under Section 16. To the
extent that a Stock Appreciation Right related to an Option is
exercised, such Option shall be deemed to have been exercised.
Incentive and Non-Qualified Stock Options, Stock Appreciation
Rights, Performance Shares, Restricted Stock and Performance
Units awarded under the Plan may be fulfilled in accordance with
the terms of the Plan with cash, authorized and unissued shares
of the Common Stock, issued shares of such Common Stock held in
the Corporation's treasury or shares of Common Stock acquired on
the open market.
SECTION III
ELIGIBILITY
Present and future officers and key employees
(including officers or key employees who are also directors) of
the Corporation, or of any Parent or Subsidiary, who are
regularly employed on a salaried basis as common law employees
shall be eligible to participate in the Plan.
SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the
direction of, the Committee, which shall administer the Plan so
as to comply at all times with the Exchange Act, to the extent
such compliance is required, and, subject to the Code, shall
otherwise have plenary authority to interpret the Plan and to
make all determinations specified in or permitted by the Plan or
deemed necessary or desirable for its administration or for the
conduct of the Committee's business. Subject to the provisions
of Section XIII hereof, all interpretations and determinations of
the Committee may be made on an individual or group basis and
shall be final, conclusive, and binding on all interested
parties. Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine
the persons to whom Plan Awards shall be granted, the times when
such Plan Awards shall be granted, the number of Plan Awards, the
purchase price or exercise price of each Plan Award, the
period(s) during which such Plan Award shall be exercisable
(whether in whole or in part), the restrictions to be applicable
to Plan Awards and the other terms and provisions thereof (which
need not be identical). In addition, the authority of the
Committee shall include, without limitation, the following:
(a) Financing. The arrangement of temporary financing
---------
for an Optionee by registered broker-dealers, under the rules and
regulations of the Federal Reserve Board, for the purpose of
assisting the Optionee in the exercise of an Option, such
authority to include the payment by the Corporation of the
commissions of the broker-dealer;
(b) Procedures for Exercise of Option. The
---------------------------------
establishment of procedures for an Optionee (i) to exercise an
Option by payment of cash or any other property acceptable to the
Committee, (ii) to have withheld from the total number of shares
of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together
with such cash as shall be paid in respect of fractional shares,
shall equal the Option exercise price of the total number of
shares of Common Stock to be acquired, (iii) to exercise all or a
portion of an Option by delivering that number of shares of
Common Stock already owned by him having a Fair Market Value
which shall equal the Option exercise price for the portion
exercised and, in cases where an Option is not exercised in its
entirety, and subject to the requirements of the Code, to permit
the Optionee to deliver the shares of Common Stock thus acquired
by him in payment of shares of Common Stock to be received
pursuant to the exercise of additional portions of such Option,
the effect of which shall be that an Optionee can in sequence
utilize such newly acquired shares of Common Stock in payment of
the exercise price of the entire Option, together with such cash
as shall be paid in respect of fractional shares and (iv) to
engage in any form of "cashless" exercise.
(c) Withholding. The establishment of a procedure
-----------
whereby a number of shares of Common Stock or other securities
may be withheld from the total number of shares of Common Stock
or other securities to be issued upon exercise of an Option,
Stock Appreciation Right or other grant or award, as applicable,
or for the tender of shares of Common Stock owned by the
Participant to meet the obligation of withholding for taxes
incurred by the Optionee upon such exercise.
(d) Types of Plan Awards. The Committee may grant
--------------------
awards in the form of one or more of the following: (i) Incentive
Stock Options and Non-Qualified Stock Options (described in
Section V), (ii) Stock Appreciation Rights (described in Section
VI), (iii) grants of Restricted Stock (described in Section VII),
(iv) Performance Share Awards (described in Section VII) and (v)
Performance Units (described in Section VII).
SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its
discretion, to grant Incentive Stock Options or to grant
Non-Qualified Stock Options or to grant both types of Options.
No Option shall be granted for a term of more than ten (10)
years. Notwithstanding anything contained herein to the
contrary, an Incentive Stock Option may be granted only to common
law employees of the Corporation or of any Parent or Subsidiary
now existing or hereafter formed or acquired, and not to any
director or officer who is not also such a common law employee.
The terms and conditions of the Options shall be determined from
time to time by the Committee; provided, however, that the
-------- -------
Options granted under the Plan shall be subject to the following:
(a) Exercise Price. The Committee shall establish the
--------------
exercise price at the time any Option is granted at such amount
as the Committee shall determine; provided, however, that the
-------- -------
exercise price for each share of Common Stock purchasable under
any Incentive Stock Option granted hereunder shall be such amount
as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock at the date the Option is granted; and
provided, further, that in the case of an Incentive Stock Option
granted to a person who, at the time such Incentive Stock Option
is granted, owns shares of stock of the Corporation or of any
Parent or Subsidiary which possess more than ten percent (10%) of
the total combined voting power of all classes of shares of stock
of the Corporation or of any Parent or Subsidiary, the exercise
price for each share of Common Stock shall be such amount as the
Committee, in its best judgment, shall determine to be not less
than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The
exercise price will be subject to adjustment in accordance with
the provisions of Section IX of the Plan.
(b) Payment of Exercise Price. The price per share of
-------------------------
Common Stock with respect to each Option shall be payable at the
time the Option is exercised. Such price shall be payable in
cash or, upon the discretion of the Committee, pursuant to any of
the methods set forth in Sections IV(a) or (b) hereof. Shares of
Common Stock delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the
Common Stock on the date preceding the date of the exercise of
the Option.
(c) Exercisability of Options. Each Option shall be
-------------------------
exercisable in whole or in installments, and at such time(s), and
subject to the fulfillment of any conditions on exercisability as
may be determined by the Committee at the time of the grant of
such Options. The right to purchase shares of Common Stock shall
be cumulative so that when the right to purchase any shares of
Common Stock has accrued such shares of Common Stock or any part
thereof may be purchased at any time thereafter until the
expiration or termination of the Option.
(d) Expiration of Options. No Option by its terms
---------------------
shall be exercisable after the expiration of ten (10) years from
the date of grant of the Option; provided, however, in the case
-------- -------
of an Incentive Stock Option granted to a person who, at the time
such Option is granted, owns shares of stock of the Corporation
or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares
of stock of the Corporation or of any Parent or Subsidiary, such
Option shall not be exercisable after the expiration of five (5)
years from the date such Option is granted.
(e) Exercise Upon Death of Optionee. In the event of
-------------------------------
the death of the Optionee prior to his termination of employment
with the Corporation or with any Parent or Subsidiary, any
nonvested Options granted to such Optionee shall vest immediately
and his estate (or other beneficiary, if so designated in writing
by the Participant) shall have the right, until the expiration
date of the Option(s), to exercise his Option(s) with respect to
all or any part of the shares of Common Stock as to which the
deceased Optionee had not exercised his Option(s) at the time of
his death, regardless of whether such Option or Options were
fully exercisable at such time.
(f) Exercise Upon Disability of Optionee. If the
------------------------------------
employment by the Corporation or by any Parent or Subsidiary of
an Optionee is terminated because of such Optionee's Disability,
any nonvested Options granted to such Optionee shall vest
immediately and he shall have the right, within one (1) year
after the date of such termination in the case of an Incentive
Stock Option (but in no case after the expiration of the
Option(s)), and until the expiration date of the Option(s) in the
case of a Non-Qualified Stock Option, to exercise his Option(s)
with respect to all or any part of the shares of Common Stock as
to which he had not exercised his Option(s) at the time of such
termination, regardless of whether such Option or Options were
fully exercisable at such time.
(g) Exercise Upon Optionee's Other Termination of
---------------------------------------------
Employment. Except as provided in the following sentence, if the
----------
employment of an Optionee by the Corporation or by any Parent or
Subsidiary is terminated for any reason other than those
specified in Sections V(e) or (f), above, he shall have the
right, within three (3) months after the date of such termination
in the case of an Incentive Stock Option (but in no case after
the expiration date of the Option(s)), and until the expiration
date of the Option in the case of a Non-Qualified Stock Option,
to exercise his Option(s) only with respect to that number of
shares of Common Stock that he was entitled to purchase pursuant
to Option(s) that were exercisable immediately prior to such
termination. Notwithstanding the provisions of the immediately
preceding sentence, (i) if an Optionee's employment is terminated
by the Corporation or by any Parent or Subsidiary for Good Cause
or (ii) if an Optionee voluntarily terminates his employment with
the Corporation or with any Parent or Subsidiary without the
written consent of the Committee, then the Optionee shall, at the
time of such termination of employment, forfeit his rights to
exercise any and all of such Option(s).
(h) Maximum Amount of Incentive Stock Options. Each
-----------------------------------------
Plan Award under which Incentive Stock Options are granted shall
provide that to the extent the aggregate of the (i) Fair Market
Value of the shares of Common Stock (determined as of the time of
the grant of the Option) subject to such Incentive Stock Option
and (ii) the fair market values (determined as of the date(s) of
grant of the option(s) of all other shares of Common Stock
subject to incentive stock options granted to an Optionee by the
Corporation or any Parent or Subsidiary, which are exercisable
for the first time by any person during any calendar year,
exceed(s) one hundred thousand dollars ($100,000), such excess
shares of Common Stock shall not be deemed to be purchased
pursuant to Incentive Stock Options. The terms of the
immediately preceding sentence shall be applied by taking all
options, whether or not granted under this Plan, into account in
the order in which they are granted.
SECTION VI
STOCK APPRECIATION RIGHTS
(a) Tandem Stock Appreciation Rights. The Committee
--------------------------------
shall have the authority to grant Stock Appreciation Rights in
tandem with an Option, either at the time of grant of the Option
or by amendment. Each such Stock Appreciation Right shall be
subject to the same terms and conditions as the related Option,
if any, and shall be exercisable only at such times and to such
extent as the related Option is exercisable; provided, however,
-------- -------
that a Stock Appreciation Right may be exercised only when the
Fair Market Value of the Common Stock exceeds the exercise price
of the related Option. A Stock Appreciation Right shall entitle
the Optionee to surrender to the Corporation unexercised the
related Option, or any portion thereof, and to receive from the
Corporation in exchange therefor cash (as provided below) or that
number of shares of Common Stock having an aggregate value equal
to the excess of the Fair Market Value of one share of the Common
Stock of the Corporation on the day preceding the surrender of
such Option over the exercise price per share of Common Stock
multiplied by the number of shares of Common Stock provided for
under the Option, or portion thereof, which is surrendered;
provided, however, that no fractional shares shall be issued of
-------- -------
Common Stock (cash being delivered to the Participant in lieu of
such fractional shares). The number of shares of Common Stock
which may be received pursuant to the exercise of a Stock
Appreciation Right may not exceed the number of shares of Common
Stock provided for under the Option, or portion thereof, which is
surrendered. The Committee shall have the right, in its sole
discretion, to approve an election by a Participant to receive
cash in whole or in part in settlement of the Stock Appreciation
Right. Within thirty (30) days following the receipt by the
Committee of a request to receive cash in whole or in part in
settlement of a Stock Appreciation Right, the Committee shall, in
its sole discretion, either consent to or disapprove, in whole or
in part, such a request. A request to receive cash in whole or
in part in settlement of a Stock Appreciation Right may provide
that, in the event the Committee shall disapprove such request,
such request shall be deemed to be an exercise of such Stock
Appreciation Right for shares of Common Stock.
(b) Freestanding Stock Appreciation Rights. The
--------------------------------------
Committee also shall have the authority to grant Stock
Appreciation Rights unrelated to any Option that may be granted
hereunder. Each such Stock Appreciation Right shall be subject
to the terms and conditions as determined by the Committee.
Freestanding Stock Appreciation Rights shall entitle the Optionee
to surrender to the Corporation a portion or all of such rights
and to receive from the Corporation in exchange therefor cash (as
provided below) or that number of shares of Common Stock having
an aggregate value equal to the excess of the Fair Market Value
of one share of the Common Stock of the Corporation on the day
preceding the surrender of such Rights over the Fair Market Value
per share of Common Stock (determined as of the date the Stock
Appreciation Right was granted) multiplied by the number of Stock
Appreciation Rights which are surrendered; provided, however,
-------- -------
that no fractional shares of Common Stock shall be issued (cash
being delivered to the Participant in lieu of such fractional
shares). The Committee shall have the right, in its sole
discretion, to approve an election by a Participant to receive
cash in whole or in part in settlement of a Stock Appreciation
Right. Within thirty (30) days following the receipt by the
Committee of a request to receive cash in whole or in part in
settlement of a Stock Appreciation Right, the Committee shall, in
its sole discretion, either consent to or disapprove, in whole or
in part, such a request. A request to receive cash in whole or
in part in settlement of a Stock Appreciation Right may provide
that, in the event the Committee shall disapprove such request,
such request shall be deemed to be an exercise of such Stock
Appreciation Right for shares of Common Stock.
(c) Exercise of Stock Appreciation Rights. If the
-------------------------------------
Participant (i) voluntarily ceases to be an employee of the
Corporation, or of any Parent or Subsidiary, with the written
consent of the Committee, (ii) dies or becomes Disabled or (iii)
suffers an involuntary termination of his employment with the
Corporation or with any Parent or Subsidiary for reasons other
than Good Cause, the Plan Award earned under Section VI(b) with
respect to any outstanding Freestanding Stock Appreciation Rights
shall be determined as otherwise provided herein or in any
agreement executed by the Corporation and such Participant
hereunder. If the Participant ceases to be an employee of the
Corporation or of any Parent or Subsidiary for any other reason,
all Plan Awards granted under Section VI(b) shall be forfeited.
SECTION VII
PERFORMANCE SHARES, RESTRICTED STOCK AND PERFORMANCE UNITS
The Committee shall have the authority to grant
Performance Shares, Restricted Stock or Performance Units either
separately or in combination with other Plan Awards. The terms
and conditions of Performance Shares, Restricted Stock or
Performance Units shall be determined from time to time by the
Committee, without limitation, except as otherwise provided in
the Plan. Furthermore:
(a) Services Rendered. Each such Plan Award shall be
-----------------
granted for services rendered (or to be rendered) and at no
additional cost to the Participant, provided, however, that the
-------- -------
value of the services performed must, in the opinion of counsel
to the Corporation, equal or exceed the par value of such shares
of Common Stock to be granted to the Participant.
(b) Performance Account. The Corporation shall
-------------------
establish a performance account for each Participant to whom
Performance Shares or Performance Units are granted, and the
Performance Shares or Performance Units granted shall be credited
to such account. Shares of Common Stock granted in the form of
Restricted Stock shall be registered in the name of the
Participant and, together with a stock power endorsed in blank,
deposited with the Corporation at the time the account is
credited.
(c) Duration of Performance or Restriction Period.
---------------------------------------------
The duration of the performance or restriction period shall be
determined by the Committee at the time each such grant is made
and will be set forth under the Award Agreement. More than one
grant may be outstanding at any one time, and performance or
restriction periods may be of different lengths.
(d) Restricted Stock. With respect to Restricted
----------------
Stock, the Participant shall generally have the rights and
privileges of a stockholder of the Corporation as to such shares,
including the right to vote such Restricted Stock, except that
the following restrictions shall apply: (i) the Participant
shall not be entitled to delivery of a certificate until the
expiration or termination of the restriction period, (ii) none of
the shares of Restricted Stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during
the restriction period and (iii) all of the shares of Restricted
Stock shall be forfeited by the Participant without further
obligation on the part of the Corporation as set forth in Section
VII(h) hereof. Cash and stock dividends with respect to the
Restricted Stock will be withheld by the Corporation for the
Participant's account, and interest may be paid on the amount of
cash dividends withheld at a rate and subject to such terms as
may be determined by the Corporation. All cash or stock
dividends so withheld by the Corporation shall initially be
subject to forfeiture, but shall become non-forfeitable and
payable at the same times, and at the same rate, as determined
with respect to the lapse of restrictions on Restricted Stock.
Upon the forfeiture of any Restricted Stock, such forfeited
shares of Common Stock shall be transferred to the Corporation
without further action by the Participant. Upon the expiration
or termination of the restriction period, the restrictions
imposed on the appropriate Restricted Stock shall lapse and a
stock certificate for the number of shares of Restricted Stock
with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, except any that may be
imposed by law or by any applicable stockholders' agreement, to
the Participant. A Participant who files an election with the
Internal Revenue Service to include the fair market value of any
Restricted Stock in gross income while they are still subject to
restrictions shall promptly furnish the Corporation with a copy
of such election together with the amount of any federal, state,
local or other taxes that may be required to be withheld to
enable the Corporation to claim an income tax deduction with
respect to such election.
(e) Payments of Performance Shares/Performance Units.
------------------------------------------------
Any Performance Shares or Performance Units earned during a
performance period shall be paid in cash or in shares of Common
Stock (as set forth under the Award Agreement, or as otherwise
determined by the Committee) as soon as is practicable after the
end of the performance period to which such Plan Award relates.
(f) Performance Targets. At the time of each grant,
-------------------
the Committee shall establish performance targets (to be
satisfied during the performance period) and/or periods of
service to which the vesting of Performance Shares, Performance
Units and/or Restricted Stock shall be conditioned. The Committee
may also establish a relationship between performance targets and
the number of Performance Shares or the number or value of
Performance Units which shall be earned. The Committee also
shall establish a relationship between performance results other
than the targets and the number of Performance Shares or
Restricted Stock and the number or value of Performance Units, if
any, which shall be earned. The Committee shall determine the
measures of performance to be used in determining the extent to
which Performance Shares or Performance Units are earned or to
which restrictions on Restricted Stock or units shall lapse.
Performance measures and targets may vary among grants, but once
established for a grant may not be modified with respect to that
grant except as provided in Section X and provided that, with
respect to Performance Shares and Performance Units, the
Committee may, in its sole discretion, make such adjustments to
performance targets, the number of Performance Shares or the
number or value of Performance Units which shall be earned, or
such other changes as it may deem necessary or advisable in the
event of material changes in the criteria used for establishing
performance targets which would result in the dilution or
enlargement of a Participant's award outside the goals intended
by the Committee at the time of the grant of the Plan Award.
(g) Dividend or Interest Equivalents for Performance
------------------------------------------------
Shares and Performance Units. The Committee may provide that
----------------------------
amounts equivalent to dividends or interest shall be payable with
respect to Performance Shares or Performance Units held in the
Participant's performance account. Such amounts shall be
credited to the performance account, and shall be payable to the
Participant in cash or in Common Stock, as set forth under the
terms of the Plan Award, at such time as the Performance Shares
or Performance Units are earned. The Committee further may
provide that amounts equivalent to interest or dividends held in
the performance accounts shall be credited to such accounts on a
periodic or other basis.
(h) Termination of Employment. If the Participant (i)
-------------------------
voluntarily ceases to be an employee of the Corporation, or of
any Parent or Subsidiary, with the written consent of the
Committee, (ii) dies or becomes Disabled, (iii) terminates his
employment with the Corporation or with any Parent or Subsidiary
due to Retirement or (iv) suffers an involuntary termination of
his employment with the Corporation or with any Parent or
Subsidiary for reasons other than Good Cause, the Plan Award
earned under this Section with respect to any outstanding
Performance Shares, Restricted Stock, Performance Units or
interest on dividend equivalents shall be determined as otherwise
provided herein or in any agreement executed by such Participant
hereunder. If the Participant ceases to be an employee of the
Corporation or of any Parent or Subsidiary for any other reason,
all Plan Awards granted under this Section VII and subject to
restrictions shall be forfeited. In such case, the Corporation
shall have the right to complete the blank stock power with
respect to Restricted Stock and transfer the same to its
treasury.
SECTION VIII
DEFERRAL OF PAYMENTS
The Committee may establish procedures by which a
Participant may elect to defer payment of a Plan Award. The
Committee shall determine the terms and conditions of such
deferral. Any such deferral shall be subject to the following:
(a) Contingent Nature of Allocation. Every allocation
-------------------------------
under the Plan to a performance account shall be considered
"contingent" and unfunded until any forfeiture restrictions under
the terms of the Plan Award expire or lapse, until all conditions
contained in the Plan Award are satisfied, and until any elective
deferral period expires. Such contingent allocations shall be
considered bookkeeping entries only, notwithstanding the
crediting of deemed "dividends" or "interest." Nothing
contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant and the
Corporation or the Committee.
(b) Participant's Rights to Awards. Until the Plan
------------------------------
Award vests, the elective deferral period expires, and any
restrictions are lifted, the related amounts held in the
Participant's performance account cannot be sold, conveyed,
transferred, pledged, hypothecated, or assigned and any attempt
to do so by the Participant shall result in the immediate
forfeiture of such Plan Award. Until the Plan Award vests and
becomes payable, such account balances shall be the property of
the Corporation. The Participant's right to such account
balances shall be subject to the claims of the general creditors
of the Corporation. Receipt of the Plan Award is conditioned
upon satisfactory compliance with the terms and conditions of the
such Plan Award and other requirements of the Plan.
(c) Election to Defer Payment. If a Participant
-------------------------
desires to defer the normal receipt of Common Stock or cash due
him under a Plan Award, he must make an irrevocable election in a
calendar year prior to the calendar year or years in which he is
to perform services that will entitle him to the Plan Award.
Such election shall be made in accordance with Rule 16b-3 to the
extent required and shall provide a fixed date for the
termination of the deferral period. The Participant shall not be
permitted to receive his Plan Award prior to the end of the
elected deferral period, except in the event of his death,
Disability or termination of employment with the Corporation or
any Parent or Subsidiary.
SECTION IX
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
(a) Recapitalization, Etc. In the event there is any
----------------------
change in the Common Stock of the Corporation by reason of any
reorganization, recapitalization, stock split, stock dividend or
otherwise, there shall be substituted for or added to each share
of Common Stock theretofore appropriated or thereafter subject,
or which may become subject, to any Option, Stock Appreciation
Right, grant of Restricted Stock, Performance Share or
Performance Unit award, the number and kind of shares of stock or
other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case
may be, and the per share price thereof also shall be
appropriately adjusted. Notwithstanding the foregoing, (i) each
such adjustment with respect to an Incentive Stock Option shall
comply with the rules of Section 424(a) of the Code and (ii) in
no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder to be other than an
incentive stock option for purposes of Section 422 of the Code.
(b) Merger, Consolidation or Change in Control of
---------------------------------------------
Corporation. Upon (i) the merger or consolidation of the
-----------
Corporation with or into another corporation, (pursuant to which
the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger
or consolidation, own a beneficial interest in shares of voting
securities of the corporation surviving such merger or
consolidation having at least a majority of the combined voting
power of such corporation's then outstanding securities), if the
agreement of merger or consolidation does not provide for (1) the
continuance of the Options, Stock Appreciation Rights and shares
of Restricted Stock granted hereunder or (2) the substitution of
new Options, Stock Appreciation Rights or shares of Restricted
Stock for Options, Stock Appreciation Rights and shares of
Restricted Stock granted hereunder, or for the assumption of such
Options, Stock Appreciation Rights and shares of Restricted Stock
by the surviving corporation or (ii) the dissolution,
liquidation, or sale of substantially all the assets, of the
Corporation or (iii) the Change in Control of the Corporation,
(1) the holder of any such Option or Stock Appreciation Right
theretofore granted and still outstanding (and not otherwise
expired) shall have the right immediately prior to the effective
date of such merger, consolidation, dissolution, liquidation,
sale of assets or Change in Control of the Corporation to
exercise such Option(s) or Stock Appreciation Right(s) in whole
or in part without regard to any installment provision that may
have been made part of the terms and conditions of such Option(s)
or Stock Appreciation Right(s) and (2) all restrictions regarding
transferability and forfeiture on shares of Restricted Stock
shall be removed as of the effective date of such merger,
consolidation, dissolution, liquidation, sale of assets or Change
in Control of the Corporation; provided that any conditions
precedent to the exercise of such Options or Stock Appreciation
Rights and the transfer of such shares of Restricted Stock, other
than the passage of time, have occurred. The Corporation, to the
extent practicable, shall give advance notice to affected
Optionees and holders of Stock Appreciation Rights or shares of
Restricted Stock of such merger, consolidation, dissolution,
liquidation, sale of assets or Change in Control of the
Corporation. All such Options and Stock Appreciation Rights
which are not so exercised shall be forfeited as of the effective
time of such merger, consolidation, dissolution, liquidation or
sale of assets (but not in the Change in Control of the
Corporation).
(c) Effect of Merger or Consolidation. As of the
---------------------------------
effective date of the merger, consolidation, dissolution,
liquidation or sale of substantially all of the assets of the
Corporation, no Participant shall earn any additional Performance
Share or Performance Unit or dividend or interest equivalent
under this Plan. Furthermore, if the value of any Performance
Share or Performance Unit cannot be determined as of such date
because such Plan Award is conditioned upon the future financial
performance of the Corporation, such Performance Share or
Performance Unit (including any applicable dividend or interest
equivalents) shall be canceled. Any Performance Share or
Performance Unit payable after the date of the merger,
consolidation, dissolution, liquidation or sale of substantially
all of the assets of the Corporation shall be paid in cash
(unless the appropriate merger or consolidation agreement
provides otherwise) as of the date such Performance Share or
Performance Unit originally was to have been paid, or as of such
earlier date as may be determined by the Corporation or its
successor.
(d) Definition of Change in Control of the
--------------------------------------
Corporation. As used herein, a "Change in Control of the
-----------
Corporation" shall be deemed to have occurred if any person
(including any individual, firm, partnership or other entity)
together with all Affiliates and Associates (as defined under
Rule 12b-2 of the General Rules and Regulations promulgated under
the Exchange Act) of such person, but excluding (i) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Corporation or any subsidiary of the Corporation, (ii) a
corporation owned, directly or indirectly, by the stockholders of
the Corporation in substantially the same proportions as their
ownership of the Corporation, (iii) the Corporation or any
subsidiary of the Corporation or (iv) only as provided in the
immediately following sentence, a Participant together with all
Affiliates and Associates of the Participant, is or becomes the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 40% of more of the combined voting power
of the Corporation's then outstanding securities, such person
being hereinafter referred to as an Acquiring Person. The
provisions of clause(iv) of the immediately preceding sentence
shall apply only with respect to the Option(s) held by the
Participant who, together with his Affiliates or Associates, if
any, is or becomes the direct or indirect Beneficial Owner of the
percentage of securities set forth in such clause.
SECTION X
MISCELLANEOUS PROVISIONS
(a) Administrative Procedures. The Committee may
-------------------------
establish any procedures determined by it to be appropriate in
discharging its responsibilities under the Plan. Subject to the
provisions of Section XIII hereof, all actions and decisions of
the Committee shall be final.
(b) Assignment or Transfer. No grant or award of any
----------------------
Incentive Stock Option or any other "derivative security" (as
defined by Rule 16a-l(c) promulgated under the Exchange Act) made
under the Plan or any rights or interests therein shall be
assignable or transferable by a Participant except by will or the
laws of descent and distribution or pursuant to a domestic
relations order. During the lifetime of a Participant, Options
and other Plan Awards granted hereunder shall be exercisable only
by the Participant, and Plan Awards earned hereunder shall be
payable only to the Participant. Performance Shares or
Restricted Stock or Performance Units may not be sold, assigned,
transferred, redeemed, pledged or otherwise encumbered during the
restriction period, except as may be provided in Section VIII(b)
hereof.
(c) Investment Representation. In the case of Plan
-------------------------
Awards paid in shares of Common Stock or other securities, the
Committee may require, as a condition of receiving such
securities, that the Participant furnish to the Corporation such
written representations and information as the Committee deems
appropriate to permit the Corporation, in light of the existence
or nonexistence of an effective registration statement under the
Securities Act to deliver such securities in compliance with the
provisions of the Securities Act.
(d) Withholding Taxes. The Corporation shall have the
-----------------
right to deduct from all cash payments hereunder any federal,
state, local or foreign taxes required by law to be withheld with
respect to such payments. In the case of the issuance or
distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may
require the payment (through withholding from the Participant's
salary, reduction of the number of shares of Common Stock or
other securities to be issued, or otherwise) of any such taxes.
Subject to the Rules promulgated under Section 16 of the Exchange
Act (to the extent applicable), and subject to the consent of the
Committee, the Participant, may satisfy the withholding
obligations by paying to the Corporation a cash amount equal to
the amount required to be withheld or by tendering to the
Corporation a number of shares of Common Stock having a value
equivalent to such cash amount, or by use of any available
procedure as described under Section IV(c) hereof.
(e) Forfeiture. In order for a Participant or his
----------
legal representative to receive payments or benefits under the
Plan, a Participant must (i) be an active employee of the
Corporation or of any Parent or Subsidiary, (ii) have become
Disabled or have terminated his employment with the Corporation
or with any Parent or Subsidiary due to Retirement, (iii) have
died while in the active employment of the Corporation or of any
Parent or Subsidiary, (iv) have voluntarily ceased to be an
employee of the Corporation or of any Parent or Subsidiary with
the written consent of the Committee or (v) suffered an
involuntary termination of employment by the Corporation or any
Parent or Subsidiary for other than Good Cause.
(f) Costs and Expenses. The costs and expenses of
------------------
administering the Plan shall be borne by the Corporation and
shall not be charged against any award nor to any employee
receiving a Plan Award.
(g) Funding of Plan. Except in the case of awards of
---------------
Restricted Stock, the Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure
the payment of any Plan Award under the Plan. Neither the
Participants nor any other persons shall have any interest in any
fund or in any specific asset or assets of the Corporation or any
other entity by reason of any Plan Award, except to the extent
expressly provided hereunder. The interests of each Participant
and former Participant hereunder are unsecured and shall be
subject to the general creditors of the Corporation.
(h) Other Incentive Plans. The adoption of the Plan
---------------------
does not preclude the adoption by appropriate means of any other
incentive plan for employees.
(i) Plurals and Gender. Where appearing in the Plan,
------------------
masculine gender shall include the feminine and neuter genders,
and the singular shall include the plural, and vice versa, unless
the context clearly indicates a different meaning.
(j) Headings. The headings and sub-headings in this
--------
Plan are inserted for the convenience of reference only and are
to be ignored in any construction of the provisions hereof.
(k) Severability. In case any provision of this Plan
------------
shall be held illegal or void, such illegality or invalidity
shall not affect the remaining provisions of this Plan, but shall
be fully severable, and the Plan shall be construed and enforced
as if said illegal or invalid provisions had never been inserted
herein.
(l) Payments Due Missing Persons. The Corporation
----------------------------
shall make a reasonable effort to locate all persons entitled to
benefits under the Plan; however, notwithstanding any provisions
of this Plan to the contrary, if, after a period of one (1) year
from the date such benefits shall be due, any such persons
entitled to benefits have not been located, their rights under
the Plan shall stand suspended. Before this provision becomes
operative, the Corporation shall send a certified letter to all
such persons at their last known addresses advising them that
their rights under the Plan shall be suspended. Subject to all
applicable state laws, any such suspended amounts shall be held
by the Corporation for a period of one (1) additional year and
thereafter such amounts shall be forfeited and thereafter remain
the property of the Corporation.
(m) Liability and Indemnification. (i) Neither the
-----------------------------
Corporation nor any Parent or Subsidiary shall be responsible in
any way for any action or omission of the Committee, or any other
fiduciaries in the performance of their duties and obligations as
set forth in this Plan. Furthermore, neither the Corporation nor
any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon
advice of their counsel provided that the Corporation and/or the
appropriate Parent or Subsidiary relied in good faith upon the
action of such agent or the advice of such counsel.
(ii) Except for their own gross negligence or
willful misconduct regarding the performance of the duties
specifically assigned to them under, or their willful breach
of the terms of, this Plan, the Corporation, each Parent and
Subsidiary and the Committee shall be held harmless by the
Participants, former Participants, beneficiaries and their
representatives against liability or losses occurring by
reason of any act or omission. Neither the Corporation, any
Parent or Subsidiary, the Committee, nor any agents,
employees, officers, directors or shareholders of any of
them, nor any other person shall have any liability or
responsibility with respect to this Plan, except as
expressly provided herein.
(n) Incapacity. If the Committee shall receive
----------
evidence satisfactory to it that a person entitled to receive
payment of any Plan Award is, at the time when such benefit
becomes payable, a minor, or is physically or mentally
incompetent to receive such Plan Award and to give a valid
release thereof, and that another person or an institution is
then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such
person shall have been duly appointed, the Committee may make
payment of such Plan Award otherwise payable to such person to
such other person or institution, including a custodian under a
Uniform Gifts to Minors Act, or corresponding legislation (who
shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a
valid and complete discharge for the payment of such Plan Award.
(o) Cooperation of Parties. All parties to this Plan
----------------------
and any person claiming any interest hereunder agree to perform
any and all acts and execute any and all documents and papers
which are necessary or desirable for carrying out this Plan or
any of its provisions.
(p) Governing Law. All questions pertaining to the
-------------
validity, construction and administration of the Plan shall be
determined in accordance with the laws of the State of Delaware.
(q) Nonguarantee of Employment. Nothing contained in
--------------------------
this Plan shall be construed as a contract of employment between
the Corporation (or any Parent or Subsidiary), and any employee
or Participant, as a right of any employee or Participant to be
continued in the employment of the Corporation (or any Parent or
Subsidiary), or as a limitation on the right of the Corporation
or any Parent or Subsidiary to discharge any of its employees,
with or without cause.
(r) Notices. Each notice relating to this Plan shall
-------
be in writing and delivered in person or by certified mail to the
proper address. All notices to the Corporation or the Committee
shall be addressed to it at 2650 N. Military Trail, Suite 350,
Boca Raton, Florida 33431, Attn: John W. Luciani, III. All
notices to Participants, former Participants, beneficiaries or
other persons acting for or on behalf of such persons shall be
addressed to such person at the last address for such person
maintained in the Committee's records.
(s) Written Agreements. Each Plan Award shall be
------------------
evidenced by a signed written agreement between the Corporation
and the Participant containing the terms and conditions of the
award.
SECTION XI
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have
the right to amend, suspend or terminate the Plan at any time,
provided that no amendment shall be made which shall increase
the total number of shares of the Common Stock of the Corporation
which may be issued and sold pursuant to Options or other Plan
Awards, reduce the minimum exercise price in the case of an
Incentive Stock Option or modify the provisions of the Plan
relating to eligibility with respect to Incentive Stock Options
unless such amendment is made by or with the approval of the
stockholders (such approval being granted within 12 months of the
effective date of such amendment). The Board of Directors of the
Corporation shall be authorized to amend the Plan and the Options
granted thereunder (i) to maintain qualification as "incentive
stock options" within the meaning of Section 422 of the Code, if
applicable or (ii) to comply with Rule 16b-3 (or any successor
rule) promulgated under the Exchange Act. Except as otherwise
provided herein, no amendment, suspension or termination of the
Plan shall alter or impair any Plan Awards previously granted
under the Plan without the consent of the holder thereof.
SECTION XII
TERM OF PLAN
The Plan shall terminate on the day immediately prior
to the tenth anniversary of the date the Plan was adopted by the
Board of Directors of the Corporation, unless sooner terminated
by such Board of Directors. No Plan Awards may be granted under
the Plan subsequent to the termination of the Plan.
SECTION XIII
CLAIMS PROCEDURES
(a) Denial. If any Participant, former Participant or
------
beneficiary is denied any vested benefit to which he is, or
reasonably believes he is, entitled under this Plan, either in
total or in an amount less than the full vested benefit to which
he would normally be entitled, the Committee shall advise such
person in writing the specific reasons for the denial. The
Committee shall also furnish such person at the time with a
written notice containing (i) a specific reference to pertinent
Plan provisions, (ii) a description of any additional material or
information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information
is needed and (iii) an explanation of the Plan's claim review
procedure.
(b) Written Request for Review. Within 60 days of
--------------------------
receipt of the information stated in subsection (a) above, such
person shall, if he desires further review, file a written
request for reconsideration with the Committee.
(c) Review of Document. So long as such person's
------------------
request for review is pending (including the 60 day period in
subsection (b) above), such person or his duly authorized
representative may review pertinent Plan documents and may submit
issues and comments in writing to the Committee.
(d) Committee's Final and Binding Decision. A final
--------------------------------------
and binding decision shall be made by the Committee within 60
days of the filing by such person of this request for
reconsideration; provided, however, that if the Committee, in its
-------- -------
discretion, feels that a hearing with such person or his
representative is necessary or desirable, this period shall be
extended for an additional 60 days.
(e) Transmittal of Decision. The Committee's decision
-----------------------
shall be conveyed to such person in writing and shall (i) include
specific reasons for the decision, (ii) be written in a manner
calculated to be understood by such person and (iii) set forth
the specific references to the pertinent Plan provisions on which
the decision is based.
(f) Limitation on Claims. Notwithstanding any
--------------------
provisions of this Plan to the contrary, no Participant (nor the
estate or other beneficiary of a Participant) shall be entitled
to assert a claim against the Corporation (or against any Parent
or Subsidiary) more than three years after the date the
Participant (or his estate or other beneficiary) initially is
entitled to receive benefits hereunder.
Exhibit 10.5(a)
AGREEMENT
THIS AGREEMENT, dated as of August 14, 1990 (as
amended, modified or supplemented from time to time, this
"Agreement"), is by and among J&B Management Company, a New
Jersey general partnership ("J&B"), and its affiliates J&B
Management Corp., Sulgrave Realty Corporation, and Wilmart
Development Corp., each of which is a corporation organized and
existing under the laws of the State of New Jersey (hereinafter
J&B, J&B Management Corp., Sulgrave Realty Corporation and
Wilmart Development Corp. are sometimes referred to collectively
as the "Company" or the "Co-Obligors"), and The Bank of New York
(the "Bank").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is issuing its Series 1, 12%
Debentures due 2000 (the "Debentures") pursuant to the Company's
Confidential Private Placement Memorandum dated August 14, 1990,
as the same may be from time to time amended (the "Memorandum");
WHEREAS, the Company's private placement of the
Debentures (the "Offering") will terminate on the earlier of (i)
the date on which all the Debentures are sold or (ii) December
31, 1991;
WHEREAS, subscribers will purchase Debentures at a
closing (the "Initial Closing") to be held when at least
$1,000,000 principal amount of Debentures have been sold and,
thereafter, from time to time (each, singly, an "Additional
Closing," and, collectively, the "Additional Closings"), at the
discretion of the Company, on such day or days as may be
determined by the Company, as subscriptions are received and
accepted (hereinafter the date of the Initial Closing and the
date of any Additional Closing are each referred to as a "Closing
Date");
WHEREAS, the Company desires to deliver to the Bank
amounts received by the Company from subscribers for Debentures
(each, singly, a "Purchaser," and, collectively, the
"Purchasers"), in payment for the Debentures, which amounts shall
be released to the Company at the Initial Closing and at each
Additional Closing;
WHEREAS, each Purchaser shall be entitled to receive,
on a monthly basis prior to the Closing Date with respect to that
Purchaser's Debentures, distributions representing interest
accrued on that Purchaser's subscription payment at a rate of 12%
per annum;
WHEREAS, the Company desires to establish an interest
bearing escrow fund to be called J&B Management Escrow Fund
Account No. 186635 (the "Fund") with the Bank;
WHEREAS, the Company wishes to grant the Bank, for the
benefit of the Bank and the Purchasers, a security interest in
and to assign to the Bank certain notes, instruments and
documents more fully described below and the Bank is willing to
accept such security interest and assignment upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Company wishes to appoint the Bank as
Escrow Agent, Authenticating Agent, Registrar, Paying Agent and
Custodian with respect to the Debentures and the above-mentioned
notes, instruments and documents and the Bank is willing to
accept such appointments upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained and other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Escrow Agent.
------------
Section 1.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Escrow Agent for the purposes set
forth in this Section 1, and the Bank hereby accepts such
appointment.
Section 1.2. Escrow.
------
The Company shall from time to
time deliver amounts received from Purchasers in payment for the
Debentures ("Subscription Payments") to the Bank. The Bank shall
deposit the Subscription Payments in the Fund to be established
in the Company's name for this purpose by the Bank. Subscription
Payments delivered for deposit in the Fund shall be deposited in
short term certificates of deposits (including certificates of
deposits issued by the Bank), A-1, P-1 commercial paper, interest
bearing money market accounts, all as specified by the Company
and held in trust for the benefit of the Purchasers. The Bank is
not responsible for interest losses, taxes or other charges on
investments. All checks delivered to the Bank for deposit in the
Fund shall be payable to the order of "J&B Management Company -
Escrow Account". Concurrently with such delivery, the Company
shall deliver to the Bank a statement of the name, mailing
address and tax identification number of each Purchaser whose
Subscription Payment is being delivered, and a schedule listing
the aggregate Debentures and aggregate cumulative Subscription
Payments to date delivered for deposit in the Fund. For the
purposes of this Agreement, the Company is authorized to make
deposits and give instructions as to investments of deposits and
otherwise, as contemplated in this Agreement, to the Bank.
Section 1.3. Interest.
--------
During the period (the "Escrow
Period") commencing upon the date that any Purchaser's
Subscription Payment constitutes Cleared Funds (as defined in
Section 1.11 hereof) and ending on the day immediately preceding
the Closing Date with respect to that Purchaser's Debentures,
interest will accrue on that Purchaser's Subscription Payment at
a rate of 12% per annum, computed on the basis of a year of 365
or 366 days, as the case may be, for the actual number of days
elapsed. Interest shall be payable on the fifteenth day of each
month. Four Business Days prior to each such interest payment
date, the Bank shall give the Company written notice of the
difference between the amount of interest which will be payable
on Subscription Payments on such interest payment date and the
amount of interest accruing on the Fund's assets which will be
available for such payment on such interest payment date. Not
later than 11:30 a.m. (New York time) on the second Business Day
preceding such interest payment date, the Company shall deposit
with the Bank its check in the amount of such difference. On
each interest payment date, the Bank shall pay interest which is
due and payable to the respective Purchasers by mailing its check
in the appropriate amount to each Purchaser by first class mail
at the Purchaser's mailing address provided to the Bank pursuant
to Section 1.2 hereof. In the event that the Company shall
default in its payment obligations to the Bank under this Section
1.3, the Bank shall mail its check in the amount of each
Purchaser's pro rata share of interest earned and paid on the
Fund's assets as provided in this Section 1.3. For purposes of
this Agreement, "Business Day" shall mean any day other than a
day on which the Bank is authorized to remain closed in New York
City.
Section 1.4. Conditions of Initial Closing and
---------------------------------
Additional Closings.
-------------------
Notwithstanding anything to the contrary in
this Agreement, it is a condition precedent to the Initial
Closing and to each Additional Closing that J&B shall deliver to
the Bank Set Aside Purchase Notes in an aggregate principal
amount equal to at least twice the principal amount of the
Debentures which will be sold at that Initial Closing or
Additional Closing, together with each related Consent and
Agreement pertaining to that Set Aside Purchase Note, Consent,
Assignment and Agreement, Consent and Agreement pertaining to a
Contract and the Management Fees thereunder, and related
Financing Statements (as such terms are defined in Section 7
hereof), as provided in Section 7 hereof. Upon the scheduling of
the Initial Closing and each Additional Closing, the Company
shall give written notice thereof to the Bank not less than one
(1) Business Day prior to the date scheduled for each such
closing.
Section 1.5. Cancellation.
------------
The Company shall give the
Bank notice of any Purchaser who cancels his Subscription prior
to his Closing Date or whose Subscription Payment was deposited
pursuant to Section 1.2 but whose Subscription is rejected,
setting forth the name and mailing address of the Purchaser and
the amount of the rejected or cancelled subscription. As
promptly as practicable thereafter, the Bank shall pay the amount
of the cancelled or rejected subscription from the Fund to the
Purchaser whose Subscription was cancelled or rejected as
directed by the Company. Any interest earned thereon and not
theretofore distributed pursuant to Section 1.3 hereof shall be
paid to the Purchaser in accordance with Section 1.3 hereof.
Payment shall be made by check payable to the Purchaser mailed by
the Bank by first class mail directly to the Purchaser at the
mailing address of the Purchaser.
Section 1.6. Payment.
-------
The Bank, at the Initial
Closing and each Additional Closing, upon written instruction
from the Company, shall transfer to the Company or to such third
party or parties as may be directed by the Company the Cleared
Funds then held in the Fund by the Bank. Any interest earned
thereon and not theretofore distributed in accordance with
Section 1.3 hereof shall be paid to the Purchasers in accordance
with Section 1.3 hereof.
Section 1.7. Fees and Expenses.
-----------------
The Bank shall be
entitled to compensation for its services under this Section 1 in
the amount of $5,000 as an administration and acceptance fee,
payable upon execution and delivery of this Agreement. The
Company shall also pay the Bank $3 for the preparation and
execution of each Purchaser's account including the calculation
of interest accrued; $1 for the preparation of each Purchaser's
1099 tax form; $25 for each investment transaction in the Fund;
$25 for each returned "bounced" check of a Purchaser; and $500
for each Additional Closing, payable within 10 days after the
Bank gives the Company notice that any such amounts are due and
payable. Notwithstanding anything herein to the contrary, the
Bank shall not charge the Company for the issuance of checks or
wire transfers to make monthly payments of accrued interest on
Subscription Payments. No additional fee will be payable with
respect to wire transfers of and unreturned checks for
Subscription Payments. In addition, the Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 1
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, and retention of
records, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it has incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. Amounts held in the Fund shall not be available to
satisfy this obligation or any other obligation of the Company to
the Bank. The Company shall not be obligated to reimburse the
Bank for any costs or expenses incurred in connection with the
preparation and execution of this Agreement. The provisions of
this Section 1.7 shall survive the termination of this Agreement.
