UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, for the Quarterly Period ended March 31, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, for the Transition Period from ________ to _______.
Commission File Number 0-22253
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BROOKDALE LIVING COMMUNITIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-4103821
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
77 W. Wacker Drive, Suite 4400
Chicago, IL 60601
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(Address of principal (Zip Code)
executive offices)
(312) 977-3700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, or former
fiscal year, if changed since last report)
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
----- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 16, 1999, 11,572,082 shares of the Registrant's Common Stock, $0.01
par value per share, were outstanding.
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
Form 10-Q
INDEX
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PART I: FINANCIAL INFORMATION Page
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Item 1. Financial Statements. 3
Consolidated Balance Sheets as of June 30, 1999
and as of December 31, 1998 4
Consolidated Statements of Operations for the three
months and six months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 16
PART II: OTHER INFORMATION 18
Item 1. Legal Proceedings. 18
Item 2. Changes in Securities and Use of Proceeds. 18
Item 3. Defaults Upon Senior Securities. 18
Item 4. Submission of Matters to a Vote of Security Holders. 18
Item 5. Other Information. 18
Item 6. Exhibits and Reports on Form 8-K. 19
Signatures 22
2
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
The information furnished in the accompanying unaudited consolidated
balance sheets, statements of operations, and statements of cash flows reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim period.
Brookdale Living Communities, Inc. was incorporated on September 4, 1996
and commenced operations upon the completion of its initial public offering on
May 7, 1997. The consolidated financial statements of Brookdale and its
Subsidiaries (the "Company") represent the results of operations of 19
facilities the Company operated during the period end June 30, 1999.
The aforementioned financial statements should be read in conjunction with
the notes to the consolidated financial statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations and the financial
statements for the year ended December 31, 1998 included in the Company's Annual
Report on Form 10-K as filed with the Securities and Exchange Commission on
March 31, 1999.
3
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<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value Amounts)
June 30, 1999 December 31, 1998
(unaudited) (audited)
------------- -------------
<S> <C> <C>
Assets
Cash and cash equivalents.............................................. $ 17,560 $ 1,065
Short-term investments................................................. 55,000 --
Accounts receivable.................................................... 766 379
Notes receivable....................................................... 2,151 3,486
Reimbursable development costs......................................... 10,860 9,815
Prepaid expenses and other............................................. 7,674 4,752
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Total current assets............................................. 94,011 19,497
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Property, plant and equipment.......................................... 120,386 115,801
Accumulated depreciation............................................... (7,667) (5,689)
-------------- -------------
Property, plant and equipment, net..................................... 112,719 110,112
------------- -------------
Property under development............................................. 18,400 11,221
Cash and investments - restricted...................................... 9,298 8,226
Investment certificates - restricted................................... 20,802 15,951
Letter of credit deposits.............................................. -- 13,919
Lease security deposits................................................ 66,737 55,453
Other, net............................................................. 17,484 10,254
------------- -------------
Total assets..................................................... $ 339,451 $ 244,633
============= =============
Liabilities and Stockholders' Equity
Liabilities
Current portion of long-term debt...................................... $ 323 $ 3,310
Unsecured line of credit............................................... -- 10,997
Current portion of deferred gain on sale of property................... 806 806
Accrued interest payable............................................... 373 968
Accounts payable and accrued expenses.................................. 12,197 9,234
Tenant refundable entrance fees and security deposits.................. 6,459 5,838
Other.................................................................. 1,384 629
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Total current liabilities........................................ 21,542 31,782
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Long-term debt, less current portion................................... 92,406 92,570
Convertible subordinated notes......................................... 100,000 --
Deferred lease liability............................................... 3,076 2,849
Deferred gain on sale of property, less current portion................ 15,714 16,116
------------- -------------
Total liabilities................................................ 232,738 143,317
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Stockholders' Equity:
Preferred stock, $.01 par value, 20,000 authorized, none issued........ -- --
Common stock, $.01 par value, 75,000 shares authorized, 11,572 shares
issued and outstanding at June 30, 1999 and December 31, 1998...... 116 116
Additional paid-in-capital............................................. 94,101 94,101
Accumulated earnings................................................... 12,496 7,099
------------- -------------
Total stockholders' equity....................................... 106,713 101,316
------------- -------------
Total liabilities and stockholders' equity....................... $ 339,451 $ 244,633
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue
Resident fees............................................... $ 24,410 $ 17,198 $ 48,188 $ 32,855
Development fees............................................ 1,635 1,390 3,301 2,578
Management fees............................................. 72 63 145 116
----------- ---------- ----------- -----------
Total revenue........................................ 26,117 18,651 51,634 35,549
----------- ---------- ----------- -----------
Expenses
Facility operating.......................................... 12,896 9,691 25,688 18,278
General and administrative.................................. 1,277 1,204 2,435 2,496
Lease expense............................................... 6,358 4,141 12,646 7,992
Depreciation and amortization............................... 1,320 1,205 2,682 2,431
Write-off of deferred financing costs....................... 273 -- 273 --
----------- ---------- ----------- -----------
Total operating expenses............................. 22,124 16,241 43,724 31,197
----------- ---------- ----------- -----------
Income from operations............................... 3,993 2,410 7,910 4,352
Interest income............................................. 1,943 936 3,489 1,641
Interest expense............................................ (1,788) (936) (2,915) (1,858)
------------ ----------- ------------ ------------
Income before income tax expense..................... 4,148 2,410 8,484 4,135
Income tax expense.......................................... (1,508) (889) (3,087) (1,503)
------------ ----------- ------------ ------------
Net income........................................... $ 2,640 $ 1,521 $ 5,397 $ 2,632
=========== ========== =========== ===========
Basic earnings per common share............................. $ 0.23 $ 0.16 $ 0.47 $ 0.28
=========== ========== =========== ===========
Weighted average shares used for computing basic
earnings per common share............................... 11,572 9,487 11,572 9,448
=========== ========== =========== ===========
Diluted earnings per common share........................... $ 0.22 $ 0.16 $ 0.45 $ 0.27
=========== ========== =========== ===========
Weighted average shares used for computing diluted
earnings per common share............................... 14,499 9,793 13,120 9,721
=========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six months ended June 30,
1999 1998
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<S> <C> <C>
Cash Flows from Operating Activities
Net income........................................................... $ 5,397 $ 2,632
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization..................................... 2,682 2,431
Write-off of deferred financing costs............................. 273 --
Deferred income taxes............................................. 2,787 1,536
Change in deferred lease liability................................ 227 614
Deferred gain on sale of property................................. (402) (402)
Changes in:
Accounts receivable............................................ (387) (399)
Prepaid expenses and other..................................... (6,213) (4,767)
Accrued interest payable....................................... (595) (72)
Accounts payable and accrued expenses.......................... 2,966 2,854
Tenant refundable entrance fees and security deposits.......... 128 (108)
Other current liabilities...................................... (387) (851)
-------------- ---------------
Net cash provided by operating activities.................. 6,476 3,468
------------- --------------
Cash Flows from Investing Activities
Lease security deposits and acquisitions............................. (11,295) (12,638)
Increase in cash and investments - restricted........................ (579) (12,758)
Increase in investments - restricted................................. (4,851) --
Proceeds from sale of property under development, net................ 300 3,300
Property under development, net of related payables ................. (8,048) (9,915)
Payments received on notes receivable................................ 1,903 7,446
Purchases of short-term investments.................................. (55,000) --
Additions to property, plant and equipment and reimbursable
development improvements, net of related accounts payable.......... (4,976) (2,880)
-------------- ---------------
Net cash used in investing activities...................... (82,546) (27,445)
-------------- ---------------
Cash Flows from Financing Activities
Repayment of long-term debt.......................................... (3,151) (140)
Proceeds from unsecured lines of credit.............................. 31,933 10,750
Repayment of unsecured lines of credit............................... (42,930) (2,500)
Proceeds from issuance of convertible subordinated notes,
net of costs....................................................... 94,294 --
Decrease (increase) in letter of credit deposit, net................. 13,919 (876)
Payment of financing costs........................................... (1,500) (504)
Proceeds from issuance of common stock, net.......................... -- 5,392
------------- --------------
Net cash provided by financing activities.................. 92,565 12,122
------------- --------------
Net increase (decrease) in cash and cash equivalents....... 16,495 (11,855)
Cash and cash equivalents at beginning of period........... 1,065 13,292
------------- --------------
Cash and cash equivalents at end of period................. $ 17,560 $ 1,437
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
6
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<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six months ended June 30,
1999 1998
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<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized............................. $ 3,510 $ 1,930
============= ===============
Income taxes paid..................................................... $ 486 $ 657
============= ===============
Supplemental Schedule of Noncash Investing and
Financing Activities:
In connection with property acquisitions and net lease transactions,
assets acquired and liabilities assumed were as follows:
Fair value of assets acquired.................................... $ 11,404 $ 13,860
Less: Cash consideration paid.................................... 10,911 11,875
------------- ---------------
Liabilities assumed.............................................. $ 493 $ 1,985
============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
(Unaudited)
1. Organization
Brookdale Living Communities, Inc. was incorporated in Delaware on
September 4, 1996 and commenced operations upon the completion of its initial
public offering on May 7, 1997.
The consolidated financial statements of Brookdale Living Communities, Inc.
and its subsidiaries (the "Company") include the properties owned or leased by
the Company. The Company operates in the senior independent and assisted living
segment. The properties owned, leased or managed by the Company or under
construction as of June 30, 1999 (collectively, the "Properties") are located
throughout the United States as indicated on the following table:
Date Owned
Property Name or Leased Location
- ------------- ---------- --------
Owned Facilities:
- -----------------
The Heritage of Des Plaines May 7, 1997 Des Plaines, IL
The Devonshire May 7, 1997 Lisle, IL
Hawthorn Lakes May 7, 1997 Vernon Hills, IL
Edina Park Plaza May 7, 1997 Edina, MN
Leased Facilities:
The Hallmark May 7, 1997 Chicago, IL
The Springs of East Mesa May 7, 1997 Mesa, AZ
The Gables at Brighton May 7, 1997 Brighton, NY
The Park Place May 7, 1997 Spokane, WA
The Gables at Farmington November 24, 1997 Farmington, CT
The Classic at West Palm Beach December 18, 1997 West Palm Beach, FL
The Brendenwood Retirement
Community December 22, 1997 Voorhees, NJ
Harbor Village March 6, 1998 Chicago, IL
The Atrium of San Jose May 12, 1998 San Jose, CA
The Chatfield July 2, 1998 West Hartford, CT
Ponce de Leon October 21, 1998 Santa Fe, NM
Woodside Terrace December 22, 1998 Redwood City, CA
River Bay Club January 19, 1999 Quincy, MA
Managed Facilities:
- -------------------
The Island on Lake Travis Lago Vista, TX
The Kenwood Minneapolis, MN
Heritage at Gaines Ranch (1) Austin, TX
Heritage at Southfield (1) Southfield, MI
Development Projects Under Construction(2):
- -------------------------------------------
Raleigh, North Carolina
Glen Ellyn, Illinois
New York (Battery Park City), New York
(1) These projects were developed by the Company, commenced operations in July
1999 and are being managed by the Company for third party owners.
(2) The Company is developing these projects for third party owners.
8
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for such interim
periods are not necessarily indicative of the results that may be expected for a
full fiscal year. For further information regarding significant accounting
policies, please refer to the financial statements and footnotes thereto for the
period ended December 31, 1998 included in the Company's Annual Report on Form
10-K, as filed with the Securities and Exchange Commission on March 31, 1999.
Principles of Consolidation
The consolidated financial statements include the financial statements of
Brookdale Living Communities Inc. and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates.
Development Fees
Development fees related to development activities for projects owned by
third parties are earned over the term of the development. Such fees are
recognized as revenues as the development services are provided to the owner
during the pre-construction and construction periods, which typically extend for
12 to 14 months.
Reclassifications
Certain prior period amounts have been reclassified to conform with the
current financial statement presentation.
3. Recent Developments
On May 14, 1999, the Company repaid a $5,000 unsecured loan which bore
interest at 12% per annum and which had a maturity date of May 21, 1999.
On April 14, 1999, the Company increased its unsecured revolving line of
credit to $29,000, and on April 26, 1999, extended the maturity date to May 21,
1999 (which was subsequently extended to July 31, 1999). The line of credit was
repaid on May 14, 1999. On July 31, 1999, the lender approved an increase in
such line to $35,000 and extended the maturity date to July 31, 2000. Borrowings
under the line of credit bear interest at prime plus 1/2% per annum (8.25% at
June 30, 1999) and a fee of 1/4% per annum is charged on the unused amount
available under the line of credit. As of June 30, 1999, there were no
borrowings under the line of credit although letters of credit in the aggregate
amount of $5,400 were issued under the line of credit, reducing the amount
available under the line of credit. The letters of credit expire on December 31,
1999.
On May 14, 1999, the Company issued in a private transaction $100,000 of
5.5% convertible subordinated notes due April 14, 2009 that are convertible into
5,479 shares of the Company's common stock (subject to certain adjustments). The
notes are redeemable by the Company at any time after May 14, 2002 at a price of
103%, declining ratably to par after May 14, 2003. In connection with the
issuance, the Company entered a shareholders agreement which allows the
purchaser of the notes to designate two directors to the Company's Board of
Directors, increasing the Board's size from seven to nine.
On May 27, 1999, the Company obtained replacement credit enhancements to
secure the payment of principal and interest on the $65,000 tax-exempt bonds
secured by the Devonshire and Heritage of Des Plaines facilities. In connection
with the replacement of the credit enhancements, the Company received the
release of $14,464 that was on deposit with the previous credit enhancement
providers and wrote off $273 of previously deferred financing costs. The Company
entered into interest rate caps for a notional aggregate amount of $65,000 with
a capped rate of 6.35% which had a fair value of $358 at June 30, 1999 and which
expire June 1, 2004. The Company's reimbursement obligations issued in
connection with the replacement credit enhancements are
9
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
non-recourse obligations secured by mortgages on the Devonshire and Heritage of
Des Plaines facilities; provided, however, Brookdale Living Communities, Inc.
guaranteed such reimbursement obligations up to $4,000.
On June 9, 1999, the Company sold certain development rights to a site in
Columbus, Ohio to an unaffiliated third party at cost. The sales price was $475,
of which $160 was received in cash and $315 was received by the delivery of a
promissory note bearing interest at 12% per annum. The Company will develop the
site pursuant to a development agreement with the owner.
The Company has entered into interest rate lock agreements on behalf of
third party owners of development projects with respect to interest rates on
floating rate construction debt. The agreements are designed to limit the
exposure to movements in floating interest rates on the development construction
project loans and the Company is to be reimbursed by the third party for any
payments made pursuant to the agreements. As of May 14, 1999, the Company
terminated interest rate locks with a notional amount of $50,189 at a gain of
$19. The balance of the notional amount of the construction loans being hedged
is $53,500 and the approximate fair value of such hedging contracts is $812.
4. Income Taxes
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34% to income before income tax expense principally
as a result of non-taxable amortization of the deferred gain on sale of a
property and state income taxes.
5. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the three and six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per common share $ 2,640 $ 1,521 $ 5,397 $ 2,632
Interest expense on convertible subordinated notes,
net of tax 480 -- 480 --
--------- --------- -------- ---------
Numerator for diluted earnings per share $ 3,120 $ 1,521 $ 5,877 $ 2,632
========= ========= ======== =========
Denominator:
Denominator for basic earnings per common share -
weighted-average shares 11,572 9,487 11,572 9,448
Effect of dilutive securities:
Employee stock options 97 306 125 273
Warrants -- -- -- --
Convertible subordinated notes 2,830 -- 1,423 --
--------- --------- -------- ---------
Denominator for diluted earnings per common
share-adjusted weighted-average shares
and assumed conversions 14,499 9,793 13,120 9,721
========= ========= ======== =========
Basic earnings per common share $ 0.23 $ 0.16 $ 0.47 $ 0.28
========= ========= ======== =========
Diluted earnings per common share $ 0.22 $ 0.16 $ 0.45 $ 0.27
========= ========= ======== =========
</TABLE>
6. Pro Forma Information
The following unaudited pro forma condensed and consolidated statements of
operations are not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Company had leased all of
the Leased Facilities and issued 11,572 shares and $100,000 of 5.5% convertible
subordinated notes at the beginning of each period presented, nor do they
purport to represent the results of operations of the Company for future
periods.
Six months Three months
ended June 30, ended June 30
-------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Revenue $51,939 $48,533 $26,117 $24,434
Net income 4,590 2,139 2,410 1,243
Basic earnings per share 0.40 0.18 0.21 0.11
Diluted earnings per share 0.38 0.18 0.20 0.10
The proforma information does not include interest income on available cash
from the proceeds of the 5.5% convertible subordinated notes.
10
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
7. Subsequent Events
On August 6, 1999, the Company transferred to an unaffiliated third party
its rights to acquire a development site in Huntley, IL, and the unaffiliated
third party acquired the site. The acquisition of the site was financed, in
part, with the proceeds of a loan made by the Company to the third party. In
connection with this transaction, the Company and the owner entered into a
development agreement pursuant to which the owner retained the Company to
develop the site and agreed to reimburse the Company for all costs incurred or
to be incurred by the Company in connection with the acquisition and development
of the site. The owner's obligation to repay the Company for the amounts loaned
for the acquisition of the site and to reimburse the Company for acquisition and
development costs is evidenced by a promissory note in the principal amount of
$2,032, which is secured by a mortgage on the site.
