FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: JANUARY 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-21249
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GRAND COURT LIFESTYLES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3423087
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
2650 North Military Trail,
Suite 350
Boca Raton, Florida 33431
(Address of principal
executive offices) (Zip code)
Registrant's telephone number, including area code:(561) 997-0323
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (s229.405 of this chapter)
is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [ ]
The aggregate market value of the common stock held by
nonaffiliates of the registrant was $22,022,420 at April 26,
1999.
On April 26, 1999, the Company had 17,800,000 shares of common
stock outstanding.
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GRAND COURT LIFESTYLES, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED January 31, 1999
PAGE
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . 17
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . 21
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS . . . . . . . . . 22
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . 25
ITEM 7A. QUANTATIVE AND QUALITIVE DISCLOSURES ABOUT
MARKET RISK. . . . . . . . . . . . . . . . . . 44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA . . . 45
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 45
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . . 66
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . 67
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . 71
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . 74
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . 75
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON Form 8-K . . . . . . . . . . . 76
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PART I
This Form 10-K contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of
1934. Forward-looking statements should be read with the
cautionary statements and important factors included in this Form
10-K at Item 7, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Safe Harbor for
Forward-Looking Statements." Forward-looking statements are all
statements other than statements of historical fact, including
without limitation those that are identified by the use of the
words "anticipates", "estimates", "expects", "intends",
"believes", and similar expressions. Unless the context
otherwise requires, (i) 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) and (ii) all references to the Company,
include the Company, its subsidiaries and its predecessors taken
as a whole.
ITEM 1. BUSINESS
GENERAL
Grand Court Lifestyles, Inc. (the "Company") 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. The Company is a fully
integrated provider of senior living accommodations and services
which acquires, develops and manages senior living communities
which offer independent and assisted living services. The
Company's revenues have been and are expected to continue to be,
primarily derived from sales of partnership interests
("Syndications") of partnerships it organizes to acquire existing
senior living communities ("Syndicated Communities"). The
Company has established a development program (the "Development
Plan") pursuant to which it is building new senior living
communities which offer independent and assisted living services
("Development Communities"), which are either wholly-owned by the
Company or owned pursuant to joint venture arrangements or
operated pursuant to long-term leases. The Company presently does
not intend to Syndicate the Development Communities constructed
pursuant to its new Development Plan. To the extent that the
Company continues to successfully implement the Development Plan,
the Company anticipates that the percentage of its revenues
derived from Syndications would decrease and the percentage of
revenues derived from Development Communities would increase and,
the Company believes, over time, become the primary source of the
Company's revenues. The Company manages both the Syndicated
Communities and the Development Communities. The Company is one
of the largest managers of senior living communities in the
United States, operating communities offering both independent
and assisted-living services. The Company's operating objective
is to provide high-quality, personalized living services to
senior residents, primarily persons over the age of 75. Although
the Company has experienced operating losses in its last three
fiscal years, the Company expects to report a profit for the
first quarter of Fiscal 1999.
The Company currently manages 41 Syndicated Communities
containing approximately 5,700 senior living apartment units in
15 states in the Sun Belt and the Midwest. In addition, the
Company manages (i) three Development Communities containing 410
units which it owns pursuant to joint venture arrangements and
(ii) four Development Communities containing 552 units which it
operates under long-term leases. These seven Development
Communities were developed and constructed pursuant to the
Company's Development Plan. The Company has entered into joint
venture arrangements with a third party pursuant to which it has
sold a 50% interest in four Development Communities which were
previously wholly owned by the Company. The Company intends to
enter into similar joint venture arrangements regarding other
Development Communities constructed pursuant to its Development
Plan. The Company has commenced construction on three additional
Development Communities. The Company has approximately 2,280
employees and directly conducts the day-to-day operations of the
senior living communities it manages.
Prior to 1986, the Company acquired, developed, arranged for
the Syndication of, and in most cases managed, 170 multi-family
properties containing approximately 20,000 apartment units,
primarily in the Sun Belt and the Midwest. The Company is no
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longer engaged in the acquisition, development, Syndication or
management of multi-family properties and the Company does not
presently intend to do so in the future. The Company's only
involvement with multi-family properties is as a holder of notes
and receivables from the partnerships that own 118 multi-family
properties containing 12,897 apartment units (the "Multi-Family
Properties"), which notes and receivables are to be repaid from
the cash flow and sale or refinancing proceeds these properties
generate. As of January 31, 1999, the recorded value, net of
deferred income, of these notes was $100.8 million and the
recorded amount of these receivables was $59.9 million.
Historically, the Company has arranged for the acquisition
of senior living communities by utilizing mortgage financing and
by arranging Syndications of limited partnerships ("Investing
Partnerships") formed to acquire interests in the other
partnerships that own the Syndicated Communities ("Owning
Partnerships") managed by the Company. These Syndicated
Communities are owned by the respective Owning Partnerships and
not by the Company. The Company is the managing general partner
of all but one of the Owning Partnerships. The Company is also
the general partner of most of the Investing Partnerships.
In a typical Syndication, the Company identifies a senior
living community suitable for acquisition and forms an Owning
Partnership (in which it is the managing general partner and
initially owns all of the partnership interests) to acquire the
community. An Investing Partnership is also formed ( in which
the Company is also the general partner with a 1% interest) to
purchase from the Company a 99% partnership interest in the
Owning Partnership (the "Purchased Interest"), leaving the
Company with a 1% interest in each of the Owning Partnership and
the Investing Partnership. The purchase price for the Purchased
Interest is paid in part in cash and in part by a note from the
Investing Partnership with a term of approximately five years ( a
"Purchase Note"). Limited partners purchase partnership
interests in the Investing Partnership by agreeing to make
capital contributions over approximately five years to the
Investing Partnership, which allows the Investing Partnership to
pay the purchase price for the Purchased Interest. Limited
Partners are typically permitted to pre-pay their scheduled
capital contributions. The limited partnership agreement of an
Investing Partnership provides that the limited partners are
entitled to receive, for a period not to exceed five years,
distributions equal to between 11% and 12% per annum of their
then paid-in scheduled capital contributions. Although the
Company incurs certain costs in connection with acquiring the
community and arranging for the Syndication of partnership
interests in an Investing Partnership, the Company makes a profit
on the sale of the Purchased Interest. In addition, as part of
the purchase price paid by the Investing Partnership for the
Purchased Interest, the Company receives a 40% interest in sale
and refinancing proceeds after certain priority payments to the
limited partners.
The Company also enters into a management contract with the
Owning Partnership pursuant to which the Company agrees to manage
the Syndicated Community. As part of the management fee
arrangements, the management contract requires the Company, for a
period not to exceed five years, to pay to the Owning Partnership
(to the extent that cash flows generated by the property are
insufficient) amounts sufficient to fund (i) any operating cash
deficiencies of such Owning Partnership and (ii) any part of the
specified rate of return to limited partners not paid from cash
flow from the related Syndicated Community (which the Owning
Partnerships distribute to the Investing Partnerships for
distribution to limited partners) (collectively, the "Management
Contract Obligations"). The Company, therefore, has no direct
obligation to pay specified returns to limited partners. Rather,
the Company is obligated pursuant to the management contract to
pay to the Owning Partnership amounts sufficient to make the
specified returns to the limited partners, to the extent the cash
flows generated by the Syndicated Community are insufficient to
do so. The Owning Partnership then distributes these amounts to
the Investing Partnership which, in turn, distributes these
amounts to the limited partners. As a result of the Management
Contract Obligations, the Company essentially bears the risks of
operations and financial viability of the related property for
such five-year period. The management contract, however, rewards
the Company for successful management of the property by allowing
the Company to retain as an incentive management fee any cash
flow generated by the Syndicated Community in excess of the
amount needed to satisfy the Management Contract Obligations.
After the initial five-year period, the limited partners are
entitled to the same specified rate of return, but only to the
extent there is sufficient cash flow from the Syndicated
Community. Any amounts of cash flow available after payment of
the specified return to limited partners are shared as follows:
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40% to the Company as an incentive management fee and 60% for
distribution to the limited partners. The management contract is
not terminable during this five-year period and is terminable
thereafter by either party upon thirty to sixty days notice.
The management contract with each Owning Partnership
requires the Company to manage and operate the day-to-day
operations of the Syndicated Community. Under each management
contract, the Company acts as an independent contractor.
Required services performed by the Company for each Syndicated
Community include marketing and advertising; renting apartment
units and collecting rents and charges; providing independent -
and assisted - living services (including providing meals,
activities, transportation and, for assisted-living residents,
assistance with activities of daily living ("ADLs")); hiring,
paying and supervising the on-site employees; maintaining the
property; purchasing supplies; and preparing operating budgets
and reports. Although the Company has the right to sub-contract
for such services, the Company directly performs such services
utilizing employees of the Company.
All Syndicated Communities 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.
The Company intends to continue to arrange for future
acquisitions of existing senior living communities by utilizing
mortgage financing and by arranging Syndications. The Company
anticipates acquiring between six and twelve communities during
the next two years.
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 24% to 16.3 million between 1990 and 2000. While the
population of seniors grows, other demographic trends suggest
that an increasing number of them will choose senior living
centers as their residences. According to U.S. Bureau of Census
data, the median net worth of householders over age 75 has
increased to over $75,000. At the same time, the Census shows
that 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. The
Company believes that many seniors find that senior living
centers provide them with a number of services and features that
increasingly they are unable to find at home, including security,
nutritious food and companionship. Furthermore, the National
Long Term Care Surveys, a Federal study that regularly surveys
close to 20,000 people aged 65 and older, indicate that, despite
the growth in the elderly population, the percentage of elderly
that are disabled and need assistance with 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 pursuant to
which it has completed construction of seven Development
Communities, is nearing completion of the construction of one
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additional Development Community, has commenced construction on
three additional Development Communities and intends to commence
construction on between 24 to 28 additional Development
Communities over the next two years. The Company plans to own
pursuant to joint venture arrangements or operate pursuant to
long-term operating leases or similar arrangements the
Development Communities that will be developed under the plan.
The Company will manage and operate each of the Development
Communities. The Company expects to complete the construction of
one of the four Development Communities currently under
construction by the end of the first quarter of Fiscal 1999 and
expects to complete the construction of the remaining Development
Communities under construction by the end of Fiscal 1999. These
four Development Communities, along with the seven Development
Communities whose construction is already completed, contain an
aggregate of approximately 1,490 senior living apartment units.
The 24 to 28 additional Development Communities which the Company
intends to commence construction on over the next two years will
contain between 3,024 and 3,528 additional senior living
apartment units. Each new Development Community developed by the
Company offers both independent and assisted-living services.
The first Development Communities constructed pursuant to
the Company's Development Plan are in Texas. The Company has
obtained development financing from Capstone Capital Corporation
("Capstone") pursuant to which Capstone provided $37.7 million
for development of four Development Communities. The Company has
completed construction on these communities which are being operated
by the Company pursuant to long-term leases with Capstone. The
Company has completed construction with mortgage financing on
three Development Communities in Texas. The Company has commenced
construction on four additional Development Communities in Texas.
The Company holds options to acquire sites in Knoxville, Tennessee
and Jackson, Tennessee, is actively negotiating to obtain control
over additional sites in the Southeast and Midwest and is negotiating
with several additional lenders to obtain financing to develop these
sites.
The Company anticipates that most of its Development
Communities will be financed with a combination of mortgage
financing and the contribution of capital by the Company. The
Company estimates that the cost of developing each new
Development Community (including reserves necessary to carry the
community through its lease-up period) will be approximately
$10.5 million. Subsequent to Fiscal 1998, the Company has entered
into joint venture arrangements regarding the three completed and
one substantially completed Development Communities financed with
mortgage financing. Pursuant to each joint venture arrangement,
the Company sold a 50% interest in the Development Community to a
third party. The Company realized a profit from each of the sales
and earns a management fee for managing the communities. The
third party has the right to terminate the Company's management
of the community upon 30 day's written notice. The third party
receives a cumulative priority return on each investment from all
cash flow generated by the community and any excess cash flow is
shared 50% by the Company and 50% by the third party. The Company
believes that such joint venture arrangements are beneficial
because they generate revenues upon the sale, reward the Company
for its continued management of the Development Community,
provide the Company with capital to continue to pursue its
Development Plan and allocate 50% of the start-up losses incurred
during the community's lease up period to the joint venturer
rather than the Company. However, the Company remains fully
liable on the mortgage financing for such Development
Communities. The Company expects to enter into similar joint
venture arrangements for the other Development Communities that
it will develop, although there can be no assurance that
sufficient joint venture capital will be available to the Company
on favorable terms. The Company may also utilize other types of
financings including sale/leaseback or similar arrangements which
require little or no capital on the part of the Company to
finance its Development Plan.
Upon the completion of construction of each of the
Development Communities developed pursuant to the Capstone
Development Agreement, and upon the satisfaction of certain other
conditions, the Company became the lessee under long-term lease
arrangements with Capstone. The initial term of each lease,
which began upon the completion of a facility and meeting of
other criteria, is 15 years with three five-year extension
options. Under the terms of each lease, the Company has the
option to acquire the community after operating the community for
four years. The option price is equal to the sum of 100% of the
cost incurred to develop the community and an additional 20% of
such cost (which declines by 2 percentage points per year but in
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no event declines below 10%). The initial lease rate is 350
basis points in excess of the ten-year Treasury Bill yield (but
in no event less than 9.75% per annum). The lease rate has an
annual upward adjustment equal to 3% of the previous year's rent.
The four leases have cross-default provisions. Each lease is a
triple net lease, as the Company is responsible for all costs,
including but not limited to maintenance, repair, insurance,
taxes, utilities, and compliance with legal and regulatory
requirements. If a community is damaged or destroyed, the
Company is required to restore the community to substantially the
same condition it was in immediately before such damage or
destruction, or acquire the facility for the option price
described above.
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
Development Communities. The effectuation of the Development
Plan will expose the Company to additional risk. These risks
include, but are not limited to, the risk that the construction
of each Development Community will exceed the estimated 12 month
construction period and that each Development Community will
incur start-up losses for more than the estimated ten months
after commencement of operations. In addition, there can be no
assurance that the Development Communities will generate positive
cash flow or that the Company will not suffer delays or cost
overruns in instituting its Development Plan.
The Company's senior 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 Medicare 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 senior living communities and avoid
potential financial difficulties it might encounter if it were
dependent on Medicare or other government reimbursement programs
that may suffer from health care reform, budget deficit reduction
or other pending or future government initiatives.
PARTNERSHIP OFFERINGS
The Company has arranged for the acquisition of the
Syndicated Communities that it manages by utilizing mortgage
financing and Syndications of the Investing Partnerships formed
to acquire investments in the Owning Partnerships that own these
properties. The Company is the managing general partner of all
but one of the Owning Partnerships that own the Syndicated
Communities. The Company manages all of the Syndicated
Communities. The Company is also the general partner of most of
the Investing Partnerships. The Company has a participation in
the cash flow, sale proceeds and refinancing proceeds of the
Syndicated Communities after certain priority payments to the
limited partners. In a typical Syndication, 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 Owning Partnership initially are owned by the
Company. An Investing Partnership is formed as a limited
partnership for the purpose of acquiring all or substantially all
of the partnership interests in the Owning Partnership owned by
the Company (the "Purchased Interest"). 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 ("Investor Notes"). In the case of an
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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 Purchased Interest 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 (relating to the Company's
pre-1986 Syndication of Multi-Family Properties) have balloon
payments of principal due on maturity. The Purchase Notes
executed since January 1, 1987 (relating to the Company's post-
1986 Syndication of senior living communities) 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 Purchased
Interest it holds in the Owning Partnership which it purchased
from the Company. In addition, each Purchase Agreement provides
that the Investing Partnership shall pay the Company an amount
equal to a specified percentage of the Investing Partnership's
share of the net proceeds from capital transactions (such as the
sale or refinancing of the underlying property) in excess of
certain amounts.
The limited partners purchase partnership interests in the
Investing Partnerships by agreeing to make capital contributions
over approximately five years to the Investing Partnership, which
allows the Investing Partnership to pay the purchase price for
the Purchased Interest, including the Purchase Note. Limited
partners are typically permitted to pre-pay their scheduled
capital contributions. The limited partnership agreement of the
Investing Partnership provides that the limited partners are
entitled to receive for a period not to exceed five years
distributions equal to between 11% and 12% per annum of their
then paid-in scheduled capital contributions. Pursuant to the
management contracts with the Owning Partnerships, the Company is
required to pay the Management Contract Obligations which support
the Syndicated Community's operations and the payment of such
returns to the limited partners. As a result of the Management
Contract Obligations, the Company essentially bears the risks of
operations and financial viability of the related Syndicated
Community for such five-year period. The management contract,
however, rewards the Company for successful management of the
Syndicated Community by allowing the Company to retain as an
incentive management fee any cash flow generated by the
Syndicated Community in excess of the amount needed to satisfy
the Management Contract Obligations. After the initial five-year
period, the limited partners are still entitled to the same
specified rate of return on their investment, but only to the
extent there are sufficient cash flows from the related
Syndicated Communities. To the extent property cash flows are
not sufficient to pay the limited partners their specified
return, the right to receive this shortfall accrues until
proceeds are available from a sale or refinancing of the
property. After the initial five-year period, the Company's
incentive management fee is 40% of the excess of cash flow over
the amount necessary to make the specified rate of return to the
limited partners. The remaining 60% of cash flows are to be
distributed by the Owning Partnerships to the Investing
Partnerships for distribution to limited partners.
The initial five-year term of the management contracts and
the related Management Contract Obligations have expired for a
portion of the Owning Partnerships and their related Investing
Partnerships. Although the Company has no obligation to fund
operating shortfalls after the five-year term of the management
contract, as of January 31, 1999, the Company has advanced an
aggregate of approximately $2.2 million to these Owning
Partnerships to fund operating shortfalls. All such advances are
recorded as "Other Partnership Receivables" on the Company's
Consolidated Balance Sheet. Although the Company does not intend
to do so in the future, from time to time, the Company has also
made discretionary advances to Owning Partnerships beyond the
Management Contract Obligations period for the purpose of making
distributions to limited partners.
In the past, limited partners have been allowed to prepay
capital contributions. Prepayments of capital contributions do
not result in the prepayment of the related Purchase Notes.
Instead, such amounts are loaned to the Company by the Investing
Partnership. The purchase agreements provide that, should any
failure to repay any such loan occur, the Company must credit to
the Investing Partnership the amounts loaned at the time such
amount would be required to be paid by the Investing Partnership
to meet its obligations then due under the Purchase Note. As a
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result of such loans and such provisions of the purchase
agreements, the Company records the notes receivable
corresponding to the Purchase Notes net of such loans.
Therefore, these prepayments act to reduce the recorded value of
the Company's notes receivable and reduce interest income
received by the Company. Pursuant to the terms of its
Syndications, the Company has the option not to accept future
prepayments by limited partners of capital contributions. The
Company has not determined to what extent it will continue to
accept prepayments by limited partners of capital contributions.
All of the Syndicated Communities are managed by the Company
pursuant to written management contracts, which generally have a
five year term coterminous with the Company's Management Contract
Obligations. After the initial five-year term, the Management
Contract Obligations terminate and 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. The termination of any management contracts
would result in the loss of fee income, if any, under those
contracts. In general, under the terms of the Investing
Partnerships' partnership agreements, limited partners have only
limited rights to take part in the conduct or operation of the
partnerships. The partnership agreements for the Investing
Partnerships for which the Company is the general partner provide
that a majority in ownership interests of the limited partners
can remove the Company as the general partner at any time. It is
anticipated that all future Investing Partnership agreements will
contain the same right to remove the Company as a general
partner. In addition, the consent of a majority in ownership
interests of limited partners in such Investing Partnerships is
required to be obtained in connection with any sale or
disposition of the underlying property.
The Company intends to continue to arrange for acquisitions
of existing senior living communities by utilizing mortgage
financing and by arranging Syndications. The Company plans to
acquire and Syndicate between six and twelve existing senior
living communities over the next two years. The Company is, and
will continue to be, the managing general partner of the
partnerships that own Syndicated 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 Development Communities.
STRATEGY
Growth. The Company's growth strategy focuses on
Development 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 senior living
communities and intends to take advantage of these circumstances,
plus the present availability of construction financing on
favorable terms, to develop Development Communities of its own
design in desirable markets. Historically, the Company has
expanded by the acquisition and Syndication of existing senior
living 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 will continue to acquire existing senior living
communities and intends to arrange for these acquisitions, in
part, by Syndications. The Company believes that its continuing
practice of arranging for the acquisition of senior living
communities through Syndications and privately placing debt
securities will provide additional cash flow to help the Company
pursue its Development Plan.
The Company rents apartment units in the senior living
communities which it operates pursuant to annual leases on a
strictly "private pay" basis. The Company believes this "private
pay" focus will allow it to increase rental revenues as
demographic pressure increases demand for senior living
communities and to avoid potential financial difficulties it
might encounter if it were dependent on Medicare or other
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government reimbursement programs that may suffer from health
care reform, budget deficit reduction or other pending or future
government initiatives.
New Development. While the acquisition and Syndication of
existing senior living communities will continue to play a
significant role in the Company's expansion program, the primary
focus of the expansion program is the development of Development
Communities. The Company's Development Plan emphasizes a
"prototype" senior living community that it has designed. The
Company designed the prototype based upon its experience
operating its portfolio of acquired Syndicated Communities.
Because each of its Syndicated Communities has a different
design, and due to the Company's experience in operating such
communities, the Company believes its Development Community
prototype incorporates the most beneficial characteristics of the
various communities in the industry and represents an innovative
and "state of the art" community.
The prototype Development Community has been developed in
two sizes, 126 apartment units and 142 apartment units, and is
located on sites of up to seven acres. The Company currently
intends to build primarily 126 apartment unit Development
Communities. 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. 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 economies of scale also are realized in that
more apartment units are being produced for each Development
Community that is developed. The prototype Development Community
is targeted to the "middle to upper income" segment of the
elderly population, which is the broadest segment of the elderly
population and allows the Company to provide a high quality level
of service.
Common areas 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 assigned parking. The Company believes that the common
areas and amenities offered by its prototype Development
Community 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. The Company believes that such
substantial common areas, which would often be unaffordable in
smaller communities, will provide the Company's prototype
Development Communities with a competitive advantage over smaller
communities. The Company believes that these common areas will
attract residents and promote continued stable occupancy of its
prototype communities. Unit sizes range from 400 square feet for
a studio to 850 square feet for a two bedroom/two bath unit. A
typical Development Community contains 8 studio apartments, 112
one bedroom/one bathroom apartments and 6 two bedroom/two
bathroom apartments, encompassing approximately 110,000 square
feet. Each Development Community apartment unit is a full
apartment, including a kitchen or kitchenette.
Each Development Community offers residents a choice
between independent-living and assisted-living services. As a
result, the market for each community is broader than for
communities that offer only either independent-living or
assisted-living services. Although the licensing requirements
and the expense and difficulty of converting between existing
independent-living units and assisted-living units typically make
it impractical to accomplish such conversions, the Company's
Development Community 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
Development Community therefore may adjust its mix of
independent-living and assisted-living units as the market or
existing residents demand. The Company believes that this
innovative feature distinguishes its prototype Development
Community. 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
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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.
The Company's prototype Development Community also
incorporates two interior courtyards, from which the Company's
"Grand Court" name originates. These courtyards allow residents
to enjoy the outdoors while remaining in a secure environment.
The Company believes that this feature distinguishes its
prototype Development Community.
In summary, the Company believes that the size, design and
target markets of its prototype Development Community and the
convertibility of its apartments to either independent or
assisted-living units results in "state of the art" senior living
communities that provide an excellent vehicle for economic
growth.
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 and anticipated 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
Development 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. Communities with
these characteristics are referred to as secondary markets as
opposed to primary markets, which are major urban centers, or
tertiary markets, which are smaller rural communities. The
Company has found that secondary markets generally have a
receptive population of seniors who desire and can afford the
services offered in the Company's Development Communities. The
Company believes that it can obtain zoning and other necessary
approvals in secondary markets more quickly and easily than would
be the case in primary markets. 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. The Company believes that high-quality, affordable
employees are easier to attract and retain in secondary markets
than in primary markets.
Centralized Management. The senior living business is
highly management intensive. While the location of a community
and its physical layout are extremely important, another key to
the success of a senior 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 a
senior living community, including menu planning, food and supply
purchasing, meal preparation and service, assistance with ADLs,
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
senior living 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 Development Community design and
its "The Grand Court" [registered trademark] trademarked name to
promote national brand-name recognition. The Company has adopted
the trademarked name. Historically, senior living communities
have generally been independently owned and operated and there
has been little national brand-name recognition. The Company
believes that national recognition will be increasingly important
in the senior living business. The Company intends to
continuously use its trademarked name in its business activities,
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and the life of this trademark will extend for the duration of
its use. The Company considers this trademark to be a valuable
intangible intellectual property asset.
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
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.
INDUSTRY 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. U.S. Bureau of Census
shows that the average age of the Company's residents (83 years
old) places them within one of the fastest growing segments of
the U.S. population. While increasing numbers of Americans are
living longer and healthier lives, many choose senior living
communities as a cost-effective method of obtaining the services
and life-style they desire. Senior living communities 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. Such census data also shows that
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 senior
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 Census
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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.
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 senior living communities as an
alternative. Since 1970, 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 6.9
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
senior 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 56,250
55-64 80,032 83,041
65+ 73,471 88,192
Source: U.S. Bureau of the Census
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 senior
living facilities which provide both independent and assisted-
living services.
SERVICES
It is important to identify the specific tastes and needs of
the residents of a senior 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
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place". Both independent and assisted-living services will be
offered at all of the Company's Development Communities.
Basic Service and Care Package. The Company provides three
levels of service at its senior living communities:
Level I, Independent Living, includes three meals per day,
weekly housekeeping, activities program, 24-hour security and
transportation for shopping and medical appointments.
Level II, Catered Living, offers all of the amenities of
Level I in addition to all utilities, personal laundry and daily
housekeeping.
Level III, Assisted Living, provides three meals per day,
daily housekeeping, 24-hour security, all utilities, medication
management, activities and nurse's aides to assist the residents
with any ADLs which they might require. 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. Several of the Company's Syndicated Communities are
designed to meet the needs of assisted living residents who
suffer from the early stages of Alzheimer's or dementia.
The Company charges an average fee of $1,400 per month for
Level I services, $1,700 per month for Level II services, and
$2,000 per month for Level III services, but the fee levels vary
from community to community. Residents at the communities which
offer services for early stages of Alzheimer's or dementia pay an
average of an additional $500 per month for such services. 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 III 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.
OPERATIONS
Corporate. Over the past ten years the Company has
developed extensive policies, procedures and systems for the
operation of its senior living communities. The Company also has
adopted a formal quality assurance program. In connection with
this program the Company conducts 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 senior living 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 ten regional administrators. Each
administrator is responsible for three to six communities. The
Company also has a regional administrator and a registered
dietician who oversee the food division. Each regional
administrator is reported to by the manager of those communities
he oversees.
Community. The management team at each senior living
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 senior
living 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
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depending on the size of the community and the extent of services
provided in that community. Based upon its experience in
operating senior living communities in both primary and secondary
markets, the Company believes that its secondary market focus
will make it easier for the Company to attract and retain high-
quality, affordable staff.
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.
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 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 basis 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 senior 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 senior 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. In addition, if the development of new senior living
communities outpaces demand for those communities in certain
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markets, such markets may become saturated. Such an oversupply
of facilities could cause the Company to experience decreased
occupancy, depressed margins and lower operating results.
COMPANY HISTORY
In April, 1996, John Luciani and Bernard M. Rodin, the
principal stockholders of the Company (the "Principal
Stockholders") reorganized their businesses by consolidating them
into the Company. Pursuant to the reorganization, substantially
all of the assets and liabilities of such businesses were
transferred to the Company in exchange for shares of the
Company's Common Stock. See "Certain Transactions". The primary
predecessors of Grand Court Lifestyles, Inc. are J&B Management
Company, and Leisure Centers, Inc. J&B Management Company is a
private partnership founded in 1969 which specialized in the
development and management of multi-family real estate and senior
living communities. Prior to the formation of the Company in
April, 1996, the Company's property development and management
operations were conducted through its affiliate, Leisure Centers,
Inc., located in Boca Raton, Florida. Leisure Centers, Inc. was
merged with and into the Company. 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, and management of
multi-family properties. Senior management, collectively, has
over 80 years of experience in multi-family housing, having had
interests in 170 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, and management of senior living communities
building one of the largest operating portfolios of senior 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
senior living field.
GOVERNMENT REGULATION
Regulations applicable to the Company's operations vary
among the types of senior living 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, all states except South Dakota require licenses to
provide the assisted-living services. 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 also must comply with the
requirements of the Americans with Disabilities Act ("ADA") 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
Syndicated nursing home and one Syndicated Community operated by
the Company contains nursing home beds in which some residents
rely on Medicare. As a provider of services under the Medicare
program, the Company is subject to Medicare regulations designed
to limit fraud and abuse, violations of which could result in
civil and criminal penalties and exclusion from participation in
the Medicare program. Revenues derived from Medicare comprise
less than 1% of the revenues of the communities operated by the
Company. 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,
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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 senior living communities owned or operated by
the Company could have an adverse effect on the Company's
business, operating results and financial condition. Although the
Company has not incurred any material costs for removal or
remediation of hazardous or toxic substances, there can be no
assurance that this will remain the case in the future.
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 senior living communities 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 March 19, 1999, the Company employed approximately
2,280 persons, including 57 in the Company's principal executive
offices. None of the Company's employees are covered by
collective bargaining agreements. The Company believes its
employee relations are good.
ITEM 2. PROPERTIES
SYNDICATED COMMUNITIES
The Company currently manages 41 Syndicated Communities
containing 5,694 senior living apartment units and one Syndicated
nursing home containing 57 beds. One of the Company's Syndicated
Communities contains 70 nursing home beds. Such communities are
owned by Owning Partnerships and not by the Company. The Company
generally has a 1% interest in the Owning Partnerships and a 1%
interest in the Investing Partnerships which are formed to
purchase a 99% partnership interest in the Owning Partnership.
The following chart sets forth information regarding the
Syndicated Communities managed by the Company:
NUMBER OF
COMMUNITY (1) STATE UNITS
------------- ----- ---------
The Grand Court Mesa Arizona 174
The Grand Court Phoenix Arizona 136
The Grand Court Sacramento California 122
The Grand Court Fort Myers Florida 184
The Grand Court Lakeland Florida 126
The Grand Court Lake Worth Florida 170
AVERAGE
OCCUPANCY % AS
YEAR OF MARCH 31,
COMMUNITY (1) ACQUIRED (2) 1999(8)
------------- ------------ ------------
The Grand Court Mesa 1997 97%
The Grand Court Phoenix 1991 97%
The Grand Court Sacramento 1998 74%
The Grand Court Fort Myers 1989 93%
The Grand Court Lakeland 1996 80%
The Grand Court Lake Worth 1992 75%
16
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NUMBER OF
COMMUNITY (1) STATE UNITS
------------- ----- ---------
The Grand Court North Miami Florida 189
The Grand Court Pensacola Florida 60
The Grand Court I and II Florida 114
Pompano Beach
The Grand Court South Miami Florida 96
The Grand Court Tampa Florida 165
The Grand Court Tavares Florida 94
The Grand Court Winterhaven Florida 130
The Grand Court Carrolton Georgia 68
The Grand Court Belleville Illinois 76
The Grand Court II Kansas City Kansas 127
The Grand Court Overland Park Kansas 275
The Grand Court Adrian Michigan 103
The Grand Court Farmington
Hills Michigan 164
The Grand Court Novi Michigan 114
The Grand Court Westland Michigan 153
The Grand Court I Kansas City Missouri 173
The Grand Court III Kansas
City(3) Missouri 217
The Grand Court Seward Nebraska 65
The Grand Court Las Vegas Nevada 152
The Grand Court Albuquerque New Mexico 200(7)
The Grand Court Columbus Ohio 120
The Grand Court Dayton Ohio 185
The Grand Court Findlay Ohio 73
The Grand Court Springfield Ohio 77
The Grand Court I Chattanooga Tennessee 143(4)
The Grand Court II Chattanooga Tennessee 146
The Grand Court Memphis Tennessee 197
The Grand Court Morristown Tennessee 187
The Grand Court Bryan Texas 180
The Grand Court Garland Texas 112
The Grand Court Longview Texas 132
The Grand Court Lubbock Texas 139
The Grand Court I San Antonio Texas 198
The Grand Court II San Antonio Texas 57(5)
The Grand Court Weatherford Texas 60
The Grand Court Bristol Virginia 98
AVERAGE
OCCUPANCY % AS
YEAR OF MARCH 31,
COMMUNITY (1) ACQUIRED (2) 1999(8)
------------- ------------ ------------
The Grand Court North Miami 1995 76%
The Grand Court Pensacola 1993 91%
The Grand Court I and II
Pompano Beach 1994 73%(6)
The Grand Court South Miami 1998 39%(6)
The Grand Court Tampa 1997 99%
The Grand Court Tavares 1995 99%
The Grand Court Winterhaven 1997 89%
The Grand Court Carrolton 1998 96%
The Grand Court Belleville 1993 97%
The Grand Court II Kansas City 1994 89%
The Grand Court Overland Park 1997 99%(6)
The Grand Court Adrian 1998 95%
The Grand Court Farmington
Hills 1993 99%
The Grand Court Novi 1994 96%
The Grand Court Westland 1997 98%
The Grand Court I Kansas City 1989 94%
The Grand Court III Kansas
City(3) 1989 83%(6)
The Grand Court Seward 1999 92%
The Grand Court Las Vegas 1991 94%
The Grand Court Albuquerque 1997 83%
The Grand Court Columbus 1994 94%
The Grand Court Dayton 1994 99%
The Grand Court Findlay 1992 95%
The Grand Court Springfield 1992 96%
The Grand Court I Chattanooga 1995 77%
The Grand Court II Chattanooga 1995 91%
The Grand Court Memphis 1992 90%
The Grand Court Morristown 1996 85%
The Grand Court Bryan 1992 93%
The Grand Court Garland 1997 97%(6)
The Grand Court Longview 1990 74%
The Grand Court Lubbock 1991 80%
The Grand Court I San Antonio 1993 93%
The Grand Court II San Antonio 1995 79%
The Grand Court Weatherford 1996 89%
The Grand Court Bristol 1995 96%
------------------------
(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 senior
living communities and another Owning Partnership owns one
Syndicated Community and one Syndicated nursing home. As a
result, there are 42 properties listed, which relate to 40
17
<PAGE>
Owning Partnerships. In addition, the senior living
community to be owned by one Owning Partnership is currently
under construction.
(2) Represents year in which the Owning Partnership acquired the
community.
(3) A portion of the units at The Grand Court III Kansas City
are currently rented as residential apartment units.
(4) Grand Court I Chattanooga's unit count includes a 70-bed
nursing wing.
(5) Grand Court II San Antonio is a 57-bed licensed nursing
facility.
(6) Occupancy percentage includes 1-2 units occupied by staff.
(7) Sixty (60) additional units were constructed during Fiscal
1998. Such construction was substantially completed by
October 1, 1998. The Company is in the process of renting
these additional units.
(8) The average occupancy percentage of each individual
community was determined by adding the average occupancy
percentages as of the end of each month in which the
individual community was managed by the Company and dividing
that number by the total number of months the community was
managed by the Company during the periods April 1998 through
March 1999. The average monthly occupancy percentage for
each individual community was determined by dividing the
number of occupied units in the individual community as of
the end of the month by the total number of apartment units
in the individual community.
The Syndicated Communities currently operated by the Company
are generally encumbered with mortgage financing. While these
mortgage loans are obligations of the Owning Partnerships 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. To date, the Company has
incurred no material costs or expenses relating to the correction
of hazardous environmental conditions. Although most of the
mortgage loans are non-recourse, as of January 31, 1999, (i) the
Company is liable as a general partner for approximately $12.8
million in principal amount of mortgage debt relating to six
Syndicated Communities and (ii) wholly-owned entities (whose only
asset is a specific general partner interest) are liable as
general partners for approximately $35.6 million in principal
amount of mortgage debt relating to seven Syndicated Communities
and one Syndicated nursing home managed by the Company as of
January 31, 1999. In the case of the general partner liabilities
of the wholly-owned entities (whose only asset is a specific
general partner interest), the only assets of the Company at risk
of loss are the general partnership interests in the wholly-owned
entities. As of January 31, 1999, the aggregate principal amount
of the mortgage debt of the Owning Partnerships was approximately
$209.4 million and the aggregate annual debt service obligations,
excluding any balloon amounts payable at maturity, was
approximately $19.9 million. Most of this debt contains
provisions which limit the ability of the respective Owning
Partnerships to further encumber the property. Through January
31, 2003, approximately $195.3 million of balloon payments under
the mortgages will become due and payable. The Company
anticipates that it will continue to arrange for future
acquisitions of existing senior living communities through
mortgage financing and Syndications.
DEVELOPMENT COMMUNITIES
The Company has completed construction of and currently
operates seven Development Communities containing 962 senior
living apartment units which were constructed pursuant to the
Company's Development Plan. The Company has entered into joint
venture arrangements with a third party pursuant to which it has
sold 50% interests in three of these seven Development
Communities and a fourth Development Community which is not yet
completed. The other four completed Development Communities are
operated by the Company pursuant to long-term leases. The
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<PAGE>
following chart sets forth information regarding the seven
completed Development Communities.
NUMBER OF
COMMUNITY STATE UNITS
--------- ----- --------
The Grand Court Abilene(4) Texas 126
The Grand Court Corpus Christi (3) Texas 142
The Grand Court El Paso (4) Texas 142
The Grand Court San Angelo (4) Texas 142
The Grand Court Temple (3) Texas 126
The Grand Court Wichita Falls(4) Texas 142
The Grand Court Round Rock (3) Texas 142
YEAR AVERAGE
COMMUNITY BUILT (1) OCCUPANCY (2)
--------- --------- ------------
The Grand Court Abilene(4) 1998 --
The Grand Court Corpus Christi (3) 1998 --
The Grand Court El Paso (4) 1998 --
The Grand Court San Angelo (4) 1998 --
The Grand Court Temple (3) 1998 --
The Grand Court Wichita Falls(4) 1998 --
The Grand Court Round Rock (3) 1998 --
------------------------
(1) Represents the year in which the property was placed into
service.
(2) There is no occupancy percentage calculated as yet due to
the properties being in their initial lease-up period.
(3) Represents Development Communities which are owned by the
Company pursuant to joint venture arrangements.
(4) Represents Development Communities which are operated by the
Company pursuant to long-term leases.
The Development Communities which were wholly-owned by the
Company as of January 31, 1999 and currently owned by the Company
pursuant to joint venture arrangements were developed with
mortgage financing. The Company intends to finance its future
development of Development Communities primarily through mortgage
financing and other types of financing, including joint venture
arrangements. In addition, the Company may enter into long-term
operating leases arising through sale/leaseback transactions or
similar transactions and may issue additional debt or equity
securities, to the extent necessary. The mortgage financing of
Development Communities will be direct obligations of the Company
and, accordingly, the amount of its mortgage indebtedness is
expected to increase and the Company expects to have substantial
debt service, and may have substantial annual lease payment,
requirements in the future as the Company pursues its growth
strategy.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various lawsuits and other
matters arising in the normal course of business, including
employment-related claims. 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 may 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
19
<PAGE>
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders, through the solicitation of proxies or otherwise, during
the fourth quarter of the fiscal year ended January 31, 1999.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock (the "Common Stock") is traded on
the National Market tier of the Nasdaq Stock Market, which
reports the daily high, low and closing transaction prices, as
well as volume data, under the symbol "GCLI". Trading in the
Common Stock began on March 16, 1998. The high and low bid
prices of the Common Stock are as follows:
3/16/98- 5/1/98- 8/1/98- 11/1/98- 2/1/99-
4/30/98 7/31/98 10/31/98 1/31/99 4/26/99
-------- ------- -------- -------- -------
High $11.000 $10.500 $10.250 $9.500 $9.000
Low $10.375 $ 9.375 $ 8.000 $8.000 $6.375
As of April 26, 1999, there were approximately 17 holders of
record of the Common Stock.
The Company has not declared and paid cash dividends and it
does not anticipate paying future dividends on its Common Stock.
It is the present policy of the Board of Directors to retain
earnings, if any, to finance the expansion of the Company's
business. The payment of dividends on its Common Stock 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 future
indebtedness of the Company may prohibit or limit the Company's
ability to pay dividends.
The effective date of the registration statements (Nos. 333-
05855 and 333-43331) for the Company's initial public offering of
its common stock, $.01 par value, was March 13, 1998. The
offering commenced on March 16, 1998. The managing underwriter of
the offering was Royce Investment Group, Inc. ("Royce"). Pursuant
to the offering, the Company sold to the public 2,800,000 shares
of its common stock at an initial offering price of $9.50 per
share. The aggregate price of the offering registered by the
Company was $26.6 million. On April 29, 1998, pursuant to an
over-allotment option granted to the underwriters, John Luciani
and Bernard M. Rodin (the "Selling Shareholders") each sold
173,030 shares of the Company's common stock to the public at a
price of $9.50 per share. The aggregate price of the shares
offered by and registered on behalf of the Selling Shareholders
was $3,287,600. Under the terms of the offering, the Company
incurred underwriting discounts of $1.6 million, and the Selling
Shareholders incurred aggregate underwriting discounts of
$197,250. The Company incurred the following expenses in
connection with the offering: (i) a non-accountable expense
allowance paid to Royce in the amount of $798,000, (ii) a
consulting fee paid to Royce in the amount of $266,000, and (iii)
other expenses related to the offering in the amount of $1.6
million. The net proceeds that the Company received as a result
of this offering were $22.3 million. As of January 31, 1999, the
Company's net proceeds have been used as follows: $11.3 million
has been used to purchase a series of treasury bills pending
application of the funds. $9.4 million has been used for the
purchase of land and towards the construction of plant, building
and facilities and $1.6 million has been used for working
capital.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data and other data)
The following selected consolidated financial statement of
operations and balance sheet data have been 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. 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). See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
21
<PAGE>
YEARS ENDED JANUARY 31
---------------------------
1995 1996 1997
---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales . . . . . . . . . . . . . $22,532 $31,973 $36,021
Syndication fee income . . . . . 5,587 8,603 7,690
Deferred income earned . . . . . 4,399 9,971 5,037
Interest income . . . . . . . . 9,503 12,689 13,773
Property management fees from
related parties . . . . . . . 4,351 4,057 2,093
Equity in earnings from
partnerships . . . . . . . . . 276 356 423
Senior living revenues . . . . . -- -- --
Other income . . . . . . . . . . -- 1,013 --
------ ------ ------
46,648 68,662 65,037
Total Revenues . . . . . . . . . ====== ====== ======
Costs and expenses:
Cost of sales . . . . . . . . . 21,743 27,688 34,019
Selling . . . . . . . . . . . . 6,002 7,664 7,176
Interest . . . . . . . . . . . . 13,610 15,808 16,394
General and administrative . . . 6,450 7,871 7,796
Loss on impairment of notes and
receivables . . . . . . . . . -- -- 18,442
Write-off of registration costs -- -- --
Senior living operating expenses -- -- --
Officers' compensation(1) . . . 1,200 1,200 1,200
2,290 2,620 3,331
Depreciation and amortization . ------ ------ ------
51,295 62,851 88,358
Total Costs and Expenses . . . . ====== ====== ======
Net income (loss) . . . . . . . . (4,647) 5,811 (23,321)
Pro-forma income tax provision
(benefit)(2) . . . . . . . . . . (1,859) 2,324 --
------ ------ ------
$(2,788) $3,487 $(23,321)
Pro-forma net income (loss)(2) . . . ====== ====== ======
Pro-forma earnings (loss) per $(.19) $.23 $(1.55)
common share (basic and diluted)(2) ====== ====== ======
Pro-forma weighted average 15,000 15,000 15,000
common shares used . . . . . . . . ====== ====== ======
OTHER DATA:
Senior living communities 24 28 31
operated (end of period) . . . . . ====== ====== ======
Number of units (end of 3,683 4,164 4,480
period) . . . . . . . . . . . . . ====== ====== ======
89.3% 94.7% 91.3%
Average occupancy percentage (3) ====== ====== ======
YEARS ENDED JANUARY 31
----------------------
1998 1999
---- ----
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales . . . . . . . . . . . . . $38,135 $58,010
Syndication fee income . . . . . 7,923 7,283
Deferred income earned . . . . . 7,254 3,701
Interest income . . . . . . . . 12,051 12,349
Property management fees from
related parties . . . . . . . 3,684 3,219
Equity in earnings from
partnerships . . . . . . . . . 541 685
Senior living revenues . . . . . -- 5,093
4,683 1,350
Other income . . . . . . . . . . ------ -------
74,271 91,690
Total Revenues . . . . . . . . . ====== =======
Costs and expenses:
Cost of sales . . . . . . . . . 33,635 53,547
Selling . . . . . . . . . . . . 7,602 6,335
Interest . . . . . . . . . . . . 19,409 22,066
General and administrative . . . 8,437 10,388
Loss on impairment of notes and
receivables . . . . . . . . . -- --
Write-off of registration costs 3,107 --
Senior living operating expenses -- 6,098
Officers' compensation(1) . . . 1,200 1,200
3,340 5,032
Depreciation and amortization . ------ -------
76,730 104,666
Total Costs and Expenses . . . . ====== =======
Net income (loss) . . . . . . . . (2,459) (12,976)
Pro-forma income tax provision
(benefit)(2) . . . . . . . . . . -- --
------ -------
$(2,459) $(12,976)
Pro-forma net income (loss)(2) . . . ====== =======
Pro-forma earnings (loss) per
common share (basic and $(.16) $(.74)
diluted)(2) . . . . . . . . . . . ====== =======
Pro-forma weighted average 15,000 17,455
common shares used . . . . . . . . ====== =======
OTHER DATA:
Senior living communities 37 47
operated (end of period) . . . . . ====== =======
Number of units (end of 5,261 6,591
period) . . . . . . . . . . . . . ====== =======
93.3% 89.1%
Average occupancy percentage (3) ====== =======
22
<PAGE>
AS OF JANUARY 31,
---------------------------
1995 1996 1997
---- ---- ----
BALANCE SHEET DATA:
Cash and cash equivalents . . . . $ 10,950 $ 17,961 $ 14,111
Notes and receivables-net . . . . 220,482 224,204 222,399
Total assets . . . . . . . . . . 248,553 260,023 261,661
Total liabilities . . . . . . . . 217,879 225,238 229,658
Stockholders' equity . . . . . . 30,674 34,785 32,003
AS OF JANUARY 31,
-----------------
1998 1999
---- ----
BALANCE SHEET DATA:
Cash and cash equivalents . . . . $ 11,964 $ 22,784
Notes and receivables-net . . . . 231,140 227,104
Total assets . . . . . . . . . . 295,799 319,314
Total liabilities . . . . . . . . 269,387 283,588
Stockholders' equity . . . . . . 26,412 35,726
-------------------------
(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, $600 a year for each such officer. Amounts
received by such officers in excess of such amounts are
treated as distributions for purposes of the Company's
financial statements. In fiscal 1994 through fiscal 1997,
such officers also received $943; $850, $397 and $1,566 each
respectively as a distribution. 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 the years ended
January 31, 1995 and January 31, 1996.