Section 1.8. Termination of Offering.
-----------------------
If the Offering
should be terminated, the Company shall promptly so advise the
Bank in writing, and shall authorize and direct the Bank to
return the Subscription Payments to the Purchasers. The Bank
thereupon shall return those Subscription Payments to the extent
they have not been distributed per Section 1.6 to the Purchasers
from whom they were received. Any interest earned on the
Subscription Payments and not theretofore distributed pursuant to
Section 1.3 hereof shall be paid in accordance with Section 1.3
hereof. Upon making such disbursements to the Purchasers and the
Company, the Bank shall be relieved of all of its obligations and
liabilities under this Agreement.
Section 1.9. Form 1099, etc.
---------------
In compliance with the
Interest and Dividend Tax Compliance Act of 1983, the Company
shall request that each Purchaser furnish to the Escrow Agent
such Purchaser's taxpayer identification number and a statement
certified under penalties of perjury that (a) such taxpayer
identification number is true and correct and (b) the Purchaser
is not subject to the requirements of such Act providing for
withholding of 20% of reportable interest, dividends or other
payments.
Section 1.10. Uncollected Funds.
-----------------
In the event that
any funds, including Cleared Funds, deposited in the Fund prove
uncollectible after the funds represented thereby have been
released by the Bank pursuant to this Agreement, the Company
shall reimburse the Bank upon request for the face amount of such
check or checks; and the Bank shall, upon instruction from the
Company, deliver the returned checks or other instruments to the
Company. This section shall survive the termination of this
Agreement.
Section 1.11. Cleared Funds.
-------------
For the purpose of this
agreement, Subscription Payments shall constitute "Cleared Funds"
in accordance with the following:
(a) if paid by wire transfer, such funds shall
constitute Cleared Funds on the date received by the Bank;
(b) if paid by check drawn on a New York Clearing
House Bank, such funds shall constitute Cleared Funds on the
second Business Day following the date received by the Bank; and
(c) if paid by check drawn on any bank other than a
New York Clearing House Bank, such funds shall constitute Cleared
Funds on the third Business Day following the date received by
the Bank.
Section 2. Execution.
---------
The Debentures shall be
executed on behalf of the Company by the manual or facsimile
signature of a partner or officer of the Company. All such
facsimile signatures shall have the same force and effect as if
the partner or officer had manually signed the Debentures. In
case any partner or officer of the Company whose signature shall
appear on a Debenture shall cease to be such partner or officer
before the delivery of such Debenture or the issuance of a new
Debenture following a transfer or exchange, such signature or
such facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such partner or officer had remained a
partner or officer until delivery.
Section 3. Authenticating Agent.
--------------------
Section 3.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Authenticating Agent for the purposes
set forth in this Section 3, and the Bank hereby accepts such
appointment.
Section 3.2. Authentication.
--------------
Only such Debentures as
shall have the Certificate of Authentication endorsed thereon in
substantially the form set forth in the form of Debenture
attached to the Memorandum, duly executed by the manual signature
of an authorized signatory of the Bank, shall be entitled to any
right or benefit under this Agreement. No Debentures shall be
valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by
the Bank; and such executed certificate upon any such Debenture
shall be conclusive evidence that such Debenture has been
authenticated and delivered under this Agreement. The
Certificate of Authentication on any Debenture shall be deemed to
have been executed by the Bank if signed by an authorized
signatory of the Bank, but it shall not be necessary that the
same person sign the Certificate of Authentication on all of the
Debentures.
Section 4. Mutilated, Lost, Stolen or Destroyed
------------------------------------
Debentures.
----------
Subject to applicable law, in the event any
Debenture is mutilated, lost, stolen or destroyed, the Company
may authorize the execution and delivery of a new Debenture of
like date, number, maturity and denomination as that mutilated,
lost, stolen or destroyed, provided, however, that in the case of
any mutilated Debenture, such mutilated Debenture shall first be
surrendered to the Company, and in the case of any lost, stolen
or destroyed Debenture, there shall be first furnished to the
Company and the Bank, evidence of the ownership thereof and of
such loss, theft or destruction satisfactory to the Company and
the Bank, together with indemnification through a bond of
indemnity or otherwise as shall be satisfactory to the Company
and the Bank. The Company may charge the Purchaser of such
Debenture with any amounts satisfactory to the Company and the
Bank permitted by applicable law.
Section 5. Registrar and Transfer Agent.
----------------------------
Section 5.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Registrar and Transfer Agent for the
purposes set forth in this Section 5, and the Bank hereby accepts
such appointment.
Section 5.2. Registration, Transfer and Exchange of
--------------------------------------
Debentures.
----------
The Debentures are issuable only as registered
Debentures without coupons in the denominations of $100,000 or
any multiple or any fraction thereof at the sole discretion of
the Company. Each Debenture shall bear the following restrictive
legend: "These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and sold
or otherwise transferred only if registered pursuant to the
provisions of that Act or if an exemption from registration is
available." The Bank shall keep at its principal corporate trust
office a register in which the Bank shall provide for the
registration and transfer of Debentures. Upon surrender for
registration of transfer of any Debenture at such office of the
Bank, the Company shall execute, pursuant to Section 2 hereof,
and mail by first class mail to the Bank, and the Bank shall
authenticate, pursuant to Section 3 hereof, and mail by first
class mail to the designated transferee, or transferees, one or
more new Debentures in an aggregate principal amount equal to the
unpaid principal amount of such surrendered Debenture, registered
in the name of the designated transferee or transferees. Every
Debenture presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the holder of such Debenture or his
attorney duly authorized in writing. Notwithstanding the pre-
ceding, the Debentures may not be transferred without an
effective registration statement under the Securities Act of 1933
covering the Debentures or an opinion of counsel to the holder of
such Debentures satisfactory to the Company and its counsel that
such registration is not necessary under the Securities Act of
1933 (the "Securities Act"). At the option of the owner of any
Debenture, such Debenture may be exchanged for other Debentures
of any authorized denominations, in an aggregate principal amount
equal to the unpaid principal amount of such surrendered
Debenture, upon surrender of the Debenture to be exchanged at the
principal corporate trust office of the Bank; provided, however,
that any exchange for denominations other than $100,000 or an
integral multiple thereof shall be at the sole discretion of the
Company. Whenever any Debenture is so surrendered for exchange,
the Company shall execute, pursuant to Section 2 hereof, and
deliver to the Bank, and the Bank shall authenticate, pursuant to
Section 3 hereof, and mail by first class mail to the designated
transferee, or transferees, the Debenture or Debentures which the
Debenture owner making the exchange is entitled to receive. Any
Debenture or Debentures issued in exchange for any Debenture or
upon transfer thereof shall be dated the date to which interest
has been paid on such Debenture surrendered for exchange or
transfer, and neither gain nor loss of interest shall result from
any such exchange or transfer. In addition, each Debenture
issued upon such exchange or transfer shall bear the restrictive
legend set forth above unless in the opinion of counsel to the
Company, such legend is not required to ensure compliance with
the Securities Act.
Section 5.3. Owner.
-----
The person in whose name any
Debenture shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes, and payment of or on
account of the principal of or interest on such Debenture shall
be made only to or upon the order of the registered owner thereof
or his duly authorized legal representative. Such registration
may be changed only as provided in this Section 5, and no other
notice to the Company or the Bank shall affect the rights or
obligations with respect to the transfer of a Debenture or be
effective to transfer any Debenture. All payments to the person
in whose name any Debenture shall be registered shall be valid
and effectual to satisfy and discharge the liability upon such
Debenture to the extent of the sum or sums to be paid.
Section 5.4. Transfer Agent.
--------------
The Bank shall send
executed, authenticated Debentures to Purchasers on Closing Dates
and to subsequent owners and transferees who are entitled to
receive Debentures pursuant to the terms of this Agreement, by
first class mail.
Section 5.5. Charges.
-------
No service charge shall be made
for any transfer or exchange of Debentures, but in all cases in
which Debentures shall be transferred or exchanged hereunder, the
Company or the Bank may collect from the registered owner of a
Debenture a charge for every transfer or exchange of Debentures
sufficient to reimburse them for any tax, fee or other
governmental charge required to be paid with respect to such
transfer or exchange, and such charge shall be paid before any
such new Debenture shall be delivered.
Section 5.6. Redemption.
----------
Whenever the Company shall
be required to effect mandatory redemption of part or all of the
Debentures, the Company shall give notice thereof to the Bank at
least forty (40) days prior to the date set forth for redemption,
the manner in which redemption shall be effected and all the
relevant details thereof. The Company shall deliver all redeemed
Debentures to the Bank for cancellation of the whole or portion
thereof, as appropriate, and issuance of new Debentures in
denominations equal to the unredeemed portion.
Section 5.7. Expenses.
--------
As a condition to the transfer
or exchange of any Debenture, the owner of the Debenture shall
reimburse the Company and the Bank for their respective actual
out-of-pocket expenses incurred in connection therewith
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, and retention of
records, and reasonable fees and expenses of their respective
counsel). The provisions of this Section 5.7 shall survive the
termination of this Agreement.
Section 6. Paying Agent.
------------
Section 6.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Paying Agent for the purposes set
forth in this Section 6, and the Bank hereby accepts such
appointment.
Section 6.2. Payment Provisions.
------------------
The Bank shall pay
interest on Subscription Payments and principal of and interest
on the Debentures to the persons in whose names the Debentures
are registered, in accordance with the terms and provisions of
this Agreement and the Debentures, by check mailed by first class
mail to the registered owner of a Debenture at his address as it
appears in the register; provided that not later than 11:30 a.m.
(New York time) on the second Business Day preceding each date on
which interest on or principal of any Debenture is due and
payable, the Company shall deposit with the Bank its check in the
amount due.
Section 6.3. Expenses.
--------
The Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 6
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, and retention of
records), payable within ten (10) days after the Bank gives
notice to the Company that it has incurred such expenses. The
obligation to pay such compensation and reimburse such expenses
shall be borne solely by the Company. Notwithstanding anything
herein to the contrary, the Bank shall not charge the Company any
fees for the issuance of checks or wire transfers to make
payments of interest on or repayments of principal of the
Debentures. The provisions of this Section 6.3 shall survive the
termination of this Agreement.
Section 7. The Custodian.
-------------
Section 7.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Custodian for the purposes set forth
in this Section 7, and the Bank hereby accepts such appointment.
Section 7.2. Set Aside Purchase Notes.
------------------------
(a) J&B is the holder of certain Purchase Notes. Each
such Purchase Note has been issued by an Investing Partnership,
pursuant to a certain Purchase Agreement. Under the terms of
each such Purchase Note and Purchase Agreement, J&B is entitled
to assign the Purchase Note and J&B's right to payments of
interest thereon and principal amount thereof. Under the terms
of the Purchase Agreement, payments of interest due under the
Purchase Note may be offset and reduced by payments made under
certain Investor Notes issued by the limited partners of the
Investing Partnership, which have been pledged to secure
obligations owed by J&B to one or more banks. Only that interest
("Excess Interest") under the Purchase Note which is in excess of
the amount offset and reduced by payments made to the bank, if
any, may be payable to the holder of the Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.5 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Purchase Notes, having an aggregate principal amount of
$14,080,000, listed in Exhibit A hereto (the "Set Aside Purchase
Notes") issued by the Investing Partnerships listed in Exhibit A
hereto, and the proceeds thereof. In order to perfect such
security interests, J&B shall deliver to the Bank the Set Aside
Purchase Notes. Upon receipt of each Purchase Note, the Bank
shall execute and deliver to the Company a receipt therefor.
Notwithstanding the assignment of the Set Aside Purchase Notes to
the Bank, all of the Set Aside Purchase Notes shall be payable
directly to the Company until such time as an Event of Default
(as defined in Section 7.7 hereof) shall occur and be continuing.
Under the terms of the Set Aside Purchase Notes, only that
interest thereon which is Excess Interest may be payable to the
Bank.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit B hereto, executed by each
Investing Partnership listed in Exhibit A hereto, under which the
Investing Partnership shall (i) consent to J&B's assignment to
the Bank of the Investing Partnership's Set Aside Purchase Note,
(ii) consent to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank, and (iii) agree that upon
receiving the Bank's notice of an Event of Default, the Investing
Partnership shall pay all sums due under its Set Aside Purchase
Note directly to the Bank. Upon receipt of each such Consent and
Agreement, the Bank shall execute and deliver to the Company a
receipt therefor.
Section 7.3. Purchased Partnership Interests.
-------------------------------
(a) Each Investing Partnership listed in Exhibit A
hereto, in order to secure its payment of the principal of and
interest on its Set Aside Purchase Note, has entered into a
Security Agreement listed in Exhibit A hereto (a "Security
Agreement") under which the Investing Partnership has granted a
security interest (a "Security Interest") in that Investing
Partnership's limited partnership interest listed in Exhibit A
hereto (a "Purchased Partnership Interest") in a respective
Operating Partnership listed in Exhibit A hereto (an "Operating
Partnership").
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.5 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each Security
Agreement listed in Exhibit A hereto, each Security Interest in a
Purchased Partnership Interest created under any such Security
Agreement, each such Purchased Partnership Interest, each
distribution due and payable or made from time to time on such
Purchased Partnership Interest, and the proceeds thereof. In
order to perfect such security interest, J&B shall deliver to the
Bank Uniform Commercial Code Financing Statements ("Financing
Statements") for filing by the Bank with the such appropriate
governmental authorities indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authorities in order to continue the perfection of
such security interest. Notwithstanding the assignments of the
above mentioned Security Agreements, Security Interests,
Purchased Partnership Interests, and due and payable or paid
distributions on Purchased Partnership Interests to the Bank, all
distributions on such Purchased Partnership Interests shall be
payable directly to the respective Investing Partnership if an
event of default shall not have occurred and be continuing under
that Investing Partnership's Set Aside Purchase Note; or to the
Bank for payment to the Company if the Bank shall foreclose on
the Security Interest pursuant to Section 7.6(f) hereof, and
shall be payable directly to the Bank for the benefit of the Bank
and the owners of the Debentures only if the Bank shall foreclose
on the Security Interest pursuant to Section 7.6(e) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership and Operating Partnership
listed in Exhibit A hereto, under which the Investing Partnership
and Operating Partnership shall (i) consent to J&B's assignment
to the Bank of the respective Security Agreement, Security
Interest, Purchased Partnership Interest, each distribution due
and payable or made from time to time on the Purchased
Partnership Interest, and the proceeds thereof; (ii) consent to
J&B's delivery of the above mentioned Financing Statements and
the Bank's filing of the Financing Statements from time to time
with the appropriate governmental authorities; (iii) assign to
the Bank all distributions which may be due and payable or made
from time to time on the Purchased Partnership Interest (subject
to the terms and conditions set forth in this Agreement) until
all outstanding obligations under the Set Aside Purchase Note
which is in default shall have been paid in full (including,
without limitation, all costs of collection, reasonable attorney
fees and other fees and expenses) and (iv) agree that upon
foreclosure of the Security Interest, all distributions on the
Purchased Partnership Interest shall be paid directly to the
Bank, as the assignee of J&B, regardless of whether the Bank
becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the
limitations set forth in clause (iii) above. Upon receipt of
each such Consent, Assignment and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.4. Management Fees.
---------------
(a) J&B is the managing agent of each Operating
Partnership listed in Exhibit A hereto and is entitled under its
management contract (a "Contract") with each such Operating
Partnership to receive management fees (the "Management Fees").
(b) In order to secure the Bank's fees and expenses
under this Section 7 and the payment of principal of and interest
on the Debentures, subject to the terms and conditions of Section
7.5 hereof, J&B hereby grants the Bank a security interest in and
assigns to the Bank, for the benefit of the Bank and the owners
of the Debentures from time to time, all of J&B's rights, title
and interest in and to each Contract and all of the Management
Fees listed in Exhibit A hereto, and the proceeds thereof. In
order to perfect such security interest, J&B shall deliver to the
Bank a Financing Statement for filing with the appropriate
governmental authority indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authority in order to continue the perfection of
such security interest. Notwithstanding the assignments of the
above-mentioned Management Fees to the Bank, all such Management
Fees shall be payable directly to the Company, until such time as
an Event of Default shall occur and be continuing.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit D hereto, executed by each
Operating Partnership listed in Exhibit A hereto under which the
Operating Partnership shall (i) consent to J&B's assignment to
the Bank of the Contract and J&B's Management Fees and the
proceeds thereof; (ii) consent to J&B's delivery of the above
mentioned Financing Statements and to the Bank's filing of the
above mentioned Financing Statements from time to time with the
appropriate governmental authority; and (iii) agree that upon
receiving the Bank's notice of an Event of Default, the Operating
Partnership shall pay all Management Fees directly to the Bank.
Upon receipt of each such Consent and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.5. Attachment of Security Interests.
--------------------------------
Notwithstanding anything to the contrary in this
Agreement, each security interest granted by J&B to the Bank
under this Section 7 shall become effective and shall attach only
upon J&B's delivery to the Bank of the respective Set Aside
Purchase Note, and the related Consent and Agreement pertaining
to that Set Aside Purchase Note, Consent, Assignment and
Agreement, and Consent and Agreement pertaining to a Contract and
the Management Fees thereunder. J&B shall be obligated to
deliver to the Bank only those Set Aside Purchase Notes selected
by J&B in its sole discretion as shall be in an aggregate
principal amount equal to at least twice the principal amount of
the Debentures which will be sold at the respective Initial
Closing or Additional Closing, together with each related Consent
and Agreement pertaining to that Set Aside Purchase Note,
Consent, Assignment and Agreement, Consent and Agreement
pertaining to a Contract and the Management Fees thereunder, and
related Financing Statements. At such time as the Company shall
send to the Bank the Company's irrevocable notice that there will
not be any further Additional Closings, the Company and the Bank
shall thereupon acknowledge and append hereto an additional
Exhibit E listing the Set Aside Purchase Notes, and the Investing
Partnerships, Operating Partnerships, Security Agreements,
Contracts and Management Fees relating thereto, in which the Bank
will have security interests under this Section 7.
Section 7.6. Duties of the Bank.
------------------
(a) The Bank shall hold the notes, agreements and
instruments deposited with it for the purposes of this Agreement
and for the benefit of the Bank and of the owners of the
Debentures from time to time, shall file the Financing Statements
delivered to it from time to time by J&B with the appropriate
governmental authorities indicated by J&B to the Bank and shall
perform all duties imposed upon it by this Agreement until this
Agreement is terminated. The security interests and assignments
created by this Agreement and by each Consent, Assignment and
Agreement shall automatically terminate when all of the
Debentures and all amounts payable to the Bank under this
Agreement have been paid in full. Thereupon, the Bank shall
return to J&B the Set Aside Purchase Notes deposited with it
pursuant to Section 7.2(b) hereof, and shall file with the
appropriate governmental authorities indicated by J&B to the Bank
Financing Statements delivered by J&B to the Bank recording the
termination of the Bank's security interests and assignments
granted under this Agreement and each Consent, Assignment and
Agreement.
(b) Upon the occurrence of an Event of Default, the
Bank shall declare the entire outstanding aggregate principal
balance of all the Debentures due and immediately payable with
accrued interest thereon. In addition, the Bank shall:
(i) immediately notify the makers of the Set Aside
Purchase Notes that all payments to be made thereafter on
the Set Aside Purchase Notes shall be paid directly to the
Bank; and
(ii) immediately notify the respective Operating
Partnerships that all Management Fees payable to J&B from
the Operating Partnerships shall be paid directly to the
Bank.
The Bank shall collect all payments received under the
foregoing security interests and assignments and apply them for
the benefit of the Bank and of the owners of the Debentures
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to the repayment of principal of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(c) Upon the occurrence of an Event of Default, the
Bank shall be entitled to institute action against the
Co-Obligors, jointly or severally, to collect payment under the
Debentures without any prior requirement to attempt to collect
any funds under the Set Aside Purchase Notes, the related
Purchased Partnership Interests or the assigned Management Fees.
In the event that the Company shall default on its payment
obligations to the Bank under this Agreement, the Bank shall be
entitled to institute action against the Co-Obligors, jointly or
severally, to collect payment under this Agreement, without any
prior requirement to attempt to collect any funds under the Set
Aside Purchase Notes, the related Purchased Partnership Interests
or the assigned Management Fees.
(d) Upon the occurrence of an Event of Default, the
Bank, in its discretion, is authorized to, but shall not be
required to, proceed in any way legally available to it to
liquidate the Set Aside Purchase Notes, the Purchased Partnership
Interests (if the Bank shall have foreclosed on such Set Aside
Purchase Note pursuant to Section 7.6(e) hereof) and the
assignments of Management Fees including, but not limited to, the
public or private sale of all or any part thereof upon three (3)
days' prior notice to the Co-Obligors, free and clear of any
claim, lien, charge or encumbrance including, without limitation,
any right of equity of redemption. The Bank shall apply the
proceeds of any such sale firstly to the payment of the expenses
of the sale, secondly to the payment of the Bank's fees and
expenses, thirdly to the payment of accrued interest including
accrued interest from and after the Event of Default, and next to
the payment of principal of the Debentures. The Bank shall not
be liable to any of the Co-Obligors or their affiliates because
of any sale or the consequences thereof.
(e) While an Event of Default is continuing, if there
shall occur or if there shall have occurred and be continuing an
event of default under any Set Aside Purchase Note, the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of the foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining previous
Multi-family Participation Clearance from the United States
Department of Housing and Urban Development ("HUD 2530
Clearance") with respect to that Operating Partnership, if
required, in satisfaction of that Set Aside Purchase Note (but
not of any Debenture); provided, that during any time period
pending obtaining HUD 2530 Clearance, if required, or if HUD 2530
Clearance is required for that Operating Partnership but cannot
be obtained, or if the Bank may not be admitted as a substituted
limited partner in the Operating Partnership for any reason, the
Bank shall nevertheless be entitled to receive all distributions
from that Operating Partnership as the assignee of J&B and this
Agreement shall operate as an assignment of such distributions by
the Investing Partnership, subject to the limitations set forth
in Section 7.3(c). In addition, while an Event of Default is
continuing, if there shall occur or if there shall have occurred
and be continuing an event of default under any Set Aside
Purchase Note or under any partnership agreement governing the
Operating Partnership related to the Purchased Partnership
Interest or a failure of payment under the assignment of
Management Fees related to that Operating Partnership, the Bank
shall be authorized to exercise any and all rights and remedies
available to it as the holder of the respective Set Aside
Purchase Note, the substituted partner or assignee with respect
to the Purchased Partnership Interest in the related Operating
Partnership, or the assignee of the assigned Management Fees
under the terms of the related governing documents and/or
instruments, as well as any other remedy available under law or
equity. The Bank shall apply the proceeds of its exercise of the
above mentioned rights and remedies firstly to the payment of all
costs of collection, secondly to the payment of the Bank's fees
and expenses, thirdly to the payment of all accrued interest
(including, without limitation, interest accrued after the date
of the Event of Default) and next to repayment of principal of
the Debentures, until all amounts due under the Debentures shall
have been paid in full together with all costs of collection,
fees and expenses.
(f) If a default on any payment of principal or
interest on a Set Aside Purchase Note shall occur while no Event
of Default is continuing, then the Company shall immediately give
the Bank notice thereof and upon receiving such notice the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of such foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining HUD 2530
Clearance, if required, in satisfaction of that Set Aside
Purchase Note (but not of any Debenture); provided that during
any time period pending obtaining HUD 2530 Clearance, if
required, or if HUD 2530 Clearance is required for that Operating
Partnership but cannot be obtained, or if the Bank may not be
admitted as a substituted limited partner in the Operating
Partnership for any reason, the Bank shall be entitled
nevertheless to receive all distributions from that Operating
Partnership as the assignee of J&B and this Agreement shall
operate as an assignment of such distributions by the Investing
Partnership, subject to the limitations set forth in Section
7.3(c). The Bank shall pay over to the Company any amounts
received from the Operating Partnership unless and until an Event
of Default occurs. If and when such Event of Default shall
occur, the Bank shall follow the procedures specified in Sections
7.6 (b)-(e) of this Agreement.
(g) The rights and remedies enumerated herein are in
addition to and not in lieu of any other right or remedy
available to the Bank under law or equity, including, without
limitation, rights and remedies available to a secured party
under the Uniform Commercial Code; provided, however, that the
Bank shall not be entitled to apply the proceeds of the
foreclosure of any Set Aside Purchase Note, Purchased Partnership
Interest or assigned Management Fees to amounts owing to the Bank
under this Agreement unless an Event of Default shall occur and
be continuing. The Bank shall be entitled to exercise one or
more remedies at the same time, all such rights and remedies
being cumulative and not mutually exclusive.
(h) The Co-Obligors shall remain jointly and severally
liable for any deficiency remaining after the application of
proceeds collected by the Bank including, but not limited to, all
actual costs and expenses of collection (including, without
limitation, reasonable attorneys' fees and expenses). If any
funds shall remain in the possession of the Bank after the
payment of all amounts due under the Debentures, all such costs
of collection thereof and all other actual fees and expenses
(including without limitation reasonable attorney's fees and
expenses) of the Bank, the Bank shall deliver such remaining
funds to the Company. The provisions of this Section 7.6(h)
shall survive the termination of this Agreement.
Section 7.7. Events of Default.
-----------------
If either of the following events (an "Event of
Default") shall occur and be continuing for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any part
of the principal of or interest on any Debenture when the
same shall become due and payable, and such default shall
have continued for more than 15 days; or
(ii) the Company fails to redeem a pro rata portion
of the Debentures at the time set for mandatory redemption
and such default shall have continued for more than 15 days;
then, the Bank, by notice to the Company, or the owners of at
least 25% of the principal amount of the Debentures, by notice to
the Company and to the Bank, may declare the entire principal of
and accrued interest on all Debentures to become immediately due
and payable at par without presentment, demand, protest or other
notice of any kind, all of which are waived by the Company.
Section 7.8. Sale of Set Aside Purchase Notes.
--------------------------------
The Company may from time to time while no Event of
Default shall have occurred and be continuing arrange the sale of
one or more Set Aside Purchase Notes to a third party, subject to
the following conditions:
(i) The Company shall give prompt notice thereof to
the Bank together with all relevant details of the proposed
transaction.
(ii) As part of the consideration to be paid by the
purchaser of each Set Aside Purchase Note to be sold, the
purchaser shall pay directly to the Bank cash in the amount equal
to 50% of the face amount of principal of that Set Aside Purchase
Note plus an amount sufficient to pay accrued interest on the pro
rata portion of Debentures to be prepaid pursuant to subparagraph
(iv) below.
(iii) The total consideration to be paid upon sale of
a Set Aside Purchase Note shall not be less the 50% of the face
amount of principal thereof plus an amount sufficient to pay
accrued interest on the pro rata portion of Debentures to be
prepaid pursuant to subparagraph (iv) below.
(iv) Upon receipt of cash as provided in subparagraph
(ii) above, the Bank will apply the proceeds to the pro rata
redemption of the Debentures at par plus payment of accrued
interest thereon. Thereafter, the Bank shall deliver each Set
Aside Purchase Note that is then sold to the purchaser together
with an assignment of security interest and security agreement
covering the related Purchased Partnership Interest. The Bank
shall have no liability whatsoever to the purchaser or any party
hereto for its actions pursuant to this Section 7.8.
Section 7.9. Fees and Expenses.
-----------------
The Bank shall be
entitled to compensation for its services under this Section 7 in
the amount of $2,500 as an administration fee, payable upon
execution and delivery of this Agreement; and administrative
fees, payable annually in advance, based upon the aggregate
principal amount of outstanding Debentures on the anniversary
date, in the following amounts:
$1,000,000 outstanding . . . . . . . . . . . . . . . . . $2,000
$1,000,001 to $2,000,000 outstanding . . . . . . . . . . $3,000
$2,000,001 to $3,000,000 outstanding . . . . . . . . . . $4,000
$3,000,001 to $4,000,000 outstanding . . . . . . . . . . $5,000
$4,000,001 to $5,000,000 outstanding . . . . . . . . . . $6,000
$5,000,001 to $6,000,000 outstanding . . . . . . . . . . $7,000
$6,000,001 to $7,000,000 outstanding . . . . . . . . . . $8,000
The Company shall reimburse the Bank for its actual out-of-pocket
expenses incurred in connection with its obligations pursuant to
this Section 7 (including, but not limited to, actual expenses
for stationery, postage, telephone, telex, wire transfers,
retention of records, and the filing of Financing Statements, and
reasonable fees and expenses of counsel), payable within ten (10)
days after the Bank gives notice to the Company that it incurred
such expenses. The obligation to pay such compensation and
reimburse such expenses shall be borne solely by the Company.
The Set Aside Purchase Notes, the related Purchased Partnership
Interests and the assigned Management Fees in which the Bank has
a security interest will be available to satisfy the Company's
payment obligations to the Bank under this Section 7.9 only when
an Event of Default has occurred and is continuing. The Company
shall not be obligated to reimburse the Bank for any costs or
expenses incurred in connection with the preparation and
execution of this Agreement. The provisions of this Section 7.9
shall survive the termination of this Agreement.
Section 8. Other Rights and Duties of Bank.
-------------------------------
(a) The Bank need exercise only those rights and need
perform only those duties that are contemplated or specifically
set forth in this Agreement and no others.
(b) The Bank may not be relieved from liability for
its own grossly negligent action, its own grossly negligent
failure to act, or its own willful misconduct except that:
1. This paragraph does not limit the effect of
paragraph (a) of this Section.
2. The Bank shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a Notice received by it pursuant to Section
17(b) of the Subscription Agreement.
(c) The Bank may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Bank need not investigate any fact or matter stated
in the document.
(d) Before the Bank acts or refrains from acting, it
may require an officer's certificate or an opinion of counsel.
The Bank shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(e) The Bank may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed with due care.
Section 9. No Representations.
------------------
The Bank makes no
representation as to the validity or adequacy of this Agreement
or the Debentures, or any Set Aside Purchase Note, Purchased
Partnership Interest or Management Fees in which the Bank has a
security interest, or any Financing Statement delivered to it by
J&B or the Bank's filing of any such Financing Statement with any
governmental authority; it shall not be accountable for the
Company's use of the proceeds from the Debentures and it shall
not be responsible for any statement in the Memorandum or in the
Debentures other than its authentication.
Section 10. Indemnification.
---------------
The Company shall
indemnify, defend and hold the Bank harmless from and against any
and all loss, damage, liability, claim and expense, including
taxes (other than taxes based on the income of the Bank) incurred
by the Bank arising out of or in connection with its acceptance
or performance of its obligations under this Agreement, including
the legal costs and expenses of defending itself against any
claim or liability in connection with its performance under this
Agreement. The Bank shall notify the Company promptly of any
claim for which it may seek indemnity. The Company shall defend
the claim and the Bank shall cooperate in the defense. The Bank
may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need
not reimburse any expense or indemnify against any loss or
liability incurred by the Bank through gross negligence or bad
faith. The provisions of this Section 10 shall survive the
termination of this Agreement.
Section 11. Replacement of Bank.
-------------------
(a) A resignation or removal of the Bank and
appointment of a successor Bank shall become effective only upon
the successor Bank's acceptance of appointment as provided in
this Section 11.
(b) The Bank may resign by so notifying the Company.
The owners of a majority in principal amount of the Debentures
outstanding may remove the Bank for any reason by so notifying
the Bank and the Company. The Company may remove the Bank if:
(i) the Bank is adjudged a bankrupt or an insolvent;
(ii) a receiver or public officer takes charge of
the Bank or its property; or
(iii) the Bank becomes incapable of acting.
(c) (i) If the Bank resigns or is removed or if a
vacancy exists in the office of the Bank for any reason, the
Company shall promptly appoint a successor Bank.
(ii) If a successor Bank does not take office within
60 days after the retiring Bank gives notice of resignation or
action is taken to remove the retiring Bank, the retiring Bank,
the Company or the owners of at least 10% in principal amount of
the Debentures outstanding may petition any court of competent
jurisdiction for the appointment of a successor Bank.
(iii) A successor Bank shall deliver a written
acceptance of its appointment to the retiring Bank and the
Company. Thereupon the resignation or removal of the retiring
Bank shall become effective and the successor Bank shall have all
the rights, powers and duties of the Bank under this Agreement.
The successor Bank shall mail a notice of its succession to
Debenture owners. Upon payment to the retiring Bank of all
amounts owed to it under this Agreement, the retiring Bank shall
promptly transfer all property held by it as Bank to the
successor Bank.
(d) If the Bank consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Bank.
Section 12. Notices.
-------
All notices and other
communications pursuant to this Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified
mail, return receipt requested, or by facsimile, confirmed by
writing, delivered by hand or sent by registered or certified
mail, return receipt requested, delivered or sent on the date of
the facsimile, addressed as follows:
(a) If to the Company:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Michele R. Jawin
(b) If to Debenture owners:
At the addresses of the registered owners
appearing in the register maintained by the Bank.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Diane Bligh, Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 13. Choice of Law.
-------------
This Agreement shall be
governed by the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
Section 14. Prior Agreements; Amendment.
---------------------------
This
Agreement, together with each Consent and Agreement referred to
in Section 7 hereof, sets forth the entire agreement of the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, contracts, promises,
representations, warranties, statements, arrangements and
understandings, if any, among the parties hereto or their
representatives with respect to the subject matter hereof. No
waiver, modification or amendment of any provision, term or
condition hereof shall be valid unless in writing and signed by
all parties hereto, and any such waiver, modification or
amendment shall be valid only to the extent therein set forth.
Section 15. Successors.
----------
This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 16. Enforceability.
--------------
Any provision of this
Agreement which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
Section 17. Counterparts.
------------
This Agreement may be
executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.
Section 18. Definitions.
-----------
All terms used in this
Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
J&B MANAGEMENT COMPANY
By /s/ John Luciani
--------------------------
Title: General Partner
By /s/ Bernard M. Rodin
--------------------------
Title: General Partner
J&B MANAGEMENT CORP.
By /s/ John Luciani
--------------------------
Title: President
By /s/ Bernard M. Rodin
--------------------------
Title: Secretary
SULGRAVE REALTY CORPORATION
By /s/ John Luciani
--------------------------
Title: President
By /s/ Bernard M. Rodin
--------------------------
Title: Secretary
WILMART DEVELOPMENT CORP.
By /s/ John Luciani
--------------------------
Title: President
By /s/ Bernard M. Rodin
--------------------------
Title: Secretary
THE BANK OF NEW YORK
By /s/ Vincent P. McConnell
------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
to Agreement
------------
1. (a) Investing Partnership: Shreveport Associates, a New Jersey
limited partnership
(b) Operating Partnership: Georgetown West Associates, a Louisiana
partnership in commendam
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,700,000
(ii) Date of Issue: October 31, 1983
(iii) Maturity Date: March 31, 1998
(d) Security Agreement: Purchase Agreement, dated October 31, 1983,
by and among Fred Abrams, G.E. Batchelor, Jack Bregar, Harold M.
Bruck, William Dodenhoff, Michael Fischetti, Marion Jack Henry,
Irwin Lieber, John Luciani, Bernard M. Rodin, A. Lawrence Rose,
Raanan Smelin, Fred Allen Jadwin and Barbara Samuels ("Sellers")
and Shreveport Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contracts: Each management contract existing or entered into
from time to time regarding HUD Project No: 059-35153-PM
(g) Management Fees: 7% of residential income collected, payable
monthly
2. (a) Investing Partnership: Marble Falls Associates, a New Jersey
limited partnership
(b) Operating Partnership: Rivercrest, Ltd., a Texas limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $650,000
(ii) Date of Issue: February 2, 1985
(iii) Maturity Date: February 2, 2000
(d) Security Agreement: Purchase Agreement, dated February 28, 1985,
by and among John W. Luciani, III, Bernard M. Rodin, Maurice
Rosenblatt and Hy Blueweiss ("Sellers") and Marble Falls
Associates (Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contracts: Each management contract existing or entered into
from time to time regarding HUD Project No: 115-44144-LDP
(g) Management Fees: 7.75% of residential income collected, payable
monthly
3. (a) Investing Partnership: Bastrop Associates, a Texas limited
partnership
(b) Operating Partnership: The Bond House, a Louisiana partnership
in commendam
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,700,000
(ii) Date of Issue: June 27, 1985
(iii) Maturity Date: March 31, 2000
(d) Security Agreement: Purchase Agreement, dated June 27, 1985, by
and among J&B Management Company, Robert Schwartz, Edward Weiss,
Joseph Rahn, John DeLisa, Carol Lehti, George Miller, Robert
Howard and Kurt Elias ("Sellers") and Bastrop Associates
(Sellers' respective rights and interests under the Security
Agreement have been sold, transferred and assigned to J&B
Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contracts: Each management contract existing or entered into
from time to time regarding HUD Project No: 059-35153-PM-L8
(g) Management Fees: 7% of residential income collected, payable
monthly
4. (a) Investing Partnership: Carrboro Associates, a Texas limited
partnership
(b) Operating Partnership: Tarheel Manor Associates, a North
Carolina limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,500,000
(ii) Date of Issue: June 14, 1985
(iii) Maturity Date: May 31, 2000
(d) Security Agreement: Purchase Agreement, dated June 14, 1985,
between and among J&B Management Corp., John Luciani, Bernard M.
Rodin, Albert Agar, William Agar, Phillip C. Bonnano, Daniel Duhl
and Technical Operations, Inc. ("Sellers") and Carrboro
Associates (Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and assigned to
J&B Management Company.)
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contracts: Each management contract existing or entered into
from time to time regarding HUD Project No: 053-35195-PM
(g) Management Fees: 6.5% of residential income collected, payable
monthly
5. (a) Investing Partnership: East Texas Associates, Texas limited
partnership
(b) Operating Partnership: Tyler Square Apts., Ltd., a Texas limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,300,000
(ii) Date of Issue: June 27, 1985
(iii) Maturity Date: March 31, 2000
(d) Security Agreement: Purchase Agreement, dated June 27, 1985,
between and among J&B Management Corp., John Luciani, Bernard M.
Rodin, Frederick P. Rose, Henry and Rae Kalman, Fred Schiner,
Richard Brescia, John M. Cusano, Seth M. Glickenhaus, Stephen
Kaufman, Marshall H. Kozian, Sidney Myers, Fred Siegel, Sydelle
Meyer and Harvey Realty Co. ("Sellers") and East Texas Associates
(Sellers' respective rights and interests under the Security
Agreement have been sold, transferred and assigned to J&B
Management Company.)
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contracts: Each management contract existing or entered into
from time to time regarding HUD Project No: 112-35277-PM-L8
(g) Managment Fees: 6.75% of residential income collected, payable
monthly
6. (a) Investing Partnership: Marble Falls Associates II, a New Jersey
limited partnership
(b) Operating Partnership: Falfurrias Village, Ltd., a Texas limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $665,000
(ii) Date of Issue: June 11, 1985
(iii) Maturity Date: March 31, 2000
(d) Security Agreement: Purchase Agreement, dated June 11, 1985, by
and among Bernard M. Rodin, John Luciani, J&B Management Corp.
Executive Offices Realty Corp., Salvatore Capone, Gloria Clare
Elias, Kurt Elias, Albert Esformes, Jon Spicehandler, Walter
Wilson, Michael Raskin, Michael Moss and Esformes Properties
("Sellers") and Marble Falls Associates II (Sellers' respective
rights and interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contract: Each management contract existing or entered into from
time to time regarding HUD Project No: 115-35199-PM-L8
(g) Management Fees: 7% of residential income collected, payable
monthly
7. (a) Investing Partnership: Woodhall Associates, a Texas limited
partnership
(b) Operating Partnership: Weslaco Village, Ltd., a Texas limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $485,000
(ii) Date of Issue: June 11, 1985
(iii) Maturity Date: March 31, 2000
(d) Security Agreement: Purchase Agreement, dated June 11, 1985, by
and among Bernard M. Rodin, John Luciani, J&B Management Corp.,
Quest Advisory Corp., Alex Miller, Frank Mortorana, Carl Schnall,
Stuart Bader, Joseph Cohen, Kenneth Hurst, Carl Polakoff, Andrew
Duerwald, Stuart Glasser and Armond Schiff ("Sellers") and
Woodhall Associates (Sellers' respective rights and interests
under the Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contract: Each management contract existing or entered into from
time to time regarding HUD Project No: 115-35201-PM
(g) Management Fees: 7% of residential income collected, payable
monthly
8. (a) Investing Partnership: Abbey Lane Associates, a Texas limited
partnership
(b) Operating Partnership: The Pines, Ltd., an Oklahoma limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $900,000
(ii) Date of Issue: June 1, 1985
(iii) Maturity Date: June 1, 2000
(d) Security Agreement: Purchase Agreement, dated June 1, 1985, by
and among John W. Luciani, Bernard M. Rodin, Sol Zepnick, Irving
Jacobson, Bernard Assael, Frederick Modell and Gerald Modell
("Sellers") and Abbey Lane Associates (Sellers' respective rights
and interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contract: Each management contract existing or entered into from
time to time regarding HUD Project No: 118-35100-PM-L8
(g) Management Fees: 5.75% of residential income collected, payable
monthly
9. (a) Investing Partnership: Belton Associates, a Texas limited
partnership
(b) Operating Partnership: Oak Forest Apts. Associates, a South
Carolina limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,180,000
(ii) Date of Issue: June 1, 1985
(iii) Maturity Date: June 1, 2000
(d) Security Agreement: Purchase Agreement, dated June 1, 1985, by
and among John W. Luciani, Bernard M. Rodin, J&B Management
Corp., John De Arriba, Fernando Fuentes, Paul S. Kaufman,
Winfield L. Kelley, Daniel Matarasso, Oswaldo J. Mora and Arnold
Zimmerman ("Sellers") and Belton Associates (Sellers' respective
rights and interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership interest
in the Operating Partnership
(f) Contract: Each management contract existing or entered into from
time to time regarding HUD Project No: 054-35421-PM-PAH-L8
(g) Management Fees: 7.25% of residential income collected, payable
monthly
<PAGE>
EXHIBIT B
to Agreement
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.2(c)]
THIS CONSENT AND AGREEMENT, dated as of August 14, 1990, is by
and between [name of Investing Partnership] (the "Investing Partnership"),
J&B Management Company ("J&B"), and The Bank of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, J&B Management Corp., Sulgrave Realty Corporation,
Wilmart Development Corp. and the Bank have entered into that certain
Agreement, dated as of August 14, 1990 (the "Agreement"); and
WHEREAS, Section 7.2(c) of the Agreement provides for the
execution of this Consent and Agreement by the parties hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby consent
and agree as follows:
Section 1. Consents and Agreements. The Investing Partnership
-----------------------
hereby (i) consents to J&B's assignment to the Bank of the Investing
Partnership's Set Aside Purchase Note; (ii) consents to J&B's delivery of
the Investing Partnership's Set Aside Purchase Note to the Bank; and (iii)
agrees that upon receiving the Bank's notice of an Event of Default, the
Investing Partnership shall pay all sums due under its Set Aside Purchase
Note directly to the Bank.
Section 2. Notices. All notices and other communications
-------
pursuant or relating to this Consent and Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified mail, return
receipt requested, or by facsimile, confirmed by writing delivered by hand
or sent by registered or certified mail, return receipt requested,
delivered or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
------------------------------------
------------------------------------
------------------------------------
(b) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Michele R. Jawin
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: 212 815-5999
Attention: Diane Bligh, Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to the other
parties hereto in writing. Any notice provided for herein shall be deemed
to have been given on the date of the receipt of the notice by hand
delivery or of the facsimile or the third Business Day after the date of
mailing, certified mail, return receipt requested.
Section 3. Choice of Law. This Consent and Agreement shall be
-------------
governed by the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
Section 4. Successors. This Consent and Agreement shall be
----------
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 5. Counterparts. This Consent and Agreement may be
------------
executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
Section 6. Definitions. All terms used in this Consent and
-----------
Agreement and not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consent
and Agreement as of the date first written above.