During July 1999 Brookdale opened two new facilities that were developed by
the Company and are now being managed by the Company for third party owners. The
220-unit Heritage of Southfield facility is located in Southfield, Michigan, and
the 210-unit Heritage of Gaines Ranch is located in Austin, Texas.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion is based on and should be read in conjunction with
the Consolidated Financial Statements of the Company as of June 30, 1999 and
December 31, 1998 and for the six months and three months ended June 30, 1999
and 1998, including the related notes, and other information appearing elsewhere
in this Form 10-Q. Historical results and any apparent percentage relationships
with respect thereto are not necessarily indicative of future operations.
Cautionary Statements
This quarterly report on Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and similar words and expressions are generally intended to identify
forward-looking statements. Statements that describe the Company's future
strategic plans, goals or objectives are also forward-looking statements.
Readers of this report are cautioned that any forward-looking statements,
including those regarding the intent, belief or current expectations of the
Company or management, are not guarantees of future performance, results or
events and involve risks and uncertainties and that actual results and events
may differ materially from those in the forward-looking statements as a result
of various factors, including, but not limited to, (i) general economic
conditions in the markets in which the Company operates, (ii) competitive
pressures within the industry and/or the markets in which the Company operates,
(iii) the successful completion of the acquisition of the facilities by the
Company, the successful completion of development activities, the successful
integration of newly acquired, leased or developed facilities with the
operations of the Company's existing facilities, fluctuations in operating
results or occupancy levels in the markets in which the Company competes, and/or
unanticipated changes in expenses or capital expenditures, (iv) the effect of
future legislation or regulatory changes on the Company's operations and (v)
other factors described from time to time in the Company's filings with the
Securities and Exchange Commission, including this Form 10-Q and Brookdale's
1998 Annual report on Form 10-K. The forward-looking statements included in this
report are made only as of the date hereof. Except as required by law, the
Company undertakes no obligation to update such forward-looking statements to
reflect subsequent events or circumstances.
Overview
Brookdale provides seniors assisted living services through its owned,
leased or managed facilities. As of June 30, 1999, the Company operated 19
senior independent and assisted living facilities containing a total of 4,188
units. Four facilities are owned by the Company, 13 facilities are leased by the
Company and two facilities (one of which is owned by an affiliate of The Prime
Group, Inc. ("PGI") are managed by the Company pursuant to management contracts.
The Company's senior independent and assisted living facilities offer residents
a supportive, "home-like" setting as well as assistance with activities of daily
living. By providing residents a range of service options as their needs change,
the Company seeks to achieve greater continuity of care, enabling senior
residents to "age-in-place" and thereby maintain their stay for a longer time
period. The ability to allow residents to age-in-place is beneficial to the
Company's residents as well as their families who are burdened with care
decisions for their elderly relatives.
The Company derives its revenues from resident fees, development fees and
management fees. Resident fees consist of charges for leasing units, providing
basic care services and, in certain instances, providing supplemental care
services to residents. Basic care services include meals, housekeeping services
within the resident units, social and recreational activities, scheduled
transportation, security, emergency call response, access to on-site medical
services and medical education and wellness programs. In addition to basic care
services, the Company offers custom tailored supplemental care services for
residents who desire or need such services. Optional supplemental care services
include check-in services and escort and companion services, and depending on
the particular facility and as dictated by state licensing requirements, the
Company also provides assistance with activities of daily living, such as
dressing, bathing, eating and medication administration or reminders. The
Company may expand its
11
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
supplemental service offerings, as permitted by applicable licensing, in order
to capture incremental revenue and enable its residents to remain in its
facilities longer. Resident fees typically are paid monthly by residents, their
families or other responsible parties. As of June 30, 1999, over 99% of the
Company's revenue was derived from private pay sources.
The Company derives additional revenue from development fees associated
with developing senior independent and assisted living facilities for
unaffiliated third parties and management fees from managing senior independent
and assisted living facilities for PGI and a third party pursuant to management
contracts. Management services income consists of management fees, which
typically range from 3.0% to 5.0% of a managed facility's total gross revenues.
All such fees are recognized as revenues when management services are rendered.
The Company classifies its operating expenses into the following
categories: (i) facility operating expenses, which include facility personnel
payroll and related costs, food, marketing and other direct facility expenses
and real estate taxes; (ii) general and administrative expenses, which primarily
include corporate and other overhead costs; (iii) lease expenses; and (iv)
depreciation and amortization.
Comparison of six months ended June 30, 1999 to six months ended June 30, 1998
For the six months ended June 30, 1999, results reflect the operations of
the Company's 19 facilities. For the six months ended June 30, 1998, results
reflect the operations of 15 facilities.
Revenue. Total revenue increased by $16.1 million, or 45.3%, to $51.6
million for the six months ended June 30, 1999 when compared to the six months
ended June 30, 1998. Resident fees increased by $15.3 million, or 46.7%, to
$48.2 million. Of the increase in total revenue, approximately $1.4 million (or
a "same store" increase of 4.7%) reflects an increase in resident fees at the
properties that have been operated during both periods, which resulted primarily
from increases in monthly charges under residency agreements. Approximately
$13.9 million of such increase reflects revenue from facilities first leased
after June 30, 1998. The remaining $0.8 million of the total revenue increase
reflects increased revenue from development and management fees associated with
projects being developed or managed by the Company for third party owners.
Operating Expenses. Total operating expenses increased by $12.5 million, or
40.2%, to $43.7 million for the six months ended June 30, 1999 when compared to
the six months ended June 30, 1998. Facility operating expenses increased by
$7.4 million, or 40.5%, to $25.7 million primarily due to the expenses
associated with the facilities first leased after December 31, 1998.
Lease expense increased by $4.7 million, or 58.2%, to $12.6 million for the
six months ended June 30, 1999 when compared to the six months ended June 30,
1998 due primarily to the lease expense associated with the facilities first
leased after December 31, 1998. Depreciation and amortization increased by $0.3
million, or 10.3%, to $2.7 million for the six months ended June 30, 1999 when
compared to the six months ended June 30, 1998. This increase primarily reflects
the depreciation of additional furniture, fixtures and equipment at the
corporate office.
For the six months ended June 30, 1999 the Company wrote-off $0.3 million
of deferred financing costs in connection with the replacement credit
enhancement for the $65.0 million of tax-exempt bonds secured by the Devonshire
and Heritage of Des Plaines facilities.
Interest income increased by $1.8 million, or 112.6%, to $3.5 million for
the six months ended June 30, 1999 when compared to the six months ended June
30, 1998 due to the investment of the net proceeds from the issuance of $100.0
million of 5.5% convertible subordinated notes due 2009 and an increase in
various deposits and restricted investments.
Interest expense increased $1.1 million, or 56.9%, to $2.9 million for the
six months ended June 30, 1999 when compared to the six months ended June 30,
1998 due to increased borrowings under the lines of credit and the issuance of
$100.0 million of 5.5% convertible subordinated notes due 2009.
Net Income. For the six months ended June 30, 1999, the Company generated
net income of approximately $5.4 million, as compared to a net income of $2.6
million for the six months ended June 30, 1998, due to the changes in revenue
and expenses described above.
Comparison of three months ended June 30, 1999 to three months ended June 30,
1998.
For the three months ended June 30, 1999, results reflect the operations of
the Company's 19 facilities. For the three months ended June 30, 1998, results
reflect the operations of 15 facilities.
12
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
Revenue. Total revenue increased by $7.5 million, or 40.0%, to $26.1
million for the three months ended June 30, 1999 when compared to the three
months ended June 30, 1998. Resident fees increased by $7.2 million, or 41.9%,
to $24.4 million. Of the increase in total revenue, approximately $1.0 million
(or a "same store" increase of 6.0%) reflects an increase in resident fees at
the properties that have been operated during both periods, which resulted
primarily from increases in monthly charges under residency agreements.
Approximately $6.3 million of such increase reflects revenue from facilities
first leased after April 1, 1998. The remaining $0.2 million of the total
revenue increase reflects increased revenue from development and management fees
associated with projects being developed or managed by the Company for third
party owners.
Operating Expenses. Total operating expenses increased by $5.9 million, or
36.2%, to $22.1 million for the three months ended June 30, 1999 when compared
to the three months ended June 30,1998. Facility operating expenses increased by
$3.2 million, or 33.1%, to $12.9 million primarily due to the expenses
associated with the additional facilities leased after April 1, 1998.
Lease expense increased by $2.2 million, or 53.5%, to $6.4 million for the
three months ended June 30, 1999 when compared to the three months ended June
30, 1998 due primarily to the lease expense for the facilities first leased
after December 31, 1998. Depreciation and amortization increased by $0.1
million, or 9.5%, to $1.3 million for the three months ended June 30, 1999 when
compared to the three months ended June 30, 1998. This increase primarily
reflects the depreciation of additional furniture, fixtures and equipment at the
corporate office.
For the three months ended June 30, 1999, the Company wrote-off $0.3
million of deferred financing costs in connection with the replacement credit
enhancements for the $65.0 million of tax-exempt bonds secured by the Devonshire
and Heritage of Des Plaines facilities.
Interest income increased by approximately $1.0 million, or 107.6%, to $1.9
million for the three months ended June 30, 1999 when compared to the three
months ended June 30, 1998 due to the investment of the net proceeds from the
issuance of $100.0 million of 5.5% convertible subordinated notes due 2009 and
an increase in various deposits and restricted investments.
Interest expense increased $0.9 million, or 91.0%, to $1.8 million for the
three months ended June 30, 1999 when compared to the three months ended June
30, 1998 due to increased borrowings under the Company's lines of credit and the
issuance of $100.0 million of 5.5% convertible subordinated notes due 2009.
Net Income. For the three months ended June 30, 1999, the Company generated
net income of approximately $2.6 million, as compared to a net income of $1.5
million for the three months ended June 30, 1998, due to the changes in revenue
and expenses described above.
Liquidity and Capital Resources
Cash and cash equivalents (which does not include cash and
investments-restricted of $9.3 million, short-term investments of $55.0 million,
investment certificates of $20.8 million and lease security deposits of $66.7
million) increased by $16.5 million to $17.6 million at June 30, 1999 as
compared to December 31, 1998, primarily due to the net proceeds from the
issuance of $100.0 of 5.5% convertible subordinated notes due 2009 and the
release of the letter of credit deposits upon the replacement credit
enhancements securing the $65.0 million tax-exempt bonds, offset by cash
utilized for transaction costs; offset by cash used for the leasing of the River
Bay Club facility and repayment of the unsecured lines of credit and note
payable.
Net cash provided by operating activities for the six months ended June 30,
1999 totaled approximately $6.5 million as a result of increased facility
operations before depreciation and amortization and the commencement of the
lease of the River Bay Club facility leased subsequent to December 31, 1998.
Net cash used in investing activities totaled approximately $82.5 million
for the six months ended June 30, 1999. Investing activities included cash paid
for lease security deposits in connection with the lease of the River Bay Club
facility of $10.9 million and a $0.4 million increase in existing lease security
deposits, the purchase of short-term investments of $55.0 million from the net
proceeds from the issuance of $100.0 million of 5.5% convertible subordinated
notes due 2009, an increase in investment certificates-restricted of $4.9
million, an increase in property under development of $8.0 million and other net
uses of $3.3 million.
Net cash provided by financing activities was approximately $92.6 million
for the six months ended June 30, 1999. Financing activities included $94.3
million net proceeds from the issuance of $100.0 million of 5.5% convertible
subordinated notes due 2009, proceeds from unsecured lines of credit of $31.9
million and $13.9 million of letter of credit deposits released in connection
with the replacement of credit enhancements on $65 million tax-exempt bonds,
offset by repayments of $42.9 million on borrowings under the unsecured lines of
the credit, repayments of $3.1 million on long-term debt and payment of
financing costs of $1.5 million.
13
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
The Company currently plans to acquire or lease at least 4 to 6 senior
independent and assisted living facilities per year containing an aggregate of
approximately 800 to 1,200 units and to commence development for third parties
of at least 3 new facilities per year each containing approximately 220 units.
The total construction costs, including construction period financing costs and
operating deficits during the lease-up period, for the 220-unit prototype are
estimated to be approximately $35 million, or approximately $159,000 per unit.
At June 30, 1999, the Company had 5 facilities under construction and several
sites under development for new senior independent and assisted living
facilities. The Company's estimated capital expenditures for the remainder of
1999 relating to sites under development aggregate approximately $5.0 million to
$10.0 million. Capital expenditures for the remainder of 1999 related to the
Company's existing facilities, including renovation projects are estimated to be
approximately $3.0 million to $6.0 million in the aggregate. The Company
anticipates that it will use a combination of cash on hand, borrowings under
lines of credit or otherwise, lease transactions and cash generated from
operations to fund its acquisition and development activities. On May 14, 1999,
the Company issued $100.0 million of 5.5 % convertible subordinated notes due
2009. The convertible subordinated notes bear interest at 5.5% per annum payable
semi-annually on June 30 and December 31 of each year. The convertible
subordinated notes are convertible into 5,479 shares of the Company's common
stock, subject to adjustment, in certain circumstances. The convertible
subordinated notes are redeemable at the option of Brookdale beginning May 14,
2002, at specified premiums. The holders of the convertible subordinated notes
may require Brookdale to repurchase the notes upon the occurrence of certain
merger events, as described in the convertible subordinated notes. In addition,
in June, 1998 Brookdale received a $100.0 million commitment from The Capital
Company of America (successor to Nomura Asset Capital Corporation) for
development projects, of which approximately $51.0 million was committed to the
Austin, Texas and Southfield, Michigan development projects. The Company
believes that it has sufficient funds available to finance its acquisition and
development programs for at least the next 18 months.
As of June 30, 1999, the Company had $65.0 million of long-term
indebtedness in tax-exempt bonds with floating rates. The interest rates
(exclusive of credit enhancement and other fees) on such debt averaged 3.3%
during the six months ended June 30, 1999, and the average interest rate on such
debt was 3.6% at June 30, 1999. The Company entered into interest rate caps for
an aggregate notional amount of $65.0 million with a capped rate of 6.35% which
expires June 1, 2004. Such tax-exempt bonds contain covenants requiring the
facilities to maintain a minimum number of units for income qualified residents.
The Company may obtain similar bond financing for future facilities.
The Company is dependent on third-party financing for its acquisition,
leasing and development programs. Financing obtained in the future is generally
expected to contain terms and conditions and representations and warranties that
are customary for such loans and may contain financing covenants and other
restrictions that (i) require the Company to meet certain financial tests and
maintain certain amounts of funds in escrow, (ii) limit, among other things, the
ability of the Company to borrow additional funds, dispose of assets and engage
in mergers or other business combinations and (iii) restrict the ability of the
Company to operate competing facilities within certain distances from mortgaged
facilities. There can be no assurance that financing for the Company's
acquisition and development program will be available to the Company on
acceptable terms or at all. A lack of funds may require the Company to delay or
eliminate all or some of its development projects and acquisition and leasing
plans and could therefore have a material adverse effect on the Company's growth
plans and on its future results of operations.
The ability of the Company to achieve its development plans will depend
upon a variety of factors, many of which will be outside its control. These
factors may include (i) obtaining required governmental permits for the
construction of new facilities without experiencing significant delays; (ii)
completing construction of new facilities on schedule and without going
significantly over budget; (iii) the ability to work with contractors and
subcontractors who construct the facilities; (iv) increased expenses due to
delays caused by shortages of labor or materials or adverse weather conditions;
and (v) changes in laws and regulations or how existing laws and regulations are
interpreted and applied. The Company cannot assure that it will not experience
delays in completing facilities under construction or in development or that it
will be able to identify suitable sites at acceptable prices for future
development activities. If it fails to achieve its development plans, its growth
could slow, which would adversely impact its revenues and results of operations.
The Company's growth plan includes the acquisition or lease of assisted
living facilities already in operation. The success of the Company's
acquisitions will be determined by numerous factors, including the Company's
ability to identify suitable acquisition candidates, competition for such
acquisitions, the purchase price, lease terms and conditions, the financial
performance of the facilities after acquisition and the ability of the Company
to effectively integrate and operate acquired facilities. Any failure to do so
may have a material adverse effect on the Company's business, financial
condition, revenues and earnings.
The long-term care industry is highly competitive and the assisted living
segment is becoming increasingly competitive. The Company competes with many
other companies that provide similar long-term care alternatives, such as home
health care agencies, facility-based service programs, retirement communities,
convalescent centers and other assisted living providers. In pursuing the
Company's development and operations strategies, the Company has experienced and
expects to continue to experience increased competition in its efforts to
develop, acquire and lease, assisted living facilities. Some of the present and
potential competitors of the Company are significantly larger and have, or may
obtain, greater financial resources than the
14
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
Company. Consequently, the Company cannot assure that it will not encounter
increased competition that could limit its ability to attract residents or
expand its business, which could have a material adverse effect on its revenues
and earnings.