(3) Average occupancy percentages were determined by adding all
of the occupancy percentages of the individual communities
and dividing that number by the total number of communities.
The average occupancy percentage for each particular
community was determined by dividing the number of occupied
apartment units in the particular community on the given
date by the total number of apartment units in the
particular community.
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statements
to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statements made by, or on behalf, of
the Company in this Annual Report on Form 10-K. Forward-looking
statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying
assumptions and other statements which are other than statements
of historical facts. Such forward-looking statements may be
identified, without limitation, by the use of the words
"anticipates", "estimates", "expects", "intends", "believes" and
similar expressions. From time to time, the Company or one of
its subsidiaries individually may publish or otherwise make
available forward-looking statements of this nature. All such
forward-looking statements, whether written or oral, and whether
made by or on behalf of the Company or its subsidiaries, are
expressly qualified by these cautionary statements and any other
cautionary statements which may accompany the forward-looking
statements. In addition, the Company disclaims any obligation to
update any forward-looking statements to reflect events or
circumstances after the date hereof.
Forward-looking statements made by the Company are subject
to risks and uncertainties that could cause actual results or
events to differ materially from those expressed in, or implied
by, the forward-looking statements. These forward-looking
statements include, among others, statements concerning the
Company's revenue and cost and expense trends, the number and
economic impact of anticipated acquisitions and new developments,
planned capital expenditures and financing needs and
availability. Investors or other users of the forward-looking
statements are cautioned that such statements are not a guarantee
of future performance by the Company and that such forward-
looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
expressed in, or implied by, such statements. In addition to
other factors and matters discussed elsewhere herein, the
following are some, but not all, of the important factors that,
in the view of the Company, could cause actual results to differ
materially from those discussed in the forward looking
statements:
1. The ability of the Company to service its substantial
debt obligations.
2. The ability of the Company to pay Management Contract
Obligations from the cash flow generated by the
Syndicated Communities and the impact of the terms of
future Syndications.
3. The need for the Company to utilize cash from
operations and obtain additional financing to pursue
its Development Plan.
4. The Company's ability to identify and Syndicate
suitable acquisition opportunities, a significant
source of revenues for the Company.
5. The Company's ability to identify suitable development
opportunities, pursue such opportunities, complete
development, lease-up and effectively operate the
Development Communities.
6. The ability of the Company to obtain sufficient joint
venture capital for its Development Program on
favorable terms, anticipated to be a significant source
of revenues for the Company.
7. The impact of mortgage defaults and/or foreclosures
relating to Multi-Family Properties (as defined below)
on the Company's ability to collect on its Multi-Family
Notes (as defined below).
24
<PAGE>
8. Governmental regulatory actions and initiatives,
including without limitation, those relating to
healthcare laws, benefitting disabled persons,
government mortgage insurance and subsidy programs,
environmental requirements and safety requirements.
9. The ability to attract seniors with sufficient
resources to pay for the Company's services.
10. Changes in anticipated construction costs, operating
expenses and start-up losses relating to the Company's
new Development Plan.
11. Unanticipated delays in the Company's Development Plan
including, without limitation, permitting, licensing
and construction delays.
12. Changes in general economic conditions, including, but
not limited to, factors particularly affecting real
estate and the capital markets including, but not
limited to, changes in interest rates.
13. Changes in operating costs of senior living
communities, including without limitation, staffing and
labor costs.
14. The Company's ability to attract and retain qualified
personnel.
15. Competitive factors affecting the long-term care
services industry.
16. The potential recourse and guarantee obligations of the
Company, including, without limitation, the correction
of hazardous environmental conditions relating to the
mortgage financing of the senior living communities.
17. The potential liabilities arising from the Company's
status as the general partner of Syndicated
Communities.
18. The potential impact of recent net losses.
19. The potential impact of computer related Year 2000
problems on the Company's operations, including the
ability of the Company and material third parties to
identify and/or address all material Year 2000 issues
and implement contingency plans.
OVERVIEW
The Company is a fully integrated provider of senior living
accommodations and services which acquires, develops and manages
senior living communities which provide independent and assisted-
living services. The Company's revenues have been, and are
expected to continue to be, primarily derived from the sales of
partnership interests ("Syndications") of partnerships it
organizes to acquire existing senior living communities
("Syndicated Communities") . The Company has established a new
development program (the "Development Plan") pursuant to which it
is building new senior living communities which offer independent
and assisted living services ("Development Communities"). The
Company currently owns the Development Communities pursuant to
joint venture arrangements or operates such communities pursuant
to long-term leases. To the extent that the Company's Development
Plan is successfully implemented, the Company anticipates that
the percentage of its revenues derived from Syndications would
decrease and the percentage of its revenues derived from the
Development Communities would increase and, the Company
believes, over time, become the primary source of the Company's
revenues. Although the Company has experienced operating losses
in the last three fiscal years, the Company expects to report a
profit for the first quarter of Fiscal 1999.
25
<PAGE>
Historically, the Company has arranged for the
acquisition and development of senior living communities and
multi-family properties by utilizing mortgage financing and
Syndications. The multi-family properties, which were Syndicated
by the Company prior to 1986, are not owned or managed by the
Company. Such properties are owned by their respective Owning
Partnerships and are managed by third party managing agents. The
senior living communities Syndicated by the Company since 1986
are managed by the Company but are owned by the respective Owning
Partnerships and not by the Company.
Future revenues, if any, of the Company relating to
previously Syndicated Communities would primarily arise in the
form of (i) deferred income earned on the sale of the Purchased
Interests in the related Owning Partnerships, (ii) management
fees, (iii) amounts payable by the Investing Partnerships to the
Company in the event of the subsequent sale or refinancing of
such communities, (iv) interest income on purchase notes
receivable, and (v) earnings derived from the Company's equity
interests in Owning Partnerships and Investing Partnerships.
Future revenues, if any, of the Company relating to future
Syndicated Communities would primarily arise from any initial
profit recognized upon completion of the Syndication and from the
same items listed in the previous sentence.
The Company intends to continue to arrange for future
acquisitions of existing senior living communities by utilizing
mortgage financing and by arranging Syndications, and anticipates
that between six and twelve communities will be acquired and
Syndicated in this manner during the next two years. Future
Syndications will require the allocation of funds generated by
the Company to cover the Company's initial costs relating to the
Syndication transactions (primarily any funds required to acquire
the property above the amounts received from the mortgage
financing obtained, the costs of any improvements to the property
deemed necessary and the costs associated with arranging for the
sale of the partnership interests). The Company typically pays
these costs from the proceeds it receives from its sale of the
Purchased Interests to the Investing Partnership. In addition,
future Syndications may require the allocation of the Company's
funds to satisfy any associated Management Contract Obligations
(including payment of required returns for distribution to
limited partners) that are not funded from the respective
property's operations.
The Company continually seeks senior living communities
which it deems are good acquisition prospects. In deciding which
properties it has and will acquire, the Company's senior
management exercises its business judgement to determine which
properties are good acquisition candidates and what constitutes
an acceptable purchase price. There are no fixed criteria for
these decisions, but rather, a number of factors are considered,
including the size, location, occupancy history, physical
condition, current income and expenses, quality of current
management, local demographic and market conditions, existing
competition and proposed entrants to the market.
. Sales. Income from sales of general partnership interests
in Owning Partnerships is 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 purchased property as
well as other factors such as age, location and cash flow of the
underlying property.
. Syndication Fee Income. The Company earns Syndication fee
income equal to the expenses of the Syndication which include
commissions.
. Deferred Income Earned. The Company has deferred income on
sales to Investing Partnerships of interests in Owning
Partnerships. The Company has arranged for the Syndications of
Investing Partnerships which were formed to acquire controlling
interests in Owning Partnerships which own senior living
communities ("Senior Living Owning Partnerships"). In a typical
Syndication, the Company enters into a management contract with
the Senior Living Owning Partnership, pursuant to which the
Company is required to pay, for a five-year period, any
Management Contract Obligations not paid from cash flow from the
26
<PAGE>
related property. The amount of deferred income for each
property is calculated in a multi-step process. First, based on
the property's cash flow in the previous fiscal year, the
probable cash flow for the property for the current fiscal year
is determined and that amount is initially assumed to be constant
for each remaining year of the Management Contract Obligations
period (the "Initial Cash Flow"). The Initial Cash Flow is then
compared to the Management Contract Obligations for the property
for each remaining year of the five-year period. If the Initial
Cash Flow exceeds the Management Contract Obligations for any
fiscal year, the excess Initial Cash Flow is added to the assumed
Initial Cash Flow for the following fiscal year and this adjusted
Initial Cash Flow is then compared to the Management Contract
Obligations for said following fiscal year. If the Initial Cash
Flow is less than the Management Contract Obligations for any
fiscal year, a deferred income liability is created in an amount
equal to such shortfall and no adjustment is made to the Initial
Cash Flow for the following year. As this process is performed
for each property on a quarterly basis, changes in a property's
actual cash flow will result in changes to the assumed Initial
Cash Flow utilized in this process and will result in increases
or decreases to the deferred income liability for the property.
Any deferred income liability created during a period increases
the cost of sales for that period. The payment of the Management
Contract Obligations, however, will generally not result in the
recognition of expense unless the property's actual Cash Flow for
the year is less than the Initial Cash Flow for the year, as
adjusted, and as a result thereof, the amount paid by the Company
in respect of the Management Contract Obligations is greater than
the amount assumed in establishing the deferred income liability
(such excess amount expended during any period is included as a
component of cost of sales for that period). If, however, the
property's actual cash flow is greater than the Initial Cash Flow
for the period, as adjusted, the Company's earnings will be
enhanced by the recognition of deferred income earned and, to the
extent cash flow exceeds Management Contract Obligations,
incentive management fees. The Company recognized such incentive
management fees in the amount of $1.2 million, $2.8 million and
$2.2 million for the years ended January 31, 1997, 1998 and 1999,
respectively.
The Company accounts for the pre-1986 Syndication of
Investing Partnerships which were formed to acquire controlling
interests in Owning Partnerships which own Multi-Family
Properties ("Multi-Family Owning Partnerships") under the
installment method. Under the installment method the gross
profit was determined at the time of sale. The revenue recorded
in any given year would equal the cash collections multiplied by
the gross profit percentage. At the time of the sale, the
Company deferred all future income to be recognized on each of
these transactions. Losses on these properties are recognized
immediately upon sale. Syndications relating to Multi-Family
Owning Partnerships account for 86% of the Company's deferred
income.
. Interest Income. The Company has notes receivable with
respect to Purchase Notes arising from the post-1986 Syndication
of senior living communities ("Senior Living Notes"). Such
Senior Living Notes have stated 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 Senior Living Owning Partnership. Each Senior Living Note
represents senior indebtedness of the related Investing
Partnership and is collateralized by the Investing Partnership's
interest in the Senior Living Owning Partnership that owns the
related senior living community. These properties generally are
encumbered by mortgages. The mortgages generally bear interest
at rates ranging from 7.27% to 10.50% per annum. The mortgages
generally are collateralized by a mortgage lien on the related
senior living communities. Principal and interest payments on
each Senior Living Note also are collateralized by the investor
notes payable to the Investing Partnership to which the limited
partners are admitted. The Company also recognizes interest
income relating to interest earned on cash and government
securities.
The Company also has notes receivable with respect to
Purchase Notes ("Multi-Family Notes") arising from the pre-1986
Syndication of multi-family properties (the "Multi-Family
Properties"). Such Multi-Family Notes generally have maturity
dates ranging from ten to fifteen years from the date the
partnership interests were sold. Eighty-four of the 157 Multi-
Family Notes have reached their final maturity dates and, due to
the inability, in view of the current cash flows of the Multi-
Family Properties, to maximize the value of the underlying
property at such maturity dates, either through a sale or
refinancing, these final maturity dates have been extended by the
27
<PAGE>
Company. The underlying Multi-Family Properties relating to two
extended Multi-Family Notes were refinanced and the underlying
properties relating to eight previously extended Multi-Family
Notes were sold as of January 31, 1999. During the period such
notes are extended, the Company will continue to receive the cash
flow and sale or refinancing proceeds, if any, generated by the
underlying properties. The Company expects that it may need to
extend maturities of other Multi-Family Notes. The notes
represent senior indebtedness of the related Investing
Partnership and typically are collateralized by a 99% partnership
interest in the Multi-Family Owning Partnership that owns the
related Multi-Family Property. These properties are encumbered
by mortgages, which generally bear interest at rates ranging from
7% to 12% per annum. The mortgages are typically collateralized
by a mortgage lien on the related Multi-Family Property.
Interest payments on each Multi-Family Note also are
collateralized by the related investor notes.
. Property Management Fees. Property management fees earned
for services provided to related parties are recognized as
revenue when related services have been performed.
. Equity in Earnings from Partnerships. The Company accounts
for its interests in limited partnerships under the equity method
of accounting. Under this method the Company records its share
of income and loss of the entity based upon its general
partnership interest. Fifty percent interests in four of the
Development Communities owned by the Company on January 31, 1999,
have subsequently been sold to a third party pursuant to joint
venture arrangements. The Company intends to enter into similar
joint venture arrangements regarding the other Development
Communities developed pursuant to its Development Plan. As of
January 31, 1999, all of the Company's Development Communities
were wholly-owned and consolidated into its consolidated
financial statements. To the extent that the Company enters into
such joint venture arrangements, such Development Communities
will no longer be so consolidated. Instead, the Company's
investment in such Development Communities will be reflected
under the equity basis of accounting.
. Senior Living Revenues. Senior living revenues represent the
income earned from consolidated or leased Development
Communities.
RESULTS OF OPERATION
. Revenues - Overview
Total revenues for the year ended January 31, 1999 ("Fiscal
1998") were $91.7 million as compared to $74.3 million for the
year ended January 31, 1997 ("Fiscal 1997"), representing an
increase of $17.4 million or 23.4%. Total revenues for Fiscal
1997 were $74.3 million compared to $65.0 million for the year
ending January 31, 1997 ("Fiscal 1996"), representing an increase
of $9.3 million or 14.3%.
. Syndication Communities
Revenues from this segment are derived from sales of general
partnership interests in Owning Partnerships to Investing
Partnerships, recognition of deferred income with respect to such
sales of general partnership interests, interest on Purchase
Notes received by the Company from such Investing Partnerships as
part of the purchase price paid for such general partnership
interests, property management fees received by the Company and
the Company's share of income and loss of the entities based upon
its retained general partnership interest.
JANUARY 31,
-----------------------------
1997 1998 1999
---- ---- ----
Sales . . . . . . . . . . . . $36,021 $38,135 $31,616
28
<PAGE>
JANUARY 31,
-----------------------------
Syndication fee income . . . 7,690 7,923 7,283
Deferred income earned . . . 4,093 6,140 2,913
Interest income . . . . . . . 7,054 4,768 4,204
Property management fees from
related parties . . . . . 2,093 3,684 3,219
Equity in earnings from 423 541 685
partnerships . . . . . . . ------ ------ ------
57,374 61,191 49,920
Total revenues . . . . . . . ====== ====== ======
Cost of sales . . . . . . . . 34,019 33,635 31,019
Selling . . . . . . . . . . . 6,634 6,945 5,656
Interest expense . . . . . . 3,493 4,945 4,152
General and administrative . 6,877 6,951 5,656
Officers' compensation . . . 1,059 989 653
319 363 490
Depreciation and amortization ------ ------ ------
52,401 53,828 47,626
Total costs and expenses . . ------ ------ ------
$ 4,973 $ 7,363 $ 2,294
Net income . . . . . . . . . ====== ====== ======
Sales for Fiscal 1998 were $31.6 million as compared to
$38.1 million for Fiscal 1997, representing a decrease of $6.5
million, or 17.1%. The decrease was attributable to the sale of
fewer partnership units in Fiscal 1998 as compared to Fiscal
1997. Sales for Fiscal 1997 was $38.1 million as compared to
$36.0 million in Fiscal 1996, representing an increase of $2.1
million, or 5.8%. The increase was attributable to the sale of a
greater number of partnership units in Fiscal 1997 as compared to
Fiscal 1996.
The primary factors that affect the number of partnership
units available for sale are ( i) the availability of senior
living communities for Syndications, (ii) the terms of the
Syndications and (iii) the initial cash flow of the senior living
communities being Syndicated. More favorable Syndication terms
along with a greater initial cash flow of the Syndicated
Communities will yield a greater number of units available to be
sold. Syndication terms become more favorable for the Company if
there is an increase in the ratio of (a) the purchase price paid
to the Company by the Investing Partnership for its interest in
the Operating Partnership, to (b) the initial cash flow of the
Syndicated Community. The Syndications completed in Fiscal 1998
had less favorable terms, as offset by greater initial cash flows
of the Syndicated Communities, than the Syndications completed in
Fiscal 1997. The Syndications completed in Fiscal 1997 had more
favorable terms, as offset by slightly less initial cash flows of
the Syndicated Communities than the Syndications completed in
Fiscal 1996.
Syndication fee income for Fiscal 1998 was $7.3 million as
compared to $7.9 million for Fiscal 1997, representing a decrease
of $600,000 or 7.6%. The decrease was attributable to less
commissions and professional fees paid on a lower sales volume in
Fiscal 1998 as compared to Fiscal 1997. Syndication fee income
for Fiscal 1997 did not materially change as compared to Fiscal
1996.
Deferred income earned in Fiscal 1998 was $2.9 million as
compared to $6.1 million in Fiscal 1997, representing a decrease
of $3.2 million, or 52.5%. The decrease is attributable to the
cash flows generated by Syndicated Communities during Fiscal 1998
exceeding the estimates used to establish deferred income
liabilities in Fiscal 1998 to a lesser degree than such cash
flows exceeded estimates in Fiscal 1997. Deferred income earned
for Fiscal 1997 was $6.1 million as compared to $4.1 million for
Fiscal 1996, representing an increase of $2.0 million or 48.8%.
The increase is attributable to the cash flows generated by
Syndicated Communities during Fiscal 1997 exceeding the estimates
used to establish deferred income liabilities in Fiscal 1997 to a
greater degree than such cash flow exceeded estimates in Fiscal
1996.
29
<PAGE>
Interest income for Fiscal 1998 was $4.2 million as compared
to $4.8 million in Fiscal 1997, representing a decrease of
$600,000, or 12.5%. The decrease is attributable to less
interest recognized on Senior Living Notes in Fiscal 1998 as
compared to Fiscal 1997 due to (i) sale of fewer partnership
units and (ii) an increase in percentage of prepayments received
from the purchasers of limited partnership units. Interest income
for Fiscal 1997 was $4.8 million as compared to $7.1 million for
Fiscal 1996, representing a decrease of $2.3 million or 32.4%.
The decrease is attributable to (i) the accelerated receipt of
interest payments on Senior Living Notes in Fiscal 1996 due to
the receipt of proceeds from the refinancing of a number of
Syndicated Communities (which includes the initial mortgage
financing of certain Syndicated Communities that had been
previously acquired without a mortgage) in March 1996, which
reduced interest payments that otherwise would have been received
in Fiscal 1997, and (ii) a reduction of interest income due to
the refinancings of certain Syndicated Communities which resulted
in the prepayment of mortgages which were previously assets of
the Company.
Property management fees from related parties for Fiscal
1998 was $3.2 million as compared $3.7 million in Fiscal 1997,
representing a decrease of $500,000, or 13.5%. The decrease was
attributable to the cash flows from the Syndicated Communities
exceeding the cash flow necessary to pay the specified rate of
return to the limited partners to a lesser extent in Fiscal 1998
as compared to Fiscal 1997. Property management fees from related
parties for Fiscal 1997 was $3.7 million as compared to $2.1
million for Fiscal 1996, representing an increase of $1.6 million
or 76.2%. The increase is primarily attributable to the cash
flows from the Syndicated Communities exceeding cash flow
necessary to pay the specified rate of return to the limited
partners in Fiscal 1997 to a greater extent than in Fiscal 1996.
Cost of sales (which includes (i) the cash portion of the
purchase price for Syndicated Communities plus related
transaction costs and expenses, (ii) any payments with respect to
Management Contract Obligations other than payments relating to
previously established deferred income liabilities and (iii) any
increases in deferred income liabilities established in the
relevant periods) for Fiscal 1998 was $31.0 million as compared
to $33.6 million for Fiscal 1997, representing a decrease of $2.6
million, or 7.7%. The decrease is attributable to a reduction in
the aggregate cash portion of the purchase price plus related
transaction costs and expenses paid for the Syndicated
Communities due to more favorable terms for the acquisition of
the Syndicated Communities (in view of the relationship between
the cumulative initial cash flows generated by the properties and
the cumulative purchase prices paid for such properties) as
partially offset by increased funding of Management Contract
Obligations in Fiscal 1998 as compared to Fiscal 1997. Cost of
sales for Fiscal 1997 did not materially change as compared to
Fiscal 1996. Cost of Sales and selling expenses (as described
below) as a percentage of sales and syndication fee income was
94.3% in Fiscal 1998 as compared to 88.1% in Fiscal 1997. The
increase is attributable to sales and syndication fee income
decreasing more than the decrease in cost of sales and selling
expenses. Cost of sales and selling expenses as a percentage of
sales and syndication fee income was 88.1% in Fiscal 1997 as
compared to 93.0% in Fiscal 1996. The decrease is attributable to
sales and syndication fee income increasing and cost of sales and
selling expenses decreasing.
Several factors, including the decline 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
existing senior living communities at such time 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. Several
factors have contributed towards a trend to less favorable terms
for acquisitions of senior living communities, including a
recovery in the market for senior living communities and
increased competition from other prospective purchasers of senior
living communities. Although the Company acquired senior living
communities on more favorable terms in Fiscal 1998 as compared to
Fiscal 1997, the Company acquired senior living communities on
less favorable terms in Fiscal 1997 as compared to Fiscal 1996
and the Company believes that the general trend towards less
favorable acquisition terms experienced in the years immediately
prior to Fiscal 1998 will continue in the future. In recent
years, however, the Company has been able to obtain mortgage
financing for a greater percentage of the purchase price and with
30
<PAGE>
more favorable terms (i.e., lower interest rates and longer
amortization periods) than in previous years. This factor,
combined with an overall reduction of interest rates, has
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 and Syndicating senior
living communities on terms favorable enough to offset the start-
up losses of the Development Communities as well as the Company's
debt service obligations, Management Contract Obligations and
overhead expenses.
Selling expenses for Fiscal 1998 was $5.7 million as
compared to $6.9 million for Fiscal 1997, representing a decrease
of $1.2 million, or 17.3%. The decrease is attributable to lower
commissions paid on a lower sales volume for Syndications
completed in Fiscal 1998 as compared to Fiscal 1997. Selling
expenses for Fiscal 1997 did not materially change as compared to
Fiscal 1996.
. Multi-Family Properties
Revenues from this segment are comprised of sales of the
underlying Syndicated Multi-Family Properties or controlling
interests therein, interest income on the Multi-Family Notes and
recognition of deferred income from such Syndications, which
income is being recognized on the installment method.
JANUARY 31,
---------------------------
1997 1998 1999
---- ---- ----
Sales . . . . . . . . . . . . $ -- $ -- $26,394
Deferred income earned . . . 944 1,114 788
Interest income . . . . . . . 6,719 7,283 7,317
Other Income . . . . . . . . -- 4,683 --
----- ------ ------
Total Revenues . . . . . . . 7,663 13,080 34,499
===== ====== ======
Cost of Sales . . . . . . . . -- -- 22,528
Selling . . . . . . . . . . . 542 657 679
Interest expense . . . . . . 12,752 13,778 14,887
General and administrative . 919 1,486 3,908
Officers compensation . . . . 141 211 452
Loss on impairment of notes
and receivables . . . . . . 18,442 -- --
Depreciation and amortization 2,947 2,770 3,591
------ ------ ------
Total costs and expenses . . 35,743 18,902 46,045
------ ------ ------
Net loss . . . . . . . . . . $(28,080) $(5,822) $(11,546)
====== ====== ======
In Fiscal 1998, one Multi-Family Property and controlling
interests in eight Multi-Family Owning Partnerships were sold to
third parties, resulting in the Company recognizing sales
proceeds of $26.4 million. The costs associated with these sales
were $22.5 million. The Company succeeded to these interests by
acquiring the collateral securing the related Multi-Family Note
upon such Notes becoming due without being paid and concurrently
selling such collateral to third parties. A significant portion
of the sales proceeds were generated from the sales to a single
unrelated third party. There were no such sales in Fiscal 1997 or
Fiscal 1996.
Interest income in Fiscal 1998 did not change as compared to
Fiscal 1997. Interest income in Fiscal 1997 was $7.3 million as
compared to $6.7 million in Fiscal 1996, representing an increase
of $600,000, or 8.9%. The increase is primarily attributable to
increased interest payments received as a result of the receipt
of excess proceeds from the refinancing of the mortgage debt on
four Multi-Family Properties in Fiscal 1997 as compared to the
interest payment received as a result of excess proceeds received
as a result of a mortgage debt restructuring on one Multi-Family
Property in Fiscal 1996.
31
<PAGE>
The Company realized non-cash other income of $4.7 million
in Fiscal 1997 as compared to no other income in Fiscal 1998 or
Fiscal 1996. Two Protected Partnerships (as defined below)
successfully emerged from their bankruptcy proceedings in Fiscal
1997 by paying off their mortgages at a discount with the
proceeds of new mortgage financings, resulting in these
properties having current, fully performing mortgages. This
allowed the Company to recognize other income of $3.1 million.
Approximately $1.0 million of this non-cash income resulted from
the reduction of certain previously established reserves
associated with the Company's notes and receivables. The
remaining $600,000 of this income resulted from the write-off of
liabilities which are no longer required.
The Company realized a non-cash loss on impairment of notes
and receivables of $18.4 million in Fiscal 1996 as compared to no
such loss for Fiscal 1998 or Fiscal 1997. This loss is based upon
a reduction in the recorded value, net of deferred income and
reserves, of the Multi-Family Notes and the "Other Partnership
Receivables" relating to the Protected Partnerships, as defined
below. As a result of the transfers by the Principal Stockholders
and one of their affiliates of additional assets to the Investing
Partnerships which issued such Multi-Family Notes, the Company
recorded a contribution to capital of $21.3 million in Fiscal
1996.
In Fiscal 1996, nine Multi-Family Owning Partnerships, which
were in default on their mortgages, filed petitions seeking
protection from foreclosure under Chapter 11 of the U.S.
Bankruptcy Code. In addition, one Multi-Family Owning
Partnership surrendered its property pursuant to an uncontested
foreclosure sale of such property (this Multi-Family Owning
Partnership, along with the nine Multi-Family Owning Partnerships
that filed bankruptcy petitions, are referred to herein as the
"Protected Partnerships"). Seven of the Chapter 11 petitions
resulted in the respective Protected Partnerships losing their
properties through foreclosure or voluntary conveyances of their
properties. The remaining two Protected Partnerships
successfully emerged from their bankruptcy proceedings by paying
off their mortgages at a discount with the proceeds of new
mortgage financings, resulting in these properties having
current, fully performing mortgages. Fourteen Multi-Family Owning
Partnerships are currently in default on their mortgages. HUD
has recently taken steps to foreclose on four of the defaulted
mortgages, but the relevant Multi-Family Owning Partnerships are
negotiating with HUD to obtain workout agreements or mortgage
restructurings to cure those defaults. It is possible that the
fourteen Multi-Family Owning Partnerships currently in default on
their mortgages will also file Chapter 11 Petitions or lose their
properties through foreclosure. In addition, there can be no
assurance that other Multi-Family Owning Partnerships will not
default on their mortgages, file Chapter 11 Petitions, and/or
lose their properties through foreclosure. As of January 31,
1999, the recorded value, net of deferred income, of the Multi-
Family Notes and the related advances held by the Company
relating to these fourteen Multi-Family Owning Partnerships was
$29.7 million. The Company has established reserves of $10.1
million to address the possibility that these Multi-Family Notes
and related advances may not be collected in full. One of these
fourteen remaining Multi-Family Owning Partnerships whose
mortgage is in default has had its application to refinance its
mortgage loan accepted and believes that the refinancing will
close. Other Multi-Family Owning Partnerships intend to cure
their mortgage defaults by refinancing their mortgages in the
future, although there can be no assurance that this will be the
case . The Company neither owns nor manages the Multi-Family
Properties, nor is it the general partner of any Multi-Family
Owning Partnerships but rather merely holds the related Multi-
Family Notes and other receivables relating to Multi-Family
Properties as receivables. The Company, therefore, has no
liability in connection with these mortgage defaults or
bankruptcy proceedings. Furthermore, it should be noted that in
Fiscal 1998 and previous years, six Multi-Family Owning
Partnerships whose mortgages had been in default cured these
defaults by refinancing their mortgage debt with new mortgages
and now have fully performing mortgages.
32
<PAGE>
. DEVELOPMENT COMMUNITIES
JANUARY 31,
--------------------------
1997 1996 1999
---- ---- ----
Senior living revenues . . . $-- $-- $5,093
Other income . . . . . . . . -- -- 1,350
Interest income . . . . . . . -- -- 828
---- ----- ------
Total revenues . . . . . . . -- -- 7,271
==== ===== =======
Senior living operating
expenses . . . . . . . . . -- -- 6,098
Interest expense . . . . . . 149 686 3,027
General and administrative . -- -- 824
Write off of registration
costs . . . . . . . . . . . -- 3,107 --
Officers compensation . . . . -- -- 95
Depreciation and amortization 65 207 951
---- ----- ------
Total costs and expenses . . 214 4,000 10,995
---- ----- ------
Net loss . . . . . . . . . . $(214) $(4,000) $(3,724)
==== ===== ======
Pursuant to the Company's Development Plan, seven
Development Communities were placed in service during Fiscal
1998. The Company recognized senior living revenues and operating
expenses of $5.1 million and $6.1 million, respectively. None of
the Development Communities had been completed in Fiscal 1997 or
Fiscal 1996.
Other income was $1.4 million in Fiscal 1998. In Fiscal
1998, the Company earned developer's fees in connection with the
four Development Communities which are owned by a third party and
which the Company operates pursuant to long-term leases. There
was no other income in Fiscal 1997 or Fiscal 1996.
Interest income of $800,000 for Fiscal 1998 represents
interest earned on the Company's net proceeds from its initial
public offering, which proceeds are being used primarily for the
Company's Development Plan. There was no interest income in
Fiscal 1996 or Fiscal 1997.
The Company expensed approximately $3.1 million of costs
relating to a proposed initial public offering of equity
securities in Fiscal 1997. Such costs were incurred prior to
April 30, 1997.
Expenses-Overview
The following expenses were allocated to each segment for
reporting purposes based upon gross revenues or gross assets
based upon the particular expense. The Company, however, does not
view these expenses as segment related but rather on a Company
wide basis.
General and administrative expenses for Fiscal 1998 was
$10.4 million as compared to $8.4 million for Fiscal 1997,
representing an increase of $2.0 million or 23.8%. The increase
is primarily attributable to increases in salary costs,
professional fees and other office costs in arranging for the
acquisition of the Company's portfolio of Syndicated Communities,
in managing the Company's portfolio of Syndicated Communities and
in developing and managing the Company's portfolio of Development
Communities which portfolios, in the aggregate, were larger in
Fiscal 1998 than in Fiscal 1997. General and administrative
expenses were $8.4 million in Fiscal 1997 as compared to $7.8
million for Fiscal 1996, representing an increase of $600,000 or
7.6%. The increase is attributable to increases in professional
fees, salary costs and other office expenses in managing and
33
<PAGE>
arranging for the acquisition of the Company's portfolio of
Syndicated Communities which increased in Fiscal 1997, as
partially offset by the capitalization of expenses relating to
the implementation of the Company's Development Plan.
Interest expenses was $22.1 million in Fiscal 1998 as
compared to $19.4 million in Fiscal 1997, representing an
increase of $2.7 million or 13.9% The increase is primarily
attributable to (i) the increase in principal amount of debt and
the interest rates related to such debt in Fiscal 1998 as
compared to Fiscal 1997, and (ii) interest on construction loans
payable on the three Development Communities placed in service in
Fiscal 1998 (which the Company owned directly as of January 31,
1999, but which the Company now owns pursuant to joint venture
arrangements) which construction loan interest was capitalized in
Fiscal 1997 as these communities were under construction in
Fiscal 1997. Interest expense for Fiscal 1997 was $19.4 million
as compared to $16.4 million in Fiscal 1996, representing an
increase of $3.0 million or $18.2%. The increase is attributable
to an increase in principal amount of debt and an increase in
interest rates for such debt during Fiscal 1997 as compared to
Fiscal 1996, as partially offset by the elimination of certain of
the Company's mortgage debt due to the refinancing of three
Syndicated Communities in Fiscal 1996. Interest expense includes
interest on debentures ("Debenture Debt") which are secured by
Multi-Family Notes (the "Purchase Note Collateral"). During
Fiscal 1998 and Fiscal 1997, the Debenture Debt had an average
interest rate of 11.8% and 12.05%, respectively. Interest expense
with respect to such debt for Fiscal 1998 and Fiscal 1997 was
$8.0 million and $8.4 million, respectively. During Fiscal 1997
and Fiscal 1996, the Debenture Debt had an average interest rate
of 12.05%. Interest expense with respect to such debt for Fiscal
1997 and Fiscal 1996 was $8.4 million and $9.2 million,
respectively. In structuring the Debenture Debt, the cash flow
generated by the Purchase Note Collateral was not expected to
fully fund the amount necessary to pay interest on the Debenture
Debt. During Fiscal 1996 through Fiscal 1999, the cash flow
generated by the Purchase Note Collateral was less than the
amount required to pay interest on the Debenture Debt.
Depreciation and amortization consists of (i) amortization
of deferred loan costs incurred in connection with debt
issuances, (ii) amortization of leasehold costs incurred in
connection with four Development Communities which the Company
operates pursuant to long-term leases, and (iii) depreciation of
building, furniture and equipment of three Development
Communities the Company owned directly at January 31, 1999 but
which the Company now owns pursuant to joint venture
arrangements. Depreciation and amortization was $5.0 million in
Fiscal 1998 as compared to $3.3 million in Fiscal 1997,
representing an increase of $1.7 million or 51.5%. The increase
is attributable to (i) the increase in amortization of deferred
loan costs due to additional Debenture Debt and unsecured debt
incurred by the Company, (ii) the amortization of leasehold costs
associated with the four Development Communities operated by the
Company pursuant to long-term leases, and (iii) the depreciation
of buildings, furniture and equipment associated with the three
Development Communities owned directly by the Company as of
January 31, 1999, but which the Company now owns pursuant to
joint venture arrangements, which communities were not completed
in Fiscal 1997. Depreciation and amortization for Fiscal 1997 did
not change as compared to Fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed operations through
cash flow generated by operations, Syndications and borrowings
consisting of Investor Note Debt, Unsecured Debt, Mortgage Debt
and Debenture Debt. Now that the Company has completed
development of seven Development Communities, the ownership
and/or operation of these communities is an additional source of
cash flow. The Company's principal liquidity requirements are
for payment of operating expenses, costs associated with
development of Development Communities, debt service
obligations, and Management Contract Obligations.
Cash flow used by operating activities for Fiscal 1998 was
$9.1 million and were comprised of ( i ) net loss of $13.0
million, plus (i) adjustments for non-cash items of $1.3 million
plus (iii) the net change in operating assets and liabilities of
$2.6 million. The adjustments for non-cash items is comprised of
depreciation and amortization of $5.0 million offset by deferred
income earned of $3.7 million. Cash flows used by operating
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activities for Fiscal 1997 were $11.3 million and were comprised
of (i) net loss of $2.5 million less (ii) adjustments for non-
cash items of $5.0 million less (iii) the net change in operating
assets and liabilities of $3.8 million. The adjustments for non-
cash items is comprised of depreciation and amortization of $3.3
million, plus write-off of registration costs of $3.1 million,
offset by deferred income earned of $7.3 million, the reduction
of impairment reserves on notes and receivables of $1.0 million
and non-cash other income of $3.1 million. Cash flows provided by
operating activities for Fiscal 1996 were $2.5 million and were
comprised of: (i) net loss of $23.3 million plus (ii) adjustments
for non-cash items of $16.7 million plus (iii) the net change in
operating assets and liabilities of $9.1 million. The
adjustments for non-cash items is comprised of depreciation and
amortization of $3.3 million and loss on impairment of
receivables of $18.4 million less deferred income earned of $5.0
million.
Net cash used by investing activities for fiscal 1998 of
$22.0 million was comprised of an increase of building, furniture
and equipment of $10.8 million, an increase in the cost of the
Development Communities the Company is constructing of $10.2
million and the increase in investments in general partner
interests in Syndicated Communities of $1.0 million. Net cash
used by investing activities for Fiscal 1997 of $20.4 million was
comprised of the increase in the cost of Development Communities
the Company is currently constructing of $19.5 million and the
increase in investments in general partner interests in
Syndicated Communities of $900,000. Net cash used by investing
activities for Fiscal 1996 of $7.2 million was comprised of the
increase in the cost of the Development Communities the Company
is currently constructing of $6.7 million and the increase in
investments and general partner interests in Syndicated
Communities for the period offset by a decrease in investments
due to the receipt of distributions of refinancing proceeds by
the Company based upon its general partner interests in
Syndicated Communities.
Net cash provided by financing activities for Fiscal 1998 of
$41.9 million was comprised of (i) proceeds from the issuance of
new debt of $49.2 million less debt repayments of $41.3 million,
plus (ii) the proceeds from construction mortgage financing of
$12.7 million less (iii) payments of notes payable of $1.5
million, plus (iv) the proceeds of notes payable of $300,000 plus
(v) the decrease in other assets of $200,000 plus ( vi) the net
proceeds of the initial public offering of $22.3 million. Net
cash provided by financing activities for Fiscal 1997 of $29.5
million was comprised of (i) proceeds from the issuance of new
debt of $63.4 million less debt repayments of $44.2 million plus
(ii) proceeds from construction mortgage financing of $19.8
million less (iii) payments of notes payable of $400,000 plus
(iv) increase in notes payable of $4.5 million less (v) the
increase in other assets of $13.6 million. Net cash used by
financing activities for Fiscal 1996 of $900,000 was comprised
of: (i) proceeds from the issuance of new debt of $57.8 million
less debt repayments of $55.3 million plus (ii) proceeds from
construction mortgage financing of $2.8 million less (iii)
payments of notes payable of $200,000 less (iv) distributions
paid of $800,000 and less (v) the increase in other assets of
$3.4 million due to the capitalization of costs relating to the
development and construction of new properties and the issuance
of new debt offset by the amortization of loan costs primarily in
connection with Debenture Debt.
At January 31, 1999, the Company had total indebtedness,
excluding accrued interest and construction mortgage indebtedness
on the Development Communities of $168.8 million, consisting of
$69.8 million of Debenture Debt, $72.5 million of Unsecured Debt,
$5.0 million of Mortgage Debt and $21.5 million of Investor Note
Debt, and the Company had cash and cash equivalents at January
31, 1999 of $22.8 million.
Of the principal amount of total indebtedness at January 31,
1999 described above, $29.4 million becomes due in the fiscal
year ending January 31, 2000; $35.3 million becomes due in the
fiscal year ending January 31, 2001; $38.3 million becomes due in
the fiscal year ending January 31, 2002; $22.1 million becomes
due in the fiscal year ending January 31, 2003; $10.1 million
becomes due in the fiscal year ending January 31, 2004, and the
balance of $33.6 million becomes due thereafter. Of the amount
maturing in the fiscal year ending January 31, 2000, $1.9 million
is Investor Note Debt which the Company expects to repay through
the collection of investor notes. The balance, approximately
$27.5 million, includes $7.9 million of Debenture Debt and $19.6
million of Unsecured Debt. The Company expects to repay (i) a
portion of this debt with funds generated by the Company's
business operations, and (ii) the balance of the indebtedness
through the issuance of new debt.
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During the fiscal years ended January 31, 1998 and January
31, 1999, respectively, first mortgage loans were obtained to
finance approximately 80% of the cost of developing six
Development Communities. The interest rate on four of the loans
equals the 30-day LIBOR plus 2 3/4% per annum. The fifth loan
bears interest at the lender's prime rate plus 1.5% per annum.
The sixth loan bears interest at the lender's prime rate for the
first fifteen months and then converts to LIBOR plus 2 3/4% per
annum for the following twenty-four months. These loans mature
between November, 1999 and February, 2001. As of January 31,
1998 and January 31, 1999, respectively, total funding under such
first mortgage loans amounted to $13.3 million and $26.0 million,
respectively. As a result of the Company entering into joint
venture arrangements regarding four of the Development
Communities, the Company will not reflect such mortgages on its
consolidated financial statements in future periods. The Company
intends to pursue similar joint venture arrangements regarding
the additional Development Communities to be developed. The
Company intends to increase its construction loans payable as it
pursues its Development Plan.
Pursuant to the Company's Development Plan, two limited
partnerships, in each of which the Company holds a 1% general
partnership interest, have issued limited partnership interests
for aggregate capital contributions of $9.3 million, the net
proceeds of which have been used to make second mortgage loans to
the Company to fund approximately 20% of the cost of developing
three Development Communities. Such second mortgage loans were
entered into in 1996 and bear interest at the rate of 13.125%.
These second mortgage loans mature between November 2001 and
March 2002. The Company intends to repay these second mortgage
loans from a portion of the proceeds from three of the four joint
venture arrangements which the Company recently entered into
regarding four Development Communities.
The Company's debt obligations contain various covenants and
default provisions, including provisions relating to, in some
obligations, certain Partnerships, Owning Partnerships or
affiliates of the Company. The Company has experienced
fluctuations in its net worth over the last several years. At
January 31, 1996, the Company had a net worth of $34.8 million,
at January 31, 1997, the Company had a net worth of $32.0
million, at January 31, 1998, the Company has a net worth of
$26.4 million, and at January 31, 1999, the Company had a net
worth of $35.7 million. Pursuant to one Obligation, the Company
is required to maintain a net worth of no less than $35.3
million. Certain obligations of the Company contain covenants
requiring the Company to maintain maximum ratios of the Company's
liabilities to its net worth. As of January 31, 1998, the most
the most restrictive covenant requires that the Company maintain
a ratio of "loans and accrued interest payable" to consolidated
net worth of no more than 7 to 1. As of January 31, 1999, the
most restrictive covenant requires that the Company maintain a
ratio of liabilities to consolidated net worth of no more than 10
to 1. At January 31, 1998 and January 31, 1999, the Company's
respective ratios were 6.1 to 1 and 8.2 to 1. In addition,
certain obligations of the Company provide that an event of
default will arise upon the occurrence of a material adverse
change in the financial condition of the Company or upon a
default in other obligations of the Company.
The Company has utilized mortgage financing and Syndications
to arrange for the acquisitions of the Syndicated Communities
which it operates. It intends to continue this practice for
future acquisitions of Syndicated Communities. The limited
partnership agreements of the Investing Partnerships provide that
the limited partners are entitled to receive for a period not to
exceed five-years specified distributions equal to 11% to 12% per
annum of their then paid-in scheduled capital contributions.
Pursuant to the management contracts with the Owning
Partnerships, for such five-year period, the Company has
Management Contract Obligations. During Fiscal 1997 and 1998,
the Syndicated Communities with respect to which the Company had
such Management Contract Obligations distributed to the Company,
after payment of all operating expenses and debt service, an
aggregate of $11.0 million and $9.6 million, respectively, for
application to the Company's Management Contract Obligations.
During such periods, the Company's Management Contract
Obligations exceeded such distributions by an aggregate of $6.4
million and $9.3 million, respectively. The $6.4 million the
Company paid in respect to Management Contract Obligations for
Fiscal 1997 was attributable to (i) operating expenses (including
maintenance and repair costs) increasing at a greater rate than
historically, as partially offset by increases in rental
revenues, (ii) the decrease in the average occupancy of the
Company's portfolio of Syndicated Communities, and (iii)
difficulties the Company experienced in renting apartment units
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relating to one Syndicated Community which had been converted
from a multi-family property (which community is currently 82%
occupied by senior living residents) and one underperforming
Syndicated Community. The $9.3 million of funding that was
required in respect to Management Contract Obligations in Fiscal
1998 was primarily attributable to (i) an increase in the
scheduled capital contributions by the limited partners on which
the Company is required to pay the specified rate of return, (ii)
a decrease in the average occupancy of certain Syndicated
Communities in the Company's portfolio, and (iii) an increase in
operating expenses of the same Syndicated Communities.