[Name of Investing Partnership]
By
--------------------------------
Title:
J&B MANAGEMENT COMPANY
By
--------------------------------
Title:
THE BANK OF NEW YORK
By
--------------------------------
Title:
<PAGE>
EXHIBIT C
to Agreement
[Form of Consent, Assignment and Agreement]
CONSENT, ASSIGNMENT AND AGREEMENT
[PURSUANT TO SECTION 7.3(c)]
THIS CONSENT, ASSIGNMENT AND AGREEMENT, dated as of August 14,
1990, is by and between [name of Investing Partnership] (the "Investing
Partnership"), [name of Operating Partnership] (the "Operating
Partnership"), J&B Management Company ("J&B"), and The Bank of New York
(the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, J&B Management Corp., Sulgrave Realty Corporation,
Wilmart Development Corp. and the Bank have entered into that certain
Agreement, dated as of August 14, l99O (the "Agreement"); and
WHEREAS, Section 7.3(c) of the Agreement provides for the
execution of this Consent and Agreement by the parties hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby consent
and agree as follows:
Section 1. Consents, Assignments and Agreements. The Investing
------------------------------------
Partnership and the Operating Partnership in which the Investing
Partnership owns a Purchased Partnership Interest hereby (i) consent to
J&B's assignment to the Bank of the Security Agreement, Security Interest,
Purchased Partnership Interest, all distributions which may be due and
payable or paid from time to time on such Purchased Partnership Interest,
and the proceeds thereof, relating to the Investing Partnership's Set Aside
Purchase Note; (ii) consent to J&B's delivery to the Bank of Financing
Statements and to the Bank's filing of such Financing Statements with the
appropriate governmental authorities in order to perfect and to continue
the perfection of the Bank's security interest in the Security Agreement,
Security Interest, Purchased Partnership Interest and distributions which
may be due and payable or paid from time to time on the Purchased
Partnership Interest; (iii) subject to the terms and conditions of the
Agreement, assign to the Bank all distributions which shall be due and
payable or made from time to time on the Purchased Partnership Interest,
and the proceeds thereof, until all outstanding obligations under the Set
Aside Purchase Note which is in default have been paid in full (including,
without limitation, all costs of collection, reasonable attorneys' fees and
other fees and expenses); and (iv) subject to the terms and conditions of
the Agreement, agree that upon foreclosure of the Security Interest all
distributions made on the Purchased Partnership Interest shall be paid
directly to the Bank, as the assignee of J&B, regardless of whether the
Bank becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the limitations set
forth in clause (iii) above.
Section 2. Representation of the Operating Partnership. The
-------------------------------------------
Operating Partnership hereby agrees to keep a copy of this Consent,
Assignment and Agreement with its business records.
Section 3. Agreement of the Operating Partnership. The
--------------------------------------
Operating Partnership hereby agrees to admit the Bank as a substituted
limited partner in place of the Investing Partnership in the Operating
Partnership upon the Bank's foreclosure on the Security Interest and
request, subject to the Bank's obtaining HUD 2530 Clearance and the rights
of the Investing Partnership under Section 9-505 of the Uniform Commercial
Code.
Section 4. Amendment to Partnership Agreement. Upon
----------------------------------
substitution of the Bank for the Investing Partnership as a limited partner
in the Operating Partnership pursuant to the Agreement and this Consent,
Assignment and Agreement, this Consent, Assignment and Agreement shall
constitute an amendment to the partnership agreement of the Operating
Partnership, and the Bank shall not be liable for the obligations of any
predecessor which has assigned the Purchased Partnership Interest to make
any contributions to the Operating Partnership.
Section 5. Further Assurances and Power of Attorney. Each of
----------------------------------------
the parties hereto shall, from time to time, upon request of a party
hereto, duly execute, acknowledge and deliver or cause to be duly executed,
acknowledged and delivered, all such further instruments and documents
reasonably requested by a party to effectuate the intent and purposes of
this Consent, Assignment and Agreement. Notwithstanding the foregoing,
this Consent, Assignment and Agreement shall constitute an irrevocable
power of attorney coupled with an interest for the Bank to execute and file
a certificate of amendment to the certificate of limited partnership of the
Operating Partnership or any other document or instrument in order to
effectuate the intent and purposes of this Consent, Assignment and
Agreement; provided, however, that the Bank may not be substituted as a
partner of the Operating Partnership unless such substitution is permitted
under the Uniform Commercial Code and HUD 2530 Clearance, if required, has
been obtained.
Section 6. Notices. All notices and other communications
-------
pursuant or relating to this Consent and Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified mail, return
receipt requested, or by facsimile, confirmed by writing delivered by hand
or sent by registered or certified mail return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
-----------------------------------
-----------------------------------
-----------------------------------
(b) If to the Operating Partnership:
-----------------------------------
-----------------------------------
-----------------------------------
(c) If to J&B
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Michele R. Jawin
(d) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Diane Bligh, Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to the other
parties hereto in writing. Any notice provided for herein shall be deemed
to have been given on the date of the receipt of the notice by hand
delivery or of the facsimile or the third Business Day after the date of
mailing, certified mail, return receipt requested.
Section 7. Choice of Law. This Consent, Assignment and
-------------
Agreement shall be governed by the laws of the State of New York, without
giving effect to the principles of conflicts of law thereof.
Section 8. Successors. This Consent, Assignment and Agreement
----------
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 9. Counterparts. This Consent, Assignment and Agreement
------------
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
Section 10. Definitions. All terms used in this Consent and
-----------
Agreement and not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consent
and Agreement as of the date first written above.
[Name of Investing Partnership]
By
-----------------------------
Title:
[Name of Operating Partnership]
By
-----------------------------
Title:
J&B MANAGEMENT COMPANY
By
-----------------------------
Title:
THE BANK OF NEW YORK
By
-----------------------------
Title:
<PAGE>
EXHIBIT D
to Agreement
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.4(c)]
THIS CONSENT AND AGREEMENT, dated as of August 14, 1990, in by
and between [name of Operating Partnership] (the "Operating Partnership"),
J&B Management Company ("J&B"), and The Bank of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, J&B Management Corp., Sulgrave Realty Corporation,
Wilmart Development Corp. and the Bank have entered into that certain
Agreement, dated as of August 14, 1990 (the "Agreement"); and
WHEREAS, Section 7.4(c) of the Agreement provides for the
execution of the Consent and Agreement by the parties hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby consent
and agree as follows:
Section 1. Consents and Agreement. The Operating Partnership
----------------------
hereby (i) consents to J&B's assignment to the Bank of the Operating
Partnership's Contract with J&B and the Management Fees payable by the
Operating Partnership to J&B thereunder, and the proceeds thereof; (ii)
consents to J&B's delivery to the Bank of Financing Statements and to the
Bank's filing of such Financing Statements with the appropriate
governmental authority in order to perfect and to continue the perfection
of the Bank's security interest in the Contract and the Management Fees,
and the proceeds thereof; and (iii) agrees that upon receiving the Bank's
notice of an Event of Default, the Operating Partnership shall pay all such
Management Fees directly to the Bank.
Section 2. Notices. All notices and other communications
-------
pursuant or relating to this Consent and Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified mail, return
receipt requested, or by facsimile, confirmed in writing delivered by hand
or sent by registered or certified mail, return receipt requested,
delivered or sent on the date of the facsimile addressed as follows:
(a) If to the Operating Partnership:
---------------------------------
---------------------------------
---------------------------------
(b) If to J&B
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Michele R. Jawin
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Diane Bligh, Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to the other
parties hereto in writing. Any notice provided for herein shall be deemed
to have been given on the date of the receipt of the notice by hand
delivery or of the facsimile or the third Business Day after the date of
mailing, certified mail, return receipt requested.
Section 3. Choice of Law. This Consent and Agreement shall be
-------------
governed by the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
Section 4. Successors. This Consent and Agreement shall be
----------
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 5. Counterparts. This Consent and Agreement may be
------------
executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
Section 6. Definitions. All terms used in this Consent and
-----------
Agreement and not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consent
and Agreement as of the date first written above.
[Name of Operating Partnership]
By
------------------------------
Title:
J&B MANAGEMENT COMPANY
By
------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------
Title:
Exhibit 10.5(c)
BANK AGREEMENT
THIS BANK AGREEMENT, dated as of October 11, 1991 (as
amended, modified or supplemented from time to time, this "Bank
Agreement"), is by and among J&B Management Company, a New Jersey
general partnership ("J&B"), and its affiliates; Leisure Centers,
Inc., a corporation organized and existing under the laws of the
State of Delaware, J&B Management Corp., Sulgrave Realty
Corporation, and Wilmart Development Corp., each of which is a
corporation organized and existing under the laws of the State of
New Jersey (hereinafter J&B, Leisure Centers, Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. are sometimes referred to collectively as the
"Company" or the "Co-Obligors"), and The Bank of New York (the
"Bank").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is issuing its Series 2, 12%
Debentures due April 15, 1999 (the "Debentures") pursuant to the
Company's Confidential Private Placement Memorandum dated October
11, 1991, as the same may be from time to time amended (the
"Memorandum");
WHEREAS, the Company's private placement of the
Debentures (the "Offering") will terminate on the earlier of (i)
the date on which all the Debentures are sold or (ii) June 30,
1993 (the "Offering Termination Date");
WHEREAS, subscribers will purchase Debentures at a
closing (the "Initial Closing") to be held when at least
$1,000,000 principal amount of Debentures have been sold and,
thereafter, from time to time (each, singly, an "Additional
Closing," and, collectively, the "Additional Closings"), at the
discretion of the Company, on such day or days as may be
determined by the Company, as subscriptions are received and
accepted (hereinafter the date of the Initial Closing and the
date of any Additional Closing are each referred to as a "Closing
Date");
WHEREAS, the Company desires to deliver to the Bank
amounts received by the Company from subscribers for Debentures
(each, singly, a "Purchaser," and, collectively, the
"Purchasers"), in payment for the Debentures, which amounts shall
be released to the Company at the Initial Closing and at each
Additional Closing;
WHEREAS, each Purchaser shall be entitled to receive,
on a monthly basis prior to the Closing Date with respect to that
Purchaser's Debentures, distributions representing interest
accrued on that Purchaser's subscription payment at a rate of 12%
per annum;
WHEREAS, the Company desires to establish an interest
bearing escrow fund to be called J&B Management Series 2 Escrow
Fund Account No. 201315 (the "Fund") with the Bank;
WHEREAS, the Company wishes to grant the Bank, for the
benefit of the Bank and the Purchasers, a security interest in
and to assign to the Bank certain notes, instruments and
documents more fully described below and the Bank is willing to
accept such security interest and assignment upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Company wishes to appoint the Bank as
Escrow Agent, Authenticating Agent, Registrar, Paying Agent and
Custodian with respect to the Debentures and the above-mentioned
notes, instruments and documents and the Bank is willing to
accept such appointments upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained and other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Escrow Agent.
------------
Section 1.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Escrow Agent for the purposes set
forth in this Section l, and the Bank hereby accepts such
appointment.
Section 1.2. Escrow.
------
The Company shall from time to
time deliver amounts received from Purchasers in payment for the
Debentures ("Subscription Payments") to the Bank. The Bank shall
deposit the Subscription Payments in the Fund to be established
in the Company's name for this purpose by the Bank. Subscription
Payments delivered for deposit in the Fund shall be invested in
short term certificates of deposits (including certificates of
deposits issued by the Bank), A-l, P-l commercial paper, interest
bearing money market accounts, all as specified in writing by the
Company and held in trust for the benefit of the Purchasers. The
Bank is not responsible for interest, losses, taxes or other
charges on investments. All checks delivered to the Bank for
deposit in the Fund shall be payable to the order of "J&B
Management Company - Escrow Account." Concurrently with such
delivery, the Company shall deliver to the Bank a statement of
the name, mailing address and tax identification number of each
Purchaser whose Subscription Payment is being delivered, and a
schedule listing the aggregate Debentures and aggregate
cumulative Subscription Payments to date delivered for deposit in
the Fund. For the purposes of this Bank Agreement, the Company
is authorized to make deposits and give instructions as to
investments of deposits and otherwise, as contemplated in this
Bank Agreement, to the Bank.
Section 1.3. Interest.
--------
During the period (the "Escrow
Period") commencing upon the date that any Purchaser's
Subscription Payment constitutes Cleared Funds (as defined in
Section 1.11 hereof) and ending on the day immediately preceding
the Closing Date with respect to that Purchaser's Debentures,
interest will accrue on that Purchaser's Subscription Payment at
a rate of 12% per annum, computed on the basis of a year of 360
days consisting of 12 thirty day months. Interest shall be
payable on the fifteenth day of each month. Four Business Days
prior to each such interest payment date, the Bank shall give the
Company written notice of the difference between the amount of
interest which will be payable on Subscription Payments on such
interest payment date and the amount of interest accruing on the
Fund's assets which will be available for such payment on such
interest payment date. Not later than 11:30 a.m. (New York time)
on the second Business Day preceding such interest payment date,
the Company shall deposit with the Bank its check in the amount
of such difference. On each interest payment date, the Bank
shall pay interest which is due and payable to the respective
Purchasers by mailing its check in the appropriate amount to each
Purchaser by first class mail at the Purchaser's mailing address
provided to the Bank pursuant to Section 1.2 hereof. In the
event that the Company shall default in its payment obligations
to the Bank under this Section 1.3, the Bank shall mail its check
in the amount of each Purchaser's pro rata share of interest
earned and paid on the Fund's assets as provided in this Section
1.3 and subject to Section 1.7 hereof.
For purposes of this Bank Agreement, "Business Day" shall mean
any day other than a day on which the Bank is authorized to
remain closed in New York City.
Section 1.4. Conditions of Initial Closing and
---------------------------------
Additional Closings.
-------------------
Notwithstanding anything to the contrary in
this Bank Agreement, it is a condition precedent to the Initial
Closing and to each Additional Closing that J&B shall deliver to
the Bank Set Aside Purchase Notes which at maturity will have an
aggregate outstanding balance of principal equal to at least
twice the principal amount of the Debentures which will be sold
at that Initial Closing or Additional Closing, together with the
related Consent and Agreement pertaining to each such Set Aside
Purchase Note and the related Consent, Assignment and Agreement
pertaining to the Purchased Partnership Interest and the related
Financing Statements (as such terms are defined in Section 7
hereof), as provided in Section 7 hereof. Upon the scheduling of
the Initial Closing and each Additional Closing, the Company
shall give written notice thereof to the Bank not less than one
(1) Business Day prior to the date scheduled for each such
closing. As used in this Section 1.4 and elsewhere in this Bank
Agreement, a statement concerning the outstanding principal
amount at maturity of any Set Aside Purchase Note refers to an
amount that does not include any payments on a Set Aside Purchase
Note deferred by the obligor thereof with the consent of the
Company.
Section 1.5. Cancellation.
------------
The Company shall give the
Bank notice of any Purchaser who cancels his Subscription prior
to his Closing Date or whose Subscription Payment was deposited
pursuant to Section 1.2 but whose Subscription is rejected,
setting forth the name and mailing address of the Purchaser and
the amount of the rejected or cancelled subscription. As
promptly as practicable thereafter, the Bank shall pay the amount
of the cancelled or rejected subscription from the Fund to the
Purchaser whose Subscription was cancelled or rejected as
directed by the Company. Any interest earned thereon and not
theretofore distributed pursuant to Section 1.3 hereof shall be
paid to the Purchaser in accordance with Section 1.3 hereof.
Payment shall be made by check payable to the Purchaser mailed by
the Bank by first class mail directly to the Purchaser at the
mailing address of the Purchaser.
Section 1.6. Payment.
-------
The Bank, at the Initial
Closing and each Additional Closing, upon written instruction
from the Company, shall transfer to the Company or to such third
party or parties as may be directed by the Company the Cleared
Funds then held in the Fund by the Bank.
Any interest earned thereon and not theretofore distributed in
accordance with Section 1.3 hereof shall be paid to the
Purchasers in accordance with Section 1.3 hereof.
Section 1.7. Fees and Expenses.
-----------------
In addition to the
fees set forth in Section 7.8 hereof, the Bank shall be entitled
to an administration fee as compensation for its services under
this Section 1 in the amount of $5,000 payable (i) upon the
execution and delivery of this Bank Agreement and (ii) subject to
an adjustment as provided in the next succeeding sentence of this
Section 1.7, on the first anniversary date of this Bank
Agreement, provided however that the Bank shall not be entitled
to payment of an administration fee on such first anniversary
date if all of the Debentures have been sold prior thereto. In
the event the Offering terminates prior to June 30, 1993, the
Company shall be entitled to a refund payable ten days after the
Offering Termination Date, of that portion of the administration
fee paid to the Bank on the first anniversary date of the Bank
Agreement, in an amount calculated as the difference between (a)
$5,000 and (b) the product of (x) $5,000 and (y) a fraction the
numerator of which is the number of days between the first
anniversary date of this Bank Agreement and the Offering
Termination Date, inclusive, and the denominator of which is 365.
In no event shall the Bank be entitled to payment of an
administration fee, as provided for in this Section 1.7,
following the Offering Termination Date. The Company shall also
pay the Bank $5 for the preparation and execution of each
Purchaser's account including the calculation of interest
accrued; $1 for the preparation of each Purchaser's 1099 tax
form; $25 for each investment transaction in the Fund; $25 for
each returned "bounced" check of a Purchaser; and $500 for each
Additional Closing, payable within 10 days after the Bank gives
the Company notice that any such amounts are due and payable.
Notwithstanding anything herein to the contrary, the Bank shall
not charge the Company for the issuance of checks or wire
transfers to make monthly payments of accrued interest on
Subscription Payments. No additional fee will be payable with
respect to wire transfers of and unreturned checks for
Subscription Payments. In addition, the Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 1
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it has incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. Amounts held in the Fund shall not be available to
satisfy this obligation or any other obligation of the Company to
the Bank. The Company shall not be obligated to reimburse the
Bank for any costs or expenses incurred in connection with the
preparation and execution of this Bank Agreement. The provisions
of this Section 1.7 shall survive the termination of this Bank
Agreement.
Section 1.8. Termination of Offering.
-----------------------
If the Offering
should be terminated, the Company shall promptly so advise the
Bank in writing, and shall authorize and direct the Bank to
return the Subscription Payments to the Purchasers. The Bank
thereupon shall return those Subscription Payments to the extent
they have not been distributed per Section 1.6 to the Purchasers
from whom they were received. Any interest earned on the
Subscription Payments and not theretofore distributed pursuant to
Section 1.3 hereof shall be paid in accordance with Section 1.3
hereof. Upon making such disbursements to the Purchasers and the
Company, the Bank shall be relieved of all of its obligations and
liabilities under this Bank Agreement.
Section 1.9. Form 1099, etc.
--------------
In compliance with the
Interest and Dividend Tax Compliance Act of 1983, the Company
shall request that each Purchaser furnish to the Bank such
Purchaser's taxpayer identification number and a statement
certified under penalties of perjury that (a) such taxpayer
identification number is true and correct and (b) the Purchaser
is not subject to the requirements of such Act providing for
withholding of 20% of reportable interest, dividends or other
payments.
Section 1.10. Uncollected Funds.
-----------------
In the event that
any funds, including Cleared Funds, deposited in the Fund prove
uncollectible after the funds represented thereby have been
released by the Bank pursuant to this Bank Agreement, the Company
shall reimburse the Bank upon request for the face amount of such
check or checks; and the Bank shall, upon instruction from the
Company, deliver the returned checks or other instruments to the
Company. This section shall survive the termination of this Bank
Agreement.
Section 1.11. Cleared Funds.
-------------
For the purpose of this
Bank Agreement, Subscription Payments shall constitute "Cleared
Funds" in accordance with the following:
(a) if paid by wire transfer, such funds shall
constitute Cleared Funds on the date received by the Bank;
(b) if paid by check drawn on a New York Clearing
House Bank, such funds shall constitute Cleared Funds on the
second Business Day following the date received by the Bank; and
(c) if paid by check drawn on any bank other than a
New York Clearing House Bank, such funds shall constitute Cleared
Funds on the third Business Day following the date received by
the Bank.
Section 2. Execution.
---------
The Debentures shall be
executed on behalf of the Company by the manual or facsimile
signature of a partner or officer of the Company. All such
facsimile signatures shall have the same force and effect as if
the partner or officer had manually signed the Debentures. In
case any partner or officer of the Company whose signature shall
appear on a Debenture shall cease to be such partner or officer
before the delivery of such Debenture or the issuance of a new
Debenture following a transfer or exchange, such signature or
such facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such partner or officer had remained a
partner or officer until delivery.
Section 3. Authenticating Agent.
--------------------
Section 3.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Authenticating Agent for the purposes
set forth in this Section 3, and the Bank hereby accepts such
appointment.
Section 3.2. Authentication.
--------------
Only such Debentures as
shall have the Certificate of Authentication endorsed thereon in
substantially the form set forth in the form of Debenture
attached to the Memorandum, duly executed by the manual signature
of an authorized signatory of the Bank, shall be entitled to any
right or benefit under this Bank Agreement. No Debentures shall
be valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by
the Bank; and such executed certificate upon any such Debenture
shall be conclusive evidence that such Debenture has been
authenticated and delivered under this Bank Agreement. The
Certificate of Authentication on any Debenture shall be deemed to
have been executed by the Bank if signed by an authorized
signatory of the Bank, but it shall not be necessary that the
same person sign the Certificate of Authentication on all of the
Debentures.
Section 4. Mutilated, Lost, Stolen or Destroyed
------------------------------------
Debentures.
----------
Subject to applicable law, in the event any
Debenture is mutilated, lost, stolen or destroyed, the Company
may authorize the execution and delivery of a new Debenture of
like date, number, maturity and denomination as that mutilated,
lost, stolen or destroyed, provided, however, that in the case of
any mutilated Debenture, such mutilated Debenture shall first be
surrendered to the Company, and in the case of any lost, stolen
or destroyed Debenture, there shall be first furnished to the
Company and the Bank, evidence of the ownership thereof and of
such loss, theft or destruction satisfactory to the Company and
the Bank, together with indemnification through a bond of
indemnity or otherwise as shall be satisfactory to the Company
and the Bank. The Company may charge the Purchaser of such
Debenture with any amounts satisfactory to the Company and the
Bank permitted by applicable law.
Section 5. Registrar and Transfer Agent.
----------------------------
Section 5.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Registrar and Transfer Agent for the
purposes set forth in this Section 5, and the Bank hereby accepts
such appointment.
Section 5.2. Registration, Transfer and Exchange of
--------------------------------------
Debentures.
----------
The Debentures are issuable only as registered
Debentures without coupons in the denominations of $100,000 or
any multiple or any fraction thereof at the sole discretion of
the Company. Each Debenture shall bear the following restrictive
legend: "These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and sold
or otherwise transferred only if registered pursuant to the
provisions of that Act or if an exemption from registration is
available." The Bank shall keep at its principal corporate trust
office a register in which the Bank shall provide for the
registration and transfer of Debentures. Upon surrender for
registration of transfer of any Debenture at such office of the
Bank, the Company shall execute, pursuant to Section 2 hereof,
and mail by first class mail to the Bank, and the Bank shall
authenticate, pursuant to Section 3 hereof, and mail by first
class mail to the designated transferee, or transferees, one or
more new Debentures in an aggregate principal amount equal to the
unpaid principal amount of such surrendered Debenture, registered
in the name of the designated transferee or transferees. Every
Debenture presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the holder of such Debenture or his
attorney duly authorized in writing. Notwithstanding the pre-
ceding, the Debentures may not be transferred without an
effective registration statement under the Securities Act of 1933
covering the Debentures or an opinion of counsel to the holder of
such Debentures satisfactory to the Company and its counsel that
such registration is not necessary under the Securities Act of
1933 (the "Securities Act"). At the option of the owner of any
Debenture, such Debenture may be exchanged for other Debentures
of any authorized denominations, in an aggregate principal amount
equal to the unpaid principal amount of such surrendered
Debenture, upon surrender of the Debenture to be exchanged at the
principal corporate trust office of the Bank; provided, however,
that any exchange for denominations other than $100,000 or an
integral multiple thereof shall be at the sole discretion of the
Company. Whenever any Debenture is so surrendered for exchange,
the Company shall execute, pursuant to Section 2 hereof, and
deliver to the Bank, and the Bank shall authenticate, pursuant to
Section 3 hereof, and mail by first class mail to the designated
transferee, or transferees, the Debenture or Debentures which the
Debenture owner making the exchange is entitled to receive. Any
Debenture or Debentures issued in exchange for any Debenture or
upon transfer thereof shall be dated the date to which interest
has been paid on such Debenture surrendered for exchange or
transfer, and neither gain nor loss of interest shall result from
any such exchange or transfer. In addition, each Debenture
issued upon such exchange or transfer shall bear the restrictive
legend set forth above unless in the opinion of counsel to the
Company, such legend is not required to ensure compliance with
the Securities Act.
Section 5.3. Owner.
-----
The person in whose name any
Debenture shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes, and payment of or on
account of the principal of or interest on such Debenture shall
be made only to or upon the order of the registered owner thereof
or his duly authorized legal representative. Such registration
may be changed only as provided in this Section 5, and no other
notice to the Company or the Bank shall affect the rights or
obligations with respect to the transfer of a Debenture or be
effective to transfer any Debenture. All payments to the person
in whose name any Debenture shall be registered shall be valid
and effectual to satisfy and discharge the liability upon such
Debenture to the extent of the sum or sums to be paid.
Section 5.4. Transfer Agent.
--------------
The Bank shall send
executed, authenticated Debentures to Purchasers on Closing Dates
and to subsequent owners and transferees who are entitled to
receive Debentures pursuant to the terms of this Bank Agreement,
by first class mail.
Section 5.5. Charges.
-------
No service charge shall be made
for any transfer or exchange of Debentures, but in all cases in
which Debentures shall be transferred or exchanged hereunder, the
Company or the Bank may collect from the registered owner of a
Debenture a charge for every transfer or exchange of Debentures
sufficient to reimburse them for any tax, fee or other
governmental charge required to be paid with respect to such
transfer or exchange, and such charge shall be paid before any
such new Debenture shall be delivered.
Section 5.6. Redemption.
----------
Whenever the Company shall
be required to effect mandatory redemption of part or all of the
Debentures, the Company shall give notice thereof to the Bank at
least forty (40) days prior to the date set forth for redemption,
the manner in which redemption shall be effected and all the
relevant details thereof. The Bank shall give notice to the
Purchasers of that redemption at least thirty (30) days prior to
the date set forth for redemption. The Company shall deliver all
redeemed Debentures to the Bank for cancellation of the whole or
portion thereof, as appropriate, and issuance of new Debentures
in denominations equal to the unredeemed portion.
Section 5.7. Expenses.
--------
As a condition to the transfer
or exchange of any Debenture, the owner of the Debenture shall
reimburse the Company and the Bank for their respective actual
out-of-pocket expenses incurred in connection therewith
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of their respective
counsel). The provisions of this Section 5.7 shall survive the
termination of this Bank Agreement.
Section 6. Paying Agent.
------------
Section 6.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Paying Agent for the purposes set
forth in this Section 6, and the Bank hereby accepts such
appointment.
Section 6.2. Payment Provisions.
------------------
The Bank shall pay
interest on Subscription Payments and principal of and interest
on the Debentures to the persons in whose names the Debentures
are registered, in accordance with the terms and provisions of
this Bank Agreement and the Debentures, by check mailed by first
class mail to the registered owner of a Debenture at his address
as it appears in the register; provided that not later than 11:30
a.m. (New York time) on the second Business Day preceding each
date on which interest on or principal of any Debenture is due
and payable, the Company shall deposit with the Bank its check in
the amount due.
Section 6.3. Expenses.
--------
The Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 6
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records), payable within ten (10) days after the Bank gives
notice to the Company that it has incurred such expenses. The
obligation to pay such compensation and reimburse such expenses
shall be borne solely by the Company. Notwithstanding anything
herein to the contrary, the Bank shall not charge the Company any
fees for the issuance of checks or wire transfers to make
payments of interest on or repayments of principal of the
Debentures. The provisions of this Section 6.3 shall survive the
termination of this Bank Agreement.
Section 7. The Custodian.
-------------
Section 7.1. Appointment.
-----------
The Company hereby appoints
and designates the Bank as Custodian for the purposes set forth
in this Section 7, and the Bank hereby accepts such appointment.
Section 7.2. Set Aside Purchase Notes.
------------------------
(a) J&B is the holder of certain Purchase Notes. Each
such Purchase Note has been issued by an Investing Partnership,
pursuant to a certain Purchase Agreement. Under the terms of
each such Purchase Note and Purchase Agreement, J&B is entitled
to assign each Purchase Note and J&B's right to payments of
interest thereon and principal amount thereof. Under the terms
of each Purchase Agreement, payments of interest and, where
required, annual payments of principal due under the Purchase
Note may be offset and reduced by payments made under certain
Investor Notes issued by the limited partners of the respective
Investing Partnership, which have been pledged to secure
obligations owed by J&B to one or more banks. Only that interest
and, where applicable, annual principal payments ("Excess
Interest and Principal") under a Purchase Note which is in excess
of the amount offset and reduced by payments made to such banks,
if any, may be payable to the holder of the Purchase Note. Any
interest and, where required, annual payment of principal that
are due but unpaid on Purchase Notes shall be deferred until the
maturity of that Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Purchase Notes, having an aggregate face value of $16,880,000
and an aggregate balance of principal due at maturity equal to
$14,654,500, listed in Exhibit A hereto (the "Set Aside Purchase
Notes") issued by the Investing Partnerships listed in Exhibit A
hereto, and the proceeds thereof. In order to perfect such
security interests, J&B shall deliver to the Bank the Set Aside
Purchase Notes. Upon receipt of each Purchase Note, the Bank
shall execute and deliver to the Company a receipt therefor.
Notwithstanding the assignment of the Set Aside Purchase Notes to
the Bank, the annual payments of principal due on certain Set
Aside Purchase Notes so providing and interest payments on all of
the Set Aside Purchase Notes shall be payable directly to the
Company until such time as an Event of Default (as defined in
Section 7.6 hereof) shall occur and be continuing. Under the
terms of the Set Aside Purchase Notes, only that principal and
interest thereon which is Excess Interest and Principal may be
payable to the Bank. The parties hereto confirm that annual
principal payments made under the Set Aside Purchase Notes listed
in Exhibit A hereto, as requiring such annual principal payment,
will belong to the Company until such time as an Event of Default
shall occur and be continuing. The parties hereto further
confirm that any deferred interest and principal on a Set Aside
Purchase Note paid at the maturity thereof shall belong to the
Company so long as an Event of Default shall not have occurred
and be continuing.
(c) J&B shall deliver to the Bank a Consent Agreement
in the form of Exhibit B hereto, executed by each Investing
Partnership listed in Exhibit A hereto, under which the Investing
Partnership shall (i) consent to J&B's assignment to the Bank of
the Investing Partnership's Set Aside Purchase Note, (ii) consent
to J&B's delivery of the Investing Partnership's Set Aside
Purchase Note to the Bank, and (iii) agree that upon receiving
the Bank's notice of an Event of Default, the Investing
Partnership shall pay all sums due under its Set Aside Purchase
Note directly to the Bank. Upon receipt of each such Consent and
Agreement, the Bank shall execute and deliver to the Company a
receipt therefor.
Section 7.3. Purchased Partnership Interests.
-------------------------------
(a) Each Investing Partnership listed in Exhibit A
hereto, in order to secure its payment of the principal of and
interest on its Set Aside Purchase Note, has entered into a
Security Agreement listed in Exhibit A hereto (a "Security
Agreement") under which the Investing Partnership has granted a
security interest (a "Security Interest") in that Investing
Partnership's limited partnership interest listed in Exhibit A
hereto (a "Purchased Partnership Interest") in a respective
Operating Partnership listed in Exhibit A hereto (an "Operating
Partnership").
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each Security
Agreement listed in Exhibit A hereto, each Security Interest in a
Purchased Partnership Interest created under any such Security
Agreement, each such Purchased Partnership Interest, each
distribution due and payable or made from time to time on such
Purchased Partnership Interest, and the proceeds thereof. In
order to perfect such security interest, J&B shall deliver to the
Bank Uniform Commercial Code Financing Statements ("Financing
Statements") for filing by the Bank with the such appropriate
governmental authorities indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authorities in order to continue the perfection of
such security interest. Notwithstanding the assignments of the
above mentioned Security Agreements, Security Interests,
Purchased Partnership Interests, and due and payable or paid
distributions on Purchased Partnership Interests to the Bank, all
distributions on such Purchased Partnership Interests shall be
payable directly to the respective Investing Partnership if an
event of default shall not have occurred and be continuing under
that Investing Partnership's Set Aside Purchase Note; or to the
Bank for payment to the Company if the Bank shall foreclose on
the Security Interest pursuant to Section 7.5(f) hereof, and
shall be payable directly to the Bank for the benefit of the Bank
and the owners of the Debentures only if the Bank shall foreclose
on the Security Interest pursuant to Section 7.5(e) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership and Operating Partnership
listed in Exhibit A hereto, under which the Investing Partnership
and Operating Partnership shall (i) consent to J&B's assignment
to the Bank of the respective Security Agreement, Security
Interest, Purchased Partnership Interest, each distribution due
and payable or made from time to time on the Purchased
Partnership Interest, and the proceeds thereof; (ii) consent to
J&B's delivery of the above mentioned Financing Statements and
the Bank's filing of the Financing Statements from time to time
with the appropriate governmental authorities; (iii) assign to
the Bank all distributions which may be due and payable or made
from time to time on the Purchased Partnership Interest (subject
to the terms and conditions set forth in this Bank Agreement)
until all outstanding obligations under the Set Aside Purchase
Note which is in default shall have been paid in full (including,
without limitation, all costs of collection, reasonable attorney
fees and other fees and expenses) and (iv) agree that upon
foreclosure of the Security Interest, all distributions on the
Purchased Partnership Interest shall be paid directly to the
Bank, as the assignee of J&B, regardless of whether the Bank
becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the
limitations set forth in clause (iii) above. Upon receipt of
each such Consent, Assignment and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.4. Attachment of Security Interests.
--------------------------------
Notwithstanding anything to the contrary in this Bank
Agreement, each security interest granted by J&B to the Bank
under this Section 7 shall become effective and shall attach only
upon J&B's delivery to the Bank of the respective Set Aside
Purchase Note, and the related Consent and Agreement and
Financing Statements pertaining to that Set Aside Purchase Note
and the related Consent, Assignment and Agreement and related
Financing Statements pertaining to the Purchased Partnership
Interest. J&B shall be obligated to deliver to the Bank only
those Set Aside Purchase Notes selected by J&B in its sole
discretion as shall have an aggregate balance of principal due at
maturity equal to at least twice the principal amount of the
Debentures which will be sold at the respective Initial Closing
or Additional Closing, together with the related Consent and
Agreement and Financing Statements pertaining to that Set Aside
Purchase Note, and the related Consent, Assignment and Agreement
and related Financing Statements pertaining to the Purchased
Partnership Interest. At such time as the Company shall send to
the Bank the Company's irrevocable notice that there will not be
any further Additional Closings, the Company and the Bank shall
thereupon acknowledge and append hereto an additional Exhibit E
listing the Set Aside Purchase Notes, Investing Partnerships,
Operating Partnerships and Security Agreements, in which the Bank
will have security interests under this Section 7.
Section 7.5. Duties of the Bank.
------------------
(a) The Bank shall hold the notes, Agreements and
instruments deposited with it for the purposes of this Bank
Agreement and for the benefit of the Bank and of the owners of
the Debentures from time to time, shall file the Financing
Statements delivered to it from time to time by J&B with the
appropriate governmental authorities indicated by J&B to the Bank
and shall perform all duties imposed upon it by this Bank
Agreement until this Bank Agreement is terminated. The security
interests and assignments created by this Bank Agreement and by
each Consent, Assignment and Agreement shall automatically
terminate when all of the Debentures and all amounts payable to
the Bank under this Bank Agreement have been paid in full.
Thereupon, the Bank shall return to J&B the Set Aside Purchase
Notes deposited with it pursuant to Section 7.2(b) hereof, and
shall file with the appropriate governmental authorities
indicated by J&B to the Bank Financing Statements delivered by
J&B to the Bank recording the termination of the Bank's security
interests and assignments granted under this Bank Agreement and
each Consent, Assignment and Agreement.
(b) Upon the occurrence of an Event of Default, the
Bank shall declare the entire outstanding aggregate principal
balance of all the Debentures due and immediately payable with
accrued interest thereon. In addition, the Bank shall
immediately notify the makers of the Set Aside Purchase Notes
that all payments to be made thereafter on the Set Aside Purchase
Notes shall be paid directly to the Bank.
The Bank shall collect all payments received under the
foregoing security interests and assignments and apply them for
the benefit of the Bank and of the owners of the Debentures
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to the repayment of principal of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(c) Upon the occurrence of an Event of Default, the
Bank shall be entitled to institute action against the
Co-Obligors, jointly or severally, to collect payment under the
Debentures without any prior requirement to attempt to collect
any funds under the Set Aside Purchase Notes or the related
Purchased Partnership Interests. In the event that the Company
shall default on its payment obligations to the Bank under this
Bank Agreement, the Bank shall be entitled to institute action
against the Co-Obligors, jointly or severally, to collect payment
under this Bank Agreement, without any prior requirement to
attempt to collect any funds under the Set Aside Purchase Notes
or the related Purchased Partnership Interests.
(d) Upon the occurrence of an Event of Default, the
Bank, in its discretion, is authorized to, but shall not be
required to, proceed in any way legally available to it to
liquidate the Set Aside Purchase Notes and the Purchased
Partnership Interests (if the Bank shall have foreclosed on such
Set Aside Purchase Note pursuant to Section 7.5(e) hereof)
including, but not limited to, the public or private sale of all
or any part thereof upon three (3) days' prior notice to the
Co-Obligors, free and clear of any claim, lien, charge or
encumbrance including, without limitation, any right of equity of
redemption. The Bank shall apply the proceeds of any such sale
firstly to the payment of the expenses of the sale, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of accrued interest including accrued interest from and
after the Event of Default, and next to the payment of principal
of the Debentures. The Bank shall not be liable to any of the
Co-Obligors or their affiliates because of any sale or the
consequences thereof.
(e) While an Event of Default is continuing, if there
shall occur or if there shall have occurred and be continuing an
event of default under any Set Aside Purchase Note, the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of the foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining previous
Multi-family Participation Clearance from the United States
Department of Housing and Urban Development ("HUD 2530
Clearance") with respect to that Operating Partnership, if
required, in satisfaction of that Set Aside Purchase Note (but
not of any Debenture); provided, that during any time period
pending obtaining HUD 2530 Clearance, if required, or if HUD 2530
Clearance is required for that Operating Partnership but cannot
be obtained, or if the Bank may not be admitted as a substituted
limited partner in the Operating Partnership for any reason, the
Bank shall nevertheless be entitled to receive all distributions
from that Operating Partnership as the assignee of J&B and this
Bank Agreement shall operate as an assignment of such
distributions by the Investing Partnership, subject to the
limitations set forth in Section 7.3(c). In addition, while an
Event of Default is continuing, if there shall occur or if there
shall have occurred and be continuing an event of default under
any Set Aside Purchase Note or under any Partnership Agreement
governing the Operating Partnership related to the Purchased
Partnership Interest, the Bank shall be authorized to exercise
any and all rights and remedies available to it as the holder of
the respective Set Aside Purchase Note, the substituted partner
or assignee with respect to the Purchased Partnership Interest in
the related Operating Partnership, as well as any other remedy
available under law or equity. The Bank shall apply the proceeds
of its exercise of the above mentioned rights and remedies
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to repayment of principal of the Debentures, until all amounts
due under the Debentures shall have been paid in full together
with all costs of collection, fees and expenses.
(f) If a default on any payment of principal or
interest on a Set Aside Purchase Note shall occur while no Event
of Default is continuing, then the Company shall immediately give
the Bank notice thereof and upon receiving such notice the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of such foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining HUD 2530
Clearance, if required, in satisfaction of that Set Aside
Purchase Note (but not of any Debenture); provided that during
any time period pending obtaining HUD 2530 Clearance, if
required, or if HUD 2530 Clearance is required for that Operating
Partnership but cannot be obtained, or if the Bank may not be
admitted as a substituted limited partner in the Operating
Partnership for any reason, the Bank shall be entitled
nevertheless to receive all distributions from that Operating
Partnership as the assignee of J&B and this Bank Agreement shall
operate as an assignment of such distributions by the Investing
Partnership, subject to the limitations set forth in Section
7.3(c). The Bank shall pay over to the Company any amounts
received from the Operating Partnership unless and until an Event
of Default occurs. If and when such Event of Default shall
occur, the Bank shall follow the procedures specified in Sections
7.5 (b)-(e) of this Bank Agreement.
(g) The rights and remedies enumerated herein are in
addition to and not in lieu of any other right or remedy
available to the Bank under law or equity, including, without
limitation, rights and remedies available to a secured party
under the Uniform Commercial Code; provided, however, that the
Bank shall not be entitled to apply the proceeds of the
foreclosure of any Set Aside Purchase Note or Purchased
Partnership Interest to amounts owing to the Bank under this Bank
Agreement unless an Event of Default shall occur and be
continuing. The Bank shall be entitled to exercise one or more
remedies at the same time, all such rights and remedies being
cumulative and not mutually exclusive.
(h) The Co-Obligors shall remain jointly and severally
liable for any deficiency remaining after the application of
proceeds of the foreclosure of any Set Aside Purchase Note or
Purchased Partnership Interest collected by the Bank including,
but not limited to, all actual costs and expenses of collection
(including, without limitation, reasonable attorneys' fees and
expenses). If any funds shall remain in the possession of the
Bank after the payment of all amounts due under the Debentures,
all such costs of collection thereof and all other actual fees
and expenses (including without limitation reasonable attorney's
fees and expenses) of the Bank, the Bank shall deliver such
remaining funds to the Company. The provisions of this Section
7.5(h) shall survive the termination of this Bank Agreement.
Section 7.6. Events of Default.
-----------------
If either of the following events (an "Event of
Default") shall occur and be continuing for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any part of
the principal of or interest on any Debenture when the same
shall become due and payable, and such default shall have
continued for more than 15 days; or
(ii) the Company fails to redeem a pro rata portion of
the Debentures at the time set for mandatory redemption and
such default shall have continued for more than 15 days;
then, the Bank, by notice to the Company, or the owners of at
least 25% of the principal amount of the Debentures, by notice to
the Company and to the Bank, may declare the entire principal of
and accrued interest on all Debentures to become immediately due
and payable at par without presentment, demand, protest or other
notice of any kind, all of which are waived by the Company.
Section 7.7. Sale of Set Aside Purchase Notes.
--------------------------------
The Company may from time to time while no Event of
Default shall have occurred and be continuing arrange the sale of
one or more Set Aside Purchase Notes to a third party, subject to
the following conditions:
(i) The Company shall give prompt written notice
thereof to the Bank together with all relevant details of
the proposed transaction.
(ii) As part of the consideration to be paid by the
purchaser of each Set Aside Purchase Note to be sold, the
purchaser shall pay directly to the Bank cash in the amount
equal to 50% of the principal balance due at maturity of
that Set Aside Purchase Note plus an amount sufficient to
pay accrued interest on the pro rata portion of Debentures
to be prepaid pursuant to subparagraph (iv) below.
(iii) The total consideration to be paid upon sale of a
Set Aside Purchase Note shall not be less the 50% of the
principal balance due at maturity thereof plus an amount
sufficient to pay accrued interest on the pro rata portion
of Debentures to be prepaid pursuant to subparagraph (iv)
below.
(iv) Upon receipt of cash as provided in subparagraph
(ii) above, the Bank will apply the proceeds to the pro rata
redemption of the Debentures at par plus payment of accrued
interest thereon. Thereafter, the Bank shall deliver each
Set Aside Purchase Note that is then sold to the purchaser
together with an assignment of Security Interest and
Security Agreement covering the related Purchased
Partnership Interest. Subject to Section 8(b) hereof the
Bank shall have no liability whatsoever to the purchaser or
any party hereto for its actions pursuant to this Section
7.7.
Section 7.8. Fees and Expenses.
-----------------
In addition to the
administration fee set forth in Section 1.7 hereof, the Bank
shall be entitled to compensation for its services under this
Section 7 in the amount of $2,500 as an acceptance fee, payable
upon execution and delivery of this Bank Agreement; and
administrative fees, payable annually on the anniversary date of
this Bank Agreement, based upon the aggregate principal amount of
outstanding Debentures ten days prior to the anniversary date, in
the following amounts:
$1,000,000 outstanding . . . . . . . . . . . . . . . $2,500
$1,000,001 to $2,000,000 outstanding . . . . . . . . $3,000
$2,000,001 to $3,000,000 outstanding . . . . . . . . $4,000
$3,000,001 to $4,000,000 outstanding . . . . . . . . $5,000
$4,000,001 to $5,000,000 outstanding . . . . . . . . $6,000
$5,000,001 to $6,000,000 outstanding . . . . . . . . $7,000
$6,000,001 to $7,000,000 outstanding . . . . . . . . $8,000
$7,000,001 to $7,300,000 outstanding . . . . . . . . $9,000
The Company shall reimburse the Bank for its actual out-of-pocket
expenses incurred in connection with its obligations pursuant to
this Section 7 (including, but not limited to, actual expenses
for stationery, postage, telephone, telex, wire transfers,
telecopy, retention of records, and the filing of Financing
Statements, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. The Set Aside Purchase Notes and the related
Purchased Partnership Interests in which the Bank has a security
interest will be available to satisfy the Company's payment
obligations to the Bank under this Section 7.8 only when an Event
of Default has occurred and is continuing. The Company shall not
be obligated to reimburse the Bank for any costs or expenses
incurred in connection with the preparation and execution of this
Bank Agreement. The provisions of this Section 7.8 shall survive
the termination of this Bank Agreement.
Section 8. Other Rights and Duties of Bank.
-------------------------------
(a) The Bank need exercise only those rights and need
perform only those duties that are contemplated or specifically
set forth in this Bank Agreement and no others.
(b) Notwithstanding anything herein to the contrary,
the Bank may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act, or
its own willful misconduct except that:
1. This paragraph does not limit the effect of
paragraph (a) of this Section.