Impact of Inflation
Resident fees from senior independent and assisted living facilities owned
or leased by the Company, management fees from facilities managed by the Company
for third parties and development fees from facilities developed by the Company
for third parties are the Company's primary sources of revenue. These revenues
are affected by monthly resident fee rates and facility occupancy rates. The
rates charged for senior independent and assisted living services are highly
dependent upon local market conditions and the competitive environment in which
the facilities operate. Substantially all of the Company's residency agreements
allow for adjustments in the monthly fees payable thereunder not less frequently
than every 12 or 13 months, thereby enabling the Company to seek increases in
monthly fees due to inflation, demand or other factors. Any such increase would
be subject to market and competitive conditions. The Company believes, however,
that the ability to adjust the monthly fees payable under the residency
agreements on an annual basis serves to reduce the risk to the Company of the
adverse effect of inflation. In addition, employee compensation expense is a
principal cost element of facility operations and is also dependent upon local
market conditions. There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes. In addition, at
June 30, 1999, approximately $65.0 million in principal amount of the Company's
indebtedness bore interest at a floating rate of approximately 3.6% and future
indebtedness may bear floating rate interest. The Company entered into interest
rate caps for an aggregate notional amount of $65.0 million with a capped rate
of 6.35% which expires June 1, 2004. Inflation, and its impact on floating
interest rates, could affect the amount of interest payments due on such
indebtedness.
Readiness for Year 2000
The Company has implemented a program to mitigate the potential impact of
the Year 2000 Issue throughout the Company. The Company's program has been
structured to address its internal computer systems and applications, network
services operations, facilities operations and third-party vendors and
suppliers. The Company believes that it is taking the necessary steps within its
control to mitigate the potential impact of the Year 2000 Issue on the Company.
Information Systems
The Company has upgraded its accounting and human resources systems, and is
in the process of upgrading its property management and marketing systems for
the Year 2000 Issue. The Company expects that the replacement of its systems
will mitigate the impact of the Year 2000 Issue on its accounting operations.
The corporate software selection has been completed and a contract was executed
in the third quarter of 1998 to commence development and implementation in the
fourth quarter of 1998. The corporate software was installed and became
operational on May 1, 1999. The Company has one vendor software package that is
used to process property level accounting information at each facility which was
not Year 2000 compliant but has been remedied during the second quarter 1999. In
June 1999, the Company executed a contract for replacement software at the
facilities it owns or operates.
Facilities
The Company has completed an assessment of each facility, including an
assessment of infrastructure equipment such as elevator, HVAC and security
systems, and other critical service provider readiness issues. The Company
completed its preliminary assessment by December 31, 1998 and completed the
update assessment in June, 1999. As of August 3, 1999, the Company's assessment
of the facilities and infrastructure equipment did not indicate that any
significant costs will need to be incurred to mitigate the Year 2000 Issue.
The aforementioned vendor software package at each facility is used for
resident billing and payable processing. As noted above, the Company executed a
contract to purchase replacement software. The Company commenced its
implementation in June 1999 with an expected completion date of November 1999.
The Company has undertaken contingency planning for each of its facilities as
necessary.
Third-Party Vendors and Suppliers
The Company's approach to third-party suppliers involves the process of
identification and prioritization of critical suppliers and communicating with
them about their plans and progress in addressing the Year 2000 Issue. This
evaluation, including prioritization of critical suppliers, and the subsequent
contingency planning was undertaken during the first quarter of 1999 and will be
substantially completed in the third quarter of 1999.
15
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
Costs
The final cost to complete the projects discussed above, which were
undertaken primarily to facilitate Company growth and not just for Year 2000
readiness, has not yet been determined; however, the estimated total cost,
including capital expenditures, will approximate $3.0 million to $4.0 million
through December 31, 1999, of which approximately $2.5 million has been incurred
through June 30, 1999. The Company's costs include the costs of outside
consultants and contractors and hardware and software replacements and upgrades.
The Company anticipates that cash on hand, cash generated from operations
and additional debt financings will provide sufficient cash to fund Year 2000
compliance expenditures. The Company's allocation of other personnel resources
and planned expenditures has not resulted in the deferral of any information
technology projects. Remediation costs, other than the planned expenditures
described above, are not expected to be material.
Risks
Management believes that the Company's information technology and embedded
systems at the facilities will be substantially Year 2000 compliant prior to
January 1, 2000. While the Company exercises no control over such third parties,
the Company may face potential Year 2000 related risks and may experience
business interruption to its operations as a result of third-party vendors and
suppliers failing to address their Year 2000 compliance issues. The Company has
substantially completed its assessment of third-party vendors and suppliers to
identify Year 2000 compliance issues and is assessing the potential impact upon
the Company and its operations.
Project completion dates are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
ability of third parties to modify the Company's systems on a timely basis.
There can be no guarantee that the project will be completed in a timely manner.
Specific factors that might delay completion of the project include, but are not
limited to, the availability of qualified personnel, the ability to locate and
correct all relevant computer codes, and similar uncertainties. Although the
Company intends to continue preparations for Year 2000, it is not possible to
quantify potential indirect effects resulting from the lack of readiness of any
third party with whom the Company conducts business. Further, given the inherent
uncertainty in any Year 2000 assessment, there may be claims against the Company
based on Year 2000 Issues not currently anticipated by the Company.
Readers are cautioned that forward-looking statements contained in the Year
2000 disclosure should be read in conjunction with "Cautionary Statements" set
forth above.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to interest rate risk primarily through its
borrowing and leasing activities. There is inherent risk from borrowings and
leasing as they mature or expire and are renewed at market rates. The extent of
this risk is not quantifiable or predictable because of the variability of
future interest rates and the Company's future financing requirements. The
Company does not enter into financial instruments transactions for trading or
other speculative purposes.
Long-term debt - As of June 30, 1999 the Company had $92.7 million of
long-term debt at a weighted average interest rate of 4.96%. Included therein
are mortgage notes of $27.7 million which bear fixed rates of interest ranging
from 8.0% to 8.525% through maturity in 2027 when the loans mature, and variable
rate tax-exempt bonds of $27.0 million, $6.0 million and $32.0 million which are
payable interest only until maturity in 2025 and 2019, respectively.
For fixed rate debt, changes in interest rates generally affect the fair
value, but not earnings or cash flows. Conversely, changes in interest rates for
variable rate debt generally do not impact fair value, but do affect future
earnings and cash flows.
The Company has entered into interest rate lock agreements on behalf of
third party owners of development projects to limit their exposure to movements
in variable interest rates of which $50.2 million were terminated as of May 14,
1999. The notional aggregate amount of construction loans is $53.5 million and
the fair value is approximately $0.8 million. The Company is to be reimbursed by
the third party for any payments made pursuant to the agreements. In connection
with the $65.0 million variable rate tax-exempt bonds the Company purchased
interest rate caps at 6.35% a fair value of $0.4 million at June 30, 1999 expire
June 1, 2004.
If interest rates on the Company's variable rate debt, including tax-exempt
bonds, increased by 1 percentage point, the annual interest expense would
increase by approximately $0.7 million. The Company entered into interest rate
caps for an aggregate notional amount of $65.0 million with a capped rate of
6.35% which expire June 1, 2004.
16
<PAGE>
Lease expense - The Company has entered into operating leases which have
fixed terms and are subject to renewal at the option of the Company. The Company
has an option to purchase all but four of these facilities prior to or at the
end of the respective lease term. Four of the facilities leases require the
payment of additional rent of 10% of the excess of each year's revenue compared
to 1998.
17
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
No material developments with respect to legal proceedings
occurred during the period covered by this quarterly
report.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
On May 20,1999, Brookdale Living Communities, Inc. held its
1999 annual meeting of stockholders at 35 West Wacker
Drive, Chicago, Illinois. The annual meeting was called for
the following purposes:
(1) to elect two directors for terms of three years each;
(2) to ratify the appointment of Ernst & Young LLP as
Brookdale's independent auditors;
(3) to approve the 1999 Stock Incentive Plan; and
(4) to transact such other business as may properly come
before the annual meeting.
The following table sets forth the names of the directors
elected at the annual meeting for new three year-terms and
the number of votes cast for and withheld for each
director:
<TABLE>
Withheld
Authority to
Directors For Vote
--------- --- ------------
<S> <C> <C>
Darryl W. Copeland 9,496,716 194,265
----------- ------------
Darryl W. Hartley-Leonard 9,555,716 135,265
----------- ------------
</TABLE>
The names of each of the other directors whose terms of
offices continued after the annual meeting are as follows:
Michael W. Reschke, Mark J. Schulte, Wayne D. Boberg, Dr.
Bruce L. Gewertz and Daniel J. Hennessy.
Paul H. Warren and Mark H. Tabak were appointed directors
on May 14, 1999 and May 20, 1999, respectively. Daniel J.
Hennessy resigned as a director on May 20, 1999, and a
replacement director has not yet been appointed.
The appointment of Ernst & Young LLP as Brookdale's
independent auditors was ratified at the meeting. The vote
tabulation was as follows: 9,689,016 votes (99.98% of the
total eligible votes excluding broker-non-votes) were cast
for the ratification of Ernst & Young LLP as Brookdale's
independent auditors, 0 votes (0% of the total eligible
votes excluding broker-non-votes) were cast against such
approval and 1,965 votes (0.02% of the total eligible votes
casts, excluding broker-non-votes) were abstentions.
The 1999 Stock Incentive Plan was also approved at the
meeting. The vote tabulation was as follows: 6,861,153
votes (70.84% of the total eligible votes excluding
broker-non-votes) were cast for approval of the 1999 Stock
Incentive Plan, 2,819,806 votes (29.11% of the total
eligible votes cast, excluding broker-non-votes) were cast
against such approval and 4,715 votes (0.05% of the total
eligible votes cast, excluding broker-non-votes) were
abstentions.
Item 5. Other Information.
None
18
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Brookdale Living
Communities, Inc., as filed with the Securities and Exchange
Commission on June 16, 1997 as Exhibit 3.1 to the Company's
Form 10-Q for the period ended March 31, 1997 (File No.
0-22253) and incorporated herein by reference
3.2 Amended and Restated By-laws of Brookdale Living
Communities, Inc., as filed with the Securities and Exchange
Commission on June 16, 1997 as Exhibit 3.2 to the Company's
Form 10-Q for the period ended March 31, 1997 (File No.
0-22253) and incorporated herein by reference
4.1 Form of certificate representing Common Stock of Brookdale
Living Communities, Inc., as filed with the Securities and
Exchange Commission on March 17, 1997 as Exhibit 10.14 to
the Company's Registration Statement on Form S-1
(Registration No. 333-12259) and incorporated herein by
reference
10.1 Note Purchase Agreement, dated as of April 27, 1999, by and
between Brookdale Living Communities, Inc. and Health
Partners, as filed with the Securities and Exchange
Commission on May 19, 1999 as Exhibit 10.1 to the Company's
Form 8-K dated April 27, 1999 (File No. 0-22253) and
incorporated herein by reference
10.2 Indenture, dated as of May 14, 1999, by and between
Brookdale Living Communities, Inc. and State Street Bank and
Trust Company, as Trustee, as filed with the Securities and
Exchange Commission on May 19, 1999 as Exhibit 10.2 to the
Company's Form 8-K dated April 27, 1999 (File No. 0-22253)
and incorporated herein by reference
10.3 Supplemental Indenture, dated as of May 14, 1999, by and
between Brookdale Living Communities, Inc. and State Street
Bank and Trust Company, as Trustee, as filed with the
Securities and Exchange Commission on May 19, 1999 as
Exhibit 10.3 to the Company's Form 8-K dated April 27, 1999
(File No. 0-22253) and incorporated herein by reference
10.4 Registration Rights Agreement, dated as of May 14, 1999, by
and between Brookdale Living Communities, Inc. and Health
Partners, as filed with the Securities and Exchange
Commission on May 19, 1999 as Exhibit 10.4 to the Company's
Form 8-K dated April 27, 1999 (File No. 0-22253) and
incorporated herein by reference
10.5 Stockholders Agreement, dated as of May 14, 1999, by and
among Brookdale Living Communities, Inc. and the signatories
listed therein, as filed with the Securities and Exchange
Commission on May 19, 1999 as Exhibit 10.5 to the Company's
Form 8-K dated April 27, 1999 (File No. 0-22253) and
incorporated herein by reference
10.6 Limited Guaranty, dated as of May 27, 1999, by and between
Brookdale Living Communities, Inc. and Glaser Financial
Group, Inc., as filed with the Securities and Exchange
Commission on June 21, 1999 as Exhibit 10.1 to the Company's
Form 8-K dated May 27, 1999 (File No. 0-22253) and
incorporated herein by reference
10.7 Reimbursement and Security Agreement, dated as of May 1,
1999, by and between Federal Home Loan Mortgage Corporation
and The Ponds of Pembroke Limited Partnership, as filed with
the Securities and Exchange Commission on June 21, 1999 as
Exhibit 10.2 to the Company's Form 8-K dated May 27, 1999
(File No. 0-22253) and incorporated herein by reference
10.8 Reimbursement and Security Agreement, dated as of May 1,
1999, by and between Federal Home Loan Mortgage Corporation
and River Oaks Partners, as filed with the Securities and
Exchange Commission on June 21, 1999 as Exhibit 10.3 to the
Company's Form 8-K dated May 27, 1999 (File No. 0-22253) and
incorporated herein by reference
10.9 Reimbursement and Security Agreement, dated as of May 1,
1999, by and between Federal Home Loan Mortgage Corporation
and The Ponds of Pembroke Limited Partnership, as filed with
the Securities and Exchange Commission on June 21, 1999 as
Exhibit 10.4 to the Company's Form 8-K dated May 27, 1999
(File No. 0-22253) and incorporated herein by reference
19
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
10.10 Ninth Amendment to Loan Agreement and Documents, dated as of
April 14, 1999, by and between Brookdale Living Communities,
Inc. and LaSalle National Bank
10.11 Tenth Amendment to Loan Agreement and Documents, dated as of
April 26, 1999, by and between Brookdale Living Communities,
Inc. and LaSalle National Bank
10.12 Eleventh Amendment to Loan Agreement and Documents, dated as
of May 21, 1999, by and between Brookdale Living
Communities, Inc. and LaSalle National Bank
10.13 1998 Brookdale Living Communities, Inc. Stock Incentive Plan
10.14 1999 Brookdale Living Communities, Inc. Stock Incentive Plan
12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
27 Financial Data Schedule
20
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
(b) Reports on Form 8-K:
On April 29, 1999, the Company filed a Current Report on Form 8-K dated
April 27, 1999 with the Securities and Exchange Commission announcing pursuant
to Item 5 of Form 8-K the execution of a definitive agreement for the sale in a
private placement of $100.0 million of its 5.5% Convertible Subordinated Notes
due 2009.
On May 19, 1999, the Company filed a Current Report on Form 8-K dated
April 27, 1999 with the Securities and Exchange Commission announcing pursuant
to Item 5 of Form 8-K the sale of $100.0 million of its 5.5% Convertible
Subordinated Notes due 2009.
On June 21, 1999, the Company filed a Current Report on Form 8-K dated May
27, 1999 with the Securities and Exchange Commission announcing pursuant to Item
5 of Form 8-K the issuance of replacement credit enhancements to secure the
payment of principal and interest on tax-exempt bonds with a current outstanding
aggregate principal balance of $65.0 million and the release of $14.5 million
previously on deposit as collateral with the previous credit enhancement
providers.
21
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
BROOKDALE LIVING COMMUNITIES, INC.
Registrant
Date: August 16, 1999 /s/ Mark J. Schulte
--------------- ------------------------------------------
Mark J. Schulte
President and
Chief Executive Officer
Date: August 16, 1999 /s/ Darryl W. Copeland, Jr.
--------------- ------------------------------------------
Darryl W. Copeland, Jr.
Executive Vice President and
Chief Financial Officer
22
NINTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS NINTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of April
14, 1999 (this "Amendment"), is entered into by and between BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (the "Borrower"), and LaSALLE NATIONAL
BANK, a national banking association (the "Bank").