The refinancings of a number of Syndicated Communities in
Fiscal 1996 resulted in over $43 million being returned to
limited partners, which reduced the amount of capital upon which
the Company is obligated to make payments in respect of the
Management Contract Obligations. The amount paid by the Company
with respect to its Management Contract Obligations for Fiscal
1996 was partially offset by an increase in interest income
received by the Company for Fiscal 1996, which was also the
result of the refinancings. While the refinancings increased the
Company's funding of Management Contract Obligations in the short
term, the long term effect will be a reduction of the Company's
Management Contract Obligations relating to the refinanced
Syndicated Communities. The capital that was returned to the
limited partners (which causes the reduction in the Company's
Management Contract Obligations) was applied first to the later
years in which their capital contributions are due and then to
the earlier years. The refinancings, therefore, reduce the
Company's Management Contract Obligations more in Fiscal 1999 and
subsequent years than in Fiscal 1996 through 1998. The aggregate
gross amount (before considering the cash flow from the
properties) of Management Contract Obligations relating solely to
returns to limited partners based on existing management
contracts is $19.8 million for Fiscal 1999, which will increase
to $19.9 million in Fiscal 2000, and decrease to $15.8 million in
Fiscal 2001, decrease to $8.0 million in Fiscal 2002 and decrease
to $2.0 million in Fiscal 2003. Such amounts of Management
Contract Obligations are calculated based upon all remaining
scheduled capital contributions with respect to fiscal years 1999
through 2003. Actual amounts of Management Contract Obligations
in respect of such contracts will vary based upon the timing and
amount of such capital contributions. Furthermore, such amounts
of Management Contract Obligations are calculated without regard
to Management Contract Obligations relating to future
Syndications.
The aggregate amount of the Company's Management Contract
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 Syndicated
Communities and the terms of future Syndications. The Company
anticipates that for at least two years the Management Contract
Obligations with respect to existing and future Syndications
will exceed the cash flow generated by the related Syndicated
Communities, which will result in the need to utilize funds
generated by the Company from sources other than the operations
of the Syndicated Communities to make Management Contract
Obligations payments. In general, the payment of expenses arising
from obligations of the Company, including Management Contract
Obligations, have priority over earnings that might otherwise be
available for distribution to shareholders. The Company intends
to structure future Syndications to minimize the likelihood that
it will be required to utilize the cash it generates to pay
Management Contract Obligations, but there can be no assurance
that this will be the case.
The initial five-year term of the management contracts and
the related Management Contract Obligations have expired for 13
Owning Partnerships and their seventeen related Investing
Partnerships. Although the Company has no obligation to fund
operating shortfalls after the five-year term of the management
contracts, as of January 31, 1999, the Company had advanced an
aggregate of approximately $2.2 million to seven of these Owning
Partnerships to fund operating shortfalls. All such advances
are recorded as "Other Partnership Receivables" on the Company's
Consolidated Balance Sheet. Although the Company does not intend
to do so in the future, from time to time, the Company has also
made discretionary payments to Owning Partnerships beyond the
Management Contract Obligations period for the purpose of making
distributions to limited partners.
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In the past, limited partners have been allowed to prepay
capital contributions. The percentage of the prepayments
received upon the closings of the sales of limited partnership
interests in Investing Partnerships averaged 65.7% in Fiscal
1996, 78.8% in Fiscal 1997 and 75.4% for Fiscal 1998.
Prepayments of capital contributions do not result in the
prepayment of the related Purchase Notes held by the Company.
Instead, such amounts are loaned to the Company by the Investing
Partnership. As a result of such loans and the crediting
provisions of the related purchase agreements, the Company
records the Purchase Notes net of such loans. Therefore, these
prepayments act to reduce the recorded value of the Company's
note receivables and reduce interest income received by the
Company. Pursuant to the terms of the Syndication offerings, the
Company has the option not to accept future prepayments by
limited partners of capital contributions. The Company has not
determined to what extent it will continue to accept prepayments
by limited partners of capital contributions.
As of January 31, 1999, the Company holds 157 Purchase Notes
("Multi-Family Notes") which are secured by controlling interests
in Multi-Family Owning Partnerships which own 118 multi-family
properties that were Syndicated by the Company prior to 1986 (the
"Multi-Family Properties"). Although it has no obligation to do
so, the Company has also made advances to various Multi-Family
Owning Partnerships to support the operation of their properties,
which advances are included in the "Other Partnership
Receivables" recorded on the Company's Consolidated Balance
Sheet. The Multi-Family Notes and the Other Partnership
Receivables entitle the Company to receive all cash flow and sale
or refinancing proceeds generated by the respective Multi-Family
Property until the Multi-Family Note and Other Partnership
Receivables are satisfied. As of January 31, 1999, the recorded
value, net of deferred income, of Multi-Family Notes was $100.8
million. All but approximately $3.4 million of the $63.3 million
of Other Partnership Receivables recorded on the Company's
Consolidated Balance Sheet as of January 31, 1999 relate to
advances to Multi-Family Owning Partnerships.
Fourteen of the Multi-Family Owning Partnerships are in
default on their respective mortgages. The Company neither owns
nor manages these properties, nor is it the general partner of
any Multi-Family Owning Partnerships, but rather, merely holds
the related Multi-Family Notes and related advances as
receivables. The Company, therefore, has no liability in
connection with these mortgage defaults. In that these mortgages
were insured by the United States Department of Housing and Urban
Development ("HUD"), HUD became the holder of these mortgages
after they went into default. In the past, HUD has instituted
initiatives to deal with its portfolio of defaulted mortgages,
such as selling such mortgages at auction. Although HUD has
discontinued this auction program, these auctions resulted in one
of the fourteen defaulted mortgages being sold to a third party,
subject to an existing workout agreement. The remaining thirteen
defaulted mortgages are held by HUD, with workout agreements in
place regarding three of them with terms of from one to nine
years. HUD's policies regarding the granting of workout
agreements have become more restrictive in recent years and there
can be no assurance that HUD will renew these workout agreements
or restructure the related mortgage debt when these workout
agreements expire. Similarly, there can be no assurance that the
related Multi-Family Owning Partnerships can obtain workout
agreements or restructure the related mortgage debt for the ten
defaulted mortgages without workout agreements currently in
place. HUD has recently taken steps to foreclose on four of the
defaulted mortgages without workouts. Notwithstanding these
steps, the relevant Multi-Family Owning Partnerships are
negotiating with HUD to obtain workout agreements or mortgage
restructurings (which are now possible pursuant to new HUD
policies) to cure the defaults. In view of the foregoing, it is
possible that the fourteen Multi-Family Owning Partnerships which
are in default of their mortgages will file bankruptcy petitions
or take similar actions seeking protection from the creditors
and/or lose their properties through foreclosure. As of January
31, 1999, the recorded value, net of deferred income, of the
Multi-Family Notes and the related advances held by the Company
relating to these fourteen Multi-Family Owning Partnerships was
$29.7 million. The Company has established reserves of $10.1
million to address the possibility that these Multi-Family Notes
and related advances may not be collected in full. One of these
fourteen remaining Multi-Family Owning Partnerships whose
mortgage is in default has had its application to refinance its
mortgage loan accepted and believes that the refinancing will
close. Other Multi-Family Owning Partnerships intend to cure
their mortgage defaults by refinancing their mortgages in the
future, although there can be no assurance that this will be the
case. Furthermore, in Fiscal 1998 and previous years, six Multi-
Family Owning Partnerships whose mortgages had been in default
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cured those defaults by refinancing their mortgages with new
mortgage financings and now have fully performing mortgages.
The Multi-Family Properties were typically built or
acquired with the assistance of programs administered by HUD that
provide mortgage insurance, favorable financing terms and/or
rental assistance payments to the owners. As a condition to the
receipt of assistance under these and other HUD programs, the
properties must comply with various HUD requirements, including
limiting rents on these properties to amounts approved by HUD.
Most of the rental assistance payment contracts relating to the
Multi-Family Properties will expire over the next few years. In
view of the foregoing, there can be no assurance that other
Multi-Family Owning Partnerships will not default on their
mortgages, file bankruptcy petitions, and/or lose their
properties through foreclosure. The Company neither owns nor
manages these properties, nor is it the general partner of any
Multi-Family Owning Partnerships, but rather, holds the Multi-
Family Notes and related advances as receivables. Any such
future mortgage defaults could, and any such future filings of
bankruptcy petitions or the loss of any such property through
foreclosure would, cause the Company to realize a non-cash loss
equal to the recorded value of the applicable Multi-Family Note
plus any related advances, net of any deferred income recorded
and any reserves for such Multi-Family Note and advances
previously established by the Company, which would reduce such
loss. In addition, the Company could be required to realize such
a non-cash loss even in the absence of mortgage defaults,
bankruptcy petitions or the loss of any such property through
foreclosure if such note is considered impaired. Such impairment
would be measured under applicable accounting rules. Such
losses, if any, while non-cash in nature, could adversely affect
the Company's business, operating results and financial
condition.
HUD has introduced various initiatives to restructure its
housing subsidy programs by increasing reliance on prevailing
market rents, and by reducing spending on future rental
assistance payment contracts by, among other things, not renewing
expiring contracts and by restructuring mortgage debt on those
properties where a decline in rental revenues is anticipated.
Due to uncertainty regarding the final policies that will result
from these initiatives and numerous other factors that affect
each property, which can change over time (including the local
real estate market, the provisions of the mortgage debt
encumbering the property, prevailing interest rates and the
general state of the economy), the Company cannot determine
whether these initiatives will have an impact on the Multi-Family
Properties and, if there is an impact, whether the impact will be
positive or negative.
Certain of the Multi-Family Owning Partnerships intend to
take advantage of the new HUD initiatives and/or improving market
conditions to (i) either refinance their HUD-insured mortgages
with conventional mortgage financing or restructure their HUD-
insured mortgage debt, or (ii) sell their Multi-Family
Properties. In some cases, the Multi-Family Owning Partnerships
will make certain improvements to the properties and may not
renew rental assistance contracts as part of a strategy to
reposition those Multi-Family Properties as market-rate, non-
subsidized properties. Seventeen of such Multi-Family Owning
Partnerships have refinanced their HUD-insured mortgages with
conventional mortgage financing and a number of others have
applications for commitments pending. To the extent that any of
these Multi-Family Owning Partnerships complete such actions, the
Company believes that the ability of the Investing Partnerships
relating to the Multi-Family Properties (the "Multi-Family
Investing Partnerships") to make payments to the Company on their
respective Multi-Family Notes will be enhanced and accelerated.
In Fiscal 1998, the Company received $2.6 million of excess
refinancing proceeds as holder of the related Multi-Family Notes
and expects to receive excess refinancing proceeds from the
refinancing of other Multi-Family Properties in Fiscal 1999.
However, there can be no assurance that these additional Multi-
Family Owning Partnerships will be able to refinance their
mortgages or will be able to successfully reposition any of the
Multi-Family Properties.
In addition, one Multi-Family Property and controlling
interests in eight Multi-Family Owning Partnerships were sold to
third parties in Fiscal 1998. The Company succeeded to these
controlling interests by acquiring the collateral securing the
related Multi-Family Notes upon such Notes becoming due without
being paid and concurrently selling such collateral to third
parties. The Company recognized $26.4 million in sale proceeds
as a result of these sales in Fiscal 1998. A significant portion
of sales proceeds were generated from the sales to a single
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unrelated third party. Due to the fact that Contracts of Sale
have been entered into regarding one additional Multi-Family
Property, letters of intent have been executed for the sale of
two additional Multi-Family Properties, and other Multi-Family
Owning Partnerships are currently negotiating the terms of offers
to purchase their properties, the Company expects to receive
additional sale proceeds from such transactions which occur in
Fiscal 1999. There can be no assurance, however, that additional
sale transactions will actually close.
The future growth of the Company will be based upon the
continued acquisition and Syndication of existing senior living
communities and the construction of Development Communities,
which the Company presently does not intend to Syndicate. The
Company anticipates that it will acquire between six and twelve
existing senior living communities over the next two years. It
is anticipated that acquisitions of existing senior living
communities will be arranged by utilizing a combination of
mortgage financing and Syndications. The Company holds contracts
to acquire senior living communities in Las Vegas, Nevada,
Radcliff, Kentucky and Denver, Colorado respectively. The Company
regularly obtains acquisition mortgage financing from two
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 arrange for acquisitions of existing
senior living communities in part by Syndications.
In a typical Syndication, limited partners 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 limited partners to generate cash when needed,
including to pursue its Development Plan and to repay debt.
The Company anticipates that the proceeds of the Company's
initial public offering, funds generated by its business
operations and construction mortgage financing will provide
sufficient funds to pursue its Development Plan (as described
above) for at least 6 months at the projected rate of
development. The Company will use the proceeds of (i)
anticipated joint venture arrangements of Development
Communities, (ii) refinancings or sale-leasebacks of stabilized
Development Communities at higher principal amounts than the
original construction financing, (iii) additional long-term
leases or similar forms of financing which require the investment
of little or no capital on the part of the Company, and/or (iv)
may use funds raised through the issuance of securities, to
continue with its Development Plan for more than the next 6
months at its projected rate of development. There can be no
assurance that funds generated by these potential sources will be
available or sufficient to complete the Company's Development
Plan. In addition, there are a number of circumstances beyond
the Company's control and which the Company cannot predict that
may result in the Company's financial resources being inadequate
to meet its needs. A lack of available funds may require the
Company to delay, scale back or eliminate some of the Development
Communities that are currently contemplated in its Development
Plan.
The first new Development Communities developed pursuant to
the Company's Development Plan are in Texas. The Company has
completed construction with mortgage financing on three
Development Communities in Texas. The Company has commenced
construction with mortgage financing on four Development
Communities in Texas. The Company has options to acquire sites
in Knoxville, Tennessee and Jackson, Tennessee, and is actively
negotiating to obtain control of additional sites in the
Southeast and Midwest. The Company is negotiating with several
lenders to obtain financing to develop these sites. The Company
has entered into joint venture arrangements with a third party
pursuant to which it has sold 50% interests in four Development
Communities located in Texas. The Company intends to enter into
similar joint venture arrangements with regard to future
Development Communities it develops with mortgage financing.
The Company has, and may in the future, utilize long-term
lease financing arrangements to develop and operate new
Development Communities. The Company has obtained financing of
$37.7 million from Capstone for 100% of the development cost of
four Development Communities that are being operated by the
Company pursuant to long-term leases with Capstone.
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The Company is actively engaged in negotiations with other
mortgage and long-term lease lenders to provide additional
construction financing. The Company anticipates that most of the
construction mortgage loans it obtains to finance the development
and lease-up costs of new Development Communities will contain
terms where the lender will fund at least 80% of such costs,
requiring the Company to contribute approximately 20% of such
costs.
STOCK BUYBACK
On March 22, 1999, the Board of Directors authorized the
Company to purchase up to 300,000 shares of the Company's common
stock. As of April 30, 1999, the Company had purchased 25,600
shares at an average price of $6.796 per share.
Other than as described herein, management is not aware of
any other trends, events, commitments or uncertainties that will,
or are likely to, materially impact the Company's liquidity.
YEAR 2000 UPDATE
Year 2000 Overview - The Year 2000 issue is the result of
many computer systems and non-information technology systems
which rely upon embedded computer technology using only the last
two digits to refer to a year and therefore being unable to
distinguish between the years 1900 and 2000. If not corrected,
many computer applications that are date sensitive could fail or
create erroneous results. As part of the process of upgrading
its internal computer hardware and software and in anticipation
of the Year 2000 issue, the Company began to audit, inventory,
modify and replace its mission critical software and hardware
(including personal computers, spread sheets, and word
processing) in its Fort Lee, New Jersey and Boca Raton, Florida
corporate offices in 1997 ("Year 2000 Project"). During 1998,
the Company's Year 2000 Project was extended to include software
and hardware located at the Syndicated Communities and the
Development Communities, "embedded technology" (such as
telephones, fax machines, copiers and postage machines), property
and corporate facilities (such as security/fire systems,
emergency call systems, elevators, and HVAC systems) and business
relationships with governmental agencies, utilities and material
third party vendors, and service providers.
The Company has separate computer hardware and software
systems at each of its Fort Lee, New Jersey and Boca Raton,
Florida offices. Each office has an intra-office network. None
of the Syndicated Communities or Development Communities are part
of a computer network. The Company is using a multi-step
approach in conducting its Year 2000 Project. These steps are:
inventory, assessment, remediation and testing, and contingency
planning. The first step, an inventory of all systems and
devices with potential year 2000 problems has been completed.
The next step, an assessment of such inventory to determine the
state of year 2000 readiness for material systems and devices has
also been completed for the Company's two offices and it has been
completed at the majority of the Syndicated Communities and
Development Communities. A majority of the remediation and
testing of the Company's software and hardware has already been
completed and full completion is anticipated to occur by July 31,
1999. To date, the Company has updated or replaced the
following financial and accounting systems with Year 2000
compliant systems: accounting servers and related hardware,
accounts payable systems, accounts receivable systems, general
ledgers, cash management programs and payroll systems. In
addition, the Company has updated its construction server and
data base as well as the network software located in the
Company's two offices and replaced substantially all of the desk-
top personal computers located therein.
However, even if the Company is successful in becoming year
2000 compliant, the Company remains at risk from year 2000
failures caused by key third parties. The Company has therefore
initiated efforts with key third parties to assess and wherever
possible remediate Year 2000 issues. In most cases, the Company
will be relying upon statements from such entities as to the Year
2000 readiness of their systems and will not attempt any
independent verification. To date, the Company has not received
sufficient information from such entities to complete its
41
<PAGE>
assessment of their year 2000 compliance. In addition, the
Company cannot predict the outcome of other companies'
remediation efforts.
Year 2000 Costs - The total cost associated with the Year
2000 Project to become Year 2000 compliant is not expected to be
material to the Company's financial position. The Company
currently plans to complete the Year 2000 Project by July 31,
1999. The cost of the Company's total Year 2000 Project is
based on presently available information. The Company does not
separately track the internal costs incurred for the Year 2000
Project. Such costs are principally the related payroll costs
for its information systems group. The total remaining cost of
the year 2000 Project is estimated at approximately $50,000.
Substantially all of this $50,000 is related to the cost to
replace software and computers. To date, the Company incurred
approximately $25,000 related to the Year 2000 Project.
Substantially all of this $25,000 is related to the cost to
replace software and computers. The costs of the project and the
date on which the Company plans to complete the Year 2000
modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third
parties' Year 2000 preparedness and other factors.
Risks - The failure to correct a material Year 2000 problem
could result in an interruption in, or a failure of, certain
normal business activities or operations. The Company believes
that all material Year 2000 problems which are within its control
will be corrected by July 31, 1999 and therefore such problems
are not anticipated to have a material adverse affect on the
Company's financial position and results of operations. Even if
the Company successfully remediates its year 2000 issues, it can
be materially and adversely affected by failures of third parties
to remediate their own Year 2000 issues. The Company believes
that the most reasonably likely worst case scenario is the loss
of utility service (telecommunications and power) at the
Company's corporate offices, and all or some of the senior living
communities it operates. Based upon procedures which are
currently in place and the contingency plans which are being
prepared and anticipated to be put in place, such a scenario is
not expected to have a material adverse affect on the Company's
financial position and results of operations.
Contingency Plans - Contingency plans are anticipated to be
prepared so that the Company's critical business processes can be
expected to continue to function on January 1, 2000 and beyond.
Such plans are anticipated to be developed by July 31, 1999. These
plans will attempt to mitigate both internal risks as well as
potential risks due to business relationships with third parties.
NEW ACCOUNTING PRONOUNCEMENTS
In June of 1998, the FASB issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The Company's use of derivative instruments has
consisted of treasury bill locks related to two specific
mortgage debt financings. While the Company has not completed its
analysis of Statement No. 133 and has not made a decision
regarding the timing of adoption, it does not believe that
adoption will have a material effect on its financial position
and results of operations based on its current use of derivative
instruments.
42
<PAGE>
ITEM 7A. QUANTATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET
RISK.
Interest Rate Risk
The Company is subject to market risk from fluctuations in
interest rates related to its borrowing activities. The majority
of the Company's debt is fixed rate debt. For fixed rate
debt, changes in interest rates do not affect the Company's
earnings or cash flow. Since the Company does not have an
obligation to prepay fixed rate debt until maturity, interest
rate risk should not have a material affect on the fixed rate
debt until the Company is required to refinance such debt. The
table below details the principal cash repayments and the related
weighted average interest rates of the Company's fixed rate and
variable rate debt based upon expected maturity dates and
principal balances as of the first day of each fiscal year. The
weighted average interest rate for the variable rate debt is based
on the interest rates in effect at January 31, 1999.
Principal Amounts by
Expected Maturity Dates
1999 2000 2001 2002
---- ---- ---- ----
Long-Term Variable Rate Debt 16.2 19.8 6.1 4.2
(millions)
Weighted Average Interest
Rate 9.24% 9.58% 9.97% 9.97%
Long-Term Fixed Rate
Debt (millions) 27.5 29.9 35.3 21.2
Weighted Average Interest
Rate 12.51% 12.38% 12.38% 12.32%
43.8 49.7 41.4 25.4
========== ========== ========== ==========
Principal Amounts by
Expected Maturity Dates
2003 Thereafter Total
---- ---------- -----
Long-Term Fixed Rate Debt 1.1 0 47.5
Weighted Average Interest Rate 10.06
Long-Term Variable Rate Debt 9.0 33.7 156.6
Weighted Average Interest Rate 12.03% 11.78%
10.1 33.7 204.1
========== ========== ===========
The Company's long term fixed rate debt was issued in
private placements at par and no public or secondary market
exists for such debt. In the Company's estimation, the fair
value of its debt is to equal the outstanding principal amount
of such debt.
Except as described in this paragraph, the Company does not
hedge its interest rate risk. As of January 31, 1999, the
Company has entered into a treasury bill lock under the terms of
one of the first mortgage loans incurred as part of the
Development Plan. The treasury bill lock was intended to reduce
the impact of interest rate risk on the ability of the Company to
refinance the relevant mortgage loan. As of such date, the
notional amount of such financial instrument was $8,475,000 and
its market value as calculated by the counterparty to the
transaction was ($330,000). The maturity date of such financial
instrument is February 15, 2012. The Company does not enter into
financial instruments transactions for trading purposes.
43
<PAGE >
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
----------
PAGE
Independent Auditors' Reports 45, 46
Consolidated Balance Sheets as of January 31, 1998
and 1999 47
Consolidated Statements of Operations for the Years
Ended January 31, 1997, 1998 and 1999 48
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended January 31, 1997, 1998
and 1999 49
Consolidated Statements of Cash Flows for the Years
Ended January 31, 1997, 1998 and 1999 50
Notes to Consolidated Financial Statements 51
44
<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 sheet of
Grand Court Lifestyles, Inc. and subsidiaries as of January 31,
1999 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended.
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
audit.
We conducted our audit 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 audit provides 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, 1999, and the results of their operations and their
cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
April 16, 1999
45
<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 sheet of
Grand Court Lifestyles, Inc. and subsidiaries as of January 31,
1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in
the period ended January 31, 1998. 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, 1998, and the results of their operations and their
cash flows for each of the two years in the period ended January
31, 1998 in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 27, 1998
46
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, except per share data)
----------------------------------------------------------------
JANUARY 31,
---------------
1998 1999
---- ----
ASSETS
Cash and cash equivalents . . . . . . $11,964 $22,784
Notes and receivables - net . . . . . 231,140 227,104
Investments in partnerships . . . . . 3,924 4,945
Construction in progress . . . . . . 26,241 11,617
Property, buildings and equipment -
net . . . . . . . . . . . . . . . . -- 35,294
Other assets - net . . . . . . . . . 22,530 17,570
------- -------
Total assets . . . . . . . . . . . . $295,799 $319,314
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Loans and accrued interest payable . $161,850 $169,781
Construction and mortgage loans 22,595 35,286
payable . . . . . . . . . . . . . .
Notes and commissions payable . . . . 5,299 4,158
Other liabilities . . . . . . . . . . 3,531 5,767
Deferred income . . . . . . . . . . . 76,112 68,596
------- -------
Total liabilities . . . . . . . . . . 269,387 283,588
------- -------
Commitments and contingencies . . . .
Stockholders' equity . . . . . . . .
Preferred Stock, $.001 par value -
authorized, 15,000 shares; none
issued and outstanding . . . . . . -- --
Common Stock, $.01 par value -
authorized, 40,000 shares; issued
and outstanding, 15,000 and 17,800
shares, respectively . . . . . . . 150 178
Paid-in capital . . . . . . . . . . . 51,189 73,451
Accumulated deficit . . . . . . . . . (24,927) (37,903)
------- ------
TOTAL STOCKHOLDERS' EQUITY . . . . . 26,412 35,726
------- -------
Total liabilities and stockholders' $295,799 $319,314
equity . . . . . . . . . . . . . . ======= =======
See Notes to Consolidated Financial Statements.
47
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
----------------------------------------------------------------
YEARS ENDED JANUARY 31,
----------------------------
1997 1998 1999
---- ---- ----
Revenues:
Sales . . . . . . . $36,021 $38,135 $58,010
Syndication fee
income . . . . . . 7,690 7,923 7,283
Deferred income
earned . . . . . . 5,037 7,254 3,701
Interest income . . 13,773 12,051 12,349
Property management
fees from related
parties . . . . . 2,093 3,684 3,219
Equity in earnings
from partnerships 423 541 685
Senior living
revenues . . . . . -- -- 5,093
Other income . . . . -- 4,683 1,350
----- ------ ------
65,037 74,271 91,690
------ ------ ------
Cost and Expenses:
Cost of sales . . . 34,019 33,635 53,547
Selling . . . . . . 7,176 7,602 6,335
Interest . . . . . . 16,394 19,409 22,066
General and
administrative . . 7,796 8,437 10,388
Loss on impairment of
notes and
receivables . . . 18,442 -- --
Write-off of
registration costs -- 3,107
Officers'compensation 1,200 1,200 1,200
Senior living
operating expenses. -- -- 6,098
Depreciation and
amortization . . . 3,331 3,340 5,032
------ ------ -------
88,358 76,730 104,666
------ ------ -------
Net loss . . . . . . . . $(23,321) $(2,459) $(12,976)
====== ======= =======
Loss per common share $(1.55) $(0.16) $(0.74)
(basic and diluted) ====== ======= =======
Weighted average 15,000 15,000 17,455
common shares used . ====== ======= =======
See Notes to Consolidated Financial Statements.
48
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1997, 1998 AND 1999
(In Thousands)
----------------------------------------------------------------
COMMON COMMON
STOCK STOCK PAID-IN-
(SHARES) (DOLLARS) CAPITAL
------ ------- -------
Stockholders' equity 15,000 $150 $34,635
January 31, 1996 . .
Net loss . . . . . . . . (1,647)
Capital contribution . . 21,333
Distributions . . . . . .
------ ------ ------
Stockholders' equity
January 31, 1997 . . 15,000 150 54,321
Net loss . . . . . . . .
Distributions . . . . . . (3,132)
------ ------ ------
Stockholder's equity
January 31, 1998 . . 15,000 150 51,189
Net loss . . . . . . . .
Sale of 2,800 shares, net
of expenses of 2,800 28 22,262
$4,310 . . . . . . . ------ ------ ------
Stockholders' equity 17,800 $178 $73,451
January 31, 1999 . . ====== ====== ======
ACCUMULATED
DEFICIT TOTAL
------- -----
Stockholders' equity $ -- $34,785
January 31, 1996 . . .
Net loss . . . . . . . . . (21,674) (23,321)
Capital contribution . . . 21,333
Distributions . . . . . . . (794) (794)
------ ------
Stockholders' equity
January 31, 1997 . . . (22,468) 32,003
Net loss . . . . . . . . . (2,459) (2,459)
Distributions . . . . . . . (3,132)
------ ------
Stockholder's equity
January 31, 1998 . . . (24,927) 26,412
Net loss . . . . . . . . . (12,976) (12,976)
Sale of 2,800 shares, net 22,290
of expenses of $4,310 ------ ------
Stockholders' equity $(37,903) $35,726
January 31, 1999 . . . ====== =======
See Notes to Consolidated Financial Statements.
49
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
--------------------------------------------------------------------------
YEARS ENDED JANUARY 31,
-----------------------
1997 1998 1999
---- ---- ----
Cash flows provided (used) from operating
activities:
Net loss . . . . . . . . . . . . . . . $(23,321) $(2,459) $(12,976)
------ ------ ------
Adjustments to reconcile net loss to
net cash provided by (used)
operating activities:
Depreciation and amortization . . . . 3,331 3,340 5,032
Loss on impairment of notes and
receivables . . . . . . . . . . . 18,442 -- --
Reduction to allowance for
uncollectible notes receivable . -- (1,023) --
Deferred income earned . . . . . . . . (5,037) (7,254) (3,701)
Write-off of registration costs . . . -- 3,107 --
Other income (non-cash) . . . . . . . -- (3,132) --
Adjustment for changes in assets and
liabilities:
Accrued interest on notes and
receivables 715 (3,611) (1,780)
Notes and receivables . . . . . . . . 3,981 (4,107) 5,816
Commissions payable . . . . . . . . . 211 (503) 62
Other liabilities . . . . . . . . . . 375 (862) 2,236
Deferred income . . . . . . . . . . . 3,766 5,195 (3,815)
------ ------ ------
25,784 (8,850) 3,850
------ ------ ------
Net cash provided (used) by operating
activities . . . . . . . . . . . 2,463 (11,309) (9,126)
------ ------ ------
Cash flows used by investing activities:
Increase in investments . . . . . . . (449) (868) (1,021)
Property, buildings and equipment . . -- -- (10,803)
Increase in construction in progress (6,742) (19,499) (10,170)
------ ------ ------
Net cash used by investing
activities . . . . . . . . . . . (7,191) (20,367) (21,994)
------ ------ ------
Cash flows from financing activities:
Payments on loans payable . . . . . . (55,340) (44,178) (41,290)
Proceeds from loans payable . . . . . 57,874 63,400 49,221
Proceeds from construction and
mortgage loans payable . . . . . 2,750 19,845 12,691
Increase in other assets . . . . . . . (3,433) (13,624) 231
Payments of notes payable . . . . . . (179) (434) (1,521)
Proceeds from notes payable . . . . . -- 4,520 318
Net proceeds from initial public
offering -- -- 22,290
Distributions . . . . . . . . . . . . (794) -- --
------ ------ ------
Net cash provided by financing
activities . . . . . . . . . . . 878 29,529 41,940
------ ------ ------
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . (3,850) (2,147) 10,820
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . 17,961 14,111 11,964
------ ------ ------
Cash and cash equivalents, end of period . $14,111 $11,964 $22,784
====== ====== =======
Supplemental information:
Interest paid . . . . . . . . . . . . $16,739 $19,396 21,482
====== ====== =======
Non cash capital contribution . . . . $21,333 $ -- $ --
====== ====== =======
See Notes to Consolidated Financial Statements.
50
<PAGE>
GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
See Notes to Consolidated Financial Statements.
51
<PAGE>
GRAND COURT LIFESTYLES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1997, 1998, AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Grand Court Lifestyles, Inc. and subsidiaries (the "Company") was
formed pursuant to the merger of various Sub-chapter S
corporations which were wholly-owned by certain principal
stockholders of the Company (the "Principal Stockholders") and
the transfer of certain assets by and assumption of certain
liabilities of (i) a partnership that was wholly-owned by the
Principal Stockholders and (ii) the Principal Stockholders
individually. In exchange for the transfer of such stock, assets
and liabilities, the Principal Stockholders received shares of
the Company's common stock. These transactions are collectively
called the "reorganization". All of the assets and liabilities
were transferred at historical cost. The reorganization was
effective as of April 1, 1996 and accordingly, accumulated
deficit represents results of operations subsequent to that date.
Prior to the reorganization, the various Sub-chapter S
corporations and the partnership, which were wholly-owned by the
Principal Stockholders, were historically reported on a combined
basis.
The Company (i) filed a Restated Certificate of Incorporation on
March 13, 1997 that provides for, among other things, the
authorization of 40,000 shares of Common Stock and 15,000 shares
of Preferred Stock, (ii) on March 13, 1997 effected an
approximate 1,626.19-for-1 stock split of the issued and
outstanding Common Stock (all shares have been restated for prior
periods) and (iii) adopted a Stock Option Plan reserving for
issuance up to 2,500 shares of Common Stock pursuant to stock
options and other stock awards. (See Footnote 15).
LINES OF BUSINESS - The Company, a fully integrated provider of
senior living accommodations and services, acquires, develops and
manages senior living communities in 15 states in the Sun Belt
and the Midwest. The Company's revenues have been and are
expected to continue to be primarily derived from sales of
partnership interests ("Syndications") in partnerships it
organizes to acquire existing senior living communities
("Syndicated Communities"). As a result of the Company's
Syndication activities, limited partnerships ("Senior Living
Investing Partnerships") are formed whereby the Company retains a
1% to 1.5% general partnership interest. Investing Partnerships
generally own a 98.5% to 99% interest in partnerships that own
senior living communities ("Senior Owning Partnerships"). The
Company also arranges for the mortgage financing of the
Syndicated Communities and is involved in the development and
management of senior living communities. The Company has
established a development program (the "Development Plan")
pursuant to which it (i) is building new senior living
communities ("Development Communities") of which seven are
complete and in their initial lease up phase (individually a
"Development Community and cumulatively the "Development
Communities") and (ii) has commenced construction on three
additional Development Communities all of which are in Texas. The
Company owns the completed Development Communities or operates
them pursuant to long-term leases. Another source of income is
interest income on notes receivable.
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 Syndications 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 profit recognized has been reduced by
the estimated maximum reasonably possible exposure to loss.
Revenue from Syndications includes any syndication fees earned by
the Company. The Company determines the collectibility of the
sales price by evidence supporting the buyers' substantial
52
<PAGE>
initial and continuing investment in the Syndicated Communities
as well as other factors such as age, location and cash flow of
the underlying property. In addition, three of the Syndications
have involved the construction of additional apartment units and
common space at the acquired Syndicated Communities. The Owning
Partnerships hire independent third party contractors to do the
construction pursuant to maximum price contracts. The new
construction generates additional risks, such as increased costs
due to change orders, which the Company believes are not
material.
The Company has deferred income on sales to Investing
Partnerships of interests in Owning Partnerships. The Company
has arranged for the private placement of limited partnership
interests in Investing Partnerships. Offerings of interests in
Investing Partnerships which were formed to acquire controlling
interests in Owning Partnerships which own senior living
properties ("Senior Living Owning Partnerships") provide that the
limited partners are entitled to receive for a period not to
exceed five years distributions equal to between 11% and 12% of
their then paid-in scheduled capital contributions. Pursuant to
management contracts with the Senior Living Owning Partnerships,
for such five-year period, the Company is required to pay to the
Senior Living Owning Partnerships, amounts sufficient to fund (i)
any operating cash deficiencies of such senior living Owning
Partnership and (ii) any part of such 11% and 12% return not paid
from cash flow from the related property (which the Senior Living
Owning Partnerships distribute to the Investing Partnerships for
distribution to limited partners) (collectively, "Management
Contract Obligations"). The amount of deferred income for each
property is calculated in a multi-step process. First, based on
the property's cash flow in the previous fiscal year, the
probable cash flow for the property for the current fiscal year
is determined and that amount is initially assumed to be constant
for each remaining year of the Management Contract Obligations
period (the "Initial Cash Flow"). The Initial Cash Flow is then
compared to the Management Contract Obligations for the property
for each remaining year of the five-year period. If the Initial
Cash Flow exceeds the Management Contract Obligations for any
fiscal year, the excess Initial Cash Flow is added to the assumed
Initial Cash Flow for the following fiscal year and this adjusted
Initial Cash Flow is then compared to the Management Contract
Obligations for said following fiscal year. If the Initial Cash
Flow is less than the Management Contract Obligations for any
fiscal year, a deferred income liability is created in an amount
equal to such shortfall and no adjustment is made to the Initial
Cash Flow for the following year. Such deferred income liability
represents the estimated maximum reasonably possible exposure to
loss as discussed above. As this process is performed for each
property on a quarterly basis, changes in a property's actual
cash flow will result in changes to the assumed Initial Cash Flow
utilized in this process and will result in increases or
decreases to the deferred income liability for an individual
property. Any increase in deferred income liabilities increases
the cost of sales relating to the sale. The payment of the
Management Contract Obligations, however, will generally not
result in the recognition of expense unless the property's actual
cash flow for the year is less than the expected Initial Cash
Flow for that year, as adjusted, and as a result thereof, the
amount paid by the Company in respect of the Management Contract
Obligations is greater than the amount assumed in establishing
the deferred income liability. Such expense amounted to $2,500,
$5,900 and $8,300 for the years ended January 31, 1997, 1998,
1999, respectively, and such expense is included as a component
of cost of sales. Although the Company does not intend to do so
in the future, from time to time, the Company has made
discretionary payments to Owning Partnerships beyond the
Management Contract Obligations period for the purpose of making
distributions to limited partners. If, however, the property's
actual cash flow is greater than the Initial Cash Flow for the
year, as adjusted, the Company's earnings will be enhanced by the
recognition of deferred income earned and, to the extent cash
flow exceeds Management Contract Obligations, incentive
management fees. The Company recognized such incentive
management fees in the amount of $1,200, $2,800 and $2,200 for
the years ended January 31, 1997, 1998 and 1999 respectively.
The Company accounted for the sales of interests in Owning
Partnerships which own multi-family properties ("Multi-Family
Owning Partnerships") 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. At
the time of sale, the Company deferred all future income to be
recognized on these transactions until cash is received.
53
<PAGE>
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 and other partnership receivables, if any, to the
value of the underlying property less any encumbrances to
determine if an allowance is required for impairment. A
significant portion of the interest income on multi-family notes
is recognized as cash is collected.
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.
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include those of the Company and its subsidiaries.
The effects of all significant intercompany transactions have
been eliminated.
DEFERRED LOAN COSTS - Costs incurred in connection with obtaining
long-term financing have been deferred and are amortized over the
term of the financing.
CONSTRUCTION IN PROGRESS - Costs incurred in connection with the
construction and development of Development Communities prior to
the completion of construction are capitalized. Such costs
include the capitalization of interest during the construction
period. If a project is discontinued or capitalized costs are
deemed not recoverable, the applicable capitalized project costs
are expensed.
INITIAL LEASE-UP COSTS - The Company has capitalized the initial
lease-up costs associated with the Development Communities placed
in service based upon units unavailable for rental.
DEPRECIATION AND AMORTIZATION - The Company depreciates and/or
amortizes the costs associated with its Development Communities
using the straight line method over the life of the applicable
asset.
INVESTMENTS - The Company accounts for its interests in
Syndicated senior living 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
estimated life of the underlying partnership. The unamortized
portion of such difference is $2,515 and $3,425 as of January 31,
1998 and 1999 respectively.
PROPERTY MANAGEMENT FEES - Property management fees earned for
services provided to related parties are recognized as revenue
when related services have been performed.
RECLASSIFICATION - Certain amounts in prior years have been
reclassified to conform with current year presentation.
EARNINGS PER SHARE - Earnings per share on a basic and diluted
basis, as required by Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", is calculated based upon
the average shares outstanding during the periods. The effect of
stock options outstanding during fiscal 1998 is anti-dilutive.
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COMPREHENSIVE INCOME - Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", requires the
reporting of all items which are required to be recognized under
generally accepted accounting principles as components of
comprehensive income in the financial statements. The Company has
no items of comprehensive income.
STOCK OPTIONS AND COMPENSATION - Effective January 1, 1996, the
Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation". The Company applies the intrinsic value-based
methodology permitted by SFAS No. 123 in accounting for stock
options issued to employees. Under the intrinsic value-based
methodology, stock-based compensation cost is the excess of the
quoted market price of the Company's common stock at the grant
date over the amount the employee must pay for the stock
(exercise price). The Company generally grants stock options with
an exercise price equal to the stock price at the date of grant
and accordingly, no compensation cost is recognized.
NEW ACCOUNTING PRONOUNCEMENTS - In June of 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
This statement established accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The Company's use of derivative instruments has
consisted of a treasury bill lock related to two specific debt
financings. While the Company has not completed its analysis of
SFAS No. 133 and has not made a decision regarding the timing of
adoption, it does not believe that adoption will have a material
effect on its financial position and results of operations based
on its current use of derivative instruments.
3. 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 are from related parties, primarily
Syndicated partnerships, and consist of the following:
JANUARY 31,
----------------
1998 1999
---- ----
Notes receivable multi-family
(a)(e) . . . . . . . . . . . . . . $173,598 $166,562
Notes and accrued interest receivable
-- adult living (b) . . . . . . . . 6,503 6,776
Other partnership receivables (c)(e) 60,265 63,313
Accrued interest receivable . . . . . 883 562
------- -------
241,249 237,213
Less allowance for uncollectible
receivables (d) . . . . . . . . . . 10,109 10,109
------- -------
$231,140 $227,104
======= =======
At January 31, 1998 and 1999, the carrying value of impaired
notes receivable, net of related deferred income, was
approximately $41,106 and $29,721, respectively. Interest income
on impaired notes is recognized on the cash basis. Such income
recognized was $1,261, $1,342 and $826 for the years ended
January 31, 1997, 1998 and 1999 respectively.
(a) The Company has notes receivable from the Syndicated
Investing Partnerships which were formed to acquire controlling
interests in Owning Partnerships which own multi-family
properties ("Multi-Family Notes"). The Multi-Family Notes
55
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generally have maturity dates ranging from ten to fifteen years
from the year of syndication. At January 31, 1999, 84 of the 157
notes (approximate face value $80,386) have reached their final
maturity dates and these final maturity dates have been extended
by the Company. Two multi-family properties relating to two
extended Multi-Family Notes were refinanced, five Multi-Family
properties relating to eight previously extended Multi-Family
Notes were sold in Fiscal 1998 and a contract to sell one Multi-
Family Property and letters of intent to sell two Multi-Family
Properties whose notes have been extended have been executed. It
is the Company's intention to collect the principal and interest
payments on the Multi-Family notes from the cash flows
distributed by the related multi-family properties and the
proceeds in the event of a sale or refinancing. The Company
expects to extend maturities of other multi-family notes.
Interest income on all of the Multi-Family Notes amounted to
$6,949, and $7,481 and $7,449 for the years ended January 31,
1997, 1998 and 1999, respectively.
(b) The Company has notes receivable from the Syndicated
Investing Partnerships which were formed to acquire controlling
interests in Owning Partnerships which own senior 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 partnership
interests. The notes represent senior indebtedness of the
related Investing Partnerships, and are collateralized by the
respective interests in the Owning Partnerships. 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. Limited Partners are allowed to prepay
their capital contributions. These prepayments of capital
contributions do not result in the prepayment of the related
purchase notes held by the Company. Instead, such amounts are
loaned to the Company at a rate of between 11% and 12% by the
Investing Partnerships. As a result of such loans and the
crediting provisions of the related purchase agreements, the
Company records the notes receivable corresponding to the
purchase notes net of such loans. Therefore, these prepayments
act to reduce the recorded value of the Company's notes
receivable.
(c) Other partnership receivables substantially represent
reimbursable expenses and advances made to the multi-family
partnerships. These amounts do not bear interest and have no
specific repayment date. It is the Company's intention to
collect these receivables from the excess cash flows distributed
by the related multi-family properties and the proceeds in the
event of a sale or refinancing.
(d) Allowance for Uncollectible Notes Receivable:
Charged Balance
Balance at to Costs Reductions at End
Beginning and to of
of Period Expenses Allowance Period
--------- -------- --------- ------
Year Ended January 31, 1997
Allowance for notes receivable $14,023 18,442 21,333 $11,132
Year Ended January 31, 1998
Allowance for notes receivable $11,132 -- 1,023 $10,109
Year Ended January 31, 1999
Allowance for notes receivable $10,109 -- -- $10,109
The Multi-Family Notes relating to nine Owning Partnerships that
filed petitions under Chapter 11 of the U.S. Bankruptcy Code (the
"Chapter 11 Petitions") and the one Owning Partnership which lost
its property pursuant to an uncontested foreclosure sale of its
property (said ten Owning Partnerships are, collectively, the
"Protected Partnerships") were first deemed impaired when the
mortgages on their respective properties went into default, which
defaults occurred between August 1989 and June 1994. Once in
default, the holders of these mortgages assigned them to the
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United States Department of Housing and Urban Development
("HUD"). The Protected Partnerships then attempted to negotiate,
and in some cases obtained, workout agreements with HUD.
Although it could temporarily lower or suspend debt service
payments during the term of a workout agreement, HUD, unlike a
conventional lender, did not have the legal authority to
restructure the defaulted mortgages it holds by permanently
lowering interest rates or reducing the principal amount of such
mortgages. HUD then sold the mortgages (subject to those workout
agreements which were in place) at auctions in September 1995 and
June 1996. Since the new mortgage holders did not have HUD's
legal constraints as to the restructuring of mortgages they hold,
the Protected Partnerships began negotiations with the new
holders to restructure their mortgages or purchase them at a
discount. The Protected Partnerships could not reach an
agreement with the new mortgage holders and the new mortgage
holders began to threaten and institute foreclosure proceedings.
The Principal Stockholders and one of their affiliates
transferred the partnership interests they owned personally in
various partnerships that own multi-family properties (the
"Assigned Interests") to the Investing Partnerships that owned
interests in the Protected Partnerships in July 1996. Seven of
the Protected Partnerships filed Chapter 11 Petitions in August
1996, two of the Protected Partnerships filed Chapter 11
Petitions in February 1997, and one of the Protected Partnerships
did not file a Chapter 11 Petition and allowed the holder of the
mortgage to foreclose on its property due to the unlikelihood of
confirming a plan of reorganization. The Company established
appropriate reserves during these time periods to reflect the
varying extent of impairment of these Multi-Family Notes in view
of the state of facts at such time. In that the Principal
Stockholders transferred the Assigned Interests in July 1996, the
Company recorded a $21,300 capital contribution in Fiscal 1996.