2. The Bank shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a Notice received by it pursuant to Section
17(b) of the Subscription Agreement.
(c) The Bank may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Bank need not investigate any fact or matter stated
in the document.
(d) Before the Bank acts or refrains from acting, it
may require an officer's certificate or an opinion of counsel.
The Bank shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(e) The Bank may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed with due care.
Section 9. No Representations.
------------------
The Bank makes no
representation as to the validity or adequacy of this Bank
Agreement or the Debentures, or any Set Aside Purchase Note or
Purchased Partnership Interest in which the Bank has a security
interest, or any Financing Statement delivered to it by J&B or
the Bank's filing of any such Financing Statement with any
governmental authority; it shall not be accountable for the
Company's use of the proceeds from the Debentures and it shall
not be responsible for any statement in the Memorandum or in the
Debentures other than its authentication.
Section 10. Indemnification.
---------------
The Company shall
indemnify, defend and hold the Bank harmless from and against any
and all loss, damage, liability, claim and expense, including
taxes (other than taxes based on the income of the Bank) incurred
by the Bank arising out of or in connection with its acceptance
or performance of its obligations under this Bank Agreement,
including the legal costs and expenses of defending itself
against any claim or liability in connection with its performance
under this Bank Agreement. The Bank shall notify the Company
promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Bank shall cooperate in
the defense. The Bank may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Bank through gross negligence
or bad faith. The provisions of this Section 10 shall survive
the termination of this Bank Agreement.
Section 11. Replacement of Bank.
-------------------
(a) A resignation or removal of the Bank and
appointment of a successor Bank shall become effective only upon
the successor Bank's acceptance of appointment as provided in
this Section 11.
(b) The Bank may resign by so notifying the Company.
The owners of a majority in principal amount of the Debentures
outstanding may remove the Bank for any reason by so notifying
the Bank and the Company. The Company may remove the Bank if:
(i) the Bank is adjudged a bankrupt or an insolvent;
(ii) a receiver or public officer takes charge of the
Bank or its property; or
(iii) the Bank becomes incapable of acting.
(c) (i) If the Bank resigns or is removed or if a
vacancy exists in the office of the Bank for any reason, the
Company shall promptly appoint a successor Bank.
(ii) If a successor Bank does not take office within
60 days after the retiring Bank gives notice of resignation or
action is taken to remove the retiring Bank, the retiring Bank,
the Company or the owners of at least 10% in principal amount of
the Debentures outstanding may petition any court of competent
jurisdiction for the appointment of a successor Bank.
(iii) A successor Bank shall deliver a written
acceptance of its appointment to the retiring Bank and the
Company. Thereupon the resignation or removal of the retiring
Bank shall become effective and the successor Bank shall have all
the rights, powers and duties of the Bank under this Bank
Agreement. The successor Bank shall mail a notice of its
succession to Debenture owners. Upon payment to the retiring
Bank of all amounts owed to it under this Bank Agreement, the
retiring Bank shall promptly transfer all property held by it as
Bank to the successor Bank.
(d) If the Bank consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Bank.
Section 12. Notices.
-------
All notices and other
communications pursuant to this Bank Agreement shall be in
writing and shall be delivered by hand or sent by registered or
certified mail, return receipt requested, or by facsimile,
confirmed by writing, delivered by hand or sent by registered or
certified mail, return receipt requested, delivered or sent on
the date of the facsimile, addressed as follows:
(a) If to the Company:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Gerald E. Eppner
(b) If to Debenture owners:
At the addresses of the registered owners
appearing in the register maintained by the Bank.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 13. Choice of Law.
-------------
This Bank Agreement shall
be governed by the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
Section 14. Prior Agreements; Amendment.
---------------------------
This Bank
Agreement, together with each Consent and Agreement and each
Consent, Assignment and Agreement referred to in Section 7
hereof, sets forth the entire Agreement of the parties hereto
with respect to the subject matter hereof and supersedes all
prior Agreements, contracts, promises, representations,
warranties, statements, arrangements and understandings, if any,
among the parties hereto or their representatives with respect to
the subject matter hereof. No waiver, modification or amendment
of any provision, term or condition hereof shall be valid unless
in writing and signed by all parties hereto, and any such waiver,
modification or amendment shall be valid only to the extent
therein set forth.
Section 15. Successors.
----------
This Bank Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 16. Enforceability.
--------------
Any provision of this
Bank Agreement which may be determined by competent authority to
be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 17. Counterparts.
------------
This Bank Agreement may be
executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.
Section 18. Definitions.
-----------
All terms used in this Bank
Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed
this Bank Agreement as of the date first above written.
J&B MANAGEMENT COMPANY
By: /s/ John Luciani
--------------------------
Title: General Partner
LEISURE CENTERS, INC.
By: /s/ John Luciani
--------------------------
Title: President
J&B MANAGEMENT CORP.
By: /s/ John Luciani
--------------------------
Title: President
SULGRAVE REALTY CORPORATION
By: /s/ John Luciani
--------------------------
Title: President
WILMART DEVELOPMENT CORP.
By: /s/ John Luciani
--------------------------
Title: President
THE BANK OF NEW YORK
By: /s/ Peter Lagatta
--------------------------
Title: Assistant
Vice President
<PAGE>
EXHIBIT A
to Bank Agreement
-----------------
1. (a) Investing Partnership: Benito Associates, a New Jersey
limited partnership
(b) Operating Partnership: Villa San Benito, Associates,
Ltd., a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $375,000
(ii) Date of Issue: February 1, 1982
(iii) Maturity Date: December 31, 1997
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $375,000
(viii)Prepaid Interest as of
July 31, 1991: $23,063
(d) Security Agreement: Purchase Agreement, dated February
1, 1982, by and among Howard Samuels, Howard Squadron,
Stanley Plesent, John W. Luciani, Bernard M. Rodin
("Sellers") and Benito Associates (Sellers' respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
2. (a) Investing Partnership: Benito Valley Associates, a New
Jersey limited partnership
(b) Operating Partnership: Villa San Benito Associates,
Ltd., a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $375,000
(ii) Date of Issue: February 1, 1982
(iii) Maturity Date: December 31, 1997
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $375,000
(viii)Prepaid Interest as of
July 31, 1991: $23,063
(d) Security Agreement: Purchase Agreement, dated February
2, 1982, by and among Howard Samuels, Howard Squadron,
Stanley Plesent, John W. Luciani, Bernard M. Rodin
("Sellers") and Benito Valley Associates (Sellers'
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
3. (a) Investing Partnership: Rio Benito Associates, a New
Jersey limited partnership
(b) Operating Partnership: Villa San Benito Associates,
Ltd., a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $375,000
(ii) Date of Issue: February 1, 1982
(iii) Maturity Date: December 31, 1997
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $375,000
(viii)Prepaid Interest as of
July 31, 1991: $23,063
(d) Security Agreement: Purchase Agreement, dated February
1, 1982, by and among Howard Samuels, Howard Squadron,
Stanley Plesent, John W. Luciani, Bernard M. Rodin
("Sellers") and Rio Benito Associates (Sellers'
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
4. (a) Investing Partnership: San Benito Associates-I, a New
Jersey limited partnership
(b) Operating Partnership: Villa San Benito Associates,
Ltd., a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $375,000
(ii) Date of Issue: February 1, 1982
(iii) Maturity Date: December 31, 1997
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $375,000
(viii)Accrued Interest as of
July 31, 1991: $23,063
(d) Security Agreement: Purchase Agreement, dated February
1, 1982, between and among Howard Samuels, Howard
Squadron, Stanley Plesent, John W. Luciani, Bernard M.
Rodin ("Sellers") and San Benito Associates-I (Sellers'
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
5. (a) Investing Partnership: Rio Donna Associates, a New
Jersey limited partnership
(b) Operating Partnership: Donna Village, Ltd., a Texas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,215,000
(ii) Date of Issue: December 23, 1982
(iii) Maturity Date: December 31, 1997
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $1,215,000
(viii)Accrued Interest as of
July 31, 1991: $292,501
(d) Security Agreement: Purchase Agreement, dated December
23, 1982, by and between Windmill Four Associates, a
New Jersey limited partnership ("Seller") and Rio Donna
Associates (Seller's respective rights and interests
under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
6. (a) Investing Partnership: Rio Dolores Associates, a New
Jersey limited partnership
(b) Operating Partnership: Rio Hondo Village, Ltd., a
Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $860,000
(ii) Date of Issue: April 28, 1982
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 10,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: ----
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $150,000
(vii) Balance of Principal
Due at Maturity: $210,000
(viii)Accrued Interest as of
July 31, 1991: $220,883
(d) Security Agreement: Purchase Agreement, dated April
28, 1983, by and between Windmill One Associates, a New
Jersey Limited Partnership ("Seller") and Rio Dolores
Associates (Seller's respective rights and interests
under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
7. (a) Investing Partnership: Rio Alma Associates, a New
Jersey limited partnership
(b) Operating Partnership: Alamo Village, Ltd., a Texas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,165,000
(ii) Date of Issue: April 28, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 14,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $ 36,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $210,000
(vii) Balance of Principal
Due at Maturity: $955,000
(viii)Accrued Interest as of
July 31, 1991: $411,637
(d) Security Agreement: Purchase Agreement, dated April
28, 1983, by and between Windmill Three Associates, a
New Jersey limited partnership ("Seller") and Rio Alma
Associates (Seller's respective rights and interests
under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
8. (a) Investing Partnership: Huntsville Associates, a New
Jersey limited partnership
(b) Operating Partnership: Cedarwood Associates, Ltd., a
Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,440,000
(ii) Date of Issue: June 27, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 14,500
(v) Total Payments of
Principal deemed made
as of July 31, 1991: ---
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $217,500
(vii) Balance of Principal
Due at Maturity: $1,222,500
(viii)Accrued Interest as of
July 31, 1991: $628,828
(d) Security Agreement: Purchase Agreement, dated June 27,
1983, by and among John W. Luciani, Bernard M. Rodin,
Ronald G. Rubin and Joseph Eletto ("Sellers") and
Huntsville Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
9. (a) Investing Partnership: Rio Juanita Associates, a New
Jersey limited partnership
(b) Operating Partnership: San Juan Village, Ltd., a Texas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,800,000
(ii) Date of Issue: April 28, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 23,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $200,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $345,000
(vii) Balance of Principal
Due at Maturity: $1,455,000
(viii)Accrued Interest as of
July 31, 1991: $706,665
(d) Security Agreement: Purchase Agreement, dated April
28, 1983, by and between Pioneer Five Associates, a New
Jersey limited partnership ("Seller") and Rio Juanita
Associates (Seller's respective rights and interests
under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
10. (a) Investing Partnership: Somerset Associates, a New
Jersey limited partnership
(b) Operating Partnership: Beecher House Ltd. Associates,
a Kentucky limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,890,000
(ii) Date of Issue: October 31, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 19,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $117,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $285,000
(vii) Balance of Principal
Due at Maturity: $1,605,000
(viii)Accrued Interest as of
July 31, 1991: $555,542
(d) Security Agreement: Purchase Agreement, dated October
31, 1983, by and among John W. Luciani, Bernard M.
Rodin, J&B Management Corp., Issac Wolf, Irving Weiss,
Ronald Rubin, Irving M. Burt, Hector Delara, Stanley
Sherman M.D., Richard Edwards, Huberto Baez, Nerardo
Hernandez, Andres L. Jiminez and Hector Valdivia
("Sellers") and Somerset Associates (Sellers'
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 98% limited
partnership interest in the Operating Partnership
11. (a) Investing Partnership: Wagon Hill Associates, a New
Jersey limited partnership
(b) Operating Partnership: Shiloh Village Apts., Ltd., a
Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,725,000
(ii) Date of Issue: August 24, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $ 38,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $ 67,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $570,000
(vii) Balance of Principal
Due at Maturity: $3,155,000
(viii)Accrued Interest as of
July 31, 1991: $1,349,246
(d) Security Agreement: Purchase Agreement, dated August
24, 1983, by and among John W. Luciani, Bernard M.
Rodin, J&B Management Corp., Dr. Salvatore Capone, Dave
H. and Reba W. Williams, Irving Weiss, Frederick J.
Kaeli, Dr. Arthur Eisenstein, Issac Wolf, George
Batchelor and Gerald N. Morkoff ("Sellers") and Wagon
Hill Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
12. (a) Investing Partnership: Chase Hills Associates, a New
Jersey limited partnership
(b) Operating Partnership: Chevy Chase - Mexico
Associates, a Missouri limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,090,000
(ii) Date of Issue: September 15, 1983
(iii) Maturity Date: April 30, 1998
(iv) Annual Payment of
Principal: $ 10,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: ---
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $140,000
(vii) Balance of Principal
Due at Maturity: $950,000
(viii)Accrued Interest as of
July 31, 1991: $313,034
(d) Security Agreement: Purchase Agreement, dated
September 15, 1983, by and among Bernard M. Rodin, John
Luciani, Norman Block, Ira Levy, Stuart Tucker, Dr.
Elliot Klein, Gerald Zisholtz and S Jerome Berman
("Sellers") and Chase Hills Associates (Sellers'.
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
13. (a) Investing Partnership: Golden Village Associates, a
New Jersey limited partnership
(b) Operating Partnership: Silver Village Apts., Ltd., a
New Jersey limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,195,000
(ii) Date of Issue: April 9, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $ 22,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $154,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $308,000
(vii) Balance of Principal
Due at Maturity: $1,887,000
(viii)Accrued Interest as of
July 31, 1991: $638,692
(d) Security Agreement: Purchase Agreement, dated April 9,
1984, by and among John W. Luciani, Bernard M. Rodin,
J&B Management Corp., James Cunningham, Michael Roskin,
Jack Yogman, James M. O'Hara, Robert Frankel, Martin
Wesley and Harvey Realty Company ("Sellers") and Golden
Village Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
<PAGE>
EXHIBIT B
to Bank Agreement
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.2(c)]
THIS CONSENT AND AGREEMENT, dated as of _______, 199_,
is by and between [name of Investing Partnership] (the "Investing
Partnership"), J&B Management Company ("J&B"), and The Bank of
New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Bank Agreement of even
date herewith (the "Bank Agreement"); and
WHEREAS, Section 7.2(c) of the Bank Agreement provides
for the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents and Agreements. The Investing
-----------------------
Partnership hereby (i) consents to J&B's assignment to the Bank
of the Investing Partnership's Set Aside Purchase Note; (ii)
consents to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank; and (iii) agrees that upon
receiving the Bank's notice of an Event of Default, the Investing
Partnership shall pay all sums due under its Set Aside Purchase
Note directly to the Bank. The Bank hereby acknowledges that
interest and, where required, annual payments of principal, may
be deferred until the maturity of the Set Aside Purchase Note.
Section 2. Notices. All notices and other
-------
communications pursuant or relating to this Consent and Agreement
shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by
facsimile, confirmed by writing delivered by hand or sent by
registered or certified mail, return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
--------------------------------------
--------------------------------------
--------------------------------------
(b) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Gerald A. Eppner, Esq.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 3. Choice of Law. This Consent and Agreement
-------------
shall be governed by the laws of the State of New York, without
giving effect to the principles of conflicts of law thereof.
Section 4. Successors. This Consent and Agreement
----------
shall be binding upon and inure to the benefit of the.parties
hereto and their respective successors and permitted assigns.
Section 5. Counterparts. This Consent and Agreement
------------
may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute
one instrument.
Section 6. Definitions. All terms used in this
-----------
Consent and Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Agreement as of the date first above written.
[Name of Investing Partnership]
By
------------------------------
Title:
J&B MANAGEMENT COMPANY
By
------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------
Title:
<PAGE>
EXHIBIT C
to Bank Agreement
[Form of Consent, Assignment and Agreement]
CONSENT, ASSIGNMENT AND AGREEMENT
[PURSUANT TO SECTION 7.3(c)]
THIS CONSENT, ASSIGNMENT AND AGREEMENT, dated as of
___________ __, 199_, is by and between [name of Investing
Partnership] (the "Investing Partnership"), [name of Operating
Partnership] (the "Operating Partnership"), J&B Management
Company ("J&B"), and The Bank of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Bank Agreement of even
date herewith (the "Bank Agreement"); and
WHEREAS, Section 7.3(c) of the Bank Agreement provides
for the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents. Assignments and Agreements. The
------------------------------------
Investing Partnership and the Operating Partnership in which the
Investing Partnership owns a Purchased Partnership Interest
hereby (i) consent to J&B's assignment to the Bank of the
Security Agreement, Security Interest, Purchased Partnership
Interest, all distributions which may be due and payable or paid
from time to time on such Purchased Partnership Interest, and the
proceeds thereof, relating to the Investing Partnership's Set
Aside Purchase Note; (ii) consent to J&B's delivery to the Bank
of Financing Statements and to the Bank's filing of such
Financing Statements with the appropriate governmental
authorities in order to perfect and to continue the perfection of
the Bank's security interest in the Security Agreement, Security
Interest, Purchased Partnership Interest and distributions which
may be due and payable or paid from time to time on the Purchased
Partnership Interest; (iii) subject to the terms and conditions
of the Bank Agreement, assign to the Bank all distributions which
shall be due and payable or made from time to time on the
Purchased Partnership Interest, and the proceeds thereof, until
all outstanding obligations under the Set Aside Purchase Note, if
such be in default, have been paid in full (including, without
limitation, all costs of collection, reasonable attorneys' fees
and other fees and expenses); and (iv) subject to the terms and
conditions of the Bank Agreement, agree that upon foreclosure of
the Security Interest all distributions made on the Purchased
Partnership Interest shall be paid directly to the Bank, as the
assignee of J&B, regardless of whether the Bank becomes a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership but subject to the limitations set
forth in clause (iii) above.
Section 2. Representation of the Operating
-------------------------------
Partnership. The Operating Partnership hereby agrees to keep a
-----------
copy of this Consent, Assignment and Agreement with its business
records.
Section 3. Agreement of the Operating Partnership.
--------------------------------------
The Operating Partnership hereby agrees to admit the Bank as a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership upon the Bank's foreclosure on the
Security Interest and request, subject to the Bank's obtaining
HUD 2530 Clearance and the rights of the Investing Partnership
under Section 9-505 of the Uniform Commercial Code.
Section 4. Amendment to Partnership Agreement. Upon
----------------------------------
substitution of the Bank for the Investing Partnership as a
limited partner in the Operating Partnership pursuant to the Bank
Agreement and this Consent, Assignment and Agreement, this
Consent, Assignment and Agreement shall constitute an amendment
to the partnership agreement of the Operating Partnership, and
the Bank shall not be liable for the obligations of any
predecessor which has assigned the Purchased Partnership Interest
to make any contributions to the Operating Partnership.
Section 5. Further Assurances and Power of Attorney.
----------------------------------------
Each of the parties hereto shall, from time to time, upon request
of a party hereto, duly execute, acknowledge and deliver or cause
to be duly executed, acknowledged and delivered, all such further
instruments and documents reasonably requested by a party to
effectuate the intent and purposes of this Consent, Assignment
and Agreement. Notwithstanding the foregoing, this Consent,
Assignment and Agreement shall constitute an irrevocable power of
attorney coupled with an interest for the Bank to execute and
file a certificate of amendment to the certificate of limited
partnership of the Operating Partnership or any other document or
instrument in order to effectuate the intent and purposes of this
Consent, Assignment and Agreement; provided, however, that the
Bank may not be substituted as a partner of the Operating
Partnership unless such substitution is permitted under the
Uniform Commercial Code and HUD 2530 Clearance, if required, has
been obtained.
Section 6. Notices. All notices and other
-------
communications pursuant or relating to this Consent and Agreement
shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by
facsimile, confirmed by writing delivered by hand or sent by
registered or certified mail return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
---------------------------------------
---------------------------------------
---------------------------------------
(b) If to the Operating Partnership:
---------------------------------------
---------------------------------------
---------------------------------------
(c) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Gerald A. Eppner, Esq.
(d) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 7. Choice of Law. This Consent, Assignment
-------------
and Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflicts of law
thereof.
Section 8. Successors. This Consent, Assignment and
----------
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
Section 9. Counterparts. This Consent, Assignment and
------------
Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall
constitute one instrument.
Section 10. Definitions. All terms used in this
-----------
Consent and Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Agreement as of the date first above written.
[Name of Investing Partnership]
By
------------------------------
Title:
[Name of Operating Partnership]
By
------------------------------
Title:
J&B MANAGEMENT COMPANY
By
------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------
Title:
Exhibit 10.5(d)
BANK AGREEMENT
THIS BANK AGREEMENT, dated as of October 17, 1991 (as
amended, modified or supplemented from time to time, this "Bank
Agreement"), is by and among J&B Management Company, a New Jersey
general partnership ("J&B"), and its affiliates; Leisure Centers,
Inc., a corporation organized and existing under the laws of the
State of Delaware, J&B Management Corp., Sulgrave Realty
Corporation, and Wilmart Development Corp., each of which is a
corporation organized and existing under the laws of the State of
New Jersey (hereinafter J&B, Leisure Centers, Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. are sometimes referred to collectively as the
"Company" or the "Co-Obligors"), and The Bank of New York (the
"Bank").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is issuing its Series 3, 11%
Debentures due December 31, 1996 (the "Debentures") pursuant to
the Company's Confidential Private Placement Memorandum dated
October 17, 1991, as the same may be from time to time amended
(the "Memorandum");
WHEREAS, the Company's private placement of the
Debentures (the "Offering") will terminate on the earlier of (i)
the date on which all the Debentures are sold or (ii) June 30,
1993 (the "Offering Termination Date");
WHEREAS, subscribers will purchase Debentures at a
closing (the "Initial Closing") to be held when at least $500,000
principal amount of Debentures have been sold and, thereafter,
from time to time (each, singly, an "Additional Closing," and,
collectively, the "Additional Closings"), at the discretion of
the Company, on such day or days as may be determined by the
Company, as subscriptions are received and accepted (hereinafter
the date of the Initial Closing and the date of any Additional
Closing are each referred to as a "Closing Date");
WHEREAS, the Company desires to deliver to the Bank
amounts received by the Company from subscribers for Debentures
(each, singly, a "Purchaser," and, collectively, the
"Purchasers"), in payment for the Debentures, which amounts shall
be released to the Company at the Initial Closing and at each
Additional Closing;
WHEREAS, each Purchaser shall be entitled to receive,
on a monthly basis prior to the Closing Date with respect to that
Purchaser's Debentures, distributions representing interest
accrued on that Purchaser's subscription payment at a rate of 11%
per annum;
WHEREAS, the Company desires to establish an interest
bearing escrow fund to be called J&B Management Series 3 Escrow
Fund Account No. 201316 (the "Fund") with the Bank;
WHEREAS, the Company wishes to grant the Bank, for the
benefit of the Bank and the Purchasers, a security interest in
and to assign to the Bank certain notes, instruments and
documents more fully described below and the Bank is willing to
accept such security interest and assignment upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Company wishes to appoint the Bank as
Escrow Agent, Authenticating Agent, Registrar, Paying Agent and
Custodian with respect to the Debentures and the above-mentioned
notes, instruments and documents and the Bank is willing to
accept such appointments upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained and other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Escrow Agent.
------------
Section 1.1. Appointment. The Company hereby appoints
-----------
and designates the Bank as Escrow Agent for the purposes set
forth in this Section 1, and the Bank hereby accepts such
appointment.
Section 1.2. Escrow. The Company shall from time to
------
time deliver amounts received from Purchasers in payment for the
Debentures ("Subscription Payments") to the Bank. The Bank shall
deposit the Subscription Payments in the Fund to be established
in the Company's name for this purpose by the Bank. Subscription
Payments delivered for deposit in the Fund shall be invested in
short term certificates of deposits (including certificates of
deposits issued by the Bank), A-1, P-1 commercial paper, interest
bearing money market accounts, all as specified in writing by the
Company and held in trust for the benefit of the Purchasers. The
Bank is not responsible for interest, losses, taxes or other
charges on investments. All checks delivered to the Bank for
deposit in the Fund shall be payable to the order of "J&B
Management Company - Escrow Account." Concurrently with such
delivery, the Company shall deliver to the Bank a statement of
the name, mailing address and tax identification number of each
Purchaser whose Subscription Payment is being delivered, and a
schedule listing the aggregate Debentures and aggregate
cumulative Subscription Payments to date delivered for deposit in
the Fund. For the purposes of this Bank Agreement, the Company
is authorized to make deposits and give instructions as to
investments of deposits and otherwise, as contemplated in this
Bank Agreement, to the Bank.
Section 1.3. Interest. During the period (the "Escrow
--------
Period") commencing upon the date that any Purchaser's
Subscription Payment constitutes Cleared Funds (as defined in
Section 1.11 hereof) and ending on the day immediately preceding
the Closing Date with respect to that Purchaser's Debentures,
interest will accrue on that Purchaser's Subscription Payment at
a rate of 11% per annum, computed on the basis of a year of 360
days consisting of 12 thirty day months. Interest shall be
payable on the fifteenth day of each month. Four Business Days
prior to each such interest payment date, the Bank shall give the
Company written notice of the difference between the amount of
interest which will be payable on Subscription Payments on such
interest payment date and the amount of interest accruing on the
Fund's assets which will be available for such payment on such
interest payment date. Not later than 11:30 a.m. (New York time)
on the second Business Day preceding such interest payment date,
the Company shall deposit with the Bank its check in the amount
of such difference. On each interest payment date, the Bank
shall pay interest which is due and payable to the respective
Purchasers by mailing its check in the appropriate amount to each
Purchaser by first class mail at the Purchaser's mailing address
provided to the Bank pursuant to Section 1.2 hereof. In the
event that the Company shall default in its payment obligations
to the Bank under this Section 1.3, the Bank shall mail its check
in the amount of each Purchaser's pro rata share of interest
earned and paid on the Fund's assets as provided in this Section
1.3 and subject to Section 1.7 hereof. For purposes of this Bank
Agreement, "Business Day" shall mean any day other than a day on
which the Bank is authorized to remain closed in New York City.
Section 1.4. Conditions of Initial Closing and
---------------------------------
Additional Closings. Notwithstanding anything to the contrary in
-------------------
this Bank Agreement, it is a condition precedent to the Initial
Closing and to each Additional Closing that J&B shall deliver to
the Bank Set Aside Purchase Notes which at maturity will have an
aggregate outstanding balance of principal equal to at least
twice the principal amount of the Debentures which will be sold
at that Initial Closing or Additional Closing, together with the
related Consent and Agreement pertaining to each such Set Aside
Purchase Note and the related Consent, Assignment and Agreement
pertaining to the Purchased Partnership Interest and the related
Financing Statements (as such terms are defined in Section 7
hereof), as provided in Section 7 hereof. Upon the scheduling of
the Initial Closing and each Additional Closing, the Company
shall give written notice thereof to the Bank not less than one
(l) Business Day prior to the date scheduled for each such
closing. As used in this Section 1.4 and elsewhere in this Bank
Agreement, a statement concerning the outstanding principal
amount at maturity of any Set Aside Purchase Note refers to an
amount that does not include any payments on a Set Aside Purchase
Note deferred by the obligor thereof with the consent of the
Company.
Section 1.5. Cancellation. The Company shall give the
------------
Bank notice of any Purchaser who cancels his Subscription prior
to his Closing Date or whose Subscription Payment was deposited
pursuant to Section 1.2 but whose Subscription is rejected,
setting forth the name and mailing address of the Purchaser and
the amount of the rejected or cancelled subscription. As
promptly as practicable thereafter, the Bank shall pay the amount
of the cancelled or rejected subscription from the Fund to the
Purchaser whose Subscription was cancelled or rejected as
directed by the Company. Any interest earned thereon and not
theretofore distributed pursuant to Section 1.3 hereof shall be
paid to the Purchaser in accordance with Section 1.3 hereof.
Payment shall be made by check payable to the Purchaser mailed by
the Bank by first class mail directly to the Purchaser at the
mailing address of the Purchaser.
Section 1.6. Payment. The Bank, at the Initial
-------
Closing and each Additional Closing, upon written instruction
from the Company, shall transfer to the Company or to such third
party or parties as may be directed by the Company the Cleared
Funds then held in the Fund by the Bank. Any interest earned
thereon and not theretofore distributed in accordance with
Section 1.3 hereof shall be paid to the Purchasers in accordance
with Section 1.3 hereof.
Section 1.7. Fees and Expenses. In addition to the
-----------------
fees set forth in Section 7.8 hereof, the Bank shall be entitled
to an administration fee as compensation for its services under
this Section l in the amount of $5,000 payable (i) upon the
execution and delivery of this Bank Agreement and (ii) subject to
an adjustment as provided in the next succeeding sentence of this
Section 1.7, on the first anniversary date of this Bank
Agreement, provided however that the Bank shall not be entitled
to payment of an administration fee on such first anniversary
date if all of the Debentures have been sold prior thereto. In
the event the Offering terminates prior to June 30, 1993, the
Company shall be entitled to a refund payable ten days after the
Offering Termination Date, of that portion of the administration
fee paid to the Bank on the first anniversary date of the Bank
Agreement, in an amount calculated as the difference between (a)
$5,000 and (b) the product of (x) $5,000 and (y) a fraction, the
numerator of which is the number of days between the first
anniversary date of this Bank Agreement and the Offering
Termination Date, inclusive, and the denominator of which is 365.
In no event shall the Bank be entitled to payment of an
administration fee, as provided for in this Section 1.7,
following the Offering Termination Date. The Company shall also
pay the Bank $5 for the preparation and execution of each
Purchaser's account including the calculation of interest
accrued; $1 for the preparation of each Purchaser's 1099 tax
form; $25 for each investment transaction in the Fund; $25 for
each returned "bounced" check of a Purchaser; and $500 for each
Additional Closing, payable within 10 days after the Bank gives
the Company notice that any such amounts are due and payable.
Notwithstanding anything herein to the contrary, the Bank shall
not charge the Company for the issuance of checks or wire
transfers to make monthly payments of accrued interest on
Subscription Payments. No additional fee will be payable with
respect to wire transfers of and unreturned checks for
Subscription Payments. In addition, the Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section l
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it has incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. Amounts held in the Fund shall not be available to
satisfy this obligation or any other obligation of the Company to
the Bank. The Company shall not be obligated to reimburse the
Bank for any costs or expenses incurred in connection with the
preparation and execution of this Bank Agreement. The provisions
of this Section 1.7 shall survive the termination of this Bank
Agreement.
Section 1.8. Termination of Offering. If the Offering
-----------------------
should be terminated, the Company shall promptly so advise the
Bank in writing, and shall authorize and direct the Bank to
return the Subscription Payments to the Purchasers. The Bank
thereupon shall return those Subscription Payments to the extent
they have not been distributed per Section 1.6 to the Purchasers
from whom they were received. Any interest earned on the
Subscription Payments and not theretofore distributed pursuant to
Section 1.3 hereof shall be paid in accordance with Section 1.3
hereof. Upon making such disbursements to the Purchasers and the
Company, the Bank shall be relieved of all of its obligations and
liabilities under this Bank Agreement.
Section 1.9. Form 1099, etc. In compliance with the
---------------
Interest and Dividend Tax Compliance Act of 1983, the Company
shall request that each Purchaser furnish to the Bank such
Purchaser's taxpayer identification number and a statement
certified under penalties of perjury that (a) such taxpayer
identification number is true and correct and (b) the Purchaser
is not subject to the requirements of such Act providing for
withholding of 20% of reportable interest, dividends or other
payments.
Section 1.10. Uncollected Funds. In the event that
-----------------
any funds, including Cleared Funds, deposited in the Fund prove
uncollectible after the funds represented thereby have been
released by the Bank pursuant to this Bank Agreement, the Company
shall reimburse the Bank upon request for the face amount of such
check or checks; and the Bank shall, upon instruction from the
Company, deliver the returned checks or other instruments to the
Company. This section shall survive the termination of this Bank
Agreement.
Section 1.11. Cleared Funds. For the purpose of this
-------------
Bank Agreement, Subscription Payments shall constitute "Cleared
Funds" in accordance with the following:
(a) if paid by wire transfer, such funds shall
constitute Cleared Funds on the date received by the Bank;
(b) if paid by check drawn on a New York Clearing
House Bank, such funds shall constitute Cleared Funds on the
second Business Day following the date received by the Bank; and
(c) if paid by check drawn on any bank other than a
New York Clearing House Bank, such funds shall constitute Cleared
Funds on the third Business Day following the date received by
the Bank.
Section 2. Execution. The Debentures shall be
---------
executed on behalf of the Company by the manual or facsimile
signature of a partner or officer of the Company. All such
facsimile signatures shall have the same force and effect as if
the partner or officer had manually signed the Debentures. In
case any partner or officer of the Company whose signature shall
appear on a Debenture shall cease to be such partner or officer
before the delivery of such Debenture or the issuance of a new
Debenture following a transfer or exchange, such signature or
such facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such partner or officer had remained a
partner or officer until delivery.
Section 3. Authenticating Agent.
--------------------
Section 3.1. Appointment. The Company hereby appoints
-----------
and designates the Bank as Authenticating Agent for the purposes
set forth in this Section 3, and the Bank hereby accepts such
appointment.
Section 3.2. Authentication. Only such Debentures as
--------------
shall have the Certificate of Authentication endorsed thereon in
substantially the form set forth in the form of Debenture
attached to the Memorandum, duly executed by the manual signature
of an authorized signatory of the Bank, shall be entitled to any
right or benefit under this Bank Agreement. No Debentures shall
be valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by
the Bank; and such executed certificate upon any such Debenture
shall be conclusive evidence that such Debenture has been
authenticated and delivered under this Bank Agreement. The
Certificate of Authentication on any Debenture shall be deemed to
have been executed by the Bank if signed by an authorized
signatory of the Bank, but it shall not be necessary that the
same person sign the Certificate of Authentication on all of the
Debentures.
Section 4. Mutilated, Lost, Stolen or Destroyed
------------------------------------
Debentures. Subject to applicable law, in the event any
----------
Debenture is mutilated, lost, stolen or destroyed, the Company
may authorize the execution and delivery of a new Debenture of
like date, number, maturity and denomination as that mutilated,
lost, stolen or destroyed, provided, however, that in the case of
any mutilated Debenture, such mutilated Debenture shall first be
surrendered to the Company, and in the case of any lost, stolen
or destroyed Debenture, there shall be first furnished to the
Company and the Bank, evidence of the ownership thereof and of
such loss, theft or destruction satisfactory to the Company and
the Bank, together with indemnification through a bond of
indemnity or otherwise as shall be satisfactory to the Company
and the Bank. The Company may charge the Purchaser of such
Debenture with any amounts satisfactory to the Company and the
Bank permitted by applicable law.
Section 5. Registrar and Transfer Agent.
----------------------------
Section 5.1. Appointment. The Company hereby appoints
-----------
and designates the Bank as Registrar and Transfer Agent for the
purposes set forth in this Section 5, and the Bank hereby accepts
such appointment.
Section 5.2. Registration, Transfer and Exchange of
--------------------------------------
Debentures. The Debentures are issuable only as registered
----------
Debentures without coupons in the denominations of $100,000 or
any multiple or any fraction thereof at the sole discretion of
the Company. Each Debenture shall bear the following restrictive
legend: "These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and sold
or otherwise transferred only if registered pursuant to the
provisions of that Act or if an exemption from registration is
available." The Bank shall keep at its principal corporate trust
office a register in which the Bank shall provide for the
registration and transfer of Debentures. Upon surrender for
registration of transfer of any Debenture at such office of the
Bank, the Company shall execute, pursuant to Section 2 hereof,
and mail by first class mail to the Bank, and the Bank shall
authenticate, pursuant to Section 3 hereof, and mail by first
class mail to the designated transferee, or transferees, one or
more new Debentures in an aggregate principal amount equal to the
unpaid principal amount of such surrendered Debenture, registered
in the name of the designated transferee or transferees. Every
Debenture presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the holder of such Debenture or his
attorney duly authorized in writing. Notwithstanding the
preceding, the Debentures may not be transferred without an
effective registration statement under the Securities Act of 1933
covering the Debentures or an opinion of counsel to the holder of
such Debentures satisfactory to the Company and its counsel that
such registration is not necessary under the Securities Act of
1933 (the "Securities Act"). At the option of the owner of any
Debenture, such Debenture may be exchanged for other Debentures
of any authorized denominations, in an aggregate principal amount
equal to the unpaid principal amount of such surrendered
Debenture, upon surrender of the Debenture to be exchanged at the
principal corporate trust office of the Bank; provided, however,
that any exchange for denominations other than $100,000 or an
integral multiple thereof shall be at the sole discretion of the
Company. Whenever any Debenture is so surrendered for exchange,
the Company shall execute, pursuant to Section 2 hereof, and
deliver to the Bank, and the Bank shall authenticate, pursuant to
Section 3 hereof, and mail by first class mail to the designated
transferee, or transferees, the Debenture or Debentures which the
Debenture owner making the exchange is entitled to receive. Any
Debenture or Debentures issued in exchange for any Debenture or
upon transfer thereof shall be dated the date to which interest
has been paid on such Debenture surrendered for exchange or
transfer, and neither gain nor loss of interest shall result from
any such exchange or transfer. In addition, each Debenture
issued upon such exchange or transfer shall bear the restrictive
legend set forth above unless in the opinion of counsel to the
Company, such legend is not required to ensure compliance with
the Securities Act.
Section 5.3. Owner. The person in whose name any
-----
Debenture shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes, and payment of or on
account of the principal of or interest on such Debenture shall
be made only to or upon the order of the registered owner thereof
or his duly authorized legal representative. Such registration
may be changed only as provided in this Section 5, and no other
notice to the Company or the Bank shall affect the rights or
obligations with respect to the transfer of a Debenture or be
effective to transfer any Debenture. All payments to the person
in whose name any Debenture shall be registered shall be valid
and effectual to satisfy and discharge the liability upon such
Debenture to the extent of the sum or sums to be paid.
Section 5.4. Transfer Agent. The Bank shall send
--------------
executed, authenticated Debentures to Purchasers on Closing Dates
and to subsequent owners and transferees who are entitled to
receive Debentures pursuant to the terms of this Bank Agreement,
by first class mail.
Section 5.5. Charges. No service charge shall be made
-------
for any transfer or exchange of Debentures, but in all cases in
which Debentures shall be transferred or exchanged hereunder, the
Company or the Bank may collect from the registered owner of a
Debenture a charge for every transfer or exchange of Debentures
sufficient to reimburse them for any tax, fee or other
governmental charge required to be paid with respect to such
transfer or exchange, and such charge shall be paid before any
such new Debenture shall be delivered.
Section 5.6. Redemption. Whenever the Company shall
----------
be required to effect mandatory redemption of part or all of the
Debentures, the Company shall give notice thereof to the Bank at
least forty (40) days prior to the date set forth for redemption,
the manner in which redemption shall be effected and all the
relevant details thereof. The Bank shall give notice to the
Purchasers of that redemption at least thirty (30) days prior to
the date set forth for redemption. The Company shall deliver all
redeemed Debentures to the Bank for cancellation of the whole or
portion thereof, as appropriate, and issuance of new Debentures
in denominations equal to the unredeemed portion.
Section 5.7. Expenses. As a condition to the transfer
--------
or exchange of any Debenture, the owner of the Debenture shall
reimburse the Company and the Bank for their respective actual
out-of-pocket expenses incurred in connection therewith
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of their respective
counsel). The provisions of this Section 5.7 shall survive the
termination of this Bank Agreement.
Section 6. Paying Agent.
------------
Section 6.1. Appointment. The Company hereby appoints
-----------
and designates the Bank as Paying Agent for the purposes set
forth in this Section 6, and the Bank hereby accepts such
appointment.
Section 6.2. Payment Provisions. The Bank shall pay
------------------
interest on Subscription Payments and principal of and interest
on the Debentures to the persons in whose names the Debentures
are registered, in accordance with the terms and provisions of
this Bank Agreement and the Debentures, by check mailed by first
class mail to the registered owner of a Debenture at his address
as it appears in the register; provided that not later than 11:30
a.m. (New York time) on the second Business Day preceding each
date on which interest on or principal of any Debenture is due
and payable, the Company shall deposit with the Bank its check in
the amount due.
Section 6.3. Expenses. The Company shall reimburse
--------
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 6
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records), payable within ten (10) days after the Bank gives
notice to the Company that it has incurred such expenses. The
obligation to pay such compensation and reimburse such expenses
shall be borne solely by the Company. Notwithstanding anything
herein to the contrary, the Bank shall not charge the Company any
fees for the issuance of checks or wire transfers to make
payments of interest on or repayments of principal of the
Debentures. The provisions of this Section 6.3 shall survive the
termination of this Bank Agreement.
Section 7. The Custodian.
-------------
Section 7.1. Appointment. The Company hereby appoints
-----------
and designates the Bank as Custodian for the purposes set forth
in this Section 7, and the Bank hereby accepts such appointment.
Section 7.2. Set Aside Purchase Notes.
------------------------
(a) J&B is the holder of certain Purchase Notes. Each
such Purchase Note has been issued by an Investing Partnership,
pursuant to a certain Purchase Agreement. Under the terms of
each such Purchase Note and Purchase Agreement, J&B is entitled
to assign each Purchase Note and J&B's right to payments of
interest thereon and principal amount thereof. Under the terms
of each Purchase Agreement, payments of interest and, where
required, scheduled payments of principal payable prior to
maturity due under the Purchase Note may be offset and reduced by
payments made under certain Investor Notes issued by the limited
partners of the respective Investing Partnership, which have been
pledged to secure obligations owed by J&B to one or more banks.
Only that interest and, where applicable, scheduled principal
payments payable prior to maturity ("Excess Interest and
Principal") under a Purchase Note which is in excess of the
amount offset and reduced by payments made to such banks, if any,
may be payable to the holder of the Purchase Note. Any interest
and, where required, scheduled payments of principal payable
prior to maturity that are due but unpaid on Purchase Notes shall
be deferred until the maturity of that Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Purchase Notes, having an aggregate face value of $12,675,000
and an aggregate balance of principal due at maturity equal to
$11,066,000, listed in Exhibit A hereto (the "Set Aside Purchase
Notes") issued by the Investing Partnerships listed in Exhibit A
hereto, and the proceeds thereof. In order to perfect such
security interests, J&B shall deliver to the Bank the Set Aside
Purchase Notes. Upon receipt of each Set Aside Purchase Note,
the Bank shall execute and deliver to the Company a receipt
therefor. Notwithstanding the assignment of the Set Aside
Purchase Notes to the Bank, the scheduled payments of principal
payable prior to maturity on certain Set Aside Purchase Notes so
providing and interest payments on all of the Set Aside Purchase
Notes shall be payable directly to the Company until such time as
an Event of Default (as defined in Section 7.6 hereof) shall
occur and be continuing. Under the terms of the Set Aside
Purchase Notes, only that principal and interest thereon which is
Excess Interest and Principal may be payable to the Bank. The
parties hereto confirm that scheduled payments of principal
payable prior to maturity made under the Set Aside Purchase Notes
listed in Exhibit A hereto, as requiring such scheduled principal
payment, will belong to the Company until such time as an Event
of Default shall occur and be continuing. The parties hereto
further confirm that any deferred interest and principal on a Set
Aside Purchase Note paid at the maturity thereof shall belong to
the Company so long as an Event of Default shall not have
occurred and be continuing.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit B hereto, executed by each
Investing Partnership listed in Exhibit A hereto, under which the
Investing Partnership shall (i) consent to J&B's assignment to
the Bank of the Investing Partnership's Set Aside Purchase Note,
(ii) consent to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank, and (iii) agree that upon
receiving the Bank's notice of an Event of Default that is
continuing, the Investing Partnership shall pay all sums due
under its Set Aside Purchase Note directly to the Bank. Upon
receipt of each such Consent and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.3. Purchased Partnership Interests.
-------------------------------
(a) Each Investing Partnership listed in Exhibit A
hereto, in order to secure its payment of the principal of and
interest on its Set Aside Purchase Note, has entered into a
Security Agreement listed in Exhibit A hereto (a "Security
Agreement") under which the Investing Partnership has granted a
security interest (a "Security Interest") in that Investing
Partnership's limited partnership interest listed in Exhibit A
hereto (a "Purchased Partnership Interest") in a respective
Operating Partnership listed in Exhibit A hereto (an "Operating
Partnership").