WITNESSETH
WHEREAS, Borrower has previously executed and delivered to the Bank a
certain Note dated April 27, 1998 in the original principal amount of up to
Fifteen Million Dollars ($15,000,000.00) (the "Original Note") evidencing a
certain loan (the "Loan") set forth more fully in and governed by a certain Loan
Agreement of that same date to which the Bank is also a party (the "Original
Loan Agreement");
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Amended and Restated Note dated
July 16, 1998 increasing the principal amount of the Loan by $10,000,000.00, on
an interim basis only, from $15,000,000.00 to $25,000,000.00 (the "Amended and
Restated Note") and a certain First Amendment to Loan Agreement and Documents of
that same date to which the Bank is also a party (the "First Amendment") that
(a) increased the principal amount of the Loan on an interim basis as aforesaid
and (b) permitted a portion of the Loan to be reserved for the issuance of
standby Letters of Credit by the Bank to and for the benefit of municipalities
and other governmental units in connection with projects developed by Borrower
from time to time as set forth more fully therein;
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Second Amendment to Loan
Agreement and Documents dated October 14, 1998 to which the Bank is also a party
(the "Second Amendment") wherein (a) the Bank consented to the Borrower's
proposed issuance of a convertible subordinated and unsecured note to OZ Master
Fund, Ltd. in the principal amount of Ten Million Dollars ($10,000,000.00), (b)
the Bank permitted the Borrower to guarantee financing from other financial
institutions to certain Subsidiaries of Borrower in connection with certain
development projects located in New York, New York (Battery Park City), Glen
Ellyn, Illinois and Raleigh, North Carolina, which projects were to be
originally financed by Nomura Asset Capital Corporation, (c) the Event of
Default set forth in Section 7.01(O) of the Loan Agreement was modified and
restructured, and (d) the Interim Maturity Date was extended to November 3,
1998;
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amendment to Loan
Agreement and Documents dated October 20, 1998 to which the Bank is also a party
(the "Third Amendment") wherein (a) the Maximum Revolving Loan Commitment was
frozen at $24,953,750.00, (b) the Interim Maturity Date was extended to November
3, 1998, (c) it was agreed that, on the Interim Maturity Date (x) the
outstanding principal balance of the Loan was to be reduced to $10,000,000.00,
and (y) the principal amount of the Loan and Maximum Revolving Loan Commitment
were to be decreased from $25,000,000.00 to an amount not to exceed
$10,000,000.00, (d) the Interim Interest Rate and the Revised Default Rate were
adjusted, and (e) certain additional changes to the Maximum Revolving Loan
Commitment were mandated based upon the Stock Price of the Company from time to
time, all of the foregoing as set forth more fully in and subject to the terms
and conditions of the Third Amendment;
- 1 -
<PAGE>
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amendment to Loan
Agreement and Documents dated November 3, 1998 to which the Bank is also a party
(the "Fourth Amendment") wherein (a) the Interim Maturity Date was extended to a
date certain which was the first to occur of (x) the earlier of November 30,
1998, or (y) the date on which Borrower closed on the Offering (as defined in
the Fourth Amendment), and (b) it was agreed that, on the Interim Maturity Date
(x) the outstanding principal balance of the Loan was to be reduced to zero
($0.00) provided that the Offering had closed, (y) the outstanding principal
balance of the Loan was to be reduced to $10,000,000.00 regardless of whether
the Offering had closed, and (z) the principal amount of the Loan and Maximum
Revolving Loan Commitment were to be decreased from $25,000,000.00 to an amount
not to exceed $10,000,000.00 regardless of whether the Offering had closed, all
of the foregoing as set forth more fully in and subject to the terms and
conditions of the Fourth Amendment;
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amended and Restated Note
dated December 21, 1998 (the "Third Amended and Restated Note") and a certain
Fifth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Fifth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $10,000,000.00
to $15,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Fifth Amendment;
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amended and Restated Note
dated January 15, 1999 (the "Fourth Amended and Restated Note") and a certain
Sixth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Sixth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $15,000,000.00
to $25,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Sixth Amendment;
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Seventh Amendment to Loan
Agreement and Documents dated January 25, 1999 (the "Seventh Amendment") wherein
the Bank consented to the Borrower's execution of FBR Loan Documents (as defined
in the Seventh Amendment) to enable the Borrower to obtain the FBR Loan (as
defined in the Seventh Amendment); and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Eighth Amendment to Loan
Agreement and Documents dated March 24, 1999 (the "Eighth Amendment") wherein
the Bank consented to the Borrower's request to (a) extend the latest date on
which the Bank may issue a Letter of Credit to and for the benefit of
municipalities and other governmental or quasi-governmental units or to and for
the benefit of Battery Park City Authority in connection with projects developed
by Borrower from April 1, 1999 to December 31, 1999, (b) extend the expiry date
of any existing Letters of Credit from April 1, 1999 to a date not later than
December 31, 1999, and (c) permit the expiry date of any Letters of Credit
issued subsequent to the date thereof to be a date not later than December 31,
1999, all as set forth more fully in the Eighth Amendment (the Original Loan
Agreement, as amended by the First Amendment, the Second Amendment, the Third
Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth Amendment, the
Seventh Amendment, the Eighth Amendment and this Amendment is herein referred to
as the "Loan Agreement"); and
WHEREAS, subject to the terms and conditions of this Amendment,
Borrower has requested the Bank to increase the Loan and the Maximum Revolving
Loan Commitment from Twenty Five Million Dollars ($25,000,000.00) to Twenty Nine
Million Dollars ($29,000,000.00), which the Bank is willing to do subject to the
terms and conditions set forth herein.
- 2 -
<PAGE>
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Incorporation of Recitals. The above and foregoing recitals are
incorporated into and made a part of this Amendment. All capitalized terms used
herein, if not otherwise specifically defined, shall have the meanings and
definitions prescribed in the Loan Agreement and the Documents referred to
therein.
2. Increased Loan Commitment; Reduction; Maturity. As of the date of
this Amendment, the Loan Agreement and the Documents are hereby amended to
increase the principal amount of the Loan and Maximum Revolving Loan Commitment
from $25,000,000.00 to an amount not to exceed $29,000,000.00 until the Interim
Maturity Date on which date, without further notice or demand (a) Borrower shall
pay amounts necessary to reduce the outstanding principal balance of the Loan to
$15,000,000.00 or less, excluding the amount of the LC Reserve and (b) the
Maximum Revolving Loan Commitment shall be permanently reduced to an amount not
to exceed $15,000,000.00, excluding the amount of the LC Reserve (the "Mandatory
Permanent Reduction"). In addition to (but not to the exclusion of) the
circumstances comprising the Interim Maturity Date which result in the Mandatory
Permanent Reduction, the Maximum Revolving Loan Commitment shall also be
automatically and permanently reduced to an amount not to exceed $15,000,000.00,
excluding the amount of the LC Reserve, on a date and time certain which date
and time certain shall occur contemporaneous with Borrower's repayment of the
outstanding principal balance of the Loan to an amount that is $15,000,000.00 or
less at any time and for any reason whatsoever (the "Voluntary Permanent
Reduction"). Notwithstanding the foregoing, in the event the Interim Maturity
Date is the same date as the Maturity Date, and in any event, on the Maturity
Date, the outstanding principal balance of the Loan together with any accrued
but unpaid interest thereon and any other costs or amounts owed to the Bank
hereunder, excluding (for purposes of this Paragraph 2 only) the aggregate
amount of LC Reserves outstanding on the Maturity Date, shall be due and paid in
full on such date. On the LC Maturity Date, the aggregate amount of Loan
Advances made as a result of LC Drawings together with any accrued but unpaid
interest thereon and any other costs or amounts remaining owed to the Bank
hereunder shall be due and paid in full on such date. As of the date of this
Amendment, the provisions of this paragraph are intended to supersede the
provisions of Paragraph 3 of the Eighth Amendment.
3. Use of Loan Proceeds. Borrower reaffirms and covenants that the Loan
has been used and that the Loan (including the $4,000,000 increase in the
principal amount of the Loan and Maximum Revolving Commitment granted pursuant
this Amendment) will continue to be used by Borrower solely for working capital
or in connection with the acquisition, leasing or development of Real Property,
including for the purpose of funding expenses relating to Borrower's Real
Property located in New York, New York (Battery Park City); Southfield,
Michigan, and Austin, Texas.
4. FBR Loan. This Amendment is expressly conditioned upon FBR's
execution and delivery to the Bank of a Consent to this Amendment in the form
attached hereto as Exhibit A. Further, the Borrower hereby reaffirms the terms
and conditions of the Acknowledgment and Agreement attached to the Subordination
Agreement. For purposes of the Subordination Agreement, and to induce FBR to
consent to this Amendment, the Bank confirms that any Mandatory Permanent
Reduction or Voluntary Permanent Reduction as defined above shall constitute a
"Permanent Reduction" as contemplated by Section 3 of the Subordination
Agreement.
5. Payment of Fees. Contemporaneous with and as a condition to the
execution of this Amendment, Borrower shall pay the Bank a fee in the amount of
$10,000.00 (the "Fee"), which Fee is deemed fully earned by the Bank at the time
Borrower and the Bank execute this Amendment, as additional consideration for
increasing the amount of the Loan and Maximum Revolving Loan Commitment as set
forth in this Amendment. Borrower shall also pay the reasonable legal fees of
Bank counsel in connection with the preparation of this Amendment and matters
related thereto. In addition to the Fee, Borrower shall continue to be obligated
to pay the Bank the Unused
- 3 -
<PAGE>
Commitment Fee in the amount of one-quarter of one percent (1/4%) per annum of
the average unused Maximum Revolving Loan Commitment, excluding the LC Reserve,
and as otherwise set forth in the Loan Agreement, as amended by this Amendment.
6. Reaffirmation. To the extent any term(s) or condition(s) in the Loan
Agreement or any of the Documents shall contradict or be in conflict with the
amended terms of the Loan as set forth herein, such terms and conditions are
hereby deemed modified and amended accordingly, upon the effective date hereof,
to reflect the terms of the Loan as so amended herein. All terms of the Loan
Agreement and the Documents, as amended hereby, shall be and remain in full
force and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Bank. As of the date of this Amendment, Borrower
herein restates, ratifies and reaffirms each and every term and condition set
forth in the Loan Agreement and the Documents as amended herein. There are no
other changes to the Documents, including without limitation the Loan Agreement,
except for the changes specifically set forth herein. Notwithstanding the
foregoing, Borrower acknowledges and agrees that in addition to amending certain
terms and conditions of the Loan, this Amendment restates certain terms and
conditions previously set forth in the Loan Agreement. Any terms or conditions
set forth in the Loan Agreement that are not specifically amended or modified by
this Amendment, even if not specifically restated herein, shall remain binding
on the parties hereto.
7. No Waiver. No failure or delay on the part of the Bank in
exercising any right, power or remedy hereunder or under any other Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder or under any other
Document. The remedies herein provided and under any other Document are
cumulative and not exclusive of any remedies provided by law.
8. Certification. To further induce the Bank to enter into this
Amendment, Borrower represents and warrants to the Bank as follows: (a) Borrower
is empowered to perform all acts and things undertaken and done pursuant to this
Amendment and has taken all corporate or other action necessary to authorize the
execution, delivery and performance of the of this Amendment; (b) the officers
of Borrower executing this Amendment have been duly elected or appointed and
have been fully authorized to execute the same at the time executed; (c) this
Amendment, when executed and delivered, will be the legal, valid and binding
obligation of Borrower, enforceable against it in accordance with its respective
terms; and (d) Borrower is delivering to the Bank contemporaneously herewith, a
certificate of Borrower's Secretary certifying as to the resolutions of the
Executive Committee of Borrower's Board of Directors or the resolutions of
Borrower's Board of Directors approving this Amendment and the incumbency and
signatures of the officers of Borrower signing this Amendment.
9. Absence Of Claim. To further induce the Bank to enter into this
Amendment, Borrower hereby acknowledges and agrees that, as of the date hereof,
there exists no right of offset, defense, counterclaim or objection in favor of
Borrower as against the Bank with respect to the Obligations to the Bank.
10. Illinois Law To Govern. This Amendment and each transaction
contemplated hereunder shall be deemed to be made under and shall be construed
and interpreted in accordance with the laws of the State of Illinois.
11. Binding Effect. The terms, provisions and conditions of this
Amendment shall be binding upon and inure to the benefit of each respective
party and their respective legal representatives, successors and assigns.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Darryl W. Copeland, Jr.
------------------------------------
Print Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
ATTEST:
By: /s/ Robert J. Rudnik
--------------------------
Print Name: Robert J. Rudnik
Title: Secretary
BANK:
LaSALLE NATIONAL BANK
By: /s/ David E. Heise
------------------------------------
Print Name: David E. Heise
Title: Commercial Banking Officer
- 5 -
<PAGE>
EXHIBIT A
CONSENT
<PAGE>
CONSENT
The undersigned, FBR ASSET INVESTMENT CORPORATION, a Virginia
corporation, hereby acknowledges and consents to execution by Brookdale Living
Communities, Inc., a Delaware corporation, of (a) the Ninth Amendment to Loan
Agreement and Documents dated April 14, 1999 by and between Brookdale Living
Communities, Inc. and LaSalle National Bank, a copy of which is attached hereto
as Exhibit A, (the "Ninth Amendment"), and (b) the Fifth Amended and Restated
Note, dated April 14, 1999, made and delivered by Brookdale Living Communities,
Inc. to LaSalle National Bank, a copy of which is attached hereto as Exhibit B,
(the "Fifth Amended and Restated Note"), and acknowledges that the Loan, as
described in the Ninth Amendment and Fifth Amended and Restated Note, is part of
the Senior Obligations defined and described in the Subordination Agreement
entered into as of January 25, 1999 between FBR Asset Investment Corporation and
LaSalle National Bank (the "Subordination Agreement"), and that the Subordinated
Debt is and continues to be subordinate to the Senior Obligations as set forth
in the Subordination Agreement.
Dated: April 14, 1999.
FBR ASSET INVESTMENT CORPORATION
By: _________________________________
Name: ______________________________
Title: _____________________________
TENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS TENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of April
26, 1999 (this "Amendment"), is entered into by and between BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (the "Borrower"), and LaSALLE NATIONAL
BANK, a national banking association (the "Bank").
WITNESSETH
WHEREAS, Borrower has previously executed and delivered to the Bank a
certain Note dated April 27, 1998 in the original principal amount of up to
Fifteen Million Dollars ($15,000,000.00) (the "Original Note") evidencing a
certain loan (the "Loan") set forth more fully in and governed by a certain Loan
Agreement of that same date to which the Bank is also a party (the "Original
Loan Agreement"); and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Amended and Restated Note dated
July 16, 1998 increasing the principal amount of the Loan by $10,000,000.00, on
an interim basis only, from $15,000,000.00 to $25,000,000.00 (the "Amended and
Restated Note") and a certain First Amendment to Loan Agreement and Documents of
that same date to which the Bank is also a party (the "First Amendment") that
(a) increased the principal amount of the Loan on an interim basis as aforesaid
and (b) permitted a portion of the Loan to be reserved for the issuance of
standby Letters of Credit by the Bank to and for the benefit of municipalities
and other governmental units in connection with projects developed by Borrower
from time to time as set forth more fully therein; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Second Amendment to Loan
Agreement and Documents dated October 14, 1998 to which the Bank is also a party
(the "Second Amendment") wherein (a) the Bank consented to the Borrower's
proposed issuance of a convertible subordinated and unsecured note to OZ Master
Fund, Ltd. in the principal amount of Ten Million Dollars ($10,000,000.00), (b)
the Bank permitted the Borrower to guarantee financing from other financial
institutions to certain Subsidiaries of Borrower in connection with certain
development projects located in New York, New York (Battery Park City), Glen
Ellyn, Illinois and Raleigh, North Carolina, which projects were to be
originally financed by Nomura Asset Capital Corporation, (c) the Event of
Default set forth in Section 7.01(O) of the Loan Agreement was modified and
restructured, and (d) the Interim Maturity Date was extended to November 3,
1998; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amendment to Loan
Agreement and Documents dated October 20, 1998 to which the Bank is also a party
(the "Third Amendment") wherein (a) the Maximum Revolving Loan Commitment was
frozen at $24,953,750.00, (b) the Interim Maturity Date was extended to November
3, 1998, (c) it was agreed that, on the Interim Maturity Date (x) the
outstanding principal balance of the Loan was to be reduced to $10,000,000.00,
and (y) the principal amount of the Loan and Maximum Revolving Loan Commitment
were to be decreased from $25,000,000.00 to an amount not to exceed
$10,000,000.00, (d) the Interim Interest Rate and the Revised Default Rate were
adjusted, and (e) certain additional changes to the Maximum Revolving Loan
Commitment were mandated based upon the Stock Price of the Company from time to
time, all of the foregoing as set forth more fully in and subject to the terms
and conditions of the Third Amendment; and
- 1 -
<PAGE>
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amendment to Loan
Agreement and Documents dated November 3, 1998 to which the Bank is also a party
(the "Fourth Amendment") wherein (a) the Interim Maturity Date was extended to a
date certain which was the first to occur of (x) the earlier of November 30,
1998, or (y) the date on which Borrower closed on the Offering (as defined in
the Fourth Amendment), and (b) it was agreed that, on the Interim Maturity Date
(x) the outstanding principal balance of the Loan was to be reduced to zero
($0.00) provided that the Offering had closed, (y) the outstanding principal
balance of the Loan was to be reduced to $10,000,000.00 regardless of whether
the Offering had closed, and (z) the principal amount of the Loan and Maximum
Revolving Loan Commitment were to be decreased from $25,000,000.00 to an amount
not to exceed $10,000,000.00 regardless of whether the Offering had closed, all
of the foregoing as set forth more fully in and subject to the terms and
conditions of the Fourth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amended and Restated Note
dated December 21, 1998 (the "Third Amended and Restated Note") and a certain
Fifth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Fifth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $10,000,000.00
to $15,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Fifth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amended and Restated Note
dated January 15, 1999 (the "Fourth Amended and Restated Note") and a certain
Sixth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Sixth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $15,000,000.00
to $25,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Sixth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Seventh Amendment to Loan
Agreement and Documents dated January 25, 1999 (the "Seventh Amendment") wherein
the Bank consented to the Borrower's execution of FBR Loan Documents (as defined
in the Seventh Amendment) to enable the Borrower to obtain the FBR Loan (as
defined in the Seventh Amendment); and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Eighth Amendment to Loan
Agreement and Documents dated March 24, 1999 (the "Eighth Amendment") wherein
the Bank consented to the Borrower's request to (a) extend the latest date on
which the Bank may issue a Letter of Credit to and for the benefit of
municipalities and other governmental or quasi-governmental units or to and for
the benefit of Battery Park City Authority in connection with projects developed
by Borrower from April 1, 1999 to December 31, 1999, (b) extend the expiry date
of any existing Letters of Credit from April 1, 1999 to a date not later than
December 31, 1999, and (c) permit the expiry date of any Letters of Credit
issued subsequent to the date thereof to be a date not later than December 31,
1999, all as set forth more fully in the Eighth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Ninth Amendment to Loan
Agreement and Documents dated April 14, 1999 (the "Ninth Amendment") wherein the
Bank consented to the Borrower's request to increase the Loan and the Maximum
Revolving Loan Commitment from Twenty Five Million Dollars ($25,000,000.00) to
Twenty Nine Million Dollars ($29,000,000.00), all as set forth more fully in the
Ninth Amendment (the Original Loan Agreement, as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment, the
Ninth Amendment and this Amendment is herein referred to as the "Loan
Agreement"), and further evidenced by Borrower's execution
- 2 -
<PAGE>
and delivery to the Bank of a certain Fifth Amended and Restated Note dated
April 14, 1999 (the Fifth Amended and Restated Note"); and
WHEREAS, subject to the terms and conditions of this Amendment,
Borrower has requested the Bank to extend the Maturity Date from April 26, 1999
to May 21, 1999, which the Bank is willing to do subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Incorporation of Recitals. The above and foregoing recitals are
incorporated into and made a part of this Amendment. All capitalized terms used
herein, if not otherwise specifically defined, shall have the meanings and
definitions prescribed in the Loan Agreement and the Documents referred to
therein.