The bankruptcy petitions and risk of loss faced by the Protected
Partnerships resulted in the Company recording a non-cash loss of
$18,400 in the year ending January 31, 1997 (representing the
recorded value of the notes receivable relating to the Protected
Partnerships, net of deferred income and net of any previously
established reserves) due to the deemed full impairment of these
notes receivable. Seven of the Chapter 11 petitions resulted in
the respective Protected Partnerships losing their properties
through foreclosure or voluntary conveyances of their properties.
The remaining two Protected Partnerships successfully emerged
from their bankruptcy proceedings in January, 1998 by paying off
their mortgages at a discount with the proceeds of new mortgage
financings, resulting in these properties having current, fully
performing mortgages. This allowed the Company to recognize non-
cash other income of $3,100 in fiscal 1997. The two Investing
Partnerships related to these Protected Partnerships have
transferred the respective Assigned Interests back to the
Principal Stockholders and their affiliate. This transfer is
recorded as a non-cash distribution to the Principal Stockholders
for the release of the previously assigned collateral of $3,100.
The Company neither owns nor manages these properties, nor is the
general partner of these Owning Partnerships, but, rather, holds
the related Multi-Family Notes as receivables. The Company,
therefore, has no liability in connection with these mortgage
defaults or bankruptcy proceedings.
Fourteen of the Multi-Family Owning Partnerships remain in
default on their respective mortgages. These Multi-Family Owning
Partnerships have been negotiating with the respective mortgage
lenders and, in some cases, have obtained workout agreements with
terms of from one to nine years, pursuant to which the lenders
generally agree during the term of the agreement not to take any
action regarding the mortgage default and to accept reduced debt
service payments for a period of time, with the goal of
increasing property cash flow to enable the property to fully
service its mortgage. One of these fourteen remaining Multi-
Family Owning Partnerships whose mortgage is in default has had
its application to refinance its mortgage loan accepted and
believes that the refinancing will close. Other Multi-Family
Owning Partnerships intend to cure their mortgage defaults by
refinancing their mortgages in the future, although there can be
no assurance that this will be the case. Furthermore, it should
be noted that in fiscal 1998 and previous years, six Multi-Family
Owning Partnerships whose mortgages had been in default, cured
these defaults by refinancing their mortgage debt with new
mortgages and now have fully performing mortgages. As of January
31, 1999, the recorded value, net of deferred income, of the
Multi-Family Notes and "Other Partnership Receivables" held by
the Company relating to these fourteen Multi-Family Owning
Partnerships was $29,721. The Company has established reserves of
$10,100 to address the possibility that these notes and
receivables may not be collected in full.
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<PAGE>
(e) The Multi-Family properties were typically built or acquired
with the assistance of programs administered by HUD that provide
mortgage insurance, favorable financing terms and/or rental
assistance payments to the owners. As a condition to the receipt
of assistance under these and other HUD programs, the properties
must comply with various HUD requirements including limiting
rents on these properties to amounts approved by HUD. Various
initiatives have been instituted by HUD, including a program to
restructure its housing assistance programs. Due to uncertainty
regarding the final policies that will result from these
initiatives and numerous other factors that affect each property,
which can change over time (including the local real estate
market, the provisions of the mortgage debt encumbering the
property, prevailing interest rates and the general state of the
economy) the Company cannot determine whether these initiatives
will have an impact on the Multi-Family Properties and, if there
is an impact, whether the impact will be positive or negative.
Further, there can be no assurance that changes in federal
subsidies will not be more restrictive than those currently
proposed or that other changes in policy will not occur. Any
such changes could have an adverse effect on the Company's
ability to collect its receivables relating to the Multi-Family
Properties.
5. CONSTRUCTION IN PROGRESS
The Company has capitalized costs which include interest
associated with its construction and development of properties it
is building. If a project is discontinued, all capitalized
project costs are expensed. Such interest capitalized for years
ended January 31, 1998 and 1999 was $1,551 and $1,849,
respectively.
6. PROPERTY, BUILDINGS AND EQUIPMENT-NET
Property, buildings and equipment are comprised as follows:
Life Cost
---- ----
Land . . . . . . . . . . . . . -- $ 4,774
Buildings . . . . . . . . . . . 40 yrs 25,562
Equipment . . . . . . . . . . . 4-7 yrs 1,244
Leasehold improvements . . . . life of lease 4,017
Accumulated depreciation and
amortization . . . . . . . . (303)
------
Net property, building and $35,294
equipment . . . . . . . . . . ======
7. OTHER ASSETS
Other assets are comprised as follows:
JANUARY 31,
------------------
1998 1999
---- ----
Deferred loan costs (a) . . . . . $9,681 $11,642
Investment in cooperative
apartment building (b) . . . . . 1,782 1,782
Unsold subscription units (c) . . 111 --
Deferred registration costs (d) . 397 --
Investment held for resale (e) . 7,140 --
Other assets . . . . . . . . . . 3,419 4,146
------ ------
$22,530 $17,570
====== ======
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<PAGE>
(a) Financing costs of $5,325 and $6,501 were deferred during
the years ended January 31, 1998 and 1999, respectively. These
costs are being amortized over the term of the related debt using
the straight-line method over periods ranging from one to ten
years.
(b) The Company owns shares in a cooperative apartment building
and owns interests in a second mortgage collateralized by such
cooperative apartment building.
(c) The Company had deferred $111 of remaining costs associated
with the financing of the acquisition of senior living
communities by arranging for the sale of partnership interests,
which were substantially sold at January 31, 1998. Upon
completion of these transactions such costs were charged to cost
of sales.
(d) The Company had capitalized costs relating to the initial
public offering. These costs were charged against additional
paid-in capital upon the close of the initial public offering in
March, 1998.
(e) The Company purchased a senior living community in December
1997 for Syndication and Syndicated such property in the first
and second quarters of Fiscal 1998.
8. LOANS AND ACCRUED INTEREST PAYABLE
Loans payable consists of the following:
JANUARY 31,
-------------------
1998 1999
---- ----
Banks (including mortgages) (a) (b) $ 35,706 $ 32,435
Other, principally debentures (c) 126,144 137,346
------- -------
$161,850 $169,781
======= =======
(a) The bank loans bear interest per annum at the banks' prime
rates plus 1% to 3%. 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 is payable in four to five years.
Generally the bank loans are collateralized by the Company's
interests in the assigned limited partner investor notes which
serve as collateral for the respective purchase notes. The prime
rate of interest at January 31, 1998 and 1999 was 8.5% and 7.75%,
respectively.
(b) The Company's debt obligations contain various covenants and
default provisions, including provisions relating to, in the case
of certain of such obligations, certain Investing Partnerships,
Owning Partnerships or affiliates of the Company. Pursuant to
one obligation, the Company is required to maintain a net worth
of no less than $35,300. Certain obligations of the Company
contain covenants requiring the Company to maintain maximum
ratios of the Company's liabilities to its net worth.. As of
January 31, 1999, the most restrictive covenant requires that the
Company maintain a ratio of liabilities to consolidated net worth
of no more than 10 to 1. In addition, certain obligations of the
Company provide that an event of default will arise upon the
occurrence of a material adverse change in the financial
condition of the Company or upon default in other obligations of
the Company.
(c) Debentures are collateralized by various purchase notes and
investor notes related to pre-1986 Syndication of Multi-Family
Properties. All loans mature in 1999 through 2005 and bear
interest rates of 11% to 12% per annum.
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<PAGE>
Future annual maturities of all of the Company's loans
payable, excluding interest, over the next five years and
thereafter, are as follows:
2000 . . . . . . . . . . $29,406
2001 . . . . . . . . . . 35,253
2002 . . . . . . . . . . 38,266
2003 . . . . . . . . . . 22,076
2004 . . . . . . . . . . 10,058
Thereafter . . . . . . . 33,725
-------
168,784
Accrued interest . . . . 997
-------
$169,781
=======
9. CONSTRUCTION AND MORTGAGE LOANS PAYABLE
During the years ended January 31, 1998 and 1999, pursuant to the
Company's development plan, first mortgage loans were obtained to
finance approximately 80% of the costs of developing six new
senior living communities. The interest rate on four of the
loans equals the 30 day LIBOR plus 2 3/4% per annum. The 30-day
LIBOR rate was 5.63% at January 31, 1999. The fifth loan bears
interest at the rate of the prime rate plus 1.5% per annum. The
sixth loan bears interest at the bank's prime rate for fifteen
months then converts to LIBOR plus 2 3/4% per annum for the
following twenty four months. These loans mature between
November, 1999 and February, 2001. As of January 31, 1998 and
1999, total funding under such first mortgage loans amounted to
$13,345 and $26,036, respectively.
Pursuant to the Company's development program, two limited
partnerships, in each of which the Company holds a 1% general
partnership interest, have issued limited partnership interests
for aggregate capital contributions of $9,250, 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 Development Communities. Such second mortgage loans bear
interest at the rate of 13.125% per annum. These second mortgage
loans mature between November 2001 and March 2002.
10. DEFERRED INCOME
Deferred income is comprised of:
JANUARY 31,
----------------------
1998 1999
---- ----
Multi-family . . . . . $66,342 $58,760
Senior living(a) . . . 9,770 9,836
------ ------
$76,112 $68,596
====== ======
(a) The aggregate gross amount (before considering the cash flow
from the properties) of Management Contract Obligations relating
solely to returns to limited partners for each of the Fiscal
Years 1999 through 2003 based on existing management contracts is
$19,776, $19,881, $15,790, $8,045 and $1,971, respectively. Such
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amounts of Management Contract Obligations are calculated based
upon scheduled capital contributions with respect to Fiscal Years
1999 through 2003. Actual amounts of Management Contract
Obligations in respect of such contracts will vary based upon the
timing and amount of such capital contributions. The cash flow
generated by the related properties is applied against the total
Management Contract Obligations and any remaining balance is
established as deferred income at year end.
11. STOCKHOLDERS' EQUITY
In March 1998, in an initial public offering of its common
stock, the Company sold 2,800 shares of its common stock at a
price of $9.50 per share. The net proceeds, after deducting for
all offering expenses, that the Company received as a result of
this offering was $22,300. The Company intends to use
approximately $19,300 of the net proceeds to finance the
development of new senior living communities and the remaining
$3,000 for working capital. As of January 31, 1999, $9,400 had
been used to finance the development of new senior living
communities and $1,600 has been used for working capital. The
Company has purchased a series of treasury bills with the
remaining net proceeds pending application of such funds.
In March 1999, the Board of Directors authorized the Company
to purchase up to 300 shares of the Company's common stock at
prevailing market rates.
12. INCOME TAXES
The Company became a taxable entity as of April 1, 1996, and
has incurred losses since that date. The Company believes it is
more likely than not that deferred tax assets in excess of
deferred tax liabilities may not be realizable in future years.
Accordingly, the Company has increased the valuation allowance
from $11,340 to $13,850. 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:
JANUARY 31,
-----------------
Deferred tax assets: 1998 1999
---- ----
Notes and receivables . . . . . $ 6,092 $ 6,260
Loans payable . . . . . . . . . 2,000 2,000
Investment in partnerships . . . 5,045 6,974
Net operating loss carryforward 3,847 7,441
Other . . . . . . . . . . . . . 147 136
------ ------
Total gross deferred tax assets . . . 17,131 22,811
Less valuation allowance . . . . (11,340) (13,850)
------ ------
Deferred tax assets net of valuation
allowance . . . . . . . . . . . . . 5,791 8,961
------ ------
Deferred tax liabilities:
Fixed Assets -- 313
Deferred income . . . . . . . . . . 4,562 7,016
Other . . . . . . . . . . . . . . 1,229 1,632
------ ------
Total gross deferred tax liabilities 5,791 8,961
------ ------
Net deferred tax assets (liabilities) $ -- $ --
====== ======
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The net operating loss carry forward as of January 31, 1999 was
approximately $19,000. A substantial portion of such loss carry
forward will expire January 31, 2013 and the remainder thereof
will expire through January 31, 2019.
13. COMMITMENTS AND CONTINGENCIES
The Company rents office space under a lease expiring
February 2000. Annual rent under such lease is approximately
$206. The Company entered into a ten year lease for additional
office space, commencing September 1, 1991. The annual rent is
approximately $330.
The Company is a general partner of all but one of the
Senior Living Owning Partnerships and the general partner of 37
of 46 senior living Investing Partnerships. The mortgage
financing of the Syndicated Communities and Syndicated Multi-
Family Properties are generally without recourse to the general
credit or assets of the Company except with respect to certain
specified obligations, including, for example, costs incurred for
the correction of hazardous environmental conditions. However,
except for such non-recourse obligations, as a general partner,
the Company, or a wholly-owned entity formed solely to be the
general partner, is fully liable for all partnership obligations,
including those presently unknown or unobserved, and unknown or
future environmental liabilities. The cost of any such
obligations or claims, if partially or wholly borne by the
Company, could adversely affect the Company's business, operating
results and financial condition. Although most of the mortgage
loans are non-recourse, (i) the Company is liable as a general
partner for approximately $12,808 in principal amount of
mortgage debt relating to six Syndicated Communities and (ii)
wholly-owned entities (whose only asset is a specific general
partner interest) are liable as general partners for
approximately $35,580 in principal amount of mortgage debt
relating to seven Syndicated Communities managed by the Company
as of January 31, 1999. In the case of the general partner
liabilities of the wholly-owned entities (whose only asset is a
specific general partner interest), the only assets of the
Company at risk of loss are the interests in the wholly-owned
entities.
As part of the Company's development program, on September
18, 1996 the Company entered into a master development agreement
with Capstone Capital Corporation ("Capstone") pursuant to which
Capstone will fund 100% of the development cost of four
Development Communities. The maximum amount Capstone will fund
per such agreement is approximately $37,764 of which $35,864 had
been funded as of January 31, 1999.
The Capstone arrangement provides that the Company will
operate these four Development Communities pursuant to long-term
operating leases with Capstone, which leases were entered into
upon the completion of construction and the satisfaction of
certain other conditions. The initial term of each lease is 15
years with five-year extension options. The cumulative annual
base rent which the Company is obligated to pay to Capstone for
the four Development Communities placed in service is $3,682 with
3% per annum annual increases.
The Company is involved in legal proceedings which have
arisen in the ordinary course of business. The Company intends
to vigorously defend itself in these matters and does not believe
that the outcome of these matters will have a material effect on
its financial statements.
14. RELATED PARTY TRANSACTIONS
The Company has transactions with related parties, primarily
Syndicated partnerships 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 senior living
communities.
In addition, the Company has amounts due from unconsolidated
affiliates of $1,600 and $3,400 as of January 31, 1998 and 1999,
respectively.
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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. These
two individuals also own small equity ownership interests in the
partnerships. The Company held notes receivable, aggregating
$100,838 net of deferred income, and receivables of $59,900 at
January 31, 1999 that were collateralized by the equity interests
in such partnerships. These individuals have provided personal
guarantees for certain of the Company's Investor Note Debt and
Unsecured Debt, and the obligations thereunder may continue. The
aggregate amount of such debt personally guaranteed by each is
approximately $32,493. In addition, such officers and certain
employees will devote a portion of their time to overseeing the
third-party managers of multi-family properties in which the
Company has financial interests in that it holds the related
Multi-Family Notes, but in which such officers have equity
interests and 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 most of the
Senior Living Owning Partnerships which own the Syndicated
Communities managed by the Company. The Company also is the
general partner for most of the senior living Investing
Partnerships that own equity interests in these Owning
Partnerships. In addition, the Company is the managing agent for
all of the Syndicated Communities in the Company's portfolio.
The Company has arranged for the acquisition of Syndicated
Communities and other properties 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 Syndicated Communities.
During Fiscal 1996, 1997 and 1998, the Company paid to Francine
Rodin, the wife of Bernard M. Rodin, the Company's Chief
Operating Officer, President, Chief Financial Officer and a
Director, $204, $133 and $153, respectively, as fees for
introducing to the Company certain broker/dealers that have
assisted the Company in its Syndications of partnership interests
and in placing other securities offered by the Company. Mrs.
Rodin will receive a fee with respect to any future sales through
such broker/dealers of Syndicated partnership interests and other
securities offered by the Company. During Fiscal 1996, Mrs.
Rodin received consulting fees of $49 in connection with
coordinating the Company's marketing efforts and travel
arrangements. Mrs. Rodin has been an employee of the Company for
the Fiscal Years 1997 and 1998, respectively and performs
similar services.
The Company had loans receivable of $464 and $190 from the
Chairman of the Board and the President of the Company as of the
end of Fiscal 1997 and 1998, respectively.
15. 1996 STOCK OPTIONS AND PERFORMANCE AWARD PLAN
The Company has adopted the 1996 Stock Option and
Performance Award Plan (the "Plan"), which authorizes the grant
to officers, key employees and directors of the Company and any
parent or subsidiary of the Company, of incentive or non-
qualified stock options, stock appreciation rights, performance
shares, restricted shares and performance units. Under the Plan,
directors who are not employees of the Company may not be granted
incentive stock options. The Company plans to reserve 2,500
shares of Common Stock for issuance pursuant to the Plan.
The Plan is administered by the Board of Directors. The
Board of Directors determines the prices and terms at which
options may be granted. Options may be exercisable in
installments over the options period, but no options may be
exercised after ten years from the date of grant. Stock
appreciation rights may be granted in tandem with options or
separately.
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
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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. Incentive stock options are
not transferable, except upon the death of the optionee. In
general, upon termination of employment of an optionee (other
than death or disability) , all options granted to such persons
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 non-qualified stock options. However, all options will be
forfeited immediately upon an optionee's termination of
employment for good cause and upon an optionee's voluntary
termination of employment without the consent of the Board of
Directors.
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 or stock appreciation rights is made, the Board
of Directors determines 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.
As of January 31, 1999, options to acquire 475 shares have
been granted, each with an exercise price of $8.50 per share. 20%
of such options vest immediately and 20% will vest each year
thereafter for the next four years. Such options will expire
November 18, 2008.
Under the provisions of FASB 123, the Company accounts for
stock based compensation using the intrinsic value method
prescribed by APB 25. On a pro-forma basis, net loss would have
been $13,493 or $0.77 per share in Fiscal 1998. For purposes of
this pro-forma disclosure under FASB 123, the estimated fair
value of the options is amortized over the vesting period.
The fair value of the options was estimated at the grant
date using a Black-Scholes option pricing model with the
following weighted average assumptions for Fiscal 1998; risk-free
interest rate of 4.85%, volatility of 46%, dividend of 0% and a
weighted average expected life of the options of 10 years.
The Black-Scholes model requires the input of highly
subjective assumptions and does not necessarily provide a
reliable measure of fair value.
16. SEGMENT REPORTING INFORMATION.
The Company views its business in the following three segments:
1. Syndication - Revenues are comprised of sales, syndication
fee income, property management fees, deferred income earned and
equity in earnings from partnerships relating to the Syndicated
Communities.
2. Multi-Family - Revenues are comprised of sales of the
underlying Syndicated Multi-Family properties or controlling
interests therein, and recognition of deferred income from such
Syndications, which income is being recognized on the installment
method.
3. New Development - Revenues are derived from senior living
rental revenues from the Development Communities.
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January 31,
------------------------------
1997 1998 1999
---- ---- ----
(unaudited) (unaudited)
Revenues
Syndication (a) $50,320 $56,423 $45,716
Multi-family (b) 944 5,797 27,182
New Development - - 6,443
------ ------- ------
Combined Segments $51,264 $62,220 $79,341
====== ======= ======
Interest Income
Syndication $7,054 $4,768 $4,204
Multi-family 6,719 7,283 7,317
New Development - - 828
------ ------- ------
Combined Segments $13,773 $12,051 $12,349
====== ======= ======
Operating Profit (Loss)(c)
Syndication $4,973 $7,363 $2,294
Multi-family (28,080)(d) (5,822) (11,546)
New Development (214) (4,000) (3,724)
------------ ------- ------
Combined Segments $(23,321) $(2,459) $(12,976)
============ ======= =======
Gross Assets
Syndication $21,997 $27,719 $23,548
Multi-family 229,236 236,326 229,794
New Development 10,428 31,754 65,972
------------ ------- -------
Combined Segments $261,661 $295,799 $319,314
============ ======= =======
January 31,
-----------------------------------
1997 1998 1999
---- ---- ----
(unaudited) (unaudited)
Interest Expense
Syndication $3,493 $4,945 $4,152
Multi-family 12,752 13,778 14,887
New Development 149 686 3,027
------ ------ ------
Combined Segments $16,394 $19,409 $22,066
====== ====== ======
Depreciation and Amortization
Syndication $319 $363 $490
Multi-family 2,947 2,770 3,591
New Development 65 207 951
------ ------ ------
Combined Segments $3,331 $3,340 $5,032
====== ====== ======
Capital Expenditures
Syndication $- $- $-
Multi-family - - -
New Development 6,742 19,499 20,973
------ ------ ------
Combined Segments $6,742 $19,499 $20,973
====== ====== ======
(a) Includes non-cash income of deferred income and equity in
earnings from unconsolidated affiliates.
(b) Includes non-cash income comprised of deferred income
earned.
(c) Includes the allocation of certain expenses based upon
either gross revenues or gross assets to the individual segments.
(d) Includes a non-cash loss of $18,442.
17. SUBSEQUENT EVENT
In April 1999, the Company entered into joint venture
arrangements regarding three completed and one substantially
completed Development Community. Pursuant to each joint venture
arrangement, the Company sold a 50% interest in the Development
Communities to a third party. The Company realized a profit from
each of the sales and earns management fees for managing each of
the communities. The third party has the right to terminate the
Company's management upon thirty days written notice. The third
party receives a cumulative priority return on its investment
from all cash flow generated by the community and any excess cash
flow is shared 50% by the Company and 50% by the third party. For
future periods, the Company will no longer consolidate these
Development Communities into its consolidated financial
statements but will recognize its investment in these Development
Communities under the equity basis of accounting.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
A Form 8-K was filed on October 13, 1998. Under Item 4
Change in Registrant's Certifying Accountant, the Company
announced the appointment of BDO Seidman, LLP as the Company's
independent accountant and the Company's decision not to continue
the engagement of Deloitte & Touche, LLP.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as
follows:
Name Age Position
John Luciani(1) 66 Chairman of the Board and
Chief Executive Officer
Bernard M. Rodin(2) 68 Chief Operating Officer,
Chief Financial Officer,
President and Director
John W. Luciani III 46 Executive Vice President and
Director
Paul Jawin 43 General Counsel and Senior
Vice President
Dorian Luciani 43 Senior Vice President -
Acquisition and Construction
Deborah Luciani 42 Senior Vice President
Catherine V. Merlino 34 Chief Accounting Officer and
Vice President
Edward J. Glatz 56 Vice President - Multi-
Family
Keith Marlowe 36 Secretary
Walter Feldesman(1)(2) 81 Director
Leslie E. Goodman(1)(2) 54 Director
Sidney Dworkin(1)(2) 78 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 since January 1996, founded the earliest
predecessor of the Company in 1969 with Bernard M. Rodin 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 senior living communities for the
elderly. Mr. Luciani was a general partner of three Protected
Partnerships, but withdrew as a general partner prior to their
filing the respective Chapter 11 Petitions.
BERNARD M. RODIN, Chief Operating Officer, Chief Financial
Officer, President and Director since October, 1998, has been
engaged, since the formation of the earliest predecessor of the
Company in 1969 with John Luciani, 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 senior living communities. Mr. Rodin has a
bachelor of science degree from the City University of New York.
Mr. Rodin is a certified public accountant and was actively
engaged in the practice of public accounting prior to 1969. Mr.
Rodin was a general partner of three Protected Partnerships, but
withdrew as a general partner prior to their filing the
respective Chapter 11 Petitions.
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<PAGE>
JOHN W. LUCIANI III, Executive Vice President and Director
since June, 1996, a son of John Luciani, joined the Company in
1975 and initially was involved in the management and operations
of the Company's multi-family housing portfolio. Mr. Luciani is
presently involved in the acquisition of existing senior living
communities and the daily operation of the Company's senior
living portfolio. Mr. Luciani graduated from Fairleigh Dickinson
University with a bachelor of science degree in Accounting and a
master of business administration degree in Finance. He is an
active member of the American Seniors Housing Association (ASHA).
PAUL JAWIN, General Counsel and Senior Vice President since
September, 1998, a son-in-law of Bernard M. Rodin, joined the
Company in May 1991. His activities primarily involve the
various legal and 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. Mr. Jawin graduated from Ithaca College
with a bachelor of science degree in history and earned a juris
doctor degree from Syracuse University School of Law.
DORIAN LUCIANI, Senior Vice President - Acquisition and
Construction since June, 1996, 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 senior living
communities. Mr. Luciani graduated from Fairleigh Dickinson
University with a bachelor of science degree in business.
DEBORAH LUCIANI, Senior Vice President since May, 1998, a
daughter of John Luciani, joined the Company in January 1992.
Ms. Luciani is involved in all aspects of acquisitions, debt and
equity financing and new business development of the company's
senior housing portfolio. Prior to joining the Company, Ms.
Luciani worked for E.F. Hutton & Company, New York and with
Prudential Bache Securities, New York, as an Oil Futures Hedger
to institutional clients. Ms. Luciani graduated from Boston
University with a bachelor of science degree, a master of
political science degree and a master of economics degree.
CATHERINE V. MERLINO, Chief Accounting Officer since May,
1998 and Vice President since June, 1996, 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. Mrs. Merlino graduated
from Long Island University in May 1987 with a bachelor of
science degree in Accounting and became a certified public
accountant in February 1992.
EDWARD J. GLATZ, Vice President - Multi Family - since June,
1998, joined the Company in September 1992 and has been actively
involved in the oversite and supervision of the third-party
managing agents that manage the day-to-day operations of the
Multi-Family Properties. Prior to joining the Company, Mr. Glatz
performed asset management duties for Kovens Enterprises, a real
estate development company, from June 1988 until September 1992.
KEITH MARLOWE, Secretary of the Company since June, 1996,
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. His activities
primarily involve the various legal and financial aspects of the
Company's business. Mr. Marlowe graduated from the University of
Virginia with a bachelor of science degree in economics. Mr.
Marlowe earned a juris doctor degree from University of
California Los Angeles School of Law and an LLM in Taxation from
New York University School of Law.
WALTER FELDESMAN, Director since June, 1996, 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
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<PAGE>
and a Director of its subsidiary, Sterling National Bank & Trust
Co. Mr. Feldesman is a member 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. Mr.
Feldesman is also special counsel on elderlaw to United Senior
Health Cooperative. He has authored an article entitled "Long-
Term Care Insurance Helps Preserve an Estate," and a published
work entitled the "Dictionary of Eldercare Terminology". He has
written two other books, "New Medicare Choices" which was
published in February, 1998 and Home Care which is expected to be
published in July, 1999. Mr. Feldesman has a bachelor's degree
in economics from New York University. Mr. Feldesman earned an
LLB from Harvard Law School.
LESLIE E. GOODMAN, Director since June, 1996. Until
December 1996 Mr. Goodman was 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. He is a member
of the Board of Directors and Chairman of the Audit Committee of
Wawa Inc., a member of the Board of Directors of Tear Drop Golf
Company, Inc. and a director of Admiralty Bank Corporation. In
addition, Mr. Goodman is a member of the Board of Trustees of
Rutgers University and Hackensack University Medical Center.
SIDNEY DWORKIN, Director since June, 1998. Mr. Dworkin was
one of the founders and served as President and Chairman of the
Board of Revco D.S., Inc. until October 1987. Mr. Dworkin
currently serves as a member of the Board of Directors of Crager
Industries, Inc., Comtrex Systems, Inc., CCA Industries, Northern
Technologies, International Inc., Viragen Inc. and Novapet Inc.
He is also the owner and Chairman of the Board of Advanced
Modular Systems, Inc., a privately-held manufacturer of modular
buildings. His experience ranges across a multitude of industries
including, among others, pharmaceuticals, computer hardware and
software, modular housing and consumer products.
AUDIT COMMITTEE
The Board of Directors established an Audit Committee in
June 1996. The Audit Committee is currently composed of Messrs.
Rodin, Feldesman, Goodman and Dworkin. 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, Goodman and Dworkin. The
compensation Committee recommends compensation levels of senior
management and works with senior management on benefit and
compensation programs for Company employees.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
NO. OF
TRANSACTIONS
NOT FAILURE TO
NO. OF LATE TIMELY FILE
REPORTS REPORTED REQUIRED FORM
---------- ------------ -------------
John Luciani 1 1 0
Bernard Rodin 1 1 0
John W. Luciani III 0 1 1
Sidney Dworkin 2 1 0
Leslie Goodman 1 0 0
Dorian Luciani 0 1 1
Paul Jawin 0 1 1
Edward J. Glatz 0 1 1
Deborah Luciani 0 1 1
Catherine V. Merlino 0 1 1
Keith Marlowe 0 1 1
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ITEM 11. 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 Fiscal 1996, 1997 and
1998, respectively.
< TABLE >
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL SECURITIES ALL
COMPENSATION UNDERLYING OTHER
NAME AND PRINCIPAL SALARY OPTIONS COMPENSATION
POSITION YEAR ($) (#) ($)
------------------ ---- ---------- ----------- --------
John Luciani,
Chairman of the Board
and Chief Executive Fiscal
Officer(1) . . . . . 1996 $500,000 -- $497,000
Fiscal
1997 $600,000 1,566,000
Fiscal
1998 $600,000 -- --
Bernard M. Rodin,
Chief Operating
Officer, Chief
Financial Officer,
President and Fiscal
Director(1) . . . . . 1996 $500,000 -- $497,000
Fiscal
1997 $600,000 -- 1,566,000
Fiscal
1998 $600,000 -- --
John W. Luciani, III,
Executive Vice
President and Fiscal
Director . . . . . . 1996 $350,000
Fiscal
1997 $353,846 -- --
Fiscal
1998 $375,000 50,000 --
Dorian Luciani, Fiscal
Senior Vice President 1996 $350,000 -- --
Fiscal
1997 $353,846 -- --
Fiscal
1998 $375,000 50,000 --
Paul Jawin, General
Counsel and Senior Fiscal
Vice President . . . 1996 $325,000 -- --
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LONG-TERM
COMPENSATION
AWARDS
ANNUAL SECURITIES ALL
COMPENSATION UNDERLYING OTHER
NAME AND PRINCIPAL SALARY OPTIONS COMPENSATION
POSITION YEAR ($) (#) ($)
------------------ ---- ---------- ----------- --------
Fiscal
1997 $344,327 -- --
Fiscal
1998 $365,000 50,000 --
--------------------
(1) Messrs. Luciani and Rodin received dividends and
distributions from the Company's predecessors but did not
receive salaries. As of April 1, 1996 a salary for each of
Messrs. Luciani and Rodin was established at the rate of
$600,000 per year. In fiscal 1996 such officers also
received $397,000 each as a dividend and $100,000 each for
the period from February 1, 1996 until April 1, 1996, which
was in the form of a dividend but which is classified as
officers' compensation for financial statement purposes. In
January 1998, such officers received a non-cash distribution
for the release of previously assigned collateral of $1,566
each.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee
in June 1996. The Compensation Committee currently consists of
Messrs. Luciani, Feldesman, Goodman and Dworkin. 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."
DIRECTOR COMPENSATION
The Company pays each Director who is not an employee of the
Company $500.00 per telephonic Board meeting attended and
$1,000.00 per Board meeting personally 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.
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, key employees and directors of the Company and any
parent or subsidiary of the Company of incentive or non-qualified
stock options, stock appreciation rights, performance shares,
restricted shares and performance units. Under the Plan,
directors who are not employees of the Company may not be granted
incentive stock options. The Company plans to reserve 2,500,000
shares of Common Stock for issuance pursuant to the Plan. Shares
issued pursuant to the Plan are subject to certain transfer
restrictions.
The Plan is administered by the Board of Directors. The
Board of Directors determines 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
72
<PAGE>
exercised after ten years from the date of grant. Stock
appreciation rights may be granted in tandem with options or
separately.
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. Incentive stock 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 and upon
an optionee's voluntary termination of employment without the
consent of the Board of Directors.
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 or stock appreciation rights is made, the Board
of Directors 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.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Granted Employees in Price
Name (#) (1) Fiscal Year ($/share)
---- --------------- ------------ --------
John W. Luciani III 50,000 10.53% 8.50
Dorian Lucian 50,000 10.53% 8.50
Paul Jawin 50,000 10.53% 8.50
Potential Realized
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term
Expiration ---------------------
Name Date 5% 10%
---- ---------- -- --
John W. Luciani III 11/18/08 267,280 677,341
Dorian Lucian 11/18/08 267,280 677,341
Paul Jawin 11/18/08 267,280 677,341
(1) As of January 31, 1999, options to acquire 475,000 shares
had been granted under the plan with an exercise price of $8.50
per share. 20% of such options vest immediately and 20% will
vest each year thereafter for the next four years. Such options
expire November 18, 2008.
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<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES
Number of Securities
Underlying Exercised
Options at Fiscal Year End
Shares Acquired Value Realized
Name on Exercise (#) ($) Exercisable
------------------ --------------- ------------- ----------
John W. Luciani III 0 0 10,000
Dorian Luciani 0 0 10,000
Paul Jawin 0 0 10,000
Value of Unexercised
In-The-Money Options
at Fiscal Year End
Name Exercisable Unexercisable
---- ----------- -------------
John W. Luciani III 0 0
Dorian Luciani 0 0
Paul Jawin 0 0
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of
April 26, 1999 concerning (i) persons known to the Company to be
the beneficial owners of more than 5% of the Company's Common
Stock, (ii) the ownership interest of each director and executive
officer of the Company listed in the compensation table and (iii)
by all directors and executive officers as a group. Note: stock
options are considered presently exercisable if exercisable
within 60 days of April 26, 1999.
< TABLE >
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER STATUS OWNERSHIP CLASS(1)
------------------- ------ ----------------- -------
John Luciani Chairman of the Board
and Chief Executive
Officer 7,326,970 shares 41.16%
Bernard M. Rodin Chief Operating
Officer, Chief
Financial Officer,
President and
Director 7,326,970 shares 41.16%
John W. Luciani III Executive Vice
President and
Director 10,000 shares(2) 0.06%
Dorian Luciani Senior Vice President 10,000 shares(2) 0.06%
Paul Jawin General Counsel and
Senior Vice President 10,000 shares(2) 0.06%
All directors and
officers as a group 14,708,940 shares(3) 82.38%
(1) Based upon 17,800,000 shares of common stock outstanding on April 26,
1999. Percentage ownership is calculated separately for each person or
group on the basis of the actual number of outstanding shares as of
such date, and assumes the exercise of certain stock options held by
such person or group (but not by anyone else) exercisable within sixty
days of April 26, 1999.
(2) Includes presently exercisable options to purchase 10,000 shares.
(3) Includes presently exercisable options to purchase 55,000 shares.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the first quarter of fiscal 1996, the Principal
Stockholders reorganized their businesses by consolidating them
into the Company. The Principal Stockholders transferred all of
the issued and outstanding stock of each of 16 Sub-chapter S
corporations along with various other assets and liabilities to
the Company in exchange for 3,252,380 shares of the Company's
Common Stock. A partnership in which the Principal Stockholders
are the sole partners transferred to the Company substantially
all of its assets, subject to substantially all of its
liabilities, in exchange for 1,626,190 shares of the Company's
Common Stock. The partnership distributed the shares received to
the Principal Stockholders. Six Sub-chapter S corporations which
were wholly-owned by the Principal Stockholders were merged into
the Company. Pursuant to the mergers the shares of the six
merged companies were converted into an aggregate of 10,121,430
shares of the Company's
Common Stock. After the reorganization was complete, the
Principal Stockholders owned an aggregate of 15,000,000 shares
of the Company's Common Stock.
Prior to the reorganization discussed above, the business of
the Principal Stockholders was conducted through a partnership
and various Sub-chapter S corporations. These entities and the
Company paid distributions and other distributions to each of the
Principal Stockholders of $850,000 and $397,000 in Fiscal 1995
and 1996, respectively, exclusive of amounts reflected as
officers' compensation.
Messrs. Luciani and Rodin, the Chairman of the Board and
President of the Company, respectively, and entities controlled
by them serve as general partners (with interests ranging between
1% and 2%) 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 (i) notes, aggregating $100.8 million, net of
deferred income, as of January 31, 1999, that are secured by the
limited partnership interests in such partnerships and (ii) other
partnership receivables aggregating $59.9 million from such
partnerships at January 31, 1999. Messrs. Luciani and Rodin have
provided personal guarantees for certain of the Company's
Investor Note Debt and Unsecured Debt, and the obligations
thereunder may continue. The aggregate amount of such debt
personally guaranteed by each of Messrs. Luciani and Rodin is
approximately $32.5 million. In addition, Messrs. Luciani and
Rodin and certain employees will devote a limited portion of
their time to overseeing the third-party managers of Multi-Family
Properties and one senior living community in which the Company
has financial interests in that it holds the related Purchase
Notes, but in which Messrs. Luciani and Rodin have equity
interests and the Company does not.
Subsequent to the reorganization, the Principal Stockholders
and one of their affiliates transferred the Assigned Interests to
the Investing Partnerships that own interests in the Protected
Partnerships. The Assigned Interests were owned personally by
the Principal Stockholders and their affiliate and provided
additional assets at the Investing Partnership level and, as a
result, additional security for the related Multi-Family Notes.
Two Investing Partnerships related to these Protected
Partnerships transferred the respective Assigned Interests back
to the Principal Stockholders and their affiliate after these
Protected Partnerships successfully emerged from their bankruptcy
proceedings. In that the Principal Stockholders transferred the
Assigned Interests in July 1996, the Company recorded a $21.3
million capital contribution in Fiscal 1996. The bankruptcy
petitions and risk of loss faced by the Protected Partnerships
resulted in the Company recording a non-cash loss for Fiscal 1996
in the amount of $18.4 million (representing the recorded value
of these Multi-Family Notes, net of deferred income and net of
any previously established reserves) due to the deemed full
impairment of the Multi-Family Notes. The transfer of the
Assigned Interest back to the Principal Stockholders caused the
Company to recognize non-cash other income of $3.1 million and to
record a non-cash dividend to the Principal Stockholders for the
release of the previously assigned interest of $3.1 million in
Fiscal 1997. Each of the Principal Stockholders was a general
partner of three of the Protected Partnerships, but withdrew as a
general partner prior to such partnerships' filings of the
respective Chapter 11 Petitions.
75
<PAGE>
During Fiscal 1997 and 1998 the Company paid to Francine
Rodin, the wife of Bernard M. Rodin, the Company's Chief
Operating Officer, Chief Financial Officer, President and a
Director, $132,885 and $153,008, respectively, as fees for
introducing to the Company broker/dealers that have assisted the
Company in its Syndications of partnership interests and in
placing other securities offered by the Company. Mrs. Rodin will
receive a fee with respect to any future sales through such
broker/dealers of such Syndicated partnership interests and other
securities offered by the Company. During Fiscal 1996, Mrs.
Rodin received consulting fees of $49,435 in connection with
coordinating the Company's marketing efforts and travel
arrangements. Mrs. Rodin has been an employee of the Company for
the entire fiscal years ended January 31, 1998 and 1999 and
performs similar services.
Walter Feldesman, a Director of the Company, is Of Counsel
to the law firm of Baer Marks & Upham LLP, which acts as counsel
to the Company from time to time. In addition, Mr. Feldesman is a
director of Sterling National Bank & Trust Co. which has entered
into a revolving credit agreement with the Company which permits
the Company to borrow up to $8,000,000, of which $3,199,002 was
outstanding at January 31, 1999
Michele R. Jawin, the daughter of Mr. Rodin and wife of Paul
Jawin, the Company's General Counsel and a Senior Vice President,
is Of Counsel to Thelen Reid & Priest LLP, which acts as
securities counsel to the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Please refer to Item 8, "Financial Statements and
Supplementary Data" for a complete listing of all
consolidated financial statements and financial statement
schedules.
(b) Exhibits: Reference is made to the Exhibit Index commencing
on page 77.
76
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GRAND COURT LIFESTYLES, INC.
/s/ Bernard M. Rodin
--------------------
Bernard M. Rodin
Chief Financial Officer and
Vice President
Dated: May 3, 1999
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
---------------------- -------------------- ------
/s/ John Luciani Chairman of the Board May 3, 1999
---------------- of Directors and
John Luciani Chief Executive Officer
(Principal Executive
Officer)
/s/ Bernard M. Rodin President, Chief May 3, 1999
-------------------- Operating Officer,
Bernard M. Rodin Chief Financial Officer
and Director (Principal
Financial and
Accounting Officer)
/s/ John W. Luciani, III Executive Vice May 3, 1999
------------------------ President and Director
John W. Luciani, III
/s/ Walter Feldesman Director May 3, 1999
--------------------
Walter Feldesman
/s/ Leslie E. Goodman Director May 3, 1999
---------------------
Leslie E. Goodman
/s/ Sidney Dworkin Director May 3, 1999
------------------
Sidney Dworkin
77
<PAGE>
EXHIBIT INDEX
*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.
*2.1(b) -- Second 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.
*2.1(c) -- Third 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.
*2.1(d) -- Fourth 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.
*2.1(e) -- Fifth 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.
*2.1(f) -- Sixth 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 -- Restated Certificate of Incorporation of the
Company.
*3.2 -- By-Laws of the Company.
4.0 -- Indenture, dated October 1, 1998, between the
Company and The Bank of New York (the
"Indenture").
4.1 -- Officer's Certificate, dated as of December 24,
1998, under Section 301 of the Indenture, with
form Note attached.
4.2 -- Supplemental Officer's Certificate, dated March
12, 1999, under the Indenture.
+*10.1 -- 1996 Stock Option and Performance Award Plan.
*10.2(a) -- Loan Agreements dated as of November 25, 1996, by
and between Leisure Centers LLC-1 and Bank United
relating to financing of the Corpus Christi, Texas
property.
*10.2(b) -- Guaranty Agreement, dated as of November 25, 1996,
between the Company and Bank United relating to
financing of the Corpus Christi, Texas property.
*10.2(c) -- Loan Agreement, dated as of January 29, 1997, by
and between Leisure Centers LLC-1 and Bank United
relating to financing of the Temple, Texas
property.
*10.2(d) -- Guaranty Agreement, dated as of January 29, 1997,
between the Company and Bank United relating to
the financing of the Temple, Texas property.
78
<PAGE>
*10.3 -- Master Development Agreement dated September 18,
1996 between Capstone Capital Corp. and 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.
*10.4(k) -- Form of 12% Debenture due June 30, 2004 - Series
11.
*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) -- Amendment No. 2, dated as of April 15, 1997, 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(d) -- Amendment No. 3, dated as of June 26, 1998, 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(e) -- Bank Agreement dated October 11, 1991 between The
Bank of New York and the Company with respect to
12% Debentures, Series 2.
10.5(f) -- Amendment No. 1, dated as of December, 1996, to
Bank Agreement dated as of October 11, 1991
between The Bank of New York and the Company with
respect to 12% Debentures, Series 2.
10.5(g) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of October 11, 1991
between The Bank of New York and the Company with
respect to 12% Debentures, Series 2.
*10.5(h) -- Bank Agreement dated October 17, 1991 between The
Bank of New York and the Company with respect to
11% Debentures, Series 3.
10.5(i) -- Amendment No. 1, dated as of December, 1996, to
Bank Agreement dated as of October 17, 1991
between The Bank of New York and the Company with
respect to 11% Debentures, Series 3.
10.5(j) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of October 17, 1991
between The Bank of New York and the Company with
respect to 11% Debentures, Series 3.
*10.5(k) -- 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(l) -- Amendment No. 1, dated as of April 15, 1997, to
Bank Agreement dated as of April 1, 1992 between
The Bank of New York and the Company with respect
to 11.5% Debentures, Series 4.
10.5(m) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of April 1, 1992 between
The Bank of New York and the Company with respect
to 11.5% Debentures, Series 4.
*10.5(n) -- Bank Agreement dated October 30, 1992 between The
Bank of New York and the Company with respect to
12% Debentures, Series 5.
79
<PAGE>
10.5(o) -- Amendment No. 1, dated as of April 15, 1997, to
Bank Agreement dated as of October 30, 1992
between The Bank of New York and the Company with
respect to 12% Debentures, Series 5.
10.5(p) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of October 30, 1992
between The Bank of New York and the Company with
respect to 12% Debentures, Series 5.
*10.5(q) -- Bank Agreement dated May 24, 1993 between The Bank
of New York and the Company with respect to 12%
Debentures, Series 6.
10.5(r) -- Amendment No. 1, dated as of December, 1996, to
Bank Agreement dated as of May 24, 1993 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 6.
10.5(s) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of May 24, 1993 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 6.
*10.5(t) -- Bank Agreement dated October 27, 1993 between The
Bank of New York and the Company with respect to
11% Debentures, Series 7.
*10.5(u) -- 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(v) -- Amendment No. 2, dated as of April 15, 1997, to
Bank Agreement dated as of October 27, 1993
between The Bank of New York and the Company with
respect to 11% Debentures, Series 7.
10.5(w) -- Amendment No. 3, dated as of June 26, 1998,to Bank
Agreement dated as of October 27, 1993 between The
Bank of New York and the Company with respect to
11% Debentures, Series 7.
*10.5(x) -- Bank Agreement dated November 29, 1993 between The
Bank of New York and the Company with respect to
11% Debentures, Series 8.
10.5(y) -- Amendment No. 1, dated as of April 15, 1997, to
Bank Agreement dated as of November 29, 1993
between The Bank of New York and the Company with
respect to 11% Debentures, Series 8.
10.5(z) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of November 29, 1993
between The Bank of New York and the Company with
respect to 11% Debentures, Series 8.
*10.5(aa) -- Bank Agreement dated September 12, 1994 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 9.