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each Security
Agreement listed in Exhibit A hereto, each Security Interest in a
Purchased Partnership Interest created under any such Security
Agreement, each such Purchased Partnership Interest, each
distribution due and payable or made from time to time on such
Purchased Partnership Interest, and the proceeds thereof. In
order to perfect such security interest, J&B shall deliver to the
Bank Uniform Commercial Code Financing Statements ("Financing
Statements") for filing by the Bank with the such appropriate
governmental authorities indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authorities in order to continue the perfection of
such security interest. Notwithstanding the assignments of the
above mentioned Security Agreements, Security Interests,
Purchased Partnership Interests, and due and payable or paid
distributions on Purchased Partnership Interests to the Bank, all
distributions on such Purchased Partnership Interests shall be
payable directly to the respective Investing Partnership if an
event of default shall not have occurred and be continuing under
that Investing Partnership's Set Aside Purchase Note; or to the
Bank for payment to the Company if the Bank shall foreclose on
the Security Interest pursuant to Section 7.5(f) hereof, and
shall be payable directly to the Bank for the benefit of the Bank
and the owners of the Debentures only if the Bank shall foreclose
on the Security Interest pursuant to Section 7.5(e) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership and Operating Partnership
listed in Exhibit A hereto, under which the Investing Partnership
and Operating Partnership shall (i) consent to J&B's assignment
to the Bank of the respective Security Agreement, Security
Interest, Purchased Partnership Interest, each distribution due
and payable or made from time to time on the Purchased
Partnership Interest, and the proceeds thereof; (ii) consent to
J&B's delivery of the above mentioned Financing Statements and
the Bank's filing of the Financing Statements from time to time
with the appropriate governmental authorities; (iii) assign to
the Bank all distributions which may be due and payable or made
from time to time on the Purchased Partnership Interest (subject
to the terms and conditions set forth in this Bank Agreement)
until all outstanding obligations under the Set Aside Purchase
Note which is in default shall have been paid in full (including,
without limitation, all costs of collection, reasonable attorney
fees and other fees and expenses) and (iv) agree that upon
foreclosure of the Security Interest, all distributions on the
Purchased Partnership Interest shall be paid directly to the
Bank, as the assignee of J&B, regardless of whether the Bank
becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the
limitations set forth in clause (iii) above. Upon receipt of
each such Consent, Assignment and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.4. Attachment of Security Interests.
--------------------------------
Notwithstanding anything to the contrary in this Bank
Agreement, each security interest granted by J&B to the Bank
under this Section 7 shall become effective and shall attach only
upon J&B's delivery to the Bank of the respective Set Aside
Purchase Note, and the related Consent and Agreement and
Financing Statements pertaining to that Set Aside Purchase Note
and the related Consent, Assignment and Agreement and related
Financing Statements pertaining to the Purchased Partnership
Interest. J&B shall be obligated to deliver to the Bank only
those Set Aside Purchase Notes selected by J&B in its sole
discretion as shall have an aggregate balance of principal due at
maturity equal to at least twice the principal amount of the
Debentures which will be sold at the respective Initial Closing
or Additional Closing, together with the related Consent and
Agreement and Financing Statements pertaining to that Set Aside
Purchase Note, and the related Consent, Assignment and Agreement
and related Financing Statements pertaining to the Purchased
Partnership Interest. At such time as the Company shall send to
the Bank the Company's irrevocable notice that there will not be
any further Additional Closings, the Company and the Bank shall
thereupon acknowledge and append hereto an additional Exhibit D
listing the Set Aside Purchase Notes, Investing Partnerships,
Operating Partnerships and Security Agreements, in which the Bank
will have security interests under this Section 7.
Section 7.5. Duties of the Bank.
------------------
(a) The Bank shall hold the notes, Agreements and
instruments deposited with it for the purposes of this Bank
Agreement and for the benefit of the Bank and of the owners of
the Debentures from time to time, shall file the Financing
Statements delivered to it from time to time by J&B with the
appropriate governmental authorities indicated by J&B to the Bank
and shall perform all duties imposed upon it by this Bank
Agreement until this Bank Agreement is terminated. The security
interests and assignments created by this Bank Agreement and by
each Consent, Assignment and Agreement shall automatically
terminate when all of the Debentures and all amounts payable to
the Bank under this Bank Agreement have been paid in full.
Thereupon, the Bank shall return to J&B the Set Aside Purchase
Notes deposited with it pursuant to Section 7.2(b) hereof, and
shall file with the appropriate governmental authorities
indicated by J&B to the Bank Financing Statements delivered by
J&B to the Bank recording the termination of the Bank's security
interests and assignments granted under this Bank Agreement and
each Consent, Assignment and Agreement.
(b) Upon the occurrence and continuation of an Event
of Default, the Bank shall declare the entire outstanding
aggregate principal balance of all the Debentures due and
immediately payable with accrued interest thereon. In addition,
the Bank shall immediately notify the makers of the Set Aside
Purchase Notes that all payments to be made thereafter on the Set
Aside Purchase Notes shall be paid directly to the Bank.
The Bank shall collect all payments received under the
foregoing security interests and assignments and apply them for
the benefit of the Bank and of the owners of the Debentures
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to the repayment of principal of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(c) Upon the occurrence and continuation of an Event
of Default, the Bank shall be entitled to institute action
against the Co-Obligors, jointly or severally, to collect payment
under the Debentures without any prior requirement to attempt to
collect any funds under the Set Aside Purchase Notes or the
related Purchased Partnership Interests. In the event that the
Company shall default on its payment obligations to the Bank
under this Bank Agreement, the Bank shall be entitled to
institute action against the Co-Obligors, jointly or severally,
to collect payment under this Bank Agreement, without any prior
requirement to attempt to collect any funds under the Set Aside
Purchase Notes or the related Purchased Partnership Interests.
(d) Upon the occurrence and continuation of an Event
of Default, the Bank, in its discretion, is authorized to, but
shall not be required to, proceed in any way legally available to
it to liquidate the Set Aside Purchase Notes and the Purchased
Partnership Interests (if the Bank shall have foreclosed on such
Set Aside Purchase Note pursuant to Section 7.5(e) hereof)
including, but not limited to, the public or private sale of all
or any part thereof upon three (3) days' prior notice to the
Co-Obligors, free and clear of any claim, lien, charge or
encumbrance including, without limitation, any right of equity of
redemption. The Bank shall apply the proceeds of any such sale
firstly to the payment of the expenses of the sale, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of accrued interest including accrued interest from and
after the Event of Default, and next to the payment of principal
of the Debentures. The Bank shall not be liable to any of the
Co-Obligors or their affiliates because of any sale or the
consequences thereof.
(e) While an Event of Default is continuing, if there
shall occur or if there shall have occurred and be continuing an
event of default under any Set Aside Purchase Note, the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of the foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining previous
Multi-family Participation Clearance from the United States
Department of Housing and Urban Development ("HUD 2530
Clearance") with respect to that Operating Partnership, if
required, in satisfaction of that Set Aside Purchase Note (but
not of any Debenture); provided, that during any time period
pending obtaining HUD 2530 Clearance, if required, or if HUD 2530
Clearance is required for that Operating Partnership but cannot
be obtained, or if the Bank may not be admitted as a substituted
limited partner in the Operating Partnership for any reason, the
Bank shall nevertheless be entitled to receive all distributions
from that Operating Partnership as the assignee of J&B and this
Bank Agreement shall operate as an assignment of such
distributions by the Investing Partnership, subject to the
limitations set forth in Section 7.3(c). In addition, while an
Event of Default is continuing, if there shall occur or if there
shall have occurred and be continuing an event of default under
any Set Aside Purchase Note or under any Partnership Agreement
governing the Operating Partnership related to the Purchased
Partnership Interest, the Bank shall be authorized to exercise
any and all rights and remedies available to it as the holder of
the respective Set Aside Purchase Note, the substituted partner
or assignee with respect to the Purchased Partnership Interest in
the related Operating Partnership, as well as any other remedy
available under law or equity. The Bank shall apply the proceeds
of its exercise of the above mentioned rights and remedies
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to repayment of principal of the Debentures, until all amounts
due under the Debentures shall have been paid in full together
with all costs of collection, fees and expenses.
(f) If a default on any payment of principal or
interest on a Set Aside Purchase Note shall occur while no Event
of Default is continuing, then the Company shall immediately give
the Bank notice thereof and upon receiving such notice the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of such foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining HUD 2530
Clearance, if required, in satisfaction of that Set Aside
Purchase Note (but not of any Debenture); provided that during
any time period pending obtaining HUD 2530 Clearance, if
required, or if HUD 2530 Clearance is required for that Operating
Partnership but cannot be obtained, or if the Bank may not be
admitted as a substituted limited partner in the Operating
Partnership for any reason, the Bank shall be entitled
nevertheless to receive all distributions from that Operating
Partnership as the assignee of J&B and this Bank Agreement shall
operate as an assignment of such distributions by the Investing
Partnership, subject to the limitations set forth in Section
7.3(c). The Bank shall pay over to the Company any amounts
received from the Operating Partnership unless and until an Event
of Default shall occur and be continuing. If and when such Event
of Default shall occur and be continuing, the Bank shall follow
the procedures specified in Sections 7.5 (b)-(e) of this Bank
Agreement.
(g) The rights and remedies enumerated herein are in
addition to and not in lieu of any other right or remedy
available to the Bank under law or equity, including, without
limitation, rights and remedies available to a secured party
under the Uniform Commercial Code; provided, however, that the
Bank shall not be entitled to apply the proceeds of the
foreclosure of any Set Aside Purchase Note or Purchased
Partnership Interest to amounts owing to the Bank under this Bank
Agreement unless an Event of Default shall occur and be
continuing. The Bank shall be entitled to exercise one or more
remedies at the same time, all such rights and remedies being
cumulative and not mutually exclusive.
(h) The Co-Obligors shall remain jointly and severally
liable for any deficiency remaining after the application of
proceeds of the foreclosure of any Set Aside Purchase Note or
Purchased Partnership Interest collected by the Bank including,
but not limited to, all actual costs and expenses of collection
(including, without limitation, reasonable attorneys' fees and
expenses). If any funds shall remain in the possession of the
Bank after the payment of all amounts due under the Debentures,
all such costs of collection thereof and all other actual fees
and expenses (including without limitation reasonable attorney's
fees and expenses) of the Bank, the Bank shall deliver such
remaining funds to the Company. The provisions of this Section
7.5(h) shall survive the termination of this Bank Agreement.
Section 7.6. Events of Default.
-----------------
If any of the following events (an "Event of Default")
shall occur and be continuing for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any part of
the principal of any Debenture when the same shall become
due and payable, and such default shall have continued for
more than 30 days; or
(ii) the Company defaults in the payment of any part of
the interest on any Debenture when the same shall become due
and payable, and such default shall have continued for more
than 15 days;
then, the Bank, by notice to the Company, or the owners of at
least 25% of the principal amount of the Debentures, by notice to
the Company and to the Bank, may declare the entire principal of
and accrued interest on all Debentures to become immediately due
and payable at par without presentment, demand, protest or other
notice of any kind, all of which are waived by the Company.
Section 7.7. Sale of Set Aside Purchase Notes.
--------------------------------
The Company may from time to time while no Event of
Default shall have occurred and be continuing arrange the sale of
one or more Set Aside Purchase Notes to a third party, subject to
the following conditions:
(i) The Company shall give prompt written notice
thereof to the Bank together with all relevant details of
the proposed transaction.
(ii) As part of the consideration to be paid by the
purchaser of each Set Aside Purchase Note to be sold, the
purchaser shall pay directly to the Bank cash in the amount
equal to 50% of the principal balance due at maturity of
that Set Aside Purchase Note plus an amount sufficient to
pay accrued interest on the pro rata portion of Debentures
to be prepaid pursuant to subparagraph (iv) below.
(iii) The total consideration to be paid upon sale of a
Set Aside Purchase Note shall not be less the 50% of the
principal balance due at maturity thereof plus an amount
sufficient to pay accrued interest on the pro rata portion
of Debentures to be prepaid pursuant to subparagraph (iv)
below.
(iv) Upon receipt of cash as provided in subparagraph
(ii) above, the Bank will apply the proceeds to the pro rata
redemption of the Debentures at par plus payment of accrued
interest thereon. Thereafter, the Bank shall deliver each
Set Aside Purchase Note that is then sold to the purchaser
together with an assignment of Security Interest and
Security Agreement covering the related Purchased
Partnership Interest. Subject to Section 8(b) hereof the
Bank shall have no liability whatsoever to the purchaser or
any party hereto for its actions pursuant to this Section
7.7.
Section 7.8. Fees and Expenses. In addition to the
-----------------
administration fee set forth in Section 1.7 hereof, the Bank
shall be entitled to compensation for its services under this
Section 7 in the amount of $2,500 as an acceptance fee, payable
upon execution and delivery of this Bank Agreement; and
administrative fees, payable annually on the anniversary date of
this Bank Agreement, based upon the aggregate principal amount of
outstanding Debentures ten days prior to the anniversary date, in
the following amounts:
$500,000 to $1,000,000 outstanding $2,500
$1,000,001 to $2,000,000 outstanding $3,000
$2,000,001 to $3,000,000 outstanding $4,000
$3,000,001 to $4,000,000 outstanding $5,000
$4,000,001 to $5,000,000 outstanding $6,000
$5,000,001 to $5,500,000 outstanding $7,000
The Company shall reimburse the Bank for its actual out-of-pocket
expenses incurred in connection with its obligations pursuant to
this Section 7 (including, but not limited to, actual expenses
for stationery, postage, telephone, telex, wire transfers,
telecopy, retention of records, and the filing of Financing
Statements, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. The Set Aside Purchase Notes and the related
Purchased Partnership Interests in which the Bank has a security
interest will be available to satisfy the Company's payment
obligations to the Bank under this Section 7.8 only when an Event
of Default has occurred and is continuing. The Company shall not
be obligated to reimburse the Bank for any costs or expenses
incurred in connection with the preparation and execution of this
Bank Agreement. The provisions of this Section 7.8 shall survive
the termination of this Bank Agreement.
Section 8. Other Rights and Duties of Bank.
-------------------------------
(a) The Bank need exercise only those rights and need
perform only those duties that are contemplated or specifically
set forth in this Bank Agreement and no others.
(b) Notwithstanding anything herein to the contrary,
the Bank may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act, or
its own willful misconduct except that:
1. This paragraph does not limit the effect of
paragraph (a) of this Section.
2. The Bank shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a Notice received by it pursuant to Section
17(b) of the Subscription Agreement.
(c) The Bank may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Bank need not investigate any fact or matter stated
in the document.
(d) Before the Bank acts or refrains from acting, it
may require an officer's certificate or an opinion of counsel.
The Bank shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(e) The Bank may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed wit
Section 9. No Representations. The Bank makes no
------------------
representation as to the validity or adequacy of this Bank
Agreement or the Debentures, or any Set Aside Purchase Note or
Purchased Partnership Interest in which the Bank has a security
interest, or any Financing Statement delivered to it by J&B or
the Bank's filing of any such Financing Statement with any
governmental authority; it shall not be accountable for the
Company's use of the proceeds from the Debentures and it shall
not be responsible for any statement in the Memorandum or in the
Debentures other than its authentication.
Section 10. Indemnification. The Company shall
---------------
indemnify, defend and hold the Bank harmless from and against any
and all loss, damage, liability, claim and expense, including
taxes (other than taxes based on the income of the Bank) incurred
by the Bank arising out of or in connection with its acceptance
or performance of its obligations under this Bank Agreement,
including the legal costs and expenses of defending itself
against any claim or liability in connection with its performance
under this Bank Agreement. The Bank shall notify the Company
promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Bank shall cooperate in
the defense. The Bank may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Bank through gross negligence
or bad faith. The provisions of this Section 10 shall survive
the termination of this Bank Agreement.
Section 11. Replacement of Bank.
-------------------
(a) A resignation or removal of the Bank and
appointment of a successor Bank shall become effective only upon
the successor Bank's acceptance of appointment as provided in
this Section 11.
(b) The Bank may resign by so notifying the Company.
The owners of a majority in principal amount of the Debentures
outstanding may remove the Bank for any reason by so notifying
the Bank and the Company. The Company may remove the Bank if:
(i) the Bank is adjudged a bankrupt or an insolvent;
(ii) a receiver or public officer takes charge of
the Bank or its property; or
(iii) the Bank becomes incapable of acting.
(c)(i) If the Bank resigns or is removed or if a
vacancy exists in the office of the Bank for any reason, the
Company shall promptly appoint a successor Bank.
(ii) If a successor Bank does not take office
within 60 days after the retiring Bank gives notice of
resignation or action is taken to remove the retiring Bank, the
retiring Bank, the Company or the owners of at least 10% in
principal amount of the Debentures outstanding may petition any
court of competent jurisdiction for the appointment of a
successor Bank.
(iii) A successor Bank shall deliver a written
acceptance of its appointment to the retiring Bank and the
Company. Thereupon the resignation or removal of the
retiring Bank shall become effective and the successor Bank
shall have all the rights, powers and duties of the Bank
under this Bank Agreement. The successor Bank shall mail a
notice of its succession to Debenture owners. Upon payment
to the retiring Bank of all amounts owed to it under this
Bank Agreement, the retiring Bank shall promptly transfer
all property held by it as Bank to the successor Bank.
(d) If the Bank consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Bank.
Section 12. Notices. All notices and other
-------
communications pursuant to this Bank Agreement shall be in
writing and shall be delivered by hand or sent by registered or
certified mail, return receipt requested, or by facsimile,
confirmed by writing, delivered by hand or sent by registered or
certified mail, return receipt requested, delivered or sent on
the date of the facsimile, addressed as follows:
(a) If to the Company:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Gerald E. Eppner, Esq.
(b) If to Debenture owners:
At the addresses of the registered owners
appearing in the register maintained by the
Bank.
(c) If to the Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 13. Choice of Law. This Bank Agreement shall
-------------
be governed by the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
Section 14. Prior Agreements; Amendment. This Bank
---------------------------
Agreement, together with each Consent and Agreement and each
Consent, Assignment and Agreement referred to in Section 7
hereof, sets forth the entire Agreement of the parties hereto
with respect to the subject matter hereof and supersedes all
prior Agreements, contracts, promises, representations,
warranties, statements, arrangements and understandings, if any,
among the parties hereto or their representatives with respect to
the subject matter hereof. No waiver, modification or amendment
of any provision, term or condition hereof shall be valid unless
in writing and signed by all parties hereto, and any such waiver,
modification or amendment shall be valid only to the extent
therein set forth.
Section 15. Successors. This Bank Agreement shall be
----------
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 16. Enforceability. Any provision of this
--------------
Bank Agreement which may be determined by competent authority to
be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 17. Counterparts. This Bank Agreement may be
------------
executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.
Section 18. Definitions. All terms used in this Bank
-----------
Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed
this Bank Agreement as of the date first above written.
J&B MANAGEMENT COMPANY
By: /s/ Bernard M. Rodin
-----------------------------
Title: General Partner
LEISURE CENTERS, INC.
By: /s/ Bernard M. Rodin
-----------------------------
Title: Vice President
J&B MANAGEMENT CORP.
By: /s/ Bermard M. Rodin
-----------------------------
Title: Vice President
SULGRAVE REALTY CORPORATION
By: /s/ Bernard M. Rodin
-----------------------------
Title: Vice President
WILMART DEVELOPMENT CORP.
By: /s/ Bernard M. Rodin
-----------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Jenepher Lattibeaudiere
-----------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
to Bank Agreement
-----------------
1. (a) Investing Partnership: Troost Associates, a New Jersey
limited partnership
(b) Operating Partnership: Eleanor Apts., Ltd., a Missouri
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $62,500
(ii) Date of Issue: September 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $62,500
(viii) Prepaid Interest as of
July 31, 1991: $65,960
(d) Security Agreement: Purchase Agreement, dated
September 30, 1982, by and among John Luciani, Bernard
M. Rodin, Woodlands Associates and Realty Executive
Associates ("Sellers") and Troost Associates, Center
Associates, Grand Associates, and Missouri Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
2. (a) Investing Partnership: Center Associates, a New Jersey
limited partnership
(b) Operating Partnership: Eleanor Apts., Ltd., a Missouri
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $62,500
(ii) Date of Issue: September 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $62,500
(viii) Prepaid Interest as of
July 31, 1991: $65,960
(d) Security Agreement: Purchase Agreement, dated
September 30, 1982, by and among John Luciani, Bernard
M. Rodin, Woodlands Associates and Realty Executive
Associates ("Sellers") and Troost Associates, Center
Associates, Grand Associates, and Missouri Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
3. (a) Investing Partnership: Grand Associates, a New Jersey
limited partnership
(b) Operating Partnership: Eleanor Apts., Ltd., a Missouri
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $62,500
(ii) Date of Issue: September 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $62,500
(viii) Prepaid Interest as of
July 31, 1991: $65,960
(d) Security Agreement: Purchase Agreement, dated
September 30, 1982, by and among John Luciani, Bernard
M. Rodin, Woodlands Associates and Realty Executive
Associates ("Sellers") and Troost Associates, Center
Associates, Grand Associates and Missouri Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
4. (a) Investing Partnership: Missouri Associates, a New
Jersey limited partnership
(b) Operating Partnership: Eleanor Apts., Ltd., a Missouri
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $62,500
(ii) Date of Issue: September 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $62,500
(viii) Prepaid Interest as of
July 31, 1991: $65,960
(d) Security Agreement: Purchase Agreement, dated
September 30, 1982, by and among John Luciani, Bernard
M. Rodin, Woodlands Associates and Realty Executive
Associates ("Sellers") and Troost Associates, Center
Associates, Grand Associates and Missouri Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
5. (a) Investing Partnership: Brushcreek Associates, a New
Jersey limited partnership
(b) Operating Partnership: Sunny Slope Apartments, Ltd., a
Missouri limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $72,500
(ii) Date of Issue: July 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $72,500
(viii) Prepaid Interest as of
July 31, 1991: $78,679
(d) Security Agreement: Purchase Agreement, dated July 30,
1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Brushcreek Associates, Llewellyn
Associates, Logan Place Associates and Jason Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
6. (a) Investing Partnership: Llewellyn Associates, a New
Jersey limited partnership
(b) Operating Partnership: Sunny Slope Apartments, Ltd., a
Missouri limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $72,500
(ii) Date of Issue: July 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $72,500
(viii) Prepaid Interest as of
July 31, 1991: $78,679
(d) Security Agreement: Purchase Agreement, dated July 30,
1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Brushcreek Associates, Llewellyn
Associates, Logan Place Associates and Jason Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
7. (a) Investing Partnership: Logan Place Associates, a New
Jersey limited partnership
(b) Operating Partnership: Sunny Slope Apartments, Ltd., a
Missouri limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $72,500
(ii) Date of Issue: July 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $72,500
(viii) Prepaid Interest as of
July 31, 1991: $78,679
(d) Security Agreement: Purchase Agreement, dated July 30,
1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Brushcreek Associates, Llewellyn
Associates, Logan Place Associates and Jason Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
8. (a) Investing Partnership: Jason Associates, a New Jersey
limited partnership
(b) Operating Partnership: Sunny Slope Apartments, Ltd., a
Missouri limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $72,500
(ii) Date of Issue: July 30, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $72,500
(viii) Prepaid Interest as of
July 31, 1991: $78,679
(d) Security Agreement: Purchase Agreement, dated July 30,
1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates, and Realty Executive Associates
("Sellers") and Brushcreek Associates, Llewellyn
Associates, Logan Place Associates and Jason Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
9. (a) Investing Partnership: Kansas Associates, a New Jersey
limited partnership
(b) Operating Partnership: Jewel Crest, Ltd., a Kansas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $100,000
(ii) Date of Issue: November 3, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $100,000
(viii) Prepaid Interest as of
July 31, 1991: $119,133
(d) Security Agreement: Purchase Agreement, dated November
3, 1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Kansas Associates, Wyandotte
Associates, Worth Associates and Cipal Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
10. (a) Investing Partnership: Wyandotte Associates, a New
Jersey limited partnership
(b) Operating Partnership: Jewel Crest, Ltd., a Kansas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $100,000
(ii) Date of Issue: November 3, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $100,000
(viii) Prepaid Interest as of
July 31, 1991: $119,133
(d) Security Agreement: Purchase Agreement, dated November
3, 1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Kansas Associates, Wyandotte
Associates, Worth Associates and Cipal Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
11. (a) Investing Partnership: Worth Associates, a New Jersey
limited partnership
(b) Operating Partnership: Jewel Crest, Ltd., a Kansas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $100,000
(ii) Date of Issue: November 3, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $100,000
(viii) Prepaid Interest as of
July 31, 1991: $119,133
(d) Security Agreement: Purchase Agreement, dated November
3, 1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Kansas Associates, Wyandotte
Associates, Worth Associates and Cipal Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
12. (a) Investing Partnership: Cipal Associates, a New Jersey
limited partnership
(b) Operating Partnership: Jewel Crest, Ltd., a Kansas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $100,000
(ii) Date of Issue: November 3, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $100,000
(viii) Prepaid Interest as of
July 31, 1991: $119,133
(d) Security Agreement: Purchase Agreement, dated November
3, 1982, by and among John Luciani, Bernard M. Rodin,
Woodlands Associates and Realty Executive Associates
("Sellers") and Kansas Associates, Wyandotte
Associates, Worth Associates and Cipal Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 24.25% limited
partnership interest in the Operating Partnership
13. (a) Investing Partnership: Millville Associates-I, a New
Jersey limited partnership
(b) Operating Partnership: BOS Associates, a New Jersey
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $495,000
(ii) Date of Issue: May 12, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $95,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $95,000
(vii) Balance of Principal
Due at Maturity: $400,000
(viii) Prepaid Interest as of
July 31, 1991: $65,559
(d) Security Agreement: Purchase Agreement, dated May 12,
1982, by and among John Luciani, Bernard M. Rodin,
Harold Bobroff, Alfred Olonoff and Herbert L. Scharf
("Sellers"), and BOS Associates (Sellers' respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
14. (a) Investing Partnership: Millville Associates-II, a New
Jersey limited partnership
(b) Operating Partnership: BOS Associates, a New Jersey
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $495,000
(ii) Date of Issue: May 12, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $95,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $95,000
(vii) Balance of Principal
Due at Maturity: $400,000
(viii) Prepaid Interest as of
July 31, 1991: $65,559
(d) Security Agreement: Purchase Agreement, dated May 12,
1982, by and among John Luciani, Bernard M. Rodin,
Harold Bobroff, Alfred Olonoff and Herbert Scharf
("Sellers"), and BOS Associates (Sellers' respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
15. (a) Investing Partnership: Millville Associates-III, a New
Jersey limited partnership
(b) Operating Partnership: BOS Associates, a New Jersey
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $495,000
(ii) Date of Issue: May 12, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $95,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $95,000
(vii) Balance of Principal
Due at Maturity: $400,000
(viii) Prepaid Interest as of
July 31, 1991: $65,559
(d) Security Agreement: Purchase Agreement, dated May 12,
1982, by and among John Luciani, Bernard M. Rodin,
Harold Bobroff, Alfred Olonoff and Herbert L. Scharf
("Sellers"), and BOS Associates (Sellers' respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
16. (a) Investing Partnership: Millville Associates-IV, a New
Jersey limited partnership
(b) Operating Partnership: BOS Associates, a New Jersey
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $495,000
(ii) Date of Issue: May 12, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $95,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $95,000
(vii) Balance of Principal
Due at Maturity: $400,000
(viii) Prepaid Interest as of
July 31, 1991: $65,559
(d) Security Agreement: Purchase Agreement, dated May 12,
1982, by and among John Luciani, Bernard M. Rodin,
Harold Bobroff, Alfred Olonoff and Herbert L. Scharf
("Sellers"), and BOS Associates (Sellers' respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 24.75% limited
partnership interest in the Operating Partnership
17. (a) Investing Partnership: Vine Hill Associates, a New
Jersey limited partnership
(b) Operating Partnership: Walnut Associates, a New Jersey
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,920,000
(ii) Date of Issue: December 29, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: $20,000
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $48,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $260,000
(vii) Balance of Principal
Due at Maturity: $1,660,000
(viii) Prepaid Interest as of
July 31, 1991: $1,218,733
(d) Security Agreement: Purchase Agreement, dated December
29, 1982, by and among John Luciani, Bernard M. Rodin,
Robert Brodsky, Peter Hopf, Richard Adler, Arthur
Barchenko, Robert Frankel and Donald Gillin ("Sellers")
and Walnut Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
18. (a) Investing Partnership: Delaware Associates, a New
Jersey limited partnership
(b) Operating Partnership: Bethlehem Associates, a New
Jersey limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,200,000
(ii) Date of Issue: October 25, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $246,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $420,000
(vii) Balance of Principal
Due at Maturity: $1,780,000
(viii) Prepaid Interest as of
July 31, 1991: $343,684
(d) Security Agreement: Purchase Agreement, dated October
25, 1982, by and among John Luciani, Bernard M. Rodin,
William Goldberg, Irving Weis, Jack Ortman, Jerry
Blickman, William Nelkin and Robert Nelson ("Sellers")
and Delaware Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
19. (a) Investing Partnership: Woodlands Associates, a New
Jersey limited partnership
(b) Operating Partnership: Fawn Ridge Apts., Ltd., a Texas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,785,000
(ii) Date of Issue: December 21, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $2,785,000
(viii) Prepaid Interest as of
July 31, 1991: $1,068,103
(d) Security Agreement: Purchase Agreement, dated December
21, 1982, by and among John Luciani, Bernard M. Rodin,
John Luciani III, J&B Management Corp., Barbara H.
Freitag, Harvey Realty Company, Harvey R. Heller, James
Heller, Seymour A. Heller and Tangelo Associates
("Sellers") and Woodlands Associates (Sellers'
respective rights and interests under the Security
Agreement have been sold, transferred and assigned to
J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
20. (a) Investing Partnership: Wilkes Barre Associates, a New
Jersey limited partnership
(b) Operating Partnership: Hanover Associates, Ltd., a New
York limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,850,000
(ii) Date of Issue: October 29, 1982
(iii) Maturity Date: December 31, 1996
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of July 31, 1991: $550,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $550,000
(vii) Balance of Principal
Due at Maturity: $2,300,000
(viii) Prepaid Interest as of
July 31, 1991: $437,824
(d) Security Agreement: Purchase Agreement, dated October
29, 1982, by and among John Luciani, Bernard M. Rodin,
Alan Underberg, Manuel Goldman, Andrew Greenstein,
Irving Kessler, Bradley Schwartz, Herman Schwartz,
Theodore Ellenoff, Charles August, Harry Goldman and
Lois Ellenoff ("Sellers") and Hanover Associates
(Sellers' respective rights and interests under the
Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited
partnership interest in the Operating Partnership
<PAGE>
EXHIBIT B
to Bank Agreement
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.2(c)]
THIS CONSENT AND AGREEMENT, dated as of _______, 199_,
is by and between [name of Investing Partnership] (the "Investing
Partnership"), J&B Management Company ("J&B"), and The Bank of
New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Agreement dated October
_, 1991 (the "Agreement"); and
WHEREAS, Section 7.2(c) of the Agreement provides for
the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents and Agreements. The Investing
-----------------------
Partnership hereby (i) consents to J&B's assignment to the Bank
of the Investing Partnership's Set Aside Purchase Note; (ii)
consents to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank; and (iii) agrees that upon
receiving the Bank's notice of an Event of Default that is
continuing, the Investing Partnership shall pay all sums due
under its Set Aside Purchase Note directly to the Bank. The Bank
hereby acknowledges that interest and, where required, scheduled
payments of principal payable prior to maturity may be deferred
until the maturity of that Set Aside Purchase Note.
Section 2. Notices. All notices and other
-------
communications pursuant or relating to this Consent and Agreement
shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by
facsimile, confirmed by writing delivered by hand or sent by
registered or certified mail, return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
--------------------------------------
--------------------------------------
--------------------------------------
(b) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Gerald A. Eppner, Esq.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 3. Choice of Law. This Consent and Agreement
-------------
shall be governed by the laws of the State of New York, without
giving effect to the principles of conflicts of law thereof.
Section 4. Successors. This Consent and Agreement
----------
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Section 5. Counterparts. This Consent and Agreement
------------
may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute
one instrument.
Section 6. Definitions. All terms used in this
-----------
Consent and Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Agreement as of the date first written above.
[Name of Investing Partnership]
By
-----------------------------
Title:
J&B MANAGEMENT COMPANY
By
-----------------------------
Title:
THE BANK OF NEW YORK
By
-----------------------------
Title:
<PAGE>
EXHIBIT C
to Bank Agreement
[Form of Consent, Assignment and Agreement]
CONSENT, ASSIGNMENT AND AGREEMENT
[PURSUANT TO SECTION 7.3(c)]
THIS CONSENT, ASSIGNMENT AND AGREEMENT, dated as of
___________ __, 199_, is by and between [name of Investing
Partnership] (the "Investing Partnership"), [name of Operating
Partnership] (the "Operating Partnership"), J&B Management
Company ("J&B"), and The Bank of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Agreement dated October
__, 1991 (the "Agreement"); and
WHEREAS, Section 7.3(c) of the Agreement provides for
the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents, Assignments and Agreements. The
------------------------------------
Investing Partnership and the Operating Partnership in which the
Investing Partnership owns a Purchased Partnership Interest
hereby (i) consent to J&B's assignment to the Bank of the
Security Agreement, Security Interest, Purchased Partnership
Interest, all distributions which may be due and payable or paid
from time to time on such Purchased Partnership Interest, and the
proceeds thereof, relating to the Investing Partnership's Set
Aside Purchase Note; (ii) consent to J&B's delivery to the Bank
of Financing Statements and to the Bank's filing of such
Financing Statements with the appropriate governmental
authorities in order to perfect and to continue the perfection of
the Bank's security interest in the Security Agreement, Security
Interest, Purchased Partnership Interest and distributions which
may be due and payable or paid from time to time on the Purchased
Partnership Interest; (iii) subject to the terms and conditions
of the Agreement, assign to the Bank all distributions which
shall be due and payable or made from time to time on the
Purchased Partnership Interest, and the proceeds thereof, until
all outstanding obligations under the Set Aside Purchase Note
which is in default have been paid in full (including, without
limitation, all costs of collection, reasonable attorneys' fees
and other fees and expenses); and (iv) subject to the terms and
conditions of the Agreement, agree that upon foreclosure of the
Security Interest all distributions made on the Purchased
Partnership Interest shall be paid directly to the Bank, as the
assignee of J&B, regardless of whether the Bank becomes a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership but subject to the limitations set
forth in clause (iii) above.
Section 2. Representation of the Operating
-------------------------------
Partnership. The Operating Partnership hereby agrees to keep a
-----------
copy of this Consent, Assignment and Agreement with its business
records.
Section 3. Agreement of the Operating Partnership.
--------------------------------------
The Operating Partnership hereby agrees to admit the Bank as a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership upon the Bank's foreclosure on the
Security Interest and request, subject to the Bank's obtaining
HUD 2530 Clearance and the rights of the Investing Partnership
under Section 9-505 of the Uniform Commercial Code.
Section 4. Amendment to Partnership Agreement. Upon
----------------------------------
substitution of the Bank for the Investing Partnership as a
limited partner in the Operating Partnership pursuant to the
Agreement and this Consent, Assignment and Agreement, this
Consent, Assignment and Agreement shall constitute an amendment
to the partnership agreement of the Operating Partnership, and
the Bank shall not be liable for the obligations of any
predecessor which has assigned the Purchased Partnership Interest
to make any contributions to the Operating Partnership.
Section 5. Further Assurances and Power of Attorney.
----------------------------------------
Each of the parties hereto shall, from time to time, upon request
of a party hereto, duly execute, acknowledge and deliver or cause
to be duly executed, acknowledged and delivered, all such further
instruments and documents reasonably requested by a party to
effectuate the intent and purposes of this Consent, Assignment
and Agreement. Notwithstanding the foregoing, this Consent,
Assignment and Agreement shall constitute an irrevocable power of
attorney coupled with an interest for the Bank to execute and
file a certificate of amendment to the certificate of limited
partnership of the Operating Partnership or any other document or
instrument in order to effectuate the intent and purposes of this
Consent, Assignment and Agreement; provided, however, that the
Bank may not be substituted as a partner of the Operating
Partnership unless such substitution is permitted under the
Uniform Commercial Code and HUD 2530 Clearance, if required, has
been obtained.
Section 6. Notices. All notices and other
-------
communications pursuant or relating to this Consent and Agreement
shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by
facsimile, confirmed by writing delivered by hand or sent by
registered or certified mail return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
-------------------------------------
-------------------------------------
-------------------------------------
(b) If to the Operating Partnership:
-------------------------------------
-------------------------------------
-------------------------------------
(c) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Gerald A. Eppner, Esq.
(d) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 7. Choice of Law. This Consent, Assignment
-------------
and Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflicts of law
thereof.
Section 8. Successors. This Consent, Assignment and
----------
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
Section 9. Counterparts. This Consent, Assignment and
------------
Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall
constitute one instrument.
Section 10. Definitions. All terms used in this
-----------
Consent and Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Agreement as of the date first written above.
[Name of Investing Partnership]
By
------------------------------
Title:
[Name of Operating Partnership]
By
------------------------------
Title:
J&B MANAGEMENT COMPANY
By
------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------
Title:
Exhibit 10.5(e)
BANK AGREEMENT
THIS BANK AGREEMENT, dated as of April 1, 1992 (as
amended, modified or supplemented from time to time, this "Bank
Agreement"), is by and among J&B Management Company, a New Jersey
general partnership ("J&B"), and its affiliates; Leisure Centers,
Inc., a corporation organized and existing under the laws of the
State of Delaware, J&B Management Corp., Sulgrave Realty
Corporation, and Wilmart Development Corp., each of which is a
corporation organized and existing under the laws of the State of
New Jersey (hereinafter J&B, Leisure Centers, Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. are sometimes referred to collectively as the
"Company" or the "Co-Obligors"), and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is issuing its Series 4, 11.5%
Debentures due April 15, 2000 (the "Debentures") pursuant to the
Company's Confidential Private Placement Memorandum dated April
2, 1992, as the same may be from time to time amended (the
"Memorandum");
WHEREAS, the Company's private placement of the
Debentures (the "Offering") will terminate on the earlier of (i)
the date on which all the Debentures are sold or (ii) December
31, 1993 (the "Offering Termination Date");
WHEREAS, subscribers will purchase Debentures at a
closing (the "Initial Closing") to be held when at least
$1,000,000 principal amount of Debentures have been sold and,
thereafter, from time to time (each, singly, an "Additional
Closing," and, collectively, the "Additional Closings"), at the
discretion of the Company, on such day or days as may be
determined by the Company, as subscriptions are received and
accepted (hereinafter the date of the Initial Closing and the
date of any Additional Closing are each referred to as a "Closing
Date");
WHEREAS, the Company desires to deliver to the Bank
amounts received by the Company from subscribers for Debentures
(each, singly, a "Purchaser," and, collectively, the
"Purchasers"), in payment for the Debentures, which amounts shall
be released to the Company at the Initial Closing and at each
Additional Closing;
WHEREAS, each Purchaser shall be entitled to receive,
on a monthly basis prior to the Closing Date with respect to that
Purchaser's Debentures, distributions representing interest
accrued on that Purchaser's subscription payment at a rate of
11.5% per annum;
WHEREAS, the Company desires to establish an interest
bearing escrow fund to be called J&B Management Series 4 Escrow
Fund Account No. 201317 (the "Fund") with the Bank;
WHEREAS, the Company wishes to grant the Bank, for the
benefit of the Bank and the Purchasers, a security interest in
and to assign to the Bank certain notes, instruments and
documents more fully described below and the Bank is willing to
accept such security interest and assignment upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Company wishes to appoint the Bank as
Escrow Agent, Authenticating Agent, Registrar, Paying Agent and
Custodian with respect to the Debentures and the above-mentioned
notes, instruments and documents and the Bank is willing to
accept such appointments upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained and other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Escrow Agent.
------------
Section 1.1. Appointment.
----------- The Company hereby appoints
and designates the Bank as Escrow Agent for the purposes set
forth in this Section 1, and the Bank hereby accepts such
appointment.
Section 1.2. Escrow.
------ The Company shall from time to
time deliver amounts received from Purchasers in payment for the
Debentures ("Subscription Payments") to the Bank. The Bank shall
deposit the Subscription Payments in the Fund to be established
in the Company's name for this purpose by the Bank. Subscription
Payments delivered for deposit in the Fund shall be invested in
short term certificates of deposits (including certificates of
deposits issued by the Bank), A-1, P-1 commercial paper, interest
bearing money market accounts, all as specified in writing by the
Company and held in trust for the benefit of the Purchasers. The
Bank is not responsible for interest, losses, taxes or other
charges on investments. All checks delivered to the Bank for
deposit in the Fund shall be payable to the order of "J&B
Management Company - Escrow Account." Concurrently with such
delivery, the Company shall deliver to the Bank a statement of
the name, mailing address and tax identification number of each
Purchaser whose Subscription Payment is being delivered, and a
schedule listing the aggregate Debentures and aggregate
cumulative Subscription Payments to date delivered for deposit in
the Fund. For the purposes of this Bank Agreement, the Company
is authorized to make deposits and give instructions as to
investments of deposits and otherwise, as contemplated in this
Bank Agreement, to the Bank.
Section 1.3. Interest.
-------- During the period (the "Escrow
Period") commencing upon the date that any Purchaser's
Subscription Payment constitutes Cleared Funds (as defined in
Section 1.11 hereof) and ending on the day immediately preceding
the Closing Date with respect to that Purchaser's Debentures,
interest will accrue on that Purchaser's Subscription Payment at
a rate of 11.5% per annum, computed on the basis of a year of 360
days consisting of 12 thirty day months. Interest shall be
payable on the fifteenth day of each month. Four Business Days
prior to each such interest payment date, the Bank shall give the
Company written notice of the difference between the amount of
interest which will be payable on Subscription Payments on such
interest payment date and the amount of interest accruing on the
Fund's assets which will be available for such payment on such
interest payment date. Not later than 11:30 a.m. (New York time)
on the second Business Day preceding such interest payment date,
the Company shall deposit with the Bank its check in the amount
of such difference. On each interest payment date, the Bank
shall pay interest which is due and payable to the respective
Purchasers by mailing its check in the appropriate amount to each
Purchaser by first class mail at the Purchaser's mailing address
provided to the Bank pursuant to Section 1.2 hereof. In the
event that the Company shall default in its payment obligations
to the Bank under this Section 1.3, the Bank shall mail its check
in the amount of each Purchaser's pro rata share of interest
earned and paid on the Fund's assets as provided in this Section
1.3. For purposes of this Bank Agreement, "Business Day" shall
mean any day other than a day on which the Bank is authorized to
remain closed in New York City.
Section 1.4. Conditions of Initial Closing and
---------------------------------
Additional Closings.
------------------- Notwithstanding anything to the contrary in
this Bank Agreement, it is a condition precedent to the Initial
Closing and to each Additional Closing that J&B shall deliver to
the Bank Set Aside Purchase Notes which at maturity will have an
aggregate outstanding balance of principal equal to at least
twice the principal amount of the Debentures which will be sold
at that Initial Closing or Additional Closing, together with the
related Consent and Agreement pertaining to each such Set Aside
Purchase Note and the related Consent, Assignment and Agreement
pertaining to the Purchased Partnership Interest and the related
Financing Statements (as such terms are defined in Section 7
hereof), as provided in Section 7 hereof. Upon the scheduling of
the Initial Closing and each Additional Closing, the Company
shall give written notice thereof to the Bank not less than one
(1) Business Day prior to the date scheduled for each such
closing. As used in this Section 1.4 and elsewhere in this Bank
Agreement, a statement concerning the outstanding principal
amount at maturity of any Set Aside Purchase Note refers to an
amount that does not include any payments on a Set Aside Purchase
Note deferred by the obligor thereof with the consent of the
Company.
Section 1.5. Cancellation.
------------
The Company shall give the Bank notice of any Purchaser who
cancels his Subscription prior to his Closing Date or whose
Subscription Payment was deposited pursuant to Section 1.2 but
whose Subscription is rejected, setting forth the name and
mailing address of the Purchaser and the amount of the rejected
or cancelled subscription. As promptly as practicable
thereafter, the Bank shall pay the amount of the cancelled or
rejected subscription from the Fund to the Purchaser whose
Subscription was cancelled or rejected as directed by the
Company. Any interest earned thereon and not theretofore
distributed pursuant to Section 1.3 hereof shall be paid to the
Purchaser in accordance with Section 1.3 hereof. Payment shall
be made by check payable to the Purchaser mailed by the Bank by
first class mail directly to the Purchaser at the mailing address
of the Purchaser.
Section 1.6. Payment.
------- The Bank, at the Initial Closing
and each Additional Closing, upon written instruction from the
Company, shall transfer to the Company or to such third party or
parties as may be directed by the Company the Cleared Funds then
held in the Fund by the Bank. Any interest earned thereon and
not theretofore distributed in accordance with Section 1.3 hereof
shall be paid to the Purchasers in accordance with Section 1.3
hereof.
Section 1.7. Fees and Expenses.
-----------------
In addition to the fees set forth in Section 7.8 hereof, the Bank
shall be entitled to an administration fee as compensation for
its services under this Section 1 in the amount of $5,000 payable
(i) upon the execution and delivery of this Bank Agreement and
(ii) subject to an adjustment as provided in the next succeeding
sentence of this Section 1.7, on the first anniversary date of
this Bank Agreement, provided however that the Bank shall not be
entitled to payment of an administration fee on such first
anniversary date if all of the Debentures have been sold prior
thereto. In the event the Offering terminates prior to December
31, 1993, the Company shall be entitled to a refund payable ten
days after the Offering Termination Date, of that portion of the
administration fee paid to the Bank on the first anniversary date
of the Bank Agreement, in an amount calculated as the difference
between (a) $5,000 and (b) the product of (x) $5,000 and (y) a
fraction, the numerator of which is the number of days between
the first anniversary date of this Bank Agreement and the
Offering Termination Date, inclusive, and the denominator of
which is 365. In no event shall the Bank be entitled to payment
of an administration fee, as provided for in this Section 1.7,
following the Offering Termination Date. The Company shall also
pay the Bank $5 for the preparation and execution of each
Purchaser's account including the calculation of interest
accrued; $1 for the preparation of each Purchaser's 1099 tax
form; $25 for each investment transaction in the Fund; $25 for
each returned "bounced" check of a Purchaser; and $500 for each
Additional Closing, payable within 10 days after the Bank gives
the Company notice that any such amounts are due and payable.