2. Interim Maturity Date. The term "Interim Maturity Date" is hereby
amended and restated to mean a date certain which is the first to occur of (a)
the Maturity Date (as defined herein), (b) a date certain which is the date on
which Borrower closes on the refinancing or restructuring of three letters of
credit currently extended by LaSalle National Bank and BankOne in the
approximate amount of $65,000,000.00 in connection with bonds issued with
respect to Real Property located in Lisle, Illinois (The Devonshire) and Des
Plaines, Illinois (The Heritage), but only if as a result thereof, Borrower or
an Affiliate or a Subsidiary receives the return of the cash collateral
currently pledged as security for said letters of credit, (c) a date certain
which is the date on which Borrower closes on the restructuring of two recent
lease transactions, but only if as a result thereof, Borrower or an Affiliate or
a Subsidiary receives the return of the cash invested in said transactions, or
(d) a date certain which is the date on which Borrower closes on any offering of
Borrower's Stock. On the Interim Maturity Date, without further notice or demand
(a) Borrower shall pay amounts necessary to reduce the outstanding principal
balance of the Loan to $15,000,000.00 or less, excluding the amount of the LC
Reserve and (b) the Maximum Revolving Loan Commitment shall be permanently
reduced to an amount not to exceed $15,000,000.00, excluding the amount of the
LC Reserve (the "Mandatory Permanent Reduction"). In addition to (but not to the
exclusion of) the circumstances comprising the Interim Maturity Date which
result in the Mandatory Permanent Reduction, the Maximum Revolving Loan
Commitment shall also be automatically and permanently reduced to an amount not
to exceed $15,000,000.00, excluding the amount of the LC Reserve, on a date and
time certain which date and time certain shall occur contemporaneous with
Borrower's repayment of the outstanding principal balance of the Loan to an
amount that is $15,000,000.00 or less at any time and for any reason whatsoever
(the "Voluntary Permanent Reduction"). Notwithstanding the foregoing, in the
event the Interim Maturity Date is the same date as the Maturity Date, and in
any event, on the Maturity Date, the outstanding principal balance of the Loan
together with any accrued but unpaid interest thereon and any other costs or
amounts owed to the Bank hereunder, excluding (for purposes of Paragraphs 2 and
3 hereof only) the aggregate amount of LC Reserves outstanding on the Maturity
Date, shall be due and paid in full on such date. On the LC Maturity Date, the
aggregate amount of Loan Advances made as a result of LC Drawings together with
any accrued but unpaid interest thereon and any other costs or amounts remaining
owed to the Bank hereunder shall be due and paid in full on such date. As of the
date of this Amendment, the provisions of this paragraph are intended to
supersede the provisions of Paragraph 2 of the Ninth Amendment.
- 3 -
<PAGE>
3. Maturity Date. The term "Maturity Date" is hereby amended and
restated to mean the first to occur of (a) May 21, 1999, or (b) the date on
which Borrower closes on the issuance and sale of $100,000,000 convertible
subordinated debt pursuant to the Indenture, Supplemental Indenture and related
instruments, drafts of which have been tendered to the Bank. On the Maturity
Date, the outstanding principal balance of the Loan together with any accrued
but unpaid interest thereon and any other costs or amounts owed to the Bank
hereunder, excluding (for purposes of Paragraphs 2 and 3 hereof only) the
aggregate amount of LC Reserves outstanding on the Maturity Date, shall be due
and paid in full.
4. FBR Loan. This Amendment is expressly conditioned upon FBR's
execution and delivery to the Bank of a Consent to this Amendment in the form
attached hereto as Exhibit A. Further, the Borrower hereby reaffirms the terms
and conditions of the Acknowledgment and Agreement attached to the Subordination
Agreement. For purposes of the Subordination Agreement, and to induce FBR to
consent to this Amendment, the Bank confirms that any Mandatory Permanent
Reduction or Voluntary Permanent Reduction as defined above shall constitute a
"Permanent Reduction" as contemplated by Section 3 of the Subordination
Agreement.
5. Payment of Fees. Borrower shall pay the reasonable legal fees of
Bank counsel in connection with the preparation of this Amendment and matters
related thereto.
6. Reaffirmation. To the extent any term(s) or condition(s) in the Loan
Agreement or any of the Documents shall contradict or be in conflict with the
amended terms of the Loan as set forth herein, such terms and conditions are
hereby deemed modified and amended accordingly, upon the effective date hereof,
to reflect the terms of the Loan as so amended herein. All terms of the Loan
Agreement and the Documents, as amended hereby, shall be and remain in full
force and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Bank. As of the date of this Amendment, Borrower
herein restates, ratifies and reaffirms each and every term and condition set
forth in the Loan Agreement and the Documents as amended herein. There are no
other changes to the Documents, including without limitation the Loan Agreement,
except for the changes specifically set forth herein. Notwithstanding the
foregoing, Borrower acknowledges and agrees that in addition to amending certain
terms and conditions of the Loan, this Amendment restates certain terms and
conditions previously set forth in the Loan Agreement. Any terms or conditions
set forth in the Loan Agreement that are not specifically amended or modified by
this Amendment, even if not specifically restated herein, shall remain binding
on the parties hereto.
7. No Waiver. No failure or delay on the part of the Bank in exercising
any right, power or remedy hereunder or under any other Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or under any other Document. The
remedies herein provided and under any other Document are cumulative and not
exclusive of any remedies provided by law.
8. Certification. To further induce the Bank to enter into this
Amendment, Borrower represents and warrants to the Bank as follows: (a) Borrower
is empowered to perform all acts and things undertaken and done pursuant to this
Amendment and has taken all corporate or other action necessary to authorize the
execution, delivery and performance of the of this Amendment; (b) the officers
of Borrower executing this Amendment have been duly elected or appointed and
have been fully authorized to execute the same at the time executed; (c) this
Amendment, when executed and delivered, will be the legal, valid and binding
obligation of Borrower, enforceable against it in accordance with its respective
terms; and (d) Borrower is delivering to the Bank contemporaneously herewith, a
certificate of Borrower's Secretary certifying as to the resolutions of the
Executive Committee of Borrower's Board of Directors or the resolutions of
Borrower's Board of Directors approving this Amendment and the incumbency and
signatures of the officers of Borrower signing this Amendment.
- 4 -
<PAGE>
9. Absence Of Claim. To further induce the Bank to enter into this
Amendment, Borrower hereby acknowledges and agrees that, as of the date hereof,
there exists no right of offset, defense, counterclaim or objection in favor of
Borrower as against the Bank with respect to the Obligations to the Bank.
10. Illinois Law To Govern. This Amendment and each transaction
contemplated hereunder shall be deemed to be made under and shall be construed
and interpreted in accordance with the laws of the State of Illinois.
11. Binding Effect. The terms, provisions and conditions of this
Amendment shall be binding upon and inure to the benefit of each respective
party and their respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Darryl W. Copeland, Jr.
-----------------------------------
Print Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
ATTEST:
By: /s/ Robert J. Rudnik
--------------------
Print Name: Robert J. Rudnik
Title: Secretary
BANK:
LaSALLE NATIONAL BANK
By: _________________________________
Print Name: __________________________
Title: ______________________________
- 5 -
<PAGE>
EXHIBIT A
CONSENT
- 6 -
<PAGE>
CONSENT
The undersigned, FBR ASSET INVESTMENT CORPORATION, a Virginia
corporation, hereby acknowledges and consents to the execution by Brookdale
Living Communities, Inc., a Delaware corporation, of the Tenth Amendment to Loan
Agreement and Documents dated April 26, 1999 by and between Brookdale Living
Communities, Inc. and LaSalle National Bank, a copy of which is attached hereto
as Exhibit A, (the "Tenth Amendment"), and acknowledges that the Loan, as
described in the Tenth Amendment, is part of the Senior Obligations defined and
described in the Subordination Agreement entered into as of January 25, 1999
between FBR Asset Investment Corporation and LaSalle National Bank (the
"Subordination Agreement"), and that the Subordinated Debt is and continues to
be subordinate to the Senior Obligations as set forth in the Subordination
Agreement.
Dated: April 26, 1999.
FBR ASSET INVESTMENT CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
- 7 -
ELEVENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS ELEVENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of
May 21, 1999 (this "Amendment"), is entered into by and between BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (the "Borrower"), and LaSALLE NATIONAL
BANK, a national banking association (the "Bank").
WITNESSETH
WHEREAS, Borrower has previously executed and delivered to the Bank a
certain Note dated April 27, 1998 in the original principal amount of up to
Fifteen Million Dollars ($15,000,000.00) (the "Original Note") evidencing a
certain loan (the "Loan") set forth more fully in and governed by a certain Loan
Agreement of that same date to which the Bank is also a party (the "Original
Loan Agreement"); and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Amended and Restated Note dated
July 16, 1998 increasing the principal amount of the Loan by $10,000,000.00, on
an interim basis only, from $15,000,000.00 to $25,000,000.00 (the "Amended and
Restated Note") and a certain First Amendment to Loan Agreement and Documents of
that same date to which the Bank is also a party (the "First Amendment") that
(a) increased the principal amount of the Loan on an interim basis as aforesaid
and (b) permitted a portion of the Loan to be reserved for the issuance of
standby Letters of Credit by the Bank to and for the benefit of municipalities
and other governmental units in connection with projects developed by Borrower
from time to time as set forth more fully therein; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Second Amendment to Loan
Agreement and Documents dated October 14, 1998 to which the Bank is also a party
(the "Second Amendment") wherein (a) the Bank consented to the Borrower's
proposed issuance of a convertible subordinated and unsecured note to OZ Master
Fund, Ltd. in the principal amount of Ten Million Dollars ($10,000,000.00), (b)
the Bank permitted the Borrower to guarantee financing from other financial
institutions to certain Subsidiaries of Borrower in connection with certain
development projects located in New York, New York (Battery Park City), Glen
Ellyn, Illinois and Raleigh, North Carolina, which projects were to be
originally financed by Nomura Asset Capital Corporation, (c) the Event of
Default set forth in Section 7.01(O) of the Loan Agreement was modified and
restructured, and (d) the Interim Maturity Date was extended to November 3,
1998; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amendment to Loan
Agreement and Documents dated October 20, 1998 to which the Bank is also a party
(the "Third Amendment") wherein (a) the Maximum Revolving Loan Commitment was
frozen at $24,953,750.00, (b) the Interim Maturity Date was extended to November
3, 1998, (c) it was agreed that, on the Interim Maturity Date (x) the
outstanding principal balance of the Loan was to be reduced to $10,000,000.00,
and (y) the principal amount of the Loan and Maximum Revolving Loan Commitment
were to be decreased from $25,000,000.00 to an amount not to exceed
$10,000,000.00, (d) the Interim Interest Rate and the Revised Default Rate were
adjusted, and (e) certain additional changes to the Maximum Revolving Loan
Commitment were mandated based upon the Stock Price of the Company from time to
time, all of the foregoing as set forth more fully in and subject to the terms
and conditions of the Third Amendment; and
- 1 -
<PAGE>
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amendment to Loan
Agreement and Documents dated November 3, 1998 to which the Bank is also a party
(the "Fourth Amendment") wherein (a) the Interim Maturity Date was extended to a
date certain which was the first to occur of (x) the earlier of November 30,
1998, or (y) the date on which Borrower closed on the Offering (as defined in
the Fourth Amendment), and (b) it was agreed that, on the Interim Maturity Date
(x) the outstanding principal balance of the Loan was to be reduced to zero
($0.00) provided that the Offering had closed, (y) the outstanding principal
balance of the Loan was to be reduced to $10,000,000.00 regardless of whether
the Offering had closed, and (z) the principal amount of the Loan and Maximum
Revolving Loan Commitment were to be decreased from $25,000,000.00 to an amount
not to exceed $10,000,000.00 regardless of whether the Offering had closed, all
of the foregoing as set forth more fully in and subject to the terms and
conditions of the Fourth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Third Amended and Restated Note
dated December 21, 1998 (the "Third Amended and Restated Note") and a certain
Fifth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Fifth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $10,000,000.00
to $15,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Fifth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Fourth Amended and Restated Note
dated January 15, 1999 (the "Fourth Amended and Restated Note") and a certain
Sixth Amendment to Loan Agreement and Documents of that same date to which the
Bank is also a party (the "Sixth Amendment") wherein the principal amount of the
Loan and the Maximum Revolving Loan Commitment was increased from $15,000,000.00
to $25,000,000.00, as set forth more fully in and subject to the terms and
conditions of the Sixth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Seventh Amendment to Loan
Agreement and Documents dated January 25, 1999 (the "Seventh Amendment") wherein
the Bank consented to the Borrower's execution of FBR Loan Documents (as defined
in the Seventh Amendment) to enable the Borrower to obtain the FBR Loan (as
defined in the Seventh Amendment); and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Eighth Amendment to Loan
Agreement and Documents dated March 24, 1999 (the "Eighth Amendment") wherein
the Bank consented to the Borrower's request to (a) extend the latest date on
which the Bank may issue a Letter of Credit to and for the benefit of
municipalities and other governmental or quasi-governmental units or to and for
the benefit of Battery Park City Authority in connection with projects developed
by Borrower from April 1, 1999 to December 31, 1999, (b) extend the expiry date
of any existing Letters of Credit from April 1, 1999 to a date not later than
December 31, 1999, and (c) permit the expiry date of any Letters of Credit
issued subsequent to the date thereof to be a date not later than December 31,
1999, all as set forth more fully in the Eighth Amendment; and
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Ninth Amendment to Loan
Agreement and Documents dated April 14, 1999 (the "Ninth Amendment") wherein the
Bank consented to the Borrower's request to increase the Loan and the Maximum
Revolving Loan Commitment from Twenty Five Million Dollars ($25,000,000.00) to
Twenty Nine Million Dollars ($29,000,000.00), as further evidenced by Borrower's
execution and delivery to the Bank of a certain Fifth Amended and Restated Note
dated April 14, 1999 (the "Fifth Amended and Restated Note"); and
- 2 -
<PAGE>
WHEREAS, the Loan was subsequently modified and amended by Borrower's
execution and delivery to the Bank of a certain Tenth Amendment to Loan
Agreement and Documents dated April 26, 1999 (the "Tenth Amendment") wherein the
Bank consented to the Borrower's request to extend the Maturity Date from April
26, 1999 to May 21, 1999, all as set forth more fully in the Tenth Amendment
(the Original Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the
Sixth Amendment, the Seventh Amendment, the Eighth Amendment, the Ninth
Amendment, the Tenth Amendment and this Amendment is herein referred to as the
"Loan Agreement"); and
WHEREAS, subject to the terms and conditions of this Amendment,
Borrower has requested the Bank to extend the Maturity Date from May 21, 1999 to
July 30, 1999, which the Bank is willing to do subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Incorporation of Recitals. The above and foregoing recitals are
incorporated into and made a part of this Amendment. All capitalized terms used
herein, if not otherwise specifically defined, shall have the meanings and
definitions prescribed in the Loan Agreement and the Documents referred to
therein.
2. Maturity Date. The term "Maturity Date" is hereby amended and
restated to mean July 30, 1999. On the Maturity Date, the outstanding principal
balance of the Loan together with any accrued but unpaid interest thereon and
any other costs or amounts owed to the Bank hereunder, excluding the aggregate
amount of any LC Reserves outstanding on the Maturity Date which shall be due
and payable on the LC Maturity Date pursuant to the Loan Agreement, shall be due
and paid in full.
3. Interim Maturity Date Stricken. Effective as the of the date of this
Amendment, the Interim Maturity Date is hereby stricken from the Loan Agreement.
4. FBR Loan Repaid. Borrower represents and warrants to the Bank that
on May 14, 1999 the FBR Loan was paid in full and Borrower covenants not to
borrow any amounts from FBR without the consent of the Bank.
5. Designated Senior Debt. Borrower acknowledges and represents and
warrants to the Bank that (a) the Loan and any disbursements of the Loan,
including any amounts of the Loan constituting the LC Reserve, and Borrower's
obligation to repay the amounts of principal and interest due on the Loan (i)
are expressly superior to the Securities (as defined and described in that
certain Indenture dated as of May 14, 1999 between Borrower and State Street
Bank and Trust Company, as Trustee) [the "Indenture"] and to Borrower's
obligation to repay the amounts of principal and interest on the Securities (as
defined and described in the Indenture), and (ii) constitute Designated Senior
Debt for purposes of and as defined in the Indenture, and (b) the Bank shall
have and be entitled to all rights and benefits of the holder of Designated
Senior Debt under and pursuant to the Indenture.