10.5(bb) -- Amendment No. 1, dated as of April 15, 1997, to
Bank Agreement dated as of September 12, 1994
between The Bank of New York and the Company with
respect to 12% Debentures, Series 9.
10.5(cc) -- Amendment No. 2, dated as of June 26, 1998, to
Bank Agreement dated as of September 12, 1994
between The Bank of New York and the Company with
respect to 12% Debentures, Series 9.
*10.5(dd) -- Bank Agreement dated July 12, 1995 between The
Bank of New York and the Company with respect to
12% Debentures, Series 10.
10.5(ee) -- Amendment No. 1, dated as of June 26, 1998, to
Bank Agreement dated as of July 12, 1995 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 10.
*10.5(ff) -- Bank Agreement dated July 25, 1997 between the
Bank of New York and the Company with respect to
12% Debentures, Series 11.
10.5(gg) -- Amendment No. 1, dated as of June 26, 1998, to
Bank Agreement dated as of July 25, 1997 between
The Bank of New York and the Company with respect
to 12% Debentures, Series 11.
*10.6(a) -- Form of Short-term Step-up Bond due March 15, 2001
- Series 1.
80
<PAGE>
*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.
*10.9 -- Assumption Agreement dated as of September 10,
1996 among Sterling National Bank & Trust, the
Company, Bernard M. Rodin and John Luciani.
*10.9(a) -- First Amendment to Assumption Agreement dated as
of September 10, 1996 among Sterling National Bank
& Trust, the Company, Bernard M. Rodin and John
Luciani.
*10.9(b) -- Second Amendment to Assumption Agreement among
Sterling National Bank, formerly known as Sterling
National Bank & Trust Company, the Company,
Bernard M. Rodin and John Luciani
*10.10(a) -- Form of 13.125% Retirement Financing Notes - III,
due October 31, 2001.
*10.10(b) -- Form of 13.125% Retirement Financing Notes - IV,
due March 31, 2002.
*10.10(c) -- Form of 13.125% Retirement Financing Notes - V,
due June 30, 2003.
*10.10(d) -- Form of 13.125% Retirement Financing Notes - VI,
due April 15, 2001.
*10.10(e) -- Form of 13.125% Retirement Financing Notes - VII,
due October 15, 2002.
*10.11(a) -- Bank Agreement dated as of September 6, 1996
between the Bank of New York and the Company with
respect to 13.125% Retirement Financing Notes -
III.
*10.11(b) -- Bank Agreement dated as of October 22, 1996
between the Bank of New York and the Company with
respect to 13.125% Retirement Financing Notes -
IV.
*10.11(c) -- Bank Agreement dated as of May 14, 1997 between
the Bank of New York and the Company with respect
to 13.125% Retirement Financing Notes - V.
*10.11(d) -- Bank Agreement dated as of November 6, 1997
between the Bank of New York and the Company with
respect to 13.125% Retirement Financing Notes -
VI.
*10.11(e) -- Bank Agreement dated as of November 20, 1997
between Bank of New York and the Company with
respect to 13.125% Retirement Financing Notes -
VII.
*10.12 -- Warrant Agreement
10.13 -- Form of Amended and Restated Regulations and
Operating Agreement.
21 -- List of Subsidiaries of the Company.
27.1 -- Financial Data Schedule for the period ended
January 31, 1999.
----------------
* Previously filed in Registration Statement No. 333-05955.
(+) Management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Form 10-K by item
601(b)(10)(iii) of Regulation S-K.
81
EXHIBIT 4.0
__________________________________________
GRAND COURT LIFESTYLES, INC.,
ISSUER
TO
THE BANK OF NEW YORK,
TRUSTEE
_________
INDENTURE
DATED AS OF OCTOBER 1, 1998
__________________________________________
<PAGE>
TABLE OF CONTENTS
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
SECTION 101. Definitions . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . 2
Authorized Officer . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . 2
Company Order or Company Request . . . . . . . . . 2
Corporate Trust Office . . . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . 3
Discount Security . . . . . . . . . . . . . . . . . 3
Dollar or $ . . . . . . . . . . . . . . . . . . . . 3
Eligible Obligations . . . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . . . 3
Exchange Act . . . . . . . . . . . . . . . . . . . 3
Government Obligations . . . . . . . . . . . . . . 3
Holder . . . . . . . . . . . . . . . . . . . . . . 3
Indenture . . . . . . . . . . . . . . . . . . . . . 3
interest . . . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . . . 4
Notice of Default . . . . . . . . . . . . . . . . . 4
Officer's Certificate . . . . . . . . . . . . . . . 4
Opinion of Counsel . . . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . . . 5
Periodic Offering . . . . . . . . . . . . . . . . . 5
Person . . . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . . . 6
Redemption Date . . . . . . . . . . . . . . . . . . 6
Redemption Price . . . . . . . . . . . . . . . . . 6
Regular Record Date . . . . . . . . . . . . . . . . 6
Required Currency . . . . . . . . . . . . . . . . . 6
Responsible Officer . . . . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . . . 6
Security Register and Security Registrar . . . . . 6
Special Record Date . . . . . . . . . . . . . . . . 6
Stated Interest Rate . . . . . . . . . . . . . . . 6
Stated Maturity . . . . . . . . . . . . . . . . . . 7
Tranche . . . . . . . . . . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act . . . . . . . . . . . . . . . . 7
United States . . . . . . . . . . . . . . . . . . . 7
SECTION 102. Compliance Certificates and Opinions . . 7
SECTION 103. Form of Documents Delivered to Trustee . 8
SECTION 104. Acts of Holders . . . . . . . . . . . . . 9
SECTION 105. Notices, Etc. to Trustee or Company . . . 10
SECTION 106. Notice to Holders of Securities; Waiver . 11
SECTION 107. Conflict with Trust Indenture Act . . . . 12
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . 12
SECTION 109. Successors and Assigns . . . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . . . 12
SECTION 112. Governing Law . . . . . . . . . . . . . . 12
SECTION 113. Legal Holidays . . . . . . . . . . . . . 12
ARTICLE TWO
SECURITY FORMS . . . . . . . . . . 13
SECTION 201. Forms Generally . . . . . . . . . . . . . 13
SECTION 202. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . 13
ARTICLE THREE
THE SECURITIES . . . . . . . . . . 14
SECTION 301. Amount Unlimited; Issuable in Series . . 14
SECTION 302. Denominations . . . . . . . . . . . . . . 17
SECTION 303. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . 17
SECTION 304. Temporary Securities . . . . . . . . . . 19
SECTION 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . 20
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . 21
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . 22
SECTION 308. Persons Deemed Owners . . . . . . . . . . 23
SECTION 309. Cancellation . . . . . . . . . . . . . . 23
SECTION 310. Computation of Interest . . . . . . . . . 23
SECTION 311. Payment to Be in Proper Currency . . . . 23
SECTION 312. CUSIP Numbers . . . . . . . . . . . . . . 24
ARTICLE FOUR
REDEMPTION OF SECURITIES . . . . . . . . 24
SECTION 401. Applicability of Article . . . . . . . . 24
SECTION 402. Election to Redeem; Notice to Trustee . . 24
SECTION 403. Selection of Securities to Be Redeemed . 24
SECTION 404. Notice of Redemption. . . . . . . . . . . 25
SECTION 405. Securities Payable on Redemption Date . . 26
SECTION 406. Securities Redeemed in Part . . . . . . . 26
ARTICLE FIVE
SINKING FUNDS . . . . . . . . . . . 27
SECTION 501. Applicability of Article . . . . . . . . 27
SECTION 502. Satisfaction of Sinking Fund Payments
with Securities . . . . . . . . . . . . . 27
SECTION 503. Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . . . 27
ARTICLE SIX
COVENANTS . . . . . . . . . . . . 28
SECTION 601. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . 28
SECTION 602. Maintenance of Office or Agency . . . . . 28
SECTION 603. Money for Securities Payments to Be Held
in Trust . . . . . . . . . . . . . . . . 29
SECTION 604. Corporate Existence . . . . . . . . . . . 30
SECTION 605. Annual Officer's Certificate . . . . . . 30
SECTION 606. Waiver of Certain Covenants . . . . . . . 30
SECTION 607. Calculation of the Original Issue
Discount . . . . . . . . . . . . . . . . 31
ARTICLE SEVEN
SATISFACTION AND DISCHARGE . . . . . . . 31
SECTION 701. Satisfaction and Discharge of
Securities . . . . . . . . . . . . . . . 31
SECTION 702. Satisfaction and Discharge of Indenture . 33
SECTION 703. Application of Trust Money . . . . . . . 34
ARTICLE EIGHT
EVENTS OF DEFAULT; REMEDIES . . . . . . . 34
SECTION 801. Events of Default . . . . . . . . . . . . 34
SECTION 802. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . 35
SECTION 803. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . 36
SECTION 804. Trustee May File Proofs of Claim . . . . 36
SECTION 805. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . 37
SECTION 806. Application of Money Collected . . . . . 37
SECTION 807. Limitation on Suits . . . . . . . . . . . 37
SECTION 808. Unconditional Right of Holders to
Receive Principal, Premium and Interest . 38
SECTION 809. Restoration of Rights and Remedies . . . 38
SECTION 810. Rights and Remedies Cumulative . . . . . 39
SECTION 811. Delay or Omission Not Waiver . . . . . . 39
SECTION 812. Control by Holders of Securities . . . . 39
SECTION 813. Waiver of Past Defaults . . . . . . . . . 39
SECTION 814. Undertaking for Costs . . . . . . . . . . 40
SECTION 815. Waiver of Usury, Stay or Extension Laws . 40
ARTICLE NINE
THE TRUSTEE . . . . . . . . . . . 40
SECTION 901. Certain Duties and Responsibilities . . . 40
SECTION 902. Notice of Defaults . . . . . . . . . . . 41
SECTION 903. Certain Rights of Trustee . . . . . . . . 42
SECTION 904. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . 43
SECTION 905. May Hold Securities . . . . . . . . . . . 43
SECTION 906. Money Held in Trust . . . . . . . . . . . 43
SECTION 907. Compensation and Reimbursement . . . . . 43
SECTION 908. Disqualification; Conflicting Interests . 44
SECTION 909. Corporate Trustee Required; Eligibility . 44
SECTION 910. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . 45
SECTION 911. Acceptance of Appointment by Successor . 46
SECTION 912. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . 47
SECTION 913. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 48
SECTION 914. Appointment of Authenticating Agent . . . 48
SECTION 915. Co-trustee and Separate Trustees. . . . . 49
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . 51
SECTION 1001. Lists of Holders. . . . . . . . . . . . . 51
SECTION 1002. Reports by Trustee and Company. . . . . . 51
ARTICLE ELEVEN
CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER . 51
SECTION 1101. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . . . 51
SECTION 1102. Successor Person Substituted . . . . . . 52
SECTION 1103. Merger into Company . . . . . . . . . . . 52
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES . . . . . . . . 52
SECTION 1201. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . 52
SECTION 1202. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . 54
SECTION 1203. Execution of Supplemental Indentures . . 55
SECTION 1204. Effect of Supplemental Indentures . . . . 56
SECTION 1205. Conformity With Trust Indenture Act . . . 56
SECTION 1206. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . 56
SECTION 1207. Modification Without Supplemental
Indenture . . . . . . . . . . . . . . . . 56
ARTICLE THIRTEEN
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING . . . 57
SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . . . . 57
SECTION 1302. Call, Notice and Place of Meetings . . . 57
SECTION 1303. Persons Entitled to Vote at Meetings . . 57
SECTION 1304. Quorum; Action . . . . . . . . . . . . . 58
SECTION 1305. Attendance at Meetings; Determination of
Voting Rights;
Conduct and Adjournment of Meetings . . . 58
SECTION 1306. Counting Votes and Recording Action of
Meetings . . . . . . . . . . . . . . . . 59
SECTION 1307. Action Without Meeting . . . . . . . . . 60
ARTICLE FOURTEEN . . . . . . . . . . . . . . . . . . . . . . 60
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 1401. Liability Solely Corporate . . . . . . . 60
Testimonium . . . . . . . . . . . . . . . . . . . . . . . . . 61
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 61
<PAGE>
GRAND COURT LIFESTYLES, INC.
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of October 1, 1998
Trust Indenture Act Section Indenture
Section
S.310 (a)(1) . . . . . . . . . . 909
(a)(2) . . . . . . . . . . 909
(a)(3) . . . . . . . . . . 915
(a)(4) . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . 908
910
S.311 (a) . . . . . . . . . . . 913
(b) . . . . . . . . . . . 913
(c) . . . . . . . . . . . Not Applicable
S.312 (a) . . . . . . . . . . . 1001
(b) . . . . . . . . . . . 1001
(c) . . . . . . . . . . . 1001
S.313 (a) . . . . . . . . . . . 1002
(b)(1) . . . . . . . . . . Not Applicable
(b)(2) . . . . . . . . . . 1002
(c) . . . . . . . . . . . 1002
(d) . . . . . . . . . . . 1002
S.314 (a) . . . . . . . . . . . 1002
(a)(4) . . . . . . . . . . 605
(b) . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . 102
(c)(2) . . . . . . . . . . 102
(c)(3) . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . 102
S.315 (a) . . . . . . . . . . . 901(a)
(b) . . . . . . . . . . . 902
(c) . . . . . . . . . . . 901(b)
(d) . . . . . . . . . . . 901(c)
(d)(1) . . . . . . . . . . 901(a)(1), 901(c)(1)
(d)(2) . . . . . . . . . . 901(c)(2)
(d)(3) . . . . . . . . . . 901(c)(3)
(e) . . . . . . . . . . . 814
S.316 (a) . . . . . . . . . . . 812
813
(a)(1)(A) . . . . . . . . 802
812
(a)(1)(B) . . . . . . . . 813
(a)(2) . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . 808
S.317 (a)(1) . . . . . . . . . . 803
(a)(2) . . . . . . . . . . 804
(b) . . . . . . . . . . . 603
S.318 (a) . . . . . . . . . . . 107
<PAGE>
INDENTURE, dated as of October 1, 1998 among GRAND
COURT LIFESTYLES, INC., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the
"Company"), having its principal office at 2650 North Military
Trail, Suite 350, Boca Raton, Florida 33431, and THE BANK OF NEW
YORK, a New York banking corporation, having its principal
corporate trust office at 101 Barclay Street, New York, New York
10286, as Trustee (herein called the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time
to time of its unsecured debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in
one or more series as contemplated herein; and all acts necessary
to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities or of series thereof (except as
otherwise contemplated herein), as follows:
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article and include
the plural as well as the singular;
(b) all terms used herein which are defined in
the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein;
(c) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance
with generally accepted accounting principles in the
United States of America, and, except as otherwise
herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation
required or permitted hereunder shall mean such
accounting principles as are generally accepted in the
United States of America at the date of such
computation;
(d) any reference to an "Article" or a "Section"
refers to an Article or a Section, as the case may be,
of this Indenture; and
(e) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this
Indenture as a whole and not to any particular Article,
Section or other subdivision.
Certain terms, used principally in Article Nine, are
defined in that Article.
"ACT", when used with respect to any Holder of a
Security, has the meaning specified in Section 104.
"AFFILIATE" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "CONTROL" when used
with respect to any specified Person means the power to direct
generally the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"AUTHENTICATING AGENT" means any Person or Persons
authorized by the Trustee to act on behalf of the Trustee to
authenticate the Securities of one or more series.
"AUTHORIZED OFFICER" means the Chairman of the Board,
the President, any Vice President, the Treasurer, the Secretary
or any other Person duly authorized by the Company to act in
respect of matters relating to this Indenture.
"BOARD OF DIRECTORS" means either the board of
directors of the Company or any committee of that board duly
authorized to act in respect of matters relating to this
Indenture.
"BOARD RESOLUTION" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors of
the Company and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"BUSINESS DAY", when used with respect to a Place of
Payment or any other particular location specified in the
Securities or this Indenture, means any day, other than a
Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other
location are generally authorized or required by law, regulation
or executive order to remain closed, except as may be otherwise
specified as contemplated by Section 301.
"COMMISSION" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Exchange Act, or, if at any time after the date of execution and
delivery of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body, if any, performing such duties at
such time.
"COMPANY" means the Person named as the "Company" in
the first paragraph of this Indenture until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such
successor Person.
"COMPANY ORDER" or "COMPANY REQUEST" mean,
respectively, a written order or request, as the case may be,
signed in the name of the Company by an Authorized Officer and
delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the office of the
Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the
date of execution of this Indenture is located at 101 Barclay
Street 12 East, New York, New York 10286, Attention: Corporate
Trust Administration.
"CORPORATION" means a corporation, association,
company, joint stock company or business trust.
"DEFAULTED INTEREST" has the meaning specified in
Section 307.
"DISCOUNT SECURITY" means any Security which provides
for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 802.
"DOLLAR" or "$" means a dollar or other equivalent unit
in such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and
private debts.
"ELIGIBLE OBLIGATIONS" means:
(a) with respect to Securities denominated in
Dollars, Government Obligations; or
(b) with respect to Securities denominated in a
currency other than Dollars or in a composite currency,
such other obligations or instruments as shall be
specified with respect to such Securities, as
contemplated by Section 301.
"EVENT OF DEFAULT" has the meaning specified in Section
801.
"EXCHANGE ACT" means the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as
amended from time to time.
"GOVERNMENT OBLIGATIONS" means securities which are (a)
(i) direct obligations of the United States where the payment or
payments thereunder are supported by the full faith and credit of
the United States or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the
United States where the timely payment or payments thereunder are
unconditionally guaranteed as a full faith and credit obligation
by the United States or (b) depository receipts issued by a bank
(as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of or other amount
with respect to any such Government Obligation held by such
custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific
payment of interest on or principal of or other amount with
respect to the Government Obligation evidenced by such depository
receipt.
"HOLDER" means a Person in whose name a Security is
registered in the Security Register.
"INDENTURE" means this instrument as originally
executed and as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Indenture and any such
supplemental indenture, respectively. The term "Indenture" shall
also include the terms of particular series of Securities
established as contemplated by Section 301.
"INTEREST", when used with respect to a Discount
Security which by its terms bears interest only after Maturity,
means interest payable after Maturity.
"INTEREST PAYMENT DATE", when used with respect to any
Security, means the Stated Maturity of an installment of interest
on such Security.
"MATURITY", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as provided in
such Security or in this Indenture, whether at the Stated
Maturity, by declaration of acceleration, upon call for
redemption or otherwise.
"NOTICE OF DEFAULT" means a written notice of the kind
specified in Section 801(b).
"OFFICER'S CERTIFICATE" means a certificate signed by
an Authorized Officer of the Company and who shall be acceptable
to the Trustee.
"OPINION OF COUNSEL" means a written opinion of
counsel, who may be counsel for the Company, and who shall be
acceptable to the Trustee.
"OUTSTANDING", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(a) Securities theretofore canceled or delivered
to the Trustee for cancellation;
(b) Securities deemed to have been paid for all
purposes of this Indenture in accordance with Section
701 (whether or not the Company's indebtedness in
respect thereof shall be satisfied and discharged for
any other purpose); and
(c) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which
other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such
Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it and
the Company that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether or not the Holders
of the requisite principal amount of the Securities Outstanding
under this Indenture, or the Outstanding Securities of any series
or Tranche, have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or whether or not
a quorum is present at a meeting of Holders of Securities,
(x) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the
Company or of such other obligor (unless the Company,
such Affiliate or such obligor owns all Securities
Outstanding under this Indenture, or all Outstanding
Securities of each such series and each such Tranche,
as the case may be, determined without regard to this
clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice,
consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which a
Responsible Officer of the Trustee actually knows to be
so owned shall be so disregarded; provided, however,
that Securities so owned which have been pledged in
good faith may be regarded as Outstanding if it is
established to the reasonable satisfaction of the
Trustee that the pledgee, and not the Company, or any
such other obligor or Affiliate of either thereof, has
the right so to act with respect to such Securities and
that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the
Company or of such other obligor;
(y) the principal amount of a Discount Security
that shall be deemed to be Outstanding for such
purposes shall be the amount of the principal thereof
that would be due and payable as of the date of such
determination upon a declaration of acceleration of the
Maturity thereof pursuant to Section 802; and
(z) the principal amount of any Security which is
denominated in a currency other than Dollars or in a
composite currency that shall be deemed to be
Outstanding for such purposes shall be the amount of
Dollars which could have been purchased by the
principal amount (or, in the case of a Discount
Security, the Dollar equivalent on the date determined
as set forth below of the amount determined as provided
in (y) above) of such currency or composite currency
evidenced by such Security, in each such case certified
to the Trustee in an Officer's Certificate, based (i)
on the average of the mean of the buying and selling
spot rates quoted by three banks which are members of
the New York Clearing House Association selected by the
Company in effect at 11:00 A.M. (New York time) in The
City of New York on the fifth Business Day preceding
any such determination or (ii) if on such fifth
Business Day it shall not be possible or practicable to
obtain such quotations from such three banks, on such
other quotations or alternative methods of
determination which shall be as consistent as
practicable with the method set forth in (i) above;
provided, further, that in the case of any Security the principal
of which is payable from time to time without presentment or
surrender, the principal amount of such Security that shall be
deemed to be Outstanding at any time for all purposes of this
Indenture shall be the original principal amount thereof less the
aggregate amount of principal thereof theretofore paid.
"PAYING AGENT" means any Person, including the Company,
authorized by the Company to pay the principal of, and premium,
if any, or interest, if any, on any Securities on behalf of the
Company.
"PERIODIC OFFERING" means an offering of Securities of
a series from time to time any or all of the specific terms of
which Securities, including without limitation the rate or rates
of interest, if any, thereon, the Stated Maturity or Maturities
thereof and the redemption provisions, if any, with respect
thereto, are to be determined by the Company or its agents from
time to time subsequent to the initial request for the
authentication and delivery of such Securities by the Trustee, as
contemplated in Section 301 and clause (b) of Section 303.
"PERSON" means any individual, corporation,
partnership, limited liability company, joint venture, trust or
unincorporated organization or any government or any political
subdivision, instrumentality or agency thereof.
"PLACE OF PAYMENT", when used with respect to the
Securities of any series, or Tranche thereof, means the place or
places, specified as contemplated by Section 301, at which,
subject to Section 602, principal of and premium, if any, and
interest, if any, on the Securities of such series or Tranche are
payable.
"PREDECESSOR SECURITY" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"REDEMPTION DATE", when used with respect to any
Security to be redeemed, means the date fixed for such redemption
by or pursuant to this Indenture.
"REDEMPTION PRICE", when used with respect to any
Security to be redeemed, means the price at which it is to be
redeemed pursuant to this Indenture.
"REGULAR RECORD DATE" for the interest payable on any
Interest Payment Date on the Securities of any series means the
date specified for that purpose as contemplated by Section 301.
"REQUIRED CURRENCY" has the meaning specified in
Section 311.
"RESPONSIBLE OFFICER", when used with respect to the
Trustee, means any officer within the Corporate Trust Office of
the Trustee including, without limitation, any vice president,
any assistant vice president, any assistant secretary, any
assistant treasurer, any corporate trust officer, or any other
officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers also
means, with respect to a particular corporate trust matter, any
other officer of the Trustee to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
"SECURITIES" has the meaning stated in the first
recital of this Indenture and more particularly means any
securities authenticated and delivered under this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, and
the rules and regulations promulgated thereunder, as amended from
time to time.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the
respective meanings specified in Section 305.
"SPECIAL RECORD DATE" for the payment of any Defaulted
Interest on the Securities of any series means a date fixed by
the Trustee pursuant to Section 307.
"STATED INTEREST RATE" means a rate (whether fixed or
variable) at which an obligation by its terms is stated to bear
simple interest. Any calculation or other determination to be
made under this Indenture by reference to the Stated Interest
Rate on a Security shall be made without regard to the effective
interest cost to the Company of such Security and without regard
to the Stated Interest Rate on, or the effective cost to the
Company of, any other indebtedness the Company's obligations in
respect of which are evidenced or secured in whole or in part by
such Security.
"STATED MATURITY", when used with respect to any
Security or any obligation or any installment of principal
thereof or interest thereon, means the date on which the
principal of such obligation or such installment of principal or
interest is stated to be due and payable (without regard to any
provisions for redemption, prepayment, acceleration, purchase or
extension).
"TRANCHE" means a group of Securities which (a) are of
the same series and (b) have identical terms except as to
principal amount and/or date of issuance.
"TRUSTEE" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee
shall have become such with respect to one or more series of
Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each
Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to
the Securities of any series shall mean the Trustee with respect
to Securities of that series.
"TRUST INDENTURE ACT" means, as of any time, the Trust
Indenture Act of 1939 as in force at such time.
"UNITED STATES" means the United States of America, its
territories, its possessions and other areas subject to its
jurisdiction.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided in this
Indenture, upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating
to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or
investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant has
been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
(a) Any Officer's Certificate may be based (without
further examination or investigation), insofar as it relates to
or is dependent upon legal matters, upon an opinion of, or
representations by, counsel, unless, in any case, such officer
has actual knowledge that the certificate or opinion or
representations with respect to the matters upon which such
Officer's Certificate may be based as aforesaid are erroneous.
Any Opinion of Counsel may be based (without further
examination or investigation), insofar as it relates to or is
dependent upon factual matters, information with respect to which
is in the possession of the Company, upon a certificate of, or
representations by, an officer or officers of the Company unless
such counsel has actual knowledge that the certificate or opinion
or representations with respect to the matters upon which his
opinion may be based as aforesaid are erroneous. In addition,
any Opinion of Counsel may be based (without further examination
or investigation), insofar as it relates to or is dependent upon
matters covered in an Opinion of Counsel rendered by other
counsel, upon such other Opinion of Counsel, unless such counsel
has actual knowledge that the Opinion of Counsel rendered by such
other counsel with respect to the matters upon which his Opinion
of Counsel may be based as aforesaid are erroneous. If, in order
to render any Opinion of Counsel provided for herein, the signer
thereof shall deem it necessary that additional facts or matters
be stated in any Officer's Certificate provided for herein, then
such certificate may state all such additional facts or matters
as the signer of such Opinion of Counsel may request.
(b) In any case where several matters are required to
be certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such
matters in one or several documents. Where (i) any Person is
required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other
instruments under this Indenture, or (ii) two or more Persons are
each required to make, give or execute any such application,
request, consent, certificate, statement, opinion or other
instrument, any such applications, requests, consents,
certificates, statements, opinions or other instruments may, but
need not, be consolidated and form one instrument.
(c) Whenever, subsequent to the receipt by the Trustee
of any Board Resolution, Officer's Certificate, Opinion of
Counsel or other document or instrument, a clerical,
typographical or other inadvertent or unintentional error or
omission shall be discovered therein, a new document or
instrument may be substituted therefor in corrected form with the
same force and effect as if originally filed in the corrected
form and, irrespective of the date or dates of the actual
execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered
as of the date or dates required with respect to the document or
instrument for which it is substituted. Anything in this
Indenture to the contrary notwithstanding, if any such corrective
document or instrument indicates that action has been taken by or
at the request of the Company which could not have been taken had
the original document or instrument not contained such error or
omission, the action so taken shall not be invalidated or
otherwise rendered ineffective but shall be and remain in full
force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the
generality of the foregoing, any Securities issued under the
authority of such defective document or instrument shall
nevertheless be the valid obligations of the Company entitled to
the benefits of this Indenture equally and ratably with all other
Outstanding Securities, except as aforesaid.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction,
notice, consent, election, waiver or other action provided by
this Indenture to be made, given or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing or, alternatively, may be
embodied in and evidenced by the record of Holders voting in
favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders duly called and held in
accordance with the provisions of Article Thirteen, or a
combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both
are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any
such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments and so voting at
any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any
Person of a Security, shall be sufficient for any purpose of this
Indenture and (subject to Section 901) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this
Section. The record of any meeting of Holders shall be proved in
the manner provided in Section 1306.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof or may be
proved in any other manner which the Trustee and the Company deem
sufficient. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his
authority.
(c) The ownership, principal amount (except as
otherwise contemplated in clause (y) of the first proviso to the
definition of Outstanding) and serial numbers of Securities held
by any Person, and the date of holding the same, shall be proved
by the Security Register.
(d) Any request, demand, authorization, direction,
notice, consent, election, waiver or other Act of a Holder shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(e) Until such time as written instruments shall have
been delivered to the Trustee with respect to the requisite
percentage of principal amount of Securities for the action
contemplated by such instruments, any such instrument executed
and delivered by or on behalf of a Holder may be revoked with
respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in
which such instrument was proven.
(f) Securities of any series, or any Tranche thereof,
authenticated and delivered after any Act of Holders may, and
shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any action taken by such Act of
Holders. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee and the Company, to such action may be
prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities
of such series or Tranche.
(g) The Company may, at its option, by Company Order
fix in advance a record date for the determination of Holders
entitled to give any request, demand, authorization, direction,
notice, consent, waiver or other Act solicited by the Company,
but the Company shall not have any obligation to do so; provided,
however, that the Company may not fix a record date for the
giving or making of any notice, declaration, request or direction
referred to in the next sentence. In addition, the Trustee may,
at its option, fix in advance a record date for the determination
of Holders entitled to join in the giving or making of any Notice
of Default, any declaration of acceleration referred to in
Section 802, any request to institute proceedings referred to in
Section 807 or any direction referred to in Section 812. If any
such record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act, or such notice,
declaration, request or direction, may be given before or after
such record date, but only the Holders of record at the close of
business on the record date shall be deemed to be Holders for the
purposes of determining (i) whether Holders of the requisite
proportion of the Outstanding Securities have authorized or
agreed or consented to such Act (and for that purpose the
Outstanding Securities shall be computed as of the record date)
and/or (ii) which Holders may revoke any such Act
(notwithstanding subsection (e) of this Section ); and any such
Act, given as aforesaid, shall be effective whether or not the
Holders which authorized or agreed or consented to such Act
remain Holders after such record date and whether or not the
Securities held by such Holders remain Outstanding after such
record date.
SECTION 105. NOTICES, ETC. TO TRUSTEE OR COMPANY.
Any request, demand, authorization, direction, notice,
consent, election, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with, the Trustee by any Holder or by the
Company, or the Company by the Trustee or by any Holder, shall be
sufficient for every purpose hereunder (unless otherwise
expressly provided herein) if in writing and delivered personally
to an officer or other responsible employee of the addressee, or
transmitted by facsimile transmission, or transmitted by
registered mail, charges prepaid, to the applicable address set
forth for such party below or to such other address as any party
hereto may from time to time designate:
If to the Trustee, to:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Telephone: (212) 815-5736
Telecopy: (212) 815-7157
If to the Company, to:
Grand Court Lifestyles, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: Secretary
Telephone: (201) 947-7322
Telecopy: (201) 947-6663
Any communication contemplated herein shall be deemed
to have been made, given, furnished and filed if personally
delivered, on the date of delivery, if transmitted by facsimile
transmission, on the date of transmission, and if transmitted by
registered mail, on the date of receipt.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.
Except as otherwise expressly provided herein, where
this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given, and shall be deemed given, to
Holders if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at the address of such Holder
as it appears in the Security Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the
giving of such notice.
In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice to Holders by mail, then such notification as
shall be made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders.
Any notice required by this Indenture may be waived in
writing by the Person entitled to receive such notice, either
before or after the event otherwise to be specified therein, and
such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or
conflicts with another provision hereof which is required or
deemed to be included in this Indenture by, or is otherwise
governed by, any provision of the Trust Indenture Act, such other
provision shall control; and if any provision hereof otherwise
conflicts with the Trust Indenture Act, the Trust Indenture Act
shall control.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Indenture and
the Table of Contents are for convenience only and shall not
affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or the
Securities shall be held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by
and construed in accordance with the law of the State of New York
(including without limitation Section 5-1401 of the New York
General Obligations Law or any successor to such statute), except
to the extent that the Trust Indenture Act shall be applicable.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Securities other than a
provision in Securities of any series, or any Tranche thereof, or
in the indenture supplemental hereto, Board Resolution or
Officer's Certificate which establishes the terms of the
Securities of such series or Tranche, which specifically states
that such provision shall apply in lieu of this Section) payment
of interest or principal and premium, if any, need not be made at
such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same
force and effect as if made on the Interest Payment Date,
Redemption Date, or Stated Maturity, and, if such payment is made
or duly provided for on such Business Day, no interest shall
accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, to such Business Day.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities of each series shall be in
substantially the form or forms thereof established in the
indenture supplemental hereto establishing such series or in a
Board Resolution establishing such series, or in an Officer's
Certificate pursuant to such a supplemental indenture or Board
Resolution, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as
evidenced by their execution thereof. If the form or forms of
Securities of any series are established in a Board Resolution or
in an Officer's Certificate pursuant to a Board Resolution, such
Board Resolution and Officer's Certificate, if any, shall be
delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication
and delivery of such Securities.
Unless otherwise specified as contemplated by Section
301, the Securities of each series shall be issuable in
registered form without coupons. The definitive Securities shall
be produced in such manner as shall be determined by the officers
executing such Securities, as evidenced by their execution
thereof.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in
substantially the form set forth below:
This is one of the Securities of the series
designated therein referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By: _____________________________
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may
be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series.
Subject to the last paragraph of this Section, prior to the
authentication and delivery of Securities of any series there
shall be established by specification in a supplemental indenture
or in a Board Resolution of the Company or in an Officer's
Certificate of the Company (which need not, comply with Section
102) pursuant to a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series
(which shall distinguish the Securities of such series
from Securities of all other series);
(b) any limit upon the aggregate principal amount
of the Securities of such series which may be
authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in
lieu of, other Securities of such series pursuant to
Section 304, 305, 306, 406 or 1206 and except for any
Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered
hereunder);
(c) the Person or Persons (without specific
identification) to whom any interest on Securities of
such series, or any Tranche thereof, shall be payable,
if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for
such interest;
(d) the date or dates on which the principal of
the Securities of such series or any Tranche thereof,
is payable or any formulary or other method or other
means by which such date or dates shall be determined,
by reference to an index or other fact or event
ascertainable outside of this Indenture or otherwise
(without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of
such series, or any Tranche thereof, shall bear
interest, if any (including the rate or rates at which
overdue principal shall bear interest after Maturity if
different from the rate or rates at which such
Securities shall bear interest prior to Maturity, and,
if applicable, the rate or rates at which overdue
premium or interest shall bear interest, if any), or
any formulary or other method or other means by which
such rate or rates shall be determined by reference to
an index or other fact or event ascertainable outside
of this Indenture or otherwise, the date or dates from
which such interest shall accrue; the Interest Payment
Dates and the Regular Record Dates, if any, for the
interest payable on such Securities on any Interest
Payment Date; and the basis of computation of interest,
if other than as provided in Section 310;
(f) the place or places at which or methods (if
other than as provided elsewhere in this Indenture) by
which (i) the principal of and premium, if any, and
interest, if any, on Securities of such series, or any
Tranche thereof, shall be payable, (ii) registration of
transfer of Securities of such series, or any Tranche
thereof, may be effected, (iii) exchanges of Securities
of such series, or any Tranche thereof, may be effected
and (iv) notices and demands to or upon the Company in
respect of the Securities of such series, or any
Tranche thereof, and this Indenture may be served; the
Security Registrar and any Paying Agent or Agents for
such series or Tranche; and if such is the case, that
the principal of such Securities shall be payable
without presentment or surrender thereof;
(g) the period or periods within which, or the
date or dates on which, the price or prices at which
and the terms and conditions upon which the Securities
of such series, or any Tranche thereof, may be
redeemed, in whole or in part, at the option of the
Company and any restrictions on such redemptions;
(h) the obligation, if any, of the Company to
redeem or purchase or repay the Securities of such
series, or any Tranche thereof, pursuant to any sinking
fund or other mandatory redemption provisions or at the
option of a Holder thereof and the period or periods
within which or the date or dates on which, the price
or prices at which and the terms and conditions upon
which such Securities shall be redeemed or purchased or
repaid, in whole or in part, pursuant to such
obligation and applicable exceptions to the
requirements of Section 404 in the case of mandatory
redemption or redemption or repayment at the option of
the Holder;
(i) the denominations in which Securities of such
series, or any Tranche thereof, shall be issuable if
other than denominations of $1,000 and any integral
multiple thereof;
(j) if the principal of or premium, if any, or
interest, if any, on the Securities of such series, or
any Tranche thereof, are to be payable, at the election
of the Company or a Holder thereof, in a coin or
currency other than that in which the Securities are
stated to be payable, the period or periods within
which, and the terms and conditions upon which, such
election may be made and the manner in which the amount
of such coin or currency payable is to be determined;
(k) the currency or currencies, including
composite currencies, in which payment of the principal
of and premium, if any, and interest, if any, on the
Securities of such series, or any Tranche thereof,
shall be payable (if other than Dollars) and the manner
in which the equivalent of the principal amount thereof
in Dollars is to be determined for any purpose,
including for the purpose of determining the principal
amount deemed to be Outstanding at any time;
(l) if the principal of or premium, if any, or
interest on the Securities of such series, or any
Tranche thereof, are to be payable, or are to be
payable at the election of the Company or a Holder
thereof, in securities or other property, the type and
amount of such securities or other property, or the
formulary or other method or other means by which such
amount shall be determined, and the period or periods
within which, and the terms and conditions upon which,
any such election may be made;
(m) if the amount payable in respect of principal
of or premium, if any, or interest, if any, on the
Securities of such series, or any Tranche thereof, may
be determined with reference to an index or other fact
or event ascertainable outside this Indenture, the
manner in which such amounts shall be determined to the
extent not established pursuant to clause (e) of this
paragraph;
(n) if other than the entire principal amount
thereof, the portion of the principal amount of
Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration
of the Maturity thereof pursuant to Section 802;
(o) any Events of Default, in addition to those
specified in Section 801, or any exceptions to those
specified in Section 801, with respect to the
Securities of such series, and any covenants of the
Company for the benefit of the Holders of the
Securities of such series, or any Tranche thereof, in
addition to those set forth in Article Six, or any
exceptions to those set forth in Article Six;
(p) the terms, if any, pursuant to which the
Securities of such series, or any Tranche thereof, may
be converted into or exchanged for shares of capital
stock or other securities of the Company or any other
Person;
(q) the obligations or instruments, if any, which
shall be considered to be Eligible Obligations in
respect of the Securities of such series, or any
Tranche thereof, denominated in a currency other than
Dollars or in a composite currency, and any provisions
for satisfaction and discharge of Securities of any
series, in addition to those set forth in Section 701,
or any exceptions to those set forth in Section 701;
(r) if the Securities of such series, or any
Tranche thereof, are to be issued in global form, (i)
any limitations on the rights of the Holder or Holders
of such Securities to transfer or exchange the same or
to obtain the registration of transfer thereof, (ii)
any limitations on the rights of the Holder or Holders
thereof to obtain certificates therefor in definitive
form in lieu of global form and (iii) any other matters
incidental to such Securities;
(s) if the Securities of such series, or any
Tranche thereof, are to be issuable as bearer
securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental
indenture as contemplated by clause (g) of Section
1201;
(t) to the extent not established pursuant to
clause (r) of this paragraph, any limitations on the
rights of the Holders of the Securities of such Series,
or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer
thereof; and if a service charge will be made for the
registration of transfer or exchange of Securities of
such series, or any Tranche thereof, the amount or
terms thereof;
(u) any exceptions to Section 113, or variation
in the definition of Business Day, with respect to the
Securities of such series, or any Tranche thereof; and
(v) any other terms of the Securities of such
series, or any Tranche thereof.
With respect to Securities of a series subject to a
Periodic Offering, the indenture supplemental hereto or the Board
Resolution which establishes such series, or the Officer's
Certificate pursuant to such supplemental indenture or Board
Resolution, as the case may be, may provide general terms or
parameters for Securities of such series and provide either that
the specific terms of Securities of such series, or any Tranche
thereof, shall be specified in a Company Order or that such terms
shall be determined by the Company or its agents in accordance
with procedures specified in a Company Order as contemplated in
clause (b) of Section 303.
Unless otherwise provided with respect to a series of
Securities as contemplated in Section 301(b), the aggregate
principal amount of a series of Securities may be increased and
additional Securities of such series may be issued up to the
maximum aggregate principal amount authorized with respect to
such series as increased.
SECTION 302. DENOMINATIONS.
Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, the Securities of each series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities or any Tranche
thereof, the Securities shall be executed on behalf of the
Company by an Authorized Officer of the Company, and may have the
corporate seal of the Company affixed thereto or reproduced
thereon attested by its Secretary, one of its Assistant
Secretaries or any other Authorized Officer. The signature of
any or all of these officers on the Securities may be manual or
facsimile.
A Security bearing the manual or facsimile signature of
an individual who was at the time of execution an Authorized
Officer of the Company shall bind the Company, notwithstanding
that any such individual has ceased to be an Authorized Officer
prior to the authentication and delivery of the Security or did
not hold such office at the date of such Security.
The Trustee shall authenticate and deliver Securities
of a series for original issue, at one time or from time to time
in accordance with the Company Order referred to below, upon
receipt by the Trustee of:
(a) the instrument or instruments establishing the
form or forms and terms of the Securities of such series, as
provided in Sections 201 and 301;
(b) a Company Order requesting the authentication and
delivery of such Securities and, to the extent that the
terms of such Securities shall not have been established in
an indenture supplemental hereto or in a Board Resolution,
or in an Officer's Certificate pursuant to a supplemental
indenture or Board Resolution, all as contemplated by
Sections 201 and 301, either (i) establishing such terms or
(ii) in the case of Securities of a series subject to a
Periodic Offering, specifying procedures, acceptable to the
Trustee, by which such terms are to be established (which
procedures may provide, to the extent acceptable to the
Trustee, for authentication and delivery pursuant to oral or
electronic instructions from the Company or any agent or
agents thereof, which oral instructions are to be promptly
confirmed electronically or in writing), in either case in
accordance with the instrument or instruments delivered
pursuant to clause (a) above;
(c) Securities of such series, each executed on behalf
of the Company by an Authorized Officer of the Company;
(d) an Opinion of Counsel to the effect that:
(i) (A) the forms of such Securities have been duly
authorized by the Company and (B) the forms of the
Securities have been established in conformity with the
provisions of this Indenture;
(ii) (A) the terms of such Securities have been duly
authorized by the Company and (B) the terms of the
Securities have been established in conformity with the
provisions of this Indenture; and
(iii) such Securities, when authenticated and
delivered by the Trustee and issued and delivered by the
Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and
legally binding obligations of the Company, entitled to the
benefits provided by this Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to
laws relating to or affecting generally the enforcement of
creditors' rights, including, without limitation, bankruptcy
and insolvency laws and to general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity as at law);
provided, however, that, with respect to Securities of a series
subject to a Periodic Offering, the Trustee shall be entitled to
receive such Opinion of Counsel only once at or prior to the time
of the first authentication and delivery of Securities of such
series, and that in lieu of the opinions described in clauses
(ii) and (iii) above such Opinion of Counsel may, alternatively,
state, respectively,
(x) that, when the terms of such Securities shall have
been established pursuant to a Company Order or Orders or
pursuant to such procedures as may be specified from time to
time by a Company Order or Orders all as contemplated by and
in accordance with the instrument or instruments delivered
pursuant to clause (a) above, such terms will have been duly
authorized by the Company, respectively, and will have been
established in conformity with the provisions of this
Indenture; and
(y) that such Securities, when (1) executed by the
Company, (2) authenticated and delivered by the Trustee in
accordance with this Indenture, (3) issued and delivered by
the Company and (4) paid for, all as contemplated by and in
accordance with the aforesaid Company Order or Orders or
specified procedures, as the case may be, will have been
duly issued under this Indenture and will constitute valid
and legally binding obligations of the Company, entitled to
the benefits provided by the Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to
laws relating to or affecting generally the enforcement of
creditors' rights, including, without limitation, bankruptcy
and insolvency laws and to general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity or at law).
With respect to Securities of a series subject to a
Periodic Offering, the Trustee may conclusively rely, as to the
authorization by the Company of any of such Securities, the forms
and terms thereof and the legality, validity, binding effect and
enforceability thereof, upon the Opinion of Counsel and other
documents delivered pursuant to Sections 201 and 301 and this
Section, as applicable, at or prior to the time of the first
authentication of Securities of such series, unless and until
such opinion or other documents have been superseded or revoked
or expire by their terms. In connection with the authentication
and delivery of Securities of a series, pursuant to a Periodic
Offering, the Trustee shall be entitled to assume that the
Company's instructions to authenticate and deliver such
Securities do not violate any applicable law or any applicable
rule, regulation or order of any governmental agency or
commission having jurisdiction over the Company.
If the forms or terms of the Securities of any series
have been established by or pursuant to a Board Resolution or an
Officer's Certificate as permitted by Sections 201 or 301, the
Trustee shall not be required to authenticate such Securities if
the issuance of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under the
Securities and this Indenture or otherwise in a manner which is
not reasonably acceptable to the Trustee.
Except as otherwise specified as contemplated by
Section 301 with respect to any series of securities, or any
Tranche thereof, each Security shall each be dated the date of
its authentication.
Except as otherwise specified as contemplated by
Section 301 with respect to any series of Securities, or any
Tranche thereof, no Security shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of
authentication substantially in the form provided for herein
executed by the Trustee or its agent by manual signature of an
authorized signatory thereof, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder to the Company, or any
Person acting on its behalf, but shall never have been issued and
sold by the Company, and the Company shall deliver such Security
to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel)
stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any
series, or any Tranche thereof, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities;
provided, however, that temporary Securities need not recite
specific redemption, sinking fund, conversion or exchange
provisions.
If temporary Securities of any series or Tranche are
issued, the Company shall cause definitive Securities of such
series or Tranche to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series or
Tranche, the temporary Securities of such series or Tranche shall
be exchangeable for definitive Securities of such series or
Tranche upon surrender of the temporary Securities of such series
or Tranche at the office or agency of the Company maintained
pursuant to Section 602 in a Place of Payment for such series or
Tranche, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any
series or Tranche, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor definitive
Securities of the same series or Tranche, of authorized
denominations and of like tenor and aggregate principal amount.