Notwithstanding anything herein to the contrary, the Bank shall
not charge the Company for the issuance of checks or wire
transfers to make monthly payments of accrued interest on
Subscription Payments. No additional fee will be payable with
respect to wire transfers of and unreturned checks for
Subscription Payments. In addition, the Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 1
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it has incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. Amounts held in the Fund shall not be available to
satisfy this obligation or any other obligation of the Company to
the Bank. The Company shall not be obligated to reimburse the
Bank for any costs or expenses incurred in connection with the
preparation and execution of this Bank Agreement. The provisions
of this Section 1.7 shall survive the termination of this Bank
Agreement.
Section 1.8. Termination of Offering.
-----------------------
If the Offering should be terminated, the Company shall promptly
so advise the Bank in writing, and shall authorize and direct the
Bank to return the Subscription Payments to the Purchasers. The
Bank thereupon shall return those Subscription Payments to the
extent they have not been distributed per Section 1.6 to the
Purchasers from whom they were received. Any interest earned on
the Subscription Payments and not theretofore distributed
pursuant to Section 1.3 hereof shall be paid in accordance with
Section 1.3 hereof. Upon making such disbursements to the
Purchasers and the Company, the Bank shall be relieved of all of
its obligations and liabilities under this Bank Agreement.
Section 1.9. Form 1099, etc.
-------------- In compliance with the
Interest and Dividend Tax Compliance Act of 1983, the Company
shall request that each Purchaser furnish to the Bank such
Purchaser's taxpayer identification number and a statement
certified under penalties of perjury that (a) such taxpayer
identification number is true and correct and (b) the Purchaser
is not subject to the requirements of such Act providing for
withholding of 20% of reportable interest, dividends or other
payments.
Section 1.10. Uncollected Funds.
----------------- In the event that any
funds, including Cleared Funds, deposited in the Fund prove
uncollectible after the funds represented thereby have been
released by the Bank pursuant to this Bank Agreement, the Company
shall reimburse the Bank upon request for the face amount of such
check or checks; and the Bank shall, upon instruction from the
Company, deliver the returned checks or other instruments to the
Company. This section shall survive the termination of this Bank
Agreement.
Section 1.11. Cleared Funds.
------------- For the purpose of this
Bank Agreement, Subscription Payments shall constitute "Cleared
Funds" in accordance with the following:
(a) if paid by wire transfer, such funds shall
constitute Cleared Funds on the date received by the Bank;
(b) if paid by check drawn on a New York Clearing
House Bank, such funds shall constitute Cleared Funds on the
second Business Day following the date received by the Bank; and
(c) if paid by check drawn on any bank other than a
New York Clearing House Bank, such funds shall constitute Cleared
Funds on the third Business Day following the date received by
the Bank.
Section 2. Execution.
--------- The Debentures shall be
executed on behalf of the Company by the manual or facsimile
signature of a partner or officer of the Company. All such
facsimile signatures shall have the same force and effect as if
the partner or officer had manually signed the Debentures. In
case any partner or officer of the Company whose signature shall
appear on a Debenture shall cease to be such partner or officer
before the delivery of such Debenture or the issuance of a new
Debenture following a transfer or exchange, such signature or
such facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such partner or officer had remained a
partner or officer until delivery.
Section 3. Authenticating Agent.
---------------------
Section 3.1. Appointment.
------------ The Company hereby appoints
and designates the Bank as Authenticating Agent for the purposes
set forth in this Section 3, and the Bank hereby accepts such
appointment.
Section 3.2. Authentication.
--------------- Only such Debentures as
shall have the Certificate of Authentication endorsed thereon in
substantially the form set forth in the form of Debenture
attached to the Memorandum, duly executed by the manual signature
of an authorized signatory of the Bank, shall be entitled to any
right or benefit under this Bank Agreement. No Debentures shall
be valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by
the Bank; and such executed certificate upon any such Debenture
shall be conclusive evidence that such Debenture has been
authenticated and delivered under this Bank Agreement. The
Certificate of Authentication on any Debenture shall be deemed to
have been executed by the Bank if signed by an authorized
signatory of the Bank, but it shall not be necessary that the
same person sign the Certificate of Authentication on all of the
Debentures.
Section 4. Mutilated, Lost, Stolen or Destroyed
------------------------------------
Debentures.
----------- Subject to applicable law, in the event any
Debenture is mutilated, lost, stolen or destroyed, the Company
may authorize the execution and delivery of a new Debenture of
like date, number, maturity and denomination as that mutilated,
lost, stolen or destroyed, provided, however, that in the case of
any mutilated Debenture, such mutilated Debenture shall first be
surrendered to the Company, and in the case of any lost, stolen
or destroyed Debenture, there shall be first furnished to the
Company and the Bank, evidence of the ownership thereof and of
such loss, theft or destruction satisfactory to the Company and
the Bank, together with indemnification through a bond of
indemnity or otherwise as shall be satisfactory to the Company
and the Bank. The Company may charge the Purchaser of such
Debenture with any amounts satisfactory to the Company and the
Bank and permitted by applicable law.
Section 5. Registrar and Transfer Agent.
-----------------------------
Section 5.1. Appointment.
-----------
The Company hereby appoints and designates the Bank as Registrar
and Transfer Agent for the purposes set forth in this Section 5,
and the Bank hereby accepts such appointment.
Section 5.2. Registration, Transfer and Exchange of
-------------------------------------
Debentures.
---------- The Debentures are issuable only as registered
Debentures without coupons in the denominations of $100,000 or
any multiple or any fraction thereof at the sole discretion of
the Company. Each Debenture shall bear the following restrictive
legend: "These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and sold
or otherwise transferred only if registered pursuant to the
provisions of that Act or if an exemption from registration is
available." The Bank shall keep at its principal corporate trust
office a register in which the Bank shall provide for the
registration and transfer of Debentures. Upon surrender for
registration of transfer of any Debenture at such office of the
Bank, the Company shall execute, pursuant to Section 2 hereof,
and mail by first class mail to the Bank, and the Bank shall
authenticate, pursuant to Section 3 hereof, and mail by first
class mail to the designated transferee, or transferees, one or
more new Debentures in an aggregate principal amount equal to the
unpaid principal amount of such surrendered Debenture, registered
in the name of the designated transferee or transferees. Every
Debenture presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the holder of such Debenture or his
attorney duly authorized in writing. Notwithstanding the
preceding, the Debentures may not be transferred without an
effective registration statement under the Securities Act of 1933
covering the Debentures or an opinion of counsel to the holder of
such Debentures satisfactory to the Company and its counsel that
such registration is not necessary under the Securities Act of
1933 (the "Securities Act"). At the option of the owner of any
Debenture, such Debenture may be exchanged for other Debentures
of any authorized denominations, in an aggregate principal amount
equal to the unpaid principal amount of such surrendered
Debenture, upon surrender of the Debenture to be exchanged at the
principal corporate trust office of the Bank; provided, however,
that any exchange for denominations other than $100,000 or an
integral multiple thereof shall be at the sole discretion of the
Company. Whenever any Debenture is so surrendered for exchange,
the Company shall execute, pursuant to Section 2 hereof, and
deliver to the Bank, and the Bank shall authenticate, pursuant to
Section 3 hereof, and mail by first class mail to the designated
transferee, or transferees, the Debenture or Debentures which the
Debenture owner making the exchange is entitled to receive. Any
Debenture or Debentures issued in exchange for any Debenture or
upon transfer thereof shall be dated the date to which interest
has been paid on such Debenture surrendered for exchange or
transfer, and neither gain nor loss of interest shall result from
any such exchange or transfer. In addition, each Debenture
issued upon such exchange or transfer shall bear the restrictive
legend set forth above unless in the opinion of counsel to the
Company, such legend is not required to ensure compliance with
the Securities Act.
Section 5.3. Owner.
----- The person in whose name any
Debenture shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes, and payment of or on
account of the principal of or interest on such Debenture shall
be made only to or upon the order of the registered owner thereof
or his duly authorized legal representative. Such registration
may be changed only as provided in this Section 5, and no other
notice to the Company or the Bank shall affect the rights or
obligations with respect to the transfer of a Debenture or be
effective to transfer any Debenture. All payments to the person
in whose name any Debenture shall be registered shall be valid
and effectual to satisfy and discharge the liability upon such
Debenture to the extent of the sum or sums to be paid.
Section 5.4. Transfer Agent.
--------------- The Bank shall send
executed, authenticated Debentures to Purchasers on Closing Dates
and to subsequent owners and transferees who are entitled to
receive Debentures pursuant to the terms of this Bank Agreement,
by first class mail.
Section 5.5. Charges.
------- No service charge shall be made
for any transfer or exchange of Debentures, but in all cases in
which Debentures shall be transferred or exchanged hereunder, the
Company or the Bank may collect from the registered owner of a
Debenture a charge for every transfer or exchange of Debentures
sufficient to reimburse them for any tax, fee or other
governmental charge required to be paid with respect to such
transfer or exchange, and such charge shall be paid before any
such new Debenture shall be delivered.
Section 5.6. Redemption.
-----------
(a) Whenever the Company shall effect a voluntary
redemption of part or all of the Debentures, which shall be
without premium or penalty, or is required to effect mandatory
redemption of part or all of the Debentures, the Company shall
give notice thereof to the Bank at least forty (40) days prior to
the date set forth for redemption, the manner in which redemption
shall be effected and all the relevant details thereof. The Bank
shall give notice to the Purchasers of that redemption at least
thirty (30) days prior to the date set forth for redemption. The
Company shall deliver all redeemed Debentures to the Bank for
cancellation of the whole or portion thereof, as appropriate, and
issuance of new Debentures in denominations equal to the
unredeemed portion. In no event, however, shall the Bank pay the
redeemed amount or issue new Debentures in denominations equal to
the unredeemed portion to a registered owner if that registered
owner has not surrendered its Debenture to the Company. No
interest shall be payable on the redeemed portion of a Debenture
from and after the date of redemption.
(b) The Bank hereby acknowledges that the Company may
effect a voluntary redemption of part or all of the Debentures
without premium or penalty. In the event the Company should
effect a partial redemption of the Debentures, the Bank will
return to the Company Set Aside Purchase Notes selected by the
Company that in the aggregate will have a principal balance at
their respective maturities equal to twice the principal amount
of the redeemed portion of the Debentures, together with a
release of the existing assignment of the Security Interest and
Security Agreement covering the related Purchased Partnership
Interest (as such terms are defined in Section 7.3(a) herein).
In no event, however, will the Bank release Set Aside Purchase
Notes that will result in the amount of Set Aside Purchase Notes
held by the Bank to be less than twice the principal amount of
the Debentures that remain outstanding.
Section 5.7. Expenses.
--------- As a condition to the transfer
or exchange of any Debenture, the owner of the Debenture shall
reimburse the Company and the Bank for their respective actual
out-of-pocket expenses incurred in connection therewith
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of their respective
counsel). The provisions of this Section 5.7 shall survive the
termination of this Bank Agreement.
Section 6. Paying Agent.
-------------
Section 6.1. Appointment.
---------- The Company hereby appoints
and designates the Bank as Paying Agent for the purposes set
forth in this Section 6, and the Bank hereby accepts such
appointment.
Section 6.2. Payment Provisions.
------------------- The Bank shall pay
interest on Subscription Payments and principal of and interest
on the Debentures to the persons in whose names the Debentures
are registered, subject to the limitations contained in Section
5.6(a) and in accordance with the terms and provisions of this
Bank Agreement and the Debentures, by check mailed by first class
mail to the registered owner of a Debenture at his address as it
appears in the register; provided that not later than 11:30 a.m.
(New York time) on the second Business Day preceding each date on
which interest on or principal of any Debenture is due and
payable, the Company shall deposit with the Bank its check in the
amount due.
Section 6.3. Expenses.
--------- The Company shall reimburse
the Bank for its actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 6
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records), payable within ten (10) days after the Bank gives
notice to the Company that it has incurred such expenses. The
obligation to pay such compensation and reimburse such expenses
shall be borne solely by the Company. Notwithstanding anything
herein to the contrary, the Bank shall not charge the Company any
fees for the issuance of checks or wire transfers to make
payments of interest on or repayments of principal of the
Debentures. The provisions of this Section 6.3 shall survive the
termination of this Bank Agreement.
Section 7. The Custodian.
-------------
Section 7.1. Appointment.
----------- The Company hereby appoints
and designates the Bank as Custodian for the purposes set forth
in this Section 7, and the Bank hereby accepts such appointment.
Section 7.2. Set Aside Purchase Notes.
-------------------------
(a) J&B is the holder of certain Purchase Notes. Each
such Purchase Note has been issued by an Investing Partnership,
pursuant to a certain Purchase Agreement. Under the terms of
each such Purchase Note and Purchase Agreement, J&B is entitled
to assign each Purchase Note and J&B's right to payments of
interest thereon and principal amount thereof. Under the terms
of each Purchase Agreement, payments of interest and, where
required, scheduled payments of principal payable prior to
maturity due under the Purchase Note may be offset and reduced by
payments made under certain Investor Notes issued by the limited
partners of the respective Investing Partnership, which have been
pledged to secure obligations owed by J&B to one or more banks.
Only that interest and, where applicable, scheduled principal
payments payable prior to maturity ("Excess Interest and
Principal") under a Purchase Note which is in excess of the
amount offset and reduced by payments made to such banks, if any,
may be payable to the holder of the Purchase Note. Any interest
and, where required, scheduled payments of principal payable
prior to maturity that are due but unpaid on Purchase Notes shall
be deferred until the maturity of that Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Purchase Notes, having an aggregate face value of $24,405,000
and an aggregate balance of principal due at maturity equal to
$21,539,000, listed in Exhibit A hereto (the "Set Aside Purchase
Notes") issued by the Investing Partnerships listed in Exhibit A
hereto, and the proceeds thereof. In order to perfect such
security interests, J&B shall deliver to the Bank the Set Aside
Purchase Notes. Upon receipt of each Set Aside Purchase Note,
the Bank shall execute and deliver to the Company a receipt
therefor. Notwithstanding the assignment of the Set Aside
Purchase Notes to the Bank, the scheduled payments of principal
payable prior to maturity on certain Set Aside Purchase Notes so
providing and interest payments on all of the Set Aside Purchase
Notes shall be payable directly to the Company until such time as
an Event of Default (as defined in Section 7.6 hereof) shall
occur and be continuing. Under the terms of the Set Aside
Purchase Notes, only that principal and interest thereon which is
Excess Interest and Principal may be payable to the Bank. The
parties hereto confirm that scheduled payments of principal
payable prior to maturity made under the Set Aside Purchase Notes
listed in Exhibit A hereto, as requiring such scheduled principal
payment, will belong to the Company until such time as an Event
of Default shall occur and be continuing. The parties hereto
further confirm that any deferred interest and principal on a Set
Aside Purchase Note paid at the maturity thereof shall belong to
the Company so long as an Event of Default shall not have
occurred and be continuing.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit B hereto, executed by each
Investing Partnership listed in Exhibit A hereto, under which the
Investing Partnership shall (i) consent to J&B's assignment to
the Bank of the Investing Partnership's Set Aside Purchase Note,
(ii) consent to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank, and (iii) agree that upon
receiving the Bank's notice of an Event of Default that is
continuing, the Investing Partnership shall pay all sums due
under its Set Aside Purchase Note directly to the Bank. Upon
receipt of each such Consent and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.3. Purchased Partnership Interests.
--------------------------------
(a) Each Investing Partnership listed in Exhibit A
hereto, in order to secure its payment of the principal of and
interest on its Set Aside Purchase Note, has entered into a
Security Agreement listed in Exhibit A hereto (a "Security
Agreement") under which the Investing Partnership has granted a
security interest (a "Security Interest") in that Investing
Partnership's limited partnership interest listed in Exhibit A
hereto (a "Purchased Partnership Interest") in a respective
Operating Partnership listed in Exhibit A hereto (an "Operating
Partnership").
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.4 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each Security
Agreement listed in Exhibit A hereto, each Security Interest in a
Purchased Partnership Interest created under any such Security
Agreement, each such Purchased Partnership Interest, each
distribution due and payable or made from time to time on such
Purchased Partnership Interest, and the proceeds thereof. In
order to perfect such security interest, J&B shall deliver to the
Bank Uniform Commercial Code Financing Statements ("Financing
Statements") for filing by the Bank with the such appropriate
governmental authorities indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authorities in order to continue the perfection of
such security interest. Notwithstanding the assignments of the
above mentioned Security Agreements, Security Interests,
Purchased Partnership Interests, and due and payable or paid
distributions on Purchased Partnership Interests to the Bank, all
distributions on such Purchased Partnership Interests shall be
payable directly to the respective Investing Partnership if an
event of default shall not have occurred and be continuing under
that Investing Partnership's Set Aside Purchase Note; or to the
Bank for payment to the Company if the Bank shall foreclose on
the Security Interest pursuant to Section 7.5(f) hereof, and
shall be payable directly to the Bank for the benefit of the Bank
and the owners of the Debentures only if the Bank shall foreclose
on the Security Interest pursuant to Section 7.5(e) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership and Operating Partnership
listed in Exhibit A hereto, under which the Investing Partnership
and Operating Partnership shall (i) consent to J&B's assignment
to the Bank of the respective Security Agreement, Security
Interest, Purchased Partnership Interest, each distribution due
and payable or made from time to time on the Purchased
Partnership Interest, and the proceeds thereof; (ii) consent to
J&B's delivery of the above mentioned Financing Statements and
the Bank's filing of the Financing Statements from time to time
with the appropriate governmental authorities; (iii) assign to
the Bank all distributions which may be due and payable or made
from time to time on the Purchased Partnership Interest (subject
to the terms and conditions set forth in this Bank Agreement)
until all outstanding obligations under the Set Aside Purchase
Note which is in default shall have been paid in full (including,
without limitation, all costs of collection, reasonable attorney
fees and other fees and expenses) and (iv) agree that upon
foreclosure of the Security Interest, all distributions on the
Purchased Partnership Interest shall be paid directly to the
Bank, as the assignee of J&B, regardless of whether the Bank
becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the
limitations set forth in clause (iii) above. Upon receipt of
each such Consent, Assignment and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.4. Attachment of Security Interests.
--------------------------------
Notwithstanding anything to the contrary in this Bank
Agreement, each security interest granted by J&B to the Bank
under this Section 7 shall become effective and shall attach only
upon J&B's delivery to the Bank of the respective Set Aside
Purchase Note, and the related Consent and Agreement and
Financing Statements pertaining to that Set Aside Purchase Note
and the related Consent, Assignment and Agreement and related
Financing Statements pertaining to the Purchased Partnership
Interest. J&B shall be obligated to deliver to the Bank only
those Set Aside Purchase Notes selected by J&B in its sole
discretion as shall have an aggregate balance of principal due at
maturity equal to at least twice the principal amount of the
Debentures which will be sold at the respective Initial Closing
or Additional Closing, together with the related Consent and
Agreement and Financing Statements pertaining to that Set Aside
Purchase Note, and the related Consent, Assignment and Agreement
and related Financing Statements pertaining to the Purchased
Partnership Interest. At such time as the Company shall send to
the Bank the Company's irrevocable notice that there will not be
any further Additional Closings, the Company and the Bank shall
thereupon acknowledge and append hereto an additional Exhibit D
listing the Set Aside Purchase Notes, Investing Partnerships,
Operating Partnerships and Security Agreements, in which the Bank
will have security interests under this Section 7.
Section 7.5. Duties of the Bank.
------------------
(a) The Bank shall hold the notes, Agreements and
instruments deposited with it for the purposes of this Bank
Agreement and for the benefit of the Bank and of the owners of
the Debentures from time to time, shall file the Financing
Statements delivered to it from time to time by J&B with the
appropriate governmental authorities indicated by J&B to the Bank
and shall perform all duties imposed upon it by this Bank
Agreement until this Bank Agreement is terminated. The security
interests and assignments created by this Bank Agreement and by
each Consent, Assignment and Agreement shall automatically
terminate when all of the Debentures and all amounts payable to
the Bank under this Bank Agreement have been paid in full.
Thereupon, the Bank shall return to J&B the Set Aside Purchase
Notes deposited with it pursuant to Section 7.2(b) hereof, and
shall file with the appropriate governmental authorities
indicated by J&B to the Bank Financing Statements delivered by
J&B to the Bank recording the termination of the Bank's security
interests and assignments granted under this Bank Agreement and
each Consent, Assignment and Agreement.
(b) Upon the occurrence and continuation of an Event
of Default, the Bank shall declare the entire outstanding
aggregate principal balance of all the Debentures due and
immediately payable with accrued interest thereon. In addition,
the Bank shall immediately notify the makers of the Set Aside
Purchase Notes that all payments to be made thereafter on the Set
Aside Purchase Notes shall be paid directly to the Bank.
The Bank shall collect all payments received under the
foregoing security interests and assignments and apply them for
the benefit of the Bank and of the owners of the Debentures
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to the repayment of principal of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(c) Upon the occurrence and continuation of an Event
of Default, the Bank shall be entitled to institute action
against the Co-Obligors, jointly or severally, to collect payment
under the Debentures without any prior requirement to attempt to
collect any funds under the Set Aside Purchase Notes or the
related Purchased Partnership Interests. In the event that the
Company shall default on its payment obligations to the Bank
under this Bank Agreement, the Bank shall be entitled to
institute action against the Co-Obligors, jointly or severally,
to collect payment under this Bank Agreement, without any prior
requirement to attempt to collect any funds under the Set Aside
Purchase Notes or the related Purchased Partnership Interests.
(d) Upon the occurrence and continuation of an Event
of Default, the Bank, in its discretion, is authorized to, but
shall not be required to, proceed in any way legally available to
it to liquidate the Set Aside Purchase Notes and the Purchased
Partnership Interests (if the Bank shall have foreclosed on such
Set Aside Purchase Note pursuant to Section 7.5(e) hereof)
including, but not limited to, the public or private sale of all
or any part thereof upon three (3) days' prior notice to the
Co-Obligors, free and clear of any claim, lien, charge or
encumbrance including, without limitation, any right of equity of
redemption. The Bank shall apply the proceeds of any such sale
firstly to the payment of the expenses of the sale, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of accrued interest including accrued interest from and
after the Event of Default, and next to the payment of principal
of the Debentures. The Bank shall not be liable to any of the
Co-Obligors or their affiliates because of any sale or the
consequences thereof.
(e) While an Event of Default is continuing, if there
shall occur or if there shall have occurred and be continuing an
event of default under any Set Aside Purchase Note, the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of the foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining previous
Multi-family Participation Clearance from the United States
Department of Housing and Urban Development ("HUD 2530
Clearance") with respect to that Operating Partnership, if
required, in satisfaction of that Set Aside Purchase Note (but
not of any Debenture); provided, that during any time period
pending obtaining HUD 2530 Clearance, if required, or if HUD 2530
Clearance is required for that Operating Partnership but cannot
be obtained, or if the Bank may not be admitted as a substituted
limited partner in the Operating Partnership for any reason, the
Bank shall nevertheless be entitled to receive all distributions
from that Operating Partnership as the assignee of J&B and this
Bank Agreement shall operate as an assignment of such
distributions by the Investing Partnership, subject to the
limitations set forth in Section 7.3(c). In addition, while an
Event of Default is continuing, if there shall occur or if there
shall have occurred and be continuing an event of default under
any Set Aside Purchase Note or under any Partnership Agreement
governing the Operating Partnership related to the Purchased
Partnership Interest, the Bank shall be authorized to exercise
any and all rights and remedies available to it as the holder of
the respective Set Aside Purchase Note, the substituted partner
or assignee with respect to the Purchased Partnership Interest in
the related Operating Partnership, as well as any other remedy
available under law or equity. The Bank shall apply the proceeds
of its exercise of the above mentioned rights and remedies
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to repayment of principal of the Debentures, until all amounts
due under the Debentures shall have been paid in full together
with all costs of collection, fees and expenses.
(f) If a default on any payment of principal or
interest on a Set Aside Purchase Note shall occur while no Event
of Default is continuing, then the Company shall immediately give
the Bank notice thereof and upon receiving such notice the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
Security Interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of such foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to obtaining HUD 2530
Clearance, if required, in satisfaction of that Set Aside
Purchase Note (but not of any Debenture); provided that during
any time period pending obtaining HUD 2530 Clearance, if
required, or if HUD 2530 Clearance is required for that Operating
Partnership but cannot be obtained, or if the Bank may not be
admitted as a substituted limited partner in the Operating
Partnership for any reason, the Bank shall be entitled
nevertheless to receive all distributions from that Operating
Partnership as the assignee of J&B and this Bank Agreement shall
operate as an assignment of such distributions by the Investing
Partnership, subject to the limitations set forth in Section
7.3(c). The Bank shall pay over to the Company any amounts
received from the Operating Partnership unless and until an Event
of Default shall occur and be continuing. If and when such Event
of Default shall occur and be continuing, the Bank shall follow
the procedures specified in Sections 7.5 (b)-(e) of this Bank
Agreement.
(g) The rights and remedies enumerated herein are in
addition to and not in lieu of any other right or remedy
available to the Bank under law or equity, including, without
limitation, rights and remedies available to a secured party
under the Uniform Commercial Code; provided, however, that the
Bank shall not be entitled to apply the proceeds of the
foreclosure of any Set Aside Purchase Note or Purchased
Partnership Interest to amounts owing to the Bank under this Bank
Agreement unless an Event of Default shall occur and be
continuing. The Bank shall be entitled to exercise one or more
remedies at the same time, all such rights and remedies being
cumulative and not mutually exclusive.
(h) The Co-Obligors shall remain jointly and severally
liable for any deficiency remaining after the application of
proceeds of the foreclosure of any Set Aside Purchase Note or
Purchased Partnership Interest collected by the Bank including,
but not limited to, all actual costs and expenses of collection
(including, without limitation, reasonable attorneys' fees and
expenses). If any funds shall remain in the possession of the
Bank after the payment of all amounts due under the Debentures,
all such costs of collection thereof and all other actual fees
and expenses (including without limitation reasonable attorney's
fees and expenses) of the Bank, the Bank shall deliver such
remaining funds to the Company. The provisions of this Section
7.5(h) shall survive the termination of this Bank Agreement.
Section 7.6. Events of Default.
------------------ If any of the
following events (an "Event of Default") shall occur and be
continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(i) the Company defaults in the payment of any part of
the principal of any Debenture when the same shall become
due and payable, and such default shall have continued for
more than 30 days; or
(ii) the Company defaults in the payment of any part
of the interest on any Debenture when the same shall become
due and payable, and such default shall have continued for
more than 15 days;
then, the Bank, by notice to the Company, or the owners of at
least 25% of the principal amount of the Debentures, by notice to
the Company and to the Bank, may declare the entire principal of
and accrued interest on all Debentures to become immediately due
and payable at par without presentment, demand, protest or other
notice of any kind, all of which are waived by the Company.
Section 7.7. Sale of Set Aside Purchase Notes.
---------------------------------
The Company may from time to time while no Event of
Default shall have occurred and be continuing arrange the sale of
one or more Set Aside Purchase Notes to a third party, subject to
the following conditions:
(i) The Company shall give prompt written notice
thereof to the Bank together with all relevant details of
the proposed transaction.
(ii) As part of the consideration to be paid by the
purchaser of each Set Aside Purchase Note to be sold, the
purchaser shall pay directly to the Bank cash in the amount
equal to 50% of the principal balance due at maturity of
that Set Aside Purchase Note plus an amount sufficient to
pay accrued interest on the pro rata portion of Debentures
to be prepaid pursuant to subparagraph (iv) below.
(iii) The total consideration to be paid upon sale of
a Set Aside Purchase Note shall not be less the 50% of the
principal balance due at maturity thereof plus an amount
sufficient to pay accrued interest on the pro rata portion
of Debentures to be prepaid pursuant to subparagraph (iv)
below.
(iv) Upon receipt of cash as provided in subparagraph
(ii) above, the Bank will apply the proceeds to the pro rata
redemption of the Debentures at par plus payment of accrued
interest thereon. Thereafter, the Bank shall deliver each
Set Aside Purchase Note that is then sold to the purchaser
together with an assignment of Security Interest and
Security Agreement covering the related Purchased
Partnership Interest. Subject to Section 8(b) hereof the
Bank shall have no liability whatsoever to the purchaser or
any party hereto for its actions pursuant to this Section
7.7.
Section 7.8. Fees and Expenses.
----------------- In addition to
the administration fee set forth in Section 1.7 hereof, the Bank
shall be entitled to compensation for its services under this
Section 7 in the amount of $2,500 as an acceptance fee, payable
upon execution and delivery of this Bank Agreement; and
administrative fees, payable annually on the anniversary date of
this Bank Agreement, based upon the aggregate principal amount of
outstanding Debentures ten days prior to the anniversary date, in
the following amounts:
$ 500,000 to $1,000,000 outstanding $ 2,500
$ 1,000,001 to $2,000,000 outstanding $ 3,000
$ 2,000,001 to $3,000,000 outstanding $ 4,000
$ 3,000,001 to $4,000,000 outstanding $ 5,000
$ 4,000,001 to $5,000,000 outstanding $ 6,000
$ 5,000,001 to $6,000,000 outstanding $ 7,000
$ 6,000,001 to $7,000,000 outstanding $ 8,000
$ 7,000,001 to $8,000,000 outstanding $ 9,000
$ 8,000,001 to $9,000,000 outstanding $10,000
$ 9,000,001 to $10,000,000 outstanding $11,000
$10,000,001 to $10,750,000 outstanding $12,000
The Company shall reimburse the Bank for its actual out-of-pocket
expenses incurred in connection with its obligations pursuant to
this Section 7 (including, but not limited to, actual expenses
for stationery, postage, telephone, telex, wire transfers,
telecopy, retention of records, and the filing of Financing
Statements, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. The Set Aside Purchase Notes and the related
Purchased Partnership Interests in which the Bank has a security
interest will be available to satisfy the Company's payment
obligations to the Bank under this Section 7.8 only when an Event
of Default has occurred and is continuing. The Company shall not
be obligated to reimburse the Bank for any costs or expenses
incurred in connection with the preparation and execution of this
Bank Agreement. The provisions of this Section 7.8 shall survive
the termination of this Bank Agreement.
Section 8. Other Rights and Duties of Bank.
--------------------------------
(a) The Bank need exercise only those rights and need
perform only those duties that are contemplated or specifically
set forth in this Bank Agreement and no others.
(b) Notwithstanding anything herein to the contrary,
the Bank may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act, or
its own willful misconduct except that:
1. This paragraph does not limit the effect of
paragraph (a) of this Section.
2. The Bank shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a Notice received by it pursuant to Section
17(b) of the Subscription Agreement.
(c) The Bank may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Bank need not investigate any fact or matter stated
in the document.
(d) Before the Bank acts or refrains from acting, it
may require an officer's certificate or an opinion of counsel.
The Bank shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(e) The Bank may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed wit
Section 9. No Representations.
------------------- The Bank makes no
representation as to the validity or adequacy of this Bank
Agreement or the Debentures, or any Set Aside Purchase Note or
Purchased Partnership Interest in which the Bank has a security
interest, or any Financing Statement delivered to it by J&B or
the Bank's filing of any such Financing Statement with any
governmental authority; it shall not be accountable for the
Company's use of the proceeds from the Debentures and it shall
not be responsible for any statement in the Memorandum or in the
Debentures other than its authentication.
Section 10. Indemnification.
---------------- The Company shall
indemnify, defend and hold the Bank harmless from and against any
and all loss, damage, liability, claim and expense, including
taxes (other than taxes based on the income of the Bank) incurred
by the Bank arising out of or in connection with its acceptance
or performance of its obligations under this Bank Agreement,
including the legal costs and expenses of defending itself
against any claim or liability in connection with its performance
under this Bank Agreement. The Bank shall notify the Company
promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Bank shall cooperate in
the defense. The Bank may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Bank through gross negligence
or bad faith. The provisions of this Section 10 shall survive
the termination of this Bank Agreement.
Section 11. Replacement of Bank.
-------------------
(a) A resignation or removal of the Bank and
appointment of a successor Bank shall become effective only upon
the successor Bank's acceptance of appointment as provided in
this Section 11.
(b) The Bank may resign by so notifying the Company.
The owners of a majority in principal amount of the Debentures
outstanding may remove the Bank for any reason by so notifying
the Bank and the Company. The Company may remove the Bank if:
(i) the Bank is adjudged a bankrupt or an insolvent;
(ii) a receiver or public officer takes charge of the
Bank or its property; or
(iii) the Bank becomes incapable of acting.
(c) (i) If the Bank resigns or is removed or if a
vacancy exists in the office of the Bank for any reason, the
Company shall promptly appoint a successor Bank.
(ii) If a successor Bank does not take office within
60 days after the retiring Bank gives notice of resignation or
action is taken to remove the retiring Bank, the retiring Bank,
the Company or the owners of at least 10% in principal amount of
the Debentures outstanding may petition any court of competent
jurisdiction for the appointment of a successor Bank.
(iii) A successor Bank shall deliver a written
acceptance of its appointment to the retiring Bank and the
Company. Thereupon the resignation or removal of the retiring
Bank shall become effective and the successor Bank shall have all
the rights, powers and duties of the Bank under this Bank
Agreement. The successor Bank shall mail a notice of its
succession to Debenture owners. Upon payment to the retiring
Bank of all amounts owed to it under this Bank Agreement, the
retiring Bank shall promptly transfer all property held by it as
Bank to the successor Bank.
(d) If the Bank consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Bank.
Section 12. Notices.
-------- All notices and other
communications pursuant to this Bank Agreement shall be in
writing and shall be delivered by hand or sent by registered or
certified mail, return receipt requested, or by facsimile,
confirmed by writing, delivered by hand or sent by registered or
certified mail, return receipt requested, delivered or sent on
the date of the facsimile, addressed as follows:
(a) If to the Company:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Gerald E. Eppner, Esq.
(b) If to Debenture owners:
At the addresses of the registered owners
appearing in the register maintained by the
Bank.
(c) If to the Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 13. Choice of Law.
------------- This Bank Agreement shall
be governed by the laws of the State of New York, without giving
effect to the principles of conflicts of law thereof.
Section 14. Prior Agreements; Amendment.
---------------------------- This Bank
Agreement, together with each Consent and Agreement and each
Consent, Assignment and Agreement referred to in Section 7
hereof, sets forth the entire Agreement of the parties hereto
with respect to the subject matter hereof and supersedes all
prior Agreements, contracts, promises, representations,
warranties, statements, arrangements and understandings, if any,
among the parties hereto or their representatives with respect to
the subject matter hereof. No waiver, modification or amendment
of any provision, term or condition hereof shall be valid unless
in writing and signed by all parties hereto, and any such waiver,
modification or amendment shall be valid only to the extent
therein set forth.
Section 15. Successors.
----------- This Bank Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 16. Enforceability.
-------------- Any provision of this Bank
Agreement which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
Section 17. Counterparts.
------------- This Bank Agreement may be
execute n any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.
Section 18. Definitions.
------------ All terms used in this Bank
Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed this
Bank Agreement as of the date first above written.
J&B MANAGEMENT COMPANY
By: /s/ Bernard M. Rodin
---------------------
Title: Vice President
LEISURE CENTERS, INC.
By: /s/ Bernard M. Rodin
---------------------
Title: Vice President
J&B MANAGEMENT CORP.
By: /s/ Bernard M. Rodin
--------------------
Title: Vice President
SULGRAVE REALTY CORPORATION
By: /s/ Bernard M. Rodin
----------------------
Title: Vice President
WILMART DEVELOPMENT CORP.
By: /s/ Bernard M. Rodin
----------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Peter Lagatta
-----------------------
Title: Assistant
Vice President
<PAGE>
EXHIBIT A
To Bank Agreement
1. (a) Investing Partnership: Plano Associates, a New Jersey
limited partnership
(b) Operating Partnership: Northgate Village Apts., Ltd.,
a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,250,000
(ii) Date of Issue: September 30, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $33,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $41,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $495,000
(vii) Balance of Principal
Due at Maturity: $2,755,000
(viii) Accrued Interest as of
January 31, 1992: $855,272
(d) Security Agreement: Purchase Agreement dated
September 30, 1983, by and among Dr. Ralph Aloi, Dr.
Paul Cavalli, Joseph A. Conte, Ira Goldstein, Anthony
Lo Presti, Salvatore Lo Presti, Dr. Bernard Morse,
Gerald T. Rhine, Samuel Simmons, David Klein, Rainbow
Ltd., Lester Klein, John Luciani, Bernard M. Rodin
("Sellers") and Plano Associates (Sellers, respective
rights and interests under the Security Agreement have
been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
2. (a) Investing Partnership: Wharton Associates, a New
Jersey limited partnership
(b) Operating Partnership: The Meadows Associates, Ltd.,
a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,320,000
(ii) Date of Issue: May 31, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $13,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: Not Applicable
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $195,000
(vii) Balance of Principal
Due at Maturity: $1,125,000
(viii) Accrued Interest as of
January 31, 1992: $511,852
(d) Security Agreement: Purchase Agreement dated May 31, 1983,
by and among Isaac Wolf, George Crohn, Leo Seaman, Moses
Schwed, William Nelkin, Victor Weinman, Southwest One
Associates, John Luciani, Bernard M. Rodin ("Sellers") and
Wharton Associates (Sellers' respective rights and interests
under the Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
3. (a) Investing Partnership: Chambersburg Associates, a New
Jersey limited partnership
(b) Operating Partnership: United Tower Associates, a
Pennsylvania limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,980,000
(ii) Date of Issue: June 27, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $20,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $170,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $300,000
(vii) Balance of Principal
Due at Maturity: $1,680,000
(viii) Accrued Interest as of
January 31, 1992: $601,204
(d) Security Agreement: Purchase Agreement dated June 27, 1983,
by and among Pioneer Six Associates ("Sellers") and
Chambersburg Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
4. (a) Investing Partnership: West Oaks Associates, a New
Jersey limited partnership
(b) Operating Partnership: Villa Americana Associates, a
Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $4,300,000
(ii) Date of Issue: August 15, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $35,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: Not Applicable
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $525,000
(vii) Balance of Principal
Due at Maturity: $3,775,000
(viii) Accrued Interest as of
January 31, 1992: $1,738,878
(d) Security Agreement: Purchase Agreement dated August 15,
1983, by and among William Goldberg, Irving Weiss, Elaine
Berger, Augostine Materba, Burton Cooperburg, Lee Hartzmark,
Leon I. Weisburgh, Allen A. Isen, Jerry C. Tobin, Arnold
Glickman, Bernard M. Rodin ("Sellers") and West Oak
Associates (Sellers' respective rights and interests under
the Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
5. (a) Investing Partnership: Kings Villa Associates, a New
Jersey limited partnership
(b) Operating Partnership: Kings Manor Associates, Ltd.,
a Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $490,000
(ii) Date of Issue: November 28, 1983
(iii) Maturity Date: March 31, 1998
(iv) Annual Payment of
Principal: $5,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: Not Applicable
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $70,000
(vii) Balance of Principal
Due at Maturity: $420,000
(viii) Accrued Interest as of
January 31, 1992: $172,620
(d) Security Agreement: Purchase Agreement dated November 28,
1983, by and among James A. Duff, John Luciani, Bernard M.
Rodin ("Sellers") and Kings Villa Associates (Sellers'
respective rights and interests under the Security Agreement
have been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
6. (a) Investing Partnership: McAllen Grande Associates, a
New Jersey limited partnership
(b) Operating Partnership: La Vista Associates, Ltd., a
Texas limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,000,00
(ii) Date of Issue: July 29, 1983
(iii) Maturity Date: July 29, 1998
(iv) Annual Payment of
Principal: $7,500
(v) Total Payments of
Principal deemed made
as of January 31, 1992: Not Applicable
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $105,000
(vii) Balance of Principal
Due at Maturity: $895,000
(viii) Accrued Interest as of
January 31, 1992: $403,197
(d) Security Agreement: Purchase Agreement dated July 29, 1983,
by and among Irving Feinrider, John Luciani, Bernard M.
Rodin ("Sellers") and McAllen Grande Associates (Sellers'
respective rights and interests under the Security Agreement
have been sold, transferred and assigned to J&B Management
Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
7. (a) Investing Partnership: Dickinson Associates, a New
Jersey limited partnership
(b) Operating Partnership: Church Village, a Texas limited
partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,770,000
(ii) Date of Issue: July 31, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $18,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: Not Applicable
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $252,000
(vii) Balance of Principal
Due at Maturity: $1,518,000
(viii) Accrued Interest as of
January 31, 1992: $98,086
(d) Security Agreement: Purchase Agreement dated July 31, 1984,
by and among Moses Friedman, Inc., Moses Friedman, Raymond
J. Wayman, Max Salit, Rama Manufacturing Co., Moses Schwed,
William Nelkin, Sam Abrams, Isaac Wolf, Emanuel Gordon,
William Goldberg, Irving Weiss, Houston Associates, John
Luciani, Bernard M. Rodin ("Sellers") and Dickinson
Associates (Sellers' respective rights and interests under
the Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
8. (a) Investing Partnership: Durham Associates, a New Jersey
limited partnership
(b) Operating Partnership: Morehead Hills Associates, Ltd.,
a North Carolina limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,275,000
(ii) Date of Issue: June 1, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $13,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $91,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $182,000
(vii) Balance of Principal
Due at Maturity: $1,093,000
(viii) Accrued Interest as of
January 31, 1992: $307,371
(d) Security Agreement: Purchase Agreement dated June 1, 1984,
by and among Donavin Baumgarter, Jr., Joanne Z. Berman, Earl
Brightman, Richard Foss, J. Philip Henley, L.A. Harthun,
Robert J. Levenson, Ray Leventhal, R. Riggs Klika, John D.
Zachary, John Luciani, Bernard M. Rodin ("Sellers") and
Durham Associates (Sellers' respective rights and interests
under the Security Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
9. (a) Investing Partnership: Taylor Associates, a New Jersey
limited partnership
(b) Operating Partnership: Forest Park Apartments
Associates, a South Carolina limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,585,000
(ii) Date of Issue: April 24, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $14,500
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $10,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $203,000
(vii) Balance of Principal
Due at Maturity: $1,382,00
(viii) Accrued Interest as of
January 31, 1992: $437,072
(d) Security Agreement: Purchase Agreement dated February 29,
1984, by and among Paul D. Hughes, Dr. John Cusano, Philip
M. Fisher, Dr. Ignatius N. Quartararo, Josheh Harold Cohen,
Nasser and Paricher Ghassemis, Samuel Zepnick, Sol Zepnick,
Robert N. Schwartz, John Luciani, Bernard M. Rodin
("Sellers") and Taylor Associates (Sellers' respective
rights and interests under the Security Agreement have been
sold, transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
10. (a) Investing Partnership: Anderson Associates, a New
Jersey limited partnership
(b) Operating Partnership: Meadow Run Apts. Associates, a
South Carolina limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $1,600,000
(ii) Date of Issue: June 7, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $16,000
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $112,000
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $224,000
(vii) Balance of Principal
Due at Maturity: $1,376,000
(viii) Accrued Interest as of
January 31, 1992: $372,954
(d) Security Agreement: Purchase Agreement dated June 7, 1984,
by and among Robert A. Angell, D.A. Baumgartner, Jr., Earl
Brightman, Michael F. DiDomenico, Robert J. Eisner, Marvin
S. Heiser, Joel Hoffman, Paula D. Hughes, Daniel R. Keating,
Milton Schick, Harrison Shapiro, Gloria Sloan, Edward S.
Intihar, John Luciani, Bernard M. Rodin ("Sellers") and
Anderson Associates (Sellers' respective rights and
interests under the Security Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
11. (a) Investing Partnership: Midland Associates, a New
Jersey limited partnership
(b) Operating Partnership: Manor Crest Apts., Ltd., a Texas
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $2,235,000
(ii) Date of Issue: April 24, 1984
(iii) Maturity Date: March 31, 1999
(iv) Annual Payment of
Principal: $22,500
(v) Total Payments of
Principal deemed made
as of January 31, 1992: $157,500
(vi) Total Scheduled
Principal Payments
Prior to Maturity: $315,000
(vii) Balance of Principal
Due at Maturity: $1,920,000
(viii) Accrued Interest as of
January 31, 1992: $897,801
(d) Security Agreement: Purchase Agreement dated April 24,
1984, by and among the Estate of Philip Fisher, Walter
Feldesman, Hazan Associates, John Luciani, Bernard M. Rodin
("Sellers") and Midland Associates (Sellers' respective
rights and interests under the Security Agreement have been
sold, transferred and assigned to J&B Management Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
12. (a) Investing Partnership: Bayou Ridge Associates, a Texas
limited partnership
(b) Operating Partnership: Wellington Square Apartments
Associates, a Louisiana ordinary partnership in
commendam
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,600,000
(ii) Date of Issue: June 28, 1985
(iii) Maturity Date: March 15, 2000
(iv) Annual Payment of
Principal: NOT REQUIRED
(v) Total Payments of
Principal deemed made
as of January 31, 1992: NOT APPLICABLE
(vi) Total Scheduled
Principal Payments
Prior to Maturity: NOT APPLICABLE
(vii) Balance of Principal
Due at Maturity: $3,600,000
(viii) Accrued Interest as of
January 31, 1992: $11,185
(d) Security Agreement: Purchase Agreement dated June 28, 1985,
by and among Pioneer Seven Associates, John Luciani, Bernard
M. Rodin ("Sellers") and Bayou Ridge Associates (Sellers'
respective rights and interests under the Security Agreement
have been sold, transferred and assigned to J&8 Management
Company).