6. Indenture. Borrower further agrees and covenants to the following in
connection with the Indenture:
(a) any Event of Default under the Indenture or any default
under the Transaction Documents (as defined in the Supplemental
Indenture dated as of May 14, 1999 between Borrower and State Street
Bank and Trust Company, as Trustee) shall automatically and
simultaneously constitute an Event of Default under the Loan Agreement
and Loan Documents;
- 3 -
<PAGE>
(b) Borrower shall not amend or be a party to any amendment of
any of the Transaction Documents without the prior written consent of
the Bank;
(c) Borrower shall not directly or indirectly redeem or cause
the redemption of the Securities, in whole or in part, without the
prior written consent of the Bank;
(d) Borrower shall notify the Bank of any Payment Blockage
Notice (as defined in Section 1303 of the Indenture) that Borrower has
received or of which it is aware, within one (1) day after receipt of
the same by Borrower or within one (1) day after Borrower becomes aware
of the same; and
(e) Borrower shall not make any payment of principal, interest
or premium (whether by redemption, purchase, retirement, defeasance or
otherwise) to the Trustee or any Holder (as defined in the Indenture)
with respect to the Securities upon the occurrence and during the
pendency of an Event of Default under the Loan Agreement or Loan
Documents, except for certain payments under the circumstances and to
the extent expressly permitted under the Indenture.
7. Payment of Fees. Borrower shall pay the reasonable legal fees of
Bank counsel in connection with the preparation of this Amendment and matters
related thereto.
8. Reaffirmation. To the extent any term(s) or condition(s) in the Loan
Agreement or any of the Documents shall contradict or be in conflict with the
amended terms of the Loan as set forth herein, such terms and conditions are
hereby deemed modified and amended accordingly, upon the effective date hereof,
to reflect the terms of the Loan as so amended herein. All terms of the Loan
Agreement and the Documents, as amended hereby, shall be and remain in full
force and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Bank. As of the date of this Amendment, Borrower
herein restates, ratifies and reaffirms each and every term and condition set
forth in the Loan Agreement and the Documents as amended herein. There are no
other changes to the Documents, including without limitation the Loan Agreement,
except for the changes specifically set forth herein. Notwithstanding the
foregoing, Borrower acknowledges and agrees that in addition to amending certain
terms and conditions of the Loan, this Amendment restates certain terms and
conditions previously set forth in the Loan Agreement. Any terms or conditions
set forth in the Loan Agreement that are not specifically amended or modified by
this Amendment, even if not specifically restated herein, shall remain binding
on the parties hereto.
9. No Waiver. No failure or delay on the part of the Bank in exercising
any right, power or remedy hereunder or under any other Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or under any other Document. The
remedies herein provided and under any other Document are cumulative and not
exclusive of any remedies provided by law.
10. Certification. To further induce the Bank to enter into this
Amendment, Borrower represents and warrants to the Bank as follows: (a) Borrower
is empowered to perform all acts and things undertaken and done pursuant to this
Amendment and has taken all corporate or other action necessary to authorize the
execution, delivery and performance of the of this Amendment; (b) the officers
of Borrower executing this Amendment have been duly elected or appointed and
have been fully authorized to execute the same at the time executed; (c) this
Amendment, when executed and delivered, will be the legal, valid and binding
obligation of Borrower, enforceable against it in accordance with its respective
terms; and (d) Borrower is delivering to the Bank contemporaneously herewith, a
certificate of Borrower's Secretary certifying as to the resolutions of the
Executive Committee of Borrower's Board of Directors or the resolutions of
Borrower's Board of Directors approving this Amendment and the incumbency and
signatures of the officers of Borrower signing this Amendment.
- 4 -
<PAGE>
11. Absence Of Claim. To further induce the Bank to enter into this
Amendment, Borrower hereby acknowledges and agrees that, as of the date hereof,
there exists no right of offset, defense, counterclaim or objection in favor of
Borrower as against the Bank with respect to the Obligations to the Bank.
12. Illinois Law To Govern. This Amendment and each transaction
contemplated hereunder shall be deemed to be made under and shall be construed
and interpreted in accordance with the laws of the State of Illinois.
13. Binding Effect. The terms, provisions and conditions of this
Amendment shall be binding upon and inure to the benefit of each respective
party and their respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ R. Stanley Young
---------------------------------------
Print Name: R. Stanley Young
Title: Senior Vice President Finance
and Treasurer
ATTEST:
By: /s/ Sheryl A. Wolf
--------------------
Print Name: Sheryl A. Wolf
Title: Vice President & Controller
BANK:
LaSALLE NATIONAL BANK
By: /s/ David E. Heise
---------------------------------------
Print Name: David E. Heise
Title: Commercial Banking Officer
- 5
1998 BROOKDALE LIVING COMMUNITIES, INC.
STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. PURPOSE OF PLAN............................................................1
2. DEFINITIONS................................................................1
3. STOCK SUBJECT TO PLAN......................................................4
3.1 Stock Subject to Plan........................................4
3.2 Unexercised Options..........................................4
3.3 Changes in Company Capitalization............................4
4. GRANTING OF OPTIONS........................................................4
4.1 Eligibility..................................................4
4.2 Incentive Stock Options......................................4
4.3 Granting of Options..........................................5
4.4 Administration Of the Plan...................................5
5. TERMS OF OPTIONS...........................................................6
5.1 Option Agreement.............................................6
5.2 Vesting of Options...........................................7
5.3 Option Exercise Price........................................7
5.4 Exercise Periods.............................................7
5.5 Requirement of Continued Employment..........................8
5.6 Adjustments in Outstanding Options...........................8
5.7 Merger, Consolidation, Acquisition,
Liquidation or Dissolution.................................9
5.8 No Right to Continued Employment.............................9
6. EXERCISE OF OPTIONS........................................................9
6.1 Person Eligible to Exercise..................................9
6.2 Partial Exercise.............................................9
6.3 Manner of Exercise..........................................10
6.4 Conditions to Issuance of Stock Certificates................11
6.5 Rights as Stockholders......................................11
6.6 Transfer Restrictions.......................................11
7. ADDITIONAL PROVISIONS.....................................................12
7.1 Approval of Plan by Stockholders............................12
7.2 Nontransferability..........................................12
7.3 Death or Disability of Optionee.............................12
7.4 Securities Act..............................................12
7.5 Withholding of Tax..........................................12
7.6 Termination and Amendment of Plan...........................13
i
<PAGE>
Section Page
- ------- ----
7.7 Duties of the Company.......................................13
8. GENERAL PROVISIONS........................................................13
ii
<PAGE>
SECTION 1. PURPOSE OF PLAN
The purpose of the 1998 Brookdale Living Communities, Inc. Stock
Incentive Plan (the "Plan") is to provide a means by which Brookdale Living
Communities, Inc. (the "Company") may attract and retain directors, executive
officers and other key employees with outstanding qualifications and consultants
and advisers who provide substantial and important services to the Company, by
affording those individuals with incentives to exert maximum efforts for the
success of the Company through opportunities to participate in the growth,
development and financial success of the Company.
SECTION 2. DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they
shall have the following respective meanings:
2.1 "Board of Directors" means the Board of Directors of the
Company.
2.2 "Change in Control" shall be deemed to have occurred if
(a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
the Common Stock, Michael W. Reschke or The Prime Group, Inc. or any
of their respective affiliates, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding securities
which vote generally in the election of directors (referred to herein
as "Voting Securities");
(b) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors
and any new directors whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board of
Directors;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) more than 50% of the total
voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or
1
<PAGE>
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means as specified in Section 4.4.
2.5 "Common Stock" means the Common Stock of the Company, par
value $0.01 per share.
2.6 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation. In addition, "Company" shall mean any corporation assuming, or
issuing new employee stock options in substitution for, Incentive Stock Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.
2.7 "Date of Grant" means the date as of which an Option has been
granted pursuant to the Plan.
2.8 "Disability" means, with respect to an individual, a physical
or mental condition resulting from any medically determinable physical or mental
impairment that renders such individual incapable of engaging in any substantial
gainful employment and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less than four
consecutive months.
2.9 "Eligible Individual" means (i) any director, officer or key
employee of the Company or a Subsidiary, (ii) any officer or key employee of a
partnership in which the Company owns directly or indirectly at least 50% of the
capital or profits interest or (iii) any consultant or adviser whom the
Committee determines provides substantial and important service to the Company.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.11 "Fair Market Value" means the per share value of the Common
Stock as of a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading on
the New York Stock Exchange (or if not, on another national securities
exchange upon which the Common Stock is listed), the Fair Market Value
of the Common Stock is the closing quotation for such stock based on
composite transactions for the New York Stock Exchange (or if not
listed on it, such other national securities exchange) on the last
trading day for such stock prior to such given date.
(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System (NASDAQ System) or
any similar system of automated dissemination of quotations
2
<PAGE>
of prices in common use, the Fair Market Value of the Common Stock is
the average of the last sales price (if the stock is then listed as a
national market issue under the NASDAQ System) or the mean between the
closing representative bid and asked prices (in all other cases) for
the stock on the last 5 trading days for such stock preceding such
given date as reported by the NASDAQ System (or such similar quotation
system).
(c) If neither clause (a) nor clause (b) of this Section
2.12 is applicable, the Fair Market Value of the Common Stock is the
fair market value per share as of such valuation date, as determined
by the Board of Directors in good faith and in accordance with uniform
principles consistently applied.
2.12 "Incentive Stock Option" means an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Company or the Committee.
2.13 "Non-Qualified Option" means an Option which is not an
Incentive Stock Option and which is designated as a Non-Qualified Option by the
Company or the Committee.
2.14 "Option" means any Incentive Stock Option or Non-Qualified
Option granted under this Plan.
2.15 "Optionee" means an Eligible Individual to whom an Option is
granted under this Plan.
2.16 "Plan" means the 1998 Brookdale Living Communities, Inc. Stock
Incentive Plan, as it may be amended from time to time.
2.17 "Secretary" means the Secretary of the Company.
2.18 "Securities Act" means the Securities Act of 1933, as amended.
2.19 "Severance Date" means (i) as to an Eligible Individual who is
an employee of the Company, a Subsidiary or a Company-owned partnership, the
date the individual ceases to be so employed, (ii) as to an Eligible Individual
who is a director of the Company or a Subsidiary but not an employee described
in (i) next above, the date the individual ceases to be such a director, or
(iii) as to an Eligible Individual who is not included in (i) or (ii) above, the
date specified in the applicable Stock Option Agreement.
2.20 "Stock Option Agreement" means the agreement reflecting the
terms and conditions of an Option pursuant to Section 5.1.
2.21 "Subsidiary" means a subsidiary of the Company within the
meaning of Section 424(f) of the Code.
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SECTION 3. STOCK SUBJECT TO PLAN
3.1 Stock Subject to Plan
The stock subject to an Option shall be shares of the
Company's Common Stock. The aggregate number of such shares which may be issued
upon exercise of Options granted under Section 4 of the Plan shall not exceed
250,000 unless and until a larger number shall have been approved by the
Company's stockholders pursuant to Section 7.6.
3.2 Unexercised Options
If any Option expires or is cancelled without having been
fully exercised, a new Option or Options for the number of shares of Common
Stock that would have been issued upon exercise of the unexercised portion of
such Option may be granted under this Plan, subject to the limitations of
Section 3.1.
3.3 Changes in Company Capitalization
In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, or
the number of shares is increased or decreased by reason of a stock split, stock
dividend, combination of shares or any other increase or decrease in the number
of such shares of Common Stock effected without receipt of consideration by the
Company (provided, however, that conversion or exchange of any convertible or
exchangeable securities of the Company shall not be deemed to have been
"effected without receipt of consideration"), the Committee shall make
appropriate adjustments in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the limitations in
Section 3.1 and Section 4.1.
SECTION 4. GRANTING OF OPTIONS
4.1 Eligibility
The maximum number of shares of Common Stock that may be
subject to Options granted during any calendar year to any one Optionee shall
not exceed 250,000. Options granted to an Eligible Individual who is an employee
of the Company or a Subsidiary may be either Incentive Stock Options or
Non-Qualified Options. Options granted to any other Eligible Individual may only
be Non-Qualified Options.
4.2 Incentive Stock Options
No Incentive Stock Option shall be granted unless it qualifies
as an "incentive stock option" under Section 422 of the Code on the Date of
Grant.
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4.3 Granting of Options
(a) Subject to the availability of shares as provided under
Sections 3.1 and 7.6, the Committee shall from time to time, in its
absolute discretion:
(i) Determine who are the Eligible Individuals and
select from among them those to be granted Options;
(ii) Determine the number of shares to be subject to
such Options granted to such selected individuals, and to the
extent permitted by the Code, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Options;
and
(iii) Determine the terms and conditions of such
Options, consistent with the Plan.
(b) Upon the selection of an individual to be granted an
Option, the Committee shall instruct the Secretary to issue such
Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to
an individual that the individual surrender for cancellation some or
all of the unexercised Options which have been previously granted to
him. An Option the grant of which is conditioned upon such surrender
may have an Option price lower (or higher) than the Option price of
the surrendered Option, may cover the same (or a lesser or greater)
number of shares as the surrendered Option, may contain such other
terms as the Committee deems appropriate and shall be exercisable in
accordance with its terms, without regard to the number of shares,
price, Option period or any other term or condition of the surrendered
Option.
4.4 Administration Of the Plan
(a) The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the
Board, which Committee (unless otherwise determined by the Board)
shall satisfy the "nonemployee director" requirements of Rule 16 b-3
under the Exchange Act and the regulations of Rule 16b-3 under the
Exchange Act and the "outside director" provisions of Code Section
162(m), or any successor regulations or provisions. The members of the
Committee shall be appointed from time to time by, and shall serve at
the discretion of, the Board of Directors. Committee members may
resign by delivering written notice to the Secretary.
(b) Except as otherwise provided in the Plan and except as
otherwise expressly stated to the contrary in the Company's Articles
of Incorporation, Bylaws, or elsewhere, the Committee shall have the
sole discretionary authority (i) to select the Eligible Individuals
who are to be granted Options under the Plan, (ii) to determine the
number of Options to be granted to any Eligible Individual at any
time, (iii) to authorize the granting of Options, (iv) to impose such
conditions and restrictions on Options as it determines appropriate,
(v) to interpret the Plan, (vi) to prescribe, amend and rescind rules
and regulations relating to the Plan, and (vii) to take any other
actions in connection with the Plan as it may deem necessary
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or advisable for the administration of the Plan. The determinations of
the Committee on the matters referred to in this Section 4 shall be
conclusive.
(c) A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be
fully effective as if it had been made by a majority vote at a meeting
duly called and held.
(d) The Committee may delegate to one or more persons any of
its powers, other than its power to authorize the granting of Options,
or designate one or more persons to do or perform those matters to be
done or performed by the Committee, including administration of the
Plan. Any person or persons delegated or designated by the Committee
shall be subject to the same obligations and requirements imposed on
the Committee and its members under the Plan.
(e) Members of the Committee shall receive such compensation
for their services as members as may be determined by the Board of
Directors. All expenses and liabilities incurred by members of the
Committee in connection with the administration of the Plan shall be
borne by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Company and the Board of Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All elections
taken and all interpretations and determinations made by the Committee
in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan. Members of
the Committee and each person or persons designated or delegated by
the Committee shall be entitled to indemnification by the Company for
any action or any failure to act in connection with services performed
by or on behalf of the Committee for the benefit of the Company to the
fullest extent provided or permitted by the Company's Articles of
Incorporation, Bylaws, any insurance policy or other agreement
intended for the benefit of the Committee, or by any applicable law.
SECTION 5. TERMS OF OPTIONS
5.1 Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized officer of
the Company and which shall indicate the Date of the Grant and contain such
terms and conditions as the Committee shall determine with respect to such
Option, consistent with the Plan. Stock Option Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to
qualify such Options as "incentive stock options" under Section 422 of the Code.
5.2 Vesting of Options
(a) Options granted under the Plan shall vest as determined
by the Committee and set forth in the respective Stock Option
Agreement.
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(b) Unless otherwise provided in the Stock Option Agreement,
in the event of a Change in Control on or before the Optionee's
Severance Date, each outstanding Option held by such Optionee to the
extent not theretofore vested shall fully vest as of the date of such
Change in Control.
(c) Subject to the provisions of Section 7.3, Options which
have been granted but not yet vested under this Section 5.2 as of an
Optionee's Severance Date shall be forfeited unless otherwise provided
in the Stock Option Agreement.
5.3 Option Exercise Price
The exercise price per share for Options granted under the
Plan shall be set by the Committee; provided, however, that the price per share
shall be not less than 100% of the Fair Market Value of such share on the Date
of Grant; provided, further, that, in the case of an Incentive Stock Option, the
price per share shall not be less than 110% of the Fair Market Value of such
share on the Date of Grant in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary.
5.4 Exercise Periods
(a) No Option may be exercised in whole or in part until it
has vested, except as may be provided in Section 5.7.
(b) Subject to the provisions of Sections 5.4(c), 5.7 and
7.3, Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide
in the terms of each individual Stock Option Agreement; provided,
however, that, by resolution adopted after an Option is granted, the
Committee may, on such terms and conditions as it may determine to be
appropriate and subject to Sections 5.4(c), 5.7 and 7.3, accelerate
the time at which such Option or any portion thereof may be exercised.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which Incentive Stock Options (within the
meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by an Optionee
during any calendar year (under the Plan and all other incentive stock
option plans of the Company) exceeds $100,000, such Options shall be
treated as Non-Qualified Options. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order
in which they were granted. For purposes of this Section 5.4(c), the
Fair Market Value of Common Stock shall be determined as of the time
the Option with respect to such Common Stock is granted.