Until exchanged in full as hereinabove provided,
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of
the same series and Tranche and of like tenor authenticated and
delivered hereunder.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Company shall cause to be kept in one of the
offices or agencies designated pursuant to Section 602, with
respect to the Securities of each series or any Tranche thereof,
a register (the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities of such series or
Tranche and the registration of transfer thereof. The Company
shall designate one Person to maintain the Security Register for
the Securities of each series, and such Person is referred to
herein, with respect to such series, as the "Security Registrar."
Anything herein to the contrary notwithstanding, the Company may
designate one or more of its offices or an office of any
Affiliate as an office in which a register with respect to the
Securities of one or more series, or any Tranche or Tranches
thereof, shall be maintained, and the Company may designate
itself or any Affiliate as the Security Registrar with respect to
one or more of such series. The Security Register shall be open
for inspection by the Trustee and the Company at all reasonable
times.
Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, upon surrender for registration of transfer of
any Security of such series or Tranche at the office or agency of
the Company maintained pursuant to Section 602 in a Place of
Payment for such series or Tranche, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount.
Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, any Security of such series or Tranche may be
exchanged at the option of the Holder for one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount,
upon surrender of the Securities to be exchanged at any such
office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.
All Securities delivered upon any registration of
transfer or exchange of Securities shall be valid obligations of
the Company evidencing the same obligation, and entitled to the
same benefits under this Indenture, as the Securities surrendered
upon such registration of transfer or exchange.
Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required by
the Company or the Trustee) be duly endorsed or shall be
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee, duly executed by the
Holder thereof or his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section
301, with respect to Securities of any series, or any Tranche
thereof, no service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 406 or 1206 not involving any
transfer.
The Company shall not be required to execute or to
provide for the registration of transfer of or the exchange of
(a) Securities of any series, or any Tranche thereof, during a
period of 15 days immediately preceding the date notice is to be
given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so
selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the
Trustee, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of
the same series and Tranche, and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (a) evidence to their satisfaction of the ownership of
and the destruction, loss or theft of any Security and (b) such
security or indemnity as may be reasonably required by them to
save each of them and any agent of any of them harmless, then, in
the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company
shall execute and, upon its written request, the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of the same series and Tranche,
and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including
the fees and expenses of the Trustee) in connection therewith.
Every new Security of any series issued pursuant to
this Section in lieu of any destroyed, lost or stolen Security
shall constitute an original additional contractual obligation of
the Company whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone other than the Holder
of such new security, and any such new Security shall be entitled
to all the benefits of this Indenture equally and proportionately
with any and all other Securities of such series duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Unless otherwise provided as contemplated by Section
301 with respect to the Securities of any series, or any Tranche
thereof, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Holder on the related
Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a
date (a "Special Record Date") for the payment of such
Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Security of such series and the date of the proposed
payment, and at the same time the Company, shall deposit
with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company,
shall promptly cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of
Securities of such series at the address of such Holder as
it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities
of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special
Record Date.
(b) The Company may make payment of any Defaulted
Interest on the Securities of any series in any other lawful
manner not inconsistent with the requirements of any
securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such
Security is registered as the absolute owner of such Security for
the purpose of receiving payment of principal of and premium, if
any, and (subject to Sections 305 and 307) interest, if any, on
such Security and for all other purposes whatsoever, whether or
not such Security be overdue, and none of the Company, the
Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and, if not
theretofore canceled, shall be promptly canceled by the Trustee.
The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any
manner whatsoever or which the Company shall not have issued and
sold, and all Securities so delivered shall be promptly canceled
by the Trustee. No Securities shall be authenticated in lieu of
or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of in
accordance with the Trustee's customary procedures, and the
Trustee shall deliver, monthly, to the Company a statement of
transactions with respect to the Securities.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by
Section 301 for Securities of any series, or Tranche thereof,
interest on the Securities of each series shall be computed on
the basis of a 360-day year consisting of twelve 30-day months,
and with respect to any period less than a full calendar month,
on the basis of the actual number of days elapsed during such
period (also based on a 30-day month).
SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.
In the case of any Security denominated in any currency
other than Dollars or in a composite currency (the "Required
Currency"), except as otherwise specified with respect to such
Security as contemplated by Section 301, the obligation of the
Company to make any payment of the principal thereof, or the
premium or interest thereon, shall not be discharged or satisfied
by any tender by the Company, or recovery by the Trustee, in any
currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the Trustee timely
holding the full amount of the Required Currency then due and
payable. If any such tender or recovery is in a currency other
than the Required Currency, the Trustee may take such actions as
it considers appropriate to exchange such currency for the
Required Currency. The costs and risks of any such exchange,
including without limitation the risks of delay and exchange rate
fluctuation, shall be borne by the Company, the Company shall
remain fully liable for any shortfall or delinquency in the full
amount of Required Currency then due and payable, and in no
circumstances shall the Trustee be liable therefor except in the
case of its negligence or willful misconduct. The Company hereby
waive any defense of payment based upon any such tender or
recovery which is not in the Required Currency, or which, when
exchanged for the Required Currency by the Trustee, is less than
the full amount of Required Currency then due and payable.
SECTION 312. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of
any change in the "CUSIP" numbers.
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. APPLICABILITY OF ARTICLE.
Securities of any series, or any Tranche thereof, which
are redeemable before their Stated Maturity shall be redeemable
in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for Securities of such series or
Tranche) in accordance with this Article.
SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities
shall be evidenced by a Board Resolution or an Officer's
Certificate. The Company shall, at least 35 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of
such Securities to be redeemed. In the case of any redemption of
Securities (a) prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere
in this Indenture or (b) pursuant to an election of the Company
which is subject to a condition specified in the terms of such
Securities and the Company shall furnish the Trustee with an
Officer's Certificate evidencing compliance with such restriction
or condition.
SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series, or any
Tranche thereof, are to be redeemed, the particular Securities to
be redeemed shall be selected by the Trustee from the Outstanding
Securities of such series or Tranche not previously called for
redemption, by such method as shall be provided for such
particular series or Tranche, or in the absence of any such
provision, by such method of random selection as the Trustee
shall deem fair and appropriate and which may, in any case,
provide for the selection for redemption of portions (equal to
any authorized denomination for Securities of such series or
Tranche) of the principal amount of Securities of such series or
Tranche of a denomination larger than the minimum authorized
denomination for Securities of such series or Tranche; provided,
however, that if, as indicated in an Officer's Certificate, the
Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any
Tranche thereof, and less than all of such Securities as to which
such offer was made shall have been tendered to the Company for
such purchase, the Trustee, if so directed by Company Order,
shall select for redemption all or any principal amount of such
Securities which have not been so tendered.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities selected to be redeemed in part, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 404. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner
provided in Section 106 to the Holders of Securities to be
redeemed not less than 20 nor more than 60 days prior to the
Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Securities of any series
or Tranche are to be redeemed, the identification of
the particular Securities to be redeemed and the
portion of the principal amount of any Security to be
redeemed in part,
(d) that on the Redemption Date the Redemption
Price, together with accrued interest, if any, to the
Redemption Date, will become due and payable upon each
such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said
date,
(e) the place or places where such Securities are
to be surrendered for payment of the Redemption Price
and accrued interest, if any, unless it shall have been
specified as contemplated by Section 301 with respect
to such Securities that such surrender shall not be
required,
(f) that the redemption is for a sinking or other
fund, if such is the case, and
(g) the CUSIP numbers, if any, of such
Securities, and
(h) such other matters as the Company shall deem
desirable or appropriate.
Unless otherwise specified with respect to any
Securities in accordance with Section 301, with respect to any
notice of redemption of Securities at the election of the
Company, unless, upon the giving of such notice, such Securities
shall be deemed to have been paid in accordance with Section 701,
such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such
Securities, on or prior to the date fixed for such redemption, of
money sufficient to pay the principal of and premium, if any, and
interest, if any, on such Securities and that if such money shall
not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such
Securities. In the event that such notice of redemption contains
such a condition and such money is not so received, the
redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the
notice of redemption was given, that such money was not so
received and such redemption was not required to be made.
Notice of redemption of Securities to be redeemed at
the election of the Company, and any notice of non-satisfaction
of a condition for redemption as aforesaid, shall be given by the
Company or, on Company Request, by the Trustee in the name and at
the expense of the Company.
SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid,
and the conditions, if any, set forth in such notice having been
satisfied, the Securities or portions thereof so to be redeemed
shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date
(unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price
and accrued interest, if any) such Securities or portions
thereof, if interest-bearing, shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with
such notice, such Security or portion thereof shall be paid by
the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that
no such surrender shall be a condition to such payment if so
specified as contemplated by Section 301 with respect to such
Security; and provided, further, that except as otherwise
specified as contemplated by Section 301 with respect to such
Security, any installment of interest on any Security the Stated
Maturity of which installment is on or prior to the Redemption
Date shall be payable to the Holder of such Security, or one or
more Predecessor Securities, registered as such at the close of
business on the related Regular Record Date according to the
terms of such Security and subject to the provisions of Sections
305 and 307.
SECTION 406. SECURITIES REDEEMED IN PART.
Upon the surrender of any Security which is to be
redeemed only in part at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), the Company shall
execute, and the Trustee shall authenticate and deliver to the
Holder of such Security, without service charge, a new Security
or Securities of the same series and Tranche, of any authorized
denomination requested by such Holder and of like tenor and in
aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so
surrendered.
ARTICLE FIVE
SINKING FUNDS
SECTION 501. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to
any sinking fund for the retirement of the Securities of any
series, or any Tranche thereof, except as otherwise specified as
contemplated by Section 301 for Securities of such series or
Tranche.
The minimum amount of any sinking fund payment provided
for by the terms of Securities of any series, or any Tranche
thereof, is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount
provided for by the terms of Securities of any series, or any
Tranche thereof, is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any
series, or any Tranche thereof, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section
502. Each sinking fund payment shall be applied to the
redemption of Securities of the series or Tranche in respect of
which it was made as provided for by the terms of such
Securities.
SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES.
The Company (a) may deliver to the Trustee Outstanding
Securities (other than any previously called for redemption) of a
series or Tranche in respect of which a mandatory sinking fund
payment is to be made and (b) may apply as a credit Securities of
such series or Tranche which have been redeemed either at the
election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund
payments pursuant to the terms of such Securities, in each case
in satisfaction of all or any part of such mandatory sinking fund
payment; provided, however, that no Securities shall be applied
in satisfaction of a mandatory sinking fund payment if such
Securities shall have been previously so applied. Securities so
applied shall be received and credited for such purpose by the
Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount
of such mandatory sinking fund payment shall be reduced
accordingly.
SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund
payment date for the Securities of any series, or any Tranche
thereof, the Company shall deliver to the Trustee an Officer's
Certificate specifying:
(a) the amount of the next succeeding mandatory
sinking fund payment for such series or Tranche;
(b) the amount, if any, of the optional sinking fund
payment to be made together with such mandatory sinking fund
payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking
fund payment which is to be satisfied by the payment of
cash;
(e) the portion, if any, of such aggregate sinking
fund payment which is to be satisfied by delivering and
crediting Securities of such series or Tranche pursuant to
Section 502 and stating the basis for such credit and that
such Securities have not previously been so credited, and
the Company shall also deliver to the Trustee any Securities
to be so delivered. If the Company shall not deliver such
Officer's Certificate, the next succeeding sinking fund
payment for such series or Tranche shall be made entirely in
cash in the amount of the mandatory sinking fund payment.
Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified
in Section 403 and cause notice of the redemption thereof to
be given in the name of and at the expense of the Company in
the manner provided in Section 404. Such notice having been
duly given, the redemption of such Securities shall be made
upon the terms and in the manner stated in Sections 405 and
406.
ARTICLE SIX
COVENANTS
SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall pay the principal of and premium, if
any, and interest, if any, on the Securities of each series in
accordance with the terms of such Securities and this Indenture.
SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in each Place of Payment for
the Securities of each series, or any Tranche thereof, an office
or agency where payment of such Securities shall be made or
surrendered for payment, where registration of transfer or
exchange of such Securities may be effected and where notices and
demands to or upon the Company in respect of such Securities and
this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in
the location, of each such office or agency and prompt notice to
the Holders of any such change in the manner specified in Section
106. If at any time the Company shall fail to maintain any such
required office or agency in respect of Securities of any series,
or any Tranche thereof, or shall fail to furnish the Trustee with
the address thereof, payment of such Securities may be made,
registration of transfer or exchange thereof may be effected and
notices and demands in respect thereby may be served at the
Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent for all such purposes in any
such event.
The Company may also from time to time designate one or
more other offices or agencies with respect to the Securities of
one or more series, or any Tranche thereof, for any or all of the
foregoing purposes and may from time to time rescind such
designations; provided, however, that, unless otherwise specified
as contemplated by Section 301 with respect to the Securities of
such series or Tranche, no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency for such purposes in each Place of Payment
for such Securities in accordance with the requirements set forth
above. The Company shall give prompt written notice to the
Trustee, and prompt notice to the Holders in the manner specified
in Section 106, of any such designation or rescission and of any
change in the location of any such other office or agency.
Anything herein to the contrary notwithstanding, any
office or agency required by this Section may be maintained at an
office of the Company or any Affiliate of either of them, in
which event the Company or such Affiliate, as the case may be,
shall perform all functions to be performed at such office or
agency.
SECTION 603. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying
Agent with respect to the Securities of any series, or any
Tranche thereof, it shall, on or before each due date of the
principal of and premium, if any, or interest, if any, on any of
such Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the
principal and premium or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying
Agents for the Securities of any series, or any Tranche thereof,
it shall, prior to each due date of the principal of and premium,
if any, or interest, if any, on such Securities, deposit with
such Paying Agents sums sufficient (without duplication) to pay
the principal and premium or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company shall promptly notify the
Trustee of its action or failure so to act.
The Company shall cause each Paying Agent for the
Securities of any series, or any Tranche thereof, other than the
Company or the Trustee, to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such
Paying Agent shall:
(a) hold all sums held by it for the payment of the
principal of and premium, if any, or interest, if any, on
Securities of such series or Tranche in trust for the
benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as
herein provided;
(b) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities of such
series) in the making of any payment of principal of and
premium, if any, or interest, if any, on the Securities of
such series or Tranche; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent.
The Company may at any time pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent and, if as stated
in a Company Order delivered to the Trustee, in accordance with
the provisions of Article Seven; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of and premium, if any, or interest, if any, on any
Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or, if
then held by the Company, shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make
any such payment to the Company, may at the expense of the
Company, either (a) cause to be mailed, on one occasion only,
notice to such Holder that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30
days from the date of such mailing, any unclaimed balance of such
money then remaining will be paid to the Company or (b) cause to
be published once, in a newspaper published in the English
language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New
York, notice that such money remains unclaimed and that after a
date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money
then remaining will be paid to the Company.
SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company under Article
Eleven, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence.
SECTION 605. ANNUAL OFFICER'S CERTIFICATE
Not later than April 30 in each year, commencing April
30, 1999, the Company shall deliver to the Trustee an Officer's
Certificate which need not comply with Section 102, executed by
its principal executive officer, principal financial officer or
principal accounting officer, as to such officer's knowledge of
such obligor's compliance with all conditions and covenants under
this Indenture, such compliance to be determined without regard
to any period of grace or requirement of notice under this
Indenture.
SECTION 606. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to
comply with any term, provision or condition set forth in
(a) any covenant or restriction specified with respect
to the Securities of any series, or any Tranche thereof, as
contemplated by Section 301 or by Section 1201(b) if before
the time for such compliance the Holders of a majority in
aggregate principal amount of the Outstanding Securities of
all series and Tranches with respect to which compliance
with such covenant or restriction is to be omitted,
considered as one class, shall, by Act of such Holders,
either waive such compliance in such instance or generally
waive compliance with such term, provision or condition; and
(b) Section 1101(b) if before the time for such
compliance the Holders of a majority in principal amount of
Securities Outstanding under this Indenture shall, by Act of
such Holders, either waive such compliance in such instance
or generally waive compliance with such term, provision or
condition;
but, in either case, no such waiver shall extend to or affect
such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 607. CALCULATION OF THE ORIGINAL ISSUE DISCOUNT.
In the event that the Securities of any series or
Tranche are issued with original issue discount, the Company
shall timely file with the Trustee such specific information
relating to the original issue discount as may then be required
under the Internal Revenue Code of 1986, as amended from time to
time, or under any successor statute, to be furnished to the
Holders of such Securities by the Company or by the Trustee.
ARTICLE SEVEN
SATISFACTION AND DISCHARGE
SECTION 701. SATISFACTION AND DISCHARGE OF SECURITIES.
Any Security or Securities, or any portion of the
principal amount thereof, shall be deemed to have been paid for
all purposes of this Indenture, and the entire indebtedness of
the Company in respect thereof shall be satisfied and discharged,
if there shall have been irrevocably deposited with the Trustee
or any Paying Agent (other than the Company), in trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the
Maturity of such Securities or portions thereof, Eligible
Obligations, which shall not contain provisions permitting
the redemption or other prepayment thereof at the option of
the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof,
will provide moneys which, together with the money, if any,
deposited with or held by the Trustee or such Paying Agent,
shall be sufficient, or
(c) a combination of (a) or (b) which shall be
sufficient,
to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Securities or
portions thereof; provided, however, that in the case of the
provision for payment or redemption of less than all the
Securities of any series or Tranche, such Securities or portions
thereof shall have been selected by the Trustee as provided
herein and, in the case of a redemption, the notice requisite to
the validity of such redemption shall have been given or
irrevocable authority shall have been given by the Company to the
Trustee to give such notice, under arrangements satisfactory to
the Trustee; and provided, further, that the Company shall have
delivered to the Trustee and such Paying Agent:
(x) if such deposit shall have been made prior to the
Maturity of such Securities, a Company Order stating that
the money and Eligible Obligations deposited in accordance
with this Section shall be held in trust, as provided in
Section 603;
(y) if Eligible Obligations shall have been deposited,
an Opinion of Counsel to the effect that such obligations
constitute Eligible Obligations and do not contain
provisions permitting the redemption or other prepayment
thereof at the option of the issuer thereof, and an opinion
of an independent public accountant of nationally recognized
standing, selected by the Company, to the effect that the
other requirements set forth in clause (b) and (c) above
have been satisfied; and
(z) if such deposit shall have been made prior to the
Maturity of such Securities, an Officer's Certificate
stating the Company's intention that, upon delivery of such
Officer's Certificate, its indebtedness in respect of such
Securities or portions thereof will have been satisfied and
discharged as contemplated in this Section.
Upon the deposit of money or Eligible Obligations, or
both, in accordance with this Section, together with the
documents required by clauses (x), (y) and (z) above, the Trustee
shall, upon Company Request, acknowledge in writing that such
Securities or portions thereof are deemed to have been paid for
all purposes of this Indenture and that the entire indebtedness
of the Company in respect thereof has been satisfied and
discharged as contemplated in this Section. In the event that
all of the conditions set forth in the preceding paragraph shall
have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Officer's Certificate
specified in clause (z) (if otherwise required) shall not have
been delivered, such Securities or portions thereof shall
nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof
shall nevertheless be no longer entitled to the benefits provided
by this Indenture or of any of the covenants of the Company under
Article Six (except the covenants contained in Sections 602 and
603) or any other covenants made in respect of such Securities or
portions thereof as contemplated by Section 301 or Section
1201(b), but the indebtedness of the Company in respect of such
Securities or portions thereof shall not be deemed to have been
satisfied and discharged prior to Maturity for any other purpose;
and, upon Company Request, the Trustee shall acknowledge in
writing that such Securities or portions thereof are deemed to
have been paid for all purposes of this Indenture.
If payment at Stated Maturity of less than all of the
Securities of any series, or any Tranche thereof, is to be
provided for in the manner and with the effect provided in this
Section, the Trustee shall select such Securities, or portions of
principal amount thereof, in the manner specified by Section 403
for selection for redemption of less than all the Securities of a
series or Tranche.
In the event that Securities which shall be deemed to
have been paid for purposes of this Indenture, and, if such is
the case, in respect of which the Company's indebtedness shall
have been satisfied and discharged, all as provided in this
Section, do not mature and are not to be redeemed within the
sixty (60) day period commencing with the date of the deposit of
moneys or Eligible Obligations, as aforesaid, the Company shall,
as promptly as practicable, give a notice, in the same manner as
a notice of redemption with respect to such Securities, to the
Holders of such Securities to the effect that such deposit has
been made and the effect thereof.
Notwithstanding that any Securities shall be deemed to
have been paid for purposes of this Indenture, as aforesaid, the
obligations of the Company and the Trustee in respect of such
Securities under Sections 304, 305, 306, 404, 602, 603, 907 and
914 and this Article shall survive.
The Company shall pay, and shall indemnify the Trustee
or any Paying Agent with which Eligible Obligations shall have
been deposited as provided in this Section against, any tax, fee
or other charge imposed on or assessed against such Eligible
Obligations or the principal or interest received in respect of
such Eligible Obligations, including, but not limited to, any
such tax payable by any entity deemed, for tax purposes, to have
been created as a result of such deposit.
Anything herein to the contrary notwithstanding, (a)
if, at any time after a Security would be deemed to have been
paid for purposes of this Indenture, and, if such is the case,
the Company's indebtedness in respect thereof would be deemed to
have been satisfied and discharged, pursuant to this Section
(without regard to the provisions of this paragraph), the Trustee
or any Paying Agent, as the case may be, (i) shall be required to
return the money or Eligible Obligations, or combination thereof,
deposited with it as aforesaid to the Company or its
representative under any applicable Federal or State bankruptcy,
insolvency or other similar law, or (ii) are unable to apply any
money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction
and discharge of the Company's indebtedness in respect thereof
shall retroactively be deemed not to have been effected, and such
Security shall be deemed to remain Outstanding and (b) any
satisfaction and discharge of the Company's indebtedness in
respect of any Security shall be subject to the provisions of the
last paragraph of Section 603.
SECTION 702. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be
of further effect (except as hereinafter expressly provided), and
the Trustee, at the expense of the Company, shall execute such
instruments as the Company shall reasonably request to evidence
and acknowledge the satisfaction and discharge of this Indenture,
when:
(a) no Securities remain Outstanding hereunder; and
(b) the Company has paid or caused to be paid all
other sums payable hereunder by the Company;
provided, however, that if, in accordance with the last paragraph
of Section 701, any Security, previously deemed to have been paid
for purposes of this Indenture, shall be deemed retroactively not
to have been so paid, this Indenture shall thereupon be deemed
retroactively not to have been satisfied and discharged, as
aforesaid, and to remain in full force and effect, and the
Company shall execute and deliver such instruments as the Trustee
shall reasonably request to evidence and acknowledge the same.
Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, the obligations of the Company, and the
Trustee under Sections 304, 305, 306, 404, 602, 603, 907 and 914
and this Article shall survive.
Upon satisfaction and discharge of this Indenture as
provided in this Section, the Trustee shall turn over to the
Company any and all money, securities and other property then
held by the Trustee for the benefit of the Holders of the
Securities (other than money and Eligible Obligations held by the
Trustee pursuant to Section 703) and shall execute and deliver to
the Company such instruments as, in the judgment of the Company,
shall be necessary, desirable or appropriate to effect or
evidence the satisfaction and discharge of this Indenture.
SECTION 703. APPLICATION OF TRUST MONEY.
Neither the Eligible Obligations nor the money
deposited pursuant to Section 701, nor the principal or interest
payments on any such Eligible Obligations, shall be withdrawn or
used for any purpose other than, and shall be held in trust for,
the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal
amount thereof in respect of which such deposit was made, all
subject, however, to the provisions of Section 603; provided,
however, that any cash received from such principal or interest
payments on such Eligible Obligations, if not then needed for
such purpose, shall, to the extent practicable and upon Company
Request and delivery to the Trustee of the documents referred to
in clause (y) in the first paragraph of Section 701, be invested
in Eligible Obligations of the type described in clause (b) in
the first paragraph of Section 701 maturing at such times and in
such amounts as shall be sufficient, together with any other
moneys and the proceeds of any other Eligible Obligations then
held by the Trustee, to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on
such Securities or portions thereof on and prior to the Maturity
thereof, and interest earned from such reinvestment shall be paid
over to the Company as received, free and clear of any trust,
lien or pledge under this Indenture (except the lien provided by
Section 907); and provided, further, that any moneys held in
accordance with this Section on the Maturity of all such
Securities in excess of the amount required to pay the principal
of and premium, if any, and interest, if any, then due on such
Securities shall be paid over to the Company free and clear of
any trust, lien or pledge under this Indenture (except the lien
provided by Section 907); and provided, further, that if an Event
of Default shall have occurred and be continuing, moneys to be
paid over to the Company pursuant to this Section shall be held
until such Event of Default shall have been waived or cured.
ARTICLE EIGHT
EVENTS OF DEFAULT; REMEDIES
SECTION 801. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect
to Securities of any series, means any one of the following
events:
(a) default in the payment of principal of or premium,
if any, or interest on any Security of such series when it
becomes due and payable and continuance of such default for
a period of 30 days; or
(b) default in the performance of, or breach of, any
covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in the performance of
which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of one or more
series of Securities other than such series) and continuance
of such default or breach for a period of 90 days after
there has been given, by registered or certified mail, to
the Company by the Trustee, or to the Company and the
Trustee by the Holders of at least 75% in principal amount
of the Outstanding Securities of such series, a written
notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of
Default" hereunder, unless the Trustee, or the Trustee and
the Holders of a principal amount of Securities of such
series not less than the principal amount of Securities the
Holders of which gave such notice, as the case may be, shall
agree in writing to an extension of such period prior to its
expiration; provided, however, that the Trustee, or the
Trustee and the Holders of such principal amount of
Securities of such series, as the case may be, shall be
deemed to have agreed to an extension of such period if
corrective action is initiated by the Company within such
period and is being diligently pursued; or
(c) any other Event of Default specified with respect
to Securities of such series.
SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default shall have occurred and be
continuing with respect to Securities of any series at the time
Outstanding, then in every such case the Holders of not less than
75% in principal amount of the Outstanding Securities of such
series may declare the principal amount (or, if any of the
Securities of such series are Discount Securities, such portion
of the principal amount of such Securities as may be specified in
the terms thereof as contemplated by Section 301) of all of the
Securities of such series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by
Holders), and upon receipt by the Company of notice of such
declaration such principal amount (or specified amount) shall
become immediately due and payable; provided, however, that if an
Event of Default shall have occurred and be continuing with
respect to more than one series of Securities, the Holders of not
less than 75% in aggregate principal amount of the Outstanding
Securities of all such series, considered as one class, may make
such declaration of acceleration, and not the Holders of the
Securities of any one of such series.
At any time after such a declaration of acceleration
with respect to Securities of any series shall have been made and
before a judgment or decree for payment of the money due shall
have been obtained by the Trustee as hereinafter in this Article
provided, such declaration and its consequences shall, without
further act, be deemed to have been rescinded and annulled, if
(a) the Company shall have paid or deposited with
the Trustee a sum sufficient to pay
(1) all overdue interest, if any, on all
Securities of such series then Outstanding;
(2) the principal of and premium, if any, on
any Securities of such series then Outstanding
which have become due otherwise than by such
declaration of acceleration and interest thereon
at the rate or rates prescribed therefor in such
Securities;
(3) to the extent that payment of such
interest is lawful, interest upon overdue interest
at the rate or rates prescribed therefor in such
Securities;
(4) all amounts due to the Trustee under
Section 907;
and
(b) all Events of Default with respect to
Securities of such series, other than the non payment
of the principal of Securities of such series which
shall have become due solely by such declaration of
acceleration, shall have been cured or waived as
provided in Section 813.
No such rescission shall affect any subsequent Event of Default
or impair any right consequent thereon.
SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
If an Event of Default described in clause (a) of
Section 801 shall have occurred, the Company shall, upon demand
of the Trustee, pay to it, for the benefit of the Holders of the
Securities of the series with respect to which such Event of
Default shall have occurred, the whole amount then due and
payable on such Securities for principal and premium, if any, and
interest, if any, and, to the extent permitted by law, interest
on premium, if any, and on any overdue principal and interest, at
the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as shall be sufficient to
cover any amounts due to the Trustee under Section 907.
If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of
an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of
any series shall have occurred and be continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and
the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the
property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal, premium, if any, and interest, if any, owing and
unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim
for amounts due to the Trustee under Section 907) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amounts due it under Section 907.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the
Holders, be a member of a creditors' or similar other committee.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture,
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this
Article shall be applied in the following order, to the extent
permitted by law, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
or premium, if any, or interest, if any, upon presentation of the
Securities in respect of which or for the benefit of which such
money shall have been collected and the notation thereon of the
payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 907;
SECOND: To the payment of the amounts then due and
unpaid upon the Securities for principal of and premium, if
any, and interest, if any, in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal,
premium, if any, and interest, if any, respectively;
THIRD: To the payment of the remainder, if any, to the
Company or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
SECTION 807. LIMITATION ON SUITS.
No Holder shall have any right to institute any
proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(a) such Holder shall have previously given written
notice conforming to the requirements of Section 105 hereof,
to the Trustee of a continuing Event of Default with respect
to the Securities of such series;
(b) the Holders of 75% in aggregate principal amount
of the Outstanding Securities of all series in respect of
which an Event of Default shall have occurred and be
continuing, considered as one class, shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder or Holders shall have offered to the
Trustee indemnity reasonably satisfactory to the Trustee,
against the costs, expenses and liabilities to be incurred
in compliance with such request;
(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity shall have failed to
institute any such proceeding; and
(e) no direction inconsistent with such written
request shall have been given to the Trustee during such 60-
day period by the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series
in respect of which an Event of Default shall have occurred
and be continuing, considered as one class;
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by virtue of,
or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all of such Holders.
SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal
of and premium, if any, and (subject to Section 307) interest, if
any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the
consent of such Holder.
SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture
and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the
Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Trustee
and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and
remedies of the Trustee and such Holder shall continue as though
no such proceeding had been instituted.
SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 811. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to
exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every
right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 812. CONTROL BY HOLDERS OF SECURITIES.
If an Event of Default shall have occurred and be
continuing in respect of a series of Securities, the Holders of a
majority in principal amount of the Outstanding Securities of
such series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Securities of such series; provided,
however, that if an Event of Default shall have occurred and be
continuing with respect to more than one series of Securities,
the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all such series, considered as one
class, shall have the right to make such direction, and not the
Holders of the Securities of any one of such series; and
provided, further, that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture, and could not involve
the Trustee in personal liability in circumstances where
indemnity would not, in the Trustee's sole discretion, be
adequate, and
(b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 813. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal
amount of the Outstanding Securities of any series may on behalf
of the Holders of all the Securities of such series waive any
past default hereunder with respect to such series and its
consequences, except a default
(a) in the payment of the principal of or premium, if
any, or interest, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which
under Section 1202 cannot be modified or amended without the
consent of the Holder of each Outstanding Security of such
series affected.
Upon any such waiver, such default shall cease to
exist, and any and all Events of Default arising therefrom shall
be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 814. UNDERTAKING FOR COSTS.
The Company and the Trustee agree, and each Holder by
his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant,
but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee,
to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in aggregate principal
amount of the Outstanding Securities of all series in respect of
which such suit may be brought, considered as one class, or to
any suit instituted by any Holder for the enforcement of the
payment of the principal of or premium, if any, or interest, if
any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 815. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been
enacted.
ARTICLE NINE
THE TRUSTEE
SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of
Default with respect to Securities of any series,
(1) the Trustee undertakes to perform, with respect to
Securities of such series, such duties and only such duties
as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may, with respect to Securities of such series,
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default with respect to
Securities of any series shall have occurred and be continuing,
the Trustee shall exercise, with respect to Securities of such
series, such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that
(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a
majority in principal amount of the Outstanding Securities
of any one or more series, as provided herein, relating to
the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture
with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
SECTION 902. NOTICE OF DEFAULTS.
The Trustee shall give notice of any default hereunder
with respect to the Securities of any series to the Holders of
Securities of such series in the manner and to the extent
required to do so by the Trust Indenture Act, unless such default
shall have been cured or waived; provided, however, that in the
case of any default of the character specified in Section 801(b),
no such notice to Holders shall be given until at least 75 days
after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice or
lapse of time, or both, would become, an Event of Default with
respect to the Securities of such series.
SECTION 903. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 901 and to the
applicable provisions of the Trust Indenture Act:
(a) the Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order, or as otherwise expressly provided herein,
and any resolution of the Board of Directors of the Company
may be sufficiently evidenced by a Board Resolution thereof;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of the
Company;
(d) the Trustee may consult with counsel of its
selection and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any Holder pursuant
to this Indenture, unless such Holder shall have offered to
the Trustee security or indemnity reasonably satisfactory to
the Trustee against the costs, expenses and liabilities
which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled
to examine, during normal business hours, the books, records
and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(h) the Trustee shall not be charged with knowledge of
any Event of Default with respect to the Securities of any
series for which it is acting as Trustee unless either (1) a
Responsible Officer of the Trustee assigned to the Corporate
Trust Administration and agency group of the Trustee (or any
successor division or department of the Trustee) shall have
actual knowledge of the Event of Default or (2) written
notice of such Event of Default shall have been given to the
Trustee by the Company or any other obligor on such
Securities, or by any Holder of such Securities;
(i) the Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Indenture; and
(j) the rights, privileges, protections, immunities
and benefits given to the Trustee, including, without
limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its
capacities hereunder.
SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
The recitals contained herein and in the Securities
(except the Trustee's certificates of authentication) shall be
taken as the statements of the Company and neither the Trustee
nor any Authenticating Agent assumes responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither Trustee nor any Authenticating Agent shall be accountable
for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 905. MAY HOLD SECURITIES.
Each of the Trustee, any Authenticating Agent, any
Paying Agent, any Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 908 and
913, may otherwise deal with the Company with the same rights it
would have if it were not the Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.
SECTION 906. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not
be segregated from other funds, except to the extent required by
law. The Trustee shall be under no liability for interest on or
investment of any money received by it hereunder except as
expressly provided herein or otherwise agreed with in writing,
and for the sole benefit of, the Company.
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(a) to pay to the Trustee from time to time such
compensation for all services rendered by it hereunder as
the Company and the Trustee shall from time to time agree in
writing (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence, wilful misconduct or bad
faith; and
(c) to indemnify the Trustee and hold it harmless from
and against, any loss, liability or expense reasonably
incurred without negligence, wilful misconduct or bad faith
on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending
itself against any claim (whether asserted by the Company,
any Holder or any other Person) or liability in connection
with the exercise or performance of any of its powers or
duties hereunder.
As security for the performance of the obligations of
the Company under this Section, the Trustee shall have a lien
prior to the Securities upon all property and funds held or
collected by the Trustee as such, other than property and funds
held in trust under Section 703 (except moneys payable to the
Company as provided in Section 703).
The provisions of this Section 907 shall survive the
termination of this Indenture.
SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee shall have or acquire any conflicting
interest within the meaning of the Trust Indenture Act, it shall
either eliminate such conflicting interest or resign to the
extent, in the manner and with the effect, and subject to the
conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust
Indenture Act and to the extent permitted thereby, the Trustee,
in its capacity as trustee in respect of the Securities of any
series, shall not be deemed to have a conflicting interest
arising from its capacity as trustee in respect of the Securities
of any other series.
SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which
shall be
(a) a corporation organized and doing business under
the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of
at least $50,000,000 and subject to supervision or examination by
Federal, State or District of Columbia authority, or
(b) if and to the extent permitted by the Commission
by rule, regulation or order upon application, a corporation or
other Person organized and doing business under the laws of a
foreign government, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of
at least $50,000,000 or the Dollar equivalent of the applicable
foreign currency and subject to supervision or examination by
authority of such foreign government or a political subdivision
thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees and, in either
case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of such
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If
at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section and the Trust Indenture Act,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements
of Section 911.
(b) The Trustee may resign at any time with respect to
the Securities of one or more series by giving written notice
thereof to the Company. If the instrument of acceptance by a
successor Trustee required by Section 911 shall not have been
delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with
respect to the Securities of any series by Act of the Holders of
a majority in principal amount of the Outstanding Securities of
such series delivered to the Trustee and the Company. If the
instrument of acceptance by a successor Trustee required by
Section 911 shall not have been delivered to the Trustee within
30 days after the giving of such notice of removal, the Trustee
being removed may petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the
Securities of such series.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908
after written request therefor by the Company or by any
Holder who has been a bona fide Holder for at least six
months, or
(2) the Trustee shall cease to be eligible under
Section 909 or Section 310(a) of the Trust Indenture Act and
shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by Board Resolution may
remove the Trustee with respect to all Securities or (y) subject
to Section 814, any Holder who has been a bona fide Holder for at
least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause (other than as contemplated by clause (y)
in subsection (d) or this Section), with respect to the
Securities of one or more series, the Company, by Board
Resolutions, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series
(it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all of
such series and that at any time (subject to Section 915) there
shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable
requirements of Section 911. If, within one year after such
resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of
any series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of
Section 911, become the successor Trustee with respect to the
Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 911, any Holder who
has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the
Securities of such series.
(f) So long as no event which is, or after notice or
lapse of time, or both, would become, an Event of Default shall
have occurred and be continuing, and except with respect to a
Trustee appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities pursuant to
subsection (e) of this Section, if the Company shall have
delivered to the Trustee (i) Board Resolutions of the Company
appointing a successor Trustee, effective as of a date specified
therein, and (ii) an instrument of acceptance of such
appointment, effective as of such date, by such successor Trustee
in accordance with Section 911, the Trustee shall be deemed to
have resigned as contemplated in subsection (b) of this Section,
the successor Trustee shall be deemed to have been appointed by
the Company pursuant to subsection (e) of this Section and such
appointment shall be deemed to have been accepted as contemplated
in Section 911, all as of such date, and all other provisions of
this Section and Section 911 shall be applicable to such
resignation, appointment and acceptance except to the extent
inconsistent with this subsection (f).
(g) The Company shall give notice of each resignation
and each removal of the Trustee with respect to the Securities of
any series and each appointment of a successor Trustee with
respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106.
Each notice shall include the name of the successor Trustee with
respect to the Securities of such series and the address of its
Corporate Trust Office.
SECTION 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of all series,
every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of all sums owed to it, execute and
deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or more
(but not all) series, the Company, the retiring Trustee and each
successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and
which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect
to all Securities, shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in
such supplemental indenture shall constitute such Trustees co-
trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee, upon payment of all
sums owed to it, shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee
relates.
(c) Upon request of any such successor Trustee, the
Company shall execute any instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts referred to in subsection (a) or
(b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
SECTION 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If the Trustee shall be or become a creditor of the
Company or any other obligor upon the Securities (other than by
reason of a relationship described in Section 311(b) of the Trust
Indenture Act), the Trustee shall be subject to any and all
applicable provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act (a) the
term "cash transaction" shall have the meaning provided in Rule
11b-4 under the Trust Indenture Act, and (b) the term "self-
liquidating paper" shall have the meaning provided in Rule 11b-6
under the Trust Indenture Act.
SECTION 914. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or
Agents with respect to the Securities of one or more series, or
any Tranche thereof, which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series or
Tranche issued upon original issuance, exchange, registration of
transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States
of America, any State or territory thereof or the District of
Columbia or the Commonwealth of Puerto Rico, authorized under
such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authority. If
such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to all of substantially all
the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and the Company.
The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under
this Section.
The provisions of Sections 308, 904 and 905 shall be
applicable to each Authenticating Agent.
If an appointment with respect to the Securities of one
or more series, or any Tranche thereof, shall be made pursuant to
this Section, the Securities of such series or Tranche may have
endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication
substantially in the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
As Trustee
By______________________
As Authenticating
Agent
By______________________
Authorized Signatory
If all of the Securities of a series may not be
originally issued at one time, and if the Trustee does not have
an office capable of authenticating Securities upon original
issuance located in a Place of Payment where the Company wishes
to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing
(which writing need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel), shall appoint, in
accordance with this Section and in accordance with such
procedures as shall be acceptable to the Trustee, an
Authenticating Agent having an office in a Place of Payment
designated by the Company with respect to such series of
Securities.
SECTION 915. CO-TRUSTEE AND SEPARATE TRUSTEES.
At any time or times, for the purpose of meeting the
legal requirements of any applicable jurisdiction, the Company
and the Trustee shall have power to appoint, and, upon the
written request of the Trustee or of the Holders of at least 33%
in principal amount of the Securities then Outstanding, the
Company shall for such purpose join with the Trustee in the
execution and delivery of all instruments and agreements
necessary or proper to appoint, one or more Persons approved by
the Trustee either to act as co-trustee, jointly with the
Trustee, or to act as separate trustee, in either case with such
powers as may be provided in the instrument of appointment, and
to vest in such Person or Persons, in the capacity aforesaid, and
for the benefit of the Holders, any property, title, right or
power deemed necessary or desirable, subject to the other
provisions of this Section. If the Company does not join in such
appointment within 15 days after the receipt by it of a request
so to do, or if an Event of Default shall have occurred and be
continuing, the Trustee alone shall have power to make such
appointment.
Should any written instrument or instruments from the
Company be required by any co-trustee or separate trustee to more
fully confirm to such co-trustee or separate trustee such
property, title, right or power, any and all such instruments
shall, on request, be executed, acknowledged and delivered by the
Company.
Every co-trustee or separate trustee shall, to the
extent permitted by law, but to such extent only, be appointed
subject to the following conditions:
(a) the Securities shall be authenticated and
delivered, and all rights, powers, duties and obligations
hereunder in respect of the custody of securities, cash and other
personal property held by, or required to be deposited or pledged
with, the Trustee hereunder, shall be exercised solely, by the
Trustee;
(b) the rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon
and exercised or performed either by the Trustee or by the
Trustee and such co-trustee or separate trustee jointly, as shall
be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the
Trustee shall be incompetent or unqualified to perform such act,
in which event such rights, powers, duties and obligations shall
be exercised and performed singly by such co-trustee or separate
trustee.
(c) the Trustee at any time, by an instrument in
writing executed by it, with the concurrence of the Company, may
accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, if an Event of Default
shall have occurred and be continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-
trustee or separate trustee without the concurrence of the
Company. Upon the written request of the Trustee, the Company
shall join with the Trustee in the execution and delivery of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the
manner provided in this Section;
(d) no co-trustee or separate trustee hereunder shall
be personally liable by reason of any act or omission of the
Trustee, or any other such trustee hereunder, and the Trustee
shall not be personally liable by reason of any act or omission
of any such co-trustee or separate trustee;
(e) any Act of Holders delivered to the Trustee shall
be deemed to have been delivered to each such co-trustee and
separate trustee; and
(f) Any separate trustee or co-trustee may at any time
appoint the Trustee as its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do
any lawful act under or in respect of this Indenture on its
behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted
by law, without the appointment of a new successor trustee.
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than September 1 and March 1 in
each year, commencing March 1, 1999 and at such other times as
the Trustee may request in writing, the Company shall furnish or
cause to be furnished to the Trustee information as to the names
and addresses of the Holders, and the Trustee shall preserve such
information and similar information received by it in any other
capacity and afford to the Holders access to information so
preserved by it, all to such extent, if any, and in such manner
as shall be required by the Trust Indenture Act; provided,
however, that no such list need be furnished so long as the
Trustee shall be the Security Registrar.
SECTION 1002. REPORTS BY TRUSTEE AND COMPANY.
The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the time
and in the manner provided pursuant thereto. Reports so required
to be transmitted at stated intervals of not more than 12 months
shall be transmitted no later than September 15 in each calendar
year with respect to the 12-month period ending on the preceding
July 15, commencing September 15, 1999. A copy of each such
report shall, at the time of such transmission to Holders, be
filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company.
The Company will promptly notify the Trustee when any Securities
are listed on any stock exchange and of any delisting thereof.
The Company shall file with the Trustee (within thirty
(30) days after filing with the Commission in the case of reports
that pursuant to the Trust Indenture Act must be filed with the
Commission and furnished to the Trustee) and transmit to the
Holders, such other information, reports and other documents, if
any, at such times and in such manner, as shall be required by
the Trust Indenture Act. Delivery of such reports, information
and documents to the Trustee is for informational purposes only
and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or
determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER
SECTION 1101. COMPANY MAY CONSOLIDATE, ETC.,
ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless
(a) the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be
a Person organized and existing under the laws of the United
States, any State thereof or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on
all Outstanding Securities and the performance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(b) immediately after giving effect to such
transaction and treating any indebtedness for borrowed money
which becomes an obligation of the Company as a result of
such transaction as having been incurred by the Company at
the time of such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be
continuing; and
(c) the Company, as the case may be, shall have
delivered to the Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation,
merger, conveyance or other transfer or lease and such
indenture supplemental hereto complies with this Article and
that all conditions precedent herein provided for relating
to such transactions have been complied with.
SECTION 1102. SUCCESSOR PERSON SUBSTITUTED.
Upon any consolidation by the Company with or merger by
the Company into any other Person or any conveyance or other
transfer or lease of the properties and assets of the Company
substantially as an entirety in accordance with Section 1101, the
successor Person formed by such consolidation or into which the
Company is merged or the Person to which such conveyance, or
other transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this
Indenture and the Securities Outstanding hereunder.
SECTION 1103. MERGER INTO COMPANY.