(e) Purchased Partnership Interest: 99% limited partnership
interest in the Operating Partnership
<PAGE>
EXHIBIT B
to Bank Agreement
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.2(c)]
THIS CONSENT AND AGREEMENT, dated as of
______________, 19__, is by and between [name of Investing
Partnership] (the "Investing Partnership"), J&B Management
Company ("J&B"), and The Bank of New York (the "Bank")
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Bank Agreement of even
date herewith (the "Bank Agreement"); and
WHEREAS, Section 7.2(c) of the Bank Agreement provides
for the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents and Agreements. The Investing
-----------------------
Partnership hereby (i) consents to J&B's assignment to the Bank
of the Investing Partnership's Set Aside Purchase Note; (ii)
consents to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank; and (iii) agrees that upon
receiving the Bank's notice of an Event of Default, the Investing
Partnership shall pay all sums due under its Set Aside Purchase
Note directly to the Bank. The Bank hereby acknowledges that
interest and, where required, annual payments of principal, may
be deferred until the maturity of that Set Aside Purchase Note.
Section 2. Notices. All notices and other
-------
communications pursuant or relating to this Consent and Agreement
shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, or by
facsimile, confirmed by writing delivered by hand or sent by
registered or certified mail, return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
-------------------------------------
-------------------------------------
-------------------------------------
(b) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Michele R. Jawin, Esq.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 815-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 3. Choice of Law. This Consent and
-------------
Agreement shall be governed by the laws of the State of New York
without giving effect to the principles of conflicts of law
thereof.
Section 4. Successors. This Consent and Agreement
----------
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Section 5. Counterparts. This Consent and Agreement
------------
may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute
one instrument.
Section 6. Definitions. All terms used in this
-----------
Consent and Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Agreement as of the date first above written.
[Name of Investing Partnership]
By:
------------------------------
Title:
J&B MANAGEMENT COMPANY
By:
------------------------------
Title:
THE BANK OF NEW YORK
By:
------------------------------
Title:
<PAGE>
EXHIBIT C
to Bank Agreement
[Form of Consent, Assignment and Agreement]
CONSENT, ASSIGNMENT AND AGREEMENT
[PURSUANT TO SECTION 7.3(c)]
THIS CONSENT, ASSIGNMENT AND AGREEMENT, dated as of
_________________, 19__, is by and between [name of Investing
Partnership] (the "Investing Partnership"), J&B Management
Company ("J&B"), and The Bank of New York (the "Bank")
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management
Corp., Sulgrave Realty Corporation, Wilmart Development Corp. and
the Bank have entered into that certain Bank Agreement of even
date herewith (the "Bank Agreement"); and
WHEREAS, Section 7.3(c) of the Bank Agreement provides
for the execution of this Consent, Assignment and Agreement by
the parties hereto;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto hereby consent and agree as follows:
Section 1. Consents, Assignments and Agreements. The
------------------------------------
Investing Partnership and the Operating Partnership in which the
Investing Partnership owns a Purchased Partnership Interest
hereby (i) consent to J&B's assignment to the Bank of the
Security Agreement, Security Interest, Purchased Partnership
Interest, all distributions which may be due and payable or paid
from time to time on such Purchased Partnership Interest, and the
proceeds thereof, relating to the Investing Partnership's Set
Aside Purchase Note; (ii) consent to J&B's delivery to the Bank
of Financing Statements and to the Bank's filing of such
Financing Statements with the appropriate governmental
authorities in order to perfect and to continue the perfection of
the Bank's security interest in the Security Agreement, Security
Interest, Purchased Partnership Interest and distributions which
may be due and payable or paid from time to time on the Purchased
Partnership Interest; (iii) subject to the terms and conditions
of the Bank Agreement, assign to the Bank all distributions which
shall be due and payable or made from time to time on the
Purchased Partnership Interest, and the proceeds thereof, until
all outstanding obligations under the Set Aside Purchase Note, if
such be in default, have been paid in full (including, without
limitation, all costs of collection, reasonable attorneys, fees
and other fees and expenses); and (iv) subject to the terms and
conditions of the Bank Agreement, agree that upon foreclosure of
the Security Interest all distributions made on the Purchased
Partnership Interest shall be paid directly to the Bank, as the
assignee of J&B, regardless of whether the Bank becomes a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership but subject to the limitations set
forth in clause (iii) above.
Section 2. Representation of the Operating
-------------------------------
Partnership. The Operating Partnership hereby agrees to keep a
-----------
copy of this Consent, Assignment and Agreement with its business
records.
Section 3. Agreement of the Operating Partnership. The
--------------------------------------
Operating Partnership hereby agrees to admit the Bank as a
substituted limited partner in place of the Investing Partnership
in the Operating Partnership upon the Bank's foreclosure on the
Security Interest and request, subject to the Bank's obtaining
HUD 2530 Clearance and the rights of the Investing Partnership
under Section 9._05 of the Uniform Commercial Code.
Section 4. Amendment to Partnership Agreement. Upon
----------------------------------
substitution of the Bank for the Investing Partnership as a
limited partner in the Operating Partnership pursuant to the Bank
Agreement and this Consent, Assignment and Agreement, this
Consent, Assignment and Agreement shall constitute an amendment
to the partnership agreement of the Operating Partnership, and
the Bank shall not be liable for the obligations of any
predecessor which has assigned the Purchased Partnership Interest
to make any contributions to the Operating Partnership.
Section 5. Further Assurances and Power of Attorney.
----------------------------------------
Each of the parties hereto shall, from time to time, upon request
of a party hereto, duly execute, acknowledge and deliver or cause
to be duly executed, acknowledged and delivered, all such further
instruments and documents reasonably requested by a party to
effectuate the intent and purposes of this Consent, Assignment
and Agreement. Notwithstanding the foregoing, this Consent,
Assignment and Agreement shall constitute an irrevocable power of
attorney coupled with an interest for the Bank to execute and
file a certificate of amendment to the certificate of limited
partnership of the Operating Partnership or any other document or
instrument in order to effectuate the intent and purposes of this
Consent, Assignment and Agreement; provided, however, that the
Bank may not be substituted as a partner of the Operating
Partnership unless such substitution is permitted under the
Uniform Commercial Code and HUD 2530 Clearance, if required, has
been obtained.
Section 6. Notices. All notices and other
-------
communications pursuant or relating to this Consent, Assignment
and Agreement shall be in writing and shall be delivered by hand
or sent by registered or certified mail, return receipt
requested, or by facsimile, confirmed by writing delivered by
hand or sent by registered or certified mail, return receipt
requested, delivered or sent on the date of the facsimile,
addressed as follows:
(a) If to the Investing Partnership:
-------------------------------------
-------------------------------------
-------------------------------------
(b) If to the Operating Partnership:
-------------------------------------
-------------------------------------
-------------------------------------
(c) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: 201 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: 212 603-2298
Attention: Michele R. Jawin, Esq.
(d) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: 212 818-5999
Attention: Sandra Padmore-Lewis,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 7. Choice of Law. This Consent, Assignment and
-------------
Agreement shall be governed by the laws of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
Section 8. Successors. This Consent, Assignment and
----------
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
Section 9. Counterparts. This Consent, Assignment and
------------
Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall
constitute one instrument.
[INTENTIONALLY LEFT BLANK]
<PAGE>
Section 10. Definitions. All terms used in this
-----------
Consent, Assignment and Agreement and not otherwise defined
herein shall have the meanings ascribed to them in the Bank
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consent, Assignment and Agreement as of the date first above
written.
[Name of Investing Partnership]
By:
-----------------------------
Title:
[Name of Operating Partnership]
By:
-----------------------------
Title:
J&B MANAGEMENT COMPANY
By:
-----------------------------
Title:
THE BANK OF NEW YORK
By:
-----------------------------
Title:
Exhibit 10.5(h)
BANK AGREEMENT
THIS BANK AGREEMENT, dated as of October 27, 1993 (as
amended, modified or supplemented from time to time, the "Bank
Agreement"), is by and among J&B Management Company, a New Jersey
general partnership (J&B), and its affiliates; Leisure Centers,
Inc., a corporation organized and existing under the laws of the
State of Delaware, J&B Management Corp., Sulgrave Realty
Corporation, and Wilmart Development Corp., each of which is a
corporation organized and existing under the laws of the State of
New Jersey (hereinafter J&B, Leisure Centers, Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. are sometimes referred to collectively as the
"Company" or the "Co-Obligors"), and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is issuing its Series 7, 11%
Debentures due January 15, 2002 (the "Debentures") pursuant to
the Company's Confidential Private Placement Memorandum dated
October 26, 1993, as the same may be from time to time amended
(the "Memorandum");
WHEREAS, the Company's private placement of the
Debentures (the "Offering") will terminate on the earlier of (i)
the date on which all the Debentures are sold or (ii) December
31, 1994 (the "Offering Termination Date");
WHEREAS, subscribers will purchase Debentures at a
closing (the "Initial Closing") to be held when at least $500,000
principal amount of Debentures have been sold and, thereafter,
from time to time (each, singly, an "Additional Closing," and,
collectively, the "Additional Closings"), at the discretion of
the Company, on such day or days as may be determined by the
Company, as subscriptions are received and accepted (hereinafter
the date of the Initial Closing and the date of any Additional
Closing are each referred to as a "Closing Date");
WHEREAS, the Company desires to deliver to the Bank
amounts received by the Company from subscribers for Debentures
(each, singly, a "Purchaser," and, collectively, the
"Purchasers"), in payment for the Debentures, which amounts shall
be released to the Company at the Initial Closing and at each
Additional Closing;
WHEREAS, each Purchaser shall be entitled to receive,
on a monthly basis prior to the Closing Date with respect to that
Purchaser's Debentures, distributions representing interest
accrued on that Purchaser's subscription payment at a rate of 11%
per annum;
WHEREAS, the Company desires to establish an interest
bearing escrow fund to be called J&B Management Company Series 7
Escrow Fund Account (the "Fund") with the Bank;
WHEREAS, the Company, for the benefit of the Bank and
the Purchasers, wishes to assign to, and to grant the Bank a
security interest in, certain notes, instruments and documents as
more fully described below and the Bank is willing to accept such
security interest and assignment upon the terms and conditions
hereinafter set forth; and
WHEREAS, the Company wishes to appoint the Bank as
Escrow Agent, Authenticating Agent, Custodian, Paying Agent,
Registrar and Transfer Agent with respect to the Debentures and
the above-mentioned notes, instruments and documents and the Bank
is willing to accept such appointments upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained and other good
and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Escrow Agent.
-------------
Section 1.1 Appointment. The Company hereby appoints
and designates the Bank as Escrow Agent for the purposes set
forth in this Section 1, and the Bank hereby accepts such
appointment.
Section 1.2 Escrow.
------ The Company shall from time to
time deliver amounts received from Purchasers in payment for the
Debentures ("Subscription Payments") to the Bank. The Bank shall
deposit the Subscription Payments in the Fund to be established
in the Company's name for this purpose by the Bank. Subscription
Payments delivered for deposit in the Fund shall be invested in
short term certificates of deposit (including certificates of
deposit issued by the Bank), A-1, P-1 commercial paper, interest
bearing money market accounts, all as specified in writing by the
Company and held in trust for the benefit of the Purchasers. The
Bank is not responsible for interest, losses, taxes or other
charges on investments. All checks delivered to the Bank for
deposit in the Fund shall be payable to the order of "J&B
Management Company - Escrow Account." Concurrently with such
delivery, the Company shall deliver to the Bank a statement of
the name, mailing address and tax identification number of each
Purchaser whose Subscription Payment is being delivered, and a
schedule listing the aggregate Debentures and aggregate
cumulative Subscription Payments to date delivered for deposit in
the Fund. For the purposes of this Bank Agreement, the Company
is authorized to make deposits and give instructions as to
investments of deposits and otherwise, as contemplated in this
Bank Agreement, to the Bank.
Section 1.3 Interest.
-------- During the period (the "Escrow
Period") commencing upon the date that any Purchaser's
Subscription Payment constitutes Cleared Funds (as defined in
Section 1.11 hereof) and ending on the day immediately preceding
the Closing Date with respect to that Purchaser's Debentures,
interest will accrue on that Purchaser's Subscription Payment at
a rate of 11% per annum, computed on the basis of a year of 360
days consisting of 12 thirty day months. Interest shall be
payable on the fifteenth day of each month (each, an "Interest
Payment Date"). Four Business Days prior to each such Interest
Payment Date, the Bank shall give the Company written notice of
the difference between the amount of interest which will be
payable on Subscription Payments on such Interest Payment Date
and the amount of interest accruing on the Fund's assets which
will be available for such payment on such Interest Payment Date.
Not later than 11:30 a.m. (New York time) on the second Business
Day preceding such Interest Payment Date, the Company shall
deposit with the Bank its check in the amount of such difference.
On each Interest Payment Date, the Bank shall pay interest which
is due and payable to the respective Purchasers by mailing its
check in the appropriate amount to each Purchaser by first class
mail at the Purchaser's mailing address provided to the Bank
pursuant to Section 1.2 hereof. In the event that the Company
shall default in its payment obligations to the Bank under this
Section 1.3, the Bank shall mail its check in the amount of each
Purchaser's pro rata share of interest earned and paid on the
Fund's assets as provided in this Section 1.3. For purposes of
this Bank Agreement, "Business Day" shall mean any day other than
a day on which the Bank is authorized to remain closed in New
York City.
Section 1.4 Conditions of Initial Closing and
---------------------------------
Additional Closings.
------------------- Notwithstanding anything to the contrary in
this Bank Agreement, it is a condition precedent to the Initial
Closing and to each Additional Closing that J&B shall deliver to
the Bank Set Aside Purchase Notes and the Investor Notes that
serve as collateral security for the repayment of the principal
of and interest on such Set Aside Purchase Notes (the "Set Aside
Investor Notes") in such an amount that the sum of 50% of the
principal amount of the Set Aside Purchase Notes plus 90% of the
principal amount of the Set Aside Investor Notes equals the
principal amount of the Debentures which will be sold at that
Initial Closing or Additional Closing, together with the related
Consent and Agreement pertaining to each such Set Aside Purchase
Note and Set Aside Investor Notes and the related Consent,
Assignment and Agreement pertaining to the Purchased Partnership
Interest and the related Consent, Assignment and Agreement
pertaining to the Secured Partnership Interest and the related
Financing Statements (as such terms are defined in Section 7
hereof), as provided in Section 7 hereof. Upon the scheduling of
the Initial Closing and each Additional Closing, the Company
shall give written notice thereof to the Bank not less than one
(1) Business Day prior to the date for each such closing.
Section 1.5 Cancellation.
------------ The Company shall give the
Bank notice of any Purchaser who cancels his Subscription prior
to his Closing Date or whose Subscription Payment was deposited
pursuant to Section 1.2 but whose Subscription is rejected,
setting forth the name and mailing address of the Purchaser and
the amount of the rejected or cancelled subscription. As
promptly as practicable thereafter, the Bank shall pay the amount
of the cancelled or rejected subscription from the Fund to the
Purchaser whose Subscription was cancelled or rejected as
directed by the Company. Any interest earned thereon and not
theretofore distributed pursuant to Section 1.3 hereof shall be
paid to the Purchaser in accordance with Section 1.3 hereof.
Payment shall be made by check payable to the Purchaser mailed by
the Bank by first class mail directly to the Purchaser at the
mailing address of the Purchaser.
Section 1.6 Payment.
-------- The Bank, at the Initial Closing
and each Additional Closing, upon written instruction from the
Company, shall transfer to the Company or to such third party or
parties as may be directed by the Company the Cleared Funds then
held in the Fund by the Bank. Any interest earned thereon and
not theretofore distributed in accordance with Section 1.3 hereof
shall be paid to the Purchasers in accordance with Section 1.3
hereof.
Section 1.7 Fees and Expenses.
----------------- In addition to the fees
set forth in Section 7.10 hereof, the Bank shall be entitled to
an administration fee as compensation for its services under this
Section 1 in the amount of $5,000 payable (i) upon the execution
and delivery of this Bank Agreement and (ii) subject to an
adjustment as provided in the next succeeding sentence of this
Section 1.7, on the first anniversary date of this Bank
Agreement, provided however, that the Bank shall not be entitled
to payment of an administration fee on such first anniversary
date if all of the Debentures have been sold prior thereto. In
the event the Offering terminates prior to December 31, 1994, the
Company shall be entitled to a refund payable ten days after the
Offering Termination Date, of that portion of the administration
fee paid to the Bank on the first anniversary date of the Bank
Agreement, in an amount calculated as the difference between (a)
$5,000 and (b) the product of (x) $5,000 and (y) a fraction, the
numerator of which is the number of days between the first
anniversary date of this Bank Agreement and the Offering
Termination Date, inclusive, and the denominator of which is 365.
In no event shall the Bank be entitled to payment of an
administration fee, as provided for in this Section 1.7,
following the Offering Termination Date. The Company shall also
pay the Bank $5 for the preparation and execution of each
Purchaser's account including the calculation of interest
accrued; $1 for the preparation of each Purchaser's 1099 tax
form; $25 for each investment transaction in the Fund; $25 for
each returned "bounced" check of a Purchaser; and $500 for each
Additional Closing, payable within 10 days after the Bank gives
the Company notice that any such amounts are due and payable.
Notwithstanding anything herein to the contrary, the Bank shall
not charge the Company for the issuance of checks or wire
transfers to make monthly payments of accrued interest on
Subscription Payments. No additional fee will be payable with
respect to wire transfers of and unreturned checks for
Subscription Payments. In addition, the Company shall reimburse
the Bank for other actual out-of-pocket expenses incurred in
connection with its obligations pursuant to this Section 1
(including, but not limited to, actual expenses for stationery,
postage, telephone, telex, wire transfers, telecopy and retention
of records, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it has incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. Amounts held in the Fund shall not be available to
satisfy this obligation or any other obligation of the Company to
the Bank. The provisions of this Section 1.7 shall survive the
termination of this Bank Agreement.
Section 1.8 Termination of Offering.
----------------------- If the Offering
should be terminated, the Company shall promptly so advise the
Bank in writing, and shall authorize and direct the Bank to
return the Subscription Payments to the Purchasers. The Bank
thereupon shall return those Subscription Payments to the extent
they have not been distributed per Section 1.6 to the Purchasers
from whom they were received. Any interest earned on the
Subscription Payments and not theretofore distributed pursuant to
Section 1.3 hereof shall be paid in accordance with Section 1.3
hereof. Upon paying such disbursements to the Purchasers and the
Company, the Bank shall be relieved of all of its obligations and
liabilities under this Bank Agreement.
Section 1.9 Form 1099, etc.
----------------
In compliance with
the Interest and Dividend Tax Compliance Act of 1983, the
Company shall request that each Purchaser furnish to the
Bank such Purchaser's taxpayer identification number and a
statement certified under penalties of perjury that (a) such
taxpayer identification number is true and correct and (b) the
Purchaser is not subject to the requirements of such Act
providing for withholding of 20% of reportable interest,
dividends or other payments.
Section 1.10 Uncollected Funds.
----------------- In the event that any
funds, including Cleared Funds, deposited in the Fund prove
uncollectible after the funds represented thereby have been
released by the Bank pursuant to this Bank Agreement, the Company
shall reimburse the Bank upon request for the face amount of such
check or checks; and the Bank shall, upon instruction from the
Company, deliver the returned checks or other instruments to the
Company. This section shall survive the termination of this Bank
Agreement.
Section 1.11 Cleared Funds.
------------- For the purpose of this
Bank Agreement, Subscription Payments shall constitute "Cleared
Funds" in accordance with the following:
(a) if paid by wire transfer, such funds shall
constitute Cleared Funds on the date received by the Bank;
(b) if paid by check drawn on a New York Clearing
House Bank, such funds shall constitute Cleared Funds on the
second Business Day following the date received by the Bank; and
(c) if paid by check drawn on any bank other than a
New York Clearing House Bank, such funds shall constitute Cleared
Funds on the third Business Day following the date received by
the Bank.
Section 2. Execution.
--------- The Debentures shall be executed
on behalf of the Company by the manual or facsimile signature of
a partner or officer of the Company. All such facsimile
signatures shall have the same force and effect as if the partner
or officer had manually signed the Debentures. In case any
partner or officer of the Company whose signature shall appear on
a Debenture shall cease to be such partner or officer before the
delivery of such Debenture or the issuance of a new Debenture
following a transfer or exchange, such signature or such
facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such partner or officer had remained a
partner or officer until delivery.
Section 3. Authenticating Agent.
----------------------
Section 3.1 Appointment.
----------- The Company hereby appoints
and designates the Bank as Authenticating Agent for the purposes
set forth in this Section 3, and the Bank hereby accepts such
appointment.
Section 3.2 Authentication.
--------------- Only such Debentures as
shall have the Certificate of Authentication endorsed thereon in
substantially the form set forth in the form of Debenture
attached to the Memorandum, duly executed by the manual signature
of an authorized signatory of the Bank, shall be entitled to any
right or benefit under this Bank Agreement. No Debentures shall
be valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by
the Bank; and such executed certificate upon any such Debenture
shall be conclusive evidence that such Debenture has been
authenticated and delivered under this Bank Agreement. The
Certificate of Authentication on any Debenture shall be deemed to
have been executed by the Bank if signed by an authorized
signatory of the Bank, but it shall not be necessary that the
same person sign the Certificate of Authentication on all of the
Debentures.
Section 4. Mutilated, Lost, Stolen or Destroyed
Debentures. ------------------------------------
---------- Subject to applicable law, in the event any Debenture
is mutilated, lost, stolen or destroyed, the Company may
authorize the execution and delivery of a new Debenture of like
date, number, maturity and denomination as that mutilated, lost,
stolen or destroyed, provided, however, that in the case of any
mutilated Debenture, such mutilated Debenture shall first be
surrendered to the Company, and in the case of any lost, stolen
or destroyed Debenture, there shall be first furnished to the
Company and the Bank, evidence of the ownership thereof and of
such loss, theft or destruction satisfactory to the Company and
the Bank, together with indemnification through a bond of
indemnity or otherwise as shall be satisfactory to the Company
and the Bank. The Company may charge the Purchaser of such
Debenture with any amounts satisfactory to the Company and the
Bank and permitted by applicable law.
Section 5. Registrar and Transfer Agent.
------------------------------
Section 5.1 Appointment.
------------ The Company hereby appoints
and designates the Bank as Registrar and Transfer Agent for the
purposes set forth in this Section 5, and the Bank hereby accepts
such appointment.
Section 5.2 Registration, Transfer and Exchange of
--------------------------------------
Debentures.
---------- The Debentures are issuable only as registered
Debentures without coupons in the denomination of $100,000 or any
multiple or any fraction thereof at the sole discretion of the
Company. Each Debenture shall bear the following restrictive
legend: "These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and sold
or otherwise transferred only if registered pursuant to the
provisions of that Act or if an exemption from registration is
available." The Bank shall keep at its principal corporate trust
office a register in which the Bank shall provide for the
registration and transfer of Debentures. Upon surrender for
registration of transfer of any Debenture at such office of the
Bank, the Company shall execute, pursuant to Section 2 hereof,
and mail by first class mail to the Bank, and the Bank shall
authenticate, pursuant to Section 3 hereof, and mail by first
class mail to the designated transferee, or transferees, one or
more new Debentures in an aggregate principal amount equal to the
unpaid principal amount of such surrendered Debenture, registered
in the name of the designated transferee or transferees. Every
Debenture presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the holder of such Debenture or his
attorney duly authorized in writing. Notwithstanding the
preceding, the Debentures may not be transferred without an
effective registration statement under the Securities Act of 1933
covering the Debentures or an opinion of counsel to the holder of
such Debentures satisfactory to the Company and its counsel that
such registration is not necessary under the Securities Act of
1933 (the "Securities Act"). At the option of the owner of any
Debenture, such Debenture may be exchanged for other Debentures
of any authorized denominations, in an aggregate principal amount
equal to the unpaid principal amount of such surrendered
Debenture, upon surrender of the Debenture to be exchanged at the
principal corporate trust office of the Bank; provided, however,
that any exchange for denominations other than $100,000 or an
integral multiple thereof shall be at the sole discretion of the
Company. Whenever any Debenture is so surrendered for exchange,
the Company shall execute, pursuant to Section 2 hereof, and
deliver to the Bank, and the Bank shall authenticate, pursuant to
Section 3 hereof, and mail by first class mail to the designated
transferee, or transferees, the Debenture or Debentures which the
Debenture owner making the exchange is entitled to receive. Any
Debenture or Debentures issued in exchange for any Debenture or
upon transfer thereof shall be dated the date to which interest
has been paid on such Debenture surrendered for exchange or
transfer, and neither gain nor loss of interest shall result from
any such exchange or transfer. In addition, each Debenture
issued upon such exchange or transfer shall bear the restrictive
legend set forth above unless in the opinion of counsel to the
Company, such legend is not required to ensure compliance with
the Securities Act.
Section 5.3 Owner.
------ The person in whose name any
Debenture shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes, and payment of or on
account of the principal of or interest on such Debenture shall
be made only to or upon the order of the registered owner thereof
or his duly authorized legal representative. Such registration
may be changed only as provided in this Section 5, and no other
notice to the Company or the Bank shall affect the rights or
obligations with respect to the transfer of a Debenture or be
effective to transfer any Debenture. All payments to the person
in whose name any Debenture shall be registered shall be valid
and effectual to satisfy and discharge the liability upon such
Debenture to the extent of the sum or sums to be paid.
Section 5.4 Transfer Agent.
-------------- The Bank shall send
executed, authenticated Debentures to Purchasers on Closing Dates
and to subsequent owners and transferees who are entitled to
receive Debentures pursuant to the terms of this Bank Agreement,
by first class mail.
Section 5.5 Charges and Expenses.
-------------------- No service charge
shall be made for any transfer or exchange of Debentures, but in
all cases in which Debentures shall be transferred or exchanged
hereunder, as a condition to any such transfer or exchange, the
owner of the Debenture shall, prior to the delivery of any new
Debenture pursuant to such transfer or exchange, reimburse the
Company and the Bank for their respective actual out-of-pocket
expenses incurred in connection therewith (including, but not
limited to, any tax, fee or other governmental charge required to
be paid with respect to such transfer or exchange, actual
expenses for stationery, postage, telephone, telex, wire
transfers, telecopy and retention of records, and reasonable fees
and expenses of their respective counsel). The provisions of
this Section 5.5 shall survive the termination of this Bank
Agreement.
Section 5.6 Redemption.
----------
(a) Whenever the Company shall effect a voluntary
redemption of part or all of the Debentures, which shall be
without premium or penalty, or is required to effect mandatory
redemption of part or all of the Debentures, the Company shall
give written notice thereof to the Bank at least forty (40) days
prior to the date set forth for redemption, the manner in which
redemption shall be effected and all the relevant details
thereof. The Bank shall give written notice to the Purchasers of
that redemption at least thirty (30) days prior to the date set
forth for redemption. The Company shall deliver all redeemed
Debentures to the Bank for cancellation of the whole or portion
thereof, as appropriate, and issuance of new Debentures in
denominations equal to the unredeemed portion. In no event,
however, shall the Bank pay the redeemed amount or issue new
Debentures in denominations equal to the unredeemed portion to a
registered owner if that registered owner has not surrendered its
Debenture to the Company. No interest shall be payable on the
redeemed portion of a Debenture from and after the date of
redemption.
(b) The Bank hereby acknowledges that the Company may
effect a voluntary redemption of part or all of the Debentures
without premium or penalty. In the event the Company should
effect a partial redemption of the Debentures, the Bank shall (i)
return to the Company Set Aside Purchase Notes selected by the
Company and the related Set Aside Investor Notes in such an
amount that the sum of 50% of the principal amount of such Set
Aside Purchase Notes plus 90% of the principal amount of such Set
Aside Investor Notes equals the principal amount of the redeemed
portion of the Debentures, (ii) execute and deliver to the
Company an instrument prepared by J&B effecting a release by the
Bank of the existing assignment of the security interest and
Purchase Agreement covering the related Purchased Partnership
Interest and the related Secured Partnership Interests (as such
terms are defined in Section 7.3(a) hereof), (iii) file with the
appropriate governmental authorities indicated by J&B to the
Bank, Financing Statements delivered by J&B to the Bank recording
the termination of the Bank's security interest and assignment
granted under this Bank Agreement, and (iv) return to J&B the
Consent and Agreement described in Section 7.2(c) hereof, the
Consent, Assignment and Agreement described in Section 7.3(c)
hereof relating to such returned Set Aside Purchase Notes and the
Purchased Partnership Interest, respectively, the Consent and
Agreement described in Section 7.4(c) hereof and the Consent,
Assignment and Agreement described in Section 7.5(c) hereof
relating to such returned Set Aside Investor Notes and Secured
Partnership Interests, respectively. In no event, however, will
the Bank release Set Aside Purchase Notes and Set Aside Investor
Notes if the sum of 50% of the principal amount of Set Aside
Purchase Notes and plus 90% of the principal amount of the Set
Aside Investor Notes held by the Bank following such release
would be less than the principal amount of the Debentures that
remain outstanding.
Section 6. Paying Agent.
------------
Section 6.1 Appointment.
----------- The Company hereby appoints
and designates the Bank as Paying Agent for the purposes set
forth in this Section 6, and the Bank hereby accepts such
appointment.
Section 6.2 Payment Provisions.
-------------------
The Bank shall pay interest on Subscription Payments and
principal of and interest on the Debentures to the persons in
whose names the Debentures are registered, subject to the
limitations contained in Section 5.6(a) and in accordance with
the terms and provisions of this Bank Agreement and the
Debentures, by check mailed by first class mail to the registered
owner of a Debenture at his address as it appears in the
register; provided that not later than 11:30 a.m. (New York time)
on the second Business Day preceding each Interest Payment Date
or date on which principal of any Debenture is due and payable,
the Company shall provide the Bank with sufficient funds to make
those payments.
Section 6.3 Expenses.
-------- The Company shall reimburse the
Bank for its actual out-of-pocket expenses incurred in connection
with its obligations pursuant to this Section 6 (including, but
not limited to, actual expenses for stationery, postage,
telephone, telex, wire transfers, telecopy and retention of
records), payable within ten (10) days after the Bank gives
notice to the Company that it has incurred such expenses. The
obligation to pay such compensation and reimburse such expenses
shall be borne solely by the Company. Notwithstanding anything
herein to the contrary, the Bank shall not charge the Company any
fees for the issuance of checks or wire transfers to make
payments of interest on or repayments of principal of the
Debentures. The provisions of this Section 6.3 shall survive the
termination of this Bank Agreement.
Section 7. The Custodian.
-------------
Section 7.1 Appointment.
------------
The Company hereby appoints and designates the Bank as Custodian
for the purposes set forth in this Section 7, and the Bank hereby
accepts such appointment.
Section 7.2 Set Aside Purchase Notes.
------------------------
(a) J&B is the holder of certain Purchase Notes and
the Investor Notes pledged pursuant to a Purchase Agreement by
the respective Investing Partnerships as collateral security for
their respective Purchase Notes. Under the terms of each such
Purchase Note and Purchase Agreement, J&B is entitled to assign
each Purchase Note and J&B's right to payments of interest
thereon and the principal amount thereof. Under the terms of
each Purchase Agreement, payments of interest due under the
Purchase Note will be offset and reduced by payments made under
the related Investor Notes issued by the limited partners of the
respective Investing Partnership. Interest which is in excess of
the amount offset and reduced by payments made under a Purchase
Note ("Excess Interest") shall be deferred until the maturity of
that Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.6 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Purchase Notes, in an aggregate principal amount of
$11,750,000, listed in Exhibit A hereto (the "Set Aside Purchase
Notes") issued by the Investing Partnerships listed in Exhibit A
hereto, and the proceeds thereof. In order to perfect such
security interests, J&B shall deliver to the Bank the Set Aside
Purchase Notes. Upon receipt of each Set Aside Purchase Note,
the Bank shall execute and deliver to the Company a receipt
therefor. Notwithstanding the assignment of the Set Aside
Purchase Notes to the Bank, the interest payments on all of the
Set Aside Purchase Notes shall be payable directly to the Company
until such time as an Event of Default (as defined in Section 7.8
hereof) shall occur and be continuing. The parties hereto
further confirm that any Excess Interest and deferred principal
on a Set Aside Purchase Note paid at the maturity thereof shall
belong to the Company so long as an Event of Default shall not
have occurred and be continuing.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit B hereto, executed by each
Investing Partnership listed in Exhibit A hereto, under which the
Investing Partnership shall (i) consent to J&B's assignment to
the Bank of the Investing Partnership's Set Aside Purchase Note,
(ii) consent to J&B's delivery of the Investing Partnership's Set
Aside Purchase Note to the Bank, and (iii) agree that upon
receiving the Bank's notice of an Event of Default that is
continuing, the Investing Partnership shall pay all sums due
under its Set Aside Purchase Notes directly to the Bank. Upon
receipt of each such Consent and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.3 Purchased Partnership Interests.
--------------------------------
(a) Each Investing Partnership listed in Exhibit A
hereto, in order to secure its payment of the principal of and
interest on its Set Aside Purchase Note, has entered into a
Purchase Agreement under which the Investing Partnership has
granted a security interest in that Investing Partnership's
limited partnership interest listed in Exhibit A hereto (a
"Purchased Partnership Interest") in a respective Operating
Partnership listed in Exhibit A hereto (an "Operating
Partnership").
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.6 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each Purchase
Agreement listed in Exhibit A hereto, each security interest in a
Purchased Partnership Interest created under any such Purchase
Agreement, each such Purchased Partnership Interest, each
allocation and distribution due and payable or to be made from
time to time on such Purchased Partnership Interest, and the
proceeds thereof. In order to perfect such security interest,
J&B shall deliver to the Bank Financing Statements ("Financing
Statements") for filing by the Bank with the appropriate
governmental authorities indicated by J&B to the Bank, and hereby
agrees to deliver to the Bank from time to time such additional
Financing Statements as must be filed with such appropriate
governmental authorities in order to continue the perfection of
such security interest. Notwithstanding the assignments,
pursuant to this Section 7.3(b), of the above-mentioned Purchase
Agreements, security interests, Purchased Partnership Interests,
and due and payable allocations and distributions on Purchased
Partnership Interests to the Bank, all allocations and
distributions on such Purchased Partnership Interests, if any, in
excess of the amounts due and payable by the Investing
Partnership on account of principal and interest on their
respective Purchase Notes shall be payable directly to the
respective Investing Partnership if an event of default shall not
have occurred and be continuing under that Investing
Partnership's Set Aside Purchase Note 7.7(g) and shall be payable
directly to the Bank for the benefit of the Bank and the owners
of the Debentures only if the Bank shall foreclose on the
security interest granted pursuant to this Section 7.3(b)
pursuant to Section 7.7(e) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership and Operating Partnership
listed in Exhibit A hereto, under which the Investing Partnership
and Operating Partnership shall (i) consent to J&B's assignment
to the Bank, pursuant to Section 7.3(b) hereof, of the Purchase
Agreement, security interest in the Purchased Partnership
Interest, Purchased Partnership Interest, each allocation and
distribution due and payable or to be made from time to time on
the Purchased Partnership Interest, and the proceeds thereof;
(ii) consent to J&B's delivery of the above-mentioned Financing
Statements and the Bank's filing of the Financing Statements from
time to time with the appropriate governmental authorities; (iii)
assign to the Bank all allocations and distributions which may be
due and payable or made from time to time on the Purchased
Partnership Interest (subject to the terms and conditions set
forth in this Bank Agreement) until all outstanding obligations
under the Set Aside Purchase Note which is in default shall have
been paid in full (including, without limitation, all costs of
collection, reasonable attorney fees and other fees and
expenses); and (iv) agree that upon foreclosure of the security
interest granted pursuant to Section 7.3(b) hereof, pursuant to
Section 7.7(e) hereof, all allocations and distributions on the
Purchased Partnership Interest shall be paid directly to the
Bank, as the assignee of J&B, regardless of whether the Bank
becomes a substituted limited partner in place of the Investing
Partnership in the Operating Partnership but subject to the
limitations in clause (iii) above. Upon receipt of each such
Consent, Assignment and Agreement, the Bank shall execute and
deliver to the Company a receipt therefor.
Section 7.4 Set Aside Investor Notes.
------------------------
(a) Each Investing Partnership listed on Exhibit A
hereto is the payee of Investor Notes made by its respective
limited partners as partial consideration for their limited
partnership interests. Each Investor Note is a full recourse
non-interest bearing promissory note payable in one lump sum on
its maturity date. After the maturity of an Investor Note any
unpaid past-due principal will be subject to interest at the
default rate and for the period of time specified in the
defaulted Investor Note ("Investor Default Interest"). Under the
terms of their respective Purchase Agreements, each Investing
Partnership has pledged its Investor Notes to J&B as collateral
security for the Investing Partnership's obligations under its
respective Purchase Note.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal of
and interest on the Debentures, subject to the terms and
conditions of Section 7.6 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of Debentures from time to time, all of
the Investor Notes, having an aggregate face value of $4,418,500
listed on Exhibit D hereto, and maturity dates as set forth on
Exhibit D hereto (the "Set Aside Investor Notes"), pledged to J&B
by the Investing Partnerships listed in Exhibit A hereto, and the
proceeds thereof. Upon receipt of each Set Aside Investor Note,
the Bank shall execute and deliver to the Company a receipt
therefor. Notwithstanding the assignment of the Set Aside
Investor Notes to the Bank, the lump sum payments of principal on
all Set Aside Investor Notes and Investor Default Interest, if
any, shall be payable directly to the Company until such time as
an Event of Default shall occur and be continuing. The parties
hereto hereby confirm that the principal payable at maturity on
each Set Aside Investor Note and Investor Default Interest, if
any, listed on Exhibit D hereto will belong to the Company until
such time as an Event of Default shall occur and be continuing.
(c) J&B shall deliver to the Bank a Consent and
Agreement in the form of Exhibit B hereto, executed by each
Investing Partnership listed in Exhibit A hereto, under which the
Investing Partnership shall (i) consent to J&B's assignment to
the Bank pursuant to Section 7.4(b) hereof of the Set Aside
Investor Notes payable to such Investing Partnership, (ii)
consent to J&B's delivery to the Bank of the Investor Notes, and
(iii) agree that upon receiving the Bank's notice of an Event of
Default that is continuing, the Investing Partnership shall
notify the makers of the Set Aside Investor Notes that all
payments thereunder shall be made directly to the Bank. Upon
receipt of each such Consent and Agreement, the Bank shall
execute and deliver to the Company a receipt therefor.
Section 7.5 Secured Partnership Interests.
------------------------------
(a) Each maker of a Set Aside Investor Note
("Investor") has pledged, pursuant to the terms of the
subscription agreement between the Investing Partnership listed
on Exhibit A hereto and such Investor ("Investor Subscription
Agreement"), its limited partnership interest in the Investing
Partnership (the "Secured Partnership Interest"), as collateral
security for its obligation to pay the principal amount of the
Set Aside Investor Note at maturity. Each Investing Partnership
listed on Exhibit A hereto, has, pursuant to its Purchase
Agreement, pledged and granted to J&B a security interest in all
of its right, title and interest in the Secured Partnership
Interests, as collateral security for its obligations under its
Purchase Note listed on Exhibit A hereto.
(b) In order to secure the payment of the Bank's fees
and expenses under this Section 7 and the payment of principal
and interest on the Debentures, subject to the terms and
conditions of Section 7.6 hereof, J&B hereby grants the Bank a
security interest in and assigns to the Bank, for the benefit of
the Bank and the owners of the Debentures from time to time, all
of J&B's rights, title and interest in and to each security
interest in a Secured Partnership Interest created under the
Purchase Agreements listed in Exhibit A hereto, each allocation
and distribution due and payable or to be made from time to time
on such Secured Partnership Interests, and the proceeds thereof.
In order to perfect such security interest, J&B shall deliver to
the Bank Financing Statements for filing by the Bank with the
appropriate governmental authorities indicated by J&B to the
Bank, and hereby agrees to deliver to the Bank from time to time
such additional Financing Statements as must be filed with such
appropriate governmental authorities in order to continue the
perfection of such security interest. Notwithstanding the
assignments, pursuant to this Section 7.5(b), of the
above-mentioned security interests, Secured Partnership Interests
and due and payable allocations and distributions on Secured
Partnership Interests to the Bank, all allocations and
distributions on such Secured Partnership Interests shall be
payable directly to: (i) the Investor which owns the Secured
Partnership Interest, if an event of default shall not have
occurred under such Investor's Investor Notes and/or Investor
Subscription Agreement (an "Investor Default"); (ii) the
Investing Partnership, if an Investor Default shall have occurred
and no event of default shall have occurred and be continuing
under the Investing Partnership's Purchase Agreement; and (iii)
the Bank for payment to the Company, if the Bank shall foreclose
on its security interest pursuant to Section 7.7(g) hereof and to
the Bank for the benefit of the Bank and the owners of the
Debentures from time to time only if the Bank shall foreclose on
the security interest granted pursuant to this Section 7.5(b)
pursuant to Section 7.7(f) hereof.
(c) J&B shall deliver to the Bank a Consent,
Assignment and Agreement in the form of Exhibit C hereto,
executed by each Investing Partnership listed in Exhibit A
hereto, under which the Investing Partnership shall (i) consent
to J&B's assignment to the Bank pursuant to Section 7.5(b) hereof
of the security interest in the Secured Partnership Interests,
each allocation and distribution due and payable or made from
time to time on the Secured Partnership Interests, and the
proceeds thereof; (ii) consent to J&B's delivery of the above
mentioned Financing Statements and the Bank's filing of the
Financing Statements from time to time with the appropriate
governmental authorities; (iii) assign to the Bank all
allocations and distributions which may be due and payable or
made from time to time on the Secured Partnership Interests
(subject to the terms and conditions set forth in this Bank
Agreement) until all outstanding obligations under any Set Aside
Investor Notes which are in default shall have been paid in full
(including, without limitation, all costs of collection,
reasonable attorney fees and other fees and expenses); and (iv)
agree that upon foreclosure of the security interests granted
pursuant to Section 7.5(b) hereof, pursuant to Section 7.7(f)
hereof, all allocations and distributions on the Secured
Partnership Interests shall be paid directly to the Bank, as the
assignee of J&B (subject to the terms and conditions set forth in
this Bank Agreement), regardless of whether the Bank becomes a
substitute limited partner in the Investing Partnership in place
of the defaulting Investor. Upon receipt of each Consent,
Assignment and Agreement, the Bank shall execute and deliver to
the Company a receipt therefor.
Section 7.6 Attachment of Security Interests.
---------------------------------
Notwithstanding anything to the contrary in this Bank
Agreement, each security interest granted by J&B to the Bank
under this Section 7 shall become effective and shall attach only
upon J&B's delivery to the Bank of the respective Set Aside
Purchase Note, and the related Consent and Agreement and
Financing Statements pertaining to that Set Aside Purchase Note,
the related Consent, Assignment and Agreement and related
Financing Statements pertaining to the Purchased Partnership
Interest, the related Set Aside Investor Notes, and the related
Consent and Agreement and Financing Statements pertaining to such
Set Aside Investor Notes, and the related Consent, Assignment and
Agreement and related Financing Statements pertaining to the
Secured Partnership Interests. J&B shall be obligated to deliver
to the Bank only those Set Aside Purchase Notes selected by J&B,
in its sole discretion, and the related Set Aside Investor Notes
in such an amount that the sum of 50% of the principal amount of
the Set Aside Purchase Notes plus 90% of the principal amount of
the related Set Aside Investor Notes equals the principal amount
of the Debentures which will be sold at the respective Initial
Closing or Additional Closing, together with the Consent and
Agreement and Financing Statements pertaining to that Set Aside
Purchase Note, the Consent, Assignment and Agreement and related
Financing Statements pertaining to the Purchased Partnership
Interest, the Consent and Agreement and Financing Statements
pertaining to such Set Aside Investor Notes, and the Consent,
Assignment and Agreement and Financing Statements pertaining to
the Secured Partnership Interests.
Section 7.7 Duties of the Bank.
-------------------
(a) The Bank shall hold the notes, Agreements and
instruments deposited with it for the purposes of this Bank
Agreement and for the benefit of the Bank and of the owners of
the Debentures from time to time, shall file the Financing
Statements delivered to it from time to time by J&B with the
appropriate governmental authorities indicated by J&B to the Bank
and shall perform all duties imposed upon it by this Bank
Agreement until this Bank Agreement is terminated. The security
interests and assignments created by this Bank Agreement and by
each Consent, Assignment and Agreement shall automatically
terminate when all of the Debentures and all amounts payable to
the Bank under this Bank Agreement have been paid in full.