(d) No Option may be exercised to any extent by anyone after
the first to occur of the following events:
(i) In the case of an Incentive Stock Option,
(A) the expiration of ten years from the Date of
Grant; or
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(B) in the case of an Optionee owning (within the
meaning of Section 424(d) of the Code), at the Date
of Grant, more than 10% of the total combined voting
power of all classes of stock of the Company or any
subsidiary of the Company, the expiration of five
years from the Date of Grant; or
(C) except in the case of any Optionee who is
disabled (within the meaning of Section 22(e)(3) of
the Code), the expiration of three months from the
Optionee's Severance Date unless either such
Severance Date occurs due to such Optionee's death or
the Optionee dies within said three-month period; or
(D) in the case of an Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code),
the expiration of one year from the Optionee's
Severance Date unless either such Severance Date
occurs due to such Optionee's death or the Optionee
dies within said one-year period; or
(E) the expiration of one year from the date of
the Optionee's death.
(ii) In the case of a Non-Qualified Option,
(A) the expiration of ten years from the Date of
Grant; or
(B) the expiration of one year from the Optionee's
Severance Date unless the Optionee dies within said
one-year period; or
(C) the expiration of one year from the date of
the Optionee's death.
(e) Subject to the provisions of Section 5.4(d), the
Committee shall provide, in the terms of each individual Stock Option
Agreement, when such Option expires and becomes unexercisable.
5.5 Requirement of Continued Employment
An Option shall be forfeited if the Optionee's Severance Date
occurs within one year from the Date of Grant unless such Severance Date occurs
due to a Change in Control.
5.6 Adjustments in Outstanding Options
In the event that the outstanding shares of Common Stock
subject to Options are changed into or exchanged for a different number or kind
of shares of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, or the number of shares is
increased or decreased by reason of a stock split-up, stock dividend,
combination of shares or any other increase or decrease in the number of such
shares of Common Stock effected without receipt of consideration by the Company
(provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration"),
the Committee shall make appropriate adjustments in the number and kind of
shares as to which all outstanding Options, or portions thereof then
unexercised, shall be
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exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in Option
price per share; provided, however, that, in the case of Incentive Stock
Options, each such adjustment shall be made in such manner as not to constitute
a "modification" within the meaning of Section 424(h)(3) of the Code. Any such
adjustment made by the Committee shall be final and binding upon all Optionees,
the Company and all other interested persons.
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution
Notwithstanding the provisions of Section 5.6, in its absolute
discretion, and on such terms and condition as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person (excluding any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company) of all or substantially all of the Company's assets or more than
50% of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company; and if the Committee so provides, it may, in its
absolute discretion and on such terms and conditions as it deems appropriate,
also provide, either by the terms of such Option or by a resolution adopted
prior to the occurrence of such merger, consolidation, acquisition, liquidation
or dissolution, that, for some period of time prior to such event, such Option
shall be exercisable to all shares covered thereby, notwithstanding anything to
the contrary in Section 5.4(a), Section 5.4(b) and/or any installment provisions
of such Option.
5.8 No Right to Continued Employment
Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continued employment or
retention in service or shall interfere with or restrict in any way the rights
of the Company, a Subsidiary or any other person to terminate or discharge any
Optionee at any time for any reason whatsoever.
SECTION 6. EXERCISE OF OPTIONS
6.1 Person Eligible to Exercise
During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee. After the
death of the Optionee, any exercisable portion of an Option may, prior to the
time when such portion becomes unexercisable under the Plan or the applicable
Stock Option Agreement, be exercised by the personal representative of such
Optionee or by any person empowered to do so under the deceased Optionee's will
or under the then applicable laws of descent and distribution.
6.2 Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however,
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that the Company shall not be required to issue fractional shares and the
Committee may, by the terms of the Stock Option Agreement, require any partial
exercise to be with respect to a specified minimum number of shares.
6.3 Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that such
Option or portion is exercised, such notice complying with all
applicable rules established by the Committee; and
(b) (i) full payment (in cash or by check) for the shares with
respect to which such Option or portion is thereby exercised;
or
(ii) if permitted under the terms of an Optionee's Stock
Option Agreement or with the consent of the Committee, (A)
shares of the Company's Common Stock owned by the Optionee
duly endorsed for transfer to the Company, or (B) shares of
the Company's Common Stock issuable to the Optionee upon
exercise of the Option, with a Fair Market Value on the date
of Option exercise equal to the aggregate Option price of the
shares with respect to which such Option or portion is thereby
exercised; or
(iii) with the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall
then preclude the imputation of interest under the Code or any
successor provision) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe
the form of such note and the security to be given for such
note. No Option may, however, be exercised by delivery of a
promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law;
or
(iv) with the consent of the Committee, any combination
of the consideration provided in the foregoing subsections
(i), (ii) and (iii); and
(c) the payment to the Company of all amounts which it is
required to withhold under federal, state or local law in connection
with the exercise of the Option; provided that, with the consent of
the Committee, (i) shares of the Company's Common Stock owned by the
Optionee duly endorsed for transfer, or (ii) shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option,
valued at Fair Market Value as of the date of Option exercise, may be
used to make all or part of such payment; and
(d) such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and
any other federal or state securities laws or regulations, including
the representation that the shares of the Common Stock are being
acquired for investment and not resale. The Committee may, in its
absolute discretion, also take whatever additional
10
<PAGE>
actions it deems appropriate to effect such compliance including,
without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and
(e) in the event that the Option or portion thereof shall be
exercised pursuant to Section 6.1 by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons
to exercise the Option or portion thereof.
6.4 Conditions to Issuance of Stock Certificates
The shares of Common Stock issuable and deliverable upon the
exercise of an Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares which have then been reacquired
by the Company. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of any Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) the satisfaction of all requirements set forth in
Section 6.3, including payment of the exercise price; and
(b) the obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee shall, in
its absolute discretion, determine to be necessary or advisable; and
(c) the lapse of such reasonable period of time following
the exercise of the Option as the Committee may establish from time to
time for reasons of administrative convenience.
6.5 Rights as Stockholders
The holders of Options shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect to any shares
purchasable upon the exercise of any part of an Option unless and until the
Option is exercised, the Option price has been paid to the Company and
certificates representing such shares have been issued by the Company to such
holders.
6.6 Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require any Optionee to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive Stock Option, within two years from the Date of Grant of such
Option or one year after the acquisition of such shares by such Optionee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
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SECTION 7. ADDITIONAL PROVISIONS
7.1 Approval of Plan by Stockholders
This Plan will be submitted for the approval of the Company's
stockholders within twelve months before or after the date of the Board of
Directors' initial adoption of the Plan. Options may be granted prior to such
stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders;
provided, further, that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void.
7.2 Nontransferability
No Option or interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or any
successors in interest to the Optionee or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.2 shall prevent transfers by will or by the applicable laws of descent
and distribution.
7.3 Death or Disability of Optionee
If an Optionee dies or incurs a Severance Date due to
Disability, any Option of such Optionee which has been outstanding for at least
one year shall fully and immediately be vested. In the event of an Optionee's
death the executor, administrator or other personal representative of the
Optionee's estate, or any heir, successor, assign or other transferee of the
Optionee receiving such Options by will or by the laws of descent and
distribution, shall have the right, subject to the restrictions hereof, to
exercise all vested Options to acquire shares of Common Stock subject to such
Options at any time within one year after the date of the Optionee's death.
7.4 Securities Act
No shares of Common Stock of the Company shall be required to
be distributed until the Company shall have taken such action, if any, as is
then required to comply with the provisions of the Securities Act or any other
then applicable securities law. The Company reserves the right to place a legend
on any stock certificate issued pursuant to the Plan to assure compliance with
this Section and with the vesting requirements of Section 5.2.
7.5 Withholding of Tax
The Company shall have the right to deduct from compensation
otherwise payable to an Optionee any federal, state or local income or other
taxes required by law to be withheld with respect to any distributions under the
Plan.
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7.6 Termination and Amendment of Plan
The Committee may at any time suspend or terminate the Plan,
or make such modifications of the Plan as it shall deem advisable, provided that
the Plan shall not be so changed to increase the cost of the Plan to the
Company. However, without approval of the Company's stockholders given within
twelve months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 3.3, increase any limit imposed in
Section 3.1 on the maximum number of shares which may be issued upon exercise of
Options, materially modify the eligibility requirements of Section 4.1, reduce
the minimum Option price requirements of Section 5.3, or extend the limit
imposed in this Section 7.6 on the period during which Options may be granted.
No Option may be granted during any period of suspension nor after termination
of the Plan, and in no event may any Option be granted under this Plan after the
first to occur of the following events:
(a) the expiration of ten years from the date the Plan is
adopted by the Board of Directors; or
(b) the expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 7.1.
7.7 Duties of the Company
The Company shall, at all times during the term of each
Option, reserve and keep available for issuance or delivery such number of
shares of Common Stock as will be sufficient to satisfy the requirements of all
Options at the time outstanding, shall pay all original issue taxes with respect
to the issuance or delivery of shares pursuant to the exercise of such Option
and all other fees and expenses necessarily incurred by the Company in
connection therewith.
SECTION 8. GENERAL PROVISIONS
(a) No individual shall have any claim or right to be
granted Options under the Plan. Neither the adoption and maintenance
of the Plan nor the granting of Options pursuant to the Plan shall be
deemed to constitute a contract of employment between the Company and
any individual or to be a condition of the employment of any person.
(b) The Company shall pay all costs and expenses of
administering the Plan.
(c) The granting of Options and the issuance of shares of
Common Stock under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required. The
provisions of this Plan shall be interpreted so as to comply with the
conditions or requirements of the Securities Act, the Exchange Act,
and rules and regulations issued thereunder unless a contrary
interpretation of any such provision is otherwise required by
applicable law.
(d) The granting of an Option shall impose no obligation
upon the Optionee to exercise such option.
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(e) Whenever the context so indicates, the singular or
plural number, and the masculine, feminine or neuter gender shall each
be deemed to include the other.
(f) This Plan and all Option agreements entered into
pursuant thereto shall be construed and enforced in accordance with,
and governed by, the laws of the State of Delaware, determined without
regard to its conflict of interest rules.
14
1999 BROOKDALE LIVING COMMUNITIES, INC.
STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. PURPOSE OF PLAN............................................................1
2. DEFINITIONS................................................................1
3. STOCK SUBJECT TO PLAN......................................................4
3.1 Stock Subject to Plan........................................4
3.2 Unexercised Options..........................................4
3.3 Changes in Company Capitalization............................4
4. GRANTING OF OPTIONS........................................................4
4.1 Eligibility..................................................4
4.2 Incentive Stock Options......................................4
4.3 Granting of Options..........................................5
4.4 Administration Of the Plan...................................5
5. TERMS OF OPTIONS...........................................................6
5.1 Option Agreement.............................................6
5.2 Vesting of Options...........................................7
5.3 Option Exercise Price........................................7
5.4 Exercise Periods.............................................7
5.5 Requirement of Continued Employment..........................9
5.6 Adjustments in Outstanding Options...........................9
5.7 Merger, Consolidation, Acquisition,
Liquidation or Dissolution..................................9
5.8 No Right to Continued Employment............................10
6. EXERCISE OF OPTIONS.......................................................10
6.1 Person Eligible to Exercise.................................10
6.2 Partial Exercise............................................10
6.3 Manner of Exercise..........................................10
6.4 Conditions to Issuance of Stock Certificates................11
6.5 Rights as Stockholders......................................12
6.6 Transfer Restrictions.......................................12
7. ADDITIONAL PROVISIONS.....................................................12
7.1 Approval of Plan by Stockholders............................12
7.2 Nontransferability..........................................13
7.3 Death or Disability of Optionee.............................13
7.4 Securities Act..............................................13
7.5 Withholding of Tax..........................................13
7.6 Termination and Amendment of Plan...........................13
7.7 Duties of the Company.......................................14
8. GENERAL PROVISIONS........................................................14
<PAGE>
SECTION 1. PURPOSE OF PLAN
The purpose of the 1999 Brookdale Living Communities, Inc. Stock
Incentive Plan (the "Plan") is to provide a means by which Brookdale Living
Communities, Inc. (the "Company") may attract and retain directors, executive
officers and other key employees with outstanding qualifications and consultants
and advisers who provide substantial and important services to the Company, by
affording those individuals with incentives to exert maximum efforts for the
success of the Company through opportunities to participate in the growth,
development and financial success of the Company.
SECTION 2. DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they
shall have the following respective meanings:
2.1 "Board of Directors" means the Board of Directors of the Company.
2.2 "Change in Control" shall be deemed to have occurred if
(a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the
Common Stock, Michael W. Reschke or The Prime Group, Inc. or any of
their respective affiliates, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the total voting
power represented by the Company's then outstanding securities which
vote generally in the election of directors (referred to herein as
"Voting Securities");
(b) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors
and any new directors whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority of the Board of Directors;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) more than 50% of the total
voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
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(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company (in one transaction or a series of transactions) of all
or substantially all of the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means as specified in Section 4.4.
2.5 "Common Stock" means the Common Stock of the Company, par value
$0.01 per share.
2.6 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation. In addition, "Company" shall mean any corporation assuming, or
issuing new employee stock options in substitution for, Incentive Stock Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.
2.7 "Date of Grant" means the date as of which an Option has been
granted pursuant to the Plan.
2.8 "Disability" means, with respect to an individual, a physical or
mental condition resulting from any medically determinable physical or mental
impairment that renders such individual incapable of engaging in any substantial
gainful employment and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less than four
consecutive months.
2.9 "Eligible Individual" means (i) any director, officer or key
employee of the Company or a Subsidiary, (ii) any officer or key employee of a
partnership in which the Company owns directly or indirectly at least 50% of the
capital or profits interest or (iii) any consultant or adviser whom the
Committee determines provides substantial and important service to the Company.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.11 "Fair Market Value" means the per share value of the Common Stock
as of a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading on
the New York Stock Exchange (or if not, on another national securities
exchange upon which the Common Stock is listed), the Fair Market Value
of the Common Stock is the closing quotation for such stock based on
composite transactions for the New York Stock Exchange (or if not
listed on it, such other national securities exchange) on the last
trading day for such stock prior to such given date.
(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the Nasdaq Stock Market or any
similar system of automated dissemination of quotations of prices in
common use, the Fair Market Value of the
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Common Stock is the average of the last sales price (if the stock is
then listed as a national market issue on the Nasdaq Stock Market or
the mean between the closing representative bid and asked prices (in
all other cases) for the stock on the last 5 trading days for such
stock preceding such given date as reported by the Nasdaq Stock Market
(or such similar quotation system).
(c) If neither clause (a) nor clause (b) of this Section 2.11
is applicable, the Fair Market Value of the Common Stock is the fair
market value per share as of such valuation date, as determined by the
Board of Directors in good faith and in accordance with uniform
principles consistently applied.
2.12 "Incentive Stock Option" means an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Company or the Committee.
2.13 "Non-Qualified Option" means an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the Company or
the Committee.
2.14 "Option" means any Incentive Stock Option or Non-Qualified Option
granted under this Plan.
2.15 "Optionee" means an Eligible Individual to whom an Option is
granted under this Plan.
2.16 "Plan" means the 1999 Brookdale Living Communities, Inc. Stock
Incentive Plan, as it may be amended from time to time.
2.17 "Secretary" means the Secretary of the Company.
2.18 "Securities Act" means the Securities Act of 1933, as amended.
2.19 "Severance Date" means (i) as to an Eligible Individual who is an
employee of the Company, a Subsidiary or a Company-owned partnership, the date
the individual ceases to be so employed, (ii) as to an Eligible Individual who
is a director of the Company or a Subsidiary but not an employee described in
(i) next above, the date the individual ceases to be such a director, or (iii)
as to an Eligible Individual who is not included in (i) or (ii) above, the date
specified in the applicable Stock Option Agreement.
2.20 "Stock Option Agreement" means the agreement reflecting the terms
and conditions of an Option pursuant to Section 5.1.
2.21 "Subsidiary" means a subsidiary of the Company within the meaning
of Section 424(f) of the Code.
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SECTION 3. STOCK SUBJECT TO PLAN
3.1 Stock Subject to Plan
The stock subject to an Option shall be shares of the
Company's Common Stock. The aggregate number of such shares which may be issued
upon exercise of Options granted under Section 4 of the Plan shall not exceed
200,000 unless and until a larger number shall have been approved by the
Company's stockholders pursuant to Section 7.6.
3.2 Unexercised Options
If any Option expires or is cancelled without having been
fully exercised, a new Option or Options for the number of shares of Common
Stock that would have been issued upon exercise of the unexercised portion of
such Option may be granted under this Plan, subject to the limitations of
Section 3.1.
3.3 Changes in Company Capitalization
In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, or
the number of shares is increased or decreased by reason of a stock split, stock
dividend, combination of shares or any other increase or decrease in the number
of such shares of Common Stock effected without receipt of consideration by the
Company (provided, however, that conversion or exchange of any convertible or
exchangeable securities of the Company shall not be deemed to have been
"effected without receipt of consideration"), the Committee shall make
appropriate adjustments in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the limitations in
Section 3.1 and Section 4.1.