Nothing in this Indenture shall be deemed to prevent or
restrict any consolidation or merger after the consummation of
which the Company would be the surviving or resulting corporation
or any conveyance or other transfer, or lease of any part of the
properties of the Company which does not constitute the entirety,
or substantially the entirety, thereof.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities, all
as provided in Article Eleven; or
(b) to add one or more covenants of the Company or
other provisions for the benefit of the Holders of all or
any series of Securities, or any Tranche thereof or to
surrender any right or power herein conferred upon the
Company (and if such covenants are to be for the benefit of
less than all series of Securities, stating that such
covenants are expressly being included solely for the
benefit of such series); or
(c) to add any additional Events of Default with
respect to all or any series of Securities Outstanding
hereunder (and if such additional Events of Default are to
be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly
being included solely for the benefit of such series); or
(d) to change or eliminate any provision of this
Indenture or to add any new provision to this Indenture;
provided, however, that if such change, elimination or
addition shall adversely affect the interests of the Holders
of Securities of any series or Tranche Outstanding on the
date of such supplemental indenture in any material respect,
such change, elimination or addition shall become effective
with respect to such series or Tranche only pursuant to the
provisions of Section 1202 hereof or when no Security of
such series or Tranche remains Outstanding; or
(e) to provide collateral security for the Securities
of any series; or
(f) to establish the form or terms of Securities of
any series or Tranche as contemplated by Sections 201 and
301; or
(g) to provide for the authentication and delivery of
bearer securities and coupons appertaining thereto
representing interest, if any, thereon and for the
procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the holders thereof,
and for any and all other matters incidental thereto; or
(h) to evidence and provide for the acceptance of
appointment hereunder by a separate or successor Trustee
with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or
(i) to provide for the procedures required to permit
the Company to utilize, at its option, a non certificated
system of registration for all, or any series or Tranche of,
the Securities; or
(j) to change any place or places where (1) the
principal of and premium, if any, and interest, if any, on
all or any series of Securities, or any Tranche thereof,
shall be payable, (2) all or any series of Securities, or
any Tranche thereof, may be surrendered for registration of
transfer, (3) all or any series of Securities, or any
Tranche thereof, may be surrendered for exchange and (4)
notices and demands to or upon the Company in respect of all
or any series of Securities, or any Tranche thereof, and
this Indenture may be served; or
(k) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent
with any other provision herein, or to make any other
changes to the provisions hereof or to add other provisions
with respect to matters or questions arising under this
Indenture, provided that such other changes or additions
shall not adversely affect the interests of the Holders of
Securities of any series or Tranche in any material respect.
Without limiting the generality of the foregoing, if
the Trust Indenture Act as in effect at the date of the execution
and delivery of this Indenture or at any time thereafter shall be
amended and
(x) if any such amendment shall require one or more
changes to any provisions hereof or the inclusion herein of
any additional provisions, or shall by operation of law be
deemed to effect such changes or incorporate such provisions
by reference or otherwise, this Indenture shall be deemed to
have been amended so as to conform to such amendment to the
Trust Indenture Act, and the Company and the Trustee may,
without the consent of any Holders, enter into an indenture
supplemental hereto to evidence such amendment hereof; or
(y) if any such amendment shall permit one or more
changes to, or the elimination of, any provisions hereof
which, at the date of the execution and delivery hereof or
at any time thereafter, are required by the Trust Indenture
Act to be contained herein or are contained herein to
reflect any provision of the Trust Indenture Act as in
effect at such date, this Indenture shall be deemed to have
been amended to effect such changes or elimination, and the
Company and the Trustee may, without the consent of any
Holders, enter into an indenture supplemental hereto to this
Indenture to effect such changes or elimination or evidence
such amendment.
SECTION 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
Subject to the provisions of Section 1201, with the
consent of the Holders of not less than a majority in aggregate
principal amount of the Securities of all series then Outstanding
under this Indenture, considered as one class, by Act of said
Holders delivered to the Company and the Trustee, the Company,
when authorized by Board Resolutions, and the Trustee may enter
into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture; provided,
however, that if there shall be Securities of more than one
series Outstanding hereunder and if a proposed supplemental
indenture shall directly affect the rights of the Holders of
Securities of one or more, but less than all, of such series,
then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required;
and provided, further, that if the Securities of any series shall
have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect the rights of the
Holders of Securities of one or more, but less than all, of such
Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all
Tranches so directly affected, considered as one class, shall be
required; and provided, further, that no such supplemental
indenture shall, without the consent of the Holder of each
Outstanding Security of each series or Tranche so directly
affected,
(a) change the Stated Maturity of the principal of, or
any installment of principal of or interest on, any Security
(other than pursuant to the terms thereof), or reduce the
principal amount thereof or the rate of interest thereon (or
the amount of any installment of interest thereon) or change
the method of calculating such rate or reduce any premium
payable upon the redemption thereof, or reduce the amount of
the principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 802, or change the coin or
currency (or other property), in which any Security or any
premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or
(b) reduce the percentage in principal amount of the
Outstanding Securities of any series or any Tranche thereof,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with any
provision of this Indenture or of any default hereunder and
its consequences, or reduce the requirements of Section 1304
for quorum or voting, or
(c) modify any of the provisions of this Section,
Section 606 or Section 813 with respect to the Securities of
any series or any Tranche thereof, except to increase the
percentages in principal amount referred to in this Section
or such other Sections or to provide that other provisions
of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to
changes in the references to "the Trustee" and concomitant
changes in this Section, or the deletion of this proviso, in
accordance with the requirements of Sections 911(b) and
1201(h).
A supplemental indenture which (x) changes or eliminates any
covenant or other provision of this Indenture which has expressly
been included solely for the benefit of the Holders of, or which
is to remain in effect only so long as there shall be
Outstanding, Securities of one or more particular series, or one
or more Tranches thereof, or (y) modifies the rights of the
Holders of Securities of such series or Tranches with respect to
such covenant or other provision, shall be deemed not to affect
the rights under this Indenture of the Holders of Securities of
any other series or Tranche.
It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 1203. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this Article
or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject
to Section 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee's
own rights, duties, immunities or liabilities under this
Indenture or otherwise.
SECTION 1204. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under
this Article this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Any supplemental indenture permitted by
this Article may restate this Indenture in its entirety, and,
upon the execution and delivery thereof, any such restatement
shall supersede this Indenture as theretofore in effect for all
purposes.
SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act as then in effect.
SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES.
Securities of any series, or any Tranche thereof,
authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee, the Company, to any such supplemental
indenture may be prepared and executed by the Company, and
authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series or Tranche.
SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.
To the extent, if any, that the terms of any particular
series of Securities shall have been established in or pursuant
to a Board Resolution or an Officer's Certificate pursuant to a
supplemental indenture or Board Resolution as contemplated by
Section 301, and not in an indenture supplemental hereto,
additions to, changes in or the elimination of any of such terms
may be effected by means of a supplemental Board Resolution or
Officer's Certificate, as the case may be, delivered to, and
accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not
be accepted by the Trustee or otherwise be effective unless all
conditions set forth in this Indenture which would be required to
be satisfied if such additions, changes or elimination were
contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the
Trustee, any such supplemental Board Resolution or Officer's
Certificate shall be deemed to be a "supplemental indenture" for
purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Securities of one or more, or
all, series, or any Tranche or Tranches thereof, may be called at
any time and from time to time pursuant to this Article to make,
give or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture to be made, given or taken by Holders of Securities of
such series or Tranches.
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of
Holders of Securities of one or more, or all, series, or any
Tranche or Tranches thereof, for any purpose specified in Section
1301, to be held at such time and at such place in the Borough of
Manhattan, The City of New York, as the Trustee shall determine,
or, with the approval of the Company, at any other place. Notice
of every such meeting, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken
at such meeting, shall be given, in the manner provided in
Section 106, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.
(b) If the Trustee shall have been requested to call a
meeting of the Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, by the Company or by
the Holders of a majority in aggregate principal amount of all of
such series and Tranches, considered as one class, for any
purpose specified in Section 1301, by written request setting
forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such
meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided
herein, then the Company or the Holders of Securities of such
series and Tranches in the amount above specified, as the case
may be, may determine the time and the place in the Borough of
Manhattan, The City of New York, or in such other place as shall
be determined or approved by the Company, for such meeting and
may call such meeting for such purposes by giving notice thereof
as provided in subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or
more, or all, series, or any Tranche or Tranches thereof, shall
be valid without notice if the Holders of all Outstanding
Securities of such series or Tranches are present in person or by
proxy and if representatives of the Company and the Trustee are
present, or if notice is waived in writing before or after the
meeting by the Holders of all Outstanding Securities of such
series, or by such of them as are not present at the meeting in
person or by proxy, and by the Company and the Trustee.
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of
Securities of one or more, or all, series, or any Tranche or
Tranches thereof, a Person shall be (a) a Holder of one or more
Outstanding Securities of such series or Tranches, or (b) a
Person appointed by an instrument in writing as proxy for a
Holder or Holders of one or more Outstanding Securities of such
series or Tranches by such Holder or Holders. The only Persons
who shall be entitled to attend any meeting of Holders of
Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of
the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 1304. QUORUM; ACTION.
The Persons entitled to vote a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which a meeting shall have been called
as hereinbefore provided, considered as one class, shall
constitute a quorum for a meeting of Holders of Securities of
such series and Tranches; provided, however, that if any action
is to be taken at such meeting which this Indenture expressly
provides may be taken by the Holders of a specified percentage,
which is less than a majority, in principal amount of the
Outstanding Securities of such series and Tranches, considered as
one class, the Persons entitled to vote such specified percentage
in principal amount of the Outstanding Securities of such series
and Tranches, considered as one class, shall constitute a quorum.
In the absence of a quorum within one hour of the time appointed
for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be
dissolved. In any other case the meeting may be adjourned for
such period as may be determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may
be further adjourned for such period as may be determined by the
chairman of the meeting prior to the adjournment of such
adjourned meeting. Except as provided by Section 1305(e), notice
of the reconvening of any meeting adjourned for more than 30 days
shall be given as provided in Section 1302(a) not less than ten
days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting
shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Securities of such series and
Tranches which shall constitute a quorum.
Except as limited by Section 1202, any resolution
presented to a meeting or adjourned meeting duly reconvened at
which a quorum is present as aforesaid may be adopted only by the
affirmative vote of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which such meeting shall have been
called, considered as one class; provided, however, that, except
as so limited, any resolution with respect to any action which
this Indenture expressly provides may be taken by the Holders of
a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or
an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding
Securities of such series and Tranches, considered as one class.
Any resolution passed or decision taken at any meeting
of Holders of Securities duly held in accordance with this
Section shall be binding on all the Holders of Securities of the
series and Tranches with respect to which such meeting shall have
been held, whether or not present or represented at the meeting.
SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING
RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.
(a) Attendance at meetings of Holders of Securities
may be in person or by proxy; and, to the extent permitted by
law, any such proxy shall remain in effect and be binding upon
any future Holder of the Securities with respect to which it was
given unless and until specifically revoked by the Holder or
future Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it
may deem advisable for any meeting of Holders of Securities in
regard to proof of the holding of such Securities and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall
be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified
in Section 104. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section
104 or other proof.
(c) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting
shall have been called by the Company or by Holders as provided
in Section 1302(b), in which case the Company or the Holders of
Securities of the series and Tranches calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting
shall be elected by vote of the Persons entitled to vote a
majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class.
(d) At any meeting each Holder or proxy shall be
entitled to one vote for each $1,000 principal amount of
Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a
Security or proxy.
(e) Any meeting duly called pursuant to Section 1302
at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in aggregate principal
amount of the Outstanding Securities of all series and Tranches
represented at the meeting, considered as one class; and the
meeting may be held as so adjourned without further notice.
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting
of Holders shall be by written ballots on which shall be
subscribed the signatures of the Holders or of their
representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches
with respect to which the meeting shall have been called, held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports of all votes cast at the meeting. A record, in
duplicate, of the proceedings of each meeting of Holders shall be
prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was given as provided in Section 1302 and, if applicable, Section
1304. Each copy shall be signed and verified by the affidavits
of the permanent chairman and secretary of the meeting and one
such copy shall be delivered to the Company, and another to the
Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters
therein stated.
SECTION 1307. ACTION WITHOUT MEETING.
In lieu of a vote of Holders at a meeting as
hereinbefore contemplated in this Article, any request, demand,
authorization, direction, notice, consent, waiver or other action
may be made, given or taken by Holders by written instruments as
provided in Section 104.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 1401. LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the
principal of or premium, if any, or interest, if any, on any
Securities or any part thereof, or for any claim based thereon or
otherwise in respect thereof, or of the indebtedness represented
thereby, or upon any obligation, covenant or agreement under this
Indenture, against any incorporator, stockholder, officer or
director, as such, past, present or future of the Company or of
any predecessor or successor of it (either directly or through
the Company or a predecessor or successor of it), whether by
virtue of any constitutional provision, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that this Indenture and
all the Securities are solely corporate obligations, and that no
personal liability whatsoever shall attach to, or be incurred by,
any incorporator, stockholder, officer or director, past, present
or future, of the Company or of any predecessor or successor of
it, either directly or indirectly through the Company or any
predecessor or successor of it, because of the indebtedness
hereby authorized or under or by reason of any of the
obligations, covenants or agreements contained in this Indenture
or in any of the Securities or to be implied herefrom or
therefrom, and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of
the consideration for, the execution of this Indenture and the
issuance of the Securities.
_________________________
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first
above written.
GRAND COURT LIFESTYLES, INC.
By:/s/Bernard M. Rodin
--------------------------
THE BANK OF NEW YORK,
as Trustee
By:/s/Lucille Firrincieli
-------------------------
Lucille Firrincieli
Vice President
Exhibit 4.1
GRAND COURT LIFESTYLES, INC.
OFFICER'S CERTIFICATE
(Under Section 301 of the Indenture,
dated as of October 1, 1998)
I, the undersigned Catherine Merlino, a Vice President
of GRAND COURT LIFESTYLES, INC. (the "Company"), in accordance
with Section 301 of the Indenture, dated as of October 1, 1998
(the "Indenture", capitalized terms used herein and not defined
herein having the meanings specified in the Indenture), of the
Company to The Bank of New York, trustee (the "Trustee"), do
hereby establish a series of Securities having the terms and
characteristics set forth below (the lettered clauses set forth
below corresponding to the lettered subsections of Section 301 of
the Indenture):
(a) the title of the Securities of such series shall
be "11% Series A Notes due December 15, 2005 (the "Notes of
the First Series");
(b) the aggregate principal amount of Notes of the
First Series which may be authenticated and delivered under
the Indenture shall be limited to $10,000,000, except as
contemplated in Section 301(b) of the Indenture;
(c) interest on the Notes of the First Series shall be
payable to the Person or Persons in whose names the Notes of
the First Series are registered at the close of business on
the Regular Record Date for such interest, except as
otherwise expressly provided in the form of Note of the
First Series attached hereto and hereby authorized and
approved;
(d) the principal of the Notes of the First Series
shall be payable on December 15, 2005;
(e) (i) the Notes of the First Series shall bear
interest at the rate of 11% per annum of the principal
amount thereof, payable monthly in arrears on the 15th day
of each month of each year (each, an "Interest Payment
Date"), commencing with the Interest Payment Date next
succeeding the Original Issue Date (as defined below) and at
Maturity; provided, however, that if the Original Issue Date
of the Notes of the First Series is after a Regular Record
Date (as defined in the form of the Notes of the First
Series) and before the corresponding Interest Payment Date,
interest so payable for the period from and including the
Original Issue Date to but excluding such Interest Payment
Date shall be paid on the next succeeding Interest Payment
Date to the Holder hereof on the related Regular Record
Date;
(ii) interest on the Notes of the First
Series shall accrue from, and including, the Original Issue
Date and will accrue to, but excluding, the first Interest
Payment Date, and thereafter will accrue from, and
including, the most recent Interest Payment Date to which
interest has been paid or duly provided for to, but
excluding, the next succeeding Interest Payment Date. In
the event that any Interest Payment Date is not a Business
Day, then payment of the interest payable on such date shall
be made on the next succeeding Business Day; and, if such
payment is made or duly provided for on such next succeeding
Business Day, no interest shall accrue on such amount for
the period from and after such Interest Payment Date to such
Business Day;
(iii) the Original Issue Date of each Note of
the First Series shall be the date of the first issuance of
such Note of the First Series and shall be communicated by
the Company to the Trustee by a written order pursuant to
the Company Order No. 1 of even date herewith;
(f) the corporate trust office of The Bank of New York
in New York, New York shall be the place at which (i) the
principal of and interest, if any, on the Notes of the First
Series at Maturity shall be payable upon presentment,
interest prior to Maturity to be paid as specified in the
form of Note of the First Series attached hereto, (ii)
registration of transfer of the Notes of the First Series
may be effected, (iii) exchanges of Notes of the First
Series may be effected and (iv) notices and demands to or
upon the Company in respect of the Notes of the First Series
and the Indenture may be served; and The Bank of New York
shall be the Security Registrar and a Paying Agent for the
Notes of the First Series; provided, however, that the
Company reserves the right to change, by one or more
Officer's Certificates supplemental to this Officer's
Certificate, any such place or the Security Registrar or
such Paying Agent; and provided, further, that the Company
reserves the right to designate, by one or more Officer's
Certificates supplemental to this Officer's Certificate, its
corporate office in Fort Lee, New Jersey 07024 as any such
place or itself as the Security Registrar;
(g) the Notes of the First Series shall be subject to
redemption, in whole at any time or in part from time to
time, at the election of the Company, at a redemption price
equal to 100% of the principal amount thereof plus accrued
interest, if any, to the date fixed for redemption;
(h) [not applicable];
(i) [not applicable];
(j) [not applicable];
(k) [not applicable];
(l) [not applicable];
(m) [not applicable];
(n) [not applicable];
(o) the Company reserves the right to provide by one
or more Officer's Certificates supplemental to this Officer's
Certificate, any additional covenants of the Company for the
benefit of the Holders of the Notes of the First Series, or any
Tranche thereof, or any additional Events of Default with respect
to all or any series of Securities Outstanding;
(p) [not applicable];
(q) (i) the only obligations or instruments which
shall be considered Eligible Obligations with respect to the
Notes of the First Series shall be Government Obligations;
(ii) if the Company shall make any deposit of
money and/or Eligible Obligations with respect to any Notes of
the First Series, or any portion of the principal amount thereof,
as contemplated by Section 701 of the Indenture, the Company
shall not deliver an Officer's Certificate described in clause
(z) in the first paragraph of said Section 701 unless the Company
shall also deliver to the Trustee, together with such Officer's
Certificate, either:
(A) an instrument wherein the Company,
notwithstanding the satisfaction and discharge of its
indebtedness in respect of the Notes of the First
Series, shall assume the obligation (which shall be
absolute and unconditional) to irrevocably deposit with
the Trustee or Paying Agent such additional sums of
money, if any, or additional Eligible Obligations
(meeting the requirements of Section 701), if any, or
any combination thereof, at such time or times, as
shall be necessary, together with the money and/or
Eligible Obligations theretofore so deposited, to pay
when due the principal of and interest due and to
become due on such Notes of the First Series or
portions thereof, all in accordance with and subject to
the provisions of said Section 701; provided, however,
that such instrument may state that the obligation of
the Company to make additional deposits as aforesaid
shall be subject to the delivery to the Company by the
Trustee of a notice asserting the deficiency
accompanied by an opinion of an independent public
accountant of nationally recognized standing, selected
by the Trustee, showing the calculation thereof; or
(B) an Opinion of Counsel to the effect that the
Holders of such Notes of the First Series, or portions
of the principal amount thereof, will not recognize
income, gain or loss for United States federal income
tax purposes as a result of the satisfaction and
discharge of the Company's indebtedness in respect
thereof and will be subject to United States federal
income tax on the same amounts, at the same times and
in the same manner as if such satisfaction and
discharge had not been effected;
(r) The Notes of the First Series shall contain
restrictions on transfer, substantially as described in the form
of the Note of the First Series attached hereto. Each Note of
the First Series shall bear a non registration legend and the
registration rights legend in substantially the form set forth in
such form, unless otherwise agreed by the Company, such agreement
to be confirmed in writing by the Trustee. Nothing in the
Indenture, the Notes of the First Series or this Officer's
Certificate shall be construed to require the Company to register
any Notes of the First Series under the Securities Act, unless
otherwise expressly agreed by the Company, confirmed in writing
to the Trustee, or make any transfer of such Notes of the First
Series in violation of the applicable law. The Company will enter
into a registration rights agreement in favor of the Holders of
the Notes of the First Series pursuant to which, among other
things, the Notes of the First Series may be exchanged for the
Securities to be issued under the Indenture which will be
registered under the Securities Act.
(s) [not applicable];
(t) no service charge shall be made for the
registration of transfer or exchange of Notes of the First
Series; provided, however, that the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
payable in connection with the exchange or transfer;
(u) [not applicable];
(v) the Notes of the First Series shall be
substantially in the form of the Note of the First Series
attached hereto and hereby authorized and approved and shall have
such further terms as are set forth in such form.
IN WITNESS WHEREOF, I have executed this Officer's
Certificate this ____ day of
December 24, 1998.
_____________________________
Catherine Merlino
Vice President
<PAGE>
FORM OF THE FACE OF NOTE
[non-registration legend]
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES
MAY NOT BE TRANSFERRED OR RESOLD WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, UNLESS IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH
LAWS IS THEN AVAILABLE.
[registration rights legend]
The Holder of this Security, by acceptance hereof, will be deemed
to have agreed to be bound by the provisions of the Registration
Rights Agreement dated as of October 1, 1998, of the Company in
favor of the Holder of this Security.
GRAND COURT LIFE STYLES, INC.
11% Series A Notes due December 15, 2005
Original Issue Date: ----------------
Redemption Price: 100%
Stated Maturity: December 15, 2005
Interest Rate: 11% per annum
Interest Payment Dates: 15th day of each month
Regular Record Dates: 6th calendar day prior to
relevant Interest Payment Date
-------------------------------------------
This Security is not a Discount Security
within the meaning of the within-mentioned Indenture.
Principal Amount: Registered No.
$
GRAND COURT LIFESTYLES, INC., a corporation duly organized
and existing under the laws of the State of Delaware (herein
called the "Company," which term includes any successor
corporation under the Indenture referred to below), for value
received, hereby promises to pay to
or registered assigns, the principal sum of
DOLLARS
on the Stated Maturity specified above, and to pay interest
thereon from the Original Issue Date specified above or from the
most recent Interest Payment Date to which interest has been paid
or duly provided for, monthly in arrears on the Interest Payment
Dates specified above in each year, commencing with the Interest
Payment Date next succeeding the Original Issue Date specified
above, and at Maturity, at the Interest Rate per annum specified
above, until the principal hereof is paid or duly provided for.
The interest so payable, and paid or duly provided for, on any
Interest Payment Date shall, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date specified above (whether or not a
Business Day) next preceding such Interest Payment Date;
provided, that if the Original Issue Date of this Security is
after a Regular Record Date and before the corresponding Interest
Payment Date, interest so payable for the period from and
including the Original Issue Date to but excluding such Interest
Payment Date shall be paid on the next succeeding Interest
Payment Date to the Holder hereof on the related Regular Record
Date; and provided, further, that interest payable at Maturity
shall be paid to the Person to whom principal shall be paid.
Except as otherwise provided in said Indenture, any such interest
not so paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice of which shall be given to
Holders of Securities of this series not more than fifteen days
not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in
said Indenture. Interest on this Security shall be computed on
the basis of a 360-day year consisting of twelve 30-day months,
and with respect to any period less than a full calendar month,
on the basis of the actual number of days elapsed during such
period, based on a 360-day year (also based on a 30-day month).
Payment of the principal of this Security and interest
hereon at Maturity shall be made upon presentation of this
Security at the corporate trust office of The Bank of New York in
New York, New York or at such other office or agency as may be
designated for such purpose by the Company from time to time.
Payment of interest, if any, on this Security (other than
interest at Maturity) shall be made by check mailed to the
address of the Person entitled thereto as such address shall
appear in the Security Register, except that (a) if such Person
shall be a securities depositary, such payment may be made by
such other means in lieu of check as shall be agreed upon by the
Company, the Trustee or other Paying Agent and such Person and
(b) if such Person is a Holder of $1,000,000 or more in aggregate
principal amount of Securities of this series such payment may be
in immediately available funds by wire transfer to such account
as may have been designated in writing by the Person entitled
thereto as set forth herein in time for the Paying Agent to make
such payments in accordance with its normal procedures. Any such
designation for wire transfer purposes shall be made by filing
the appropriate information with the Trustee at its Corporate
Trust Office in The City of New York not less than fifteen
calendar days prior to the applicable payment date and, unless
revoked by written notice to the Trustee received on or prior to
the Regular Record Date immediately preceding the applicable
Interest Payment Date, shall remain in effect with respect to any
further interest payments (other than interest payments at
Maturity) with respect to this Security payable to such Holder.
Payment of the principal of and interest, if any, on this
Security, as aforesaid, shall be made in such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
<PAGE>
[FORM OF REVERSE OF NOTE]
This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"),
issued and issuable in one or more series under and equally
secured by an Indenture, dated as of October 1, 1998 (such
Indenture as originally executed and delivered and as
supplemented or amended from time to time thereafter, together
with any constituent instruments establishing the terms of
particular Securities, being herein called the "Indenture"),
between the Company and The Bank of New York, as trustee (herein
called the "Trustee," which term includes any successor trustee
under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description
of the respective rights, limitations of rights, duties and
immunities of the Company, the Trustee and the Holders of the
Securities thereunder and of the terms and conditions upon which
the Securities are, and are to be, authenticated and delivered.
The acceptance of this Security shall be deemed to constitute the
consent and agreement by the Holder hereof to all of the terms
and provisions of the Indenture. This Security is one of the
series designated above.
If any Interest Payment Date, any Redemption Date or the
Stated Maturity shall not be a Business Day (as hereinafter
defined), payment of the amounts due on this Security on such
date may be made on the next succeeding Business Day, and, if
such payment is made or duly provided for on such next succeeding
Business Day, no interest shall accrue on such amounts for the
period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be, to such Business Day.
The Securities of this series are subject to redemption at
any time, in whole or in part, at the election of the Company, at
a redemption price equal to 100% of the principal amount thereof
plus accrued interest, if any, to the date fixed for redemption.
Notice of redemption shall be given by mail to Holders of
Securities, not less than 20 days nor more than 60 days prior to
the date fixed for redemption, all as provided in the Indenture.
As provided in the Indenture, notice of redemption at the
election of the Company as aforesaid may state that such
redemption shall be conditional upon the receipt by the Paying
Agent of money sufficient to pay the principal of and interest,
if any, on this Security on or prior to the date fixed for such
redemption; a notice of redemption so conditioned shall be of no
force or effect if such money is not so received and, in such
event, the Company shall not be required to redeem this Security.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been
satisfied, the Securities of this series or portions thereof so
to be redeemed shall, on the date fixed for redemption, become
due and payable at the redemption price therein specified, and
from and after such date (unless, in the case of an unconditional
notice of redemption, the Company shall default in the payment of
the redemption price and accrued interest, if any) such
Securities of this series or portions thereof shall cease to bear
interest.
In the event of redemption of this Security in part only, a
new Security or Securities of this series, of like tenor,
representing the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to the Securities of
this series shall occur and be continuing, the principal of this
Security may be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the Trustee to enter into one or more supplemental
indentures for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of,
the Indenture with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities of all
series then Outstanding under the Indenture, considered as one
class; provided, however, that if there shall be Securities of
more than one series Outstanding under the Indenture and if a
proposed supplemental indenture shall directly affect the rights
of the Holders of Securities of one or more, but less than all,
of such series, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding
Securities of all series so directly affected, considered as one
class, shall be required; and provided, further, that if the
Securities of any series shall have been issued in more than one
Tranche and if the proposed supplemental indenture shall directly
affect the rights of the Holders of Securities of one or more,
but less than all, of such Tranches, then the consent only of the
Holders of a majority in aggregate principal amount of the
Outstanding Securities of all Tranches so directly affected,
considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one
or more supplemental indentures for limited purposes without the
consent of any Holders of Securities. The Indenture also
contains provisions permitting the Holders of a majority in
principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company
with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange therefor or in
lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest, if any, on this Security at
the times, place and rate, in the coin or currency, and in the
manner, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this Security or any portion of
the principal amount hereof will be deemed to have been paid for
all purposes of the Indenture and to be no longer Outstanding
thereunder, and, at the election of the Company, the Company's
entire indebtedness in respect thereof will be satisfied and
discharged, if there has been irrevocably deposited with the
Trustee or any Paying Agent (other than the Company), in trust,
money in an amount which will be sufficient and/or Eligible
Obligations, the principal of and interest on which when due,
without regard to any reinvestment thereof, will provide moneys
which, together with moneys so deposited, will be sufficient to
pay when due the principal of and interest on this Security when
due.
The Indenture contains terms, provisions and conditions
relating to the consolidation or merger of the Company with or
into, and the conveyance or other transfer, or lease, of assets
to, another Person, to the assumption by such other Person, in
certain circumstances, of all of the obligations of the Company
under the Indenture and on the Securities and to the release and
discharge of the Company, in certain circumstances, from such
obligation.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office of The Bank
of New York in New York, New York or such other office or agency
as may be designated by the Company from time to time, duly
endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities
of this series of authorized denominations and of like tenor and
aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only as
registered Securities, without coupons, and in denominations of
$1,000 and integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate
principal amount of Securities of the same series and Tranche, of
any authorized denominations, as requested by the Holder
surrendering the same, and of like tenor upon surrender of the
Security or Securities to be exchanged at the office of The Bank
of New York in New York, New York or such other office or agency
as may be designated by the Company from time to time.
The Company shall not be required to execute and the
Security Registrar shall not be required to register the transfer
of or exchange of (a) Securities of this series during a period
of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Securities of this series
called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this
Security is registered as the absolute owner hereof for all
purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State New York.
As used herein, "Business Day" means any day, other than a
Saturday or Sunday, that is not a day on which banking
institutions or trust companies are generally authorized or
required by law, regulation or executive order to close in The
City of New York or other city in which any Paying Agent for the
Securities of this series is located. All other terms used in
this Security which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
As provided in the Indenture, no recourse shall be had for
the payment of the principal of or interest on any Securities, or
any part thereof, or for any claim based thereon or otherwise in
respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement under the Indenture,
against, and no personal liability whatsoever shall attach to, or
be incurred by, any incorporator, shareholder, officer or
director, as such, past, present or future of the Company or of
any predecessor or successor of it (either directly or through
the Company or a predecessor or successor of it), whether by
virtue of any constitutional provision, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that the Indenture and
all the Securities are solely corporate obligations and that any
such personal liability is hereby expressly waived and released
as a condition of, and as part of the consideration for, the
execution of the Indenture and the issuance of the Securities.
Unless the certificate of authentication hereon has been
executed by the Trustee or an Authenticating Agent by manual
signature, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed.
GRAND COURT LIFESTYLES, INC.
By: ----------------------------
[Title]
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
Dated: ------------------
THE BANK OF NEW YORK, as
Trustee
By: ------------------
Authorized Officer
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
-----------------------------------------------------------------
[please insert social security or other identifying number of
assignee]
-----------------------------------------------------------------
[please print or typewrite name and address of assignee]
-----------------------------------------------------------------
the within Security of GRAND COURT LIFESTYLES, INC. and does
hereby irrevocably constitute and appoint -----------------------
-------, Attorney, to transfer said Security on the books of the
within-mentioned Company, with full power of substitution in the
premises.
Dated: _____________
Signature__________________________
Guarantee________________________
Notice: The signature to this assignment must correspond with
the name as written upon the face of the Security in every
particular without alteration or enlargement or any change
whatsoever.
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Security Registrar,
which requirements include membership or participation in the
Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the
Security Registrar in addition to, or in substitution for, STAMP.
EXHIBIT 4.2
GRAND COURT LIFESTYLES, INC.
SUPPLEMENTAL OFFICER'S CERTIFICATE
Catherine Merlino, a Vice President of GRAND COURT
LIFESTYLES, INC. (the "Company"), pursuant to the authority
granted in the Board Resolutions of the Company dated March 8,
1999, and Sections 102, 1201 and 1207 of the Indenture defined
herein, does hereby certify to The Bank of New York (the
"Trustee"), as Trustee under the Indenture of the Company (For
Unsecured Debt Securities) dated as of October 1, 1998 (the
"Indenture") that:
1. The securities of the first series issued under the
Indenture are designated "11% Series Notes due December
15, 2005" (the "Notes of the First Series"). The terms
of the Notes of the First Series are set forth in the
Officer's Certificate dated November 24, 1998 and in
Exhibit A thereto, previously delivered to the Trustee.
All capitalized terms used in this certificate which
are not defined herein but are defined in such Exhibit
A shall have the meanings set forth in such Exhibit A;
all capitalized terms used in this certificate which
are not defined herein or in such Exhibit A hereto but
are defined in the Indenture shall have the meanings
set forth in the Indenture;
2. This Supplemental Officer's Certificate is being
delivered pursuant to Sections 1201 and 1207 of the
Indenture to effect the following changes to the terms
of the Notes of the First Series:
(a) the aggregate principal amount of the Notes of the
First Series which may be authenticated and delivered
under the Indenture shall be limited to $11,000,000,
except as contemplated in Section 301(b) of the
Indenture;
3. In the opinion of the undersigned the change referred
to in item 2(a) above, does not adversely affect the
interests of the Holders of the Notes in any material
respect;
4. The undersigned has read all of the covenants and
conditions contained in the Indenture relating to the
issuance of the Notes of the First Series and the
definitions in the Indenture relating thereto and in
respect of which this certificate is made;
5. The statements contained in this certificate are based
upon the familiarity of the undersigned with the
Indenture, the documents accompanying this certificate,
and upon discussions by the undersigned with officers
and employees of the Company familiar with the matters
set forth herein;
6. In the opinion of the undersigned, she has made such
examination or investigation as is necessary to enable
her to express an informed opinion whether or not such
covenants and conditions have been complied with; and
7. In the opinion of the undersigned, such conditions and
covenants and conditions precedent, if any (including
any covenants compliance with which constitutes a
condition precedent) to the authentication and delivery
of the Notes of the First Series requested in the
accompanying Company Order have been complied with.
IN WITNESS WHEREOF, I have executed this Officer's
Certificate this 12th day of March, 1999.
/s/ Catherine Merlino
------------------------------
Catherine Merlino
Vice President
EXHIBIT 10.5(c)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
12% DEBENTURES SERIES 1
AMENDMENT NO. 2, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of August 14, 1990 (the
"Agreement"), with respect to 12% Debentures due June 16, 2000,
Series 1 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
Section 5.6 and inserting in its stead the following Section 5.6:
"Section 5.6. Redemption. Whenever the
----------
Company 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
<PAGE>
Purchasers of that redemption at least thirty (30)
days prior to the date set forth for redemption.
The Bank shall register the cancellation of the
whole or a portion of the redeemed Debentures, as
appropriate. In any event, new debentures will
not be issued to reflect the non-redeemed portion
of the debentures. No interest shall be payable
on the redeemed portion of a Debenture from and
after the date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.11:
"Section 7.11. Matured Set Aside
-----------------
Purchase Notes. The Bank shall return promptly
--------------
to the Company matured Set Aside Purchase Notes
(the "Matured Set Aside Purchase Notes") after the
delivery by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures due upon any redemption
or at maturity pursuant to Section 5.8. In
addition to the return of those Matured Set Aside
Purchase Notes, the Bank shall (i) execute and
deliver to the Company an instrument prepared by
the Company effecting a release by the Bank of the
existing assignment of the security interest and
Purchase Agreement covering the related Purchased
Partnership Interest, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
Company to the Bank recording the termination of
the Bank's security interest and assignment
<PAGE>
granted under this Bank Agreement and (iii) return
to the Company 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
Matured Set Aside Purchase Note."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
----------------------- --------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice
President
EXHIBIT 10.5(d)
AMENDMENT NO. 3
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 1
AMENDMENT NO. 3, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of August 14, 1990
(the "Agreement"), with respect to 12% Debentures due June 16,
2000, Series 1 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
Section 5.6 and inserting in its stead the following Section 5.6:
"Section 5.6. Redemption. Whenever
----------
the Company 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 five (5) 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 not be required
<PAGE>
to give written notice to Purchasers of that
redemption. The Bank shall register the
cancellation of the whole or a portion of the
redeemed Debentures, as appropriate. In any
event, new debentures will not be issued to
reflect the non-redeemed portion of the
debentures. No interest shall be payable on the
redeemed portion of a Debenture from and after the
date of redemption."
2. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
3. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
4. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
----------------------- ---------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(f)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 2
AMENDMENT NO. 1, DATED AS OF DECEMBER __, 1996 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 11, 1991
(the "Agreement"), with respect to 12% Debentures due April 15,
1999, Series 2 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
Section 5.6 and inserting in its stead the following Section 5.6:
"Section 5.6. Redemption. Whenver the Company
----------
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
<PAGE>
written notice to the Purchasers of that
redemption at least thirty (30) days prior to the
date set forth for redemption. The Bank shall
register the cancellation of the whole or a
portion of the redeemed Debentures, as
appropriate. In any event, new debentures will
not be issued to reflect the non-redeemed portion
of the debentures. No interest shall be payable
on the redeemed portion of a Debenture from and
after the date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.9:
"Section 7.9. Matured Set Aside Purchase Notes.
---------------------------------
The Bank shall return promptly to the Company
matured Set Aside Purchase Notes (the "Matured
Set Aside Purchase Notes") after the delivery
by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures due upon any redemption
or at maturity pursuant to Section 5.8. In
addition to the return of those Matured Set Aside
Purchase Notes, the Bank shall (i) execute and
deliver to the Company an instrument prepared by
the Company effecting a release by the Bank of the
existing assignment of the security interest and
Purchase Agreement covering the related Purchased
Partnership Interest, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
Company to the Bank recording the termination of
the Bank's security interest and assignment
<PAGE>
granted under this Bank Agreement and (iii) return
to the Company 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
Matured Set Aside Purchase Note."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
----------------------- --------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice
President
EXHIBIT 10.5(g)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 2
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 11, 1991
(the "Agreement"), with respect to 12% Debentures due April 15,
1999, Series 2 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
Section 5.6 and inserting in its stead the following Section 5.6:
"Section 5.6. Redemption. Whenever the Company
----------
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 five
(5) 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 not be required to give written notice
<PAGE>
to Purchasers of that redemption. The Bank shall
register the cancellation of the whole or a portion
of the redeemed Debentures, as appropriate. In any
event, new debentures will not be issued to
reflect the non-redeemed portion of the debentures.
No interest shall be payable on the redeemed portion
of a Debenture from and after the date of redemption."
2. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
3. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
4. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
----------------------- ---------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(i)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 3
AMENDMENT NO. 1, DATED AS OF DECEMBER , 1996 (THE
--
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 17, 1991
(the "Agreement"), with respect to 11% Debentures due December
31, 1996, Series 3 (the "Debentures") between J&B Management
Company ("J&B") and its affiliates: Leisure Centers Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. (collectively, the "Affiliates") and The Bank
of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The principal amount of the Debentures
---------
and any interest then due shall be payable at
maturity without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
<PAGE>
its register shall be controlling as to the
remaining unpaid principal amount thereof."
2. The Agreement is hereby amended by adding the
following Section 7.9:
"Section 7.9. Matured Set Aside
-----------------
Purchase Notes. The Bank shall return promptly to
--------------
the Company matured Set Aside Purchase Notes (the
"Matured Set Aside Purchase Notes") after the
delivery by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures at maturity pursuant to
Section 5.8. In addition to the return of those
Matured Set Aside Purchase Notes, the Bank shall
(i) execute and deliver to the Company an
instrument prepared by the Company effecting a
release by the Bank of the existing assignment of
the security interest and Purchase Agreement
covering the related Purchased Partnership
Interest, (ii) file with the appropriate
governmental authorities indicated by the Company,
financing statements delivered by the Company to
the Bank recording the termination of the Bank's
security interest and assignment granted under
this Bank Agreement and (iii) return to the
Company 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 Matured Set Aside Purchase
Note."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
[INTENTIONALLY LEFT BLANK]
<PAGE>
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
----------------------- ---------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice
President
EXHIBIT 10.5(j)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 3
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 17, 1991
(the "Agreement"), with respect to 11% Debentures due December
31, 1996, Series 3 (the "Debentures") between J&B Management
Company ("J&B") and its affiliates: Leisure Centers Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. (collectively, the "Affiliates") and The Bank
of New York (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
Section 5.6 and inserting in its stead the following Section 5.6:
"Section 5.6. Redemption. Whenever the Company
----------
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 five
(5) 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
not be required to give written notice to Purchasers
<PAGE>
of that redemption. The Bank shall register the
cancellation of the whole or a portion of the
redeemed Debentures, as appropriate. In any
event, new debentures will not be issued to
reflect the non-redeemed portion of the
debentures. No interest shall be payable on the
redeemed portion of a Debenture from and after the
date of redemption."
2. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
3. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
4. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
----------------------- ---------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(l)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
11.5% DEBENTURES SERIES 4
AMENDMENT NO. 1, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of April 1, 1992 (the
"Agreement"), with respect to 11.5% Debentures due April 15,
2000, Series 4 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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
<PAGE>
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 Bank shall
register the cancellation of the
whole or a portion of the redeemed
Debentures, as appropriate. In any
event, new debentures will not be
issued to reflect the non-redeemed
portion of the debentures. No
interest shall be payable on the
redeemed portion of a Debenture
from and after the date of
redemption."
2. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.9:
"Section 7.9. Matured Set Aside Purchase Notes.
--------------------------------
The Bank shall return promptly to the Company
matured Set Aside Purchase Notes (the "Matured
Set Aside Purchase Notes") after the delivery
by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures due upon any redemption
or at maturity pursuant to Section 5.8. In
addition to the return of those Matured Set Aside
Purchase Notes, the Bank shall (i) execute and
deliver to the Company an instrument prepared by
the Company effecting a release by the Bank of the
existing assignment of the security interest and
Purchase Agreement covering the related Purchased
Partnership Interest, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
<PAGE>
Company to the Bank recording the termination of
the Bank's security interest and assignment
granted under this Bank Agreement and (iii) return
to the Company 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
Matured Set Aside Purchase Note."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
---------------------- --------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice
President
EXHIBIT 10.5(m)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
11.5% DEBENTURES - SERIES 4
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of April 1, 1992 (the
"Agreement"), with respect to 11.5% Debentures due April 15,
2000, Series 4 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) days
prior to the date set forth for
redemption, the manner in which
redemption shall be effected and
all the relevant details thereof.
<PAGE>
The Bank shall not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application of Prepayment.
-------------------------
In the event that the Company shall
effect a voluntary redemption, at any time in its
sale and absolute discretions, of part or all of
the Debentures, without premium or penalty, it
shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
----------------------- ---------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(o)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES SERIES 5
AMENDMENT NO. 1, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 30, 1992
(the "Agreement"), with respect to 12% Debentures due January 15,
2003, Series 5 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 Bank shall
register the cancellation of the
whole or a portion of the redeemed
Debentures, as appropriate. In any
event, new debentures will not be
issued to reflect the non-redeemed
portion of the debentures. No
interest shall be payable on the
redeemed portion of a Debenture
from and after the date of
redemption."
2. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
-------------------
Debentures Payable Without Presentment
--------------------------------------
Presentment or Surrender. The portion of the
------------------------
unpaid principal amount of the Debentures and any
interest due upon any redemption or at maturity
shall be payable without presentment or surrender
of the Debentures. Notwithstanding anything
herein or in the Debentures to the contrary, the
unpaid principal amount thereof recorded by the
Bank in its register shall be controlling as to
the remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.10:
"Section 7.10. Matured Set Aside
-----------------
Purchase Notes. The Bank shall return promptly
--------------
to the Company matured Set Aside Purchase Notes
(the "Matured Set Aside Purchase Notes") after the
delivery by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures due upon any redemption
or at maturity pursuant to Section 5.8. In
addition to the return of those Matured Set Aside
Purchase Notes, the Bank shall (i) execute and
deliver to the Company an instrument prepared by
the Company effecting a release by the Bank of the
existing assignment of the security interest and
Purchase Agreement covering the related Purchased
Partnership Interest, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
Company to the Bank recording the termination of
the Bank's security interest and assignment
granted under this Bank Agreement and (iii) return
to the Company 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
Matured Set Aside Purchase Note."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
-------------------- -------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice President
EXHIBIT 10.5(p)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
12% DEBENTURES SERIES 5
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 30, 1992
(the "Agreement"), with respect to 12% Debentures due January 15,
2003, Series 5 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application of
--------------
Prepayment. In the event that the Company shall
----------
effect a voluntary redemption, at any time in its
sale and absolute discretions, of part or all of
the Debentures, without premium or penalty, it
shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
-------------------- --------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(r)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 6
AMENDMENT NO. 1, DATED AS OF DECEMBER __, 1996 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of May 24, 1993 (the
"Agreement"), with respect to 12% Debentures due April 30, 2003,
Series 6 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following paragraph (a):
"(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 Bank shall
register the cancellation of the
whole or a portion of the redeemed
Debentures, as appropriate. In any
event, new debentures will not be
issued to reflect the non-redeemed
portion of the debentures. No
interest shall be payable on the
redeemed portion of a Debenture
from and after the date of
redemption."