Thereupon, the Bank shall return to J&B the Set Aside Purchase
Notes and the related Set Aside Investor Notes deposited with it
pursuant to Section 7.2(b) and Section 7.4(b) hereof, and shall
file with the appropriate governmental authorities indicated by
J&B to the Bank Financing Statements delivered by J&B to the Bank
recording the termination of the Bank's security interests and
assignments granted under this Bank Agreement and each Consent,
Assignment and Agreement.
(b) Upon the occurrence and continuation of an Event
of Default, the Bank shall declare the entire outstanding
aggregate principal balance of all the Debentures plus all
accrued interest due and immediately payable. In addition, the
Bank shall immediately notify each Investing Partnership in
writing of the occurrence of such Event of Default. Upon receipt
of such notice, each Investing Partnership shall (i) make all
payments of principal and interest on its respective Set Aside
Purchase Note to the Bank and (ii) notify each Investor, in
writing, that all payments on its Set Aside Investor Notes shall
be made directly to the Bank.
The Bank shall collect all payments received under the
foregoing security interests and assignments and apply them for
the benefit of the Bank and of the owners of the Debentures
firstly to the payment of all costs of collection, secondly to
the payment of the Bank's fees and expenses, thirdly to the
payment of all accrued interest (including, without limitation,
interest accrued after the date of the Event of Default) and next
to the repayment of principal of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(c) Upon the occurrence and continuation of an Event
of Default, the Bank shall be entitled to institute action
against the Co-Obligors, jointly or severally, to collect payment
under the Debentures without any prior requirement to attempt to
collect any funds under the Set Aside Purchase Notes or the
related Purchased Partnership Interests, Set Aside Investor Notes
or Secured Partnership Interests. In the event that the Company
shall default on its payment obligations to the Bank under this
Bank Agreement, the Bank shall be entitled to institute action
against the Company, jointly or severally, to collect payment
under this Bank Agreement, without any prior requirement to
attempt to collect any funds under the Set Aside Purchase Notes
or the related Purchased Partnership Interests, Set Aside
Investor Notes or Secured Partnership Interests.
(d) Upon the occurrence and continuation of an Event
of Default, the Bank, in its discretion, is authorized to, but
shall not be required to, proceed in any way legally available to
it to liquidate (i) the Set Aside Purchase Notes and the
Purchased Partnership Interests (if the Bank shall have
foreclosed on such Set Aside Purchase Note pursuant to Section
7.7(e) hereof) or (ii) the Set Aside Investor Notes and Secured
Partnership Interests (if an Investor Default shall have occurred
and the Bank shall have foreclosed on such Set Aside Investor
Note pursuant to Section 7.7(f) hereof) including, in each case,
but not limited to, the public or private sale of all or any part
thereof upon three (3) days' prior notice to the Company, free
and clear of any claim, lien, charge or encumbrance including,
without limitation, any right of equity of redemption. The Bank
shall apply the proceeds of any such sale firstly to the payment
of the expenses of the sale, secondly to the payment of the
Bank's fees and expenses, thirdly to the payment of accrued
interest including accrued interest from and after the Event of
Default, and next to the payment of principal of the Debentures.
The Bank shall not be liable to the Company or its affiliates
because of any sale or the consequences thereof.
(e) While an Event of Default is continuing, if there
shall occur or if there shall have occurred and be continuing an
event of default under any Set Aside Purchase Note, the Bank
shall immediately send written notice of that event of default
under that Set Aside Purchase Note to the maker of that Set Aside
Purchase Note. If that event of default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Purchase Note, the Bank shall immediately foreclose on the
security interest in the related Purchased Partnership Interest
by notifying the general partner of the related Operating
Partnership of the foreclosure. The Bank shall send a notice to
the Investing Partnership stating that it is retaining the
Purchased Partnership Interest in discharge of the defaulted Set
Aside Purchase Note pursuant to Section 9-505 of the Uniform
Commercial Code and shall request admission as a substituted
limited partner in place of the related Investing Partnership in
that Operating Partnership, subject to the limitations set forth
in Section 7.3(c)(iii) hereof, and to obtaining previous
Multi-family Participation Clearance from the United States
Department of Housing and Urban Development ("HUD 2530
Clearance") with respect to that Operating Partnership, if
required, in satisfaction of that Set Aside Purchase Note (but
not of any Debenture); provided, that during any time period
pending obtaining HUD 2530 Clearance, if required, or if HUD 2530
Clearance is required for that Operating Partnership but cannot
be obtained, or if the Bank may not be admitted as a substituted
limited partner in the Operating Partnership for any reason, the
Bank shall nevertheless be entitled to receive all allocations
and distributions from that Operating Partnership as the assignee
of J&B and this Bank Agreement shall operate as an assignment of
such allocations and distributions by the Investing Partnership
subject to the limitations set forth in Section 7.3(c)(iii)
hereof. In addition, while an Event of Default is continuing, if
there shall occur or if there shall have occurred and be
continuing an event of default under any Set Aside Purchase Note
or under any Partnership Agreement governing the Operating
Partnership related to the Purchased Partnership Interest, the
Bank shall be authorized to exercise any and all rights and
remedies available to it as the holder of the respective Set
Aside Purchase Note, the substituted partner or assignee with
respect to the Purchased Partnership Interest in the related
Operating Partnership, as well as any other remedy available
under law or equity. The Bank shall apply the proceeds of its
exercise of the above-mentioned rights and remedies firstly to
the payment of all costs of collection, secondly to the payment
of the Bank's fees and expenses, thirdly to the payment of all
accrued interest (including, without limitation, interest accrued
after the date of the Event of Default) and next to repayment of
principal of the Debentures, until all amounts due under the
Debentures shall have been paid in full together with all costs
of collection, fees and expenses.
(f) While an Event of Default is continuing, if an
Investor Default shall occur and be continuing, the Bank shall
immediately send written notice of that Investor Default to the
defaulting Investor and to the general partner of the Investing
Partnership. If the Investor Default is continuing after the
expiration of the grace period, if any, contained in that Set
Aside Investor Note, the Bank shall immediately foreclose on the
security interest in the related Secured Partnership Interest by
notifying the defaulting Investor and general partner of the
related Investing Partnership of the foreclosure. The Bank shall
send a notice to the Investing Partnership, which shall deliver a
copy of such notice to the defaulting Investor, stating that it
is retaining the Secured Partnership Interest in discharge of the
defaulted Set Aside Investor Note pursuant to Section 9-505 of
the Uniform Commercial Code and shall request admission as a
substituted limited partner in place of the defaulting Investor
in that Investing Partnership, subject to the limitations set
forth in Section 7.5(c)(iii) hereof. If the Bank may not be
admitted as a substituted limited partner in the Investing
Partnership for any reason, the Bank shall nevertheless be
entitled to receive all allocations and distributions from the
Investing Partnership in respect of such Secured Partnership
Interest as the assignee of such Secured Partnership Interest,
and this Bank Agreement shall operate as an assignment of such
allocations and distributions by the Investing Partnership,
subject to the limitations set forth in Section 7.5(c)(iii)
hereof. In addition, while an Event of Default is continuing, if
an Investor Default shall occur or shall have occurred and be
continuing or an event of default under any Partnership Agreement
governing the Investing Partnership related to the Secured
Partnership Interest shall occur or shall have occurred and be
continuing, the Bank shall be authorized to exercise any and all
rights and remedies available to it as the holder of the
respective Set Aside Investor Note, the substituted limited
partner or assignee with respect to the Secured Partnership
Interest in the related Investing Partnership, as well as any
other remedy available under law or equity. The Bank shall apply
the proceeds of its exercise of the above-mentioned rights and
remedies firstly to the payment of all costs of collection,
secondly to the payment of the Bank's fees and expenses, thirdly
to the payment of all accrued interest (including, without
limitation, interest accrued after the date of the Event of
Default) and next to the repayment of the Debentures, until all
amounts due under the Debentures shall have been paid in full
together with all costs of collection, fees and expenses.
(g) If an Investor Default shall occur when no Event
of Default is continuing, then the Company shall immediately give
the Bank and the defaulting Investor notice thereof. If that
event of default is continuing after the expiration of the grace
period, if any, contained in the Set Aside Investor Note in
respect of which the Investor Default occurred, if the Company
shall not effect a substitution pursuant to Section 7.11(e)
hereof, the Bank shall immediately foreclose on the security
interest in the related Secured Partnership Interest by notifying
the general partner of the related Investing Partnership of such
foreclosure. The Bank shall send a notice to the Investing
Partnership, which shall deliver a copy of such notice to the
defaulting Investor, stating that it is retaining the Secured
Partnership Interest in discharge of the defaulted Set Aside
Investor-Note pursuant to Section 9-505 of the Uniform Commercial
Code and shall request admission as a substituted limited partner
in the Investing Partnership in place of the defaulting Investor,
subject to the limitations in Section 7.5(c)(iii) hereof. If the
Bank may not be admitted as a substituted limited partner in the
Investing Partnership for any reason, the Bank shall be entitled
nevertheless to receive all allocations and distributions from
that Investing Partnership as the assignee of the Secured
Partnership Interest and this Bank Agreement shall operate as an
assignment of such allocations and distributions by the Investing
Partnership, subject to the limitations in Section 7.5(c)(iii)
hereof. The Bank shall pay over to the Company any amounts
received from the Investing Partnership unless and until an Event
of Default shall occur and be continuing. If and when such Event
of Default shall occur and be continuing, the Bank shall follow
the proceedings specified in this Section 7.7.
(h) The rights and remedies enumerated herein are in
addition to and not in lieu of any other right or remedy
available to the Bank under law or equity, including, without
limitation, rights and remedies available to a secured party
under the Uniform Commercial Code; provided, however, that the
Bank shall not be entitled to apply the proceeds of the
foreclosure of any Set Aside Purchase Note, Purchased Partnership
Interest, Set Aside Investor Note, or Secured Partnership
Interest to amounts owing to the Bank or the owners of the
Debentures under this Bank Agreement unless an Event of Default
shall occur and be continuing. The Bank shall be entitled to
exercise one or more remedies at the same time, all such rights
and remedies being cumulative and not mutually exclusive.
(i) The Co-Obligors shall remain jointly and severally
liable for any deficiency remaining after the application of
proceeds of the foreclosure of any Set Aside Purchase Note,
Purchased Partnership Interest, Set Aside Investor Note, or
Secured Partnership Interest collected by the Bank including, but
not limited to, all actual costs and expenses of collection
(including, without limitation, reasonable attorneys' fees and
expenses). If any funds shall remain in the possession of the
Bank after the payment of all amounts due under the Debentures,
all such costs of collection thereof and all other actual fees
and expenses (including without limitation reasonable attorneys'
fees and expenses) of the Bank, the Bank shall deliver such
remaining funds to the Company. The provisions of this Section
7.7(i) shall survive the termination of this Bank Agreement.
Section 7.8 Events of Default.
-------------------
If any of the following events (an "Event of Default")
shall occur and be continuing for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any
part of the principal of any Debenture when the same
shall become due and payable, and such default shall
have continued for more than 30 days; or
(ii) the Company defaults in the payment of any
part of the interest on any Debenture when the same
shall become due and payable, and such default shall
have continued for more than 15 days;
then, the Bank, by notice to the Company, or the owners of at
least 25% of the principal amount of the Debentures, by notice to
the Company and to the Bank, may declare the entire principal of
and accrued interest on all Debentures to become immediately due
and payable at par without presentment, demand, protest or other
notice of any kind, all of which are waived by the Company.
Section 7.9 Sale of Set Aside Purchase Notes and
------------------------------------
Related Set Aside Investor Notes.
--------------------------------
The Company may from time to time while no Event
of Default shall have occurred and be continuing arrange the
sale of one of more Set Aside Purchase Notes and all of the
related Set Aside Investor Notes to a third party, subject to
the following conditions:
(i) The Company shall give prompt written notice
thereof to the Bank together with all relevant details
of the proposed transaction.
(ii) The Bank shall receive cash in the amount
equal to (x) the sum of 50% of the principal balance
due at maturity of the Set Aside Purchase Note being
sold plus 90% of the principal amount of the related
Set Aside Investor Notes being sold and (y) an amount
sufficient to pay accrued interest on the pro rata
portion of Debentures to be prepaid pursuant to
subparagraph (iv) below.
(iii) Notwithstanding the above, in no event may
a Set Aside Purchase Note be sold apart from all of the
related Set Aside Investor Notes and no Set Aside
Investor Note may be sold apart from the related Set
Aside Purchase Note.
(iv) Upon receipt of cash as provided in
subparagraph (ii) above, the Bank will apply the
proceeds to the pro rata redemption of the Debentures
at par plus payment of accrued interest thereon.
Thereafter, the Bank shall deliver each Set Aside
Purchase Note and related Set Aside Investor Notes that
are then sold to J&B, or at the written request of J&B,
to the purchaser, together with an assignment of
security interest and Purchase Agreement covering the
related Purchased Partnership Interest and Secured
Partnership Interests. Subject to Section 8(b) hereof
the Bank shall have no liability whatsoever to the
purchaser or any party hereto for its actions pursuant
to this Section 7.9.
Section 7.10 Fees and Expenses.
------------------- In addition to the
administration fee set forth in Section 1.7 hereof, the Bank
shall be entitled to compensation for its services under this
Section 7 in the amount of $2,500 as an acceptance fee, payable
upon execution and delivery of this Bank Agreement; and
administrative fees, payable annually on the anniversary date of
this Bank Agreement, based upon the aggregate principal amount of
outstanding Debentures ten days prior to the anniversary date, in
the following amounts:
$ 500,000 to $ 1,000,000 outstanding . . . . . . . $ 2,500
$ 1,000,001 to $ 2,000,000 outstanding . . . . . . . $ 3,000
$ 2,000,001 to $ 3,000,000 outstanding . . . . . . . $ 4,000
$ 3,000,001 to $ 4,000,000 outstanding . . . . . . . $ 5,000
$ 4,000,001 to $ 5,000,000 outstanding . . . . . . . $ 6,000
$ 5,000,001 to $ 6,000,000 outstanding . . . . . . . $ 7,000
$ 6,000,001 to $ 7,000,000 outstanding . . . . . . . $ 8,000
$ 7,000,001 to $ 8,000,000 outstanding . . . . . . . $ 9,000
$ 8,000,001 to $ 9,000,000 outstanding . . . . . . . $10,000
$ 9,000,001 to $ 9,850,000 outstanding . . . . . . . $11,000
The Company shall reimburse the Bank for its actual out-of-pocket
expenses incurred in connection with its obligations pursuant to
this Section 7 (including, but not limited to, actual expenses
for stationery, postage, telephone, telex, wire transfers,
telecopy, retention of records, and the filing of Financing
Statements, and reasonable fees and expenses of counsel), payable
within ten (10) days after the Bank gives notice to the Company
that it incurred such expenses. The obligation to pay such
compensation and reimburse such expenses shall be borne solely by
the Company. The Set Aside Purchase Notes and the related
Purchased Partnership Interests in which the Bank has a security
interest will be available to satisfy the Company's payment
obligations to the Bank under this Section 7.10 only when an
Event of Default has occurred and is continuing. The provisions
of this Section 7.10 shall survive the termination of this Bank
Agreement.
Section 7.11 Substitution of Set Aside Purchase Notes
----------------------------------------
and Set Aside Investor Notes.
------------------------------
(a) The Company may from time to time withdraw any one
or more of the Set Aside Purchase Notes together with all of the
related Set Aside Investor Notes (a withdrawn Set Aside Purchase
Note shall be defined for the purposes herein as the "Withdrawn
Set Aside Purchase Note" and the withdrawn related Set Aside
Investor Notes shall be defined for the purposes herein as the
"Withdrawn Set Aside Investor Notes") and replace the Withdrawn
Set Aside Purchase Note with any one or more Purchase Notes of
which it is the holder (any such Purchase Note shall be defined
for the purposes herein as the "New Set Aside Purchase Note") and
replace the Withdrawn Set Aside Investor Notes with Investor
Notes payable to the maker of the New Set Aside Purchase Note
(any such Investor Notes shall be defined for the purposes herein
as the "New Set Aside Investor Notes") so long as (i) no Event of
Default has occurred and is continuing and (ii) the sum of (x)
50% of the aggregate principal amount of the Set Aside Purchase
Notes held by the Bank after the Withdrawn Set Aside Purchase
Note is withdrawn and the New Set Aside Purchase Notes are
deposited plus (y) 90% of the aggregate principal balance of the
Set Aside Investor Notes held by the Bank after the Withdrawn Set
Aside Notes are withdrawn and the New Set Aside Investor Notes
are deposited is equal to the principal amount of the Debentures
that remain outstanding.
(b) The Company may only substitute a New Set Aside
Purchase Note for a Withdrawn Set Aside Purchase Note if (i) it
simultaneously substitutes the New Set Aside Investor Notes for
the withdrawn Set Aside Investor Notes and (ii) the New Set Aside
Investor Notes are payable to the Investing Partnership that is
the maker of the New Set Aside Purchase Notes.
(c) In order to effect the substitution described in
Section 7.11(a) hereof, the Company shall deliver to the Bank (i)
the New Set Aside Purchase Note along with the Consent and
Agreement as described in Section 7.2(c) hereof, the Financing
Statements pertaining to the New Set Aside Purchase Note, the
Consent, Assignment and Agreement as described in Section 7.3(c)
hereof, and the related Financing Statements pertaining to the
Purchased Partnership Interest that secures such New Set Aside
Purchase Note and (ii) the New Set Aside Investor Notes along
with the Consent and Agreement as described in Section 7.4(c)
hereof, the Financing Statements pertaining to the New Set Aside
Investor Notes, the Consent, Assignment and Agreement as
described in Section 7.5(c) hereof, and the related Financing
Statements pertaining to the Secured Partnership Interests that
secure such New Set Aside Investor Notes. Upon receiving the New
Set Aside Purchase Note, the New Set Aside Investor Notes and the
related documents described in the preceding sentence, the
security interest and assignment created by this Bank Agreement,
each Consent, Assignment and Agreement described in Section
7.2(c) hereof and Section 7.4(c) hereof each as relates to the
Withdrawn Set Aside Purchase Note, each Consent, Assignment and
Agreement described in Section 7.3(c) hereof and Section 7.5(c)
hereof each as relates to the Withdrawn Set Aside Investor Notes,
shall automatically terminate and shall have no further force or
effect. There upon, the Bank shall (i) return the Withdrawn Set
Aside Purchase Note and Withdrawn Set Aside Investor Notes to the
Company, (ii) execute and deliver to the Company an instrument
prepared by J&B effecting a release by the Bank of the existing
assignment of the security interest and Purchase Agreement
covering the related Purchased Partnership Interest and the
Secured Partnership Interests, (iii) file with the appropriate
governmental authorities indicated by J&B to the Bank, Financing
Statements delivered by J&B to the Bank recording the termination
of the Bank's security interest and assignment granted under this
Bank Agreement, and (iv) return to J&B the Consent and Agreement
described in Section 7.2(c) hereof and the Consent, Assignment
and Agreement described in Section 7.3(c) hereof, each as relates
to such Withdrawn Set Aside Purchase Note, and return to J&B the
Consent and Agreement described in Section 7.4(c) hereof and the
Consent, Assignment and Agreement described in Section 7.5(c)
hereof, each as relates to the Withdrawn Set Aside Investor
Notes. The Company will notify the Debenture holders of the
substitution of the Withdrawn Set Aside Purchase Note and
Withdrawn Set Aside Investor Notes with the New Set Aside
Purchase Note and New Set Aside Investor Notes, respectively,
within sixty (60) days thereof and provide those Debenture
holders with the information pertaining to the New Set Aside
Purchase Note and New Set Aside Investor Notes that would have
been contained in the Memorandum if the New Set Aside Purchase
Note and New Set Aside Investor Notes had been included with the
Set Aside Purchase Notes and Set Aside Investor Notes described
therein.
(d) After the substitution of the New Set Aside
Purchase Note and the New Set Aside Investor Notes for the
Withdrawn Set Aside Purchase Note and Withdrawn Set Aside
Investor Notes, respectively, the New Set Aside Purchase Note
shall be deemed to be a Set Aside Purchase Note and the New Set
Aside Investor Notes shall be deemed to be Set Aside Investor
Notes, in each case, for all purposes as set forth in this Bank
Agreement.
(e) Anything in this Bank Agreement to the contrary
notwithstanding, so long as no Event of Default shall occur and
be continuing and so long as the provisions of Section 7.11
hereof are complied with, upon the occurrence of an Investor
Default, J&B shall have the right, within 90 days of the
occurrence of such Investor Default, to arrange for the sale of
the Secured Partnership Interest of the defaulting Investor to a
new Investor and to substitute Investor Notes ("Substitute
Investor Notes"), of the new Investor (which shall be in like
principal amount and maturity as the defaulted Investor Notes and
be payable to the same Investing Partnership as the defaulted
Investor Notes for the Investor Notes) of the defaulting
Investor. Upon such substitution the Bank shall return the
defaulted Investor Notes to the Company and the Substitute
Investor Notes shall be Set Aside Investor Notes for all purposes
hereunder.
Section 7.12 Delivery of Set Aside Purchase Notes and
----------------------------------------
Set Aside Investor Notes.
-------------------------- The Company shall deliver the Set
Aside Purchase Notes and the related Set Aside Investor Notes
together with the Consent, Assignment and Agreement required by
Section 7.3(c) hereof and Section 7.5(c), and the Consent and
Agreement required by Section 7.2(c) hereof and Section 7.4(c)
hereof, and the related Financing Statements as follows:
(a) Original Set Aside Purchase Notes and related
original Set Aside Investor Notes shall be
delivered to:
The Bank of New York
1 Wall Street
New York, New York 10286
Attention: Mr. Vincent Nardone,
A.V.P., Security Operation
Free Receive Area, 5th Floor.
No less than ten days prior to the delivery by the
Company to the Bank of the first Set Aside
Purchase Note, the Company shall deliver a
schedule in duplicate form of all Set Aside
Purchase Notes and Set Aside Investor Notes to the
Bank at the address set forth in Section 12
hereof.
(b) Copies of each Set Aside Purchase Note and related
Set Aside Investor Notes together with the
Consent, Assignment and Agreement required by
Section 7.3(c) hereof and Section 7.5(c) hereof,
and the Consent and Agreement required by Section
7.2(c) hereof and Section 7.4(c) hereof, and the
related Financing Statements shall be delivered by
the Company to the Bank for execution at the
address set forth in Section 12 hereof and
promptly returned to Company's counsel at the
address as set forth in Section 12 hereof.
Section 8. Other Rights and Duties of Bank.
--------------------------------
(a) The Bank need exercise only those rights and need
perform only those duties that are contemplated or specifically
set forth in this Bank Agreement and no others.
(b) Notwithstanding anything herein to the contrary,
the Bank may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act, or
its own willful misconduct except that
(i) This paragraph does not limit the effect of
paragraph (a) of this Section.
(ii) The Bank shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a Notice received by it pursuant to Section
18(b) of the Subscription Agreement.
(c) The Bank may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Bank need not investigate any fact or matter stated
in the document.
(d) Before the Bank acts or remains from acting, it
may require an officer's certificate or an opinion of counsel.
The Bank shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(e) The Bank may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed with due care.
Section 9. No Representations.
------------------ The Bank makes no
representation as to the validity or adequacy of this Bank
Agreement or the Debentures, or any Set Aside Purchase Note,
Purchased Partnership Interest, Set Aside Investor Note or
Secured Partnership Interest in which the Bank has a security
interest, or any Financing Statement delivered to it by J&B or
the Bank's filing of any such Financing Statement with any
governmental authority; it shall not be accountable for the
Company's use of the proceeds from the Debentures and it shall
not be responsible for any statement in the Memorandum or in the
Debentures other than its authentication.
Section 10. Indemnification.
---------------- The Company shall
indemnify, defend and hold the Bank harmless from and against any
and all loss, damage, liability, claim and expense, including
taxes (other than taxes based on the income of the Bank) incurred
by the Bank arising out of or in connection with its acceptance
or performance of its obligations under this Bank Agreement,
including the legal costs and expenses of defending itself
against any claim or liability in connection with its performance
under this Bank Agreement. The Bank shall notify the Company
promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Bank shall cooperate in
the defense. The Bank may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Bank through gross negligence
or bad faith. The provisions of this Section 10 shall survive
the termination of this Bank Agreement.
Section 11. Replacement of Bank.
--------------------
(a) A resignation or removal of the Bank and
appointment of a successor Bank shall become effective only upon
the successor Bank's acceptance of appointment as provided in
this Section 11.
(b) The Bank may resign by so notifying the Company.
The owners of a majority in principal amount of the Debentures
outstanding may remove the Bank for any reason by so notifying
the Bank and the Company. The Company may remove the Bank if:
(i) the Bank is adjudged a bankrupt or an
insolvent;
(ii) a receiver or public officer takes charge of
the Bank or its property; or
(iii) the Bank becomes incapable of acting.
(c) (i) If the Bank resigns or is removed or if a
vacancy exists in the office of the Bank for any reason
the Company shall promptly appoint a successor Bank.
(ii) If a successor Bank does not take office
within 60 days after the retiring Bank gives notice of
resignation or action is taken to remove the retiring
Bank, the retiring Bank, the Company or the owners of
at least 10% in principal amount of the Debentures
outstanding may petition any court of competent
jurisdiction for the appointment of a successor Bank.
(iii) A successor Bank shall deliver a written
acceptance of its appointment to the retiring Bank and
the Company. Thereupon the resignation or removal of
the retiring Bank shall become effective and the
successor Bank shall have all the rights, powers and
duties of the Bank under this Bank Agreement. The
successor Bank shall mail a notice of its succession to
Debenture owners. Upon payment to the retiring Bank of
all amounts owed to it under this Bank Agreement, the
retiring Bank shall promptly transfer all property held
by it as Bank to the successor Bank.
(d) If the Bank consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Bank.
Section 12. Notices.
-------- All notices and other
communications pursuant to this Bank Agreement shall be in
writing and shall be delivered by hand or sent by registered,
certified, return receipt requested, or first class mail, or by
facsimile, confirmed by writing, delivered by hand or sent by
registered or certified mail, return receipt requested, delivered
or sent on the date of the facsimile, addressed as follows:
(a) If to the Company:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: (201) 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Michele R. Jawin, Esq.
(b) If to Debenture owners:
At the addresses of the registered owners
appearing in the register maintained by the Bank.
(c) If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: (212) 815-5999
Attention: Harley Jeanty,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to
the other parties hereto in writing. Any notice provided for
herein shall be deemed to have been given on the date of the
receipt of the notice by hand delivery or of the facsimile or the
third Business Day after the date of mailing, certified mail,
return receipt requested.
Section 13. Choice of Law.
--------------- This Bank Agreement shall
be governed by the laws of the state of New York, without giving
effect to the principles of conflicts of law thereof.
Section 14. Prior Agreements; Amendment.
--------------------------- This Bank
Agreement, together with each Consent and Agreement and each
Consent, Assignment and Agreement referred to in Section 7
hereof, sets forth the entire Agreement of the parties hereto
with respect to the subject matter hereof and supersedes all
prior Agreements, contracts, promises, representations,
warranties, statements, arrangements and understandings, if any,
among the parties hereto or their representatives with respect to
the subject matter hereof. No waiver, modification or amendment
of any provision, term or condition hereto shall be valid unless
in writing and signed by all parties hereto, and any such waiver,
modification or amendment shall be valid only to the extent
therein set forth.
Section 15. Successors.
----------- This Bank Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 16. Enforceability.
--------------- Any provision of this
Bank Agreement which may by determined by competent authority to
be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 17. Counterparts.
------------ This Bank Agreement may be
executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.
[INTENTIONALLY LEFT BLANK]
Section 18. Definitions.
--------------
All terms used in this Bank Agreement and not otherwise
defined herein shall have the meanings ascribed to them in the
Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed
this Bank Agreement as of the date first above written.
J&B MANAGEMENT COMPANY THE BANK OF NEW YORK
By: /s/ John Luciani By: /s/ Harley Jeanty
---------------------- ------------------------------
Title: GENERAL PARTNER Title: ASSISTANT VICE PRESIDENT
LEISURE CENTERS, INC.
By: /s/ John Luciani
--------------------------
Title: PRESIDENT
J&B MANAGEMENT CORP.
By: /s/ John Luciani
---------------------------
Title: PRESIDENT
SULGRAVE REALTY CORPORATION
By: /s/ John Luciani
--------------------------
Title: PRESIDENT
WILMART DEVELOPMENT CORP.
By: /s/ John Luciani
------------------------------
Title: PRESIDENT
<PAGE>
EXHIBIT A
TO BANK AGREEMENT
1. (a) Investing Partnership: South Florida Associates, a Texas limited
partnership
(b) Operating Partnerships: Casa Devon, Ltd., Timbercreek Gardens,
Ltd., Timbercreek I, Ltd., each a Florida limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,500,000
(ii) Date of Issue: December 1, 1985
(iii) Final Maturity Date: October 31, 2000
(iv) Annual Payment of Principal Not Applicable
(v) Total Schedule Principal
Payments Prior to Final
Maturity: Not Applicable
(vi) Balance of Principal
Due at Final Maturity: $3,500,000
(vii) Prepaid Interest as of
July 31, 1993 $ 648,334
(d) Purchase Agreement: Sale and Purchase Agreement dated December
1, 1985, by and among John Luciani and Bernard M. Rodin and South
Florida Associates (Sellers' respective rights and interests
under the Purchase Agreement have been sold, transferred and
assigned to J&B Management Company).
(e) Purchased Partnership Interest: 98.5% of the profits and losses
and 98.25% of the cash flow of the Operating Partnership
2. (a) Investing Partnership: South Dade Associates, a Texas partnership
(b) Operating Partnership: Hialeah/Miami Apts., Ltd., a Florida
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $3,900,000
(ii) Date of Issue: June 27, 1986
(iii) Final Maturity Date: June 27, 2001
(iv) Annual Payment of Principal Not Applicable
(v) Total Schedule Principal
Payments Prior to Final
Maturity: Not Applicable
(vi) Balance of Principal
Due at Final Maturity: $3,900,000
(vii) Prepaid Interest as of
July 31, 1993 $ 430,000
(d) Purchase Agreement: Sale and Purchase Agreement dated June 27,
1986, by and among John Liciani, Bernard M. Rodin, John Luciani,
III and Dorian Luciania ("Sellers") and South Dade Associates
(Sellers' respective rights and interests under the Purchase
Agreement have been sold, transferred and assigned to J&B
Management Company).
(e) Purchased Partnership Interest: 98.75% of the profits and losses
and 98.75% of the cash flow of the Operating Partnership
3. (a) Investing Partnership: Ewing Associates, a South Carolina
limited partnership
(b) Operating Partnership: Lucas Heights III, L.P., a Missouri
limited partnership
(c) Set Aside Purchase Note:
(i) Principal Amount: $4,350,000
(ii) Date of Issue: December 30, 1986
(iii) Final Maturity Date: December 30, 2001
(iv) Annual Payment of Principal Not Applicable
(v) Total Schedule Principal
Payments Prior to Final
Maturity: Not Applicable
(vi) Balance of Principal
Due at Final Maturity: $4,350,000
(vii) Prepaid Interest as of
July 31, 1992 $ 904,000
(d) Purchase Agreement: Sale and Purchase Agreement dated December
30, 1986, by and among John Luciania and Bernard M. Rodin
("Sellers") and Ewing Associates (Sellers' respective rights and
interests under the Purchase Agreement have been sold,
transferred and assigned to J&B Management Company).
(e) Purchase Partnership Interest: 98.75% of the profits and losses
(which shall decrease to 91.875% after the return of the capital
contributions to the limited partners of Lucas Heights III, L.P.
as a result of annual distributions of cash flow or of a
refinancing) and 98.75% of the cash flow of the Operating
Partnership
<PAGE>
EXHIBIT B
TO BANK AGREEMENT
[Form of Consent and Agreement]
CONSENT AND AGREEMENT
[PURSUANT TO SECTION 7.2(c)] AND SECTION 7.4(c)]
THIS CONSENT AND AGREEMENT, dated as of ________, 19___, is by
and between [name of Investing Partnership] (the "Investing Partnership"),
J&B Management Company ("J&B"), and The Bank of New York (the "Bank")
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management Corp.,
Sulgrave Realty Corporation, Wilmart Development Corp. and the Bank have
entered into that certain Bank Agreement of even date herewith (the "Bank
Agreement"); and
WHEREAS, Section 7.2(c) and Section 7.4(c) of the Bank Agreement
provide for the execution of this Consent and Agreement by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby convent
and agree as follows:
Section 1. Consents. The Investing Partnership hereby consents
--------
to (i) J&B's assignment to the Bank, pursuant to Section 7.2(c) of the Bank
Agreement, of the Investing Partnership's Set Aside Purchase Note; (ii)
J&B's assignment to the Bank, pursuant to Section 7.4(c) of the Bank
Agreement, of the Set Aside Investor Notes; (iii) J&B's delivery of the
Investing Partnership's Set Aside Purchase Note to the Bank; and (iv) J&B's
delivery of the Set Aside Investor Notes to the Bank. The Bank hereby
acknowledges that interest and, where required, annual payments of
principal, may be deferred until the maturity of that Set Aside Purchase
Note.
Section 2. Agreements. The Investing Partnership hereby agrees
----------
that upon receiving the Bank's notice of an Event of Default, the Investing
Partnership shall (i) pay all sums due under its Set Aside Purchase Note
directly to the Bank and (ii) notify the makers of the Set Aside Investor
Notes that all payments thereunder shall be made directly to the Bank.
Section 3. Notices. All notices and other communications
-------
pursuant or relating to his Consent and Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified mail, return
receipt requested, or by facsimile, confirmed by writing delivery by hand
or sent by registered or certified mail, return receipt requested,
delivered or sent on the date of the facsimile, addressed as follows:
(a) If to the Investing Partnership:
________________________________
________________________________
________________________________
(b) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: (201) 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Michele R. Jawin, Esq.
If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: (212) 815-5999
Attention: Harley Jeanty,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to the other
parties hereto in writing. Any notice provided for herein shall be deemed
to have been given on the date of the receipt of the notice by hand
delivery or of the facsimile or the third Business Day after the date of
mailing, certified mail, return receipt requested.
Section 4. Choice of Law. This Consent and Agreement shall be
-------------
governed by the laws of the State of New York without giving effect to the
principles of conflicts of law thereof.
Section 5. Successors. This Consent and Agreement shall be
----------
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 6. Counterparts. This Consent and Agreement may be
------------
executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
Section 7. Definitions. All terms used in this Consent and
-----------
Agreement and not otherwise defined herein shall have the meanings ascribed
to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consent
and Agreement as of the date first above written.
[Name of Investing Partnership]
By:____________________________
J&B MANAGEMENT COMPANY
By:____________________________
Title:
THE BANK OF NEW YORK
By:____________________________
Title:
<PAGE>
EXHIBIT C
TO BANK AGREEMENT
[Form of Consent and Agreement]
CONSENT, ASSIGNMENT AND AGREEMENT
[PURSUANT TO SECTION 7.3(c) AND SECTION 7.5(c)]
THIS CONSENT AND AGREEMENT, dated as of ________, 19___, is by
and among [name of Investing Partnership] (the "Investing Partnership"),
J&B Management Company ("J&B"), and The Bank of New York (the "Bank")
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, Leisure Centers, Inc., J&B Management Corp.,
Sulgrave Realty Corporation, Wilmart Development Corp. and the Bank have
entered into that certain Bank Agreement of even date herewith (the "Bank
Agreement"); and
WHEREAS, Section 7.3(c) and Section 7.5(c) of the Bank Agreement
provide for the execution of this Consent, Assignment and Agreement by the
parties hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby convent
and agree as follows:
Section 1. Consents, Assignments and Agreements with Respect to
----------------------------------------------------
Purchased Partnership Interests. The Investing Partnership and the
-------------------------------
Operating Partnership in which the Investing Partnership owns a Purchased
Partnership interest hereby (i) consent to J&B's assignment to the Bank of
the Purchase Agreement, security interest in the Purchased Partnership
Interest, Purchased Partnership Interest, all allocations and distributions
which may be due and payable or made from time to time on such Purchased
Partnership Interest, and the proceeds thereof, relating to the Investing
Partnership's Set Aside Purchase Note; (ii) consent to J&B's delivery to
the Bank of Financing Statements and to the Bank's filing of such Financing
Statements with the appropriate governmental authorities in order to
perfect and to continue the perfection of the Bank's security interest in
the Purchase Agreement, security interest in the Purchased Partnership
Interest, Purchased Partnership Interest allocations and distributions
which may be due and payable from time to time on the Purchased Partnership
interest; (iii) subject to the terms and conditions of the Bank Agreement,
assign to the Bank all allocations and distributions which shall be due and
payable or made from time to time on the Purchased Partnership Interest,
and the proceeds thereof, until all outstanding obligations under the Set
Aside Purchase Note, if such be in default, have been paid in full
(including, without limitation, all costs of collection, reasonable
attorneys' fees and other fees and expenses); and (iv) subject to the terms
and conditions of the Bank Agreement, agree that upon foreclosure of the
security interest in the Purchased Partnership Interest all allocations and
distributions made on the Purchased Partnership Interest shall be paid
directly to the Bank, as the assignee of J&B, regardless of whether the
Bank becomes a substituted limited partner in the Operating Partnership in
place of the Investing Partnership.
Section 2. Consents, Assignments and Agreements with respect to
----------------------------------------------------
Secured Partnership Interests. The Investing Partnership hereby (i)
-----------------------------
consents to J&B's assignment to the Bank of the security interests in the
Secured Partnership Interests, each allocation and distribution due and
payable or made from time to time on the Secured Partnership Interests, and
the proceeds thereof, relating to the Set Aside Investor Notes ("Security
Interest"); (ii) consents to J&B's delivery to the Bank of Financing
Statements and to the Bank's filing of such Financing Statements with the
appropriate governmental authorities in order to perfect and to continue
the perfection of the Security Interest; (iii) subject to the terms and
conditions of the Bank Agreement, assign to the Bank all allocations and
distributions which shall be due and payable or made from time to time on
the Secured Partnership Interests, and the proceeds thereof, until all
outstanding obligations under any Set Aside Investor notes, if such be in
default, shall have been paid in full (including, without limitation, all
costs of collection reasonable attorney's fees and other fees and
expenses); and (iv) subject to the terms and conditions of the Bank
Agreement, agree that upon foreclosure of the Security Interest all
allocations and distributions made on the Secured Partnership Interest
shall be paid directly to the Bank, as the assignee of J&B, regardless of
whether the Bank becomes a substituted limited partner in the Investing
Partnership.
Section 3. Representations of the Operating Partnership. The
--------------------------------------------
Operating Partnership hereby agrees to keep a copy of this Consent,
Assignment and Agreement with its business records.
Section 4. Agreement of the Operating Partnership. The
--------------------------------------
Operating Partnership hereby agrees to admit the Bank as a substituted
limited partner in place of the Investing Partnership in the Operating
Partnership upon the Bank's foreclosure on the security interest in the
Purchased Partnership Interest and written request, subject to the
limitations in clause 1.(iii) hereof, the Bank's obtaining HUD 2530
Clearance and the rights of the Investing Partnership under Section 9.505
of the Uniform Commercial Code.
Section 5. Amendment to Operating Partnership Agreement. Upon
--------------------------------------------
substitution of the Bank for the Investing Partnership as a limited partner
in the Operating Partnership pursuant to the Bank Agreement and this
Consent, Assignment and Agreement, this Consent, Assignment and Agreement
shall constitute an amendment to the partnership agreement of the Operating
Partnership, and the Bank shall not be liable for the obligations of any
predecessor which has assigned the Purchased Partnership Interest to make
any contributions to the Operating Partnership.
Section 6. Agreement of the Investing Partnership. The
--------------------------------------
Investing Partnership hereby agrees that upon the occurrence of an Investor
Default and following the Bank's foreclosure on the Security Interest and
written request to the Investing Partnership, the Investing Partnership
shall admit the Bank as a substituted limited partner in the Investing
Partnership, subject to the limitations in clause 2.(iii) hereof.
Section 7. Amendment to the Investing Partnership Agreement.
------------------------------------------------
Upon admission of the Bank as a substituted limited partner in the
Investing Partnership pursuant to the Bank Agreement and this Consent,
Assignment and Agreement, this Consent, Assignment and Agreement shall
constitute an amendment to the partnership agreement of the Investing
Partnership, and the Bank shall not be liable for the obligations of any
predecessor which has assigned the Secured Partnership Interest to make any
contributions to the Investing Partnership.
Section 8. Further Assurances and Power of Attorney. Each of
----------------------------------------
the parties hereto shall, from time to time, upon request of a party
hereto, duly execute, acknowledge and deliver or cause to be duly executed,
acknowledged and delivered, all such further instruments and documents
reasonably requested by a party to effectuate the intent and purposes of
this Consent, Assignment and Agreement. Notwithstanding the foregoing,
this Consent, Assignment and Agreement shall constitute an irrevocable
power of attorney coupled with an interest for the Bank to execute and file
a certificate of amendment to the certificate of limited partnership of the
Operating Partnership or any other document or instrument in order to
effectuate the intent and purposes of this Consent, Assignment and
Agreement; provided, however, that the Bank may not be substituted as a
partner of the Operating Partnership unless such substitution is permitted
under the Uniform Commercial Code and HUD 2530 Clearance, if required, has
been obtained.
Section 9. Notices. All notices and other communications
-------
pursuant or relating to this Consent, Assignment and Agreement shall be in
writing and shall be delivered by hand or sent by registered or certified
mail, return receipt requested, or by facsimile, confirmed by writing
delivered by hand or sent by registered or certified mail, return receipt
requested, delivered or sent on the date of the facsimile, addressed as
follows:
(a) If to the Operating Partnership:
________________________________
________________________________
________________________________
(b) If to the Investing Partnership:
________________________________
________________________________
________________________________
(c) If to J&B:
J&B Management Company
One Executive Drive
Fort Lee, New Jersey 07024
Facsimile Number: (201) 947-6663
Attention: Bernard M. Rodin
With a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019
Facsimile Number: (212) 603-2298
Attention: Michele R. Jawin, Esq.
If to Bank:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile Number: (212) 815-5999
Attention: Harley Jeanty,
Corporate Trust
Trustee Administration
or at such other address as a party shall have last furnished to the other
parties hereto in writing. Any notice provided for herein shall be deemed
to have been given on the date of the receipt of the notice by hand
delivery or of the facsimile or the third Business Day after the date of
mailing, certified mail, return receipt requested.
Section 10. Choice of Law. This Consent, Assignment and
-------------
Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
Section 11. Successors. This Consent, Assignment and Agreement
----------
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 12. Counterparts. This Consent, Assignment and
------------
Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
Section 13. Definitions. All terms used in this Consent,
-----------
Assignment and Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Bank Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Consent, Assignment and Agreement as of the date first above written.
[Name of Investing Partnership]
By:____________________________
[Name of Investing Partnership]
By:____________________________
J&B MANAGEMENT COMPANY
By:____________________________
Title:
THE BANK OF NEW YORK
By:____________________________
Title:
<PAGE>
EXHIBIT D
TO BANK AGREEMENT
SUMMARY OF INVESTOR NOTES
------------------------
INVESTOR INVESTOR INVESTOR INVESTOR
NOTES NOTES NOTES NOTES
MATURING MATURING MATURING MATURING
1995 1996 1997 1998
INVESTING PARTNERSHIP
SOUTH FLORIDA ASSOCIATES $225,000 $225,000 $225,000 $182,000
EWING ASSOCIATES 336,000 330,000 330,000 348,000
SOUTH DADE ASSOCIATES 247,000 253,000 258,500 235,000
-------- -------- -------- --------
TOTAL $808,500 $808,000 $813,500 $765,000
======== ======== ======== ========
INVESTOR INVESTOR
NOTES NOTES
MATURING MATURING
1999 2000 TOTAL
INVESTING PARTNERSHIP
SOUTH FLORIDA ASSOCIATES $186,000 ___ $1,043,000
EWING ASSOCIATES 319,000 $319,000 1,982,000
SOUTH DADE ASSOCIATES 211,500 188,000 1,393,500
-------- -------- ----------
TOTAL $716,500 $507,000 $4,418,500
======== ======== ==========
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to the Registration
Statement of Grand Court Lifestyles, Inc. on Form S-1 of our
report dated April 26, 1996, except for Note 11 which is as of
June 11, 1996, appearing in the Prospectus, which is part of this
Amendment No. 1 to the Registration Statement.
We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
July 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS, STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY AND STATEMENTS OF CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 12,414
<SECURITIES> 0
<RECEIVABLES> 228,974
<ALLOWANCES> 13,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 246,069
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 37,714
<TOTAL-LIABILITY-AND-EQUITY> 246,069
<SALES> 10,776
<TOTAL-REVENUES> 16,889
<CGS> 4,985
<TOTAL-COSTS> 1,797
<OTHER-EXPENSES> 3,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,028
<INCOME-PRETAX> 2,953
<INCOME-TAX> 1,181
<INCOME-CONTINUING> 1,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,772
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