SECTION 4. GRANTING OF OPTIONS
4.1 Eligibility
The maximum number of shares of Common Stock that may be
subject to Options granted during any calendar year to any one Optionee shall
not exceed 200,000. Options granted to an Eligible Individual who is an employee
of the Company or a Subsidiary may be either Incentive Stock Options or
Non-Qualified Options. Options granted to any other Eligible Individual may only
be Non-Qualified Options.
4.2 Incentive Stock Options
No Incentive Stock Option shall be granted unless it qualifies
as an "incentive stock option" under Section 422 of the Code on the Date of
Grant.
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4.3 Granting of Options
(a) Subject to the availability of shares as provided under
Sections 3.1 and 7.6, the Committee shall from time to time, in its
absolute discretion:
(i) Determine who are the Eligible Individuals and
select from among them those to be granted Options;
(ii) Determine the number of shares to be subject to such
Options granted to such selected individuals, and to the
extent permitted by the Code, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Options;
and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of an individual to be granted an
Option, the Committee shall instruct the Secretary to issue such Option
and may impose such conditions on the grant of such Option as it deems
appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an
individual that the individual surrender for cancellation some or all
of the unexercised Options which have been previously granted to him.
An Option the grant of which is conditioned upon such surrender may
have an Option price lower (or higher) than the Option price of the
surrendered Option, may cover the same (or a lesser or greater) number
of shares as the surrendered Option, may contain such other terms as
the Committee deems appropriate and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, Option
period or any other term or condition of the surrendered Option.
4.4 Administration Of the Plan
(a) The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the
Board, which Committee (unless otherwise determined by the Board) shall
satisfy the "nonemployee director" requirements of Rule 16b-3 under the
Exchange Act and the regulations of Rule 16b-3 under the Exchange Act
and the "outside director" provisions of Code Section 162(m), or any
successor regulations or provisions. The members of the Committee shall
be appointed from time to time by, and shall serve at the discretion
of, the Board of Directors. Committee members may resign by delivering
written notice to the Secretary.
(b) Except as otherwise provided in the Plan and except as
otherwise expressly stated to the contrary in the Company's Articles of
Incorporation, Bylaws, or elsewhere, the Committee shall have the sole
discretionary authority (i) to select the Eligible Individuals who are
to be granted Options under the Plan, (ii) to determine the number of
Options to be granted to any Eligible Individual at any time, (iii) to
authorize
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the granting of Options, (iv) to impose such conditions and
restrictions on Options as it determines appropriate, (v) to interpret
the Plan, (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (vii) to take any other actions in connection
with the Plan as it may deem necessary or advisable for the
administration of the Plan. The determinations of the Committee on the
matters referred to in this Section 4 shall be conclusive.
(c) A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be
fully effective as if it had been made by a majority vote at a meeting
duly called and held.
(d) The Committee may delegate to one or more persons any of
its powers, other than its power to authorize the granting of Options,
or designate one or more persons to do or perform those matters to be
done or performed by the Committee, including administration of the
Plan. Any person or persons delegated or designated by the Committee
shall be subject to the same obligations and requirements imposed on
the Committee and its members under the Plan.
(e) Members of the Committee shall receive such compensation
for their services as members as may be determined by the Board of
Directors. All expenses and liabilities incurred by members of the
Committee in connection with the administration of the Plan shall be
borne by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Company and the Board of Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All elections taken
and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon all Optionees, the Company
and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to the Plan. Members of the Committee and
each person or persons designated or delegated by the Committee shall
be entitled to indemnification by the Company for any action or any
failure to act in connection with services performed by or on behalf of
the Committee for the benefit of the Company to the fullest extent
provided or permitted by the Company's Articles of Incorporation,
Bylaws, any insurance policy or other agreement intended for the
benefit of the Committee, or by any applicable law.
SECTION 5. TERMS OF OPTIONS
5.1 Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized officer of
the Company and which shall indicate the Date of the Grant and contain such
terms and conditions as the Committee shall determine with respect to such
Option, consistent with the Plan. Stock Option Agreements
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evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to qualify such Options as "incentive stock options" under
Section 422 of the Code.
5.2 Vesting of Options
(a) Options granted under the Plan shall vest as determined by
the Committee and set forth in the respective Stock Option Agreement.
(b) Unless otherwise provided in the Stock Option Agreement,
in the event of a Change in Control on or before the Optionee's
Severance Date, each outstanding Option held by such Optionee to the
extent not theretofore vested shall fully vest as of the date of such
Change in Control.
(c) Subject to the provisions of Section 7.3, Options which
have been granted but not yet vested under this Section 5.2 as of an
Optionee's Severance Date shall be forfeited unless otherwise provided
in the Stock Option Agreement.
5.3 Option Exercise Price
The exercise price per share for Options granted under the
Plan shall be set by the Committee; provided, however, that the price per share
shall be not less than 100% of the Fair Market Value of such share on the Date
of Grant; provided, further, that, in the case of an Incentive Stock Option, the
price per share shall not be less than 110% of the Fair Market Value of such
share on the Date of Grant in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary.
5.4 Exercise Periods
(a) No Option may be exercised in whole or in part until it
has vested, except as may be provided in Section 5.7.
(b) Subject to the provisions of Sections 5.4(c), 5.7 and 7.3,
Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms
of each individual Stock Option Agreement; provided, however, that, by
resolution adopted after an Option is granted, the Committee may, on
such terms and conditions as it may determine to be appropriate and
subject to Sections 5.4(c), 5.7 and 7.3, accelerate the time at which
such Option or any portion thereof may be exercised.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which Incentive Stock Options (within the meaning
of Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other incentive stock option
plans of the Company) exceeds $100,000, such Options shall be treated
as Non-Qualified Options. The rule set forth in the preceding sentence
shall be applied by taking Options
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into account in the order in which they were granted. For purposes of
this Section 5.4(c), the Fair Market Value of Common Stock shall be
determined as of the time the Option with respect to such Common Stock
is granted.
(d) No Option may be exercised to any extent by anyone after
the first to occur of the following events:
(i) In the case of an Incentive Stock Option,
(A) the expiration of ten years from the Date of
Grant; or
(B) in the case of an Optionee owning (within the
meaning of Section 424(d) of the Code), at the Date
of Grant, more than 10% of the total combined voting
power of all classes of stock of the Company or any
subsidiary of the Company, the expiration of five
years from the Date of Grant; or
(C) except in the case of any Optionee who is
disabled (within the meaning of Section 22(e)(3) of
the Code), the expiration of three months from the
Optionee's Severance Date unless either such
Severance Date occurs due to such Optionee's death or
the Optionee dies within said three-month period; or
(D) in the case of an Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code),
the expiration of one year from the Optionee's
Severance Date unless either such Severance Date
occurs due to such Optionee's death or the Optionee
dies within said one-year period; or
(E) the expiration of one year from the date of the
Optionee's death.
(ii) In the case of a Non-Qualified Option,
(A) the expiration of ten years from the Date of
Grant; or
(B) the expiration of one year from the Optionee's
Severance Date unless the Optionee dies within said
one-year period; or
(C) the expiration of one year from the date of the
Optionee's death.
(e) Subject to the provisions of Section 5.4(d), the Committee
shall provide, in the terms of each individual Stock Option Agreement,
when such Option expires and becomes unexercisable.
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5.5 Requirement of Continued Employment
An Option shall be forfeited if the Optionee's Severance Date
occurs within one year from the Date of Grant unless such Severance Date occurs
due to a Change in Control.
5.6 Adjustments in Outstanding Options
In the event that the outstanding shares of Common Stock
subject to Options are changed into or exchanged for a different number or kind
of shares of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, or the number of shares is
increased or decreased by reason of a stock split-up, stock dividend,
combination of shares or any other increase or decrease in the number of such
shares of Common Stock effected without receipt of consideration by the Company
(provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration"),
the Committee shall make appropriate adjustments in the number and kind of
shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in Option price per share; provided, however, that, in the case of
Incentive Stock Options, each such adjustment shall be made in such manner as
not to constitute a "modification" within the meaning of Section 424(h)(3) of
the Code. Any such adjustment made by the Committee shall be final and binding
upon all Optionees, the Company and all other interested persons.
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution
Notwithstanding the provisions of Section 5.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person (excluding any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company) of all or substantially all of the Company's assets or more than
50% of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company; and if the Committee so provides, it may, in its
absolute discretion and on such terms and conditions as it deems appropriate,
also provide, either by the terms of such Option or by a resolution adopted
prior to the occurrence of such merger, consolidation, acquisition, liquidation
or dissolution, that, for some period of time prior to such event, such Option
shall be exercisable to all shares covered thereby, notwithstanding anything to
the contrary in Section 5.4(a), Section 5.4(b) and/or any installment provisions
of such Option.
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5.8 No Right to Continued Employment
Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continued employment or
retention in service or shall interfere with or restrict in any way the rights
of the Company, a Subsidiary or any other person to terminate or discharge any
Optionee at any time for any reason whatsoever.
SECTION 6. EXERCISE OF OPTIONS
6.1 Person Eligible to Exercise
During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee. After the
death of the Optionee, any exercisable portion of an Option may, prior to the
time when such portion becomes unexercisable under the Plan or the applicable
Stock Option Agreement, be exercised by the personal representative of such
Optionee or by any person empowered to do so under the deceased Optionee's will
or under the then applicable laws of descent and distribution.
6.2 Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee may,
by the terms of the Stock Option Agreement, require any partial exercise to be
with respect to a specified minimum number of shares.
6.3 Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that such
Option or portion is exercised, such notice complying with all
applicable rules established by the Committee; and
(b) (i) full payment (in cash or by check) for the shares with
respect to which such Option or portion is thereby exercised;
or
(ii) if permitted under the terms of an Optionee's Stock
Option Agreement or with the consent of the Committee, shares
of the Company's Common Stock owned by the Optionee duly
endorsed for transfer to the Company, other than shares of the
Company's Common Stock held for less than six months unless
acquired on the open market, with a Fair Market Value on the
date of Option
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exercise equal to the aggregate Option price of the shares
with respect to which such Option or portion is thereby
exercised; or
(iii) with the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall
then preclude the imputation of interest under the Code or any
successor provision) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe
the form of such note and the security to be given for such
note. No Option may, however, be exercised by delivery of a
promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law;
or
(iv) with the consent of the Committee, any combination
of the consideration provided in the foregoing subsections
(i), (ii) and (iii); and
(c) the payment to the Company of all amounts which it is
required to withhold under federal, state or local law in connection
with the exercise of the Option; provided that, with the consent of the
Committee, (i) shares of the Company's Common Stock owned by the
Optionee duly endorsed for transfer, other than shares of the Company's
Common Stock held for less than six months unless acquired on the open
market, or (ii) shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option, valued at Fair Market Value as of
the date of Option exercise, may be used to make all or part of such
payment, but only up to the minimum withholding requirement for
supplemental wages; and
(d) such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and any
other federal or state securities laws or regulations, including the
representation that the shares of the Common Stock are being acquired
for investment and not resale. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer orders to
transfer agents and registrars; and
(e) in the event that the Option or portion thereof shall be
exercised pursuant to Section 6.1 by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons
to exercise the Option or portion thereof.
6.4 Conditions to Issuance of Stock Certificates
The shares of Common Stock issuable and deliverable upon the
exercise of an Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares which have then been reacquired
by the Company. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of any Option or portion thereof prior to fulfillment of all of the
following conditions:
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(a) the satisfaction of all requirements set forth in Section
6.3, including payment of the exercise price; and
(b) the obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(c) the lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time
for reasons of administrative convenience.
6.5 Rights as Stockholders
The holders of Options shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect to any shares
purchasable upon the exercise of any part of an Option unless and until the
Option is exercised, the Option price has been paid to the Company and
certificates representing such shares have been issued by the Company to such
holders.
6.6 Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require any Optionee to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive Stock Option, within two years from the Date of Grant of such
Option or one year after the acquisition of such shares by such Optionee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
SECTION 7. ADDITIONAL PROVISIONS
7.1 Approval of Plan by Stockholders
This Plan will be submitted for the approval of the Company's
stockholders within twelve months before or after the date of the Board of
Directors' initial adoption of the Plan. Options may be granted prior to such
stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders;
provided, further, that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void.
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7.2 Nontransferability
No Option or interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or any
successors in interest to the Optionee or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.2 shall prevent transfers by will or by the applicable laws of descent
and distribution.
7.3 Death or Disability of Optionee
If an Optionee dies or incurs a Severance Date due to
Disability, any Option of such Optionee which has been outstanding for at least
one year shall fully and immediately be vested. In the event of an Optionee's
death the executor, administrator or other personal representative of the
Optionee's estate, or any heir, successor, assign or other transferee of the
Optionee receiving such Options by will or by the laws of descent and
distribution, shall have the right, subject to the restrictions hereof, to
exercise all vested Options to acquire shares of Common Stock subject to such
Options at any time within one year after the date of the Optionee's death.
7.4 Securities Act
No shares of Common Stock of the Company shall be required to
be distributed until the Company shall have taken such action, if any, as is
then required to comply with the provisions of the Securities Act or any other
then applicable securities law. The Company reserves the right to place a legend
on any stock certificate issued pursuant to the Plan to assure compliance with
this Section and with the vesting requirements of Section 5.2.
7.5 Withholding of Tax
The Company shall have the right to deduct from compensation
otherwise payable to an Optionee any federal, state or local income or other
taxes required by law to be withheld with respect to any distributions under the
Plan.
7.6 Termination and Amendment of Plan
The Committee may at any time suspend or terminate the Plan,
or make such modifications of the Plan as it shall deem advisable, provided that
the Plan shall not be so changed to increase the cost of the Plan to the
Company. However, without approval of the Company's stockholders given within
twelve months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 3.3, increase any limit imposed in
Section 3.1 on the maximum number of shares which may be issued upon exercise of
Options, materially modify the eligibility requirements of Section 4.1, reduce
the minimum Option price requirements of Section 5.3, or extend the limit
imposed in this Section
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7.6 on the period during which Options may be granted. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any Option be granted under this Plan after the first to occur of the
following events:
(a) the expiration of ten years from the date the Plan is
adopted by the Board of Directors; or
(b) the expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 7.1.
7.7 Duties of the Company
The Company shall, at all times during the term of each
Option, reserve and keep available for issuance or delivery such number of
shares of Common Stock as will be sufficient to satisfy the requirements of all
Options at the time outstanding, shall pay all original issue taxes with respect
to the issuance or delivery of shares pursuant to the exercise of such Option
and all other fees and expenses necessarily incurred by the Company in
connection therewith.
SECTION 8. GENERAL PROVISIONS
(a) No individual shall have any claim or right to be granted
Options under the Plan. Neither the adoption and maintenance of the
Plan nor the granting of Options pursuant to the Plan shall be deemed
to constitute a contract of employment between the Company and any
individual or to be a condition of the employment of any person.
(b) The Company shall pay all costs and expenses of
administering the Plan.
(c) The granting of Options and the issuance of shares of
Common Stock under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required. The
provisions of this Plan shall be interpreted so as to comply with the
conditions or requirements of the Securities Act, the Exchange Act, and
rules and regulations issued thereunder unless a contrary
interpretation of any such provision is otherwise required by
applicable law.
(d) The granting of an Option shall impose no obligation upon
the Optionee to exercise such option.
(e) Whenever the context so indicates, the singular or plural
number, and the masculine, feminine or neuter gender shall each be
deemed to include the other.
(f) This Plan and all Option agreements entered into pursuant
thereto shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware, determined without
regard to its conflict of interest rules.
14
<TABLE>
<CAPTION>
Exhibit 12
BROOKDALE LIVING COMMUNITIES, INC.
STATEMENTS REGARDING COMPUTATION OF RATIOS
OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In 000's, Except Ratios)
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
EARNINGS
- --------
<S> <C> <C> <C> <C>
Income before income tax expense
per consolidated financial statements..............$ 4,148 $ 2,410 $ 8,484 $ 4,135
Interest cost........................................ 8,253 5,389 15,739 10,303
Interest cost (capitalized).......................... (446) (399) (847) (602)
Amortization of debt expense......................... 295 313 951 616
Preferred stock dividends............................ -- -- -- --
--------- --------- --------- ---------
Earnings............................................. 12,250 7,713 24,327 14,452
========= ========= ========= =========
FIXED CHARGES
- -------------
Interest cost........................................$ 8,253 $ 5,389 $ 15,739 $ 10,303
Amortization of debt expense......................... 295 313 951 616
Preferred stock dividends............................ -- -- -- --
--------- --------- --------- ---------
Total fixed charges.................................. 8,548 5,702 16,690 10,919
========= ========= ========= =========
Ratio of earnings to combined fixed charges and
preferred stock dividends.......................... 1.43 1.35 1.46 1.32
========= ========= ========= =========
Excess of earnings to combined fixed charges and
preferred stock dividends..........................$ 3,702 $ 2,011 $ 7,637 $ 3,533
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,560
<SECURITIES> 55,000
<RECEIVABLES> 2,917
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 94,011
<PP&E> 120,386
<DEPRECIATION> 7,667
<TOTAL-ASSETS> 339,451
<CURRENT-LIABILITIES> 21,542
<BONDS> 92,406
0
0
<COMMON> 116
<OTHER-SE> 106,597
<TOTAL-LIABILITY-AND-EQUITY> 339,451
<SALES> 48,188
<TOTAL-REVENUES> 51,634
<CGS> 25,688
<TOTAL-COSTS> 43,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,915
<INCOME-PRETAX> 8,484
<INCOME-TAX> (3,087)
<INCOME-CONTINUING> 5,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,397
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.45
</TABLE>