2. The Agreement is hereby amended by adding the
following Section 5.8:
"Section 5.8. Principal Amount of
----------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.9:
"Section 7.9. Matured Set Aside
-----------------
Purchase Notes. The Bank shall return promptly to
--------------
the Company matured Set Aside Purchase Notes (the
"Matured Set Aside Purchase Notes") after the
delivery by the Company to the Bank of sufficient
funds to make payment of all principal and
interest on the Debentures due upon any redemption
or at maturity pursuant to Section 5.8. In
addition to the return of those Matured Set Aside
Purchase Notes, the Bank shall (i) execute and
deliver to the Company an instrument prepared by
the Company effecting a release by the Bank of the
existing assignment of the security interest and
Purchase Agreement covering the related Purchased
Partnership Interest, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
Company to the Bank recording the termination of
the Bank's security interest and assignment
granted under this Bank Agreement and (iii) return
to the Company 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 Matured Set
Aside Purchase Note."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
--------------------- ----------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant Vice President
EXHIBIT 10.5(s)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 6
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of May 24, 1993 (the
"Agreement"), with respect to 12% Debentures due April 30, 2003,
Series 6 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following paragraph (a):
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application
-----------
of Prepayment. In the event
-------------
that the Company shall effect a voluntary
redemption, at any time in its sale and absolute
discretions, of part or all of the Debentures,
without premium or penalty, it shall be in the
Company's sole discretion as to the mandatory
redemption that the prepayment, resulting from the
voluntary redemption, shall be applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
------------------------------ -----------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(v)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 7
AMENDMENT NO. 2, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 27, 1993
(the "Agreement"), with respect to 11% Debentures due January 15,
2002, Series 7 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
--------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 Bank shall
register the cancellation of the
whole or a portion of the redeemed
Debentures, as appropriate. In any
event, new debentures will not be
issued to reflect the non-redeemed
portion of the debentures. No
interest shall be payable on the
redeemed portion of a Debenture
from and after the date of
redemption."
2. The Agreement is hereby amended by adding the
following Section 5.7:
"Section 5.7. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.13:
"Section 7.13. Matured Set Aside
-----------------
Purchase Notes and Matured Set Aside Investor
---------------------------------------------
Notes. The Bank shall return promptly to the
------
Company matured Set Aside Purchase Notes (the
"Matured Set Aside Purchase Notes") and matured
Set Aside Investor Notes (the "Matured Set Aside
Investor Notes") after the delivery by the Company
to the Bank of sufficient funds to make payment of
all principal and interest on the Debentures due
upon any redemption or at maturity pursuant to
Section 5.7. In addition to the return of those
Matured Set Aside Purchase Notes and Matured Set
Aside Investor Notes, the Bank shall (i) execute
and deliver to the Company an instrument prepared
by the Company effecting a release by the Bank of
the existing assignment of the security interest
and Purchase Agreement covering the related
Purchased Partnership Interest and Secured
Partnership Interests, (ii) file with the
appropriate governmental authorities indicated by
the Company, financing statements delivered by the
Company to the Bank recording the termination of
the Bank's security interest and assignment
granted under this Bank Agreement and (iii) return
to the Company the Consent and Agreement described
in Sections 7.2(c) and 7.4(c) hereof and the
Consent, Assignment and Agreement described in
Sections 7.3(c) and 7.5(c) hereof, each as relates
to such Matured Set Aside Purchase Note and
Matured Set Aside Investor Notes."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
--------------------- -------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant
Vice President
EXHIBIT 10.5(w)
AMENDMENT NO. 3
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 7
AMENDMENT NO. 3, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of October 27, 1993
(the "Agreement"), with respect to 11% Debentures due January 15,
2002, Series 7 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application
-----------
of Prepayment. In the event that the Company shall
-------------
effect a voluntary redemption, at any time in its
sale and absolute discretions, of part or all of
the Debentures, without premium or penalty, it
shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
--------------------- ------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(y)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 8
AMENDMENT NO. 1, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of November 29, 1993
(the "Agreement"), with respect to 11% Debentures due January 15,
2002, Series 8 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 Bank shall
register the cancellation of the
whole or a portion of the redeemed
Debentures, as appropriate. In any
event, new debentures will not be
issued to reflect the non-redeemed
portion of the debentures. No
interest shall be payable on the
redeemed portion of a Debenture
from and after the date of
redemption."
2. The Agreement is hereby amended by adding the
following Section 5.7:
"Section 5.7. Principal Amount of
-------------------
Debentures Payable Without Presentment or
------------------------------------------
Surrender. The portion of the unpaid principal
---------
amount of the Debentures and any interest due upon
any redemption or at maturity shall be payable
without presentment or surrender of the
Debentures. Notwithstanding anything herein or in
the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the
remaining unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the
following Section 7.13:
"Section 7.13. Matured Set Aside
-----------------
Purchase Notes and Matured Set Aside Investor
---------------------------------------------
Notes. The Bank shall return promptly to the
-----
Company matured Set Aside Purchase Notes (the
"Matured Set Aside Purchase Notes") and matured
Set Aside Investor Notes (the "Matured Set Aside
Investor Notes") after the delivery by the Company
to the Bank of sufficient funds to make payment
of all principal and interest on the Debentures
due upon any redemption or at maturity pursuant
to Section 5.7. In addition to the return of
those Matured Set Aside Purchase Notes and Matured
Set Aside Investor Notes, the Bank shall (i)
execute and deliver to the Company an instrument
prepared by the Company effecting a release by
the Bank of the existing assignment of the
security interest and Purchase Agreement covering
the related Purchased Partnership Interest and
Secured Partnership Interests, (ii) file with
the appropriate governmental authorities indicated
by the Company, financing statements delivered
by the Company to the Bank recording the termination
of the Bank's security interest and assignment
granted under this Bank Agreement and (iii) return
to the Company the Consent and Agreement described
in Sections 7.2(c) and 7.4(c) hereof and the Consent,
Assignment and Agreement described in Sections 7.3(c)
and 7.5(c) hereof, each as relates to such Matured
Set Aside Purchase Note and Matured Set Aside Investor
Notes."
4. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
5. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
6. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
--------------------- ------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title: President Title: Assistant
Vice President
EXHIBIT 10.5(z)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
11% DEBENTURES - SERIES 8
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of November 29, 1993
(the "Agreement"), with respect to 11% Debentures due January 15,
2002, Series 8 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application of
--------------
Prepayment. In the event that the Company shall
----------
effect a voluntary redemption, at any time in its
sale and absolute discretions, of part or all of
the Debentures, without premium or penalty, it
shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
--------------------- ----------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(bb)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 9
AMENDMENT NO. 1, DATED AS OF APRIL 15, 1997 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of September 12, 1994
(the "Agreement"), with respect to 12% Debentures due September
15, 2001, Series 9 (the "Debentures") between J&B Management
Company ("J&B") and its affiliates: Leisure Centers Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. (collectively, the "Affiliates") and The Bank
of New York (the "Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have heretofore
entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company") has
acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B relating
to the Debentures;
WHEREAS, the Company is successor by merger to each of the
Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein, the Company and the Bank agree as follows:
1. The Agreement is hereby amended by deleting paragraph (a)
of Section 5.6 and inserting in its stead the following:
(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 Bank
shall register the cancellation of the whole or
a portion of the redeemed Debentures, as appropriate.
In any event, new debentures will not be issued to
reflect the non-redeemed portion of the debentures.
No interest shall be payable on the redeemed
portion of a Debenture from and after the date
of redemption."
2. The Agreement is hereby amended by adding the following
Section 5.7:
"Section 5.7. Principal Amount of Debentures Payable
--------------------------------------
Without Presentment or Surrender. The portion of
--------------------------------
the unpaid principal amount of the Debentures and
any interest due upon any redemption or at maturity
shall be payable without presentment or surrender
of the Debentures. Notwithstanding anything herein
or in the Debentures to the contrary, the unpaid
principal amount thereof recorded by the Bank in
its register shall be controlling as to the remaining
unpaid principal amount thereof."
3. The Agreement is hereby amended by adding the following
Section 7.13:
"Section 7.13. Matured Set Aside Purchase Notes
--------------------------------
and Matured Set Aside Investor Notes. The Bank
------------------------------------
shall return promptly to the Company matured Set
Aside Purchase Notes (the "Matured Set Aside
Purchase Notes") and matured Set Aside Investor
Notes (the "Matured Set Aside Investor Notes")
after the delivery by the Company to the Bank of
sufficient funds to make payment of all principal
and interest on the Debentures due upon any
redemption or at maturity pursuant to Section 5.7.
In addition to the return of those Matured Set Aside
Purchase Notes and Matured Set Aside Investor Notes,
the Bank shall (i) execute and deliver to the Company
an instrument prepared by the Company effecting a
release by the Bank of the existing assignment of
the security interest and Purchase Agreement covering
the related Purchased Partnership Interest and Secured
Partnership Interests, (ii) file with the appropriate
governmental authorities indicated by the Company,
financing statements delivered by the Company to
the Bank recording the termination of the Bank's
security interest and assignment granted under this
Bank Agreement and (iii) return to the Company the
Consent and Agreement described in Sections 7.2(c)
and 7.4(c) hereof and the Consent, Assignment and
Agreement described in Sections 7.3(c) and 7.5(c)
hereof, each as relates to such Matured Set Aside
Purchase Note and Matured Set Aside Investor Notes."
4. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to such terms in the Agreement.
5. This Amendment may be executed in several counterparts,
each of which when executed and delivered shall be deemed an original
and all of which counterparts, taken together, shall constitute but
one and the same Amendment.
6. Except as provided herein, all provisions, terms and
conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Mark G. Walsh
------------------------- ---------------------------
Name: Bernard M. Rodin Name: Mark G. Walsh
Title President Title: Assistant
Vice President
EXHIBIT 10.5(cc)
AMENDMENT NO. 2
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 9
AMENDMENT NO. 2, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of September 12, 1994
(the "Agreement"), with respect to 12% Debentures due September
15, 2001, Series 9 (the "Debentures") between J&B Management
Company ("J&B") and its affiliates: Leisure Centers Inc., J&B
Management Corp., Sulgrave Realty Corporation and Wilmart
Development Corp. (collectively, the "Affiliates") and The Bank
of New York (the "Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application
-----------
of Prepayment. In the event that the Company
-------------
shall effect a voluntary redemption, at any time
in its sale and absolute discretions, of part or
all of the Debentures, without premium or penalty,
it shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
--------------------- -----------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(ee)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 10
AMENDMENT NO. 1, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of July 12, 1995 (the
"Agreement"), with respect to 12% Debentures due January 15,
2004, Series 10 (the "Debentures") between J&B Management Company
("J&B") and its affiliates: Leisure Centers Inc., J&B Management
Corp., Sulgrave Realty Corporation and Wilmart Development Corp.
(collectively, the "Affiliates") and The Bank of New York (the
"Bank").
W I T N E S S E T H:
-------------------
WHEREAS, J&B, the Affiliates and the Bank have
heretofore entered into the Agreement;
WHEREAS, Grand Court Lifestyles, Inc. (the "Company")
has acquired substantially all of the assets of J&B, subject to
substantially all of J&B's liabilities;
WHEREAS, the Company has assumed the obligations of J&B
relating to the Debentures;
WHEREAS, the Company is successor by merger to each of
the Affiliates; and
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application
-----------
of Prepayment. In the event that the Company
-------------
shall effect a voluntary redemption, at any time
in its sale and absolute discretions, of part or
all of the Debentures, without premium or penalty,
it shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
------------------------- -----------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.5(gg)
AMENDMENT NO. 1
TO
BANK AGREEMENT
FOR
12% DEBENTURES - SERIES 11
AMENDMENT NO. 1, DATED AS OF JUNE 26, 1998 (THE
"AMENDMENT"), TO BANK AGREEMENT, dated as of July 25, 1997 (the
"Agreement"), with respect to 12% Debentures due June 30, 2004,
Series 11 (the "Debentures") between Grand Court Lifestyles,
Inc., (the "Company"), and The Bank of New York (the "Bank").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and the Bank desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein, the Company and the Bank agree as
follows:
1. The Agreement is hereby amended by deleting
paragraph (a) of Section 5.6 and inserting in its stead the
following:
(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 five (5) 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 not be required to
give written notice to the
Purchasers of that redemption. The
Bank shall register the
cancellation of the whole or a
portion of the redeemed Debentures,
as appropriate. In any event, new
debentures will not be issued to
reflect the non-redeemed portion of
the debentures. No interest shall
be payable on the redeemed portion
of a Debenture from and after the
date of redemption."
2. The Agreement is hereby amended by adding the
following Section 5.6(c):
"Section 5.6(c) Application of
--------------
Prepayment. In the event that the Company shall
----------
effect a voluntary redemption, at any time in its
sale and absolute discretions, of part or all of
the Debentures, without premium or penalty, it
shall be in the Company's sole discretion as to
the mandatory redemption that the prepayment,
resulting from the voluntary redemption, shall be
applied against."
3. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to such terms in the
Agreement.
4. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment.
5. Except as provided herein, all provisions, terms
and conditions of the Agreement shall remain in full force and
effect. As amended hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above
written.
GRAND COURT LIFESTYLES, INC. THE BANK OF NEW YORK
By: /s/ Bernard M. Rodin By: /s/ Robert Gennari
-------------------------- ------------------------
Name: Bernard M. Rodin Name: Robert Gennari
Title: President Title: Vice President
EXHIBIT 10.13
=================================================================
FORM OF
AMENDED AND RESTATED REGULATIONS AND
OPERATING AGREEMENT
OF
------------
=================================================================
<PAGE>
Pursuant to the provisions of the Limited
-----
Liability Company Act, (the "Company"), a limited
-----------
liability company which is subject to the provisions of the
aforesaid Limited Liability Company Act, hereby adopts the
hereinafter Amended and Restated Regulations and
------
Operating Agreement of its Operating Agreement dated as of
(the "Agreement"). Although this writing amends in
----------
its entirety the Agreement, it is not intended by the parties to
create a new limited liability company, but rather to confirm the
continuation of existence of the existing Company, without
interruption, while providing for (i) the transfer by Grand Court
Lifestyles, Inc. a Delaware corporation ("Grand Court"), the sole
member and the sole manager of the Company, of a portion of its
interest in the Company to (" ") and (iii) other
-------- ---
various amendments to the Agreement in the manner hereinafter
provided.
THE AMENDED AND RESTATED REGULATIONS AND OPERATING
AGREEMENT OF is made and entered as of by and
---- -----,
among Grand Court, and
----.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Sale and Assignment Agreement
dated as of 1999, a copy of the form of which is attached
----,
hereto as Exhibit A, by and among Grand Court, and Grand
------,
Court transferred to fifty percent (50%) of its interest
------
in the Company; and
WHEREAS, the parties hereto desire that be
-----
admitted into the Company as a Member (as such term is
hereinafter defined) of the Company; and
WHEREAS, the parties hereto, each intending to be
legally bound hereby under the laws of the State of Texas, desire
to amend in the manner hereinafter set forth, and to redefine and
restate in its entirety, the Agreement, while continuing the
Company heretofore formed, without interruption (hereinafter the
Agreement as amended and restated by this Amended and
-----
Restated Regulations and Operating Agreement shall be called the
"Agreement"); and
NOW, THEREFORE, in consideration of the mutual promises
of the parties hereto and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby covenant and agree as
follows:
1. Grand Court assigns fifty percent (50%) of its interest
as a member of the Company to .
----
2. desires to, and hereby does, accept the
------
assignment by Grand Court of fifty percent (50%) of Grand
Court's interest as a member of the Company.
3. All of the actions described in paragraphs 1 and 2
above shall be deemed to have occurred simultaneously.
4. By this writing, the parties hereto hereby amend,
redefine and restate, in its entirety, the Agreement, so that
said document shall for all purposes hereafter read as
hereinafter set forth.
ARTICLE I
DEFINED TERMS
-------------
1.1 Defined Terms. Capitalized words and phrases used
-------------
in this Agreement have the following meanings:
"Act" means the Texas Limited Liability Company Act, as
---
currently in effect and as may be amended from time to time.
"Capital Account" means an account established and
---------------
maintained for each Member pursuant to Section 5.1 hereof. The
initial Capital Account Balances shall be based upon the Capital
Accounts of the Members as reflected on Schedule A attached
hereto.
"Capital Transaction" shall mean (i) a sale or other
-------------------
disposition by the Company of all or any part of its assets
(other than sales in the ordinary course of business), (ii)
refinancing or recasting of any mortgage loan or secondary
financing of the Company, (iii) advances or additional advances
under any mortgage loan to the Partnership or the Operating
Partnership, (iv) any sale-leaseback of the Company's property,
(v) the taking or condemnation by any right of eminent domain of
any part of the Company's property, or (vi) the destruction, in
whole or in part, of the Company's property whether by fire,
other casualty, or any other cause.
"Capital Transaction Gain" or "Capital Transaction
----------------------- -------------------
Loss" shall mean the Company's taxable gain or loss,
----
respectively, with respect to a Capital Transaction.
"Cash from Capital Items" shall mean the net cash
-----------------------
proceeds from any Capital Transaction received by the Company,
after deducting (a) an amount sufficient to satisfy any unpaid
principal and interest on loans from third parties, (b) an amount
sufficient to satisfy any advances to the Company by the members,
and (c) funds used, or applied for the establishment of any
reasonable reserves, for working capital, or for alterations,
repairs of capital improvements or other uses deemed advisable by
the members whether or not for the foregoing purposes, provided
--------
that as the unused balance of such reserves are no longer needed
to be reserved, the same shall thereupon be deemed Cash from
Capital Items (such reserves to be deemed to include, without
limitation, accruals for all management and other fees payable
under any agreements with any member or any affiliate of any
member).
"Code" means the Internal Revenue Code of 1986 of the
----
United States of America, as amended, or any corresponding
provision or provisions of any succeeding law.
"Company" means
------- ------------.
"Fiscal Year" means for both accounting and U.S. income
-----------
tax purposes the calendar year, except that the first Fiscal Year
of the Company shall be the period from the formation of the
Company to December 31 of the same calendar year, and upon any
termination of the Company on a date other than December 31, the
final Fiscal Year of the Company shall be the period from the end
of the immediately preceding Fiscal Year to the date of such
termination.
"Liquidation" has the meaning ascribed thereto in
-----------
Section 11.3 hereof.
"Liquidation Proceeds" has the meaning ascribed thereto
--------------------
in Section 11.3 hereof.
"Liquidating Member" means Grand Court. If there shall
------------------
be more than one Member, it shall mean the Member selected for
such position by the vote of a majority of the Members.
"Loss(es)" means net losses other than Capital
--------
Transaction Loss as determined under U.S. income tax accounting
principles.
"Manager" means Grand Court and each of the parties who
-------
may hereafter become an additional or substitute Manager.
"Members" means Grand Court and and each of the
------- ------
parties who may hereafter become an additional or substitute
Member.
"Net Cash Flow" means, for each Fiscal Year or other
-------------
period, an amount equal to the excess, if any, of (a) the gross
receipts from operations of the Company from all sources, over
(b) all cash expenditures of the Company due to operations,
including (i) debt service under any indebtedness incurred by the
Company, (ii) taxes and governmental fees, and (iii) reserves
established from time to time in such amounts, at such times and
for such purposes as the Members shall, in their reasonable
discretion, determine. Net Cash Flow shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar
allowances, but shall be increased by any reductions of reserves
previously established pursuant to this Agreement.
"Person" means any individual, partnership, joint
------
venture, association, corporation, trust or other entity.
"Profit(s)" mean net profits other than Capital
---------
Transaction Gain as determined under U.S. income tax accounting
principles.
"Treasury Regulations" mean the regulations promulgated
--------------------
by the U.S. Treasury Department with respect to the Code, as such
regulations are amended from time to time, or corresponding
provisions of future regulations.
ARTICLE II
ORGANIZATION
------------
2.1 Formation. The Members hereby forms, pursuant to
---------
the Act, a limited liability company for the purposes and upon
the terms and conditions hereinafter set forth.
2.2 Name. The name of the Company shall be
---- --------.
All business of the Company shall be conducted under such name.
The Members may change the name of the Company in accordance with
the provisions of the Act.
2.3 Registered Office; Registered Agent; Principal
----------------------------------------------
Place of Business. The location of the registered office of the
-----------------
Company shall be The Company's registered agent at
--------.
such address shall be Capitol Commerce Reporter, Inc. The
Company's principal place of business shall be at One Executive
Drive, Fort Lee, New Jersey 07024.
2.4 Purpose. The Company's business and purpose shall
-------
consist solely of the construction, ownership, operation and
management of an adult living center to be constructed in
and such activities as are necessary, incidental or
---------
appropriate in connection therewith.
2.5 Term. The Company shall continue in existence
----
from the date hereof until December 31, 2020, or until terminated
in accordance with the provisions of this Agreement, whichever
shall occur earlier.
2.6 Meetings. All meetings of the Members shall be as
--------
set forth in the Act.
2.7 Member Determinations. Except as otherwise
---------------------
provided herein, all actions by the Members may be approved by a
majority in interest of the Members voting on such matter.
Except as otherwise provided herein, Grand Court and are
-------
each 50% members of the Company.
ARTICLE III
MANAGEMENT
----------
3.1 Management. (a) The management of the Company
----------
shall be vested in Grand Court and such officers to whom it
delegates authority. If there shall be more than one Manager,
any Manager shall have the authority to sign agreements and other
instruments on behalf of the Company in the ordinary course of
business without the joinder of any other Manager.
(b) The Manager may engage in other business
activities and shall be obliged to devote only as much of its
time to the Company's business as shall be reasonably required
for the efficient operation of the Company's business and
objectives. The Manager shall perform its duties as a manager in
good faith, in a manner it reasonably believes to be in the best
interest of the Company, and with such care as an ordinarily
prudent person in a like position would use under similar
circumstances. A person or corporate entity who so performs his
or its duties shall not have any liability by reason of being or
having been a Manager of the Company.
(c) The Manager is an agent of the Company for
the purpose of its business, and the acts of the Manager,
including the execution in the Company name of any instrument for
apparently carrying on in the usual way the business of the
Company, binds the Company, unless such act is in contravention
of this Agreement or unless the Manager so acting otherwise lacks
the authority to act for the Company and the person with whom it
is dealing has knowledge of the fact that he has no such
authority.
3.2 Powers of the Manager. The Manager shall have the
---------------------
right and authority to take all actions which it deems necessary,
useful or appropriate for the day-to-day management and conduct
of the Company's business. In particular, the Manager shall:
(a) Assist the Company in the preparation and
filing with relevant authorities various returns, reports or
other documents required by the laws and regulations of the
United States and the State of
-------;
(b) Review the appropriateness, and arrange for
payments, of the expenses incurred in connection with the
operations of the Company;
(c) Pay all expenses of the Company, (including
any organizational expenses, legal fees, and administrative
expenses; and
(d) Perform such other services as may be deemed
necessary for the operation of the Company.
(e) Borrow money for the Company's business,
execute any and all agreements or documents required for such
borrowing and pledge the Company's assets to secure such
borrowing.
3.3 Compensation of the Manager. The Manager shall be
---------------------------
paid a fee by the Company for its services. Such fee shall be
set forth in a management agreement between Grand Court and the
Company.
3.4 Termination of the Manager. shall have
-------------------------- --------
the right to terminate Grand Court as the manager of the
Company's property for cause upon 30 days written notice to Grand
Court.
ARTICLE IV
CAPITAL CONTRIBUTIONS
---------------------
4.1 Capital Contributions. As of the date hereof, the
---------------------
Members have made, will be treated as having made, or will make,
as the case may be, the Capital Contributions set forth in
Schedule A attached hereto. The Members are not obligated to
make any additional contributions to the Company.
4.2 Return of Capital. Except as specifically
-----------------
provided in this Agreement, the Members shall not have the right
to withdraw from the Company all or any part of their Capital
Contributions, nor shall any Member have any right to demand and
receive property or cash of the Company in return of its Capital
Contribution.
ARTICLE V
CAPITAL ACCOUNTS
----------------
5.1 Capital Accounts. (a) A separate Capital Account
----------------
shall be established and maintained for each Member.
(b) Each Capital Account shall be maintained and
adjusted in accordance with the applicable requirements of the
Code and the applicable provisions of the Treasury Regulations
promulgated thereunder. Each Member's Capital Account shall be
increased by (i) the amount of cash and the fair market value of
property (net of liabilities that the Company is considered to
assume or take such property subject to) contributed by such
Member to the capital of the Company, and (ii) allocations to
such member of Profits (or items thereof) and Capital Transaction
Gain (or items thereof) pursuant to Article V. Each Member's
Capital Account shall be decreased by (i) the amount of cash and
the fair market value of property (net of liabilities that such
Member is considered to assume or take such property subject to)
distributed to such Member, and (ii) allocation to such Member of
Losses (or items thereof), Capital Transaction Loss (or items
thereof) and deductions pursuant to Article V.
(c) The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with
Treasury Regulations Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations. In the event that the Members shall determine that
it is prudent to modify the manner in which the Capital Accounts
are computed in order to comply with such Treasury Regulations,
the Members may make such modification, provided that such
modification is not likely to have a material effect on the
amounts distributable to any Member pursuant to this Agreement.
5.2 Negative Capital Accounts. At no time during the
-------------------------
term of the Company or upon the dissolution and liquidation
thereof shall a Member with a negative balance in his Capital
Account have any obligation to the Company or the other Member to
restore such negative balance, except as required by law.
ARTICLE VII
ALLOCATIONS
-----------
6.1 Determination of Gains and Losses. As of the
---------------------------------
close of business on the last day of each Fiscal Year, Profits,
Capital Transaction Gain, Losses and Capital Transaction Loss of
the Company shall be determined and shall be allocated as
provided in this Article VI.
6.2 Allocation of Profits. Profits shall be allocated
---------------------
to the Members 50% to and 50% to Grand Court.
----------
6.3 Allocation of Capital Transaction Gain. Except as
--------------------------------------
otherwise required by Section 6.8 hereof, Capital Transaction
Gain of the Partnership for each Fiscal Period shall be allocated
in the following priority:
(a) To until the cumulative amount
--------
of Capital Transaction Gain allocated to
is equal to the cumulative Losses
----------
allocated to pursuant to Section
----------
6.4 hereof.; and, thereafter
(b) To until the cumulative Capital
-------
Transaction Gain allocated to
--------
pursuant to this Section 6.3(b) is equal to
and, thereafter
$---------;
(c) To in an amount equal to the Priority
-------
Return, to the extent such amount has not
previously been distributed to him; and,
thereafter
(d) To each Member having a negative Capital
Account, pro rata in accordance with the
ratio that his negative Capital Account bears
to the sum of all negative Capital Accounts
until there shall have been allocated an
amount equal to the sum of all negative
Capital Accounts; and, thereafter
(e) 50% to Grand Court and 50% to
-------.
6.4 Allocation of Losses and Capital Transaction Loss.
-------------------------------------------------
Losses and Capital Transaction Loss shall be allocated 99% to
and 1% to Grand Court.
--------
6.5 Qualified Income Offset. Notwithstanding any
-----------------------
other provision of this Agreement except as required by the
Treasury Regulations, if any member has a deficit balance in his
Capital Account from an unexpected adjustment, allocation, or
distribution described in Treasury Regulations section 1.704-
1(b)(2)(ii)(d)(4), (5), or (6), there shall be specially
allocated to such Member such items of Company income and gain in
an amount and manner sufficient to eliminate as quickly as
possible the deficit balance, to the extent required by the
Treasury Regulations, without creating or increasing a deficit
balance in the Capital Account of any other Partner. This
Section 6.5 is intended to be a qualified income offset, as such
term is used in the Treasury Regulations.
6.6 Nonrecourse Deductions. Nonrecourse Deductions
----------------------
for any Fiscal Year shall be allocated 99% to and 1% to
-------
Grand Court.
6.7 Tax Allocations: Code Section 704(c). Income,
-------------------------------------
gain, loss and deduction with respect to any property
contributed, or deemed to be contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the
Members in accordance with Code section 704(c) and the Treasury
Regulations thereunder. Any elections or other decisions
relating to such allocations shall be made by the Members in any
manner that reasonably reflects the purpose and intention of this
Operating Agreement. Allocations pursuant to this Section 6.7
are solely for purposes of Federal, state and local taxes and
shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits,
Losses, other items or distributions pursuant to any provision of
this Partnership Agreement.
6.8 Compliance with Code. Notwithstanding any
--------------------
contrary statement or provision herein, the profits and losses of
the Company for U.S. Federal income tax purposes will be
calculated and allocated as required under the Code and Treasury
Regulations thereunder.
<PAGE>
INTENTIONALLY LEFT BLANK
<PAGE>
ARTICLE VII
DISTRIBUTIONS
-------------
7.1 Distributions of Net Cash Flow. The Net Cash Flow
------------------------------
of the Company shall be distributed at such times as the Company
shall determine. The Net Cash Flow of the Company shall be
allocated among and distributed to the Members in the following
priority:
(a) To until the cumulative amount of
--------
Net Cash Flow allocated to him for the Fiscal
Year equals $ (the "Priority Return");
------
and, thereafter
(b) To the Members, 50% to Grand Court and
50% to
-------.
7.2 Distributions of Cash from Capital Items. Cash
----------------------------------------
from Capital Items occurring at times other than dissolution
shall be allocated among and distributed to the Members in the
following priority:
(a) To until the cumulative amount of
--------
Cash from Capital Items distributed to
equals $ ; and, thereafter
---------- --------
(b) To in an amount equal to unpaid
--------
Priority Return; and, thereafter
(c) To the Members, 50% to Grand Court and 50% to
-------.
7.3 Withholding. The Company shall comply with all
-----------
withholding requirements under Federal, state and local law. The
Company shall request, and the Members shall provide to the
Company, such forms or certificates as are necessary to establish
an exemption from withholding with respect to the Members, and
any representations and forms as shall reasonably be requested by
the Company to assist it in determining the extent of and in
fulfilling, its withholding obligations. The Company shall file
required forms with applicable jurisdictions and, unless an
exemption from withholding is properly established by the
Members, shall remit amounts withheld with respect to the Member
to applicable jurisdictions. To the extent the Company is
required to withhold and pay over any amounts to any authority
with respect to any distributions or allocations hereunder, the
amount withheld shall be deemed to be a distribution in the
amount of such withholding. In the event of any claimed over
withholding, the distributee shall be limited to an action
against the applicable jurisdiction. If the amount withheld was
not withheld from actual distributions, the Company may reduce
subsequent distributions by the amount of such withholding.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Indemnification. (a) The Company shall, to the
---------------
fullest extent permitted by the Act, indemnify and hold harmless
the Members from and against any and all liabilities, losses,
damages and expenses arising out of or relating to the business
of the Company (including without limitation (i) legal fees and
expenses, (provided, that if a Member retains more than one legal
counsel in any jurisdiction in connection with any claim, the
indemnification provided by this Section 8.1(a) shall be limited
to an amount equal to the aggregate of such legal fees and
expenses divided by the number of such legal counsel), and (ii)
any amounts paid in respect of any resulting judgments, finds or
settlements) suffered or incurred in any actual or threatened
claim, action, or proceeding as a result or by reason of (i) the
fact that it is or was a Member, or (ii) any alleged action or
inaction as a Member; provided, that the forgoing indemnity shall
not apply to the extent that any action or inaction by a Member
is determined by a final judgment to have constituted gross
negligence, willful misfeasance, or bad faith, it being
understood that included, without limitation, in the concept of
"willful misfeasance or bad faith" is any action or inaction by a
Member which is not authorized by or is inconsistent with the
authorization of such Member pursuant to the Articles, By-laws
and other agreements among the parties hereto.
(b) A Member may consult with legal counsel or
accountants for the Company selected by the Member and any action
or omission suffered or taken in good faith or reliance and
accordance with the opinion or advice of any such counsel or
accountants (provided that such counsel has been selected with
reasonable care) shall be full protection and justification with
respect to the action or omission so suffered or taken.
ARTICLE IX
BOOKS, RECORDS AND BANK ACCOUNTS
--------------------------------
9.1 Books and Records. Grand Court shall cause the
-----------------
Company to keep proper and complete records and books of account
of the Company's business, including all such transactions and
other matters as are usually entered into records and books of
account maintained by Persons engaged in businesses of like
character or as are required by law and including, but not
limited to, the following:
(a) if there shall be more than one Member, a
current list of the full name and last known business or
residence address of each Member set forth in alphabetical order,
together with the Capital Contributions and the share in Profits
and Losses of each Member;
(b) a copy of the certificate of formation of the
Company and all certificates of amendment, together with executed
copies of any powers of attorney pursuant to which any
certificate has been executed;
(c) copies of the Company's income tax or
information returns and reports, if any, for the six most recent
taxable years;
(d) a copy of this Agreement, and all amendments
thereto;
(e) financial statements of the Company for the
six most recent Fiscal Years; and
(f) the Company's books and records as they
relate to the internal affairs of the Company for the current and
past three Fiscal Years.
9.2 Inspection and Copying. All records and books of
----------------------
account maintained in accordance with Section 9.1 shall be open
to inspection and copying upon at least two (2) days' prior
written notice by a Member or its authorized representatives at
any reasonable time during business hours.
9.3 Accounting Basis and Fiscal Year. The Company's
--------------------------------
books and records (a) shall be kept on an accrual basis in
accordance with the accounting methods followed by the Company
for U.S. income tax purposes, (b) shall reflect all Company
transactions, (c) shall be appropriate and adequate for the
Company's business and for the carrying out of all provisions of
this Agreement, and (d) shall be closed and balanced at the end
of each Fiscal Year.
9.4 Tax Elections.
-------------
(a) The Company, at the request of a Member or a
transferee Member, shall elect where applicable, pursuant to
Section 754 of the Code, to adjust the bases of the Company
property. The Member will furnish to the Company all information
necessary to give effect to such election.
ARTICLE X
TRANSFERS
---------
10.1 Transfers. A Member may not sell, assign,
---------
transfer, exchange, charge, pledge, give, hypothecate, or
otherwise convey or encumber (any such sale, assignment,
transfer, exchange, charge, pledge, gift, hypothecation,
conveyance or encumbrance being hereinafter referred to as a
"Transfer"), directly or indirectly, voluntarily or
involuntarily, its interest in the Company without the unanimous
consent of the Members which consent may be withheld within the
sole discretion of the Members. Any Transfer of any Member's
interest without such consent shall be null and void and of no
force whatsoever.
ARTICLE XI
DISSOLUTION AND LIQUIDATION
---------------------------
11.1 Events of Dissolution. The Company may be
---------------------
dissolved, liquidated, and terminated pursuant to the provisions
of this Article XI and in accordance with the Act. The Company
shall be terminated and dissolved upon the earlier to occur of
the following events:
(a) the withdrawal, resignation, bankruptcy, or
dissolution of any Member, unless the remaining Members, if any,
unanimously elect to continue the Company within 90 days of such
event;
(b) The sale, exchange, or other disposition by
the Company of all or substantially all of the Company's
property;
(c) The expiration of the term of the Company;
(d) The election to do so by the Member; or
(e) The occurrence of any other event that would
dissolve and terminate the Company under the Act.
11.2 Liquidation. In all cases of dissolution of the
-----------
Company, the business of the Company shall be continued to the
extent necessary to allow an orderly winding up of its affairs,
including the liquidation and termination of the Company pursuant
to the provisions of Section 11.1 and this Section 11.2, as
promptly as practicable thereafter, and each of the following
shall be accomplished:
(a) The Liquidating Member shall cause to be
prepared a statement setting forth the assets and liabilities of
the Company as of the date of dissolution, a copy of which shall
be furnished to the other Members, if any.
(b) The property of the Company shall be
liquidated by the Liquidating Member as promptly as possible, but
in an orderly, businesslike and commercially reasonable manner.
The Liquidating Member may, in the exercise of its business
judgment and if commercially reasonable, determine (i) to sell
all or any portion of the property of the Company to another
Member, if any, after using best efforts to sell such property to
a person unrelated to any Member, provided that the purchase
price is not less than the fair market value of such property, or
to any other Person, or (ii) after using best efforts to sell
such property to a person unrelated to any Member, not to sell
all or any portion of the property of the Company, in which event
such property and assets shall be distributed in kind pursuant to
Section 11.3.
(c) Any Capital Transaction Gain or Capital
Transaction Loss realized by the Company upon the sale of its
property shall be recognized and allocated to the Members in the
manner set forth in Article V of this Agreement. To the extent
that an asset is to be distributed in kind, such asset shall be
deemed to have been sold at its fair market value on the date of
distribution, the profits or loss deemed recognized upon such
deemed sale shall be allocated in accordance with Article V, and
the amount of the distribution shall be considered to be such
fair market value of the asset.
11.3 Distributions Upon Dissolution. Upon dissolution
------------------------------
of the Company and the liquidation of its assets (the
"Liquidation"), the Liquidating Member shall cause the remaining
assets, including proceeds of sales or other dispositions in
liquidation of assets of the Company ("Liquidation Proceeds"), to
be distributed in accordance with the following priorities:
(a) First, to the payment of the debts and
obligations of the Company (including advances and loans by a
Member), including sales commissions, taxes, and other expenses
incident to any sale of the assets of the Company;
(b) Second, establishment of such reserves as the
Liquidating Member may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the
Company. Such reserves may be paid over by the Liquidating
Member to a bank or other financial institution, to be held in
escrow for the purpose of paying any such contingent or
unforeseen liabilities or obligations and, at the expiration of
such period as the Liquidating deems advisable, any remaining
balance shall be distributed as provided in subsection (c) of
this Section 11.3; and
(c) The balance, if any, to the Members pro rata
in accordance with their relative positive Capital Accounts
(after giving effect to all contributions, distributions and
allocations for all periods).
INTENTIONALLY LEFT BLANK
<PAGE>
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Notices. Any notice, demand, request or report
-------
required or permitted to be given or made to the Members under
this Agreement shall be in writing and shall be deemed given or
made when delivered in person or when sent by first class mail or
by other means of written communication to the Members at the
address set forth opposite their names on Schedule A, or at such
other address as the Members may from time to time designate to
the others. Facsimile notice shall be deemed to have been
received twenty-four (24) hours after dispatch, but nevertheless
is shall be confirmed by registered airmail within ten (10) days
of dispatch.
A Member may designate another address (and/or change
its address) for Notices hereunder by a Notice given pursuant to
this Section 12.1. Unless otherwise provided herein, a Notice
sent in compliance with the provisions of this Section 12.1 shall
be deemed delivered when actually received by the party to whom
sent. Rejection or other refusal to accept or the inability to
deliver because of a changed address or addressee of which no
Notice was given as provided in this Section shall be deemed
receipt of the Notice sent.
12.2 Amendments. Amendments may be made to this
----------
Agreement only with the written consent of all Members.
12.3 No Waiver. The failure of any Member to insist
---------
upon strict performance of a covenant hereunder or of any
obligation hereunder, irrespective of the length of time for
which such failure continues, shall not be a waiver of such
Member's right to demand strict compliance in the future. No
consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation hereunder shall
constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation
hereunder.
12.4 Entire Agreement. This Agreement (including the
----------------
Schedules attached hereto and all amendments and supplements)
contains the full and complete understanding of the parties
hereto with respect to the subject matter hereof, and supersedes
any and all prior and contemporaneous agreements, understandings
and negotiations between and among the parties concerning the
subject matter hereof.
12.5 Captions. The captions in this Agreement are
--------
inserted only for convenience, form no part of this Agreement and
shall not affect its interpretation.
12.6 Counterparts. This Agreement may be executed in a
------------
number of counterparts, any one of which need not contain the
signature of more than one party, and all of which together shall
for all purposes constitute one and the same Agreement.
12.7 Severability. In the event that any of the
------------
provisions, or any portion or application thereof, of this
Agreement is held to be unenforceable or invalid by any court of
competent jurisdiction, the Members shall devise an equitable
adjustment in the provisions of this Agreement with a view toward
effecting the purpose and intent of this Agreement, and the
validity and enforceability of the remaining provisions, or
portions or applications thereof, shall not be affected thereby.
12.8 Applicable Law. The validity of this Agreement
--------------
and all rights, duties and obligations arising herefrom shall be
governed by, and interpreted, construed and enforced in
accordance with, the laws of the State of Texas.
12.9 Forum Selection. The locale of any judicial
---------------
proceedings hereunder shall be under State court in the State of
New Jersey or in the courts located in the State of New Jersey
and not in any other Federal court in the United States or any
court in any other country.
12.10 Binding Effect. Subject to the limitations
--------------
on transferability contained herein, each and all of the
covenants, terms, provisions, and agreements contained herein
shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, assigns, successors, and legal
representatives.
12.11 Identification. Whenever the singular is
--------------
used in this Agreement and when required by the context, the same
shall include the plural, and the neuter gender shall include the
feminine and masculine genders.
[INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
-----------------------------
GRAND COURT LIFESTYLES, INC.
BY:
-------------------------
Name:
-----------------
Title:
-----------------
<PAGE>
SCHEDULE A
----------
MEMBER'S CAPITAL CONTRIBUTIONS
------------------------------
Name and Address Capital
Of Member Contribution
---------------- ------------
Grand Court Lifestyles, Inc. $
------------
2650 North Military Trail
Suite 350
Boca Raton, Florida 33431
$
------------------ -------------
<PAGE>
EXHIBIT A
FORM OF
-------
SALE AND ASSIGNMENT
-------------------
Grand Court Lifestyles, Inc., (hereinafter called "Seller")
hereby sells, assigns, transfers and sets over to
---------
("Buyer") fifty percent (50%) of Seller's right, title and
interest in (the "LLC") as more particularly
-------------------
set forth in the Amended and Restated Regulations and Operating
Agreement of the LLC dated as of 1999 (the "LLC
-------------,
Interest"). The total purchase price for the LLC Interest shall
be Dollars ($ .00).
------------------ ------------- ------------
is the owner of the adult living property located in
--------.
Seller hereby declares its intention that Buyer succeeds to
fifty percent (50%) of Seller's interest in the LLC and that
Buyer be admitted to the LLC as a member. Buyer declares his
intention to succeed to fifty percent of Seller's interest in the
LLC and be admitted to the LLC as a member and agrees to be bound
by all of the terms and provisions of the LLC Agreement, as
amended.
IN WITNESS WHEREOF, Seller and Buyer, intending to be
legally bound hereby, have each duly executed this Sale and
Assignment effective as of 1999.
-----------,
Seller:
GRAND COURT LIFESTYLES, INC.
By:
----------------------------
Buyer:
------------------------------
EXHIBIT 21
LIST OF SUBSIDIARIES
FOR
GRAND COURT LIFESTYLES, INC.
1. FL Executive Financing Corp., a Delaware Corporation
2. GCGP I, Inc., a Texas Corporation
3. GCGP II, Inc., a Texas Corporation
4. GCGP, Inc. III, a Kansas Corporation
5. GCGP, IV, Inc., a Texas Corporation
6. Grand Court-Amarillo, L.P., a Texas Limited Partnership
7. Grand Court-Greatwood, L.P., a Texas Limited Partnership
8. Grand Court-Overland Park, LLC, a Kansas Limited Liability
Corporation
9. Grand Court-South Shore Harbour, L.P., a Texas Limited
Partnership
10. Grand Court Development Corp., a Delaware Corporation
11. Grand Court Facilities, Inc., a Delaware Corporation
12. Grand Court Facilities, Inc., II, a Delaware Corporation
13. Grand Court Facilities, Inc., III, a Delaware Corporation
14. Grand Court Facilities, Inc., IV, a Delaware Corporation
15. Grand Court Facilities, Inc., V, a Delaware Corporation
16. Grand Court Facilities, Inc., VI, a Delaware Corporation
17. Grand Court Facilities, Inc., VII, a Delaware Corporation
18. Grand Court Facilities, Inc., VIII, a Delaware Corporation
19. Grand Court Facilities, Inc., IX, a Delaware Corporation
20. Grand Court Facilities, Inc., X, a Delaware Corporation
21. Grand Court Facilities, Inc., XI, a Delaware Corporation
22. Grand Court Facilities, Inc., XII, a Delaware Corporation
23. Grand Court Facilities, Inc., XIII, a Delaware Corporation
24. Grand Court Facilities, Inc, XIV, a Delaware Corporation
25. Grand Court Facilities, Inc., XV, a Delaware Corporation
26. Grand Court Facilities, Inc., XVI, a Delaware Corporation
27. Grand Court Facilities, Inc., XVII, a Delaware Corporation
28. Grand Court Facilities, Inc., XVIII, a Delaware Corporation
29. Grand Court Facilities, Inc., XIX, a Delaware Corporation
30. Grand Court Facilities, Inc., XX, a Delaware Corporation
31. Grand Court Facilities, Inc., XXI, a Delaware Corporation
32. Grand Court Facilities, Inc., XXII, a Delaware Corporation
33. Grand Court Facilities, Inc., XXIII, a Delaware Corporation
34. Grand Court Facilities, Inc., XXIV, a Delaware Corporation
35. Grand Court Facilities, Inc., XXV, a Delaware Corporation
36. Grand Court Facilities, Inc., XXVI, a Delaware Corporation
37. Grand Court Facilities, Inc., XXVII, a Delaware Corporation
38. Grand Court Facilities, Inc., XXVIII, a Delaware Corporation
39. Grand Court Facilities, Inc., XXIX, a Delaware Corporation
40. Grand Court Facilities, Inc., XXX, a Delaware Corporation
41. Grand Court Lifestyles Payroll Corp., a Delaware Corporation
42. J&B Financing, LLC, a Delaware Limited Liability Company
43. Leisure Centers, LLC-I, a Texas Limited Liability Company
44. Leisure Centers, LLC-II, a Texas Limited Liability Company
45. Leisure Centers, LLC-III, a Texas Limited Liability Company
46. Leisure Centers, LLC-IV, a Texas Limited Liability Company
47. Leisure Facilities, Inc., a Delaware Corporation
48. Leisure Facilities, Inc., II, a Delaware Corporation
49. Leisure Facilities, Inc., III, a Delaware Corporation
50. Leisure Facilities, Inc., IV, a Delaware Corporation
51. Leisure Facilities, Inc., V, a Delaware Corporation
52 Leisure Facilities, Inc., VI, a Delaware Corporation
53. Leisure Facilities, Inc., VII, a Delaware Corporation
54. Leisure Facilities, Inc., IX, a Delaware Corporation, doing
business in Texas under the fictitious name of Liberty
Place, Inc.
55. Leisure Facilities, Inc., X, a Delaware Corporation
56. Leisure Facilities, Inc., XII, a Delaware Corporation
57. Leisure Facilities, Inc. XV, a Delaware Corporation
58. T Lakes L.C., a Florida Limited Liability Company
59. Texas Properties, Inc., a Delaware Corporation
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